The Great Transformation

by Karl Polanyi

  T O C H A P T E R S E V E N

  8. The Literature of Speenhamland

  Only at the beginning and the end of the age of liberal capitalism do we find a consciousness of the decisive importance of Speenhamland. There was, of course, both before and after 1834 constant reference to the “allowance system” and the “maladministration of the Poor Law” which were, however, usually dated not from Speenhamland, 1795, but from Gilbert’s Act, 1782, and the true characteristics of the Speenhamland system were not clearly established in the mind of the public.

  Nor are they even today. It is still widely held that it simply meant indiscriminate poor relief. Actually, it was something entirely different, namely, systematic aid-in-wages. It was only partially recognized by contemporaries that such a practice was in head-on collision with the principles of Tudor law, nor was it realized by them at all that it was completely incompatible with the emerging wages system. As to the practical effects, it remained unnoticed until later that—in conjunction with the Anti-Combination Laws, 1799–1800—it tended to depress wages, and to become a subsidy to employers.

  The classical economists never stopped to investigate into the details of the “allowance system” as they did in the case of rent and currency. They lumped all forms of allowance and outdoor relief with the “Poor Laws,” and pressed for their abolishment root and branch. Neither Townsend, Malthus, nor Ricardo advocated a reform of the Poor Law; they demanded its repeal. Bentham, who alone had made a study of the subject, was on this matter less dogmatic than on others. Burke and he understood what Pitt had failed to see, that the truly vicious principle was that of aid-in-wages.

  Engels and Marx made no study of the Poor Law. Nothing, one would imagine, should have suited them better than to show up the pseudo-humanitarianism of a system which was reputed to pander to the whims of the poor, while actually depressing their wages under the subsistence level (powerfully assisted in this by a special anti-trade-union law), and handing public money to the rich in order to help them to make more money out of the poor. But by their time the New Poor Law was the enemy, and some Chartists naturally tended to idealize the Old. Moreover, Engels and Marx were rightly convinced that if capitalism was to come, the reform of the Poor Law was inevitable. So they missed not only some first-class debating points, but also the argument with which Speenhamland reinforced their theoretical system, namely, that capitalism could not function without a free labor market.

  For her lurid descriptions of the effects of Speenhamland, Harriet Martineau drew profusely on the classic passages of the Poor Law Report (1834). The Goulds and Barings who financed the sumptuous little volumes in which she undertook to enlighten the poor about the inevitability of their misery—she was deeply convinced that it was inevitable and that knowledge of the laws of political economy alone could make their fate bearable to them—could not have found a more sincere and, on the whole, better-informed advocate of their creed (Illustrations to Political Economy, 1831, Vol. III; also The Parish and The Hamlet in Poor Laws and Paupers, 1834). Her Thirty Years’ Peace, 1816–1846, was composed in a chastened mood and showed more sympathy toward the Chartists than toward the memory of her master, Bentham (Vol. III, p. 489, and Vol. IV, p. 453). She concluded her chronicle with this significant passage: “We have now the best heads and hearts occupied about this great question of the rights of labour with impressive warnings presented to us from abroad that it cannot be neglected under a lighter penalty than ruin to all. Is it possible that the solution should not be found? This solution may probably be the central fact of the next period of British history; and then better than now it may seem that in preparation for it lies the chief interest of the preceding Thirty Years’ Peace.” This was delayed-action prophecy. In “the next period of British history” the labor question ceased to exist; but it came back in the 1870s, and another half-century later it became a world question. Obviously, it was easier to discern in the 1840s than in the 1940s that the origins of that question lay in the principles governing the Poor Law Reform Act.

