by Sylvia Nasar
• • •
Of all the panaceas advanced during the Great Depression of the early 1880s, the American journalist Henry George’s land tax attracted by far the most popular attention and support. George’s best seller, Progress & Poverty, had made him an instant celebrity, and his lectures drew huge crowds. George’s premise was that poverty was growing faster than wealth and that landlords were to blame. He claimed that landlords were collecting fabulous incomes not for rendering a service to the community but merely because they were lucky enough to own real estate. What was more, rising rents were depressing profits and real wages by depriving businessmen of needed investment funds. Having identified rental income as the cause of poverty, he proposed a massive tax on land as a cure. The land tax would not only eliminate the need for all other taxes, he claimed. It would also “raise wages, increase the earnings of capital, extirpate pauperism, abolish poverty, give remunerative employment to whoever wishes it, afford free scope to human powers, lessen crime, elevate morals and taste and intelligence, purify government, and carry civilization to yet nobler heights.”119
Marshall was still working on Principles when he was drawn once again into the long-simmering standard-of-living controversy. The early 1880s, a period of financial and economic crisis, witnessed a resurgence of radicalism and demands for social reform, as well as growing skepticism about the extent to which economic growth was benefiting the majority of citizens. The term unemployment was coined during the recession that followed the Panic of 1893 during a heated debate over whether real wages were rising or falling in the long run.
At issue in the debate was the dominant effect of competition. Did competition result in a race to the bottom in which employers matched one another’s wage cuts? Or was it the case, as optimists insisted, that competition put pressure on companies to make constant efforts to increase efficiency and push up the average level of productivity and wages while reducing the number of poor?
The first formal confrontation between Marshall and Henry George took place at the Clarendon Hotel in Oxford in 1884.120 Catcalls, clapping, and hissing repeatedly drowned out the debaters. At one point, an undergraduate felt it necessary to primly remind the chairman that “ladies were present.” By eleven o’clock, the uproar was so deafening that George declared the meeting to be “the most disorderly he had ever addressed” and refused to answer any more questions. Amid “great noise” and groans of “Land Nationalization” and “Land Robbery,” the meeting “was brought to a rather abrupt conclusion.”
If Marshall’s support for the agricultural lockout in 1874 signaled his rejection of the “dogmas” of classical economy, his confrontation with George a decade later showed that he also objected to trendy new dogmas.
On other occasions when he had criticized George’s proposal to cure poverty with a tax on land, Marshall had called George a “poet” and praised “the freshness and earnestness of his view of life.” But at the Clarendon, Marshall was decidedly less polite, accusing George of using his “singular and almost unexampled power of catching the ear of the people” to “instill poison into their minds.” By “poison,” he meant George’s cure-all for poverty.
In his Bristol lectures, Marshall stuck to his stated intention to “avoid talking very much about George: but to discuss his subject.” George’s subtitle included an inquiry into “the increase of want with the increase of wealth,” Marshall said. “But are we sure that with the increase of wealth want has actually increased? . . . Let us then enquire what the facts are of the case.”121
Citing statistical evidence—much of it collected in the Red Book that he and Mary had compiled—Marshall argued that only the “lowest stratum” of the working classes were being pushed downward and that that stratum was far smaller—less than half the size, in proportion to the population—than it had been earlier in the century. As for the working classes as a whole, their purchasing power had tripled. “Nearly one half of the whole income of England goes to the working classes . . . [So] a very large part of all the benefit that comes from the progress of invention must fall to their share.”122
Marshall drew on his growing command of economic history. He was confident that, whatever the vices of the current age, they paled in comparison to the past. “The working classes are in no part of the world, except new countries, nearly as well off as they are in England.” What makes Marshall’s optimism all the more noteworthy is that he was speaking during what historians would later call the Great Depression.
In his second lecture, Marshall challenged George’s contention that employers who paid low wages were to blame for poverty. For one thing, employers could not set the price of labor any more than they could dictate the price of cotton or machinery. They paid the market rate, which could be high if a worker was very productive and low if he was not. “Many of the English working classes have not been properly fed, and scarcely any of them have been properly educated.” Low productivity was the cause of “low wages of a large part of the English people and of the actual pauperism of no inconsiderable number.” And although Marshall did not deny that “there is any form of land nationalization which, on the whole, would benefit,” he argued that “there is none that contains a magic and sudden remedy for poverty. We must be content to look for a less sensational cure.”123
That cure, Marshall said, was to raise productivity. One way was to:
educate (in the broadest sense) the unskilled and inefficient workers out of existence. On the other hand—and this sentence is the kernel of all I have to say about poverty—if the numbers of unskilled laborers were to diminish sufficiently, then those who did unskilled work would have to be paid good wages. If total production has not increased, these extra wages would have to be paid out of the shares of capital and of higher kinds of labor . . . But if the diminution of unskilled labor is brought about by the increasing efficiency of labor, it will increase production, and there will be a larger fund to be divided up.
