Capitalism-and-Its-Critics-A-History-From-the

Rather than addressing this question directly, Smith argued that colonialism and slavery were an unnecessary diversion from free commerce. He was much less concerned than many of his countrymen about the prospect of losing the American colonies, which he predicted would go on to become one of the world’s “greatest and most formidable” empires. He also argued that colonial ventures had been “continually drawing capital from all other trades,” and that, consequently, “many other branches of foreign trade, particularly of that to other parts of Europe, have been continually decaying.”43 Rather than directing so much effort and resources to protecting and expanding its long-distance colonial trade, Britain should focus on building up domestic markets and foreign ones closer to home, Smith said. “The industry of Great Britain, instead of being accommodated to a great number of small markets, has been principally suited to one great market,” he wrote. “But the whole system of her industry and commerce has thereby been rendered less secure, the whole state of her body politic less healthful than it otherwise would have been.”44

It’s hard to say for sure whether Smith’s favored development strategy free trade focused on Europe—would have been viable for Britain. But his argument that colonialism and mercantilism had held back its economy is hard to sustain. In 1500, Britain was “little more than a sheep walk,” the economic historian Robert Allen has noted.”45 By the time The Wealth of Nations was published, the percentage of Britain’s population that lived in urban areas had tripled, and the proportion that worked in agriculture had fallen from three-quarters to less than half. Income per capita had risen by about 50 percent—slow growth in modern terms, but rapid by previous standards—and the adult literacy rate had risen more than eightfold, to 53 percent. The country had a far-flung empire and was the dominant maritime power.46

To be sure, colonialism and mercantilism weren’t solely responsible for this metamorphosis. Revolutions in agriculture, science, and politics all played key roles. But the process of economic and political modernization took place in the context of government-sponsored globalization and imperialism. The “fiscal-military state”—a term coined by the historian John Brewer—was purposefully raising its capacity to wage wars, particularly naval wars, for commercial practices.47 In Smith’s eagerness to discredit mercantilism and extol the virtues of the invisible hand, he downplayed this transformation and underestimated its impact.

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On the other hand, Smith’s argument that letting the North American colonies go wouldn’t impoverish Britain turned out to be prescient, and so did his endorsement of free trade. After establishing its independence, the United States quickly became a key trading partner of its former colonial overlord. And once Britain established itself as the world’s leading industrial power and its lowest-cost producer, removing mercantile restrictions on its exports and imports made sense because it could successfully undercut its trading rivals. From a strategic perspective, Smith’s analysis was well ahead of its time.

In 1784 he published a third edition of The Wealth of Nations that included a new section tracing the histories of the chartered trading monopolies, including the East India Company, which was back in the news because of its renewed financial problems.48 Barely a decade after being bailed out in the early 1770s, Smith noted in the new edition, the Company had been “once more reduced to supplicate the assistance of government.”49 The source of the company’s problems was another costly military conflict —this one in southern India, where the sultan of Mysore, Hyder Ali, had attacked company forces near Madras. The expense of confronting Ali’s forces had brought the company back to the verge of bankruptcy, and Smith despaired about the prospects of it ever being “fit to govern, or even to share in the government of a great empire.”50

In his new material, Smith adduced another reason why the chartered trading companies tended to get into financial trouble: they were joint-stock companies rather than traditional business partnerships. Many modern textbooks emphasize how investing in stocks enables investors to spread their risks and protect their capital. Smith expressed a very different view. In a partnership, he pointed out, the owners of the business put their entire wealth on the line, which imbues them with some caution. By contrast, the executives of a joint-stock company enjoy limited liability: their financial risk is limited to the value of the shares they own. Smith warned: “The directors of such companies … being the managers rather of other people’s money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own.” He went on: “Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company.”51

Passages like this one further belie the common perception that Smith was an unqualified defender of capitalism. His endorsement of “commercial society” was predicated on the preservation of competition, free trade, and individual responsibility. Anything that threatened these virtues, he opposed. The publication of The Wealth of Nations turned him into a public figure. In 1778 the government in London gave him a well-paid official post as commissioner of Scottish customs (tariffs), and he moved to Edinburgh, where he lived with his mother. In 1883, William Pitt the Younger became Britain’s prime minister. Pitt had read The Wealth of Nations and was determined to enact some of the principles it expounded. His government reduced the import duties on tea, wines, spirits, and tobacco. It sought to encourage trade with Europe and signed a trade treaty with France. Responding to public outrage about the renewed financial troubles of the East India Company, it created a new Board of Control to oversee its operations from London and strengthened the powers of the governor-general in Bengal.