  Right through the Victorian Age and after, no philosopher or historian dwelled on the petty economics of Speenhamland. Of the three historians of Benthamism, Sir Leslie Stephen did not trouble to inquire into its details; Elie Halevy, the first to recognize the pivotal role of the Poor Law in the history of philosophic radicalism, had only the haziest notions on the subject. In the third account, Dicey’s, the omission is even more striking. His incomparable analysis of the relations between law and public opinion treated “laissez-faire” and “collectivism” as the woof and warp of the texture; the pattern itself, he believed, sprang from the industrial and business trends of the time, that is, from the institutions fashioning economic life. No one could have stressed more strongly than Dicey the dominant role played by pauperism in public opinion nor the importance of the Poor Law Reform in the whole system of Benthamite legislation. And yet he was puzzled by the central importance assigned to the Poor Law Reform by the Benthamites in their legislative scheme and actually believed that the burden of the rates on industry was the point in question. Historians of economic thought of the rank of Schumpeter or Mitchell analysed the concepts of the classical economists without any reference to Speenhamland conditions.

  With A. Toynbee’s lectures (1881) the Industrial Revolution became a subject of economic history; Toynbee made Tory Socialism responsible for Speenhamland and its “principle of the protecting of the poor by the rich.” About this time William Cunningham turned to the same subject and as by miracle it came to life; but his was a voice in the wilderness. Though Mantoux (1907) had the benefit of Cunningham’s masterpiece (1881) he referred to Speenhamland as just “another reform” and curiously enough credited it with the effect of “chasing the poor into the labour market” (The Industrial Revolution in the Eighteenth Century, p. 438). Beer, whose work was a monument to early English socialism, hardly mentioned the Poor Law.

  It was not until the Hammonds (1911) conceived the vision of a new civilization ushered in by the Industrial Revolution that Speenhamland was rediscovered. With them it formed a part not of economic but of social history. The Webbs (1927) continued this work, raising the question of the political and economic preconditions of Speenhamland, conscious of the fact that they were dealing with the origins of the social problems of our own time.

  J. H. Clapham endeavored to build up a case against what might be called the institutionalist approach to economic history such as Engels, Marx, Toynbee, Cunningham, Mantoux, and, more recently, the Hammonds, represented. He refused to deal with the Speenhamland system as an institution and discussed it merely as a trait in the “agrarian organization” of the country (Vol. I, Ch. 4). This was hardly adequate since it was precisely its extension to the towns which brought down the system. Also, he divorced the effect of Speenhamland on the rates from the wage issue and discussed the former under “Economic Activities of the State.” This, again, was artificial and omitted the economics of Speenhamland from the point of view of the employers’ class which benefited by low wages as much or more than it lost on the rates. But Clapham’s conscientious respect for the facts made up for his disregard of the institution. The decisive effect of “war enclosures” on the area in which the Speenhamland system was introduced, as well as the actual degree to which real wages were depressed by it, was shown for the first time by him.

  The utter incompatibility of Speenhamland with the wage system was permanently remembered only in the tradition of the economic liberals. They alone realized that, in a broad sense, every form of the protection of labor implied something of the Speenhamland principle of interventionism. Spencer hurled the charge of “make-wages” (as the allowance system was called in his part of the country) against any “collectivist” practices, a term which he found no difficulty in extending to public education, housing, the provision of recreation grounds, and so on. Dicey, in 1913, summed up his criticism of the Old Age Pensions Act (1908) in the words: “It is in essenc
e nothing but a new form of outdoor relief for the poor.” And he doubted whether economic liberals ever had a fair chance of bringing their policy to a successful issue. “Some of their proposals have never been carried into effect; outdoor relief, for example, has never been abolished.” If such was Dicey’s opinion, it was only natural that Mises maintained “that as long as unemployment benefit is paid, unemployment must exist” (Liberalism, 1927, p. 74); and that “assistance to the unemployed has proved to be one of the most effective weapons of destruction” (Socialism, 1927, p. 484; Nationalökonomie, 1940, p. 720). Walter Lippmann in his Good Society (1937) tried to dissociate himself from Spencer, but only to invoke Mises. He and Lippmann mirrored liberal reaction to the new protectionism of the 1920s and 1930s. Undoubtedly, many features of the situation now recalled Speenhamland. In Austria unemployment benefit was being subsidized by a bankrupt Treasury; in Great Britain “extended unemployment benefit” was indistinguishable from the “dole”; in America WPA and PWA had been launched; actually Sir Alfred Mond, head of Imperial Chemical Industries, vainly advocated in 1926 that British employers should receive grants from the unemployment fund in order to “make up” wages and thus help to increase employment. On the unemployment issue as on the currency issue, liberal capitalism in its death throes was faced with the still unsolved problems bequeathed to it by its beginnings.

