Quakerism & Capitalism — Transition (1895-1920): The Limited Liability Corporation
June 30, 2011 § Leave a comment
When London Yearly Meeting approved the Foundations of a True Social Order after discussing the report of the Committee on War and the Social Order during the 1918 sessions, the sense of the meeting was that the social order—that is, capitalism—had played a key role in causing the war that was still crippling an entire generation. In the Foundations, one can see this relatively new awareness of capitalism as a system with potentially horrible social consequences reaching beyond a narrow focus on the war to include labor and industrial relations as well (the British Labour Party was constituted in the same year). In fact, British Friends declared that nothing less than the ‘personality’—the personhood of the human—was at risk in the ways that the system treated its participants.
Personhood was central to the discussion in part because full legal ‘personhood’ had been conferred decisively upon the limited liability corporation in Britain and America only twenty years before. In that short time, the new technology had completely transformed the capitalist system. It was also completely transforming British Quakerism.
It’s hard to exaggerate how momentous this innovation was. The modern corporation, wrote Peter Drucker, the preeminent business thinker of the 20th century, “was the first autonomous institution in hundreds of years, the first to create a power center that was within society yet independent of the central government of the national state.” * (The Company: A Short History of a Revolutionary Idea, John Micklethwaite and Adrian Wooldridge, Modern Library Edition, New York, 2003)
The idea was not new. The Limited Liability Act of 1855 (in Britain) had granted limited liability to companies incorporated under the Joint Stock Companies
Act of 1844, subject to some capital requirements. The earlier act had done away with the need to get a special charter from Parliament to form a company, requiring only simple registration. The system was further rationalized under the Joint Stock Companies act of 1856, requiring only seven people to sign a Memorandum of Association and to put “ltd” at the end of the company’s name. However, the final block was put in place when, in 1897, in Salomon v. Saloman & Co., Ltd., the House of Lords (which was then Britain’s Supreme Court) finally firmly established the separate legal identity of a company and conferred upon its directors—not just its shareholders—the ‘corporate veil’ of protection. The corporation had become the equivalent of a person before the law.
Limited liability meant that shareholders were only financially liable for the value of their own investment in the company and that, when someone sued the company, they were suing the company and not its owners or investors. It essentially made the company in some ways the equivalent of a person in terms of the law. This affected not just financial liability; it also simplified a host of other financial, legal and management problems: by wrapping responsibility up in the fiction of corporate ‘personhood’, a company’s business relations and transactions no longer had to be conducted with each of its individual shareholders as owners. All this made it possible to raise the capital necessary to form the kind of large companies that the mature industrial economy required and to run them with managerial efficiency.
The proceedings of LYM’s 1918 sessions reveal that some members of the Meeting were nervous about the very essence of this innovation: was it morally right to relieve the owners of a business from responsibility for its actions? This seemed inconsistent with moral principle. It also struck at the heart of the Protestant Spirit that had dominated Quaker business practice for two centuries (and which had only just been defined in Max Weber’s landmark book, The Protestant Ethic and the Spirit of Capitalism), in which one viewed one’s business as an expression of one’s religious calling. That only worked if you owned and ran the business yourself. It didn’t work if untold numbers of people owned the business through investment shares who then relegated the business’s operations to directors and managers, and whose legal responsibility for its actions were now severely limited.
But that debate about limited liability went nowhere. In the proceedings of the 1918 sessions, you see some Friends arguing forcefully for the moral contradictions involved, which even the supporters of the new technology had trouble refuting. But it was too late. The modern corporation had already completely taken over. It was obvious to everyone that it was now, not just a fait accompli, but also actually indispensable to the new social order.
This fact was literally demoralizing to those Friends who considered it. At just the moment when Friends had become aware for the first time of capitalism as a system with mixed moral consequences, they were forced to accept its amoral (was it actually immoral?) character. In retreat, London Yearly Meeting resolved to reform the system as best they could, responding with one of the signature acts of modern liberal Quakerism—they formed a committee. The Committee on Industry and the Social Order went on to do some of the most searching and challenging work in the history of Quaker social testimony. But Friends had effectively abandoned any direct challenge to capitalism itself on moral grounds.
Moreover, the limited liability corporation did more than challenge the moral identity of British Friends. It also destroyed their sizable fortunes. Many Quaker business owners held onto their family ownership for a long time, but eventually they virtually all went public. Cadbury, Rowntree, Lever Brothers, Barclay—one by one, Quaker owners became managers in firms that had been in their families for generations. Gradually over the course of the 20th century, the great Quaker fortunes of Great Britain dwindled in size and importance. For two centuries, Quakers had been the wealthiest, or one of the wealthiest, communities in the United Kingdom. Between the triumph of the limited liability corporation and later the influx of convinced Friends from the middle middle class, the social demographics of British Quakerism dramatically changed for the second time in its history: from yeoman farmers and small trades people in the 1650s, to industrialist tycoons during the 18th and 19th centuries, and then back again towards the middle classes during the 20th.