He did not object to unions or even to some fairly radical proposals for land reform or progressive taxation. He merely noted that none of these could produce “more bread and butter.” This required “competition,” time, and the cooperation of all parts of society, government, and the poor themselves.124
He accused George of promoting a quack cure. The problem wasn’t just that “Mr. George said, ‘If you want to get rich, take land,’” but that it would divert from education and training, hard work, and thrift. George’s scheme would yield “less than a penny in the shilling on their income . . . For the sake of this, Mr. George is willing to pour contempt on all the plans by which workingmen have striven to benefit themselves.”125
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When Marshall’s Principles of Economics finally appeared in 1890, it breathed new life into a faltering discipline. It established him as its intellectual leader and the authority to whom governments turned for advice.
Principles embodied Marshall’s rejection of Socialism, embrace of the system of private property and competition, and optimism about the improvability of man and his circumstances. The book portrayed economics not as a dogma but as “an apparatus of the mind.” As Dickens hoped, Marshall had managed, while placing the discipline on a more sound scientific footing, to humanize economics by injecting “a little human bloom . . . and a little human warmth.”
But the chief insight reflected the lesson he learned in America. Under a system of private property and competition, business firms are under constant pressure to achieve more with the same or fewer resources. From society’s standpoint, the corporation’s function is to raise productivity and, hence, living standards.
Of all social institutions, the business firm was more central, enjoyed a higher status, and did more to shape the American mind and civilization than elsewhere. The company was not only the principal creator of wealth in America but also the most important agent of social change and the biggest magnet for talented individuals. It made Dickens’s depictions
of businessmen as cretins or predators, workers as zombies, and successful manufacture as rigid repetition look ridiculous. The undisputed fact that American productive power was growing at an unimaginably rapid rate meant that businesses must be doing more, at least in the aggregate, than exploiting Peter to line Paul’s pockets or merely repeating the same operations from one year to the next. On his visits to factories, Marshall was especially struck by managers’ constant search for small improvements and workers’ equally constant search for better opportunities and useful skills. Both seemed obsessed with making the most of the resources at their command.
Naturally, Marshall recognized that companies also exist to generate profits for owners, managerial salaries for executives, and wages for workers. Adam Smith had pointed out that to maximize their own income in the face of competition, firms had to benefit consumers by producing as much and as cheaply as possible. But Marshall introduced the element of time into his analysis. Over time, firms could remain profitable and continue to exist only if they became more and more productive. Survival in the face of competition not only implied incessant adaptation. Competition for the most productive workers meant that, over time, firms had to share gains from productivity improvements.
This is precisely what Mill and the other founders of political economy had denied. They had maintained that advances in productivity were of little or no benefit to the working classes. In their imaginary firms, productivity might grow by leaps and bounds, but wages never rose for long above some physiological maximum. Working conditions, if anything, worsened over time. Marshall saw not only that this was not so in fact, but also that it could not be so. Competition for labor forced owners to share the benefits of efficiency and quality improvements with workers, first as wage earners, then as consumers. The evidence confirmed that Marshall was right. The share of wages in the gross domestic product—the nation’s annual income from wages, profits, interest, and proprietors’ income—was rising, not falling, and so were the levels of wages and working-class consumption—as they had been in most years since 1848, when The Communist Manifesto and Mill’s Principles of Political Economy appeared.
Chapter III
Miss Potter’s Profession: Webb and the Housekeeping State
She yearned for something by which her life might be filled with action at once rational and ardent; and since the time was gone by for guiding visions . . . what lamp was there but knowledge?
—George Eliot, Middlemarch1
Every year in March, the “upper ten thousand” descended on London like a vast flock of extravagantly plumed and exotic migratory birds.2 During the three or four months of the London “season,” Britain’s elite devoted itself to an elaborate mating ritual. Mornings were spent riding along Rotten Row or the Ladies’ Mile in Hyde Park. Afternoons were for repairing to Parliament or to clubs for the males of the species, shopping and paying social calls for the wives and daughters. In the evenings everyone met at operas, dinner parties, and balls that provided opportunities for magnificent displays. Every few days, an obligatory race, regatta, cricket match, or gallery opening introduced a slight variation to the schedule.
As with so much else in Victorian high society, this frenetic and seemingly frivolous pursuit of pleasure was serious business: during the season, which began when Parliament resumed its session, London became the epicenter of the global marriage market. Wealthy parents thought of giving a daughter two or three London seasons in the same way as sending a son to Oxford or Cambridge. The expense and effort of participating in this extraordinarily intricate mating dance were certainly comparable. If the family had no permanent “town” house, an imposing mansion had to be found at a fashionable address. A vast quantity of expensive items had to be purchased and conveyed, what with “the stable of horses and carriages . . . , the elaborate stock of garments . . . , [and] all the commissariat and paraphernalia for dinners, dances, picnics and weekend parties” considered de rigueur. Needless to say, socializing on so ambitious a scale demanded an executive to oversee “extensive [plans], a large number of employees and innumerable decisions”—in other words, the lady of the household.3
These were the reflections that occupied Beatrice Ellen Potter, Bo or Bea to her family, the eighth of nine daughters of a rich railway tycoon from Gloucester named Richard Potter. The carriage she was sharing with her father on a raw February afternoon in 1883 rolled to a stop in front of an imposing terrace of tall, cream-colored Italianate villas. The slender young woman with an air of command surveyed number 47 Princes Gate coolly. It was meant to serve as the social headquarters of the sprawling Potter clan, which included her six married sisters and their large families, for the season. The five-story mansion had a sumptuous façade with Ionic columns, Corinthian pilasters, tall windows, and swags of fruit and flowers, and it faced Hyde Park. At the back, visible through French doors, was an expanse of terraced lawn furnished with classical statues and enormous pots with masses of scarlet pelargoniums tumbling over their sides. The houses on either side of theirs were similarly grand. Her father had chosen Princes Gate precisely so they would be flanked by neighbors as wealthy and powerful as he. Junius Morgan, the American banker, leased number 13. Joseph Chamberlain, a Manchester industrialist turned Liberal politician and the father of Neville Chamberlain, had taken number 40 for the season. It was a perfect setting for Potter’s brilliant daughter.
