Karl Polyani



from The Great Transformation, Rinehart & Company, Inc, 1944



THE PROBLEM of poverty centered around two closely related subjects: pauperism and political economy. Though we will deal with their impact on modern consciousness separately, they formed part of one indivisible whole: the discovery of society. (103)

Up to the time of Speenhamland no satisfactory answer could be found to the question of where the poor come from. It was, however, generally agreed among eighteenth century thinkers that pauperism and progress were inseparable. The greatest number of poor is not to be found in barren countries or amidst barbarous nations, but in those which are the most fertile and the most civilized, wrote John M'Farlane, in 1782. Giammaria Ortes, the Italian economist, pronounced it an axiom that the wealth of a nation corresponds with its population; and its misery corresponds with its wealth (1774). And even Adam Smith in his cautious manner declared that it is not in the richest countries that the wages of labor are highest. M'Farlane was not, therefore, venturing an unusual view when he expressed his belief that as England had now approached the meridian of her greatness, the "number of poor will continue to increase." (M'Farlane, J., Enquiries Concerning the Poor, 1782. Cf. also Postlethwayt's editorial remark in the Universal Dictionary of 1757 on the Dutch Poor Law of 7th October, 1531) (103)

Again, for an Englishman to forecast commercial stagnation was merely to echo a widely held opinion. If the rise in exports during the half century preceding 1782 was striking, the ups and downs of trade were even more so. Trade was just starting to recover from a slump which had reduced export figures to the level of almost half a century before. To contemporaries the great expansion of trade and apparent growth of national prosperity which followed upon the Seven Years' War merely signified that England too had bad her chance after Portugal, Spain, Holland, and France. Her steep rise was now a matter of the past, and there was no reason to believe in the continuance of her progress, which seemed merely the result of a lucky war. Almost unanimously, as we saw, a falling off of trade was expected. (103)

In actual fact, prosperity was just round the corner, a prosperity of gigantic proportions which was destined to become a new form of life not for one nation alone but for the whole of mankind. But neither statesmen nor economists had the slightest intimation of its oncoming. As for the statesmen, this may have been a matter of indifference, as for another two generations the rocketing trade figures only dented the edge of popular misery. But in the case of the economists it was singularly unfortunate as their whole theoretical system was erected during this spate of "abnormalcy," when a tremendous rise in trade and production happened to be accompanied by an enormous increase in human misery - in effect, the apparent facts on which the principles of Malthus, Ricardo, and James Mill were grounded reflected merely paradoxical tendencies prevailing during a sharply defined period of transition. (104)

The situation was indeed puzzling. It was in the first half 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" and their gradual transformation into a class of free laborers was the combined result of the fierce persecution of vagrancy and the fostering of domestic industry which was powerfully helped by a continuous expansion of foreign trade. During the course of the seventeenth century there was less mention of pauperism, even the incisive measure of the Act of Settlement was passed without public discussion. When by the end of the century discussion revived, Thomas More's Utopia and the early Poor Laws were more than 150 years old, the dissolution of the monasteries and Kett's Rebellion were long forgotten. Some enclosing and "engrossing" had been going on all the time, for example, during the reign of Charles I, but the new classes as a whole had become settled. Also while the poor in the middle of the sixteenth century were a danger to society, on which they descended like hostile armies, at the end of the seventeenth century the poor were merely a burden on the rates. On the other hand, this was no more a semifeudal society but a semicommercial one, the representative members of which were favoring work for its own sake, and could accept neither the medieval view that poverty was no problem, nor that of the successful encloser that the unemployed were merely able-bodied idlers. From this time onward, opinions about pauperism began to reflect philosophical outlook, very much as theological questions had before. Views on the poor mirrored more and more views on existence as a whole. Hence, the variety and seeming confusion in these views, but also their paramount interest to the history of our civilization. (104, 105)