In America, things were quite different. The United States embraced the limited liability corporation earlier and with greater enthusiasm than the Brits, seeing the innovation as democratizing and recognizing early on how it served the already famous American entrepreneurial spirit. But corporate law was mostly a matter for the states to write, so the technology grew for a long time in a haphazard way as states variously began legalizing it and then began competing with each other for business. First New Jersey, and then, ultimately, Delaware, made corporation-friendly law a hallmark of state identity. As in Great Britain, these laws first emerged in the middle of the 19th century and finally coalesced into some sense of national policy toward the end of the century, but states have always retained the power of incorporation.
With the Sherman Act (1890) and subsequent anti-trust legislation, the federal government began finally to seriously regulate corporations for the first time and these efforts figured prominently in the rise of Progressivism in America. Then came the New Deal. But these developments hardly affected Quakerism in America, which had always been more economically diverse than in Great Britain. The rich Quakers of Philadelphia had not played the central role in creating capitalism that their British brethren had, they were not by and large industrialists, and they represented only a small portion of the American Quaker population, let alone of the American wealthy and power elite. Even as early as the War for Independence, Philadelphia Quakers had ceased to be very important to the nation’s economy. By the time of the second transition in Quaker economics at the end of the 19th century, the final codification and rationalization of corporate law had no real impact on Quaker culture in America.
Quakers & Capitalism — Transition: Seebohm Rowntree and the Awakening of ‘Liberal’ Economic Consciousness
June 15, 2011 § 4 Comments
The second major transition in Quaker economic culture caused a dramatic shift away from the double-culture period of the 1700s and 1800s, in which Friends had withdrawn from the world around them in virtually every sphere of human activity but one—industry, commerce and the practical arts and sciences. In these areas, they played a truly significant role. Beginning around 1895, however, external forces combined with trends within Quakerism to draw (or even force) Friends out of their shell and reawaken them to responsibility for the wider social order.
In historical moments like these, key individuals often serve as a bridge into the new culture and its ethos. These Friends respond to the changes going on around them with new sensibilities. They speak and act and live in ways that lead the rest of the Society in a new direction. In this second major transition period, a number of extraordinary individuals shine out in this regard: Rufus Jones and John Wilhelm Rowntree are perhaps the best known. Less well known but equally important, at least in his influence on Quaker economic history, is Benjamin Seebohm Rowntree.
The external forces to which he responded include the plight of the industrial poor, whose conditions remained awful, in spite of efforts throughout the 19th century to deal with the problem: the New Poor Laws of the 1830s in England, the rise of organized philanthropic giving, and attempts at reform by individual business owners, in which Friends often led the way. By 1895, these efforts at reducing poverty and helping the poor were no longer new, but something else was: the emergence of what we now call the social sciences: psychology, sociology, and the discipline of economics itself. In the field of sociology, especially, brilliant new thinkers published groundbreaking work during this period of intense social change.
Karl Marx is sometimes called the true father of sociology, though Auguste Comte and Emmanuel-Joseph Sieyes independently coined the term in the 1830s, and Herbert Spencer pushed the science along in the 1870s and 1880s, but it was Emile Durkheim who laid the foundation for the discipline as a science and set up the first sociology department in a university in 1895. Max Weber (1864-1920) began writing prolifically in the late 1880s about social policy and began work on his landmark book The Protestant Ethic and the Spirit of Capitalism in 1904. Weber was keenly interested in economics throughout his career. But it was a man named Charles Booth (1840-1916) who inspired Seebohm Rowntree.
Booth conducted the first scientific sociological statistical study in history, ultimately interviewing thousands of households of the poor in London, beginning in the East End. He published the first fruit of his research in 1889 and went on to publish a total of 17 volumes through 1903. He invented the concept of the ‘poverty line’ and proved that 35% of Londoners lived in abject poverty and that the vast majority of them worked. Here was scientific proof that the poor were poor, not because of their moral character, as had been assumed for centuries, but because they did not earn enough in their work. Poverty resulted, not from moral failure but from systemic failure. They may have had too many children; they may have spent some money on drink, gambling and other vices or diversions, but the real problem was that they didn’t have enough money in the first place.
