Alfred Marshall: Progress and Politics (Routledge Revivals)

David Reisman

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136703430
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

First published in 1987, Alfred Marshall: Progress and Politics provides an enlightening insight into Marshall's thoughts on social improvement, adaptive upgrading, policy and polity. He planned books on these subjects which he never subsequently wrote, but the thesis of this work is that a close study of such writings as Marshall did complete makes possible a very detailed reconstruction of the important contribution which Marshall was capable of making to Victorian evolutionary thought (much in the shadow of Darwin and Spencer). In the ongoing debate on the political element in political economy, he reveals himself to have been as much an eclectic as was Adam Smith and as much a man of commitment as was T. H. Green.

1     Introduction

Marshall's great books on progress and politics were never written. His fourth major work was to be Progress: Its Economic Conditions, but he never found time in his crowded life to convert the notes into the treatise. The third volume of his Principles, he announced in 1907, was to deal with ‘the economic functions of Government’, thereby indicating his conviction that, alongside micro (‘the modern conditions of industry and trade’) and macro (‘credit and employment’)¹ the student of economics should in some measure also be a student of political economy. As, of course, Adam Smith and so many of the English classicals had been. And Plato, who, as Keynes reminds us, inevitably captured the imagination of the philosopher missionary: ‘One day in his eighty-second year he said that he was going to look at Plato's Republic, for he would like to try and write about the kind of Republic that Plato would wish for, had he lived now.’² But the great interdisciplinary account of Economy and Polity, Ethics and Society, had in the event this in common with the path-breaking dynamical synthesis of Growth and Betterment, Upgrading and Evolution, that it too never saw the light of day.

The books were never written but that does not mean that the ideas were lost. On the contrary; and it is the thesis of the present volume that a very great deal indeed is known about Marshall's views on progress and politics precisely because he assigned so much importance to these topics as to discuss them extensively even in books and articles ostensibly concerned primarily with other themes. This is entirely to be expected, for Marshall's maximand was human well-being (as opposed to economic welfare) and his time-period absolutely continuous (as opposed to the eternal stasis of the stationary state). As we allocate, Marshall reasoned, so we grow; as we grow, so we grow different; and what renders legitimate such upheaval and such mutation is the fact that such change is not random and kaleidoscopic but purposive and improving, a movement from alcohol to tea and not tea to alcohol. Where, moreover, the invisible hand is demonstrably inadequate for the task of uplifting and upgrading, then the visible hand must be enlisted in the service of the tone of life, as if guided by a hectoring moral philosopher and an ethically-informed political economist anxious to do good. Market mechanism and State intervention, Marshall believed, are but instruments, to be selected or rejected on grounds of expediency rather than dogma. What matters most of all is attainment of the end. And that end is the uplifting and upgrading of the tone of life.

2 Human Betterment

Alfred Marshall did not look backward with regret to some ‘Golden Age’ before the Fall but rather forward to the future with cautious optimism and a reasonable amount of hope: ‘There is then need to guard against the temptation to overstate the economic evils of our own age, and to ignore the existence of similar and worse evils in earlier ages.’¹ We should not be romantics but nor should we be fatalists; and while quite sensibly avoiding the ‘potent medicines’ and ‘impatient insincerity’ of what Adam Smith would have called the ‘man of system’ (and what Marshall dismisses as the ‘charlatan’), we are duty-bound also to avoid the evil of ‘that moral torpor which can endure that we, with our modern resources and knowledge, should look on contentedly at the continued destruction of all that is worth having in multitudes of human lives, and solace ourselves with the reflection that anyhow the evils of our own age are less than those of the past’.² But there are good grounds for a moderate degree of complacency nonetheless; for, Marshall stressed, situating himself in that way far more on the side of the Polyanna than on that of the Cassandra, the truth is that ‘we never find a more widely diffused comfort alloyed by less suffering than exists in the western world today’.³

Many have been critical of that complacency. Joseph Schumpeter, for example, who wrote as disparagingly as one suspects the aristocratic and luxury-loving Pareto would have done of Marshall's ‘mid-Victorian morality, seasoned by Benthamism’, and who suggested that Marshall's ideal world of property, frugality, enterprise, energy, initiative, calculativeness, exchange, individualism, deferred gratification, industrious self-reliance is (however functional from the economist's perspective) a somewhat boring and antiseptic middle-class Utopia that ‘knows no glamor and no passion.’⁴ Jacob Viner, similarly, like Schumpeter writing in the dark days of the Second World War, was sharply critical of Alfred Marshall on human betterment: ‘Marshall's economics is now distinctly that of a generation which is past, and is increasingly not that of our own.... Both the Victorian complacency with respect to the present and the Victorian optimism with respect to future progress are now utterly inappropriate. As a social philosopher, Marshall is not yet merely a period piece. If he should become so in the near future, it would properly be a matter for concern, but not for surprise.’⁵

