Monday, December 21, 2009

The Labour Theory of Capitalism; or Rubes, Rednecks and Hicks: The Makers of the Modern World

Reading The Industrial Revolution, published this year, and written by Lee Wyatt. It seems like an advanced undergraduate text, but general histories of this momentous event are surprisingly hard to come by. 

My long-running thesis is that "industrialization" had little to do, at first, with inventions such as the steam engine. Instead, it was the division of labour which was key. Wyatt hews to the "consensus" that machinery was essential to the industrial revolution, but presents evidence that suggests otherwise. 

The classic example of early division of labour was found, of course, in Adam Smith's Wealth of Nations, from 1776, in which is described a pin factory where work is "divided into a number of branches, of which the greater part are likewise peculiar trades. One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on, is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them." (page 8 in pdf text at link above) 

What Smith described was essentially a process of manual labour — very tedious and even strenuous labour — that went largely or wholly unaided by water- or steam-power at all. The classic case of the division of labour, very familiar to modern society, is the McDonald's restaurant. Established as a single outlet in California in the 1950s, it was the McDonald brothers' themselves who established the production-line approach to service (the title of a 1972 Harvard Business Review article by Theodore Levitt) that became characteristic of the later worldwide chain, when they eliminated wait-staff (including all female employees, who were presumed to be magnets for amorous punks), radically simplified the menu (eliminating any dish that required the use of a fork and knife), and of course, divided up the responsibilities for the cooking and cashiering between several more people than would normally be employed at a hamburger joint — staffing levels made affordable by the very low wages paid for the work. 

This is, I think, "industrial revolution" in a nutshell. Like any instance of the division of labour, a McDonald's (or any fast-food) restaurant results in the de-skilling of work. McDonald's has long been the byword for low-paid, low-skill work (the "McJob") that doesn't require much talent or even brightness at all. Wages are evaluated so meagrely precisely because "any idiot" can do a McJob. It works out from the employer's point of view, because employees who quit or grow insubordinate can be quickly replaced by the next idiot. The key point is that McDonald's has never employed actual powered-machinery to achieve the "assembly-line" levels of productivity that made it the global success that it remains. Of course, the original McDonald's restaurant no doubt employed the most up-to-date appliances and other technology for fast-food production. However, in this respect, it was no different than hundreds, and even thousands, of competitors at the time. Where it was dissimilar was in the utilization of the manual labour of making hamburgers and french-fries. The McDonald's division of labour rapidly increased hamburger-productivity, and with it, the profits from selling fast-food. Eventually, of course, it was this method which resulted in billions and billions in profits, from "serving millions and millions" all around the world. 

It was the same with the pin factory and similar efforts at the division of labour in industrializing Britain. It allowed — unaided in large part by machinery — for a workforce of ten to "make among them upwards of forty-eight thousand pins in a day," as Smith described it. He went on: "Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations." (Wealth of Nations, page 9 of above pdf text) 

The steam engine and other engineered machinery came to be employed for productive purposes, because of the division of labour, rather than the latter being a consequence of the former. The division of labour was made possible in turn, by the widespread acceptance of wage-labour. It is the chief reason why Britain became the first industrialized country. 

There, far more than on the Continent, the feudal system had given way to enclosure, and landowners cleared their possessions of wastelands and peasantry, to farm cash crops and raise livestock. The nobility converted themselves into agrarian capitalists (the word "firm" comes from "farm"), and the toiling masses were converted into wage-labourers. 

The rural proletariat of the early-modern period were doubtless no better off than the peasantry of the Middle Ages. However, the enclosure of farmlands vastly increased agricultural productivity, thereby causing a decrease in the price of basic staples. This is the reason, too, why wages in the agricultural sector remained so pitifully low. 

However, the capitalization of the agricultural industry was also the spur for innovation and improvement in farming techniques (such as those introduced in the early eighteenth century by the pioneer agronomist Jethro Tull). These innovations, in turn, boosted productivity all the more, thereby making food staples all the more cheaper. This had the effect of boosting population in Britain considerably (an increase of thirty-three percent to nine million between 1700 and 1790), while higher productivity and a larger workforce continued to depress wages. 

