F.A. Hayek, Capitalism and the Historians

Preface

I had intended on writing this for a long time now. F.A. Hayek’s 1954 work, Capitalism and the Historians, was divisive, and it has remained that way over the course of the last sixty years. To some degree, I hope to explain why this volume was so divisive, defend it against some of its unwarranted criticisms, and point to avenues for further historical development. This essay will cover Hayek’s introduction in full (pp. 3-29) from the volume he edited, Capitalism and the Historians, featuring essays by T.S. Ashton (2), Louis Hacker, W.K. Hutt, and Bertrand de Jouvenel. In addition, I will summarize and address some of the scholarly reviews of Capitalism and the Historians, as well as go through E.P. Thompson's well-know critique of the book. These summaries of reviews may be a little less interesting, so the reader wishing to stick to the most relevant sections may skip to section XIII after finishing with the section on Hayek.

F.A. Hayek, ed, Capitalism and the Historians (Chicago: University of Chicago Press, 1954).

Hayek begins by noting that our political views are perennially shaped by our view of history. History is inevitably colored by the fact that there have been varying interpretations on events, and it is from this rather than from our knowledge of the objective facts of history that our political proclivities are influenced. At times, our understandings can be at odd with the facts, preventing us from benefiting from the rich experiences of which the past affords us boundless examples. From this, Hayek concludes that the writers of history probably “exercise. . . .more immediate and extensive [public influence] that that of the political theorists who launch new ideas” (3-4). And even when the new ideas of political theorists influence the public, it is often through their interpretation of historical events, rather than abstract theory.

Contemporary intellectuals had been unable to appreciate this primarily because, during Hayek’s time, historians purported to be value-free scientists of history, capable of eradicating any vestiges of bias or prejudice. This was of course nonsense, as even the choice of which facts are important will always require theory to sort through the infinite variety of facts that exist. Furthermore, the historian needs to employ an understanding of causality, which also requires theory and an understanding of “the interconnection of social process” (5). Even the choice of topic itself is not a value-free decision, since individuals are choosing between an indefinite amount of alternative subjects to research--let alone the decision whether to research and write history at all--necessarily implying the historian sees his choice of subject-matter as worthwhile.

Hayek then mentions the significance of the whig theory of history--a theory that history, on the whole, tends to lead to progressive betterment and advancement in all aspects of human endeavor--and its positive impact it had on the recognition of the value of political liberty (6). While the whig theory concentrating on political history had faded and become much less fashionable, in favor of social and economic history, Hayek points out that this change has not led to any diminution in the significance of history on political views. In fact, socialist historians had picked up where the liberal historians left off, injecting their own interpretations into the historical discussion. Unfortunately, Hayek points out, these socialist historians, while purportedly writing about “facts which everybody knows,” were actually utilizing facts that “have long been proved not to have been facts at all.” The public devoured much of this socialist history in the early twentieth century, meaning the public had been hoodwinked for decades into believing in certain “facts” about history that were simply erroneous (7). Hayek says it “would require several books like [Capitalism and the Historians] to show how most of what is commonly believed. . . .is not history but political legend” (9).

Hayek then presents his thesis, namely that “There is, however, one supreme myth which more than any other has served to discredit the economic system to which we owe our present-day civilization and to the examination of which the present volume is devoted. It is the legend of the deterioration of the working classes in consequence of the rise of ‘capitalism.’” This myth says that any increased prosperity “which the competitive order has produced was purchased at the price of depressing the standard of life of the weakest elements of society” (10). While Hayek finds that recent economic historians such as J.H. Clapham or T.S. Ashton have refuted this theory of capitalist “catastrophe,” the public has not noticed this, and it is through this book that Hayek hoped to communicate to the public the refutation of the pessimistic version of the industrial revolution in Britain (10-11). It was primarily the work of Barbara and J.L. Hammond that created this belief among the public, even though they later would admit, in their revised 1947 edition of The Bleak Age, that

statisticians tell us that when they have put in order such data as they can find, they are satisfied that earnings increased and that most men and women were less poor when this discontent was loud and active than they were when the eighteenth century was beginning to grow old in a silence like that of autumn, The evidence, of course, is scanty, and its interpretation not too simple, but this general view is probably more or less correct (12).

Once the impression is already imposed on the mind, it is difficult to reverse such an impression. It certainly does not help that “the slow and irregular progress of the working class which we now know to have taken place is of course rather unsensational and uninteresting to the layman” (14).

Hayek, in discussing the origins of the rise of modern industry, puts some weight on the limitations on government that the Glorious Revolution precipitated in the seventeenth century. In addition, Hayek points out it wasn’t as if capitalism sprang into being in the late eighteenth century, de novo; it was a more extended process of the expansion of economic freedom.

He then goes on to explain the role of machinery, which gave peasants an incentive to accumulate the capital equipment necessary to allow greater proportions of the next generation to survive. Before this, when there was a limited amount of arable land and manual tools were needed to survive, few people were able to employ additional workers profitably enough in a time when “the advantage of employing additional hands was limited mainly to the instances where the division of the tasks increased the efficiency of the work of the owner of the tools”--not enough to create a substantial return on investment (15-16).* It was only then that the population could increase substantially past the Malthusian trap that awaited civilization for all of human history before this time. Hence, Hayek concludes that it was capitalism that created this working class, in that it permitted these additional people to survive, rather than “degraded” people from a higher condition to a lower one (16):

In so far as it is true that the growth of capital made the appearance of the proletariat possible, it was in the sense that it raised the productivity of labor so that much larger numbers of those who had not been equipped by their parents with the necessary tools were enabled to maintain themselves by their labor alone (16).