However, Booth’s The Life and Labour of the People of London was inaccessible, too huge and too dense to reach any but the most interested intellectuals. Among the intelligentsia, it sparked intense debate. Were these problems confined to the capital, or were the provinces beset with similar conditions? Put another way, was capitalism the problem, or was it London? Seebohm Rowntree set out to answer this question by applying Booth’s new statistical, sociological methods to his own home town of York, where only two employers controlled most of the economy: the railroad and his own family’s chocolate business.
Rowntree surveyed 11,560 families, representing 46,754 of York’s population of 75,812, roughly 60% of the city. He defined two classes of poverty: “primary poverty,” affecting people who lacked the financial resources to provide for themselves even the basic essentials—10% of the total; and “secondary poverty,” in which earnings would suffice for basics, except for “other expenditures, either useful or wasteful”—18%. In other words, close to one third of York’s population was poor. More importantly, half of the people living in primary poverty had regular jobs!
Like Booth, Rowntree concluded that poverty resulted, not from bad character (though gambling, drink and other bad habits were often aggravating the problem), but from low wages. The traditional Quaker virtues that had helped to make Quakers so successful, like prudence and thrift, simplicity and moderation, and Puritan abandonment of the world’s pleasures, would help these people hardly at all. And philanthropy could hardly touch their condition, let alone change it. Poverty and its ills were inherent in the character of capitalism itself, not in the character of its workers. The poor were victims, not causes, of their suffering. And paternalistic attempts to solve the problem by morally elevating the poor were ill conceived and failed to address the causes of the problem.
Rowntree’s book had a tremendous impact. It was well organized, well written, it was short and accessible, and it struck a chord. It spoke to the liberal-scientific worldview that was emerging at the time and it resonated with other reformist forces at work in English and American society. Other well-received books and Parliamentary reports had sparked a lively debate about poverty and social reform in society and in the press. The suffragette movement was on the rise and so was labor and socialism and, in America, Progressivism. Reaction to the labor movement was becoming violent; the police riots against strikers in Chicago’s Haymarket Square had taken place in 1896. The troubles in Ireland, too, had people wondering where society was going. The book became a bestseller.
Someone recommended it to Winston Churchill, then a young Conservative Member of Parliament, who couldn’t get it out of his consciousness, calling it “a book which has fairly made my hair stand on end.” He wrote and spoke about it repeatedly and reviewed it for a military journal. It ignited both his moral conscience and his creative imagination and redirected his political career. Ultimately, he joined the Liberal government that formed in 1906.
In 1908, Churchill became President of the Board of Trade and Lloyd George became Chancellor. The two men joined forces to bring sweeping reforms to the political economy and Rowntree’s book, and Rowntree himself, figured prominently in their work. George, who had been an MP since 1890, had risen from humble beginnings himself and devoted his whole career to alleviating poverty. George and Rowntree became friends and George would brandish Poverty as he spoke to large crowds all over Great Britain campaigning for the New Liberalism that he, Churchill and others had inaugurated in 1906. Though their People’s Budget and the social legislation it funded provoked a short-lived constitutional crisis in the House of Lords, in 1911 Parliament passed the National Insurance Act, providing for state-funded insurance for unemployment, sickness and old age. The modern welfare state had been born and Poverty: A Study in Town Life had provided much of the prevailing argument for radical systemic change, with its clear exposition, demonstrable evidence and straightforward, scientific approach.
The book inspired more such studies in other regions of the country. It heavily influenced Churchill’s own 1909 publication, Liberalism and the Social Problem. Rowntree was named to a government committee to study land, land tax and housing issues. The committee applied Rowntree’s methodology to these problems in the years 1912-1914. Thus Rowntree became an expert on land reform and this remained an abiding concern throughout his life. He championed the creation of garden cities, in particular, in order to diversify the agricultural system and relieve some of the pressures threatening both the health of workers and the dwindling rural areas. Beginning in England in 1910 and soon spreading to the U.S., the garden city movement favored relatively low-density planned communities with lots of open space, including, usually, a green belt encircling the housing and areas with flexible zoning that could support local industry and commerce. He also came to believe that the labor movement was an essential part of economic reform.
But what did the Rowntrees do about the subject of Seebohm’s book, poverty in the city of York and Rowntree’s own family business? Poverty encouraged Seebohm’s father, Joseph Rowntree, to build new rental housing, what we would call today low- and moderate-income housing. Despite his efforts to provide acceptable accommodations at the lowest possible cost, however, these apartments remained beyond the means of the very poor, the people for whom he’d intended them. According to James Walvin (The Quakers: Money & Morals), the welfare services provided by the company represented 0.8% of gross selling price in 1908. Joseph Rowntree kept improving the company’s benefits, adding profit sharing, better sick pay, paid vacations, and convalescent facilities. But the basic problem remained: wages.
