Monday, October 26, 2015

Karl Polanyi: The Social Crisis of Poverty and Commodity Labor

The Austrian Karl Polanyi wrote The Great Transformation: The Political and Economic Origins of Our Time in the Second World War while a refugee from fascist Europe in Britain and the US.

In "Capitalism as a Utopian Movement" we discussed Polanyi's argument that capitalism was an ideological movement.

In "Great Depression Failure of the English System" Polanyi explains why the the "self-regulated market" and the gold standard failed in the years after World War I.

In "History of Exchange Prior to the Modern Market" Polanyi tells us that humans in the pre-market world lived perfectly happily without markets for everything.

In "The Self Regulating Market and Its Fictions" Polanyi talks about the commodification of labor, land, and money as "fictions."

In "Speenhamland and the Poor Law" Polanyi looked at how that the Speenhamland welfare law lowered wages in Napoleonic era England.

Now he sets the Speenhamland laws in context, between the era of labor regulated by the Elizabethan Poor Law and Statute of Artificers and the Poor Law Reform Act of 1834 that passed immediately after the middle class came to political power through the Reform Bill of 1832 and plunged the working poor into a full-scale labor market.

The Statute of Artificers was passed in 1563 and "enforced labor, seven years apprenticeship, and yearly wage assessment by public officials." After about a century its provisions became less rigorously enforced and the wage and apprenticeship clauses were repealed in 1813 and 1814.

The Poor Law covered the relief of all those -- unemployed, aged, infirm, and orphaned -- in a society where "there was a place for every Christian." Beggary and vagrancy were severely punished. But a further Act of Settlement and Removal was passed after 1660 to prevent the poor from moving around because the poor naturally moved to parishes with the best benefits. In 1795, as the Industrial Revolution was getting into gear, this "parish serfdom was abolished" and labor mobility restored. At the same time the Elizabethan "enforced labor" system was ended and replaced by a "right to live" under Speenhamland. On the one hand the government was setting up a national labor market; on the other hand it was destroying the labor market by subsidizing wages with "grants-in-aid of wages.

This all may seem clueless. That's because it was.
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.
Indeed, people were expecting "a permanent recession of foreign trade" just as the world lurched "toward a planetary economy." Instead, everyone was concerned about the rise of pauperism, and wondering where the poor came from and writers were found aplenty to come up with wacky ideas to explain everything.

Polanyi inclines towards Engels' theory of the "industrial reverse army" under which the slow increase of overall employment was masked by the sudden increases in unemployment caused by fluctuations in trade.

But nothing can hide the fact of brutal transformation. On the one hand, "Speenhamland was an unfailing instrument of popular demoralization...  an automaton for demolishing the standards on which any kind of society could be based", encouraging shirking and trapping the poor in the poorhouse. But then Speenhamland was repealed in 1834 in a sudden move that pitched the entire working class into the wage system "making nonsense of the legend of English gradualism... The memory of that brutal shock haunted for generations the British working class.
In 1834 industrial capitalism was ready to be started, and Poor Law Reform was ushered in. 
Speenhamland had protected the laborers against "the full force of the market mechanism" but had "eaten into the marrow of society." Yet reform led to a "denial of responsibility" by the well-to-do. "Unheard-of wealth" combined with "unheard-of poverty." Pro-market activists proclaimed that science showed how the world worked, and removed compassion and human solidarity "in the name of the greatest happiness of the greatest number."

"Human labor had to be made a commodity", and the reactionaries "tried in vain to resist." It was a blind rush into a "utopian market economy."

But where had the poor come from?
It was in the first part of the sixteenth century that the poor first appeared in England; they became conspicuous as individuals unattached to the manor, "or to any feudal superior"[.]
The poor were experienced at that time as a hostile army: hence the Poor Law. But by the 18th century the poor were "merely a burden on the rates" and writers were generally agreed that poverty came with increased trade: "pauperism and progress were inseparable."

Everyone had an idea about what to do about the unemployed poor. The Quakers proposed "Colleges of Industry" It was the first of numerous plans to make the poor profitable. Jeremy Bentham proposed using the poor to run machinery; his Panopticon was a way to run prisons on a cost-effective plan. Robert Owen revived the Quaker plan and called it Villages of Union.  Nothing seemed to work, and meanwhile the cost of the poor kept going up, from 400,000 pounds in 1696 to 8 million pounds in 1818.

Meanwhile men like Adam Smith were coming to think that they knew how the "economy" worked. On his system "Self-interest merely prompts us to do what, intrinsically, will also benefit others". On the other hand were those like Joseph Townsend who reckoned that "it is the quantity of food which regulates the number of the human species." Edmund Burke had a different concern. He saw a link between the security of white slave masters in the West Indies and the security of the better classes in England. All in all, the Smithian notion of self-interest could combine with Townsend's notion of the natural limit of population and the need for security and end up with a policy that farmed out the poor to factories where "'the more persistent and more minutely detailed authority of the employer' took the place of the government's and the parish's enforcement of work."

Whereas Adam Smith seemed to prophesy an overall increase in prosperity, the Townsend idea and the growing ranks of paupers helped popularize the iron law of wages  that explained why wages stayed at bare subsistence level. It was not till a century after Smith that it was "clearly realized that under a market system the factors of production shared in the product".

"One man alone" understood the "meaning of the ordeal" of the working man, writes Polanyi, and that man was Robert Owen. He rejected the "animalistic approach" of the iron law of wages. But he also rejected the individualism of Christianity, that made men "incapable of union though all eternity."
[Owen's] socialism, one might say, was based on a reform of human consciousness to be reached through the recognition of the reality of society.
Society was the reality, not the individual. And to Owen,
the general diffusion of manufactures... generates a new character in its inhabitants... on a principle quite unfavorable to individual and general happiness [and] it will produce the most lamentable and permanent evils, unless its tendency be counteracted by legislative interference and direction.
Polanyi now proceeds to the discussion of this tug of war, between the market economy and legislative intervention, in "Part II. Self-Protection of Society."  It is the next exciting installment in this review. 

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