Ironically, it was this capital that allowed these members of the proletariat to survive in the first place that the proletariat would later claim they had a “right [to] a share in its ownership.” Thus, without intending to do so, these capitalists, in pursuing their own self-interest, advanced the interests of the vast majority of the proletariat (16-17).

How was it, then, that the working classes would suddenly become conscious of the facts of their poverty, if it were not the result of a deterioration in their living standards? The answer, as Hayek points out, is that it was the “increase in wealth and well-being which. . . . raised standards and aspirations” (18):

What for ages had seemed a natural and inevitable situation, or even as an improvement upon the past, came to be regarded as incongruous with the opportunities which the new age appeared to offer. Economic suffering both became more conspicuous and seemed less justified, because general wealth was increasing faster than ever before (18).

Ultimately, Hayek is saying that there needn’t be an actual increase in misery for people to become more agitated about their poverty, despite what many socialist historians would have us believe. Indeed, the fact that so many people chose to move from their picturesque country cottages to the cheap houses of city industrial workers meant that they considered this situation an improvement. Even the sanitary problems that are so often attributed to the rise of the factory seemed to be improving during that time (18-19).

Hayek shrewdly notes that the main opposition to the factory and industrialism were actually the landowning class, who were natural opponents of a system that competed with them for laborers and sought to sway public opinion against their competitors in order to hold onto the political privileges they had accumulated over the ages (19).

The early generations of economic historians had often been socialists looking to history for political propaganda, so it was no surprise that when they went looking through history for the harm capitalism would inevitably cause to the working classes, they found it (21-22). Additionally, Hayek connects these writers, such as Werner Sombart, to the German Historical School, who had been opponents of the theoretical approach of classical economics and many of whom were socialists. He believes that in the academic environment dominated by the historical schools, there was great pressure to conform to the opinion that capitalism was exploitative, lest they be labeled “apologists” for the capitalist system and the bourgeoisie (22-23). Hayek returns here to the historicist idea that the historian was supposed to look at the facts “without any theoretical conceptions” in order to let the facts speak for themselves. To show the problems with this approach, Hayek gives the example of the introduction of machinery reducing the demand for labor. Once we actually go through the theory, we will quickly realize the fallacy; but if we only look through the historical record, we can easily find facts that will conform to this erroneous theory, or any number of other alternatives (24).

Certainly, however, some people did not prosper during the industrial revolution, but this isn’t a bad thing in every case. For instance,  “There were, no doubt, many people whose privileged position, whose power to secure a comfortable income by preventing others from doing better what they were being paid for, was destroyed by the advance of freedom of enterprise” (25). That we need not shed a tear over such a thing is too obvious to warrant elucidation. And yet

The recognition that the working class as a whole benefited from the rise of modern industry is of course entirely compatible with the fact that some individuals or groups in this as well as other classes may for a time have suffered from its results. The new order meant an increased rapidity of change, and the quick increase of wealth was largely the result of the increased speed of adaptation to change which made it possible (27).

Skilled workers, for instance, to the extent that they did not embrace these changes and develop their human capital parallel to the developing economy, probably lost out during the industrial revolution. But it was, of course, their choice to do this. For some, this choice meant seeking protection against competition in order that need not develop new skills; we needn’t feel bad for those who chose to use the political means to wealth accumulation rather than the economic means.

Still, capitalism could not do everything for all people at once; capitalism, after all, is a profit and loss system. To suppose that any system could meet such a criteria is utopian, and hardly a failure of capitalism. Finally, Hayek points out that although machinery and a comparatively freer economy may have allowed the economy to prosper, there were still pre-, anti-, or non-capitalistic elements in society that prevented the capitalist system from operating as smoothly as it could have (28). It was during this time, of course, that the immensely costly Napoleonic Wars ravaged Europe and left Britain in severe debt; and the prevalence of state-granted monopolies had not been completely eradicated either.

*In his copy of Capitalism and the Historians, Rothbard underlined this section and stressed its importance.

Scholarly Reception

Scholarly receptions of Capitalism and the Historians have ranged from strong praise by those in laissez faire liberal community, to mild and scattered praise, to scholarly criticism, dismissiveness, and even hostility. I examine these below.

I.

Arthur Schlesinger, Jr., Review of Capitalism and the Historians, edited by F.A. Hayek, Annals of the American Academy of Political and Social Science 293 (May 1954): 177-178.

Arthur Schlesinger, Jr., the noted liberal historian, wrote that the thesis of Capitalism and the Historians was that “historians, American and British, have been engaged, if not in a calculated conspiracy against the capitalist system, at least in a spontaneous attack on it.” Already, in the opening sentence, we see Schlesinger painting Hayek and compatriots as a cadre of conspiracy theorists, rather than serious academics. “Capitalism and the Historians,says Schlesinger, “is apparently prepared to stand or fall on the case it can bring against the historical profession in terms of this ‘supreme myth’”; that is, the myth that capitalism caused the deterioration of the working classes.