  9. Poor Law and the Organization of Labor

  No inquiry has yet been made into the wider implications of the Speenhamland system, its origins, its effects and the reasons of its abrupt discontinuance. Here are a few of the points involved.

  1. To what extent was Speenhamland a war measure?

  From the strictly economic point of view, Speenhamland can not truly be said to have been a war measure, as has often been asserted. Contemporaries hardly connected the wages position with the war emergency. In so far as there was a noticeable rise in wages, the movement had started before the war. Arthur Young’s Circular Letter of 1795, designed to ascertain the effects of the failure of crops on the price of corn contained (point IV) this question: “What has been the rise (if any) in the pay of the agricultural labourers, on comparison with the preceding period?” Characteristically, his correspondents failed to attach any definite meaning to the phrase “preceding period.” References ranged from three to fifty years. They included the following stretches of time:

  3 years

  J. Boys, p. 97.

  3–4 years

  J. Boys, p. 90.

  10 years

  Reports from Shropshire, Middlesex, Cambridgeshire.

  10–15 years

  Sussex and Hampshire.

  10–15 years

  E. Harris.

  20 years

  J. Boys, p. 86.

  30–40 years

  William Pitt.

  50 years

  Rev. J. Howlett.

  No one set the period at two years, the term of the French War, which had started in February 1793. In effect, no correspondent as much as mentioned the war.

  Incidentally, the usual way of dealing with the increase in pauperism caused by a bad harvest and adverse weather conditions resulting in unemployment consisted (1) in local subscriptions involving doles and distribution of food and fuel free or at reduced cost; (2) in the providing of employment. Wages remained usually unaffected; during a similar emergency, in 1788–89 additional employment was actually provided locally at lower than the normal rates. (Cf. J. Harvey, “Worcestershire,” in Ann. of Agr., v, XII, p. 132, 1789. Also E. Holmes, “Cruckton,” I.c., p. 196.)

  Nevertheless, it has been assumed with good cause that the war had, at least, an indirect bearing on the adoption of the Speenhamland expedient. Actually, two weaknesses of the rapidly spreading market system were being aggravated by the war and contributed to the situation out of which Speenhamland arose: (1) the tendency of corn prices to fluctuate, (2) the most deleterious effect of rioting on these fluctuations. The corn market, only recently freed, could hardly be expected to stand up to the strain of war and threats of blockade. Nor was the corn market proof against the panics caused by the habit of rioting which now took on an ominous import. Under the so-called regulative system, “orderly rioting” had been regarded by the central authorities more or less as an indicator of local scarcity which should be handled leniently; now it was denounced as a cause of scarcity and an economic danger to the community at large, not least to the poor themselves. Arthur Young published a warning on the “Consequences of rioting on account of the high prices of food provisions” and Hannah More helped to broadcast similar views in one of her didactic poems called “The Riot, or, Half a loaf is better than no bread” (to be sung to the tune of “A Cobbler there was”). Her answer to the housewives merely set in rhymes what Young in a fictitious dialogue expressed thus: “ ‘Are we to be quiet till starved?’ Most assuredly you are not—you ought to complain; but complain and act in such a manner as shall not aggravate the very evil that is felt.” There was, he insisted, not the slightest danger of a famine “provided we are free of riots.” There was good reason for concern, the supply of corn being highly sensitive to panic. Moreover, the French Revolution was giving a threatening connotation even to orderly riots. Though fear of a rise in wages was undoubtedly the economic cause of Speenhamland, it may be said that, as far as the war was concerned, the implications of the situation were far more social and political than economic.

