Idealist philosophy of history

In a previous post I commended W.H. Walsh's approach to the philosophy of history for Walsh's sympathetic effort to understand both traditions in the field, including what is called "speculative" philosophy of history (An Introduction to Philosophy of History). And Walsh is to be commended as well for his analytical ability to formulate and explicate these positions. This is in fact what we want from good historians of philosophy -- a detailed, text-based explication of the theories of difficult thinkers such as Hegel and Dilthey.

So the fact that Walsh offers an extended and nuanced interpretation of the efforts by Hegel, Herder, and Dilthey is to his credit as an exegetical scholar. But a key issue remains: do the positions that he explicates stand up to criticism? Is there in fact an intellectually credible place for speculative or idealist philosophy of history?

Walsh's position seems to be ambiguous on this question. On the one hand, he seems sometimes simply to be saying that there is a meaningful and philosophically intelligible program of thought associated with the speculative school -- which is consistent with an ultimate finding that this program fails in execution. And at other times he seems to go further and to assert that Hegel or Herder actually succeed in providing something of a substantive speculative philosophy of history that adds to our knowledge. Here is how he describes the intellectual work Hegel seeks to complete:

To accomplish this task the philosopher must take the results of empirical history as data, but it will not suffice for him merely to reproduce them. He must try to illuminate history by bringing his knowledge of the Idea, the formal articulation of reason, to bear upon it, striving, in a phrase Hegel uses elsewhere, to elevate empirical contents to the rank of necessary truth. (143)

Here is part of Walsh's assessment of the success of Hegel's project:

We must now try to estimate the adequacy of this defence. As regards the first point, it is surely successful. I have tried to stress throughout this chapter and the last the metaphysical and moral context within which speculative philosophy of history arose and was pursued. As we have seen, those engaged in these enquiries were concerned to divine the meaning or point or rationality behind the historical process as a whole, and they took up this question primarily because of its metaphysical relevance. (148)

My own assessment of idealist philosophy of history as presented by Walsh is measured. First, Walsh includes the centrality of action and ideas within history as a central tenet of idealist philosophy of history. This is Collingwood's central idea, and it seems to be Dilthey's as well. And in my opinion, it is a credible and empirically suitable hypothesis. Even if we conclude in the end that there is more to the historical process than deliberation and action, we can agree that action is a highly important component. And therefore an explication of the ways we investigate and interpret meanings and actions is a valid exercise. It falls in the category of epistemology, with a harmless bit of ontology stirred in (the constitutive importance of action).

But it must be emphasized that this perspective doesn't rule out other important insights into the ways that historical change takes place. In particular, we can also adhere to a limited materialism and structuralism in history, following Marx in holding that "men make their own history, but not in circumstance of their own choosing."

Second, I'm willing to be persuaded that there is a valid object of study for philosophers in the logical-semantic systems that thinkers like Hegel have created; and this extends to their philosophies of history. So the philosophical study and explication of metaphysical philosophy of history is a rationally acceptable enterprise as well.

What I have difficulty in accepting is that such a system can actually succeed. When Walsh writes that the goal of the historian and the philosopher is to tell the story of history in such a way that all the events make sense within the context of a master narrative -- when he proposes that the goal of the philosophy of history is to discover the real meaning and rationality of history as a whole -- I believe he is describing an effort that cannot succeed. There is no single unifying meaning or plan in history. And efforts to "colligate" events in such a way as to demonstrate that they contribute to such a plan seem to be unguided acts of creativity.

It is a commonplace that a series of actual events can be interpreted in different and apparently incompatible ways. We can attribute different motives to the actors and interpret their actions in such a way as to tell very different stories. (This is what we refer to as the "Rashomon effect".)  In ordinary settings we can sometimes gain more evidence to choose between them. But when the choice is between interpretation frameworks at the highest level -- a materialist theory of history and a theory based on the unfolding of reason, for example -- we can't possibly provide empirical evidence that would choose between these all-encompassing hypotheses.

So I'm putting my bets on several ideas: yes to the validity of the hermeneutic program, yes to the interpretive task of understanding the great metaphysical systems from a philosophical point of view, and no to the idea of rationally justifiable interpretations of the whole of history. In Walsh's terms this means yes to a limited idealism, yes to the task of the history of philosophy, and no to the aspiration towards a substantive metaphysics of history.

And, indeed, Walsh seems eventually to come to a similar conclusion:

Our speculative philosophy of history must accordingly be a mixed one. In a way, we are forced to characterize it as utterly wrong-headed, since its programme amounts to an attempt to comprehend history from the outside; an attempt which, as Croce made clear long ago, cannot have any appeal for working historians. On the other hand, its most celebrated exponents certainly did make an important indirect contribution to the development of historical studies, as we have just tried to show.  Whether there is any future in this type of philosophizing is another question, dependent, it would seem, on what chance there is of anyone's producing a tenable moral justification of the course history has taken. (153-54)

Idealist philosophy of history

In a previous post I commended W.H. Walsh's approach to the philosophy of history for Walsh's sympathetic effort to understand both traditions in the field, including what is called "speculative" philosophy of history (An Introduction to Philosophy of History). And Walsh is to be commended as well for his analytical ability to formulate and explicate these positions. This is in fact what we want from good historians of philosophy -- a detailed, text-based explication of the theories of difficult thinkers such as Hegel and Dilthey.

So the fact that Walsh offers an extended and nuanced interpretation of the efforts by Hegel, Herder, and Dilthey is to his credit as an exegetical scholar. But a key issue remains: do the positions that he explicates stand up to criticism? Is there in fact an intellectually credible place for speculative or idealist philosophy of history?

Walsh's position seems to be ambiguous on this question. On the one hand, he seems sometimes simply to be saying that there is a meaningful and philosophically intelligible program of thought associated with the speculative school -- which is consistent with an ultimate finding that this program fails in execution. And at other times he seems to go further and to assert that Hegel or Herder actually succeed in providing something of a substantive speculative philosophy of history that adds to our knowledge. Here is how he describes the intellectual work Hegel seeks to complete:

To accomplish this task the philosopher must take the results of empirical history as data, but it will not suffice for him merely to reproduce them. He must try to illuminate history by bringing his knowledge of the Idea, the formal articulation of reason, to bear upon it, striving, in a phrase Hegel uses elsewhere, to elevate empirical contents to the rank of necessary truth. (143)

Here is part of Walsh's assessment of the success of Hegel's project:

We must now try to estimate the adequacy of this defence. As regards the first point, it is surely successful. I have tried to stress throughout this chapter and the last the metaphysical and moral context within which speculative philosophy of history arose and was pursued. As we have seen, those engaged in these enquiries were concerned to divine the meaning or point or rationality behind the historical process as a whole, and they took up this question primarily because of its metaphysical relevance. (148)

My own assessment of idealist philosophy of history as presented by Walsh is measured. First, Walsh includes the centrality of action and ideas within history as a central tenet of idealist philosophy of history. This is Collingwood's central idea, and it seems to be Dilthey's as well. And in my opinion, it is a credible and empirically suitable hypothesis. Even if we conclude in the end that there is more to the historical process than deliberation and action, we can agree that action is a highly important component. And therefore an explication of the ways we investigate and interpret meanings and actions is a valid exercise. It falls in the category of epistemology, with a harmless bit of ontology stirred in (the constitutive importance of action).

But it must be emphasized that this perspective doesn't rule out other important insights into the ways that historical change takes place. In particular, we can also adhere to a limited materialism and structuralism in history, following Marx in holding that "men make their own history, but not in circumstance of their own choosing."

Second, I'm willing to be persuaded that there is a valid object of study for philosophers in the logical-semantic systems that thinkers like Hegel have created; and this extends to their philosophies of history. So the philosophical study and explication of metaphysical philosophy of history is a rationally acceptable enterprise as well.

What I have difficulty in accepting is that such a system can actually succeed. When Walsh writes that the goal of the historian and the philosopher is to tell the story of history in such a way that all the events make sense within the context of a master narrative -- when he proposes that the goal of the philosophy of history is to discover the real meaning and rationality of history as a whole -- I believe he is describing an effort that cannot succeed. There is no single unifying meaning or plan in history. And efforts to "colligate" events in such a way as to demonstrate that they contribute to such a plan seem to be unguided acts of creativity.