Schlesinger, knowingly or not, slightly mischaracterizes Hayek’s thesis. Schlesinger makes it appear as though Hayek is saying that professional historians still were writing books about how capitalism caused the deterioration of the standard of living of the working classes. That was not what he was saying. In fact, Hayek pointed to early historians--as I have pointed out above--that used their histories as a chance to forward socialist propaganda, and then to the Hammonds in the first decades of the twentieth century who influenced the general public into adopting the pessimist view. Hayek then says that subsequent economic historians disproved the Hammond's’ thesis, and that even the Hammonds relented on characterizing the industrial revolution in this way. His point was that despite this, the public still clings to the pessimistic view. He also points to non-historian academic who wrote for public audiences that also still propagated this view, but this was only part of his main thrust. Hence, when Schlesinger proceeded to assert that “Professor Hayek and his colleagues have no serious case to bring at all,” and asks “What British or American historian, for example, has argued that living standards for the working class have failed to rise under capitalism?”--responding that Hayek could point to not a single historian--he had missed the point of Hayek’s argument and was instead striking down a straw-man. Furthermore, I find no basis for Schlesinger’s assertion that “Professor Hayek shifts his ground to denounce historians for suggesting that the immediate impact of industrialism might have been to depress living conditions,” and then saying that T.S. Ashton deserts him on this point (perhaps I missed it).

Writing on Ashton, Schlesinger’s point that the immediate effects of industrialism were complicated, and that Ashton  admittedly was guessing when he concluded that more people benefited from industrialism than not, is well-taken--Ashton did of course say this, and the historical evidence throughout is difficult to navigate.

Oddly, Schlesinger then accuses Hayek of “fiery dogmatism”--perhaps I need to refresh my memory and read it over a second time in the course of a single day, but fiery is not a word that fits the rhetoric of “Professor Hayek.” Schlesinger’s subsequent assertion, “that most British and American historians have been deeply and uncritically devoted to the capitalist system” seems debatable, at the least, given the gradual penetration of socialist and communist academics into the profession over the decades prior to Hayek’s volume. In a further attempt to belittle the work of the writers, he says that “all the contributors to this queer volume seem to be driven by some curious sense of persecution” by socialists, with Ashton feeling persecuted by “the students at the London School of Economics, who do seem to turn in monumentally silly exam papers,” and “Professor W.S. Hutt, by those incurable sentimentalists who question the virtue of child labor and a fourteen-hour day.” He concludes by comparing the book to a “witch hunt” or McCarthyism and calling it “anti-intellectualism.” Of course, one might wonder what constitutes intellectualism if Schlesinger spent the course of a two page review making only a single substantial point on Ashton, and used the rest of the review to belittle the authors and the significance of their work.

II.

W.T. Easterbrook, Review of Capitalism and the Historians, edited by F.A. Hayek, The American Economic Review 44, no. 4 (September 1954): 658-660.

William T. Easterbrook, an economist from the University of Toronto and a specialist in Canadian economic history, writes that Capitalism and the Historians was designed as a corrective against the predominantly “socialist interpretation of economic history which has dominated much of our political thinking for the past two or three generations.”

Easterbrook describes Ashton’s essay “The Treatment of Capitalism by Historians” as the most scholarly contribution, pointing out how “The preoccupation of historians with social grievances rather than with the actual course of economic change has been productive of a one-sided picture of the consequences of industrialism,” ignoring effects such as the Napoleonic Wars, among other things, that cannot be attributed to capitalism. Considered in combination with Hayek’s introduction, Easterbrook finds a strong statement of the anti-capitalistic bias, which he thinks do not fit with the rest of the essays, which are more confusing than helpful. He criticizes L.M. Hacker’s “The Anticapitalist Bias of American Historians” as “a rather rambling defense of nineteenth-century achievements” devoid of “economic sophistication,” with a crude equation of capitalism with Republicanism and risk-taking. And, while praising Bertrand de Jouvenal’s prose, Easterbrook considers de Jouvenal’s essay as a marginal contribution due to an overly broad inclusiveness in his characterizations of anti-capitalist intellectuals. The final two reprinted essays by Ashton and Hutt he says add little to the argument that there is an anti-capitalist bias among historians.

In his concluding paragraph, Easterbrook makes a nice point when he says that the conflation of capitalism, industrialism, and the factory system leads to murky thinking, and leaves us unclear what intellectuals are really criticizing or praising when they use these terms interchangeably. His concluding sentence suggests that “the most useful and enduring contribution of Capitalism and the Historians lies in the distinction drawn in its pages between the evidence of history and the beliefs by which we live, beliefs which suggest that for better or worse the nineteenth century is still very much with us.” Overall, it seems to be a favorable review of the works in the volume, but that the works themselves don’t fit around the central thesis expressed in Hayek’s introduction.

III.

Eric E. Lampard, Review of Capitalism and the Historians, edited by F.A. Hayek, The American Historical Review 60, no. 1 (October 1954): 64-65.

Eric E. Lampard, a historian from the University of Pennsylvania, characterizes Hayek’s thesis that there is “a ‘Gresham’s law of history’ whereby the false account forces out the true and proceeds to use this metaphor to identify intellectuals as the counterfeiters and “Manchesterism” as the purportedly sound currency being coined by Hayek. This analogy to a Gresham's law of history is hyperbolic--maybe it was self-consciously so--since Hayek in no way suggests that it is always the worst historical interpretations get on top.

Lampard begins with the positives, saying that the authors “complain justifiably” of the “political folklore” that the Industrial Revolution was disastrous for the working classes, and that “the demonology of the Left omits so much that is vital in the story of capitalism and distorts the motives of so many who participated in its growth, that it proves a wholly unreliable guide to the study of economic change.”

