THE LONG GERMINATION OF THE IDEA OF A WORLD FREE OF POVERTY

Although mercantilist ideas lost influence with the emergence of classical economics, mainstream thinking in the nineteenth century still held little prospect for a world free of poverty.

The economics of the time appeared to offer little reason to be hopeful about progress against persistent poverty. The classical theories of wage determination allowed the pos­sibility of a short-term rise in real wage rates through an upward shift in the aggregate demand for labor associated with technical progress. However, the induced growth in the size of the working class due to higher earnings—due either to higher fertility or lower child mortality—would soon bring the wage rate back down to the subsistence level. Thomas Robert Malthus is famous for this argument, but a version is also found in Smith (1776, Book 1, Chapter 8). The induced population growth that was central to such Malthusian dynamics was seen to reflect the “moral weaknesses” of poor people.

Nor did the most influential classical economists after Smith offer much support for direct public interventions to fight poverty. Indeed, Malthus and David Ricardo were positively hostile to the idea of antipoverty policy, with incentive arguments figuring prominently in their writings. They claimed that such antipoverty policies would dis­courage work effort and savings and create poverty rather than remove it. Again, the behaviors of poor people were faulted by the elites.^[424]

Here, too, it is hardly evident that the economics was decisive one way or the other. Indeed, Malthus (1806) acknowledged that better health and education for working class families could break the brutal population corrective to rising real wages. However, the main interpretation given to the economics of the time was hostile to such policies. In no small measure, this was the intellectual rationalization of a political backlash against the First Poverty Enlightenment, notably among the elites in England who resisted the new liberal ideas that were traveling across the English Channel from France.

22.5.1 The Debate About the Poor Laws

By the early nineteenth century a major public debate about the Poor Laws began (though debates about poverty relief dated back to at least the late seventeenth century). A strong political push for reform came from the landlords, who were financing relief under the Old Poor Laws, who dominated the English parliament around this time, and who were (it seems) no longer worried about impending revolution (Lindert, 2004, Chapter 4). The backlash against the Poor Laws often invoked incentive argu­ments, and England’s classical economists were widely cited by critics of the Poor Laws, including those from America (Klebaner, 1964).

This was a significant debate in the history of thought on poverty. For some time, powerful critics had been concerned about the overall cost of the policy. Labor migration in response to industrialization had meant that local landlords were left to finance a rising support bill for children and the elderly (Solar, 1995). Nor was work found by all, and unemployment was causing many in Europe and America to turn to the state for help. But these were not the explanations for the rising relief bill that gained favor. Observers such as de Tocqueville (1835) (in a memoir reporting on a visit to England with the aim­ing of understanding why there were so many paupers despite the country’s affluence) argued that the Poor Laws were a disincentive to work, such that they helped create the poverty problem they aimed to solve. Prominent classical economists, including Malthus (1806, Chapters 5 and 6) and Ricardo (1817), argued for either abandoning the Poor Laws or at least reforming them to ensure better targeting.^[425] In an influential earlier pamphlet, A Dissertation on the Poor Laws, Townsend (1786, p. 17) wrote that “[t]hese laws, so beautiful in theory, promote the evils they mean to remedy, and aggra­vate the distress they were intended to relieve.” Assumptions about incentives were the core of Townsend’s argument.

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However, the evidence was clearly weak for the claims that behavioral responses to the laws were an important cause of the poverty they tried to address. The evidence appears to have been largely based on easily manipulated anecdotes and characterizations, with plainly weak claims of attribution; for example, was the claimed high incidence of intemperance a cause or effect of poverty? Nor was there much recognition that nonin­tervention could be socially costly, too—that problems of heterogeneous risk and asym­metric information could entail that the private insurance was unavailable,^[426] and that uninsured risk could spill over into production and investment decisions of poor people in ways that could impede long-term prospects of escaping poverty. For example, against the concerns that relief would reduce the labor supply, Solar (1995) argues that the Old Poor Laws had the opposite effect, by providing security against the risk of unemployment for smallholders who were considering whether to become laborers instead.

Although incentive effects and dependency were a legitimate concern, the economic arguments against England’s Old Poor Laws may well have been exaggerated to serve political ends (and it was not the first or last time this happened). The “evidence” was weak, and the arguments were somewhat one-sided, with many potential economic ben­efits of the laws ignored.