It is a commonplace that a series of actual events can be interpreted in different and apparently incompatible ways. We can attribute different motives to the actors and interpret their actions in such a way as to tell very different stories. (This is what we refer to as the "Rashomon effect".)  In ordinary settings we can sometimes gain more evidence to choose between them. But when the choice is between interpretation frameworks at the highest level -- a materialist theory of history and a theory based on the unfolding of reason, for example -- we can't possibly provide empirical evidence that would choose between these all-encompassing hypotheses.

So I'm putting my bets on several ideas: yes to the validity of the hermeneutic program, yes to the interpretive task of understanding the great metaphysical systems from a philosophical point of view, and no to the idea of rationally justifiable interpretations of the whole of history. In Walsh's terms this means yes to a limited idealism, yes to the task of the history of philosophy, and no to the aspiration towards a substantive metaphysics of history.

And, indeed, Walsh seems eventually to come to a similar conclusion:

Our speculative philosophy of history must accordingly be a mixed one. In a way, we are forced to characterize it as utterly wrong-headed, since its programme amounts to an attempt to comprehend history from the outside; an attempt which, as Croce made clear long ago, cannot have any appeal for working historians. On the other hand, its most celebrated exponents certainly did make an important indirect contribution to the development of historical studies, as we have just tried to show.  Whether there is any future in this type of philosophizing is another question, dependent, it would seem, on what chance there is of anyone's producing a tenable moral justification of the course history has taken. (153-54)

Idealist philosophy of history

In a previous post I commended W.H. Walsh's approach to the philosophy of history for Walsh's sympathetic effort to understand both traditions in the field, including what is called "speculative" philosophy of history (An Introduction to Philosophy of History). And Walsh is to be commended as well for his analytical ability to formulate and explicate these positions. This is in fact what we want from good historians of philosophy -- a detailed, text-based explication of the theories of difficult thinkers such as Hegel and Dilthey.

So the fact that Walsh offers an extended and nuanced interpretation of the efforts by Hegel, Herder, and Dilthey is to his credit as an exegetical scholar. But a key issue remains: do the positions that he explicates stand up to criticism? Is there in fact an intellectually credible place for speculative or idealist philosophy of history?

Walsh's position seems to be ambiguous on this question. On the one hand, he seems sometimes simply to be saying that there is a meaningful and philosophically intelligible program of thought associated with the speculative school -- which is consistent with an ultimate finding that this program fails in execution. And at other times he seems to go further and to assert that Hegel or Herder actually succeed in providing something of a substantive speculative philosophy of history that adds to our knowledge. Here is how he describes the intellectual work Hegel seeks to complete:

To accomplish this task the philosopher must take the results of empirical history as data, but it will not suffice for him merely to reproduce them. He must try to illuminate history by bringing his knowledge of the Idea, the formal articulation of reason, to bear upon it, striving, in a phrase Hegel uses elsewhere, to elevate empirical contents to the rank of necessary truth. (143)

Here is part of Walsh's assessment of the success of Hegel's project:

We must now try to estimate the adequacy of this defence. As regards the first point, it is surely successful. I have tried to stress throughout this chapter and the last the metaphysical and moral context within which speculative philosophy of history arose and was pursued. As we have seen, those engaged in these enquiries were concerned to divine the meaning or point or rationality behind the historical process as a whole, and they took up this question primarily because of its metaphysical relevance. (148)

My own assessment of idealist philosophy of history as presented by Walsh is measured. First, Walsh includes the centrality of action and ideas within history as a central tenet of idealist philosophy of history. This is Collingwood's central idea, and it seems to be Dilthey's as well. And in my opinion, it is a credible and empirically suitable hypothesis. Even if we conclude in the end that there is more to the historical process than deliberation and action, we can agree that action is a highly important component. And therefore an explication of the ways we investigate and interpret meanings and actions is a valid exercise. It falls in the category of epistemology, with a harmless bit of ontology stirred in (the constitutive importance of action).

But it must be emphasized that this perspective doesn't rule out other important insights into the ways that historical change takes place. In particular, we can also adhere to a limited materialism and structuralism in history, following Marx in holding that "men make their own history, but not in circumstance of their own choosing."

Second, I'm willing to be persuaded that there is a valid object of study for philosophers in the logical-semantic systems that thinkers like Hegel have created; and this extends to their philosophies of history. So the philosophical study and explication of metaphysical philosophy of history is a rationally acceptable enterprise as well.

What I have difficulty in accepting is that such a system can actually succeed. When Walsh writes that the goal of the historian and the philosopher is to tell the story of history in such a way that all the events make sense within the context of a master narrative -- when he proposes that the goal of the philosophy of history is to discover the real meaning and rationality of history as a whole -- I believe he is describing an effort that cannot succeed. There is no single unifying meaning or plan in history. And efforts to "colligate" events in such a way as to demonstrate that they contribute to such a plan seem to be unguided acts of creativity.

It is a commonplace that a series of actual events can be interpreted in different and apparently incompatible ways. We can attribute different motives to the actors and interpret their actions in such a way as to tell very different stories. (This is what we refer to as the "Rashomon effect".)  In ordinary settings we can sometimes gain more evidence to choose between them. But when the choice is between interpretation frameworks at the highest level -- a materialist theory of history and a theory based on the unfolding of reason, for example -- we can't possibly provide empirical evidence that would choose between these all-encompassing hypotheses.

So I'm putting my bets on several ideas: yes to the validity of the hermeneutic program, yes to the interpretive task of understanding the great metaphysical systems from a philosophical point of view, and no to the idea of rationally justifiable interpretations of the whole of history. In Walsh's terms this means yes to a limited idealism, yes to the task of the history of philosophy, and no to the aspiration towards a substantive metaphysics of history.

And, indeed, Walsh seems eventually to come to a similar conclusion:

Our speculative philosophy of history must accordingly be a mixed one. In a way, we are forced to characterize it as utterly wrong-headed, since its programme amounts to an attempt to comprehend history from the outside; an attempt which, as Croce made clear long ago, cannot have any appeal for working historians. On the other hand, its most celebrated exponents certainly did make an important indirect contribution to the development of historical studies, as we have just tried to show.  Whether there is any future in this type of philosophizing is another question, dependent, it would seem, on what chance there is of anyone's producing a tenable moral justification of the course history has taken. (153-54)

Marx on a global wage

What is the longterm tendency in the wage for relatively unskilled labor?  In the United States we've been thinking about this problem in the past three decades in the context of "outsourcing" and the flight of manufacturing jobs to low-wage countries. Moderate- and high-wage industrial jobs have left the country in large numbers.  In the 1970s and 1980s apparel manufacture largely left the US for Latin America and Asia, and in the 1990s and 2000s heavy manufacturing jobs (in the auto industry in particular) were widely perceived to have fled to Asia.

What are the effects of these global shifts in manufacturing for the wage in all countries?  It turns out that Karl Marx had some remarkably prescient ideas about this question in the 1860s that still seem important today.  Here are some markedly current observations from Marx's Capital (link) on the wage in a competitive international context:

A writer of the 18th century, often quoted already, the author of the "Essay on Trade and Commerce," only betrays the innermost secret soul of English capitalism, when he declares the historic mission of England to be the forcing down of English wages to the level of the French and the Dutch. [37] With other things he says naively: "But if our poor" (technical term for labourers) "will live luxuriously ... then labour must, of course, be dear.... When it is considered what luxuries the manufacturing populace consume, such as brandy, gin, tea, sugar, foreign fruit, strong beer, printed linens, snuff, tobacco, etc." [38] He quotes the work of a Northamptonshire manufacturer, who, with eyes squinting heavenward moans: "Labour is one-third cheaper in France than in England; for their poor work hard, and fare hard, as to their food and clothing. Their chief diet is bread, fruit, herbs, roots, and dried fish; for they very seldom eat flesh; and when wheat is dear, they eat very little bread." [39] "To which may be added," our essayist goes on, "that their drink is either water or other small liquors, so that they spend very little money.... These things are very difficult to be brought about; but they are not impracticable, since they have been effected both in France and in Holland." [40] (Capital I, chap. 24)

And the footnote amplifies:

[40] Today, thanks to the competition on the world-market, established since then, we have advanced much further. "If China," says Mr. Stapleton, M.P., to his constituents, "should become a great manufacturing country, I do not see how the manufacturing population of Europe could sustain the contest without descending to the level of their competitors." (Times, Sept. 3, 1873, p. 8.) The wished-for goal of English capital is no longer Continental wages but Chinese.