However, he thinks that the authors are instead substituting a “demonology of the Right” for that of the Left, insofar as all critics of the industrial era tend to be lumped together under the common banner of “anticapitalism” or “socialism.” The Hammonds in particular, he notes, did not criticize capitalism for its economic consequences but for its spiritual consequences. According to Lampard, what is needed is a balanced approach to the history of the industrial revolution, not an unabashedly “rightist” one. I tend to agree it was no balanced in the way many of these authors wanted it to be, but we need to recognize that this was outside of the scope of the questions Hayek and the other authors sought to answer.

IV.

T.H. Minshall, Review of Capitalism and the Historians, edited by F.A. Hayek, International Affairs 31, no. 2 (Apr., 1955): 221.

T.H. Minshall’s very brief review overall praises Capitalism and the Historians for pointing out the uncritical acceptance of the Webbs and Hammond’s work and the authors’ distinction between evils that “occurred apart from the Industrial Revolution,” calling it an “interesting” volume, and in particular praising the chapters of Hayek, Ashton, and de Jouvenal.

V.

H. Scott Gordon, Review of Capitalism and the Historians, edited by F.A. Hayek, The Canadian Journal of Economics and Political Science 21, no. 2 (May 1955): 271-273.

H. Scott Gordon criticizes Hayek’s introductory essay that gives the impression “that the evidence concerning standards of living is so overwhelmingly clear that only incompetence or malice can account for its distortion by historians,” when in fact, according to Hutt and Ashton, the statistical evidence can at best lead us to “cautious conclusions.” Indeed, he says Hutt relies on a theoretical argument rather than statistics. According to Hutt, “The salient fact, and one which most writers fail to stress, is that in so far as the work people then had a 'choice of alternative benefits,' they chose the conditions which the reformers condemned.” I’d argue that this is an extremely strong theoretical point, even though Gordon considers is “not a very conclusive proposition” because of its reliance on the voluntariness of the choice itself.

Gordon does sympathize with the notion “that urban poverty was overstressed and exaggerated by many popular writers of the time, and by later historians who used these writings as source material.” Yet, he generally criticizes Hayek for his claims of socialist conspiracy, as well as his tracing of the influence of the German Historical School, to the exclusion of the connections between Ricardo, Marx, and the Fabians. I generally agree; although the German Historical School and its influence are important, especially to Austrian economics, the views of Marx and his later disciples seem more pertinent to the creation of these myths.

Gordon goes on to describe the odd currents of thought permeating Hacker’s piece, which finds that “those historians who seek inspiration in Jefferson and Jeffersonianism are anticapitalist” (Hacker); “the socialists were those who saw virtues in weak government” (Gordon); “the historians sympathetic to Jackson are also anticapitalists” (Hacker); socialism changed in favor of big government by the New Deal; all coalescing around the idea that American historians had been biased in favor of the common man and thus were socialists.

Gordon praises de Jouvenal’s piece for profound insights, including “the natural hostility of the intellectual to the business man,” but that other sweeping statements he makes are loaded and of questionable veracity.

Gordon, like Lampard, thinks that for whatever contributions this volume may have to the “sociology of knowledge,” it risks substituting its own biases in the place of the Left’s; as such, “The condemnation which this book will undoubtedly receive is, I think, deserved.”

VI.

Allan Birch, Review of Capitalism and the Historians, edited by F.A. Hayek, The Australian Quarterly 27, no. 1 (March 1955): 121-123.

Allan Birch points out that much of the errors of early historians of the industrial revolution stemmed from their misappropriation of sources, such as taking the parliamentary enquiries as a true and unbiased account of the factory system. One of the major points of the volume, Birch notes, is that it tackles “the intellectual's attitude to the economic events of the last couple of centuries.” He finds this “prospect of intellectuals studying their own position in the world could be vastly amusing.” Ultimately, Birch concludes that “anyone who is concerned with political problems and who does not think that the deeds of the British captains of industry were the blackest pieces of villainy that darkened the last century would find something of interest here.”

VII.

J.D. Chambers, Review of Capitalism and the Historians, edited by F.A. Hayek, Economica 23, New ser., no. 92 (November 1956): 380-81.

J.D. Chambers, unlike the other reviewers, points out that each of the authors of the volume has a different attitude “in accordance with the different intellectual traditions which they represent.” de Jouvenal, for example, postulates that the intellectuals’ attitudes toward capitalism stem from “the malaise. . . .of the intellectual in an industrial society”; Hayek, Chambers says, blames Marx at the root of the anticapitalist bias; Hacker claims American historians made “value judgments about industrial society without examining the stubborn economic facts on which [they] rested”; Hutt and Ashton simply think historians have misused sources and were ignorant of the causal relationships of economics. On the whole Chambers seems to have an, at least, marginally positive view of the volume, but seems to suspect the book will be considered by most “as no more than a contribution to the polemics of the pessimistic and optimistic schools of historians of the Industrial Revolution.”

VIII.

Charles Wilson, Review of Capitalism and the Historians, edited by F.A. Hayek, The Economic History Review, New ser. 8, no. 3 (1956): 469.