Significant reforms to the Poor Laws were implemented in 1834 (including repeal of Speenhamland). Spending was slashed, from a peak of about 2.5% of national income around 1830 to 1% in 1840 (Lindert, 2013, Figure 1). Wider use was made of work­houses. These had long existed, and by the late eighteenth century, 1-2% of the popu­lation of London was seeking relief in some 80 workhouses. Their role expanded under the reform effort to ensure better targeting, and the new nineteenth-century workhouses appear to have been even more unpleasant and punitive places than in the past (described well in London Lives). Earnings in the workhouse were never to exceed local wages (Beaudoin, 2007, p. 80). The policy became better targeted, but it lost the broad public support of the Old Poor Laws and (indeed) became the subject of intense social criticism. By confining beneficiaries to workhouses, the reformed policy was seen by critics to treat poor people as criminals. The conditions under which inmates were kept became a spe­cific focus of criticism, famously so in the early chapters of Dickens’s (1838) Oliver Twist. And the criticisms (which started almost immediately) of the New Poor Laws were not just confined to social critics but reached deeply into the leading circles of the Conser­vative Party, including Benjamin Disraeli (Himmelfarb, 1984a,b).

22.5.2 Utilitarianism

Social contract theory, with its emphasis on rights and freedoms, lost ground in the nine­teenth century to a rival school of thought, utilitarianism. This also emerged in the late eighteenth century and over the next 200 years came to have great influence on norma­tive economics—indeed, it became the “official theory of traditional welfare economics” (Sen, 2000, p. 63). Jeremy Bentham, the founding father of utilitarianism, was motivated

³³ See the entry on workhouses in London Lives 1690—1800. Also see in Hindle’s (2004, p. 176) discussion of the use of encouragements to work under the Old Poor Laws, whereby the church vestry often became a “job-creation service” (p. 176). Workhouses existed elsewhere in Europe, including Hollandwhere they were introduced in Amsterdam around 1600 (Beaudoin, 2007, p. 48). by practical policy reform, and this led him to reject ideas like “natural rights.” (Artz, 1934, p. 83, quotes him as describing the Declaration of the Rights of Man and of the Citizen as “a hodge-podge of confusion and absurdity.”) Instead, utilitarianism advocated that social choices should maximize the sum of utilities across all individuals, where “utility” was equated with “happiness.” Assuming diminishing marginal utility of income, this objective generated a case against income inequality because the marginal losses to rich donors of any mean-preserving transfer would be outweighed by marginal gains to poor recipients. This did not, however, open the floodgates of redistributive interventions. Assuming diminishing marginal utility of income and a common utility function only implied that equality of incomes was optimal if total income was invariant to its distribution. The case was unclear if income redistribution lowered overall output, as Bentham expected to be the case. Even aside from incentive effects, merely introduc­ing interpersonal heterogeneity (such that the utility valuation of a given income level varies) upsets the claim that an equal allocation of income maximizes social welfare though this point did not seem to get the same attention as the growth-equity tradeoff.

Bentham and followers had seen government as a necessary evil, and put any actual or contemplated policy effort to the utilitarian test. Some of the literature has (derisively) characterized this as a period of “laissez-faire,” although to an economist’s eyes it was a welcome discipline in sound policy making, to ensure maximum social welfare. The real issue was what one meant by “social welfare.” The influential rights-based thinkers on policy prior to the utilitarians, such as Condorcet, would no doubt have also advo­cated higher social welfare but would have rejected any attempt to equate welfare with “happiness” or “utility” (Rothschild, 2001).

By the mid-nineteenth century, it was becoming accepted in prominent progressive circles that the state did have a role in “... redressing the inequalities and wrongs of nature” (Mill, 1848, p. 805). Even so, it is clear that poverty was still widely accepted as a normal state of affairs. Poor people were still being blamed for their poverty (notably by their reproduction), and there was little role for the state. Even protection was increasingly “targeted” to extreme cases. The best that could be hoped for was that workers would somehow come to see the wisdom of curtailing their desired family sizes. Even among the most progressive utilitarian voices of the time (such as John Stuart Mill), the closest one came to promotional policies would be to point to a role for education of the working class in reducing population growth, but with a strictly limited role for the state.