  2. Sir William Young and the relaxation of the Act of Settlement

  Two incisive Poor Law measures date from 1795: Speenhamland and the relaxation of “parish serfdom.” It is difficult to believe that this was a mere coincidence. On the mobility of labor their effect was up to a point opposite. While the latter made it more attractive for the laborer to wander in search of employment, the former made it less imperative for him to do so. In the convenient terms of “push” and “pull” sometimes used in studies on migration, while the “pull” of the place of destination was increased, the “push” of the home village was diminished. The danger of a large-scale unsettlement of rural labor as a result of the revision of the Act of 1662 was thus certainly mitigated by Speenhamland. From the angle of Poor Law administration, the two measures were frankly complementary. The loosening of the Act of 1662 involved the risk which that Act was designed to avoid, namely the flooding of the “better” parishes by the poor. But for Speenhamland, this might have actually happened. Contemporaries made but little mention of this connection, which is hardly surprising once one remembers that even the Act of 1662 itself was carried practically without public discussion. Yet the conviction must have been present in the mind of Sir William Young, who twice sponsored the two measures conjointly. In 1795 he advocated the amendment of the Act of Settlement while he was also the mover of the 1796 bill by which the Speenhamland principle was incorporated in law. Once before, in 1788, he had in vain sponsored the same measures. He moved the repeal of the Act of Settlement almost in the same terms as in 1795, sponsoring at the same time a measure of relief of the poor which proposed to establish a living wage, two-thirds of which were to be defrayed by the employer, one-third to be paid from the rates (Nicholls, History of the Poor Laws, Vol. II). However, it needed another bad failure of the crops plus the French War to make these principles prevail.

  3. Effects of high urban wages on the rural community.

  The “pull” of the town caused a rise in rural wages and at the same time it tended to drain the countryside of its agricultural labor reserve. Of these two closely connected calamities, the latter was the more significant. The existence of an adequate reserve of labor was vital to the agricultural industry which needed many more hands in spring and October than during the slack winter months. Now, in a traditional society of organic structure the availability of such a reserve of labor is not simply a matter of the wage level, but rather of the institutional environment which determines the status of the poorer part of the population. In almost all known societies we find lega
l or customary arrangements which keep the rural laborer at the disposal of the landowner for employment at times of peak demand. Here lies the crux of the situation created in the rural community by the rise in urban wages, once status gave way to contractus.

  Before the Industrial Revolution there were important reserves of labor in the countryside: there was domestic or cottage industry which kept a man busy in winter while keeping him and his wife available for work in the fields in spring and autumn. There was the Act of Settlement which held the poor practically in serfdom to the parish and thereby dependent upon the local farmers. There were the various other forms under which the Poor Law made the resident laborer a pliable worker such as the labor rate, billeting or the roundsmen system. Under the charters of the various Houses of Industry a pauper could be punished cruelly not only at discretion, but actually in secret; sometimes the person seeking relief could be apprehended and taken to the House if the authorities who had the right of forcibly entering his place of abode in day-time found that he “was in want, and ought to be relieved” (31 Geo. III. c. 78). The death rate at such houses was appalling. Add to this the condition of the hind or borderer of the North, who was paid in kind and was compelled to help at any time in the fields, as well as the manifold dependencies that went with tied cottages and the precarious forms of land tenure on the part of the poor, and one can gauge the extent to which a latent reserve army of docile labor was at the disposal of rural employers. Quite apart from the wage issue, there was, therefore, the issue of the maintenance of an adequate agricultural labor reserve. The relative importance of the two issues may have varied at different periods. While the introduction of Speenhamland was intimately connected with the farmers’ fear of rising wages, and while the rapid spread of the allowance system during the later years of the agricultural depression (after 1815) was probably determined by the same cause, the almost unanimous insistence of the farming community in the early 1830s on the need for the retention of the allowance system, was due not to fear of rising wages, but to their concern about an adequate supply of readily disposable labor. This latter consideration cannot, however, have been quite absent from their minds at any time, especially not during the long period of exceptional prosperity (1792–1813) when the average price of corn was soaring and outstripped by far the rise in the price of labor. Not wages, but labor supply was the permanent underlying concern at the back of Speenhamland.