In other words, Marx's view in 1867 was that there is an inevitable competitive pressure on British firms (high wages) to seek out manufacturing locations in other countries where labor costs are lower; and, of course, this movement brings competitive downward pressures on the domestic manufacturing wage.  So the British manufacturing wage falls as low-wage European competitors (eventually Chinese competitors) are able to produce commodities at lower unit cost.  This has a long-term global result: the unskilled manufacturing labor market becomes global, and the wage approaches a global equilibrium that is significantly lower than the present.

One thing is striking about this observation in 1867 is the reference to China.  Mr. Stapleton's observations in 1873 were highly speculative; China was a century from becoming a great manufacturing country.  But Marx's eye was focused on the long-term patterns; and he (and Mr. Stapleton) correctly noted the inherent logic of global competition for low-wage labor.  The long-term result, apparently unavoidably, is that production processes that involve low-skill labor will be involved in a rapid race to the bottom, leading to an equilibrium wage across nations that is barely sufficient for subsistence.

Another major force operating on the level of the wage for unskilled labor that Marx emphasizes is the rapid introduction of technology and innovations enhancing labor productivity -- leading to a reduction in the demand for labor and putting more downward pressure on the wage.  Writing after the American Civil War about English cotton manufacture, he writes:

The instrument of labour strikes down the labourer. This direct antagonism between the two comes out most strongly, whenever newly introduced machinery competes with handicrafts or manufactures, handed down from former times. But even in Modern Industry the continual improvement of machinery, and the development of the automatic system, has an analogous effect. "The object of improved machinery is to diminish manual labour, to provide for the performance of a process or the completion of a link in a manufacture by the aid of an iron instead of the human apparatus." [119] "The adaptation of power to machinery heretofore moved by hand, is almost of daily occurrence ... the minor improvements in machinery having for their object economy of power, the production of better work, the turning off more work in the same time, or in supplying the place of a child, a female, or a man, are constant, and although sometimes apparently of no great moment, have somewhat important results." [120] "Whenever a process requires peculiar dexterity and steadiness of hand, it is withdrawn, as soon as possible, from the cunning workman, who is prone to irregularities of many kinds, and it is t)laced in charge of a peculiar mechanism, so self-regulating that a child can superintend it." [121] "On the automatic plan skilled labour gets progressively superseded." [122] "The effect of improvements in machinery, not merely in superseding the necessity for the employment of the same quantity of adult labour as before, in order to produce a given result, but in substituting one description of human labour for another, the less skilled for the more skilled, juvenile for adult, female for male, causes a fresh disturbance in the rate of wages." [123] "The effect of substituting the self-acting mule for the common mule, is to discharge the greater part of the men spinners, and to retain adolescents and children." [124] The extraordinary power of expansion of the factory system owing to accumulated practical experience, to the mechanical means at hand, and to constant technical progress, was proved to us by the giant strides of that system under the pressure of a shortened working-day. But who, in 1860, the Zenith year of the English cotton industry, would have dreamt of the galloping improvements in machinery, and the corresponding displacement of working people, called into being during the following 3 years, under the stimulus of the American Civil War? A couple of examples from the Reports of the Inspectors of Factories will suffice on this point. A Manchester manufacturer states: "We formerly had 75 carding engines, now we have 12, doing the same quantity of work.... We are doing with fewer hands by 14, at a saving in wages of £10 a-week. Our estimated saving in waste is about 10% in the quantity of cotton consumed." "In another fine-spinning mill in Manchester, I was informed that through increased speed and the adoption of some self-acting processes, a reduction had been made, in number, of a fourth in one department, and of above half in another, and that the introduction of the combing machine in place of the second carding, had considerably reduced, the number of hands formerly employed in the carding-room." Another spinning-mill is estimated to effect a saving of labour of 10%. The Messrs. Gilmour, spinners at Manchester, state: "In our blowing-room department we consider our expense with new machinery is fully one-third less in wages and hands ... in the jack-frame and drawing-frame room, about one-third less in expense, and likewise one-third less in hands; in the spinningroom about one-third less in expenses. But this is not all; when our yarn goes to the manufacturers, it is so much better by the application of our new machinery, that they will produce a greater quantity of cloth, and cheaper than from the yarn produced by old machinery." [125] Mr. Redgrave further remarks in the same Report: "The reduction of hands against increased production is, in fact, constantly taking place, in woollen mills the reduction commenced some time since, and is continuing; a few days since, the master of a school in the neighbourhood of Rochdale said to me, that the great falling off in the girls' school is not only caused by the distress, but by the changes of machinery in the woollen mills, in consequence of which a reduction of 70 short-timers had taken place." [126]
(Capital I, Chapter 15)

The note is important as well:

[126] l. c., p. 109. The rapid improvement of machinery, during the crisis, allowed the English manufacturers, immediately after the termination of the American Civil War, and almost in no time, to glut the markets of the world again. Cloth,' during the last six months of 1866, was almost unsaleable. Thereupon began the consignment of goods to India and China, thus naturally making the glut more intense. At the beginning of 1867 the manufacturers resorted to their usual way out of the difficulty, viz., reducing wages 5 per cent. The workpeople resisted, and said that the only remedy was to work short time, 4 days a week; and their theory was the correct one. After holding out for some time, the self-elected captains of industry had to make up their minds to short time, with reduced wages in some places, and in others without. 

So is there any way out for the worker?  Is there any scenario where ordinary working people can earn a moderate to high wage and corresponding standard of living?  There is, through education and skill.  The only way of maintaining a high wage for workers is on the basis of a given workforce possessing the ability to accomplish production tasks on the basis of non-generalized knowledge and skill.  When labor is a commodity that is interchangeable in Karnataka, Guangdong, and Detroit, the wage will approach something like a low-level equilibrium.  But when workers are able to add exceptional value to the process through their skills, talents, and knowledge, they will share in that productivity in the form of higher wages and a higher standard of living.

This observation converges with several themes already discussed in earlier postings: the attractiveness of the "high-skill" alternative to mass manufacturing that is highlighted by Chuck Sabel (link), and the current urgency that we should all feel about making sure that all young people have the opportunity to complete a tertiary degree (link).

Marx on a global wage

What is the longterm tendency in the wage for relatively unskilled labor?  In the United States we've been thinking about this problem in the past three decades in the context of "outsourcing" and the flight of manufacturing jobs to low-wage countries. Moderate- and high-wage industrial jobs have left the country in large numbers.  In the 1970s and 1980s apparel manufacture largely left the US for Latin America and Asia, and in the 1990s and 2000s heavy manufacturing jobs (in the auto industry in particular) were widely perceived to have fled to Asia.

What are the effects of these global shifts in manufacturing for the wage in all countries?  It turns out that Karl Marx had some remarkably prescient ideas about this question in the 1860s that still seem important today.  Here are some markedly current observations from Marx's Capital (link) on the wage in a competitive international context:

A writer of the 18th century, often quoted already, the author of the "Essay on Trade and Commerce," only betrays the innermost secret soul of English capitalism, when he declares the historic mission of England to be the forcing down of English wages to the level of the French and the Dutch. [37] With other things he says naively: "But if our poor" (technical term for labourers) "will live luxuriously ... then labour must, of course, be dear.... When it is considered what luxuries the manufacturing populace consume, such as brandy, gin, tea, sugar, foreign fruit, strong beer, printed linens, snuff, tobacco, etc." [38] He quotes the work of a Northamptonshire manufacturer, who, with eyes squinting heavenward moans: "Labour is one-third cheaper in France than in England; for their poor work hard, and fare hard, as to their food and clothing. Their chief diet is bread, fruit, herbs, roots, and dried fish; for they very seldom eat flesh; and when wheat is dear, they eat very little bread." [39] "To which may be added," our essayist goes on, "that their drink is either water or other small liquors, so that they spend very little money.... These things are very difficult to be brought about; but they are not impracticable, since they have been effected both in France and in Holland." [40] (Capital I, chap. 24)

And the footnote amplifies:

[40] Today, thanks to the competition on the world-market, established since then, we have advanced much further. "If China," says Mr. Stapleton, M.P., to his constituents, "should become a great manufacturing country, I do not see how the manufacturing population of Europe could sustain the contest without descending to the level of their competitors." (Times, Sept. 3, 1873, p. 8.) The wished-for goal of English capital is no longer Continental wages but Chinese.

In other words, Marx's view in 1867 was that there is an inevitable competitive pressure on British firms (high wages) to seek out manufacturing locations in other countries where labor costs are lower; and, of course, this movement brings competitive downward pressures on the domestic manufacturing wage.  So the British manufacturing wage falls as low-wage European competitors (eventually Chinese competitors) are able to produce commodities at lower unit cost.  This has a long-term global result: the unskilled manufacturing labor market becomes global, and the wage approaches a global equilibrium that is significantly lower than the present.