According to Wyatt, already by 1700, the proportion of the workforce involved in the agricultural sector was considerably smaller than in the major European nations: "... in 1600 the average farmer in Great Britain had produced enough food to support his family and half an additional one. By 1800 that same farmer could feed his own family and one and one-half more. By the mid-19th century, Great Britain had the lowest proportion of its workforce in agriculture than any other country in the entire world." 

At that time, according to Wyatt, only 22% of the British workforce was involved in farming. It was the "surplus" non-farming population which supplied the workforce for the early manufactories, in the textiles and other industries (such as pin-making) — not to mention the markets for the cheap (in price and quality) goods that were produced from this process. It is no coincidence that the factory system developed in the very areas (namely, the midlands and north of England) where enclosure was pursued most vigorously and successfully (Wyatt points out that not all, or even the vast majority of efforts at enclosure were carried out off). It shows how industrialization, at least in its early stages, represents not the colonization of the metropole by the hinterlands, but rather, the reverse: factory-industry developed initially far from the centres of power, culture and influence, eventually drawing metropolitan areas into its orbit. This is why, as Wyatt points out, the five largest cities after London in 1800 — Manchester, Liverpool, Birmingham, Leeds, and Sheffield — were small towns or mere villages in 1600. No coincidence again, that all of these were major manufacturing centres at the turn of the nineteenth century. 

This pattern held, too, for the United States, which in 1800 could be considered one vast hinterland, in relation to the economic might of its former colonial master, Great Britain. The American industrial revolution, though, took place largely away from the old centres of power — Boston, New York city, Philadelphia, Washington, Atlanta and so on — in backwater places that later became Pittsburgh, Detroit, Chicago (which grew from a population of 250 in 1833 to three quarters of a million at the time of the great fire in 1871), Indianapolis, and Los Angeles. Manufacturing that did take place in the states that were the original Thirteen Colonies, was concentrated away from larger centres: rural New Jersey, Connecticut or New York upstate instead of New York city, Lowell, Massachusetts instead of Boston, Pittsburgh instead of Philadelphia. 

I believe conventional historical understanding of the past is mistaken, as well, in respect to the the notion that machine-industrialization (in Britain) as elsewhere, developed under "laissez-faire" or "invisible-hand" conditions. Manufacturing under division-of-labour conditions was, in eighteenth-century Britain, largely accomplished without government intervention. 

However, as Wyatt himself notes, until the Revolutionary/Napoleonic wars near the close of the eighteenth century, British industrialization was not characterized by the sort of the heavy, steam- or coal-driven machinery that would characterize factory work in the nineteenth and into the twentieth centuries: "In reality, until the 19th century the large factory was not the common sight in industrial districts, as most mills were essentially just more sophisticated workshops of the past." 

The latter form of factory industry occurred in Britain, as elsewhere, due to deliberate government involvement in the economy — whether to fight war or a result of a dirigiste economic policy (ie., as in later nineteenth-century France, Germany, Japan and, much later, Soviet Russia). 

The idea that government subsidy and other forms of intervention were necessary for factory-industry to grow was one of the few areas of agreement between Thomas Jefferson, the third U.S. president and advocate of an agrarian-yeoman republic, and Alexander Hamilton, the Caribbean-born American revolutionary and later the first Secretary of the Treasury, who advocated an industrial policy

They simply disagreed as to how desirable such intervention was. Hamilton pursued industrial development both in and out of government. 

As a private citizen, though, Hamilton acted not merely as a venture investor, but as a lobbyist to federal and state government for subsidies and trade restrictions which would help industry develop. Eventually, he and others entered into partnership with the New Jersey government, encouraging industrial activity in a remote area that eventually became the city of Paterson. Hamilton's efforts were, as it turns out, largely desultory, and the United States remained an agrarian nation until another form of government intervention in the civilian economy — the American civil war — sparked a real machine-industrial revolution. 

The division of labour itself, while made practicable by the existence of wage-labour as the standard form of contract (to the exclusion also of slavery), is a by-product of analytical consciousness, given such potency in modern times by the printing press, optical technologies such as telescopes, abstract-icons such as graphs, maps and clocks — timepieces especially. 

