John Stuart Mill, in Principles of Political Economy (1848), thought that the ‘necessary functions of government’ were ‘considerably more multifarious than most people are at first aware of’.39 He listed as exceptions to the rule of laissez-faire: education, poor relief, hospitals, various public services, the limitation of the hours of work, and the regulations of the conditions of work.40
Edmund Burke had been more restrictive. In a memorandum for Prime Minister William Pitt in November 1795 (published posthumously in 1800) he wrote that one of the key problems of law-making was to determine ‘What the State ought to take upon itself to direct by the public wisdom, and what it ought to leave, with as little interference as possible, to individual discretion.’41 This is a famous passage, a little misquoted by John Maynard Keynes in ‘The End of Laissez-Faire’ (1926).42 The fuller context of Edmund Burke’s memorandum contains a rosier picture of Great Britain than others had sought to present, that of ‘one nation’ – to use an expression coined later – ‘united in prosperity’:
The consideration of this ought to bind us all, rich and poor together, against those wicked writers of the newspapers who would inflame the poor against their friends, guardians, patrons, and protectors. Not only very few … have actually died of want, but we have seen no traces of those dreadful exterminating epidemics which, in consequence of scanty and unwholesome food, in former times not infrequently wasted whole nations. Let us be saved from too much wisdom of our own, and we shall do tolerably well.
Having set the context Burke sought to establish the limits of state interference:
the state ought to confine itself to what regards the state or the creatures of the state: namely, the exterior establishment of its religion; its magistracy; its revenue; its military force by sea and land; the corporations that owe their existence to its fiat; in a word, to everything that is truly and properly public, to the public peace, to the public safety, to the public order, to the public prosperity … Statesmen who know themselves will … proceed only in this the superior orb and first mover of their duty, steadily, vigilantly, severely, courageously … They ought to know the different departments of things – what belongs to laws, and what manners alone can regulate.43
But that was in 1795 and the words were those of a leading member of the conservative wing of the Whigs. When the state is in the hands of one’s opponent, when it is an oppressive force, when one is a revolutionary, then the idea of an end to the state is somewhat appealing. Thus Tom Paine, towards the beginning of his Common Sense (1776), declared ‘Society in every state is a blessing, but Government, even in its best state, is but a necessary evil; in its worst state an intolerable one.’44 Friedrich Engels looked forward to the withering away of the state under communism: ‘the government of persons is replaced by the administration of things … The state is not “abolished”, it withers away.’45 Lenin reiterated this semi-utopian concept in State and Revolution in August 1917, before the actual Bolshevik seizure of power in October. But when one is in power or close to power the priority for government becomes, as Keynes, pragmatically and perhaps wisely, declared, ‘not to do things which individuals are doing already … but to do things which at present are not done at all’.46
To find in Britain a true advocate of the minimalist state after 1860 one has to go to the tough-talking libertarian ‘philosopher’ Herbert Spencer. It was he who coined the expression ‘the survival of the fittest’ (often wrongly attributed to Darwin): ‘This survival of the fittest, which I have here sought to express in mechanical terms, is that which Mr. Darwin has called “natural selection or the preservation of favoured races in the struggle for life”.’47 Spencer’s anti-statism would sound today somewhat eccentric, loved only by dogmatic ultra-libertarians. So extreme was Spencer that he held the view that the state should not step in to help prevent epidemics. One should not take it for granted, he explained in The Man versus the State (originally published in Contemporary Review in 1884), ‘that all suffering ought to be prevented, which is not true: much suffering is curative, and prevention of it is prevention of a remedy’.48 In his days he was regarded as one of the great social thinkers of his age. In 1891 the Scottish philosopher David George Ritchie, in the midst of a tirade against Spencer, felt obliged to admit that ‘Mr. Spencer is perhaps the most formidable intellectual foe with whom the New Radicalism has to reckon.’49