One thing is striking about this observation in 1867 is the reference to China.  Mr. Stapleton's observations in 1873 were highly speculative; China was a century from becoming a great manufacturing country.  But Marx's eye was focused on the long-term patterns; and he (and Mr. Stapleton) correctly noted the inherent logic of global competition for low-wage labor.  The long-term result, apparently unavoidably, is that production processes that involve low-skill labor will be involved in a rapid race to the bottom, leading to an equilibrium wage across nations that is barely sufficient for subsistence.

Another major force operating on the level of the wage for unskilled labor that Marx emphasizes is the rapid introduction of technology and innovations enhancing labor productivity -- leading to a reduction in the demand for labor and putting more downward pressure on the wage.  Writing after the American Civil War about English cotton manufacture, he writes:

The instrument of labour strikes down the labourer. This direct antagonism between the two comes out most strongly, whenever newly introduced machinery competes with handicrafts or manufactures, handed down from former times. But even in Modern Industry the continual improvement of machinery, and the development of the automatic system, has an analogous effect. "The object of improved machinery is to diminish manual labour, to provide for the performance of a process or the completion of a link in a manufacture by the aid of an iron instead of the human apparatus." [119] "The adaptation of power to machinery heretofore moved by hand, is almost of daily occurrence ... the minor improvements in machinery having for their object economy of power, the production of better work, the turning off more work in the same time, or in supplying the place of a child, a female, or a man, are constant, and although sometimes apparently of no great moment, have somewhat important results." [120] "Whenever a process requires peculiar dexterity and steadiness of hand, it is withdrawn, as soon as possible, from the cunning workman, who is prone to irregularities of many kinds, and it is t)laced in charge of a peculiar mechanism, so self-regulating that a child can superintend it." [121] "On the automatic plan skilled labour gets progressively superseded." [122] "The effect of improvements in machinery, not merely in superseding the necessity for the employment of the same quantity of adult labour as before, in order to produce a given result, but in substituting one description of human labour for another, the less skilled for the more skilled, juvenile for adult, female for male, causes a fresh disturbance in the rate of wages." [123] "The effect of substituting the self-acting mule for the common mule, is to discharge the greater part of the men spinners, and to retain adolescents and children." [124] The extraordinary power of expansion of the factory system owing to accumulated practical experience, to the mechanical means at hand, and to constant technical progress, was proved to us by the giant strides of that system under the pressure of a shortened working-day. But who, in 1860, the Zenith year of the English cotton industry, would have dreamt of the galloping improvements in machinery, and the corresponding displacement of working people, called into being during the following 3 years, under the stimulus of the American Civil War? A couple of examples from the Reports of the Inspectors of Factories will suffice on this point. A Manchester manufacturer states: "We formerly had 75 carding engines, now we have 12, doing the same quantity of work.... We are doing with fewer hands by 14, at a saving in wages of £10 a-week. Our estimated saving in waste is about 10% in the quantity of cotton consumed." "In another fine-spinning mill in Manchester, I was informed that through increased speed and the adoption of some self-acting processes, a reduction had been made, in number, of a fourth in one department, and of above half in another, and that the introduction of the combing machine in place of the second carding, had considerably reduced, the number of hands formerly employed in the carding-room." Another spinning-mill is estimated to effect a saving of labour of 10%. The Messrs. Gilmour, spinners at Manchester, state: "In our blowing-room department we consider our expense with new machinery is fully one-third less in wages and hands ... in the jack-frame and drawing-frame room, about one-third less in expense, and likewise one-third less in hands; in the spinningroom about one-third less in expenses. But this is not all; when our yarn goes to the manufacturers, it is so much better by the application of our new machinery, that they will produce a greater quantity of cloth, and cheaper than from the yarn produced by old machinery." [125] Mr. Redgrave further remarks in the same Report: "The reduction of hands against increased production is, in fact, constantly taking place, in woollen mills the reduction commenced some time since, and is continuing; a few days since, the master of a school in the neighbourhood of Rochdale said to me, that the great falling off in the girls' school is not only caused by the distress, but by the changes of machinery in the woollen mills, in consequence of which a reduction of 70 short-timers had taken place." [126]
(Capital I, Chapter 15)

The note is important as well:

[126] l. c., p. 109. The rapid improvement of machinery, during the crisis, allowed the English manufacturers, immediately after the termination of the American Civil War, and almost in no time, to glut the markets of the world again. Cloth,' during the last six months of 1866, was almost unsaleable. Thereupon began the consignment of goods to India and China, thus naturally making the glut more intense. At the beginning of 1867 the manufacturers resorted to their usual way out of the difficulty, viz., reducing wages 5 per cent. The workpeople resisted, and said that the only remedy was to work short time, 4 days a week; and their theory was the correct one. After holding out for some time, the self-elected captains of industry had to make up their minds to short time, with reduced wages in some places, and in others without. 

So is there any way out for the worker?  Is there any scenario where ordinary working people can earn a moderate to high wage and corresponding standard of living?  There is, through education and skill.  The only way of maintaining a high wage for workers is on the basis of a given workforce possessing the ability to accomplish production tasks on the basis of non-generalized knowledge and skill.  When labor is a commodity that is interchangeable in Karnataka, Guangdong, and Detroit, the wage will approach something like a low-level equilibrium.  But when workers are able to add exceptional value to the process through their skills, talents, and knowledge, they will share in that productivity in the form of higher wages and a higher standard of living.

This observation converges with several themes already discussed in earlier postings: the attractiveness of the "high-skill" alternative to mass manufacturing that is highlighted by Chuck Sabel (link), and the current urgency that we should all feel about making sure that all young people have the opportunity to complete a tertiary degree (link).

Marx on a global wage

What is the longterm tendency in the wage for relatively unskilled labor?  In the United States we've been thinking about this problem in the past three decades in the context of "outsourcing" and the flight of manufacturing jobs to low-wage countries. Moderate- and high-wage industrial jobs have left the country in large numbers.  In the 1970s and 1980s apparel manufacture largely left the US for Latin America and Asia, and in the 1990s and 2000s heavy manufacturing jobs (in the auto industry in particular) were widely perceived to have fled to Asia.

What are the effects of these global shifts in manufacturing for the wage in all countries?  It turns out that Karl Marx had some remarkably prescient ideas about this question in the 1860s that still seem important today.  Here are some markedly current observations from Marx's Capital (link) on the wage in a competitive international context:

A writer of the 18th century, often quoted already, the author of the "Essay on Trade and Commerce," only betrays the innermost secret soul of English capitalism, when he declares the historic mission of England to be the forcing down of English wages to the level of the French and the Dutch. [37] With other things he says naively: "But if our poor" (technical term for labourers) "will live luxuriously ... then labour must, of course, be dear.... When it is considered what luxuries the manufacturing populace consume, such as brandy, gin, tea, sugar, foreign fruit, strong beer, printed linens, snuff, tobacco, etc." [38] He quotes the work of a Northamptonshire manufacturer, who, with eyes squinting heavenward moans: "Labour is one-third cheaper in France than in England; for their poor work hard, and fare hard, as to their food and clothing. Their chief diet is bread, fruit, herbs, roots, and dried fish; for they very seldom eat flesh; and when wheat is dear, they eat very little bread." [39] "To which may be added," our essayist goes on, "that their drink is either water or other small liquors, so that they spend very little money.... These things are very difficult to be brought about; but they are not impracticable, since they have been effected both in France and in Holland." [40] (Capital I, chap. 24)

And the footnote amplifies:

[40] Today, thanks to the competition on the world-market, established since then, we have advanced much further. "If China," says Mr. Stapleton, M.P., to his constituents, "should become a great manufacturing country, I do not see how the manufacturing population of Europe could sustain the contest without descending to the level of their competitors." (Times, Sept. 3, 1873, p. 8.) The wished-for goal of English capital is no longer Continental wages but Chinese.

In other words, Marx's view in 1867 was that there is an inevitable competitive pressure on British firms (high wages) to seek out manufacturing locations in other countries where labor costs are lower; and, of course, this movement brings competitive downward pressures on the domestic manufacturing wage.  So the British manufacturing wage falls as low-wage European competitors (eventually Chinese competitors) are able to produce commodities at lower unit cost.  This has a long-term global result: the unskilled manufacturing labor market becomes global, and the wage approaches a global equilibrium that is significantly lower than the present.

