The Great Transformation

by Karl Polanyi

  Man was forced to resign himself to secular perdition: he was doomed either to stop the procreation of his race or to condemn himself wittingly to liquidation through war and pestilence, hunger and vice. Poverty was nature surviving in society; that the limitedness of food and the unlimitedness of men had come to an issue just when the promise of a boundless increase of wealth burst in upon us made the irony only the more bitter.

  Thus was the discovery of society integrated with man’s spiritual universe; but how was this new reality, society, to be translated into terms of everyday life? As guides to practice the moral principles of harmony and conflict were strained to the utmost, and forced into a pattern of all but complete contradiction. Harmony was inherent in economy, it was said, the interests of the individual and the community being ultimately identical—but such harmonious self-regulation required that the individual should respect economic law even if it happened to destroy him. Conflict, also, seemed inherent in economy, whether as competition of individuals or as struggle of classes—but such conflict, again, might turn out to be only the vehicle of a deeper harmony immanent in present, or perhaps future, society.

  Pauperism, political economy, and the discovery of society were closely interwoven. Pauperism fixed attention on the incomprehensible fact that poverty seemed to go with plenty. Yet this was only the first of the baffling paradoxes with which industrial society was to confront modern man. He had entered his new abode through the door of economics, and this adventitious circumstance invested the age with its materialist aura. To Ricardo and Malthus nothing seemed more real than material goods. The laws of the market meant for them the limit of human possibilities. Godwin believed in unlimited possibilities and hence had to deny the laws of the market. That human possibilities were limited, not by the laws of the market, but by those of society itself was a recognition reserved to Owen who alone discerned behind the veil of market economy the emergent reality: society. However, his vision was lost again for a century.

  Meanwhile, it was in relation to the problem of poverty that people began to explore the meaning of life in a complex society. The introduction of political economy into the realm of the universal happened under two opposite perspectives, that of progress and perfectibility on the one hand, determinism and damnation on the other; its translation into practice also was achieved in two opposite ways, through the principle of harmony and self-regulation on the one hand, competition and conflict on the other. Economic liberalism and the class concept were preformed in these contradictions. With the finality of an elemental event, a new set of ideas entered our consciousness.

  * Meredith, H. O., Outlines of the Economic History of England, 1908.

  C H A P T E R E I G H T

  Antecedents and Consequences

  The Speenhamland system was originally no more than a makeshift. Yet few institutions have shaped the fate of a whole civilization more decisively than this, although it had to be discarded before the new era could begin. It was the typical product of a time of transition and deserves the attention of any student of human affairs today.

  Under the mercantile system the labor organization of England rested on the Poor Law and the Statute of Artificers. Poor law, as applied to the laws of 1536 to 1601, is admittedly a misnomer; actually these laws, and subsequent amendments, formed half of the labor code of England; the other half consisted of the Statute of Artificers of 1563. The latter dealt with the employed; the Poor Law, with what we would call the unemployed and unemployable (apart from the aged and children). To these measures were added later, as we saw, the Act of Settlement of 1662 concerning the legal abode of the people which restricted their mobility to the utmost. (The neat distinction between employed, unemployed, and unemployable is, of course, anachronistic since it implies the existence of a modern wage system which was absent for another 250 years or so; we use these terms for the sake of simplicity in this very broad presentation.)

  Labor organization, according to the Statute of Artificers, rested on three pillars: enforcement of labor, seven years’ apprenticeship, and yearly wage assessment by public officials. The law—this should be emphasized—applied to agricultural laborers as much as to artisans and was enforced in rural districts as well as in towns. For about eighty years the Statute was strictly executed; later the apprenticeship clauses fell partly into desuetude, being restricted to the traditional crafts; to the new industries like cotton they simply did not apply; yearly wage assessments based on the cost of living, also were in abeyance in a large part of the country after the Restoration (1660). Formally, the wage clause of the Statute was repealed only in 1813, the apprenticeship clause in 1814. However, in many respects the apprenticeship rule survived the Statute; it is still the general practice in the skilled trades in England. The enforcement of labor in the countryside was discontinued little by little. Still it can be said that for the two and a half centuries in question the Statute of Artificers laid down the outlines of a national organization of labor based on the principles of regulation and paternalism.

  The Statute of Artificers was thus supplemented by the Poor Laws, a most confusing term in modern ears, to which “poor” and “pauper” sound much alike. Actually, the gentlemen of England judged all persons poor who did not command an income sufficient to keep them in leisure. “Poor” was thus practically synonymous with “common people,” and the common people comprised all but the landed classes (hardly any successful merchant failed to acquire landed property). Hence the term “poor” meant all people who were in need and all the people, if and when they were in need. This, of course, included paupers, but not them alone. The aged, the infirm, the orphans had to be taken care of in a society which claimed that within its confines there was a place for every Christian. But over and above, there were the able-bodied poor, whom we would call the unemployed, on the assumption that they could earn their living by manual work if only they could find employment. Beggary was severely punished; vagrancy, in case of repetition, was a capital offense. The Poor Law of 1601 decreed that the able-bodied poor should be put to work so as to earn their keep, which the parish was to supply; the burden of relief was squarely put on the parish, which was empowered to raise the necessary sums by local taxes or rates. These were to be levied upon all householders and tenants, rich and nonrich alike, according to the rental of the land or houses they occupied.