Charles Wilson, of Jesus College in Cambridge, begins by succinctly laying out some of the positive contributions of the authors and supports Hayek et al’s contention that the history that permeates the public mind is essentially “the orthodoxy of nineteenth-century social and economic history.” Wilson believes that bad history can account for most of the errors in historical narrative propounded by early social and economic historians, rather than a resort to common sense instead of theoretical presuppositions in the organization and interpretation of historical facts. Overall, Wilson finds that “The task the contributors set themselves is an important one,” namely the correction of the errors of bad history pertaining to the industrial revolution--a task which he thinks needs to continued.

IX.

Asa Briggs, Review of Capitalism and the Historians, edited by F.A. Hayek, The Journal of Economic History 14, No. 3 (Summer, 1954), pp. 290-291.

Asa Briggs, of Worcester College, starts of by calling the book “Patchy in style and in substance,” and asserting that the idea that there is still a “legend of the deterioration of the position of the working classes in consequence of the rise of capitalism” has been dispensed with by serious historians. Nevertheless, he recognizes that the ideas of writers like Engels are still taught in many schools. However, like both Gordon and Lampard, thinks that “The danger of this book is that it gets rid of one myth only to substitute another of a more fashionable kind.” As such, “At times it presents such a one-sided case that many irritated readers will still prefer the more familiar outlines of the old story.”

Moving on to the essays themselves, he generally agrees with what Hayek has to say, but says that “by saying it in the way he says it, Mr. Hayek gets very near to minimizing the social strains and stresses of early industrialism. Certainly he makes no attempt to understand them.” Discussing Ashton, he finds much of value but still thinks that “it is possible to agree with most that he asserts and still feel that J. L. and B. Hammond had much of value to say which he ignores.” Hutt’s article he condemns, calling it a “highly polemical” article “which should not have been reprinted in its 1926 form without revision.” Lastly, he writes that Bertrand de Jouvenal’s article was “by far the most stimulating in the book” because of the way in which he demystifies the underlying reasons for the intellectuals’ aversion to capitalism, as well as why intellectual’s were in error in analyzing the misery of the working classes:

He suggests that many writers on the economic and social history of early industrialism have taken for granted that a sharp increase in the social awareness of and indignation about misery is a true index of increased misery, and have given little thought to the possibility that the increase might have been a function of new facilities of expression, growing philanthropic sensitivity, and a new sense of the human power to change thing.

X.

Rondo E. Cameron, Review of Capitalism and the Historians, edited by F.A. Hayek, Southern Economic Journal 21, No. 1 (July 1954): 96-98.

Rondo E. Cameron, of the University of Wisconsin, finds that the book often plays fast and loose with its assertions and accusations, such as Hayek’s derogation of Guido de Ruggiero and Elie Halevy, both "supposedly liberal historian[s]." Ashton’s section he finds much more mild and precise, but still insufficient to prove “the existence of either conspiracy or bias on the part of historians generally.” Louis Hacker’s essay he demolishes as “shoddy,” declaring that all American historians were anticapitalists who bias stems from “their espousal of Jeffersonian as posed to Hamiltonian ideas.” As Cameron goes on to point out, any expositor of laissez faire liberalism would find this statement distressing, given that Hamilton was the epitome of crony capitalism, special interest favoritism, and mercantilism, which “demonstrate his intellectual confusion.” de Jouvenal’s essay he finds stimulating--and the idea that the intellectual is “antagonistic to capitalism because his own product, when subjected to market forces, languishes unsold and unsalable on the shelves” is “arresting”--but does not actually prove that intellectuals suffer from an anticapitalist bias.

Ultimately, Cameron thinks that the book makes important points, but the conspiratorial aspect of the book will not solve the problems they identify, calling it “Academic McCarthyism.”

XI.

M. David Morris, Review of Capitalism and the Historians, edited by F.A. Hayek, The Accounting Review 29, no. 4 (October 1954): 706-708.

M. David Morris writes that the Hammonds in the early decades of the twentieth century wrote brilliant studies on the dismal view of the social effects of the industrial revolution. Morris states the thesis of the work that the pessimistic historical bias was largely the work of poor historical scholarship, the attribution of progress to government intervention, and a profoundly socialist bias. He says Hacker challenges the idea that there was a socialist bias among American histories, and that it was instead their populist/egalitarian bias, including a levelling, anti-monopolistic tendency of the Jeffersonians that led them to pessimism--pointing out, again, that such a view tends to be at odds with what Hayek and the other contributors would tend to think. de Jouvenal as well, he says, doesn’t think that it is a socialist bias, but rather than natural juxtaposition and opposition of the intellectual to wealthy businessmen whose success they essentially resent and of which they are envious.

In concluding, Morris finds that Hayek and his other contributors “leave the lay reader with a false sense of proportion,” only focusing on the positive effects of the industrial revolution to the exclusion of those who did suffer, whose suffering “cannot be dismissed as cavalierly as Hayek does.” In addition, he finds that the work of Ashton has limited applicability given the data of which it relies in is sparse and thus can only lead us to provisional conclusions. Ultimately, Morris believes that the work of the historian is finding a balanced approach in between the extremes, and not having such strong ideological blinders that we only focus on one category of evidence that supports our predispositions.

XII.

Oscar Handlin, “Review: Capitalism, Power, and the Historians: An Essay Review,” The New England Quarterly 28, no. 1 (March 1955): 99-107.

