The Worldly Philosophers

Both David Ricardo and Parson Malthus saw economics in a much more pessimistic light than Smith; their arguments cast economics as “the dismal science.” The men themselves could not have been more different: Malthus, who spent his life immersed in academic research, was a member of the English upper-middle class; Ricardo was the son of a Dutch-Jewish merchant-banker who worked for his father before becoming independently wealthy. Ironically, the academic Malthus’s work focused on the real world while the stock trader Ricardo centered on abstract theory. Malthus, often called “the best abused man of his age” (83), generated ideas that were widely assailed, while Ricardo’s ideas were venerated. Although they argued incessantly, the two men remained close friends.

Because the human race tended to multiply, and so became exponentially more populous—and land, unlike people, never multiplied—Malthus concluded that most people would forever live in misery, constantly under the threat of starvation. Likewise pessimistic but in a different way, Ricardo believed the market system would lead to a tragic end: Workers’ addiction to procreation would cause wage increases to be quickly followed by population increases, forcing the working classes into a subsistence lifestyle, the only remedy for which was a self-restraint that Ricardo doubted the working class could exercise. The capitalist’s entire purpose was to accumulate—to save their profits and reinvest them—but profits depended on how much had to pay in wages. Competition quickly erased profit made from new inventions, further complicating the capitalist’s quest.

Ricardo believed that Smith failed to perceive adequate fertile land as a bottleneck to progress, arguing that only landlords, not society as a whole, stood to gain from the market system. Ricardo argued that an expanding population required increased food production through the cultivation of new fields. Because current agriculture already used the best land, Ricardo believed new fields would be less productive, leading food production costs to rise, and increasing the rents capitalists had to pay to landlords. Wages would rise as food prices rose; workers had to be paid enough to afford food. Thus, between workers’ wages and landlords’ rents, capitalists were squeezed on both sides. Landlords benefited from the land, their income static in the face of both population growth and competition. Those with better land made more money because they paid the same expenses but produced more. 

Robert Owen, one of a group of 19th-century reformers known as the Utopian Socialists, ran a factory in Scotland called New Lanark, the antithesis of horrific Industrial Revolution factory conditions. Owen, born poor in Wales, apprenticed as a linen draper during his childhood. At 18, he went to Manchester and worked as a factory manager, quickly becoming the boy wonder of the textile world.

The father of the woman he fell in love with owned spinning mills in the poor community of New Lanark. Owen borrowed money and bought them—and married the daughter. Within 10 years, New Lanark achieved worldwide fame and Owen became wealthy. New Lanark generated incredible profits while giving workers adequate living space, prohibiting child labor, and punishing workers only in extreme circumstances. Owen saw New Lanark as small-scale laboratory for testing his theories on human advancement. He believed that people could be no better than their environment; by improving the environment, one could achieve paradise on Earth.

Between 1816 and 1820, Owen repeatedly addressed a special committee formed to deal with a severe economic depression happening at the time. He argued that making the poor productive would eliminate poverty. He proposed “villages of cooperation,” made up of 800 to 1,200 people working together on a farm and factory as self-sustaining units, with workers housed in private apartments but sharing common space. When his ideas were ignored—the ruling classes of the time found them threatening—he attempted to set up his utopian community in America. When the venture failed due to poor planning and rampant fraud, he returned to England to find his ideas had sparked a nascent working-class movement.

Although he was the most romantic of the Utopian Socialists, Owen was not the only one. Henri de Saint-Simon, a count who believed himself descended from Charlemagne, loved the idea of democracy and fought in both the American and French Revolutions. He was jailed for his activities in the latter. After his release, he fanatically searched for knowledge, squandering his wealth in the process, but he managed to inspire a small group of followers by emphasizing the necessity of work. He believed his disorganized world should abandon its notions of temporal and spiritual power and embrace equality, focusing on the performance of useful work. Workers, he argued, deserved society’s highest rewards, while the idle upper class deserved the least, the opposite of the way society actually functioned.

The eccentric Charles Fourier also believed that the world was unjustly organized. In response, he proposed utopian communes like those of Owen, called phalanxes. These communes would consist of grand hotels surrounded by fields and factories, with each worker given a private room. Everyone had to work but could do the work they liked best, and everyone would be a part owner. Though his ideas were fantastical, they hold in the United States, where over 40 phalanxes were set up. Together with communities inspired by Owen and likeminded religious movements, approximately 178 Utopian groups, with 15 to 900 members each, flourished during this period.

Utopian Socialists lacked respect among the upper classes, whom they sought to disempower, but found a convert in John Stuart Mill, considered the greatest economist of his day. Mill’s father, a famous historian and philosopher, pushed Mill to learn Greek and Latin by age 12, and then, during Mill’s teens, required him to read every major work on logic and political economy, allowing no holidays and no friends who would interfere with his studies. After suffering a nervous breakdown in his 20s, Mills started a 20-year-long chaste romance with a married woman, finally marrying her and having a child after her first husband died. He wrote his great work, Principles of Political Economy, in his 40s. The book surveyed the entire field of political economy, arguing that the true province of economic law was in production rather than distribution.

Mill believed that economic laws can maximize the production of wealth, and are absolute, but they have nothing to do with how society chooses to distribute that wealth. Mill saw no “correct” distribution of wealth: Societies could part with tradition and customs and alter distribution as they saw fit. Since society was not stationary, great change could be made by taxing away inheritances, preventing landlords from living on unearned benefits, and allowing workers to control their own work through cooperatives.

Mill lived until 1873, held in such high regard that his mild socialist leanings were forgiven since he had supplanted Malthusian and Ricardian despair by giving people hope for the future: “After all, what he advocated was not so shocking but that it could be embraced by many who were not socialists: taxation of rents, and inheritance taxes, and the formation of workers cooperatives” (133).