Ritchie thought, like many modern liberals as well as sensible people, that one should defend good government against bad government and not be against government in principle.50 Spencer did not have such problems: helping the poor is bad, always. His thought, such as it was, was admirably suited to the American scene in the late nineteenth century, since it sounded scientific and comprehensive. In the America of the 1880s it was impossible to be active in the social sciences and political philosophy without mastering Spencer.51 In France between 1871 and 1881 he was the most popular author in the Revue scientifique and more than twenty articles of his were published in the Revue philosophique.52 In Italy the new positivist thinkers read him avidly, particularly those such as Cesare Lombroso, Achille Loria, and Enrico Ferri, associated with the Sinistra storica (the Historic Left), politically in the ascendant.53 In China, Westernizers like Yan Fu (who translated Spencer) were full of admiration.54 In Japan, most of the builders of the new Meiji state were dazzled by his system-building prowess.55 Between 1877 and 1900 more than thirty of his works were translated into Japanese; Japanese readers were particularly interested in his views on progress and individual rights.56 In 1885 the Arabic science journal Al-Muqtataf called Spencer ‘one of the greatest philosophers of the age’.57 In Mexico he was more influential than Auguste Comte.58 In Australia the politician Bruce Smith, in his appropriately named Liberty and Liberalism: A protest against the growing tendency towards undue interference by the state, with individual liberty, private enterprise and the rights of property (1887), included many respectful references to Spencer’s works.
But the positive judgement of his contemporaries did not outlast Spencer. The peak of his fame was reached in the 1870s and 1880s.59 During his lifetime he and his supporters in the Liberty and Property League were regarded as a little extreme, while his The Man versus the State (1884) was an embarrassment to moderate individualists.60 Today Spencer’s expression, ‘the survival of the fittest’, is commonly attributed to Darwin while Spencer himself is virtually forgotten and mostly unread. His views apparently were not fit enough to survive in the marketplace of ideas.
The authentic laissez-faire liberals had fought their battle somewhat earlier, in the 1840s and 1850s. They had started from the simple assumption that the freedom of the individual was the foundation of the ‘good’ social order. Their most exemplary champions were reformers of the so-called Manchester School, whose main proponents were Richard Cobden and John Bright (for whom, in any case, free trade mattered far more than laissez-faire). They and their counterparts elsewhere favoured a minimalist state that would limit itself to law and order and the enforcement of contracts, though even they accepted the case for some regulation of the labour market, especially in matters of child labour and public goods, such as road maintenance and the preservation of forests.
While strict liberal economics was widely acclaimed, it was never put into effect. Politics, even in England, compelled pragmatic liberals to acknowledge that such ideas could not be defended with excessive vigour. The most august political representative of laissez-faire liberalism, William Gladstone, became, when Prime Minister, an advocate of limited state interventionism and social reformism.
Thus by the second half of the nineteenth century, non-interventionist liberalism was being questioned even in Britain. Liberals such as John Stuart Mill claimed that there were circumstances in which human improvement (progress) and protection of individual rights required interference with private property. Mill’s posthumously published Chapters on Socialism contained a passionate attack on the iniquities of the capitalist s
ystem, the idleness of the rich, and the miserable conditions of the working classes. Although he accepted the idea of profit and competition, he claimed that the aim of production should be the common good, and the means of production be held in common. From the 1880s onwards a new breed of liberalism was stalking Britain: the ‘New Liberalism’. By the 1880s laissez-faire ‘had been definitively abandoned by the liberal mainstream and socialism in its general ethical sense had become part of the liberal terminology’.61 Henry Sidgwick in his Elements of Politics (1891) tried to put forward a moderate individualism by listing the things that should be done by the state: protection of children, enforcement of professional standards, disease control, making certain types of information available.62 And in 1883 the Pall Mall Gazette lamented that ‘even the liberals speak of laissez-faire with scorn’.63
Sidney Webb, in an article in 1892, pointed out that adhesion to laissez-faire had become the prerogative of only one faction of the Liberal Party grouped around Gladstone, whose idea of social reforms was that they should enable some members of the lower classes to become small capitalists and not, as the trade unions wanted, to ‘raise the social condition of the class itself’.64 Within the party, however, continued Webb, there was emerging a radical ‘collectivist’ faction whose new principle was that ‘the best Government is that which can safely and advantageously administer most’.65 The struggle between the old fashioned laissez-faire Manchester Liberals and the new radicals, Webb pointed out, was at the heart of the difficulties of modern liberalism: ‘the citadel of individualist Liberalism is being besieged on all sides by the Labour forces’.66
Economic liberalism in mid-nineteenth-century Britain had meant, in practical terms, the abolition of the Corn Laws (thereby lowering the price of imported foodstuffs and containing labour costs). This was achieved in 1846. It was British liberalism`s greatest victory.