The Quakers, these pioneers in the exploration of the possibilities of modern existence, were the first to recognize that involuntary unemployment must be the outcome of some defect in the organization of labor. With their strong faith in businesslike methods they applied to the poor amongst themselves that principle of collective self-help which they occasionally practiced as conscientious objectors when wishing to avoid supporting the authorities by paying for their keep in prison. Lawson, a zealous Quaker, published an Appeal to the Parliament concerning the Poor that there be no beggar in England as a "Platforme," in which he suggested the establishment of Labor Exchanges in the modern sense of the public employment agency. This was in 1660; an "Office of Addresses and Encounters" had been proposed ten years before by Henry Robinson. But the Restoration government favored more pedestrian methods; the tendency of the Act of Settlement in 1662 was directly contrary to any rational system of labor exchanges, which would have created a wider market for labor; settlement - a term used for the first time in the Act - bound labor to the parish. (105)

After the Glorious Revolution (1688), Quaker philosophy produced in John Bellers a veritable prognosticator of the trend of social ideas of the distant future. It was out of the atmosphere of the Meetings of Sufferings, in which statistics were now often used to give scientific precision to religious policies of relief, that, in 1696, his suggestion for the establishment of "Colleges of Industry" was born, in which the involuntary leisure of the poor could be turned to good account. Not the principles of a Labor Exchange, but the very different ones of exchange of labor underlay this scheme. The former was associated with the conventional idea of finding an employer for the unemployed; the latter implied no less than that laborers need no employer as long as the can exchange their products directly. "The labor of the poor being the mines of the rich," as BeHers said, why should they not be able to support themselves by exploiting those riches for their own benefit, leaving even something over? All that was needed was to organize them in a "College" or corporation, where they could pool their efforts. This was at the heart of all later socialist thought on the subject of poverty, whether it took the form of Owen's Villages of Union, Fourier's Phalansteres, Proudhon's Banks of Exchange, Louis Blanc's Ateliers Nationaux, Lassalle's Nationale Werkstatten, or for that matter, Stalin's Five-Year Plans. Bellers' book contained in nuce most of the proposals that have been connected with the solution of this problem ever since the first appearance of those great dislocations that the machine produced in modern society. "This college-fellowship will make labor and not money, the standard to value all necessaries by......... “It was planned as "a College of all sorts of useful trades that shall work for one another without relief. ...” The thinking of labor-notes, self-help, and cooperation is significant. The laborers, to the number of three hundred, were to be self-supporting, and work in common for their bare existence, "what any doth more, to be paid for it." Thus subsistence rations and payment according to results were to be combined. In the case of some minor experiments of self-help the financial surplus had gone to the Meeting of Sufferings and was spent for the benefit of other members of the religious community. This surplus was destined to have a great future; the novel idea of profits was the panacea of the age. Bellers' national scheme for the relief of unemployment was actually to be run for profit by capitalists! In the same year, 1696, John Cary promoted the Bristol Corporation for the Poor, which, after some initial success failed to yield profits as did, ultimately, all other ventures of the kind. Yet Bellers' proposal was built on the same assumption as John Locke's labor-rate system, put forward also in 1696, according to which the village poor should be allocated to the local ratepayers for work, in the proportion in which these latter were contributing to the rates. This was the
origin of the ill-starred system of roundsmen practiced under Gilbert's Act. The idea that pauperism could be made to pay had firmly gripped people's minds. (105, 106)