One thing is striking about this observation in 1867 is the reference to China.  Mr. Stapleton's observations in 1873 were highly speculative; China was a century from becoming a great manufacturing country.  But Marx's eye was focused on the long-term patterns; and he (and Mr. Stapleton) correctly noted the inherent logic of global competition for low-wage labor.  The long-term result, apparently unavoidably, is that production processes that involve low-skill labor will be involved in a rapid race to the bottom, leading to an equilibrium wage across nations that is barely sufficient for subsistence.

Another major force operating on the level of the wage for unskilled labor that Marx emphasizes is the rapid introduction of technology and innovations enhancing labor productivity -- leading to a reduction in the demand for labor and putting more downward pressure on the wage.  Writing after the American Civil War about English cotton manufacture, he writes:

The instrument of labour strikes down the labourer. This direct antagonism between the two comes out most strongly, whenever newly introduced machinery competes with handicrafts or manufactures, handed down from former times. But even in Modern Industry the continual improvement of machinery, and the development of the automatic system, has an analogous effect. "The object of improved machinery is to diminish manual labour, to provide for the performance of a process or the completion of a link in a manufacture by the aid of an iron instead of the human apparatus." [119] "The adaptation of power to machinery heretofore moved by hand, is almost of daily occurrence ... the minor improvements in machinery having for their object economy of power, the production of better work, the turning off more work in the same time, or in supplying the place of a child, a female, or a man, are constant, and although sometimes apparently of no great moment, have somewhat important results." [120] "Whenever a process requires peculiar dexterity and steadiness of hand, it is withdrawn, as soon as possible, from the cunning workman, who is prone to irregularities of many kinds, and it is t)laced in charge of a peculiar mechanism, so self-regulating that a child can superintend it." [121] "On the automatic plan skilled labour gets progressively superseded." [122] "The effect of improvements in machinery, not merely in superseding the necessity for the employment of the same quantity of adult labour as before, in order to produce a given result, but in substituting one description of human labour for another, the less skilled for the more skilled, juvenile for adult, female for male, causes a fresh disturbance in the rate of wages." [123] "The effect of substituting the self-acting mule for the common mule, is to discharge the greater part of the men spinners, and to retain adolescents and children." [124] The extraordinary power of expansion of the factory system owing to accumulated practical experience, to the mechanical means at hand, and to constant technical progress, was proved to us by the giant strides of that system under the pressure of a shortened working-day. But who, in 1860, the Zenith year of the English cotton industry, would have dreamt of the galloping improvements in machinery, and the corresponding displacement of working people, called into being during the following 3 years, under the stimulus of the American Civil War? A couple of examples from the Reports of the Inspectors of Factories will suffice on this point. A Manchester manufacturer states: "We formerly had 75 carding engines, now we have 12, doing the same quantity of work.... We are doing with fewer hands by 14, at a saving in wages of £10 a-week. Our estimated saving in waste is about 10% in the quantity of cotton consumed." "In another fine-spinning mill in Manchester, I was informed that through increased speed and the adoption of some self-acting processes, a reduction had been made, in number, of a fourth in one department, and of above half in another, and that the introduction of the combing machine in place of the second carding, had considerably reduced, the number of hands formerly employed in the carding-room." Another spinning-mill is estimated to effect a saving of labour of 10%. The Messrs. Gilmour, spinners at Manchester, state: "In our blowing-room department we consider our expense with new machinery is fully one-third less in wages and hands ... in the jack-frame and drawing-frame room, about one-third less in expense, and likewise one-third less in hands; in the spinningroom about one-third less in expenses. But this is not all; when our yarn goes to the manufacturers, it is so much better by the application of our new machinery, that they will produce a greater quantity of cloth, and cheaper than from the yarn produced by old machinery." [125] Mr. Redgrave further remarks in the same Report: "The reduction of hands against increased production is, in fact, constantly taking place, in woollen mills the reduction commenced some time since, and is continuing; a few days since, the master of a school in the neighbourhood of Rochdale said to me, that the great falling off in the girls' school is not only caused by the distress, but by the changes of machinery in the woollen mills, in consequence of which a reduction of 70 short-timers had taken place." [126]
(Capital I, Chapter 15)

The note is important as well:

[126] l. c., p. 109. The rapid improvement of machinery, during the crisis, allowed the English manufacturers, immediately after the termination of the American Civil War, and almost in no time, to glut the markets of the world again. Cloth,' during the last six months of 1866, was almost unsaleable. Thereupon began the consignment of goods to India and China, thus naturally making the glut more intense. At the beginning of 1867 the manufacturers resorted to their usual way out of the difficulty, viz., reducing wages 5 per cent. The workpeople resisted, and said that the only remedy was to work short time, 4 days a week; and their theory was the correct one. After holding out for some time, the self-elected captains of industry had to make up their minds to short time, with reduced wages in some places, and in others without. 

So is there any way out for the worker?  Is there any scenario where ordinary working people can earn a moderate to high wage and corresponding standard of living?  There is, through education and skill.  The only way of maintaining a high wage for workers is on the basis of a given workforce possessing the ability to accomplish production tasks on the basis of non-generalized knowledge and skill.  When labor is a commodity that is interchangeable in Karnataka, Guangdong, and Detroit, the wage will approach something like a low-level equilibrium.  But when workers are able to add exceptional value to the process through their skills, talents, and knowledge, they will share in that productivity in the form of higher wages and a higher standard of living.

This observation converges with several themes already discussed in earlier postings: the attractiveness of the "high-skill" alternative to mass manufacturing that is highlighted by Chuck Sabel (link), and the current urgency that we should all feel about making sure that all young people have the opportunity to complete a tertiary degree (link).

Prosperity based on commodities

An earlier post looked at economic prosperity and standard of living from the point of view of a grain-based agricultural economy. There I singled out intensive, extensive, and technology-based growth, and the effects these scenarios had on the standard of living for a farming population. This is a particularly simple case, since it equates standard of living with food availability per capita. (This is enough, however, to arrive at credible estimates of the standard of living over long stretches of Chinese history, as Bozhong Li has demonstrated in Agricultural Development in Jiangnan, 1620-1850.)  This simplification leaves out markets, prices, and trade; so it doesn't shed much light on economies based substantially on the production of commodities (including farm products, but also including manufactured goods). So how does the situation change when we postulate production for exchange and consumption based on cash income?

Let's once again consider an isolated region, where all products consumed are produced in the region. So there is no interregional trade. And let's suppose there are three goods: grain, shirts, and beer. Every household needs some of each, and households acquire income through ownership of resources: land, capital, and labor power. The income available to a household is the net return it achieves through use of its resources. Goods are produced by "firms" and are bought and sold through competitive markets.

Now to estimate a household's standard of living we need to do a more complex estimation: we need to estimate the household's income and we need to estimate the "purchasing power" of this income in terms of the baskets of goods this income can purchase at prevailing prices. So we need an income model and a price model for the three goods.  (See Robert Allen's detailed efforts at answering these questions across Eurasia (link, link).)

Production requires access to resources.  Each resource can be used in two basic ways: it can be used directly by its owner in production, or it can be "rented" to a firm for use by the firm in production. So there is also a competitive market for resources: rent for land, interest for capital, and wages for labor. And at any given time there is a specific distribution of resources across population; some households have dramatically more of each resource than others.

We can begin our thought experiment by taking as fixed the techniques of production that exist for the three basic commodities. In order to produce at a given level of output, the firm needs access to a known quantity of resources, in a specific proportion. Firms amd households with lots of resources can begin producing shirts, beer, and grain immediately. Poor firms and households will either rent access to more resources through promise of future rents; or they will rent out the resources they currently possess, including labor time. So landless, propertyless households have no choice but to sell their labor time; they become workers. So now let's picture our region as populated by firms and households producing commodities, and all persons functioning as consumers purchasing a bundle of commodities for life needs.

So far we've provided a scene very familiar from the classical political economists and Marx. Much of subsequent economic thought went into solving various parts of this story: what determines prices, what does the distribution of income look like, and how do innovation and organizational and technological change fit into this story?  What does an equilibrium of production, consumption, and price look like with static technology?  What are the dynamic processes of adjustment that occur when there is a substantial change in the process of production?

My question here is a limited one: what needs to occur in this scenario in order for there to be a rising trend in the average and median standard living for this society?

Let's define the standard of living as the size of the wage basket available to the median consumer: the sets of baskets of grain, shirts, and beer that the median income earner is able to purchase. In order for the standard of living to rise in this isolated region, there needs to be an overall increase in the efficiency and productivity of the production process for the three goods. And the money wage of the median consumer needs to rise.  (Amartya Sen provides quite a bit of analysis of the meaning of the standard of living in The Standard of Living.)