Rowntree laborers were paid by the piece. Joseph Rowntree set up a process for wage review every three months and he monitored wages. If someone fell below the ‘poverty line’ that his son’s book had so popularized that he often is credited with its invention, rather than Booth, the company moved the worker to different work or encouraged them to work harder. Those who couldn’t make it were dismissed or encouraged to find another job. Departments were evaluated according to the percentage of employees that were making more than the minimum wage. Meanwhile, although Seebohm Rowntree agreed with labor unions in principle, in practice, he resisted them in his own plants. Quaker paternalism was not dead yet.
Nevertheless, in both his book and his long and distinguished career in public service, Seebohm Rowntree helped lead Friends through the transition into the twentieth century and its liberal engagement with social problems. By ‘liberal’ I mean an optimistic faith in the ability of society (meaning, mostly, government, but also civil society) to change things by studying them, proposing solutions, developing programs, and creating institutions for implementing the programs. Rowntree came to believe in state regulation of aspects of the economy “to over-ride the immediate interests of the employer by imposing on him (sic) obligations which are to the advantage of the nation rather than his (sic) own.” This was a fundamental break from the double-culture compromise forged in the persecutions of the first transition period, that Friends would leave the state and the foundations of the social order alone, as long as they were left alone in turn. Under the leadership of Seebohm Rowntree and other young reform-minded Friends, Quaker religion once again became a public, and not just a private, affair.
Poverty: A Study of Town Life launched Rowntree on an exceedingly prolific writing career; Amazon lists 26 books. Poverty itself is available from Google Books for free as a download here. And here’s a link to a bibliography of Rowntree’s writings, to give you a sense of the range of his interests. Four main themes dominate his work: He returned again and again to the problem of unemployment and he wrote several books on housing. He wrote about the Christian and the Quaker responses to social problems. And he wrote several books trying to humanize business and industrial relations. He also applied for a patent in chocolate manufacturing.
This extraordinary man deserves our thankful remembrance for the following landmark achievements:
- Groundbreaking work—understanding poverty. Poverty is the second attempt in history to use a sociological survey (and statistical analysis) to understand a social problem (poverty) and to shape a meaningful policy response.
- Defining the “poverty line”. Rowntree is widely credited for inventing the idea of the “poverty line,” an income level below which a person or a family can no longer provide for the basics of food, clothing and shelter. I believe, however, that again we can thank Charles Booth for this innovation. However, Rowntree put it on the map and I believe he revised Booth’s calculations to make them reflect reality a little more accurately, though most economists today agree that it still needs to be redefined. The current formula for the poverty line (at least in America) comes originally from an American economist from the Roosevelt administration named Mollie Orshansky, who based her own work on Rowntree’s. The idea really caught on with the War on Poverty in the 1960s. Once a ‘scientific’ way to define poverty had been established, Rowntree (and before him Booth) came to a revolutionary and truly startling conclusion:
- Groundbreaking conclusion—the poor are poor through no fault of their own. Rowntree’s research proved that poverty was not primarily the result of personal moral failing, but was rather a systemic, structural problem endemic in the capitalist system itself. It proved that the vast majority of the poor actually worked, worked hard, too hard; they just didn’t make enough money to survive—their wages were too low. It was not indolence, drink, gambling, sex (too many kids), and general wantonness that had cast them into poverty, as most people believed until then, though these factors often made things worse. The real problem for the poor was not at its root moral; it was structural—it was low wages. The poor wanted to work, they did, in fact work. It just wasn’t enough to lift them up out of poverty.
- Groundbreaking paradigm—social science and technocratic solutions. This helped to usher in the modern social scientific approach to understanding and treating social problems. Poverty showed that scientific methods yielded results that you could not arrive at using moral philosophy, and it helped to pinpoint where and what the problems really were. This did not put an end to moralizing, as we well know. Conservatives, especially, have continued to cite moral failure as the cause of social ills up to the present day. Now, however, they must also downplay, discredit, bypass and obstruct scientific arguments that clearly point to structural evils in the system. Rowntree’s book ushered in an age of warring paradigms in social policy. One of them was rooted in 19th century evangelical theology and the political economics it had nurtured, focused on individuals, their choices and their ‘freedom’ from government intervention. The other paradigm was rooted in science and focused on communities, on systemic causes and solutions to social problems, and on the roles that only government was in a position to play in addressing these issues.
- Groundbreaking policy—the birth of the welfare system. The book led directly to the modern welfare state in England and, by extension, everywhere else in Europe and North America.