Pitt’s reforms weren’t entirely successful, but they heralded an important shift from protection toward free trade, and from commercial colonialism toward formal empire. The mercantile capitalism that had provided the backdrop to The Wealth of Nations was about to be supplanted by industrial capitalism. In the years after Cromford Mill opened, Thomas Arkwright licensed his water frame technology to other entrepreneurs, and by 1788 well over a hundred Cromford-like mills were operating across northern England, Wales, and Scotland. Another important moment came in 1781, when the Scottish inventor James Watt patented his rotative steam engine. Four years later, a mill near Nottingham became the first cotton spinning factory to use Watt’s engine. The cotton industry represented the future, but it was deeply integrated into the old colonial system that Smith had critiqued. Even before it started importing raw cotton produced on slave plantations in the American South, it sourced its key input from plantations in the West Indies and mainland South America, particularly Brazil. Some cloths that the industry produced were shipped in the opposite direction across the Atlantic, as well as to slave trading ports in Africa.

These exports “flowed, in effect, within the same channels of the Atlantic economy that Britain had spent two hundred years and untold treasure building,” the Harvard historian Sven Beckert noted in his 2014 opus, Empire of Cotton.52

Smith, for all his perspicacity, could have no inkling of the impact that cotton and industrialization would have on the economy, society, and policymaking. On July 17, 1790, at the age of sixty-seven, he died at his house in Edinburgh. That same year, an enterprise called Piccadilly Mill became the first cotton mill in Manchester to use a steam engine manufactured by Boulton and Watt, a firm that James Watt had established with his business partner Matthew Boulton. The fast-growing Lancashire city was on its way to replacing Bengal as the global leader in cotton manufacturing, and to giving its name to a school of economics based on Smith’s ideas: the Manchester School.

“On the brink for the last struggle”

The Logic of the Luddites

In the early hours of April 12, 1812, more than one hundred men approached Rawfolds Mill, a four-story building on the banks of the River Spen at Liversedge in West Yorkshire. This is Brontë country—a landscape of bleak moors, steep valleys, and small towns and hamlets. The members of the crowd, who had gathered on the moor hours earlier, were armed with muskets, sticks, hatchets, and heavy blacksmiths’ hammers. When they reached the mill, the men at the front broke windows in an effort to gain entry. Some of them fired shots into the dark factory. Unbeknownst to the attackers, the mill’s owner, William Cartwright, had been preparing for trouble.

During the previous twelve months, there had been a series of attacks on textile factories and workshops in central and northern England. The outbreak had begun in Nottinghamshire in early 1811, when some stocking knitters had stormed their employers’ premises and disabled new machinery that they blamed for undercutting their wages and reducing them to penury. The attacks had spread to the neighboring county of Derbyshire; to Lancashire, the center of cotton manufacturing; and to the West Riding of Yorkshire, home to many woolen mills. Cartwright and other Yorkshire mill owners had been trying to mechanize the ancient art of “dressing” woven woolen cloth, which involved raising the nap and cutting it into finished pieces. For centuries, a tight-knit group of skilled workers, known as “shearers” or “croppers,” had carried out this task manually using the spiked heads of teasel plants and handheld shears. Cartwright was trying to replace some of these workers with new machines: gig mills, which employed metal rollers to raise the nap, and shearing frames operated by a single millhand turning a crank. Weeks earlier a group of unidentified men had attacked a cart carrying some new machinery to Rawfolds Mill.

Since then Cartwright had been staying in the mill overnight with some of his other employees and armed reservists from the Cumberland Militia, one of many military units that the British authorities had dispatched to centers of unrest. According to one historian, more troops were deployed to put down the machine-breaking attacks than the Duke of Wellington had under his command in the Peninsular War against Napoleon Bonaparte.1 The members of the Cumberland Militia had been ordered to repulse any assault on the Rawfolds Mill. When the attack began, they opened fire on the crowd. Some of Cartwright’s men dropped rocks from the roof of the mill. The attackers, who hadn’t been expecting much resistance, quickly scattered, leaving behind some of their weapons and two young men who had been seriously wounded. One of them had lost his job at the mill; the other was a saddler’s apprentice from the nearby town of Huddersfield. Within forty-eight hours, both died from their wounds. At a subsequent inquest, a coroner issued a verdict of “justifiable homicide.”2

For months the authorities searched for the organizers of the attack, employing paid informers. In January 1813, at York Castle, they put on trial fourteen croppers, who were charged with riot and machine breaking, which the Westminster Parliament, dominated by landowners and business interests, had the previous year deemed a capital offense in a special Frame-Breaking Act.3 The court at York discharged some of the defendants, but five others were found guilty and sentenced to death.4 In trials related to other incidents of violence and machine breaking in West Yorkshire, nine other men were also convicted.