Let's refer to the concrete production process at a given time as the current practice; this is the specific way that inputs are organized in order to create the output. As we saw in the graph of output against time borrowed from Mark Elvin (link), we can think of progress here in two ways. First, there is refinement of practice, as producers gradually recognize small modifications that permit removal of costs from the process. And, as Marx and Smith agree, firms and households producing goods for a market have a powerful incentive to seek out these improvements: they can continue to sell their products at the old price until the rest of the producers catch up.

Second, producers can introduce substantial, revolutionary changes in technology. They may replace skilled sewing-machine operators with sewing robots that reduce each of the inputs into the good. Productivity takes a big stride forward.

There is a third mechanism of cost reduction available: the firm/household may speed up the labor process, lengthen the working day, or lower the wage. Volume I of Capital goes into detail on each of these mechanisms within a market-governed firm.  And each of these approaches is negative for the quality of life of the working class.

Now let's get back to the question of the standard of living. Does the process of competition, rising productivity, and falling prices imply an improvement in the standard of living? Or, conceivably, does it lead to a paradoxical immiseration of the bulk of the population? Both outcomes are possible. Rising efficiency and productivity have permitted our little society to produce a rising quantity of beer, grain, and shirts. And this on the basis of a fixed level of basic resources. So in principle everyone may be better off. But it is possible as well that the benefits of rising productivity have been disproportionately captured by a small advantaged group. So income may have become increasingly concentrated at the top. The average wage basket will have increased. But the median consumer may have declined through that process of concentration.

What this story tells us is something fairly simple: the effects of productivity improvement within a commodity economy depend critically on the prior distribution of assets and the institutions through which income and the gains of efficiency are distributed. And this in turn suggests a point much like that of Robert Brenner: the social-property relations embedded within an economy are critical in determining the fate of the median person, and they are subject to profound political struggle (post).

It would be very interesting to use agent-based modeling software to represent a series of scenarios based on this description of a commodity-based economy undergoing growth.  What do distributive outcomes look like when the prior distribution is relatively equal?  How about when they are substantially unequal?  How much difference does the timing of growth make on the eventual distributive and welfare characteristics of the scenario?

(Piero Sraffa's Production of Commodities by Means of Commodities : Prelude to a Critique of Economic Theory picks up some parts of this story in a neo-Ricardian way; Marxian economists have looked at Sraffa's work as also providing a novel basis for the labor theory of value.  The framework provided here also leads into an argument for a new definition of exploitation by John Roemer in A General Theory of Exploitation and Class.)

Prosperity based on commodities

An earlier post looked at economic prosperity and standard of living from the point of view of a grain-based agricultural economy. There I singled out intensive, extensive, and technology-based growth, and the effects these scenarios had on the standard of living for a farming population. This is a particularly simple case, since it equates standard of living with food availability per capita. (This is enough, however, to arrive at credible estimates of the standard of living over long stretches of Chinese history, as Bozhong Li has demonstrated in Agricultural Development in Jiangnan, 1620-1850.)  This simplification leaves out markets, prices, and trade; so it doesn't shed much light on economies based substantially on the production of commodities (including farm products, but also including manufactured goods). So how does the situation change when we postulate production for exchange and consumption based on cash income?

Let's once again consider an isolated region, where all products consumed are produced in the region. So there is no interregional trade. And let's suppose there are three goods: grain, shirts, and beer. Every household needs some of each, and households acquire income through ownership of resources: land, capital, and labor power. The income available to a household is the net return it achieves through use of its resources. Goods are produced by "firms" and are bought and sold through competitive markets.

Now to estimate a household's standard of living we need to do a more complex estimation: we need to estimate the household's income and we need to estimate the "purchasing power" of this income in terms of the baskets of goods this income can purchase at prevailing prices. So we need an income model and a price model for the three goods.  (See Robert Allen's detailed efforts at answering these questions across Eurasia (link, link).)

Production requires access to resources.  Each resource can be used in two basic ways: it can be used directly by its owner in production, or it can be "rented" to a firm for use by the firm in production. So there is also a competitive market for resources: rent for land, interest for capital, and wages for labor. And at any given time there is a specific distribution of resources across population; some households have dramatically more of each resource than others.

We can begin our thought experiment by taking as fixed the techniques of production that exist for the three basic commodities. In order to produce at a given level of output, the firm needs access to a known quantity of resources, in a specific proportion. Firms amd households with lots of resources can begin producing shirts, beer, and grain immediately. Poor firms and households will either rent access to more resources through promise of future rents; or they will rent out the resources they currently possess, including labor time. So landless, propertyless households have no choice but to sell their labor time; they become workers. So now let's picture our region as populated by firms and households producing commodities, and all persons functioning as consumers purchasing a bundle of commodities for life needs.

So far we've provided a scene very familiar from the classical political economists and Marx. Much of subsequent economic thought went into solving various parts of this story: what determines prices, what does the distribution of income look like, and how do innovation and organizational and technological change fit into this story?  What does an equilibrium of production, consumption, and price look like with static technology?  What are the dynamic processes of adjustment that occur when there is a substantial change in the process of production?

My question here is a limited one: what needs to occur in this scenario in order for there to be a rising trend in the average and median standard living for this society?

Let's define the standard of living as the size of the wage basket available to the median consumer: the sets of baskets of grain, shirts, and beer that the median income earner is able to purchase. In order for the standard of living to rise in this isolated region, there needs to be an overall increase in the efficiency and productivity of the production process for the three goods. And the money wage of the median consumer needs to rise.  (Amartya Sen provides quite a bit of analysis of the meaning of the standard of living in The Standard of Living.)

Let's refer to the concrete production process at a given time as the current practice; this is the specific way that inputs are organized in order to create the output. As we saw in the graph of output against time borrowed from Mark Elvin (link), we can think of progress here in two ways. First, there is refinement of practice, as producers gradually recognize small modifications that permit removal of costs from the process. And, as Marx and Smith agree, firms and households producing goods for a market have a powerful incentive to seek out these improvements: they can continue to sell their products at the old price until the rest of the producers catch up.

Second, producers can introduce substantial, revolutionary changes in technology. They may replace skilled sewing-machine operators with sewing robots that reduce each of the inputs into the good. Productivity takes a big stride forward.

There is a third mechanism of cost reduction available: the firm/household may speed up the labor process, lengthen the working day, or lower the wage. Volume I of Capital goes into detail on each of these mechanisms within a market-governed firm.  And each of these approaches is negative for the quality of life of the working class.

Now let's get back to the question of the standard of living. Does the process of competition, rising productivity, and falling prices imply an improvement in the standard of living? Or, conceivably, does it lead to a paradoxical immiseration of the bulk of the population? Both outcomes are possible. Rising efficiency and productivity have permitted our little society to produce a rising quantity of beer, grain, and shirts. And this on the basis of a fixed level of basic resources. So in principle everyone may be better off. But it is possible as well that the benefits of rising productivity have been disproportionately captured by a small advantaged group. So income may have become increasingly concentrated at the top. The average wage basket will have increased. But the median consumer may have declined through that process of concentration.

What this story tells us is something fairly simple: the effects of productivity improvement within a commodity economy depend critically on the prior distribution of assets and the institutions through which income and the gains of efficiency are distributed. And this in turn suggests a point much like that of Robert Brenner: the social-property relations embedded within an economy are critical in determining the fate of the median person, and they are subject to profound political struggle (post).

It would be very interesting to use agent-based modeling software to represent a series of scenarios based on this description of a commodity-based economy undergoing growth.  What do distributive outcomes look like when the prior distribution is relatively equal?  How about when they are substantially unequal?  How much difference does the timing of growth make on the eventual distributive and welfare characteristics of the scenario?

(Piero Sraffa's Production of Commodities by Means of Commodities : Prelude to a Critique of Economic Theory picks up some parts of this story in a neo-Ricardian way; Marxian economists have looked at Sraffa's work as also providing a novel basis for the labor theory of value.  The framework provided here also leads into an argument for a new definition of exploitation by John Roemer in A General Theory of Exploitation and Class.)