At twenty-five, Beatrice was the veteran of more than half a dozen London seasons but had never been in love. Until now, her duties had consisted of enjoying herself at some fifty balls, sixty parties, thirty dinners, and twenty-five breakfasts before society packed up and retreated to the country in July.4 She’d had nothing whatsoever to do with “all that elaborate machinery”5 that was required backstage. This year would be different. Beatrice had been the only one of the Potter sisters, except for thirteen-year-old Rosie, who was still living at home in Gloucester when their mother died the previous spring. Suddenly she was promoted to lady of her father’s house.
Before leaving Gloucester, Beatrice had made a solemn vow “to give myself up to Society, and make it my aim to succeed therein.”6 By “succeed,” she meant marry an important man, as each of her older sisters had done, although her use of “give myself up” suggests that the price of success was self-immolation. The latest to do so had been her favorite sister, Kate, who had waited until the advanced age of thirty-one to marry a prominent Liberal economist and politician, Leonard Courtney, currently serving as Treasury secretary. Her father did not doubt that Bo would follow suit. Besides beauty, breeding, and a large fortune, she had the gift of commanding attention. Her long, graceful neck, fiercely intelligent eyes, and glossy black hair made people seeing her for the first time across a crowded room think of a beautiful, slightly dangerous black swan. Men were charmed by her, especially when they realized that she refused to take them seriously.
For a while after the Potters’ arrival, all was chaos and confusion. More retainers, extra horses, and additional carriages appeared. When the servants finally withdrew and her father had gotten some supper, Beatrice went upstairs and found the bedroom in the back of the mansion that she had determined would be hers. Now she could think of something besides seating plans and menus—namely, the books that she had brought to read; the things she meant to learn. Beatrice saw nothing inherently contradictory in her various desires and duties. After all, a happily married woman sat on the throne, and George Eliot reigned as the most successful writer of the day. When Beatrice was eighteen, she had spent more time studying Eastern religions than preparing for her “coming out.”
Her bedroom window overlooked the Victoria and Albert Museum. It suddenly struck her that the great monument to human ingenuity stood in the very center of London yet managed to remain wonderfully “undisturbed by the rushing life of the great city.”7 Beatrice wondered whether she might do the same, maintaining a Buddhist-like detachment in crowded drawing rooms and theaters. Might she not she fulfill so
ciety’s expectations while still cultivating the “thoughtful” part of her life, the part that drove her to constantly to ask herself, “How am I to live and for what object?”8
• • •
The question of her destiny had preoccupied Beatrice since her fifteenth birthday. Her mother and sisters had always regarded her obsession as unhealthy. Wasn’t it enough to simply be “one of the fashionable Miss Potters who live in grand houses and beautiful gardens and marry enormously wealthy men?”9 Had Beatrice been the heroine of a Victorian novel, its author would have felt obliged to offer some justification for making the question of her destiny the “center of interest.” In The Portrait of a Lady, published in 1881, Henry James had done exactly that: “Millions of presumptuous girls, intelligent or not intelligent, daily affront their destiny, and what is it open to their destiny to be, at the most, that we should make an ado about it?” James asked in his preface.10 Before middle-class women had viable alternatives to early marriage and motherhood, and the Married Women’s Property Act of 1882 gave them the right to their own incomes, the recurring question in The Portrait of a Lady—“Well, what will she do?”—could hardly have merited a reader’s interest.
“You are young, pretty, rich, clever, what more do you want?” Beatrice’s cousin Margaret Harkness, the novelist daughter of a poor country parson, had asked with a trace of exasperation when they were at school together. “Why cannot you be satisfied?”11 Like James’s heroine Isabel Archer, Beatrice had been brought up with an unusual freedom to travel, read, form friendships, and satisfy her “great desire for knowledge” and “immense curiosity about life.” Beatrice preferred the company of men and took it for granted that most would fall under her spell, but like Isabel she had no desire to “begin life by marrying.”12 She was as interested in winning recognition for her intellectual achievements as for her feminine charms. Each passing year made her longing for a “real aim and occupation” more urgent.13 She was conscious of “a special mission” and believed with all her heart that she was meant to live “a life with some result.”14 Like Dorothea in Middlemarch, Beatrice yearned for principles, “something by which her life might be filled with action at once rational and ardent.”15