22.5.3 Schooling Debates

Children from poor families typically started their working lives at an early age; although the evidence is patchy, it was common prior to the mid-nineteenth century for working class children in England to start looking for work from 7 years of age (Cunningham, 1990). The survival of the family often demanded that every able-bodied person worked. Any skills required would only be those that could be passed on by the family. Idle poor children were abhorrent to the rich; work was the only solution. Child labor was not only condoned but widely seen as desirable; unemployment of poor children was believed to be the bigger social problem (Cunningham, 1990). The idea of mass public schooling appears to have had little support. Indeed, echoing de Mandeville’s views, a common view was that mass schooling was wasteful and even dangerous. By the middle of the nineteenth century some 40% of children aged 5—9 in England and Wales were still not in school.^[427]

Nor was the state deemed to have an important role in the schooling that was pro­vided. Before the nineteenth century, and well into that century in some countries (including England), almost all schooling received by children from poor families was provided by religious groups. The system of voluntary schooling in England and else­where in Europe was clearly highly stratified and unequal. Schooling by religious groups had a mixed record. In England, the church resisted any public role in provision yet also left much unmet demand (Lindert, 2004, Chapter 5). The debate on mass schooling opportunities continued in England until quite late in the nineteenth century, and the country lagged behind much of Europe and North America in schooling attainment, despite its wealth.

Poor families did not always see Church schools as being in their interests. Informal private schools were often more promising for those who could afford them. Van Horn Melton (1988, p. 11) describes the “backstreet schools” in Austria and Prussia that offered more efficient instruction “subordinating religious instruction to the goal of imparting literacy to their pupils,” and it appears that these schools were often favored by poor par­ents who were eager to ensure their children’s efficient learning and eventual employ­ability; with reference to Prussia, Van Horn Melton (p. 11) writes that: “... backstreet schools offered poorer families a more cost-effective means of acquiring literacy.” This echoes observations ofthe “backstreet schools” found throughout India today, reflecting evident failures of the state-run schooling system (Probe Team, 1999).

A change in popular views about schooling for poor families started to be evident in much of Europe and North America in the mid-nineteenth century. Mercantilism had lost its influence, and the classical economics that replaced it was not opposed to promo­tional policies such as public schooling—policies that were capable of a propoor change in the distribution of wealth. The working conditions of children in the factories of the time provided fuel for social novels and for the increasingly vocal critics of capitalism, most notably Karl Marx and Friedrich Engels. Prominent calls started to be heard for improving the working conditions of children and for schooling as the better way to address unemployment. Schooling for poor children came to be seen as key to their self­improvement and mobility. Mass schooling was also believed to have external benefits, such as reduced crime rates.

National legislation for compulsory schooling had only emerged in a few countries (including Austria and Prussia) toward the end of the eighteenth century but was becom­ing widespread in Europe and North America by the late nineteenth century.^[428] This fol­lowed a protracted public debate in Britain, Europe, and North America during the nineteenth century (Weiner, 1991, Chapter 6). Although there were some who argued against almost any intrusion by the state into private decision making,^[429] this does not appear to have been the main argument of opponents. Mill’s (1859) influential volume On Liberty argued that the state had a role in compelling parents to school their children, although Mill did not favor government monopoly in the provision of that schooling. Opponents had long argued that schooling the poor would lead them to unrealistic aspi­rations (Vinovskis, 1992). As one would expect, the industries that were heavily depen­dent on child labor lobbied against compulsory schooling although over the course of the nineteenth-century industrial capitalists became more supportive of mass schooling because they wanted to create the more skilled workforce needed for the new technol­ogies (Bowles and Gintis, 1976, with reference to the United States). However, this was not simply a matter of schooling catering to the needs of new technologies developed under capitalism; the debates about schooling were broader socially, and it is not clear that industrial capitalists had that much influence (Vinovskis, 1992). Poor parents and local communities were also increasingly vocal in their demands for mass public school­ing. It seems that by the latter half of the nineteenth century the earlier unrealistic aspi­rations of poor parents for a better life for their children had started to become more realistic. There were also administrative constraints on enforcement to overcome; it was not until birth registration systems had been developed around the mid-nineteenth century that truancy laws could be properly enforced (Weiner, 1991, p. 121).