In a more extended essay review, Oscar Handlin, reviewing both Capitalism and the Historians and Study in Power. John D. Rockefeller Industrialist and Philanthropist by Allan Nevins, immediately calls out Capitalism and the Historians as a “disgraceful performance.” Needless to say, Handlin apparently took offense to the volume. As a whole, he says the work has “an essentially misleading character,” and its conspiratorial thesis has “not a shred of substance to it.” The final two scholarly essays reprinted in the volume are totally irrelevant to this thesis, so Handlin ignores them. Like Schlesinger, Handlin takes Hayek to task for his lack of citation of historians propagating this myth: “It may be significant that he does not quote a single historian who maintains the position he claims all historians held. There are occasional references to philosophers, political theorists, and journalists; but professional historians are only three times referred to.”

Ashton’s essay hardly supports the claim either, as undergraduate students hardly qualify as academic historians--even if Ashton does make “some useful points about the rise in level of general income.” Same for de Jouvenal, who he says we probably shouldn’t have expected to provide any evidence because he “sneers at ‘scientific education’ from page to page.” Handlin finds more substance in Hacker’s essay, pointing out that Hacker was once a Marxist (one has to wonder if Handlin, an American historian, only finds substance in Hacker’s essay on American historians because he doesn’t know anything other than the sentiments of the Americanists). Nonetheless, he criticizes Hacker heavily for his both ignorance of and wanton misstatement of the facts, and his odd belief in the anti-capitalism of Jefferson’s historian defends--especially when he says Hacker explicitly referred to the Jeffersonian-Jacksonians as an “agrarian slave-capitalist group.”

Handlin also calls it a “vicious little book” with “irresponsible and false assertions,” believing the book will have no significance, except to undermine “the study of ‘capitalism’ itself” by shrouding “the much more vital issues of the means by which ‘capitalism’ transformed the economy, the forms it took, and its effects upon the whole society.“ As he moves on to discussing Alan Nevins’ work, which he says is much more meticulous in its use of sources, although an apologia for John D. Rockefeller, calls Hayek et al’s essays “sins.”

* * * * * * * * * * * * * * * * * * * * * * *

One of the common criticisms out of these reviews was that for all of Hayek’s blustering that historians have been so influential in constructing the pessimistic view and persisting in pushing this view on the public, the works Hayek cited were either decades or longer old (Hammonds, Sidney and Beatrice Webb, Karl Marx, Werner Sombart) and either popular works or works by non-historians (Bertrand Russell, Frederick Watkins).

Another common criticism was that Hayek's thesis came close to suggesting a conspiracy on the part of many historians to put forward propaganda under the guise of historical fact.

A third common criticism is the lack of balance apparent in the presentation of the book, either making it appear that the case for optimism is stronger than the evidence warrants or simply not confronting the situation of those who did not benefit from the industrial revolution.

The last common criticism, and one that I think correct, is the general criticism of Hacker's essay on American historians and capitalism. The claim that Alexander Hamilton--whose views today are regarded by most classical liberals as crony capitalist and mercantilist--is the real patron saint of American laissez faire capitalism, rather than Thomas Jefferson, is not a pill today's classical liberals can swallow. It would seem that Hacker fell into the common misreading of Jefferson that was prevalent up until recently, namely that Jefferson's agrarianism and critique of "capitalists" and banking was indicative of his backward anti-capitalism, which has increasingly been rejected in recent years. In general, Hacker's work seems at odds with liberalism and laissez faire capitalism, and is not a particularly strong or enlightening essay.

The Making of the English Working Class

E.P. Thompson, The Making of the English Working Class (New York: Vintage Books, 1966).

With the whole of the academic reviews exhausted, I will move on to one of the most significant criticisms of Capitalism and the Historians penned by E.P. Thompson in his The Making of the English Working Class, first published in 1963. Thompson’s critique of Hayek primarily was focused in Part II, Chapter Six of his work titled “Exploitation.” with some criticism put forward in Chapter Ten “Standards and Experiences.”

The first thing we’ll notice is that, despite the admonitions of many reviewers that no respectable historian believed that the industrial revolution made everything worse for the masses, many historians in the sixties would come to question the optimistic view and ultimately take a negative view of the industrial revolution. We’ll also notice that this movement was led by the ideological descendants of those whom Hayek had said a decade earlier led the way in propagating myths about the industrial revolution, that is, socialists. This time, it was Marxist academics E.P. Thompson and E.J. Hobsbawm that led the way in countering the more optimistic claims of the economic historians of the 1930’s, 40’s and 50’s.

In the beginning of Chapter Six, Thompson establishes that many contemporaries during the industrial revolution “observed the same equation: steam power and the cotton-mill=new working class,” and characterizes this new form of production as “more or less compulsory [emphasis added]” (190-191). The “scale and intensity” of popular agitation during the period against the machinery and the factory confirmed for many historians that the change being wrought was “catastrophic.” “And when this popular agitation is recalled alongside the dramatic pace of change in the cotton industry, it is natural to assume a direct causal relationship” (191-192). Corresponding to this idea of catastrophic change was the image of the “dark, Satanic mill” that was burned upon the mind of the public, which Hayek alluded to in his work.

Thompson describes how many accounts of factory conditions center around the cotton mill. While the cotton mill was “the pace-making industry of the Industrial Revolution,” the cotton industry worker and his experience was not typical of the “average working man” (192-193). Even further, to consider the factory hand as the center of the labour movement was equally problematic, since Jacobins were more likely to be artisans, while Luddites were more likely to be skilled craftsmen in small workshops (193).