The liberal state was soon also expected to safeguard savings (and hence financial institutions) and the stability of the currency (to protect savers), to refrain from interfering in disputes between wage workers and capitalists (though in practice it often did and often on the side of the capitalists), and to uphold some welfare principles, such as social insurance, particularly if the costs were to be borne by the employers. Many liberals were prepared to countenance some protectionism. Most businessmen are not, contrary to popular belief, ‘natural’ liberals. Their inclination is towards order and peace. They tend to be anxious and feel vulnerable, understandably so since they seldom know what is going to happen next. When they wave the banner of liberalism, they do so not out of ideology but in defence of their interests. As for state intervention, there never was a united opposition to it by the business community, for it is in the nature of such a ‘community’ to have relatively few common interests except the enforcement (by the state) of the political framework that makes their existence possible. It is pretty obvious that even the most ideological of neo-liberal capitalists expect the state in which they live to safeguard credit, not to use inflation to decrease public debt, and not to default on debt, though states, of course, have occasionally been forced into such policies.
Politicians understood this well. In a speech on 28 April 1885, Joseph Chamberlain, then still a Liberal and still a minister in Gladstone’s government, enumerated the main social evils of the time whose solution, he thought, could only come from government:
Children are stunted in their growth and dulled in their intellects for want of proper nourishment … The ordinary conditions of life among a large proportion of the population are such that common decency is absolutely impossible; and all this goes on in sight of the mansions of the rich … in presence of wasteful extravagance.
Government is only the organisation of the whole people for the benefits of all its members, and that the community may – ay, and ought to – provide for all its members benefits which it is impossible for individuals to provide by their solidarity and separate efforts … It is only the community acting as a whole that can possibly deal with evils so deep-seated as those to which I have referred.67
Far from favouring ‘small government’, the Victorians systematically intervened in all areas of public and private life, and not just in those such as morality that the term ‘Victorian values’ suggests. The extent of Victorian social legislation was impressive (see Chapters 14 and 15).
Interventionism was even more popular in Germany where prominent intellectuals had taken on board Friedrich List’s prescriptions and, by the beginning of the 1870s, when Germany was being consolidated as a unitary state, became concerned with social reforms in favour of the working classes. Labelled ironically Kathedersozialisten (socialists in academic chairs) by their opponents, members of the so-called German Historical School of Economics and the Verein für Socialpolitik (Social Policy Association), founded in 1872, led by Gustav von Schmoller, Adolph Wagner, and Étienne Laspeyres, were almost unanimously critical of the so-called British school (Adam Smith, David Ricardo, etc.), whom they regarded as unreconstructed laissez-faire liberals. Schmoller regularly attacked the perceived inadequacies of the school’s contemporary followers because they could not explain the social problems of the 1890s, the new forms of business enterprises, or the unintended consequences of competition.68 Lujo Brentano, another leading German Kathedersozialisten, founded in 1900 the International Association for Labour Legislation, a precursor of the International Labour Organization, and advocated a high-wage and short-hours economy, though he was unenthusiastic about an eight-hour day throughout the country.69
Capitalism had been developing in Germany before unification, due in part to the pro-business legislation promulgated by some of the German states in the 1850s and 1860s. This had enhanced the confidence of industrialists and created the climate for industrial development after unification: state-sponsored railways, chemical, electrical, and optic industries. Many landlords had started running their estates along capitalist lines.70