Prosperity based on commodities

An earlier post looked at economic prosperity and standard of living from the point of view of a grain-based agricultural economy. There I singled out intensive, extensive, and technology-based growth, and the effects these scenarios had on the standard of living for a farming population. This is a particularly simple case, since it equates standard of living with food availability per capita. (This is enough, however, to arrive at credible estimates of the standard of living over long stretches of Chinese history, as Bozhong Li has demonstrated in Agricultural Development in Jiangnan, 1620-1850.)  This simplification leaves out markets, prices, and trade; so it doesn't shed much light on economies based substantially on the production of commodities (including farm products, but also including manufactured goods). So how does the situation change when we postulate production for exchange and consumption based on cash income?

Let's once again consider an isolated region, where all products consumed are produced in the region. So there is no interregional trade. And let's suppose there are three goods: grain, shirts, and beer. Every household needs some of each, and households acquire income through ownership of resources: land, capital, and labor power. The income available to a household is the net return it achieves through use of its resources. Goods are produced by "firms" and are bought and sold through competitive markets.

Now to estimate a household's standard of living we need to do a more complex estimation: we need to estimate the household's income and we need to estimate the "purchasing power" of this income in terms of the baskets of goods this income can purchase at prevailing prices. So we need an income model and a price model for the three goods.  (See Robert Allen's detailed efforts at answering these questions across Eurasia (link, link).)

Production requires access to resources.  Each resource can be used in two basic ways: it can be used directly by its owner in production, or it can be "rented" to a firm for use by the firm in production. So there is also a competitive market for resources: rent for land, interest for capital, and wages for labor. And at any given time there is a specific distribution of resources across population; some households have dramatically more of each resource than others.

We can begin our thought experiment by taking as fixed the techniques of production that exist for the three basic commodities. In order to produce at a given level of output, the firm needs access to a known quantity of resources, in a specific proportion. Firms amd households with lots of resources can begin producing shirts, beer, and grain immediately. Poor firms and households will either rent access to more resources through promise of future rents; or they will rent out the resources they currently possess, including labor time. So landless, propertyless households have no choice but to sell their labor time; they become workers. So now let's picture our region as populated by firms and households producing commodities, and all persons functioning as consumers purchasing a bundle of commodities for life needs.

So far we've provided a scene very familiar from the classical political economists and Marx. Much of subsequent economic thought went into solving various parts of this story: what determines prices, what does the distribution of income look like, and how do innovation and organizational and technological change fit into this story?  What does an equilibrium of production, consumption, and price look like with static technology?  What are the dynamic processes of adjustment that occur when there is a substantial change in the process of production?

My question here is a limited one: what needs to occur in this scenario in order for there to be a rising trend in the average and median standard living for this society?

Let's define the standard of living as the size of the wage basket available to the median consumer: the sets of baskets of grain, shirts, and beer that the median income earner is able to purchase. In order for the standard of living to rise in this isolated region, there needs to be an overall increase in the efficiency and productivity of the production process for the three goods. And the money wage of the median consumer needs to rise.  (Amartya Sen provides quite a bit of analysis of the meaning of the standard of living in The Standard of Living.)

Let's refer to the concrete production process at a given time as the current practice; this is the specific way that inputs are organized in order to create the output. As we saw in the graph of output against time borrowed from Mark Elvin (link), we can think of progress here in two ways. First, there is refinement of practice, as producers gradually recognize small modifications that permit removal of costs from the process. And, as Marx and Smith agree, firms and households producing goods for a market have a powerful incentive to seek out these improvements: they can continue to sell their products at the old price until the rest of the producers catch up.

Second, producers can introduce substantial, revolutionary changes in technology. They may replace skilled sewing-machine operators with sewing robots that reduce each of the inputs into the good. Productivity takes a big stride forward.

There is a third mechanism of cost reduction available: the firm/household may speed up the labor process, lengthen the working day, or lower the wage. Volume I of Capital goes into detail on each of these mechanisms within a market-governed firm.  And each of these approaches is negative for the quality of life of the working class.

Now let's get back to the question of the standard of living. Does the process of competition, rising productivity, and falling prices imply an improvement in the standard of living? Or, conceivably, does it lead to a paradoxical immiseration of the bulk of the population? Both outcomes are possible. Rising efficiency and productivity have permitted our little society to produce a rising quantity of beer, grain, and shirts. And this on the basis of a fixed level of basic resources. So in principle everyone may be better off. But it is possible as well that the benefits of rising productivity have been disproportionately captured by a small advantaged group. So income may have become increasingly concentrated at the top. The average wage basket will have increased. But the median consumer may have declined through that process of concentration.

What this story tells us is something fairly simple: the effects of productivity improvement within a commodity economy depend critically on the prior distribution of assets and the institutions through which income and the gains of efficiency are distributed. And this in turn suggests a point much like that of Robert Brenner: the social-property relations embedded within an economy are critical in determining the fate of the median person, and they are subject to profound political struggle (post).

It would be very interesting to use agent-based modeling software to represent a series of scenarios based on this description of a commodity-based economy undergoing growth.  What do distributive outcomes look like when the prior distribution is relatively equal?  How about when they are substantially unequal?  How much difference does the timing of growth make on the eventual distributive and welfare characteristics of the scenario?

(Piero Sraffa's Production of Commodities by Means of Commodities : Prelude to a Critique of Economic Theory picks up some parts of this story in a neo-Ricardian way; Marxian economists have looked at Sraffa's work as also providing a novel basis for the labor theory of value.  The framework provided here also leads into an argument for a new definition of exploitation by John Roemer in A General Theory of Exploitation and Class.)

Marx on Russia

In 1881 Marx wrote a letter to Vera Zasulich, an important Russian follower, that addresses the question of theory and prediction when it comes to thinking about the future course of history.  In particular, he denies that his theories have determinate predictive implications for the development of capitalism or socialism in Russia.  Here is a link to the letter, and below are a few paragraphs.

The issue is an important one: did Marx think of his body of knowledge as constituting a general predictive theory?  And the letter clearly implies that he did not.

The letter is interesting in several respects. First, it explicitly rejects the notion that Marx's economic and historical theories are suited to the task of identifying the necessary or inevitable course of historical development. It summarily dismisses the idea of a necessary sequence of modes of production. Instead, Marx shows himself to recognize the contingency that exists in historical development, as well as the degree to which history creates new conditions in its course that influence future developments.

The other important feature of the letter is its substantive analysis of the material characteristics of the Russian peasant commune, and the potential that this social form has for constituting the material core of an alternative route to socialism in Russia.  As the letter makes clear, Marx thinks that the social relations associated with the peasant commune provide a possible social foundation for a modern socialist economy; and this would be an economy that was not "post-capitalist" but nonetheless technologically and socially advanced.

In a way Marx's argument anticipates the theory of "late developers" -- for example, Gerschenkron's Economic Backwardness in Historical Perspective.  Marx argues that a socialism in Russia was possible through an alternative pathway.  A version of socialism in Russia based on the "archaic" commune can take advantage of the developments in technology and social organization created by advanced capitalism.  It is not necessary for Russian society to go throughout the several-centuries long process of agricultural and technological modernization that England underwent; rather, Russia can simply adopt the modern technologies now available.

The interest of this letter is not to be found in the historical predictions it makes, but rather in the example it offers of the way that Marx's mind worked.  The reasoning here represents a good example of Marx's materialist approach to history.  He wants to arrive at a fairly detailed level of understanding of the social and economic relations -- the property relations -- that constituted a historical form of the rural commune.  And he then seeks to provide an analysis of the way in which those relations might be expected to develop under a specific set of historical circumstances.  And key within this analysis is the workings of the specific form of property that corresponded to this social system -- the social relations of production.

I suppose the letter illustrates something else as well: Marx's interest at the end of his life in finding an alternative pathway to socialism.  The revolutions of 1848 were long in the past, and a proletarian revolution had not ensued.  The Paris Commune had been decisively and violently repressed in 1871.  Working-class militancy was not propitious in the advanced capitalist countries -- France, Germany, or Britain.  So the prospects of revolution in the advanced capitalist world were not encouraging to Marx.  And so finding some hope for an alternative process of social development through which the ends of socialism might be achieved was an appealing prospect for Marx.

Here are the first few paragraphs of the letter, which is worth reading in full:

1) In dealing with the genesis of capitalist production I stated that it is founded on “the complete separation of the producer from the means of production” (p. 315, column 1, French edition of Capital) and that “the basis of this whole development is the expropriation of the agricultural producer. To date this has not been accomplished in a radical fashion anywhere except in England... But all the other countries of Western Europe are undergoing the same process” (1.c., column II).