- The end of the ‘double culture’ period and the reengagement of Quakers. Seebohm Rowntree was part of the generation of modernist Friends that remade Quaker culture around the turn of the 20th century. They included his cousin John Wilhelm Rowntree, Rufus Jones and a number of others who had been energized by the Richmond Conference in 1887 and the Manchester Conference in 1895. They were the internal force for change within the Society of Friends that met the external forces that helped shape what I call the second great transition period in Quaker history, moving us from the double culture of religious and social withdrawal, on the one hand, combined paradoxically, on the other hand, with energetic engagement with the worlds of business, industry and commerce. They pulled us out of our isolation and insulation until both our feet were planted in the modern world.
- Quakers discover capitalism as a system. Seebohm Rowntree’s landmark book and methods opened Quaker eyes to capitalism as a system. Until then, Quaker testimonial life had regarded the ‘social order’ as a matter for individual attention; that is, on the one hand, as a matter for the discipline of personal behavior, of “right walking” over the world, while on the other hand, individual Friends and Friends’ meetings had focused their efforts to address social ills like poverty on individuals. Recall Elizabeth Fry’s work in Newgate Prison raising up the educational and moral levels of inmates. With Poverty, Friends became aware for the first time of structural evil, of the way that systems caused suffering. This new awareness took a long time mature. It got major reinforcement, at least in the UK, during the Great War, when London Yearly Meeting convened a Committee on War and the Social Order and approved the Eight Principles of a Just Social Order in the 1918 sessions of London Yearly Meeting, which I’ve discussed in an earlier post. Nevertheless, it was not until the 1960s that systemic thinking really began to shape Quaker testimonies in any meaningful way: Right Sharing of World Resources addressed global trade policy; AFSC turned increasingly from service to the suffering toward advocacy on behalf of the oppressed; and the War in Vietnam vividly illuminated the power and role of the “military industrial complex” in our economic life. The war also brought Marxism back to life; Marx and Engels had understood that capitalism as a system oppressed the working class way back in the middle of the 19th century. But Quakers never really warmed to Marxism, even though Das Kapital mentioned their own John Bellers by name, and even though a small, very active group of socialist Friends did emerge in the same period in which Rowntree was doing his work late in the 1800s.
For all these monumental contributions to the cause of a more just and compassionate political economy, Benjamin Seebohm Rowntree is one of my heroes. He also is one of the unsung heroes in the history of Friends. And so I have become one of his modern champions.
Note: On Tuesday, December 21, American Public Media’s daily financial news radio magazine Marketplace featured a piece on Benjamin Seebohm Rowntree (1871-1954). It’s not a bad introduction to this extraordinary man. Here is the link.
Quakerism & Capitalism — Transition: War and the Social Order
May 30, 2011 § 3 Comments
The second period of major transition in Quaker culture and economics began (as I have not-too-arbitrarily pegged it) in 1895 with the Manchester Conference and it ended with the first Friends World Conference in London in 1920. A number of significant events, both within the Quaker communities and in the world around them during this period, deserve fuller treatment than I have so far given them in my introduction. Here I want to focus on British Quakers’ awakening to the systemic evils of capitalism as it was brought to a climax by the Great War.
I do not say ‘evils’ lightly, for, as we shall see, that is the conclusion many British Friends came to. This story starts in 1915, when London Yearly Meeting convened a committee on War and the Social Order charged with examining the causes of the war and proposing actions the Yearly Meeting could take to try to prevent such a war from happening again.
The very act of convening such a committee was a mark of how Quakerism was modernizing and liberalizing in this period. Committees had been organized around a concern before this but, for two hundred fifty years, Friends had used the traditional faith and practice of Quaker ministry to pursue “concerns”: A Friend felt led, brought the “concern” to their meeting, traveled or served under the auspices of a minute, then laid down the work when they felt released from their call. In the early twentieth century, if I have my history right (it’s hard to research this kind of thing without combing through quarterly and yearly meeting minutes in detail, which I have not yet done), Quaker meetings increasingly turned to committees to act on behalf of the body in the way that the War and Social Order committee did, until we now take this mode of organizing corporate testimonial life for granted, and have almost totally lost the original mode of traditional Quaker ministry.
In 1916, the Yearly Meeting convened a Conference on War and the Social Order at Devonshire House that produced a remarkable document titled “Seven Points of the Message to all Friends”, asking all Friends to affirm its principles. The Seven Points were all positive in tone and offered no direct condemnation of capitalism per se. But it was strongly worded and, most importantly, it did directly address the economic system as a system. Notably, point number six read:
That our membership one of another involves the use of all our gifts, powers, and resources for the good of all. No system which uses these for mere money-making or private gain, alienating them from their true end, can satisfy.”
