landed class did not relent on its demands. The squeeze on profit margins threatened to put many manufacturers out of business, the fate which did in fact await many of them. Radcliffe was aware of the criticisms levelled against landlords, who ‘have been censured for raising their rents at this period, and subsequently still higher’. But he did not begrudge them their exactions. He was, after all, receiving rents from his farms in Mellor.
If every manufacturer or merchant (for it is to this class I am alluding) will now only fancy himself to have been one of these land-owners at that time, and lay his hand upon his heart and say what he would have done under the circumstances I have been stating, I think there is not one of these theoretical censors that would be found to cast a second stone.33
Under the ruling system of property rights and taxation laws, of course, Radcliffe was right in predicting how the urban capitalists would have responded had they anticipated the trend in land values. But this does not justify what happened, nor did it relieve Radcliffe of the responsibility for correctly apportioning guilt for the problems which ensued.
The problems of the cotton industry can be illuminated in theoretical terms. Rent is an economic surplus, the amount left over from production once labour and capital have received their share — a share determined through competition for the opportunity to use the available resources to create new wealth. The amount which is received by capitalists and labourers has to be sufficient to attract them into the most rewarding activities, and enable them to reproduce over time. If landowners are under the pressure of competition, they will be forced to accept the surplus, and no more. In the absence of any inducement to compete, monopoly power enables them to demand a disproportionately large share of output. They are in the happy position of the highwayman who can demand ‘Your money or your life’, but with no risk of retribution. For they control the hangman through the legislature!
By imposing increasing demands on the wealth-creating agencies, or by refusing to reduce their exactions as the value of output declines, land monopolists eat into the share which ought to go to labour and capital as wages and interest. This is an irrational situation which cannot last for long. The system must break down. Capital is withdrawn when yields become unacceptably low, and investors are deterred from undertaking fresh capital formation. Labour goes hungry and either dies or suffers from malnutrition. Aggregate output contracts, and sooner or later the landlords are forced by realities to accept a cut-back in their rents — or to hold their land idle, in the certain expectation that, sooner or later, the demand for their land will yield the rents they originally demanded.
For the cotton industry in Radcliffe’s time, unfortunately, there was no fiscal mechanism to force down rents to market levels. The increasing speculation in land forced up rents, squeezed interest and wages, and deterred manufacturers from investing money in power looms. By forcing rents beyond the point of merely appropriating the economic surplus, they were effectively demanding a slice of future output in the current period. This inherently unstable situation must, as it did, lead to a general recession.
The insights which we can extract from a review of William Radcliffe’s record of the cotton industry have not been exhausted. We will allude to one more, for it has significant general relevance. In 1815, with the end of the Napoleonic war, the landlords were anxious about the prospect of a decline in their revenue. Cheap imports would force down the price of food, and thereby compel a reduction in rents. Once again the landlords demanded a Corn Law which would protect their privileged status. So while industry was required to compete, the landlords in Parliament were able to make an exception of their ‘special’ case. Radcliffe intervened on their side.34 He argued that farmers were entitled to a secure domestic market, free from the threat of foreign competition, so that they might expand output to meet demand and thereby reduce their prices. This, in fact, is not the economic effect of protection. In reality, the landlords benefit from an artificial price rise, by capitalising the inflated prices into higher rents and selling prices of land. So, unwittingly, Radcliffe supported Parliamentary action which was expressly designed to aggravate the problem which confronted his industry! He realised that the Corn Bill would increase the food prices paid by workers, and that he would have to pay more for the three sacks of flour which he used every week with which to make paste for his factory. Had he used this as a clue, he could have seen that reduced wheat prices meant higher living standards for the workers, higher profits for the industry and a greater ability to withstand any advantage which foreign competitors might enjoy.
Nevertheless, we have to be tolerant towards Radcliffe. He was an entrepreneur and innovator who wanted nothing more than the freedom to increase the material wealth and spiritual well-being of himself, his employees and his country. Adam Smith, on the other hand, had enjoyed far more leisure time in which to reflect on matters of economic theory, and yet he had failed to warn the public of the horrible results arising from his defence of the landlords’ right not to be taxed if they chose not to release their land for use by others. It was not until 1840 that P.J. Proudhon, the French anarchist philosopher, published a book that alerted the world (if it wished to listen) to the way in which land monopoly encouraged labour and the owners of capital to adopt restrictive practices as a defensive response to the original monopoly in land.35
Contemporary historians, who as a group have concentrated on the affairs of the aristocracy and the issues of state, have compounded our problems by their neglecting to study the impact of land monopoly on the first infant industrial system. Prof. Hoskins declared of this period:
... the land inside the older towns was acquiring a scarcity value, above all in the towns that were surrounded by open fields, so that they could now grow outwards, and a steady rise in the price of land for building was added to the rise in the price of borrowed money. Possibly, too, the building trade was invaded by a new class of speculator who made conditions even worse than they need have been by extracting high profits out of the unprecedented demand for cheap houses. No one has studied this particular class of parasite, how he worked, in what opulence his descendents live today forgetful, or perhaps ignorant, of the origin of their wealth. Their forebears would make a fruitful study.36
As the towns grew, noted the Hammonds, ‘the spaces of common within their borders became more valuable, and they were appropriated by the powerful classes’.37 These two students of working class history were almost right to conclude that the advance in the value of ground rents during the Industrial Revolution was such that ‘any pupil of Adam Smith would have put a tax on the immense wealth created in the new industrial towns and taken off the heavy burdens on food, clothing and the materials of industry’.38 This is exactly what ought to have happened, but was precisely what did not happen, thanks in no small part to the compromise in the teaching of Adam Smith. Had he indeed been an enlightened fiscal counsellor, the evolution of modern Western society would have been transformed for the good of all, beyond all recognition.
Notes
1 J. R. Hicks, A Theory of Economic History, Oxford University Press, 1969, p. 148. See also E. J. Hobsbawm, ‘The British Standard of Living, 1790-1850’, Economic History Review, X (1957).
2 Quoted in J. L. and B. Hammond, The Skilled Labourer 1760-1832, London: Longmans, Green & Co., 1933, p. 71. Credence to this view has been lent by a modern Marxist historian, E. P. Thompson, The Making of the English Working Class, Harmondsworth: Penguin, 1968, p.309.