Unlike Ashton, who found the outstanding feature of the industrial revolution to be the growth in the population, E.P. Thompson sees the formation of the working class, its growth in class consciousness, and its “corresponding forms of political and industrial organization" as the greatest social features of the industrial revolution (194). To his credit, Thompson does not consider these people as passive individuals being imposed upon by the industrial revolution, but actors that made their own history.

The Classical view presented by Arnold Toynbee, the Hammonds, the Webbs, that the industrial revolution was one of catastrophe--”exploitation,” "cut-throat competition,” "acute class conflict and class oppression”--was gradually being replaced by a new liberal orthodoxy, where all the elements of the classical writers’ narratives were turned on their heads (195). Thompson asserts that this new orthodoxy predominantly gained traction in the historical profession essentially as a running critique against the mistakes and moralising of J.L. and Barbara Hammond in the first decades of the twentieth century. Unfortunately, says Thompson, these liberal historians “too often exhibit a moral complacency, a narrowness of reference, and an insufficient familiarity with the actual movements of the working people of the time” to give a true account of the social history of the working classes. Indeed, says Thompson, the great advantage of the Hammonds is “that they displayed throughout their narrative an understanding of the political context within which the Industrial Revolution took place” (196).

It is here that we see a crucial distinction between Capitalism and the Historians and The Making of the English Working Class. According to Thompson, “there are three. . . .great influences simultaneously at work. There is the tremendous increase in population. . . .There is the Industrial Revolution, in its technological aspects. And there is the political counter-revolution, from 1792-1832 [emphasis original]” (197). Thompson distinguishes between the increase in population and the industrial revolution, rather than arranging them in a causal relationship; that is, Thompson does not, as Hayek did, consider that the increase in population was made possible by the industrial revolution. He considers them as separate phenomena, and places the political counter-revolution on at least an equal plane as the other two factors in their influence on the period.

He then describes “the abrogation or repeal of 'paternalist' legislation covering apprenticeship, wage­-regulation, or conditions in industry” as “political and social apartheid [emphasis original]” (198). Under this “apartheid,” there was “more intensive or more transparent forms of economic exploitation. More intensive in agriculture and in the old domestic industries: more transparent in the new factories and perhaps in mining” (198). Such exploitation as they were subjected to was “intolerable.” In addition, “Relations between employer and labourer were becoming both harsher and less personal” (199). Thompson cites favorably “A Journeyman Cotton Spinner” who claimed that all around Manchester for miles, there was a conspiracy of all employers against the laborer (200). “[O]ld paternalism was set aside” for the depersonalized exploitation of the capitalist system (204). Capitalism was a system

fostering some sorts of expropriation (rent, interest, and profit) and outlawing others (theft, feudal dues), legitimising some types of conflict (competition, armed warfare) and inhibiting others (trades unionism, bread riots, popular political organisation)-a structure which may appear, in the eyes of the future, to be both barbarous and ephemeral (205).

This was the catastrophic nature of industrial capitalism to Thompson, a feeling shared by the great variety of “socialists” Hayek blamed for propagating myths about the industrial revolution.

Thompson begins his assault upon the way economic history has been done (albeit implicitly) when he suggests that “Certainly there were market fluctuations, bad harvests, and the rest; but the experience of intensified exploitation was constant, whereas these other causes of hardship were variable” (207). Apparently, that which is variable can be discounted? Next, he quotes Clapham’s refutation of “The legend that everything was getting worse for the working man,” in order to point out, as Clapham agreed, “that statistics of material well-being can never a people’s happiness,” and that even if we can criticize the view that everything was getting worse, it does not mean the reverse was true (208). He says that both Ashton and Hobsbawm essentially agreed that the standard of living “of the majority was bad in 1790: it remained bad in 1830”; “This does not look very much like a 'success story'; in half a century of the fullest development of industrialism, the standard-of-living still remained-for very large but indeterminate groups--at the point of subsistence” (208-209).

Here, we see Thompson begin his assault on Capitalism and the Historians. He proclaims that “Since this group of international specialists [the Mont Pelerin society members who wrote the book] regarded "a free society" as by definition a capitalist society, the effects of such an admixture of economic theory and special pleading were deplorable; and not least in the work of one of the contributors, Professor Ashton, whose cautious findings of 1949 are now transmuted-without further evidence-into the flat statement that ‘generally it is now agreed that for the majority the gain in real wages was substantial’” (210). Thus, Thompson’s criticism is not quite the same as that which most of the reviewers of the book raised; it was not a criticism of the theory that there was a socialist orthodoxy of historians currently propagating myths about the industrial revolution. Rather, Thompson undertook to criticize the overwhelmingly positive, propagandistic spin the volume gives to the industrial revolution and its impact on the working classes, which generally went unaddressed in the reviews--other than those mentioning Capitalism's one-sided account.

Essentially, Thompson thinks the numbers of the optimist economic historians don’t add up; and, furthermore, he thinks that the quantitative method of economic history obscures as much as it illuminates the condition of the working classes. Thompson points out that while there are some “data amenable to statistical measurement,” there are other qualitative aspects that cannot adequately be accounted for with scientific measurement (210-211):

Where statistical evidence is appropriate to the first, we must rely largely upon "literary evidence" as to the second. A major source of confusion arises from the drawing of conclusions as to one from evidence appropriate only to the other. It is at times as if statisticians have been arguing : "the indices reveal an increased per capita consumption of tea, sugar, meat and soap, therefore the working class was happier", while social historians have replied : "the literary sources show that people were unhappy, therefore their standard-of-living must have deteriorated" (211).