The Seven Points also focused special attention on workers and labor relations.
At its 1917 sessions, the Yearly Meeting sent the draft to the quarterly meetings and the General Meeting of Scotland for review and a new draft was presented to the Yearly Meeting in 1918. This final version consolidated the original seven principles into six and added two more. The new document, titled Foundations of a True Social Order, was more concise and, in some ways though not all, it was more forceful than the Seven Points had been.
From several different angles, the Foundations defined the purpose of an economic system: that it should express the Brotherhood revealed by Jesus Christ that “knows no restriction of race, sex or social class”, that it should further the growth of full personhood beyond material ends, that it should be organized around mutual service, not private gain.
The Foundations also defined how an economic system (the “social order”) should operate: it should apply “the spiritual force of righteousness, loving-kindness and trust” to industrial relations, not the methods of outward domination and physical force. The document was strongly anti-materialist and called for regulation of land and capital on behalf of “the need and development of man (sic)”. And it clearly recognized that serious problems plagued the current social order, that these problems were ultimately spiritual in nature, and that they demanded action.
The adoption of the Foundations of a True Social Order and the actions that followed its adoption signalled a fundamental and decisive shift in Quaker culture. At the end of the first transition period in the 1690s, with the Toleration Acts, Friends had agreed to give up their claim on the social order in return for religious toleration. Now, in reaction to the persecutions of Friends for conscientious objection to the first world war—a breach of that tacit ‘agreement’ by the state—and in reaction to the war’s manifest horrors, the deal was off. The double-culture period was over. Friends came out of this second transition period once again determined to change the world, ready to fully engage with the social order, led to a large degree by young Friends who had already paid a heavy price for their religious convictions—an been strengthened by the experience.
London Yearly Meeting approved the Foundations, but debate was very vigorous. Many Friends on the committee blamed capitalism directly for the war. Some pressed for a clear socialist recommendation and a few Friends actually formed communes when the meeting pulled back from so radical a move. On the other hand, many were anxious that it went too far and they succeeded in tempering the stronger language presented by some quarterly meetings.
Friends dealt with this internal conflict characteristically by convening another committee, the Committee on Industry and the Social Order. This extraordinary group produced a series of very searching pamphlets on the topics of economic and social policy and labor relations throughout the middle of the century. I’ve not been able to fully research this body of work and I’m not sure when the committee was finally laid down, if it was at all. The last clear reference I have found is from 1955.
Besides the new committee, the other major outcome of London Yearly Meeting’s exercise in 1918 was the first Friends World Conference in London in 1920, for which the eight “Foundations of a True Social Order” became a central theme.
On a parenthetical personal note, I would add that it was while reading the proceedings of the 1920 Friends World Conference and its discussion of the Foundations that I first felt led to study Quaker economic history further. I believe I was researching Right Sharing of World Resources for a project I had proposed for the Albert Cope Scholarship at Pendle Hill; Right Sharing was first brought to Friends by Young Adult Friends at the Friends World Conference at Guilford College in 1967. The 1920 Conference document was right next to the ones for 1967 on the shelf and I just picked picked it up out of curiosity. The debate about the limited liability corporation caught my eye first: Quakers trying to discern whether it was morally correct to use a technology whose very purpose was to divest owners and managers of culpability for a corporation’s actions. Then there was the presentation and debate about the Foundations and references to the 1918 sessions of London Yearly Meeting. I kept following this thread and eventually, the leading grew until I started writing Quakers and Capitalism in earnest.
Quakers & Capitalism — Transition into Modern Liberalism
May 12, 2011 § Leave a comment
In this series on Quakers & Capitalism, I have divided Quaker economic history into three major periods separated by times of transition that lasted roughly a generation, during which external forces have combined with internal trends within Quakerism to completely transform the community’s culture and its economic life. During the first transition, from roughly 1661 to 1695, the persecutions combined with the establishment of gospel order to turn the movement away from its radical apocalyptic engagement with the social, political and religious institutions of the day into a culture that was paradoxically dualistic: quietist and peculiar, insular and withdrawn from virtually every area of social converse—but one: Quakers were intensely engaged in the worlds of industry, commerce and the practical arts and sciences. They entered this transition as mostly independent farmers and small trades people. They emerged as a people almost wholly engaged in commerce, poised to literally change the world, after all, by ushering in an all-new system for creating wealth—industrial capitalism. Not quite single-handedly, but not far from it, either.