It was exactly a century later that Jeremy Bentham, the most prolific of all social projectors, formed the plan of using paupers on a large scale to run machinery devised by his even more inventive brother, Samuel, for the working of wood and metal. "Bentham," says Sir Leslie Stephen, "had joined his brother and they were looking out for a steam engine. It had now occurred to them to employ convicts instead of steam." This was in 1794 ; Jeremy Bentham's Panopticon plan with the help of which gaols could be designed so as to be cheaply and effectively supervised had been in existence for a couple of years, and he now decided to apply it to his convict-run factory; the place of the convicts was to be taken by the poor. Presently the Bentham brothers' private business venture merged into a general scheme of solving the social problem as a whole. The decision of the Speenhamland magistrates, Whitbread's minimum wage proposal, and, above all, Pitt's privately circulated draft of a comprehensive Bill for the reform of the Poor Law made pauperism a topic among statesmen. Bentham, whose criticism of Pitt's Bill was supposed to have brought about its withdrawal, now came forward in Arthur Young's Annals with elaborate proposals of his own (1797). His Industry-Houses, on the Panopticon plan - five storeys in twelve sectors - for the exploitation of the labor of the assisted poor were to be ruled by a central board set up in the capital and modeled on the Bank of England's Board, all members with shares worth five or ten pounds having a vote. A text published a few years later ran: "(1) The management of the concerns of the poor throughout South Britain to be vested in one authority, and the expense to be charged upon one fund. (2) This Authority, that of a Joint-Stock Company under some such name as that of the National Charity Company." (Bentham, J., Pauper Management. First published 1797) No less than 250 Industry Houses were to be erected, with approximately 500,000 inmates. The plan was accompanied by a detailed analysis of the various categories of unemployed, in which Bentham anticipated by more than a century the results of other investigators in this field. His classifying mind showed its capacity for realism at its best. "Out of place hands" who had been recently dismissed from jobs were distinguished from such as could not find employment on account of "casual-stagnation"; "periodical stagnation" of seasonal workers was distinguished from “superseded hands," such as had been "rendered superfluous by the introduction of machinery" or, in even more modern terms, from the technologically unemployed; a last group consisted of "disbanded hands," another modern category brought into prominence, in Bentham's time, by the French war. The most significant category, however, was that of "casual-stagnation," mentioned above, which included not only craftsmen and artists exercising occupations "dependent upon fashion" but also the much more important group of those unemployed "in the event of a general stagnation of manufactures." Bentham's plan amounted to no less than the leveling out of the business cycle through the commercialization of unemployment on a gigantic scale. (106, 107)

Robert Owen, in 1819, republished Bellers' more than 120-year-old plans for the setting up of Colleges of Industry. Sporadic destitution had now grown into a torrent of misery. His own Villages of Union differed from Bellers’ mainly by being much larger, comprising 1,200 persons on as many acres of land. The committee calling for subscriptions to this highly experimental plan to solve the problem of unemployment included no less an authority than David Ricardo. But no subscribers appeared. Somewhat later, the Frenchman Charles Fourier was ridiculed for expecting day by day the sleeping-partner to invest in his Phalanstere plan, which was based on ideas very similar to those sponsored by one of the greatest contemporary experts on finance. And had not Robert Owens firm in New Lanark - with Jeremy Bentham as a sleeping- partner - become world-famous through the financial success of its philanthropic schemes? There was yet no standard view of poverty nor any accepted way of making profits out of the poor. (107, 108)

Owen took over from Bellers the labor-note idea and applied it in his National Equitable Labor Exchange in 1832; it failed. The closely related principle of economic self-sufficiency of the laboring class - also an idea of Bellers - was at the back of the famous Trades-Union movement in the next two years. The Trades-Union was a general association of all trades, crafts and arts, not excluding small masters, with the vague purpose of constituting them the body of society, in one peaceful manifestation. Who would have thought that this was the embryo of all violent One Big Union attempts for a hundred years to come? Syndicalism capitalism, socialism, and anarchism were indeed indistinguishable in their plans for the poor. Proudhon's Bank of Exchange, the first practical exploit of philosophical anarchism, in 1848, was , essentially, an outgrowth of Owen's experiment. Marx, the state-socialist, sharply assailed Proudhon's ideas and henceforth it was the state that would be called upon to supply the capital for collectivist schemes of this type, of which Louis Blanc's and Lassalle's went down to history. (108)