  The Statute of Artificers and the Poor Law together provided what might be called a Code of Labor. However, the Poor Law was administered locally. Every parish—a tiny unit—had its own provisions for setting the able-bodied to work; for maintaining a poorhouse; for apprenticing orphans and destitute children; for caring for the aged and the infirm; for the burial of paupers; and every parish had its own scale of rates. This sounds grander than it sometimes was. Many parishes had no poorhouses; a great many more had no reasonable provisions for the useful occupation of the able-bodied; there was an endless variety of ways in which the sluggardliness of the local ratepayers, the indifference of the overseers of the poor, the callousness of the interests centering on pauperism vitiated the working of the law. Still, by and large, the nearly sixteen thousand Poor Law authorities of the country managed to keep the social fabric of village life unbroken and undamaged.

  Yet under a national system of labor, the local organization of unemployment and poor relief was a patent anomaly. The greater the variety of local provisions for the poor, the greater the danger to the well-kept parish that it would be swamped by the professional pauper. After the Restoration the Act of Settlement and Removal was passed to protect the “better” parishes from the influx of paupers. More than a century later, Adam Smith inveighed against this act because it immobilized the people, and thus prevented them from finding useful employment as it prevented the capitalist from finding employees. Only with the goodwill of the local magistrate and the parish authorities could a man stay in any other but his home parish; everywhere else he was liable to expulsion even though in good standing
and employed. The legal status of the people was therefore that of freedom and equality subject to incisive limitations. They were equal before the law and free as to their persons. But they were not free to choose their occupations or those of their children; they were not free to settle where they pleased; and they were forced to labor. The two great Elizabethan Statutes and the Act of Settlement together were a charter of liberty to the common people as well as a seal of their disabilities.

  The Industrial Revolution was well on the way, when in 1795, under the pressure of the needs of industry, the Act of 1662 was partially repealed, parish serfdom was abolished, and the physical mobility of the laborer was restored. A labor market could now be established on a national scale. But in the very same year, as we know, a practice of Poor Law administration was introduced which meant the reversal of the Elizabethan principle of enforced labor. Speenhamland ensured the “right to live”; grants in aid-of-wages were made general; family allowances were superadded; and all this was to be given in outdoor relief, i.e., without committing the recipient to the workhouse. Although the scale of relief was exiguous, it was enough for bare subsistence. This was a return to regulationism and paternalism with a vengeance just as, it would seem, the steam engine was clamoring for freedom and the machines were crying out for human hands. Yet the Speenhamland Law coincided in time with the withdrawal of the Act of Settlement. The contradiction was patent; the Act of Settlement was being repealed because the Industrial Revolution demanded a national supply of laborers who would offer to work for wages, while Speenhamland proclaimed the principle that no man need fear to starve and that the parish would keep him and his family, however little he earned. There was stark contradiction between the two industrial policies; what else but a social enormity could be expected from their simultaneous continued application?

  But the generation of Speenhamland was unconscious of what was on its way. On the eve of the greatest industrial revolution in history, no signs and portents were forthcoming. Capitalism arrived unannounced. No one had forecast the development of a machine industry; it came as a complete surprise. For some time England had been actually expecting a permanent recession of foreign trade when the dam burst, and the old world was swept away in one indomitable surge toward a planetary economy.

  However, not until the 1850s could anybody have said so with assurance. The key to the comprehension of the Speenhamland magistrates’ recommendation lay in their ignorance of the wider implications of the development they were facing. In the retrospect it may seem as if they had not only attempted the impossible but had done so by means the inner contradictions of which should have been apparent to them. Actually, they were successful in achieving their aim of protecting the village against dislocation, while the effects of their policy were all the more disastrous in other, unforeseen directions. Speenhamland policy was the outcome of a definite phase in the development of a market for labor power and should be understood in the light of the views taken of that situation by those in the position to shape policy. From this angle the allowance system will appear as a device contrived by squirearchy to meet a situation in which physical mobility could no longer be denied to labor, while the squire wished to avoid such unsettlement of local conditions, including higher wages, as was involved in the acceptance of a free national labor market.