Our own view is moderately more sympathetic to an author who, looking back over more than a century of unprecedented economic, social and technological development, called for more of the same: living standards for most (albeit not all) Englishmen had improved, character-patterns had been upgraded, the negative side of change was in no sense threatening enough to undermine the ever more attractive superstructure that was continuously being constructed on the healthy basis of market capitalism; and growth and betterment would in addition appear to be inextricably and symbiotically linked, each both feeding and feeding off the other. These arguments constitute the pillars of Marshall's theory of human betterment. They also constitute the subject-matter of this chapter and the next. Before, however, proceeding to examine in more detail the moralisations and prognostications of a complex author with whom even close associates such as Keynes père (‘Marshall said a good many silly things’)⁶ and Keynes fils (‘He was an utterly absurd person’)⁷ on occasion found it difficult not to lose patience, the following comment by way of defence must first be registered. One can disagree with Marshall's values (his neglect of joyful spontaneity, for example, or his eulogy of the future-orientation to the detriment of the present pleasure); one may regard his evolutionary growth-path as value-laden to the point of wishful thinking not least because his evidence is anecdotal to the point of selectivity (his neglect of the mugger and the con-man, for instance, in favour of the generous blood-donor and the responsible Strutt of Derby); and one might even argue, more controversially perhaps, that the sentimental liberalism of the Marshallian type contains the seeds of its own destruction (as where increasing altruism leads to increased in-stitutionalisation of the gift-relationship and therewith to the substitution of bureaucratic for entrepreneurial rationality as part of a campaign to assist the less privileged by direct means). What one cannot disagree with is the strength of Marshall's convictions and of his desire to demonstrate that economic science is useful because – and only because – it makes a genuine contribution to the process of human betterment. Speculation on social trends, reflection on the evolution of institutions, concern with the wider picture, are all characteristics of Marshall's economics. They are not characteristics of all of economics today. Yet there are, when all is said and done, few more important tasks for the contemporary economist than to look, with Alfred Marshall, at the broad sweep of historical processes and to ask in what way economic growth is related to individual and to social improvement.

2.1 WANT-SATISFACTION

We live in an era of rising productivity, a period in which improving methods of production have a tendency continuously to ‘increase the produce of each man's labour when aided by a given amount of capital’.¹ Many forces have boosted output per unit of input, and one of the most important of these is technological advance: ‘We all know that the progress of science and invention has multiplied enormously the efficiency of labour within the last century.... Even in agriculture the returns to labour have much increased.’² Increasing efficiency, whatever the cause, is, in a market economy, ultimately passed on via competition to the final consumer, and this cheapening of goods in the shops represents a de facto rise in real wages which Marshall much welcomed: ‘The increase of the national dividend owing to the growth of capital and invention is certain to affect all classes of commodities; and to enable the shoemaker, for instance, to purchase with his earnings more food and clothes, more and better supplies of water, artificial light and heat, travel, and so on.’³ Even where this process of boosting and cheapening initially affects only the luxuries of the rich (and ‘such cases are rare’), nonetheless the rich consumer of today can only be seen as the harbinger of what is to come: ‘Improvements, designed for the luxuries of the rich, soon spread themselves to the comforts of other classes.’⁴ The welfare gain, it must be stressed, presupposes the market mechanism, and that is why the British consumer is in an enviable position when compared with his German counterpart – since in Germany high tariffs and strong cartels mean that producers in effect have the power to ‘charge so high prices at home that the people do not get their just share of the benefits which should have resulted from those wonderfully efficient processes of modern manufacture’.⁵ Rising productivity and cheapening of goods in the shops simply do not go hand in hand when I perversely refuse to share my gain with you. Given competition, however, redistribution from producer to consumer then follows as a matter of course.