The factory itself has been described as an extension of the clock, and even before the introduction of heavy-machinery into the factory workplace, the division of labour itself was dependent upon the iron rule of the clock. The factory system's dependence upon rationality is behind the split between bourgeois and proletariat. Lord Bertrand Russell once remarked that all work consists of rearranging matter at or near the surface of the earth, and telling others to do so. The division of labour demands that a portion of the workforce must carry out tasks which are repetitive, tedious, and even robotic in nature, requiring little in the way of skill and intelligence. 

But the variegated, particularized activities of the factory demand also highly cerebral and calculative oversight — that part of the workforce which is now referred to as "management." This is the bourgeoisie, a class that once consisted largely of the direct owners of capital, but which is now made up of professional delegates of those in ownership. This basic split between worker and management, is as inevitable under the division of labour as that between lord and peasant under feudalism. 

The distinction persists even where, as in the advanced capitalist countries, a unionized worker in heavy industry (such as an automobile plant) can expect to make as much (or often much more) than many belonging to management. The class division in industrial society arises, as Marx said, in how the proletariat and bourgeoisie approach work or labour. It persists even where ownership of capital, or machine-engineering, is in the hands of the state. Marx and Engels argued that the abolition of capital would eliminate the division of labour. 

But productive wealth is based on this division. Rendering the factory system more "humane", eliminates the productivity that is the whole point of the division of labour. In the Soviet Union or any other industrialized Communist country, the division of labour was not abolished, of course, and inevitably, a managerial class emerged — the nomenclatura — which simply became the "new boss, the same as the old boss", or rather, much worse than the old boss. 

The abolition of command socialism has met with contrasting results in the two major Communist states of the twentieth century, China and Russia. Twenty years ago, the expectation might have been that Russia, which had already undergone full urbanization and industrialization, would quickly become a Westernized, developed liberal democracy after not too many years. 

China, on the other hand, was still very poor, with a vast population and Communist leadership that, while promoting economic liberalism, was ready to shoot down its own young people in the heart of the capital, Beijing, rather than submit to political reform. Instead, Chinese industrial growth zoomed far ahead not only of Russia or any other former Communist state, but also the Japanese "superstate", as well as every country in the world except for the United States, which in turn became the market for the export industries that sprang up in China during the 1990s and the new century. In the meantime, Russia went into near collapse. Not only its industrial base, but its birth rate and life expectancy went into free-fall during the ‘90s, the government unable to restore order or even to remain in office for very long, until the turn of the century when the state was taken over by a former KGB colonel. 

The conventional explanation for this divergence, is that in China, unlike Russia, the Communist party did not relinquish political control, instead abjuring political reform in favour of economic liberalization, while Russia did the opposite. 

In an article published by the Hoover Institute at Stanford university, Paul Gregory and Kate Zhou argue that the dissimilar paths taken by the two largest former Communist states, have different sources. In sum, the authors state that in China, unlike Russia, traditions of single-family ownership of farms were very ancient, an endured in spite of the period of collectivization of agriculture. 

Gregory and Zhou submit that, when privatization of land holdings came to Russia, the workforce was reluctant to depart from the security of the farm collective. But in China, the authors argue that it was the peasantry which led the way to economic reform, setting up illegal private farming operations following the lifting of totalitarian oppression after the death of Mao Tse-tung in 1976, and the removal of his radical allies the "gage of four" (including Mao's widow) thereafter. 

In contrast to China, Russia had by the time of Gorbachev's reforms experienced more than three decades of (relative) stability and (relative) liberality following the death of Stalin, Zhou and Gregory write that when reforms came in the late ‘70s, "a large percentage of the population was recovering from the catastrophes of the Mao years. Rural dwellers, in particular, had witnessed the chaos of the Great Leap and had seen their parents and children die from starvation during the 1958–61 famine. They learned they had to take care of themselves." 

In the 1980s, as Mikhail Gorbachev was offering 50-year leases of land to a resisting rural workforce, Chinese peasants "began to quietly distribute the land, with each family delivering production for the state quota. Gorbachev called for decollectivization from above; China's farmers decollectivized spontaneously from below. They created their own `contract responsibility system,' initially at risk of severe punishment. There were no leaders; there were no face-to-face confrontations. ... As agricultural production soared, Deng Xiaoping and his party realized they could not resist and could take advantage of something that was working." 

That economic reform originated in the Chinese countryside is not in dispute. There, as in Britain and the United States in the past, industrialization originated in the rural regions, before spreading to the major centres. 