22.5.4 Socialism

Landauer (1959) identifies the widespread acceptance of poverty in the nineteenth cen­tury as one of the factors that led to the emergence of socialism. The leading school of socialist thought, Marxism, saw the root cause of poverty, and most other ills, to be cap­italism itself.There was little scope for effective antipoverty policies within a capitalist economy; only communism could reliably eliminate poverty. Nor was much value attached to past philosophical and economic thought on poverty. For example, Marx was as disparaging as Bentham about talk of “rights.”^[430]

Even so, it is notable that at least a couple of the demands outlined in the Communist Manifesto of Marx and Engels (1848) can be recognized today as quite mainstream anti­poverty policies, including progressive income taxation and free education in public schools. Fleischacker (2004) identifies one key influence of Marx’s thinking on subse­quent non-Marxist thinkers, including Rawls, namely, his insistence that human nature was largely a product of social context. Instead of seeing poverty as the outcome of indi­vidual attributes (being lazy is a favorite in some quarters), one should look to social influ­ences on behavior. Of course, this idea also had pre-Marxian antecedents, notably in Rousseau.

22.5.5 Social Research

Much new research on social problems was emerging in the nineteenth century, and poverty was increasingly seen as a social problem. Social research was used to promote better informed public debate on antipoverty policy. Important contributions included Eden’s (1797) three-volume tome on poverty in England and Wales in the late eigh­teenth century, Mayhew’s (2008) newspaper reports on London’s poor in the 1840s, Frederic Le Play’s budget studies of working class families in Europe in the mid­nineteenth century (Brooke, 1998), Mathew Carey’s use of data on budgets and wages of poor people to “startle the complacent into giving alms” in Philadelphia in the 1830s (Klebaner, 1964, p. 384), and the work ofthe German statistician Engel (1857), who studied the relationship between household food expenditures and income, in which he found what came to be known as Engel’s Law, namely, that the poorer a family is the higher the share of its budget devoted to food.

Landmarks in the development of modern scientific research on poverty were the (largely independent) studies by Booth (1903) and Rowntree (1902), which documented the living conditions of England’s poor (in London and York, respectively) in the late nineteenth century. These were pioneering measurements using seemingly careful household surveys that revealed to nonpoor people how poor people lived. Their work attracted much attention.^[431] The English public was shocked that one million Londoners—about one-third of the population—lived below Booth’s frugal poverty line of 21 shillings per week for a family. This news came after a period of rising real wages, which added to the shock. Nor could it be said that this was too generous a poverty line.

By my calculations it was equivalent to 1.5 lb of good wheat per person per day—a frugal line, not very different from (say) India’s poverty line in the 1990s.3

Booth’s research responded to a demand for clarity and data among legislators. His empirical research into old-age poverty and its geographic variation influenced Britain’s introduction of a public pension in 1908 (Thane, 2000, Chapter 9) and national insurance in 1911 (Himmelfarb, 1984a,b). The research of Booth and Rowntree also stimulated debates about poverty. For example, 15 years after Booth’s books appeared, Alfred Marshall argued that there was even more poverty in Germany than Booth’s figures sug­gested was the case in England; this was in response to Marshall’s (1907, p. 12) perception that “one of the few things which every German knows for certain about England is that there are a million people in London living in extreme poverty on the verge of hunger.”

The close observational studies of poverty by Booth and Rowntree were influential in social science research. Hunter (1904) followed their lead in studying poverty in the United States. Village studies in India by Mann and collaborators were also influenced by Booth and Rowntree (Thorner, 1967). A long and distinguished tradition of quantitative-economic studies of selected villages followed, including surveys by Askok Rudra and Pranab Bardhan (Bardhan, 1984a), Bliss and Stern (1982), Walker and Ryan (1990), and Lanjouw and Stern (1998). Booth’s approach influenced the development of quantitative sociology in both Britain and the United States.^{[432] [433] Townsend’s (1979) empir­ical study of poverty in England some 80 years later clearly owed much to Booth and Rowntree. So, too, did the Chicago School of Sociology that began studying urban pov­erty in the United States during the 1930s.}