Following this up, he says

It is quite possible for statistical averages and human experiences to run in opposite directions. A per capita increase in quantitative factors may take place at the same time as a great qualitative disturbance in people's way of life, traditional relationships, and sanctions. People may consume more goods and become less happy or less free at the same time (211).

Indeed, these are powerful points. A great error in constructing economic theory, for example, comes from using empirical data, rather than a priori laws deduced from the concept of human action, which cannot be measured; by way of analogy, the historian may be making a great error when he constructs his historical narrative using only that data which can be measured. However, Thompson offers an inadequate solution to the epistemological problem he raises. Thompson’s solution is simply to overwhelm the reader with a deluge of qualitative “facts”--consisting of statements by workers, social reformers, parliamentary inquiries, and other contemporary sources--in order to measure the degree of happiness or misery of the working classes brought on by the industrial revolution. Even if we accept Thompson's criticism, namely that economic statistics cannot measure worker happiness, the economic statistics may still be more accurate in measuring what they are supposed to measure. That is, economic statistics may be (and probably are) much closer approximations to standards of living than Thompson’s deluge of qualitative data is to measuring happiness.

While it is not my purpose to get into Thompson’s overall criticism of the quantitative data, I will conclude by discussing some of Thompson’s critique of W.K. Hutt’s article in Capitalism and the Historians, since it is not a quantitatively oriented article. Thompson says that “there was a drastic increase in the intensity of exploitation of child labour between 1780 and 1840, and every historian acquainted with the sources knows that this is so” (331). It is not so, however, if we reject Marx’s labor theory of value, upon which his theory of exploitation depends, and if the children were old enough to decide for themselves to work. If so, and if parents forced their children to work, why is capitalism to blame for parental decision-making? If so, and if it were parish administrators who collected vagabond children and forced them to work, why again is capitalism to blame for the actions of the state?

Moving on, we see Thompson say that "’optimists' have, since the time of the Hammonds, surrounded the question with so many qualifications that one might almost suspect a conspiracy to explain child labour away” by pointing out that children had to work at a young age before industrialism, the evidence of increasing exploitation was primarily propaganda, among other qualifications (332). In fact, Thompson accepts the general tenor of many of these qualification, yet he says that factory work “By contemporary standards. . . .was arduous, even brutal,” giving a rich description of the kinds of working conditions the children faced (333). He describes Hutt’s article as a “slight, scarcely documented, and often directly misleading article” whose criticisms had been answered long ago, during the time of the industrial revolution itself (336). Even if the Sadler Committee, for example, was rigged to sustain the conclusion that workers were being exploited by managers and capitalists, Thompson says that “it does not follow that the evidence before Sadler's Committee can therefore be assumed to be untrue. In fact, anyone who reads the bulk of the evidence will find that it has an authenticity which compels belief” (337). Furthermore, Thompson criticizes Hutt for concluding from the existence of conflicting evidence that we must therefore side with the employers against their employees, as both Hutt and Neil Smelser do by pointing to the equally partisan Factory Commission of 1833. Buttressing his claims against marginalizing child labor, Thompson says

Even if we leave the stories of sadistic overlookers aside there was then commenced a day, for multitudes of children ' which did not end until seven or eight o'clock; and in the last hours of which children were crying or falling asleep on their feet, their hands bleeding from the friction of the yarn in "piecing", even their parents cuffing them to keep them awake, while the overlookers patrolled with the strap. In the country mills dependent upon water-power, night work or days of fourteen and sixteen hours were common when they were "thronged". If Professor Hutt does not regard this as "systematic cruelty", humane mill-owners like [John] Fielden' and [John] Wood were in no doubt (338).

Of course, the suggestion that Hutt would not regard continued aggression against children as “systematic cruelty” is rather silly; the only pertinent questions of dispute between Hutt and Thompson would be how extensive was aggression and force against children in the factory system, and whether children themselves choosing to work could ever entail exploitation. Additionally, there could be dispute between them as to whether it would be beneficial to eliminate the option of children from poor families--possibly to prevent starvation--to choose factory work, through state legislation. Alas, these questions remained largely unanswered by Thompson. Or, he presupposed favorable circumstances in answering these questions; e.g., Thompson assumed the veracity of the Marxist theory of exploitation, so he could essentially presuppose the existence of child exploitation before even examining the facts.

Conclusion

In conclusion, I believe there needs to be a Capitalism and the Historians of the twenty-first century: an updating, expanding, and, at times, correcting of the scholarship and again answering the questions raised by Hayek in his introduction: "What were the facts? How did the historians present them? and Why?" (29) I would add, "How can we best go about understanding the industrial revolution?" and "How does Austrian economics and praxeology inform this understanding?"

There needs to be both a sturdier empirical grounding of the historical argument against pessimism, as well a concrete methodological and epistemological grounding of the historical work on the industrial revolution. I believe this grounding can be found in the discipline of praxeology, particularly in the concept of revealed preference and the verstehen.

Postscript

There is undoubtedly much more praise and criticism for Capitalism and the Historians scattered throughout the scholarly literature. This chronicle was not intended to be comprehensive, except in regard to the scholarly reviews available through Jstor. If there are additional reviews out there, or other mentions of Capitalism and the Historians in the scholarly literature, I'd be happy to hear about them. (principialibertatis@gmail.com)