The double-culture period lasted two hundred years, though 19th century evangelicalism weakened the intense dualism that had marked the 18th century, drawing Friends out of their isolation to a degree and helping to inspire paternalistic philanthropic attempts to ameliorate the suffering of the poor.
The first transition period had rather clearly defined boundaries, marked by the passage of new legislation designed to crush the dissenting sects, beginning in 1661, and by their repeal, concluding fairly decisively in 1695, and by George Fox’s efforts to establish gospel order among Friends upon his release from prison in 1661 and by his death in 1691. The second transition period is a little less clearly defined. I have chosen 1895 as the starting point and 1920 as the end.
Externally, 1895 saw the passage in Great Britain of the final legislation legalizing the limited liability corporation. This new technology would completely transform, not just capitalism, but Quakerism, as well.
Other forces emerged about the same time that created a fertile environment for dramatic change within the Society:
- the origins of the what would soon become the Labour Party in Great Britain;
- the rise in America of Progressivism as an alternative response to industrialization besides the conservatism and socialism and anarchism of the day;
- the rise in America of Pentecostalism, often dated to 1901, and of the Social Gospel movement, which had a relationship with the Progressive Party much like today’s Christian right does with the Republican party; and
- the articulation for the first time of Catholic social teaching, beginning with Pope Leo III’s encyclical, Rerum Novarum, in 1891.
All of these movements were to a degree responses to the downside of industrial capitalism, whose awesome wealth-generating capacity had outgrown society’s ability to control its excesses and its ability to protect its victims.
Then came the Great War, a cataclysm that, in Europe, anyway, would reroute virtually all social energies, decimate an entire generation of men, and transform the zeitgeist of the West.
The war also brought to a climax a new zeitgeist in Quakerism that had begun in 1895 in Britain, with the Manchester Conference, and in 1887 in America, with the Richmond Conference. The conferences marked a turning point in the course of evangelicalism among Friends and, for many Friends, a decisive move toward liberalism. Friends General Conference formed in 1900, Three Years Meeting (later Friends United Meeting) formed in 1902. In 1893, Rufus Jones became the editor of Friends’ Review (later, The American Friend), and began a lifelong effort to reunite divided Friends and modernize Quakerism. In 1897, Jones met John Wilhelm Rowntree, a kindred spirit who had played a major role in the Manchester Conference and the summer school movement that came out of it. A generation of young very gifted Friends began leading Quakers into the modern era and toward a level engagement with the world around them that had not existed since the 1650s.
Then, again for the first time in 250 years, Friends faced persecution for their faith, for conscientious objection to the war. After more than a decade of liberalization and increasing involvement with social problems and institutions, this experience finally closed the door on Quaker withdrawal from the world. The American Friends Service Committee was born in 1917. In 1918, London Yearly Meeting heard and discussed the report of its Committee on War and the Social Order, charged with analyzing the causes of the war and proposing responses. The resulting Eight Principles of a Just Social Order became a major theme of the first Friends World Conference, held in London in 1920.
In the meantime, Quaker economics also entered a new era. In a future post, we’ll start examining this major transition in our economic history with a look at Benjamin Seebohm Rowntree and his landmark book, Poverty: A Study in Town Life.
Quakers & Capitalism — The Decline of Evangelical Political Economy
March 30, 2011 § 1 Comment
In 1832 and 1834, the debate in Britain over how to deal with industrial urban poverty took a decisive turn in the New Poor Law, whose policies and ethos more or less dominated Victorian poor relief for the rest of the century. The New Poor Law denied any able-bodied person money or help unless they lived in a workhouse and worked. It mandated that workhouses be built in every parish and living conditions were deliberately designed to be worse than conditions outside the workhouse in order to discourage people from seeking aid. Eligibility requirements were set very high.
The laws were a decisive triumph for evangelical political economy, codifying the mostly predetermined conclusions of the Royal Commission into the Operation of the Poor Laws 1832, two of whose four members were staunchly evangelical (Bishop John Bird Sumner and its economist, Nassau William Senior). They reflected a weird convergence of Thomas Malthus’s population theory and evangelical moral philosophy, David Ricardo’s classical economic theory of wages, and Jeremy Bentham’s utilitarianism. Sumner saw Malthus’s theory of geometric population growth and its threat to national security as part of the Divine Plan and agreed that, by removing some of the poor’s suffering, the old assessment system tended to remove the incentive for moral improvement. The law therefore embraced suffering as a deterrent to the moral vices believed to cause poverty and as an incentive to repentance. It also embraced Benthan’s utilitarian faith in the free market system to provide the “greatest good for the greatest number,” in terms of wages, and also his assumption that people choose pleasant options over unpleasant ones, and would therefore choose to work rather than to live in the workhouse, if conditions in workhouses were bad enough.