The late nineteenth century saw new questioning of the longstanding idea that pov­erty was inevitable in any capitalist economy and the emergence of prominent arguments for promotional antipoverty policies in such an economy. Although the late eighteenth century gave birth to the modern idea of distributive justice, it was not until the late nine­teenth century that we saw the emergence of the idea of a world free of poverty. By then it had become widely accepted among the “cultivated circles” that a trend rise in the real wage rate was a sign of overall progress (Daniels, 1898, p. 203). The historian Webb (1974, p. 384) argues that in late nineteenth-century England it came to be recognized that poverty “could and must be eliminated.”^[434] Near the turn ofthe century, Marshall’s (1890, p. 2) Principles of Economics was posing the question quoted at the beginning of this chapter, bemoaning that the children of the poor received too little schooling (p. 467), and sketching policies for fighting poverty (especially., pp. 594-599) that were not just intended as short-term moralistic palliatives but were driven by a recognition that per­sistent poverty was itself a constraint on wealth generation. Marshall (1890, p. 468) wrote ofthe “cumulative evil”:

The worse fed are the children of one generation, the less they will earn when they grow up and the less will be their power of providing adequately for the material wants of their children; and so onto following generation.

Thus:

The inequalities of wealth, and especially the very low earnings ofthe poorest classes... (are)... dwarfing activities as well as curtailing the satisfaction of wants (p. 599).

Marshall’s reference here to “dwarfing activities” anticipates a view that is prominent in development thought today whereby certain inequalities are seen as instrumentally important inhibitors of overall economic progress, notwithstanding their intrinsic rele­vance in “curtailing the satisfaction of wants.” Although Marshall was careful to avoid naive utopianism (see, especially, the comments in Marshall, 1907), his writings reflect a far more optimistic perspective on social policy as a means of expanding opportunities for all to share in the potential of a competitive market economy. Here we had a forth­right and prominent advocacy of promotional policies such that “... children once born into it [poverty] should be helped to rise out of it” (p. 598).

Importantly, this new optimism was starting to be shared by poor parents, who raised their demand for schooling for their children. By the late nineteenth century, it seems that most poor parents in Europe and North America were anticipating that their chil­dren would encounter better economic opportunities than they had. Helped by signif­icant medical and public health advances that were improving child survival rates and raising life expectancy, investing in children's schooling was seen as a far less risky than it had been early in that century (and before then) when the children of the poor working class had little real hope of being anything else than working class and not much chance of being less poor workers than their parents. The demand for mass schooling thus rose along with the supply. Parents were still investing in their children to help secure their own future welfare (formal social security systems were not yet available), but they were investing more in the quality of those children. Fertility rates were falling.

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After the First World War, there was a mounting enthusiasm for policy intervention in the West, and there appears to have been broad agreement that greatly reducing, if not eliminating, poverty was a legitimate role for government (Mencher, 1967). In the writ­ings of prominent economists, such as Pigou (1920, Part IV, Chapter 1), it had become accepted that losses to the “national dividend” could be justified by gains to poor people. The incidence of absolute poverty had come to be recognized as an important yardstick for measuring social progress. For example, the eminent statistician Bowley (1915, p. 213) wrote that:

There is perhaps, no better test of the progress of a nation than that which shows what proportion are in poverty and for watching the progress the exact standard selected as critical is not of great importance, if it is kept rigidly unchanged from time to time.

From around the turn of the twentieth century, statistics was being applied to various social issues, including measuring poverty and inequality. A key methodological issue was whether one could rely on sample surveys (instead of doing a census) and how the sampling was to be done (the choice being between purposive and random sampling). Statisticians such as Bowley, Ronald Fisher, andJerzy Neyman advanced the theory of statistical inference based on random sampling, although it took a few decades before this became common practice for social and economic surveys.^[435] Poverty measurement was a leading application and, in due course, sampling methods were to revolutionize the collection of systematic survey data on poverty and inequality by national statistics offices across the world.

By the interwar period it seems that poverty was no longer being seen in mainstream circles as primarily caused by the bad behavior of poor people, but as reflecting deeper economic and social problems. If nothing else, the observation of mass involuntary unemployment during the Great Depression made that clear. And the observations were carried with force to a broad audience through various media.^[436] The period saw massive relief efforts (such as the New Deal in the United States). But these were largely transient efforts for protection rather than promotion (Heclo, 1986).

22.6.