The economic reason why no money could be made out of the paupers should have been no mystery. It was given almost 150 years before by Daniel Defoe whose pamphlet, published in 1704, stalled the discussion started by Bellers and Locke. Defoe insisted that if the poor were relieved, they would not work for wages; and that if they were put to manufacturing goods in public institutions, they would merely create more unemployment in private manufactures. His pamphlet bore the satanistic title: Giving Alms no Charity and employing the Poor a Grievance to the Nation, and was followed by Doctor Mandeville's more famous doggerels about the sophisticated bees whose community was prosperous only because it encouraged vanity and envy, vice and waste. But while the whimsical doctor indulged in a shallow moral paradox, the pamphleteer had hit upon basic elements of the new political economy. His essay was soon forgotten outside the circles of "inferior politics," as problems of policing were called in the eighteenth century, while Mandeville's cheap paradox exercised minds of the quality of a Berkeley, Hume, and Smith. Evidently, in the first half of the eighteenth century mobile wealth was still a moral issue, while poverty was not yet one. The Puritan classes were shocked by the feudal forms of conspicuous waste which their conscience condemned as luxury and vice, while they had reluctantly to agree with Mandeville's bees that but for those evils commerce and trade would quickly decay. Later these wealthy merchants were to be reassured about the morality of business: the new cotton mills did not cater any more to idle ostentation but to drab daily needs, and subtle forms of waste developed which pretended to be less conspicuous while managing to be even more wasteful than the old. Defoe's jibe at the perils of relieving the poor was not topical enough to penetrate consciences preoccupied with the moral dangers of wealth; the Industrial Revolution was still to come. And yet, as far as it went, Defoe's paradox was a forecast of the perplexities to come: "Giving alms no charity" -
for in taking away the edge of hunger one hindered production and merely created famine; "employing the poor, a grievance to the nation" - for by creating public employment one merely increased the glut of the goods on the market and hastened the ruin of private traders. Between John Bellers, the Quaker, and Daniel Defoe, the time-serving journalist, between saint and cynic, somewhere around the turn of the seventeenth century, the issues were raised to which more than two centuries of work and thought, hope and suffering, were to provide the laborious solutions. (108, 109)

But at the time of Speenhamland the true nature of pauperism was still hidden from the minds of men. There was complete agreement on the desirability of a large population, as large as possible, since the power of the state consisted in men. There was also ready agreement on the advantages of cheap labor, since only if labor were cheap could manufactures flourish. Moreover, but for the poor, who would man the ships and go to the wars? Yet, there was doubt whether pauperism was not an evil after all. And in any case, why should not paupers be as profitably employed for public profit as they obviously were for private profit? No convincing answer to these questions could be given. Defoe had chanced upon the truth which seventy years later Adam Smith may or may not have comprehended; the undeveloped condition of the market system concealed its inherent weaknesses. Neither the new wealth nor the new poverty was yet quite comprehensible. (109, 110)

That the question was in its chrysalid stage was shown by the amazing congruence of the projects reflecting minds as different as those of the Quaker Bellers, the atheist Owen, and the utilitarian Bentham. Owen, a socialist, was an ardent believer in the equality of man and his inborn rights; while Bentham despised equalitarianism, ridiculed the rights of man and bent heavily towards laissez-faire. Yet Owen's "parallelograms" resembled Bentham's Industry-Houses so closely that one might imagine he was solely inspired by them until his indebtedness to Bellers is remembered. All three men were convinced that an appropriate organization of the labor of the unemployed must produce a surplus; which Bellers, the humanitarian, hoped to use primarily for the relief of other sufferers; Bentham, the utilitarian liberal, wanted to turn over to the shareholders; Owen, the socialist, wished to return to the unemployed themselves. But while their differences merely revealed the almost imperceptible signs of future rifts, their common illusions disclosed the same radical misunderstanding of the nature of pauperism in the nascent market economy. More important than all other differences between them, there had been meanwhile a continuous growth in the number of the poor: in 1696, when Bellers wrote, total rates approximated 400,000 pounds; in 1796, when Bentham struck out against Pitt's bill, they must have passed the 2 million mark; by 1818, Robert Owen's beginnings, they were nearing 8 million. In the 120 years that elapsed between Bellers and Owen the population may have trebled, but rates increased twentyfold. Pauperism had become a portent. But its meaning was still anybody's guess. (110)