I thus expressly limited the “historical inevitability” of this process to the countries of Western Europe. And why? Be so kind as to compare Chapter XXXII, where it says:

The “process of elimination transforming individualised and scattered means of production into socially concentrated means of production, of the pigmy property of the many into the huge property of the few, this painful and fearful expropriation of the working people, forms the origin, the genesis of capital... Private property, based on personal labour ... will be supplanted by capitalist private property, based on the exploitation of the labour of others, on wage labour” (p. 341, column II).

Thus, in the final analysis, it is a question of the transformation of one form of private property into another form of private property. Since the land in the hands of the Russian peasants has never been their private property, how could this development be applicable?

2) From the historical point of view the only serious argument put forward in favour of the fatal dissolution of the Russian peasants’ commune is this: By going back a long way communal property of a more or less archaic type may be found throughout Western Europe; everywhere it has disappeared with increasing social progress. Why should it be able to escape the same fate in Russia alone? I reply: because in Russia, thanks to a unique combination of circumstances, the rural commune, still established on a nationwide scale, may gradually detach itself from its primitive features and develop directly as an element of collective production on a nationwide scale. It is precisely thanks to its contemporaneity with capitalist production that it may appropriate the latter’s positive acquisitions without experiencing all its frightful misfortunes. Russia does not live in isolation from the modern world; neither is it the prey of a foreign invader like the East Indies.

And here is an important summary statement:

Theoretically speaking, then, the Russian “rural commune” can preserve itself by developing its basis, the common ownership of land, and by eliminating the principle of private property which it also implies; it can become a direct point of departure for the economic system towards which modern society tends; it can turn over a new leaf without beginning by committing suicide; it can gain possession of the fruits with which capitalist production has enriched mankind, without passing through the capitalist regime, a regime which, considered solely from the point of view of its possible duration hardly counts in the life of society. But we must descend from pure theory to the Russian reality.

There is a major irony in rereading Marx's analysis of the emancipatory possibilities inherent in the social form of the "peasant commune" in Russia.  Most striking is the experience of the collectivization of Soviet agriculture in the 1920s and Stalin's war on the kulaks.  Rather than representing a bright new future for the peasants, collectivization represented a cruel war by starvation against rural society (Lynne Viola, The War Against the Peasantry, 1927-1930: The Tragedy of the Soviet Countryside, Volume one (Annals of Communism Series) (v. 1)).

It is also also interesting to recall that one of the disputes among the Bolsheviks within Soviet leadership in the 1920s and 1930s was the issue of cooperatives in agriculture.  A. V. Chayanov advocated for a more democratic route to Soviet socialism, through the mechanism of locally established rural cooperatives (link).  His reasoning had quite a bit in common with Marx's analysis in this letter to Vera Zasulich; and, of course, it led to his persecution and execution in 1937.

Marx on Russia

In 1881 Marx wrote a letter to Vera Zasulich, an important Russian follower, that addresses the question of theory and prediction when it comes to thinking about the future course of history.  In particular, he denies that his theories have determinate predictive implications for the development of capitalism or socialism in Russia.  Here is a link to the letter, and below are a few paragraphs.

The issue is an important one: did Marx think of his body of knowledge as constituting a general predictive theory?  And the letter clearly implies that he did not.

The letter is interesting in several respects. First, it explicitly rejects the notion that Marx's economic and historical theories are suited to the task of identifying the necessary or inevitable course of historical development. It summarily dismisses the idea of a necessary sequence of modes of production. Instead, Marx shows himself to recognize the contingency that exists in historical development, as well as the degree to which history creates new conditions in its course that influence future developments.

The other important feature of the letter is its substantive analysis of the material characteristics of the Russian peasant commune, and the potential that this social form has for constituting the material core of an alternative route to socialism in Russia.  As the letter makes clear, Marx thinks that the social relations associated with the peasant commune provide a possible social foundation for a modern socialist economy; and this would be an economy that was not "post-capitalist" but nonetheless technologically and socially advanced.

In a way Marx's argument anticipates the theory of "late developers" -- for example, Gerschenkron's Economic Backwardness in Historical Perspective.  Marx argues that a socialism in Russia was possible through an alternative pathway.  A version of socialism in Russia based on the "archaic" commune can take advantage of the developments in technology and social organization created by advanced capitalism.  It is not necessary for Russian society to go throughout the several-centuries long process of agricultural and technological modernization that England underwent; rather, Russia can simply adopt the modern technologies now available.

The interest of this letter is not to be found in the historical predictions it makes, but rather in the example it offers of the way that Marx's mind worked.  The reasoning here represents a good example of Marx's materialist approach to history.  He wants to arrive at a fairly detailed level of understanding of the social and economic relations -- the property relations -- that constituted a historical form of the rural commune.  And he then seeks to provide an analysis of the way in which those relations might be expected to develop under a specific set of historical circumstances.  And key within this analysis is the workings of the specific form of property that corresponded to this social system -- the social relations of production.

I suppose the letter illustrates something else as well: Marx's interest at the end of his life in finding an alternative pathway to socialism.  The revolutions of 1848 were long in the past, and a proletarian revolution had not ensued.  The Paris Commune had been decisively and violently repressed in 1871.  Working-class militancy was not propitious in the advanced capitalist countries -- France, Germany, or Britain.  So the prospects of revolution in the advanced capitalist world were not encouraging to Marx.  And so finding some hope for an alternative process of social development through which the ends of socialism might be achieved was an appealing prospect for Marx.

Here are the first few paragraphs of the letter, which is worth reading in full:

1) In dealing with the genesis of capitalist production I stated that it is founded on “the complete separation of the producer from the means of production” (p. 315, column 1, French edition of Capital) and that “the basis of this whole development is the expropriation of the agricultural producer. To date this has not been accomplished in a radical fashion anywhere except in England... But all the other countries of Western Europe are undergoing the same process” (1.c., column II).

I thus expressly limited the “historical inevitability” of this process to the countries of Western Europe. And why? Be so kind as to compare Chapter XXXII, where it says:

The “process of elimination transforming individualised and scattered means of production into socially concentrated means of production, of the pigmy property of the many into the huge property of the few, this painful and fearful expropriation of the working people, forms the origin, the genesis of capital... Private property, based on personal labour ... will be supplanted by capitalist private property, based on the exploitation of the labour of others, on wage labour” (p. 341, column II).

Thus, in the final analysis, it is a question of the transformation of one form of private property into another form of private property. Since the land in the hands of the Russian peasants has never been their private property, how could this development be applicable?

2) From the historical point of view the only serious argument put forward in favour of the fatal dissolution of the Russian peasants’ commune is this: By going back a long way communal property of a more or less archaic type may be found throughout Western Europe; everywhere it has disappeared with increasing social progress. Why should it be able to escape the same fate in Russia alone? I reply: because in Russia, thanks to a unique combination of circumstances, the rural commune, still established on a nationwide scale, may gradually detach itself from its primitive features and develop directly as an element of collective production on a nationwide scale. It is precisely thanks to its contemporaneity with capitalist production that it may appropriate the latter’s positive acquisitions without experiencing all its frightful misfortunes. Russia does not live in isolation from the modern world; neither is it the prey of a foreign invader like the East Indies.

And here is an important summary statement:

Theoretically speaking, then, the Russian “rural commune” can preserve itself by developing its basis, the common ownership of land, and by eliminating the principle of private property which it also implies; it can become a direct point of departure for the economic system towards which modern society tends; it can turn over a new leaf without beginning by committing suicide; it can gain possession of the fruits with which capitalist production has enriched mankind, without passing through the capitalist regime, a regime which, considered solely from the point of view of its possible duration hardly counts in the life of society. But we must descend from pure theory to the Russian reality.

There is a major irony in rereading Marx's analysis of the emancipatory possibilities inherent in the social form of the "peasant commune" in Russia.  Most striking is the experience of the collectivization of Soviet agriculture in the 1920s and Stalin's war on the kulaks.  Rather than representing a bright new future for the peasants, collectivization represented a cruel war by starvation against rural society (Lynne Viola, The War Against the Peasantry, 1927-1930: The Tragedy of the Soviet Countryside, Volume one (Annals of Communism Series) (v. 1)).

It is also also interesting to recall that one of the disputes among the Bolsheviks within Soviet leadership in the 1920s and 1930s was the issue of cooperatives in agriculture.  A. V. Chayanov advocated for a more democratic route to Soviet socialism, through the mechanism of locally established rural cooperatives (link).  His reasoning had quite a bit in common with Marx's analysis in this letter to Vera Zasulich; and, of course, it led to his persecution and execution in 1937.