The predominant economic system in the Europe of the 15th, 16th, 17th and early 18th century was that of the Mercantilist. It was generally held that the purpose of trade was to further the military strength of the nation state. In particular Mercantilism demands a positive balance of trade and this was achieved through a system of trade barriers and tariffs which often impacted particularly severely on the working poor. However, built into the old system were certain safeguards, often based in common law, which not only protected the state and its colonial and imperial markets, but also the powerless and economically vulnerable. This sense of paternalism was to be increasingly challenged as a (so-called) free-market model was pursued.
It is widely accepted by historians and economists that pressure was being brought on the mercantilist model in the 1770s, particularly by the publication in 1776 of Adam Smith’s Wealth of Nations1. This work suggests a prosperous state is more easily created through individuals’ pursuit of their own ends in the (supposedly) free-market than through state manipulation of the market. Smith (1776) served to usher in not only a new set of macroeconomic principles but also opened the door to capitalist microeconomic practices.
However in Lancashire – a locality commonly associated with developing industrialisation – this process was initiated more than two decades earlier. This is seen in the struggle between the emerging class of capitalists of the “middling sort” and those groups of ordinary workers who were to be affected by industrial change. To accelerate the process by which the means of production changed from the artisan independent worker to the paid mill-hand, customary work practices were undermined by the emerging capitalist class. This was seen as a necessary pre-condition for the control of human capital as a means of production.
Naturally, this led to a degree of opposition, and the forces of the state had to be deployed to ensure the growth of private profit. The budding capitalists began this process in and around the Manchester area, but relatively quickly expanded their efforts to the whole of the north-west. Crucially they required legal sanction to effect the required changes and they were to get this by virtue of a highly dubious legal ruling by an early advocate of the opening up of trade in the form of Lord Chief Justice Mansfield in early August 1758.
In effect, Mansfield ruled that the imposition of a “flexible” labour market was necessary to give British capitalists a global trading advantage. These events were taking place when the nation was involved in world-wide warfare; the army and navy saw action in India, the Far East, Africa, North America, the Caribbean and Europe. Under Mansfield’s ruling, those who opposed the subjugation of their economic freedom by the new capitalist class could be charged with treason and potentially sentenced to the death penalty. Thus, the right of capitalists to incorporate so as to facilitate increasing returns on their assets was enshrined in law – the right of labour to incorporate so as to facilitate increasing returns on their assets was stripped away.
As capitalism replaced mercantilism, there was a decline in the inclination of the state to manipulate goods markets for the benefit of the nation; conversely, there was an increase in the inclination of the state to manipulate labour markets for the benefit of private profit. It would be a generation before the standard of living of the working class recovered from such “progress”.
1 Smith, A. (1776) An Inquiry into the Nature and Causes of the Wealth of Nations, 5th ed. (1904) London: Methuen & Co., Ltd. Available at http://www.econlib.org/library/Smith/smWNCover.html