  The dynamic of Speenhamland was thus rooted in the circumstances of its origin. The rise in rural pauperism was the first symptom of the impending upheaval. Yet nobody seemed to have thought so at the time. The connection between rural poverty and the impact of world trade was anything but obvious. Contemporaries had no reason to link the number of the village poor with the development of commerce in the Seven Seas. The inexplicable increase in the number of the poor was almost generally put down to the method of Poor Law administration, and not without some good cause. Actually, beneath the surface, the ominous growth of rural pauperism was directly linked with the trend of general economic history. But this connection was still hardly perceptible. Scores of writers probed into the channels by which the poor trickled into the village, and the number as well as the variety of reasons adduced for their appearance was amazing. And yet only a few contemporary writers pointed to those symptoms of the dislocation which we are used to connect with the Industrial Revolution. Up to 1785 the English public was unaware of any major change in economic life, except for a fitful increase of trade and the growth of pauperism.

  Where do the poor come from? was the question raised by a bevy of pamphlets which grew thicker with the advancing century. The causes of pauperism and the means of combating it could hardly be expected to be kept apart in a literature which was inspired by the conviction that if only the most apparent evils of pauperism could be sufficiently alleviated it would cease to exist altogether. On one point there appears to have been general agreement, namely, on the great variety of causes that accounted for the fact of the increase. Among them were scarcity of grain; too high agricultural wages, causing high food prices; too low agricultural wages; too high urban wages; irregularity of urban employment; disappearance of the yeomanry; ineptitude of the urban worker for rural occupations; reluctance of the farmers to pay higher wages; the landlords’ fear that rents would have to be reduced if higher wages were paid; failure of the workhouse to compete with machinery; want of domestic economy; incommodious habitations; bigoted diets; drug habits. Some writers blamed a new type of large sheep; others, horses which should be replaced by oxen; still others urged the keeping of fewer dogs. Some writers believed that the poor should eat less, or no, bread, while others thought that even feeding on the “best bread should not be charged against them.” Tea impaired the health of many poor, it was thought, while “home-brewed beer” would restore it; those who felt most strongly on this score insisted that tea was no better than the cheapest dram. Forty years later Harriet Martineau still believed in preaching the advantages of dropping the tea habit for the sake of relieving pauperism.* True, many writers complained of the unsettling effects of enclosures; a number of others insisted on the damage done to rural employment by the ups and downs of manufactures. Yet on the whole, the impression prevails that pauperism was regarded as a phenomenon sui generis, a social disease which was caused by a variety of reasons, most of which became active only through the failure of the Poor Law to apply the right remedy.

  The true answer almost certainly was that the aggravation of pauperism and the higher rates were due to an increase in what we would today call invisible unemployment. Such a fact would not be obvious at a time when even employment was, as a rule, invisible, as it necessarily was up to a point under cottage industry. Still there remain these questions: How to account for this increase in the number of the unemployed and underemployed? And why did the signs of imminent changes in industry escape the notice even of observant contemporaries?

  The explanations lies primarily in the excessive fluctuations of trade in early times which tended to cover up the absolute increase in trade. While the latter accounted for the rise in employment, the fluctuations accounted for the much bigger rise in unemployment. But while the increase in the general level of employment was slow, the increase in unemployment and underemployment would tend to be fast. Thus the building up of what Friedrich Engels called the industrial reserve army outweighted by much the creation of the industrial army proper.

  This had the important consequence that the connection between unemployment and the rise of total trade could be easily overlooked. While it was often remarked that the rise in unemployment was due to the great fluctuations in trade, it escaped notice that these fluctuations formed part of an underlying process of even greater amplitude, namely, a general growth of commerce increasingly based on manufactures. For the contemporaries there seemed to be no connection between the mainly urban manufactories and the great increase of the poor in the countryside.

  The increase in the aggregate of trade naturally swelled the volume of employment while territorial division of
labor combined with sharp fluctuations of trade was responsible for the severe dislocation of both village and town occupations, which resulted in the rapid growth of unemployment. The distant rumor of large wages made the poor dissatisfied with those which agriculture could afford, and it created a dislike for that labor as poorly recompensed. The industrial regions of that age resembled a new country, like another America, attracting immigrants by the thousand. Migration is usually accompanied by a very considerable remigration. That such a reflux toward the village must have taken place seems to find support also in the fact that no absolute decrease of the rural population was noted. Thus a cumulative unsettling of the population was proceeding as different groups were drawn for varying periods into the sphere of commercial and manufactural employment, and then left to drift back to their original rural habitat.

  Much of the social damage done to England’s countryside sprang at first from the dislocating effects of trade directly upon the countryside itself. The Revolution in Agriculture definitely antedated the Industrial Revolution. Both enclosures of the common and consolidations into compact holdings, which accompanied the new great advance in agricultural methods, had a powerfully unsettling effect. The war on cottages, the absorption of cottage gardens and grounds, the confiscation of rights in the common deprived cottage industry of its two mainstays: family earnings and agricultural background. As long as domestic industry was supplemented by the facilities and amenities of a garden plot, a scrap of land, or grazing rights, the dependence of the laborer on money earnings was not absolute; the potato plot or “stubbing geese,” a cow or even an ass in the common made all the difference; and family earnings acted as a kind of unemployment insurance. The rationalization of agriculture inevitably uprooted the laborer and undermined his social security.