The Anxious Triumph

by Donald Sassoon

  In fact France, in the nineteenth century, was an importer of labour, receiving more immigrants than any other European country. By 1886 there were over one million foreign workers in France – 7 per cent of those employed in industry. By 1891 12 per cent of wage workers were foreigners.250 The immigrants came mainly from Belgium, then one of the most industrialized countries in western Europe, and from Italy (one of the least). In 1872, and still in 1911, Belgians and Italians constituted 61 per cent of the immigrant working population. There were more Belgians than Italians, but the former were skilled miners while the Italians were a kind of sub-proletariat who, as is often the case with such groups, were the target of local racism. Other immigrants came from Spain, Portugal, and from central and eastern Europe, including many Jews from the Tsarist Empire.251 During the recovery from the crisis of the 1870s, there was also a considerable increase in the number of internal migrants. This was a largely unskilled labour force, feeling uprooted and disoriented in big cities, and many suffering from tuberculosis.252 Female employment increased too: women were 30 per cent of the workforce in 1866 and 37.7 per cent in 1906.253 Most of the industrial employment was concentrated in small firms.254

  Industrialized Europe, at the end of the nineteenth century, consisted of a relatively few islands of manufacturing in an ocean of agriculture. These outposts were the United Kingdom, Belgium, the Netherlands, parts of Germany, parts of Scandinavia, and parts of France. Then there were the latecomers: the rest of Scandinavia, the rest of Germany, parts of Italy. Elsewhere industrialization was just in its infancy. For instance in the middle of the nineteenth century only 8 per cent of the population of Wallachia and Moldavia (the main components of modern Romania) was employed in manufacturing.255 Even in 1900 there was no proper capitalism in what had by then had become Romania: the capital stock of industrial enterprises with more than twenty-five workers represented only 1.5 per cent of the total for the country.256

  But the latecomers, since they started from a lower base, were growing rapidly – or at least some of them. In 1870 the share of total European GDP (Gross Domestic Product) in north-western Europe was 26.3 per cent (with a population just under 16 per cent of the total). By 1913 it had gone down slightly to 24.4 per cent while central and eastern Europe was surging ahead (from 46 per cent to 53.2 per cent). Russia, Romania, and Bulgaria were growing more rapidly than the Mediterranean countries.257

  In 1850, in terms of income per capita, Spain was still richer than Germany and Portugal richer than Sweden. By 1870, Germany was well ahead of Spain and one of the richest countries in Europe, while Portugal was one of the poorest.258

  Table 8 Per Capita GDP in Some European Countries and the USA, 1870–1913*

  1870 1913

  United Kingdom 3,328 5,030

  Belgium 2,722 4,263

  USA 2,454 5,301

  Netherlands 2,417 3,539

  Switzerland 2,098 4,270

  Germany 2,006 4,181

  Denmark 1,929 3,768

  Italy 1,838 2,721

  France 1,746 3,245

  Austria-Hungary 1,584 2,576

  *$ in 1990 international prices

  Source: Stephen Broadberry and Alexander Klein, ‘Aggregate and Per Capita GDP in Europe, 1870–2000’.

  The richest countries in Europe in 1870 were still rich on the eve of the First World War (see Table 8).

  The figures should not be taken too literally since the methodology used relies on uncertain figures (Italy could not have been richer than France in 1870) and GDP is a relatively recent statistical figure developed by Simon Kuznets in 1934. What matters is the relative gap between the top ten countries. Whereas today they are all fairly close, the gap was then very wide: in 1913 the income of the average French person was still only 60 per cent of that of the average British; that of the average American twice that of the average Italian or Norwegian. The clearest sign of things to come, however, was the remarkable performance of the United States, whose per capita GDP had become the highest in the world in 1913. By 1950 the USA had outdistanced even the richest European states, except for Switzerland. Only in the 1970s and 1980s would the Europeans catch up once again (see Table 9).

  In the period 1870–1913 annual growth rates in the industrial West were 2.5 per cent, just a little better than in the period 1820–70 (2.4) or 1913–50 (2.0), but much less than in 1950–73 (4.9).259 If we take Europe as a whole, growth rates between 1830 and 1910 were 1.7 per cent per annum, the kind of growth rates that until recently we would regard as stagnation. Yet there is no question that income growth in the period of industrialization, even in a bad period, was considerably higher than the growth of per capita income in previous centuries: between 1500 and 1800 per capita income increased by less than 0.3 per cent.260

  Table 9 Per Capita GDP in Some European Countries and the USA, 1950*

  USA 9.561

  Switzerland 9.071

  UK 6.879

  Sweden 6.539

  Denmark 6.404

  Belgium 5.472

  Norway 5.376

  Netherlands 5.285

  France 4.943

  Finland 4.362

  Germany 4.075

  *$ in 1990 international prices

  Source: Stephen Broadberry and Alexander Klein, ‘Aggregate and Per Capita GDP in Europe, 1870–2000’.