Rising productivity not only means cheapened consumables. It also means rising money incomes, both for those who continue to sell their existing skills and a fortiori for those who are able to turn to their own advantage the secular ‘increase in the number of the higher industrial grades relatively to the lower’,⁶ which in itself is a characteristic of economic progress. What is increasingly being demanded is increasingly being supplied, and the principal cause of this development would seem to be ‘the diffusion of education and prudent habits among the masses of the people’: The growth of general enlightenment and of a sense of responsibility towards the young has turned a great deal of the increasing wealth of the nation from investment as material capital to investment as personal capital. There has resulted a largely increased supply of trained abilities, which has much increased the national dividend, and raised the average income of the whole people.’⁷ Yet that very increase in supply ‘has taken away from these trained abilities much of that scarcity value which they used to possess, and has lowered their earnings, not indeed absolutely, but relatively to the general advance’;⁸ while, simultaneously, the reduction in the pool of the unskilled which occurs when you and I move out and into higher grades has led to a rise in the average earnings of those who do not enjoy the benefits of upward social mobility. Thus it happens that economic progress raises the incomes of ‘all the ranks of the wages receiving classes, but especially the lower ranks’.⁹ Meanwhile, the accumulation of capital which made so great a contribution to the rise in productivity has meant redistribution of income away from the capitalist classes – since ‘a rapid growth of capital’ means in effect that that input is forced by competition ‘to accept a lower rate of interest’, with the consequence that it then leaves ‘a larger share of a larger produce to be distributed among the different grades of labour’.¹⁰ As those labourers become more affluent, moreover, they are able themselves to become moderate capitalists, so great nowadays are ‘the opportunities which the new methods of business offer for the safe investment of small capitals’;¹¹ and they thus have the chance in that way to increase their money incomes still further, through the reaping of a reward to which they, before the rise of the modern joint stock company with its limited liability and its salaried managers, simply had no access. While the position of the wealthy urban landowner whose rents rise so rapidly in the course of economic progress as to redistribute the national income in his favour is undeniably the exception,¹² the rule would seem to be that almost all money incomes rise with growth but that the money incomes of relatively less advantaged groups increase the fastest. Thus, statistics ‘all indicate that middle class incomes are increasing faster than those of the rich; that the earnings of artisans are increasing faster than those of the professional classes, and that the wages of healthy and vigorous unskilled labourers are increasing faster even than those of the average artisan.’¹³ Not only does each of us receive a larger piece of a larger cake, in other words, but growth also redistributes, reallocates and restructures our relative shares. Specifically, important underlying factors in an improving economy ‘are telling on the side of moderate incomes’,¹⁴ and such a trend is a good thing: ‘Social and economic forces already at work are changing the distribution of wealth for the better.’¹⁵ Even if they were not, incidentally, the very fact that money incomes are rising across the board is in itself a solvent of social tensions since it permits of a divorce between absolutes and relatives and an escape from the nastiness of the zero sum game: clearly, ‘when the aggregate income is stationary, and any one class gets a better share than before, it must be at the expense of the others’.¹⁶

With rising incomes goes rising consumption, and here Marshall was pleased to be able to cite instance after instance where economic growth had brought about rising standards of living. As in the case of fuel: ‘During the middle ages the cottagers could generally, though not always, get the little brushwood fire needed to keep them warm as they huddled together round it in huts which had no chimneys through which the heat could go to waste.... (Coal) is now so cheap that even the comparatively poor can keep themselves warm indoors without living in an unwholesome and stupefying atmosphere.’¹⁷ And housing: ‘The modern suburban artisan's cottage contains sleeping accommodation far superior to that of the gentry in the middle ages; and the working classes had then no other beds than loose straw, reeking with vermin, and resting on damp mud floors.’¹⁸ And the environment: ‘London air is full of smoke; but it is probably less unwholesome than it was before the days of scientific sanitation’;¹⁹ ‘school playgrounds have multiplied; ... commons are now kept in good order; and ... electric tramways and railways enable an ever-increasing number of artisans, and even of unskilled labourers, to take their families out of London occasionally during the summer’.²⁰ And food: ‘A century ago very little meat was eaten by the working classes; while now, though its price is a little higher than it was ...

Table of contents

• Front Cover
• Half Title
• Title Page
• Copyright
• Title Page
• Copyright
• Contents
• 1 INTRODUCTION
• 2 HUMAN BETTERMENT
• 3 GROWTH AND BETTERMENT
• 4 COLLECTIVE ACTION
• 5 MICRO ECONOMIC POLICY
• 6 MACROECONOMIC POLICY
• 7 PROGRESS, POLITICS AND ECONOMICS
• Notes and References
• Index