On January 16, Yorkshire’s official executioner, a former sheep stealer named William Wilkinson, swung the fourteen condemned men from a scaffold outside the castle. “I do not think any of them had a proper sense of the Crime they died for,” one witness to the mass hangings, a Colonel Norton, recounted. “I mean any of the eight I call Luddites.”5

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It isn’t clear where the term Luddite originated. Some accounts trace it back to Ned Ludd, a youthful textile worker from Leicestershire, a county just to the south of Nottinghamshire, who is said to have smashed a knitting frame in 1779 after being whipped for idleness. There’s no documentary confirmation of Ludd’s existence, however. The English historian Brian Bailey, whose book The Luddite Rebellion formed the basis of my account of the attack on Rawfolds Mill, suggests the term might go back to folk memories of King Ludeca, an Anglo-Saxon monarch who died in battle in AD 827.6 Wherever the name came from, many of the machine-breakers identified “General Ludd” or “Captain Ludd” as their leader. A couple of weeks after the attack on Rawfolds Mill, in April 1812, the owner of a nearby woolen mill that had also introduced new machinery, a man named William Horsfall, was shot dead while riding home from a market. A public letter sent the day after Horsfall’s assassination, which hailed “the avenging of the death of the two brav youths who fell at the sege of Rawfolds,” began: “By Order of General Ludd.”7

Watching the machine-breaking incidents from distant London, many members of the British government, which was still at war with Napoleon’s France, regarded the participants as Jacobin insurrectionists. Brutal suppression was their response. As well as executing some Luddites, the British authorities deported others to penal colonies in Australia and elsewhere. But Luddism wasn’t a revolutionary movement: it was a defensive reaction to a new economic system that, in places like Liversedge, was threatening the livelihoods of many skilled workers. Far from trying to overthrow the socioeconomic system, the Luddites were trying to preserve their place within it.

If the Luddites weren’t revolutionaries, they also weren’t mindless opponents of modernity, as they have sometimes been portrayed. There was a clear logic to their actions, and it was essentially a conservative logic. With virtually no political representation or power—the voting franchise excluded the vast majority of the population—many of them concluded that violent protest was their only option. “The burning of Factorys or setting fire to the property of People we know is not right, but Starvation forces Nature to do that which he would not,” one Yorkshire cropper wrote. “We have tried every Effort to live by Pawning our Cloaths and Chattles, so we are now on the brink for the last struggle.”8

Industrialization involved the creation of new technologies, new jobs, new work norms, a new sexual division of labor, new patterns of geographical development, and new conglomerations of power and wealth. In the two decades since Adam Smith’s death, the pace of development had accelerated, particularly in the cotton and woolen textile industries. By 1812, Manchester and the mill towns that surrounded it employed tens of thousands of people. The fastest-growing concentration of mills was in Ancoats, a Manchester neighborhood that was located next to the newly opened Rochdale Canal. Murrays’ Mills, which was built by the Scottish brothers Adam and George Murray, consisted of two eight-story buildings, and its machinery was powered by steam engines built by Boulton and Watt.9 The mills employed more than twelve hundred people and attracted visitors from near and far.

As the output of its mills rose, Lancashire began to replace India in many parts of the world as a supplier of cotton fabrics. Between 1780 and 1810, the value of its exports had increased from less than half a million pounds to more than £10 million.10 The rise of the Lancashire industry was built on local endowments (including coal used to power the steam engines) and entrepreneurship but also on imported labor and raw materials, including immigrants from Ireland and raw cotton from the Caribbean islands and, increasingly, from the slave plantations of the American South. Much of this cotton came in through the port of Liverpool. Although Parliament had abolished the slave trade in 1807, following a lengthy campaign by William Wilberforce and his colleagues in the Evangelical movement, there was no prohibition on transporting products made by enslaved labor, and indeed, the rapid growth of the Lancashire cotton industry depended on these shipments continuing.