  In late nineteenth-century Europe the fastest growing countries were concentrated in the north (Scandinavia). The so-called ‘laggards’ were all in eastern Europe and the Mediterranean.261

  By the eve of the First World War, the countries that exceeded the European GNP average were the Scandinavian countries, Finland, Germany, Switzerland, France, Belgium, the United Kingdom, Austria-Hungary, Russia, the Netherlands, and probably Romania. Of course, volume of GNP per se is not necessarily of great significance, since a country with a large population should have a larger GNP than one with a small population. Thus China in 1880 had probably the highest GNP in the world and in 1913 Russian GNP, with 20.4 per cent of total European GNP, was higher than that of Britain with 17.2 per cent, as was Germany’s at 19.4 per cent, while France and Austria-Hungary followed at some distance with 10.7 and 10.1 per cent respectively.262 Some of the rich counties, such as the UK and the Netherlands (including Belgium), France, and Switzerland were already rich in 1800, but Portugal, one of the richest in 1800 (thanks to its colonies), was by 1913 among the poorest in Europe, exporting mainly wine, cork, and sardines.263 Some countries went from poor to rich. Thus Finland, part of the Tsarist Empire, at the beginning of the 1860s had a per capita GDP 25 per cent lower than the average for the rest of Europe. The famine of 1866–8, the last great European famine of the nineteenth century, aggravated the situation. Yet, by 1914, Finland had caught up with the average.264 The UK, on its own, accounted for 20 per cent of Europe’s GNP in 1890, up from ‘only’ 9 per cent in 1800.265 To have colonies was a bonus but not a determining factor. By 1913 other countries were catching up.

  In terms of the international economic situation, the most significant development in the nineteenth century was the rise of Europe. In 1800, Europe’s GNP per capita was 20 per cent higher than that of what was later called the Third World. By 1860 it was twice that of the Third World and by 1900 more than three times as much.266

  Had capitalist growth been equally distributed among the inhabitants of each industrial country, there would have been fewer reasons for the anxiety of being ‘left out’. There would have been a massive disruption of traditional lifestyles, and there would have been, as there always are, winners and losers; but the widespread improvement in living standards, if distributed evenly, would have considerably assuaged the population in industrial countries. However, there was no such equanimity. Capitalism cannot generate, spontaneously, anything resembling an equality of outcomes. A reasonable distribution of income is far from incompatible with capitalism, but since individual capitalists pursue private and not social benefits, unless there is a systematic political intervention in fa
vour of redistribution, the pursuit of private interests leads towards greater inequality. Yet political intervention can only be limited, since one of the motivations behind the private accumulation of wealth is that of being better off than others. Massive redistribution is unlikely to favour capital accumulation – which is not to say that some levelling policies would necessarily be dysfunctional. On the other hand massive inequalities are also dysfunctional, and not just for obvious political reasons but also for the economic one that if much of the growth accrues only to the very top, overall demand decreases. The rich save more than the poor, and saving is bad for growth, as Keynes often pointed out. ‘The fundamental psychological law … is that men are disposed … to increase their consumption as their income increases, but not by as much as the increase in their income.’267

  Inequalities did increase with industrialization. The common measure used to compute inequality is the Gini coefficient, a formula devised in 1912 by the Italian mathematician Corrado Gini. The nearer the coefficient is to zero the more equality there is, and the nearer to 100 the less equal the country is. Current studies show that many advanced capitalist countries have a more equal distribution of income than less developed ones. Thus, in 2010–13 Scandinavian countries exhibited a greater degree of equality than others: Denmark, Sweden, and Norway hover around the 25 mark while the European Union average is 30.9 (2014 figures).268 However, matters are not that simple. In 2013, Ukraine was much poorer than Britain, France, and Italy, but more equal than any of them, at 24.6, against 30.1 for France, 31.9 for Italy, and 32.4 for the United Kingdom. ‘Inequality’, as Angus Deaton writes, ‘is often a consequence of progress.’269 Income distribution in Slovakia (Gini coefficient: 26) was on a level with that of Norway. The United States was more unequal than any European country (Gini: 45), and only a little more unequal than Malawi, one of the poorest countries in the world (Gini: 39). Communist China, with 46.9, was more unequal than capitalist America, and Nigeria (43.7) was almost as unequal. Obviously there can be equality in prosperity (e.g. Japan and Sweden) as well as in misery (Ukraine and Malawi). On average the international Gini coefficient rose by one point every decade from 1820 to 1950, then decreased between 1950 and 1992.270 After 1990, according to Thomas Piketty, income inequalities increased again and, in Anglo-Saxon countries (the UK, USA, Australia, and Canada) they increased sharply after 1980.271 But income inequality was already high in the early nineteenth century, when the Industrial Revolution started. The Gini coefficient rose with industrialization until the First World War, when it reached 61 (worst than almost all African countries and all Latin American countries). Inequalities slowed between the wars but in 1950 the world Gini coefficient was still very high: 64. This was higher than all countries in the world in the late 1990s except for Namibia (74.3).272 Now (2017) no country is as unequal as the world average for 1950, but most of today’s heavily unequal countries are in Latin America and in Africa.