‘Bourgeois’ radicals, à la Kathedersozialisten, and assorted intellectual groups who regarded robust interventionism as the only road towards industrialization and who defined themselves as ‘modern’, emerged throughout Europe: in Britain the Fabian Society; in Spain those known as the generación del 98, who lamented the loss of Spain’s colonies while urging their countrymen to move forward (see Chapter 11); in Austria the fearless public intellectual Karl Kraus, who used his journal Fackel to attack German nationalism (as he had attacked and mocked Theodor Herzl’s Zionism), liberal economics, and almost everything he regarded as hypocritical (which was almost everything); in Bohemia ‘the Realists’ led by Tomáš Masaryk, soon to join the Young Czech Party (1891); in Romania the socialist group around Constantin Dobrogeanu-Gherea (originally Solomon Katz), who realized the limited hopes of a socialist movement in an agrarian country; and in Hungary the Society for the Social Sciences around the journal Huszadik Század, which sought to introduce its readers to emergent ‘modern’ ideas such as positivism and Marxism.71
The Italian counterpart of these movements consisted mostly of members of the southern liberal positivist intelligentsia, the so-called meridionalisti. They denounced socialism (‘the main enemy’), but realized that pure laissez-faire would not resolve the miserable conditions of existence of the southern peasantry. Alongside southern intellectuals such as Pasquale Villari, Giustino Fortunato, and Francesco Saverio Nitti, there were also those such as Luigi Luzzatti (briefly Prime Minister, 1910–11), grouped around the Padua-based Il giornale degli economisti (also followers of the German Kathedersozialisten).72 The rhetorical commitment to liberalism (and positivism) of the Italian press, the urban bourgeoisie, and the intelligentsia gives a distorted image of the real ideology of the meridionalisti and their northern allies. The liberating energies of free capitalism were never seen as the remedy to prevailing social problems. Consequently, the Italian state resorted, alternatively, to two distinct strategies: the stick of repression and centralization, wielded chiefly by
Francesco Crispi (Prime Minister, 1887–91, 1893–6), and the carrot of consensus and mediation, embraced above all by Giovanni Giolitti, Prime Minister for most of the period 1903 to 1914.
The Italian elites were correspondingly divided. The northern military elites as well as the southern landowning gentry were indifferent to or afraid of industrialization, negative towards the rise of a large proletariat, and frightened by the idea of modernity. But there was also a less blinkered elite of professionals, intellectuals, and entrepreneurs who wanted Italy to be more like the ‘advanced’ countries of Europe – Britain, France, or Germany. After the so-called liberal Sinistra storica (historic left) won the election in 1876, the suffrage, until then uncommonly narrow, was expanded. In the event, the Sinistra storica was not enormously different from the preceding conservative Destra storica (historic right).73 As Antonio Gramsci wrote in his Prison Notebooks, ‘The left succeeded in being only a safety valve. It largely continued the policies of the right with the personnel and the words of the left.’74 The ‘left’, though, was a little more progressive and anti-clerical than the ‘right’. While the left defended the interests of the commercial and industrial bourgeoisie, it also recognized that the poor could present a threat unless the state did something for them, wanted to work for greater harmony between the classes, and believed that class conflict belonged to the proto-industrial past or, at least, to backward or early capitalism.75
The Sinistra storica was unlucky: its advent to power coincided with the initial phase of the so-called Long Depression of 1873 to 1896. This is probably why it abandoned gradually any attachment to liberal economics it might have had. The incompetence of the Italian bourgeoisie forced the state to take the initiative in promoting growth, helped by the military elites (including the monarchy), who had finally understood that international prestige required economic growth. This, in addition to the costs of national unification and the debts inherited from pre-unification states, meant that the country had a significant public debt, so much so that a French journalist called his account of contemporary Italy, Voyage au pays du déficit: ‘Bankruptcies are followed by bankruptcies; catastrophe leads to a further ten catastrophes; from every side all one can hear is wailing and gnashing of teeth.’76 Inevitably, there were also a considerable number of financial scandals involving public funds.77
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