Although the advance of mechanization was most visible in cotton manufacturing, it was by no means confined to it. Across the Pennine Hills, in the West Riding of Yorkshire, the ancient woolen industry was also being transformed. In Leeds, on the banks of the River Aire, the merchantmanufacturer Benjamin Gott built the world’s largest woolen mill, where, in 1793, he installed a steam engine from Boulton and Watt.11 By 1800, Gott’s factory employed more than a thousand people. Its organization was a testament to Smith’s division of labor.12 From the initial task of sorting and cleaning raw yarn to the final job of packing the finished cloth, there were

twenty-nine separate production processes. Some of them quickly yielded to steam-powered mechanization. Other tasks, including the actual weaving of yarn, were carried out by hand. As Gott’s business grew, his factories “dressed and blanketed a large part of the armies of England, Russia, Prussia, and Sweden,” one historian recounted. “He served North American fur traders as well as Boston society; he sold cloth in South America and China, not to mention Germany and the Mediterranean countries.”13 A few miles from the Leeds city center, Gott bought a large estate and constructed a Greek Revival stone mansion. (Today it serves as the clubhouse of a municipal golf course that is named after him. As a teenager, the author of this book used to play there.)

Britain’s technological leadership and growing economic power were abundantly evident to contemporaries. Shortly after the Napoleonic Wars ended, the French free market economist Jean-Baptiste Say traveled around the country. “It is not the military power of England, nor even that of her navy, which has given her a preponderating influence on the Continent, nor can it be said that it is her gold; for since 1797 she has had nothing but a paper money,” Say wrote in an 1815 account of his trip. “But it is her wealth and her credit that have enabled her to exert this influence. And as these powerful weapons are the result of her whole economy, it is that which principally claims our attention.”14 Watt’s steam engines, and the wide range of uses to which they had been put, particularly impressed the visiting Frenchman. “They spin and weave cotton and wool; they brew beer and they cut glass,” he wrote. “I have seen some which embroider muslin and churn butter. At Newcastle and at Leeds, walking steam engines draw after them waggons of coal; and nothing more surprises a traveller, at first sight, than to meet in the country these long convoys, which proceed by themselves, and without the assistance of any living creature.”15

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The technological wonders that Say described were products of competition and the profit motive. Capitalist entrepreneurs like Cartwright and Gott were forever on the lookout for new machinery and new production methods. In a competitive environment, introducing new technology and reorganizing the workplace was a business imperative. The only limits to the process of mechanization were the pace at which science progressed and the resistance of workers whose living standards were threatened by the new Leviathan.

Among these embattled workers were the stocking knitters of the English Midlands, who in the early nineteenth century numbered in the tens of thousands. Under the “putting out” system that was common in the preindustrial era, many of them worked in their own cottages, where they knitted their products using hand-powered wooden frames. Others were employed in workshops owned by merchant-hosiers. Making stockings wasn’t a factory industry, but the intensification of work that attended the rise of industrial capitalism increasingly affected it. During the late eighteenth century, a new breed of capitalist merchant emerged, who rented machinery to stockingers and purchased their output. There were widespread complaints that these intermediaries, sometimes referred as “bag hosiers,” were exploiting the stockingers and undercutting the prices of their products.

A wartime slump in the textile industry intensified these tensions. Under Napoleon’s Continental System, the French sought to bar British goods from Europe. In response, the British government issued a series of Orders in Council that blockaded French ports and sought to prevent neutral countries from trading with France. Demand for stockings and other goods fell sharply. Many of the merchant-hosiers responded by manufacturing cheaper new products, known as “cut-ups,” which were made on wider frames from larger pieces of woven material that were stitched together in a seam. Compared to traditional stockings, cut-ups were of poor quality, but their low prices made them popular. As their sales grew, the stocking knitters saw their incomes decline sharply.16 Between 1807 and 1812, their wages fell by about a third, according to one account.17 Simultaneously, wartime pressures were causing the prices of corn and other foodstuffs to increase, making it increasingly hard for many knitters to feed their families.

Stocking knitters weren’t a radical group. But as craft workers, they considered themselves to be entitled to protection by limits on competition that, in some cases, dated back hundreds of years. Many of these restrictions had statutory backing. In 1663 King Charles II granted a charter to the stockingers guild, which was called the Framework-Knitters