  Health disparities are roughly the same today as they were in the early nineteenth century.273 Of course, the peoples of the world are healthier now and live longer, nor are the poor of today as poor in absolute terms as they were in the nineteenth century. The number of those in extreme poverty, 84 per cent in 1820, dropped to 24 per cent in 1992.274 Today we often speak of relative poverty. To use this concept, rather than that of absolute poverty, is a sign of an affluent age: by definition, relative poverty, in unequal societies, can never be eradicated. In many advanced capitalist societies, what the poor receive today in social assistance is better – in terms of purchasing power – than what many workers obtained in wages in 1880, for it enables them to own goods that in the 1950s were regarded as the prerogative of the rich, goods such as refrigerators, telephones, and television sets.

  Discussing inequalities, it should be noted, is hardly a novel issue. In 1880 a champion of economic liberalism in France, Paul Leroy-Beaulieu, not only believed that the concentration of wealth was a matter of the recent past and was unlikely to last but that the real danger for the future would be that there will not be enough inequality and that life will become boring if everyone is the same.275

  If we talk about the absolute poor, the really, really poor, the destitute, then their number in the world increased with industrialization at least until the end of the twentieth century, when Chinese economic growth led to the removal from the poverty line of some 400 million people. Had the growth rate of income been the same across and within countries since 1820, the number of ‘extremely’ poor people ($1 a day expressed in 1985 purchasing power parity) in 1992 would have been only 150 million instead of 1.3 billion, or 3.6 per cent instead of 24 per cent.276 What we do not know is the extent to which inequalities favoured growth. Much of the ideological divide at the end of the twentieth century, and since, centres around this question: is there a trade-off between equality and economic development?

  Capitalism requires two contradictory elements: the first is a thriving market of increasingly prosperous workers whose demand for commodities becomes a formidable incentive for investment; the second is workers prepared to work a lot for little. Capitalism sells to the prosperous workers what has been produced with the labour of the miserable ones. This works particularly well in international trade and is what occurred when some countries industrialized before others, thus widening the gap. The industrial and technological gap between the United Kingdom and China in 1820 was serious, yet in 1800 Chinese standards of living were comparable to those of the rest of western Europe, particularly in the richer areas such as the Lower Yangtze Delta, which comprises Shanghai, Nanjing, and Zhejiang province.277 Indeed, the Lower Yangtze Delta was, between 1350 and 1750, one of ‘the most consistently dynamic economies’ in the world.278 Robert Fortune, a Scottish botanist who travelled extensively in China during the middle of the nineteenth century, was struck by the abundance of food at the disposal of ordinary Chinese. He opined that:

  in no country in the world is there less real misery and want than in China … In Scotland, in former days – and I suppose it is much the same now – the harvest labourer’s breakfast consisted of porridge and milk, his dinner of bread and beer, and porridge and milk again for supper. A Chinaman would starve upon such food.279

  Adam Smith had no doubt that China was rich, as he repeatedly emphasized in The Wealth of Nations: ‘China has been long one of the richest, that is, one of the most fertile, best cultivated, most industrious, and most populous, countries in the world’; ‘China is a much richer country than any part of Europe’; ‘In China, a country much richer than any part of Europe’.280

  But China’s lead shrank continuously after 1750, partly because its agricultural productivity had not increased, partly because it had not developed its industry. By 1910 the United Kingdom was six times richer than China and, in 1950, ten times richer. In fact, throughout most of the nineteenth century, the UK became increasingly more prosperous than its European rivals.281 This was one of the key factors that sealed the victory of the pro-industrialization elites at the beginning of our story. Industry equalled prosperity, power, and political stability. By 1913 workers in industry earned more in Great Britain than anywhere else in Europe, though less than in the United States.282 Almost everywhere in the capitalist world, long working hours in sweatshops still prevailed, but, in most of the advanced countries, the wages of unskilled workers increased steadily, if slowly, between 1880 and 1914, while the cost of their main staple, bread, declined.283

  Amid the dismal conditions, the lack of hygiene, the spread of diseases, life was, by our standards, brutish and short, but longer and less brutish than before. So there was the possibility that the emerging industrial capitalist society was benefiting not only the owners of capital but also those who had to sell their labour. Few knew or even guessed that in the subsequent decades after 1914 much of the world would be plagued by wars of unparalleled cruelty and devastation. Even fewer would have anticipated that such wars would pave the way for the most rapid
growth in the history of capitalism during the decades after 1945. Much foretelling simply assumes that what happened before will happen in the future. Because matters had improved since 1800 it was reasonable to assume that they would go on improving at roughly the same pace. There is a difference, however, between the fate of humanity as a whole and the fate of each and every human. Progress is never progress for all. It is this awareness which meant that life under capitalism was a constant source of anxiety, anxiety for the poor and unemployed – never sure whether they would get a job; anxiety for the employed – never sure whether they would keep it; anxiety for the rich – unsure whether they would remain rich; anxiety for the capitalists – uncertain whether they would be winners or losers in the ever more dynamic turmoil of competitive capitalism.

  PART TWO

  Becoming Modern