Gregory and Zhou observe that in Russia in the Gorbachev era, "the farm population had shrunk to a quarter of its former size; only older workers remained, working perfunctorily on state land or tending their private plots. They had long been converted into wage workers and received pensions and socialized medical care, albeit of a low quality. In China, rural dwellers accounted for 80 percent of the population; compared to Russian farmers they were young and vibrant. They lived without the social guarantees of Russian farmers. In China, only the young had not experienced private agriculture. Small private plots had existed in China for 2,000 years." 

When, in the 1980s, both Russia and China began to privatize its non-agricultural sector, Russian entrepreneurs came largely from the city, but "China's first entrepreneurs hailed primarily from the countryside, and they got their start by marketing farm products in the cities. Private trade developed in China at the grassroots level, emerging from rural regions and prospering because it filled a vital need. The rural contract responsibility system created huge agricultural surpluses which had to be marketed outside the state system. Farm products had to be moved over long distances, either directly or through intermediaries — in violation of laws and without contracts that could be enforced in courts." 

Zhou and Gregory write, "China's early trader-entrepreneurs had to first overcome the problem of distance between producers and consumers. ... Throughout the early 1980s, farmers in north Jiangsu packed their bikes with chickens, ducks, and other fowl, crossed the Yangzi River, and shipped their products by rail to urban centers in the Yangzi basin. ... By 1983, the majority of consumers in major cities purchased their products in free markets rather than in government stores. Within one year (between 1979 and 1980), most state vegetable markets, except the highly subsidized Beijing and Shanghai markets, were out of business." 

By 2007, the authors note, the wealthiest Chinese citizen "was the daughter of a poor farmer from the southern province of Guangdong, whose family became wealthy after acquiring large tracts of land and distressed assets in the countryside, where there was no real estate business, in the early 1990s." Private firms, non-existent in 1978, numbered almost thirty million in 1997, with nearly one million corporate or joint ventures. Private capital consisted in that year two-thirds of GDP, again up from nothing almost thirty years earlier. 

Gregory and Zhou state, "Private business originated in agriculture, spread to the cities, and then returned to the countryside as rural-based industry. Many large private manufacturing firms developed in predominantly agricultural provinces (Zhejiang, Shandong, Guangdong, Hunan, and Sichuan). China's largest agribusiness, the Hoep Group, was founded by the Liu brothers, who left the city to found their company in a rural part of Sichuan province. Wang Guoduan, a rural entrepreneur from southern Guangdong province, built the largest refrigerator maker, Kelon Group; Huanyuan, China's largest air conditioner maker, is based in the agricultural province of Hunan. China's first automobile exports will likely come `from the agricultural hinterland of Anhui province...'." 

All this shows that the "capitalist" system is dependent upon the labour-factor of production, above all. Communist economics could productively organize both land and capital quite well — often better than capitalist economies (witness of the superiority of initial Soviet space technology or the MiG jet-fighter over its Western counterparts). Economic history has shown that the free market, or "invisible hand" is wont to invest in complex or engineered-machinery, i.e. productive capital, before its utility is proven by state investment in such machinery, either for war-making or as official economic policy. 

Communist economies, which have the workforce dictating the productive decisions, fail in their inability to properly organize the labour factor of production. As mentioned, Communism did not and could not abolish the division of labour. However, the organization of the workforce in this manner had desultory results, just because of the inability for command socialism to properly serve and service the vast capital infrastructure. A worker's wages could buy nothing beyond staples, and anyone was rewarded thereof regardless of how hard or little one worked (rewards came through other means, such as acting as an informant on others). As factory and industrial work generally has little inherent reward, most people chose not to work beyond what was necessary.


  1. Thanks for the missive. Both here and over at my blog. I only found it by chance because the update mechanism that notifies of comments was not working. Uggh.

    In any case, Merry Christmas.

  2. Rubes, Rednecks, and Hicks indeed!

    All these icky types who helped forge the modern world!

    BTW--I took the liberty of adding you to the blogroll for easy access for myself as well as others. Makes things less hairy. Enjoyed your analyses (I tell people, "Yes, Virginia, there really IS a plural of that word" lol)
    so far!


  3. Oh, BTW--I added a widget to the site that now allows for following. At least I THINK it works at this point...