Around mid-century, however, evangelical thinking began to lose its hold on the discipline of political economy and on the distinctive middle class piety that it had fostered in British society, though it remained a dominant force in Quakerism (both British and American), especially among the Society’s leadership, until almost the end of the century. The causes of this decline of evangelical influence on economics were its failures on several fronts:
- As economic theory, it failed to keep up with the more effective economic tools of classical economics, as represented especially by the genius of John Stuart Mill, who mastered the entire field by the age of 13, in 1819, but only wrote his masterpiece, Principles of Political Economy, in 1848.
- As public policy, it failed to deal effectively with the intensifying problems of industrial capitalism and eventually gave way to organized philanthropy in the private sector and more liberal policies in British government.
- As moral philosophy, it collapsed in the face of a terrible social and moral calamity—the Irish famine of 1845-1852..
Political economy matures.
Political economy cut its teeth on a series of economic crises in Great Britain. The first major collapse, in 1825-26, was comparable in its severity to the crash of 1929. This was the depression that so exercised J.J. Gurney, which we mentioned in an earlier post.
Evangelical political economists seized on this devastating and totally unexpected event as an example of divine retribution. One radical journalist (William Cobbett) remarked: “Will the Quakers and Unitarians now venture to deny that there is a God?” meaning a retributive, evangelical God. Cobbett’s remark leads us to believe that most Quakers were not prepared to see the crash as divine retribution; even Gurney seems to have thought it more a test than a judgment.
More shocks followed the crash of ‘25, however, with severe recessions occurring in 1837, 1847-8, 1857 and 1866. The sheer regularity of these events called for a more rational explanation than divine wrath in response to greedy speculation and over-investment leading to bubble formation and collapse. The evangelical Malthus had first defined—and predicted—economic collapses, but he ascribed it to middle-class avarice outpacing the natural limits of consumer demand, over-extending itself in debt, and collapsing in bankruptcy. However, as the understanding of business cycles advanced with real experience, the moral argument for recessions began to lose its weight. Morality still figured, of course—there was no denying the role of greed—but the mechanism was revealed as a mechanism, increasingly understood as independent of causal moral factors that could be cured with moral condemnation.
The return of organized giving.
As the industrial revolution became an industrial regime, neither personalized individual, voluntary giving nor the state’s New Poor Laws were up to the job of taking care of the poor, whose ranks were swelling and whose plight was worsening, and not just in the cities but also in the countryside, where the ‘new economy’ was shaking down the old land-based, agrarian rentier economy. Organized giving came back with a moral vengeance in mid-century in Great Britain, becoming a badge of moral probity for the middle and upper classes (think A Christmas Carol, published in 1843) and a requirement for social esteem in the mid-Victorian period. Friends provided tremendous leadership by example in the rise of philanthropy, becoming the signature examples of how and why it should be done.
Moral philosophy.
The great Irish famine proved something of a turning point in the fortunes of evangelical political economics. As a set of ideas, evangelical political economy dominated public intellectual discourse and the minds of key government actors and policy makers through much of the first half of the 19th century and society as a whole in England adopted its moral tone. This consciousness and the policy of strictly limiting governmental intervention on behalf of the poor shaped the early British response to the Irish famine in the beginning. As the crisis intensified, so did the rhetoric of divine visitation. Sir Charles Trevelyan, the British administrator of relief to the Irish, limited his government’s efforts because “the judgment of God sent the calamity to teach the Irish a lesson. . . a direct stroke of an all-wise and all-merciful Providence [designed to reveal] the deep and inveterate root of social evil.” The public works that had been organized were deliberately structured so as to produce no profit, leaving starving men to pay their own expenses while doing pure make work. Then, for a time, all relief was suspended. Meanwhile, the costs of the Poor Law fell on local landlords, who simply evicted their tenants in response, and the Law denied anyone with at least a quarter of an acre of land any relief; it also forced tenants to forfeit their land to their landlord if they couldn’t produce enough to pay rent and taxes. Nearly 200,000 people were driven off the land in 1849-50.
Eventually, however, the suffering became so visibly overwhelming (perhaps a million people died and another million migrated) that it prompted a backlash of moral revulsion against the moralizers. As both human and national sympathies were awakened in England, so was a sense of outrage at the cold-hearted blamers, who were all pointing in different directions at a bewildering multitude of sins that seemed hardly up to the job of justifying such violent wrath from the Almighty. And it became clear that the government had to act much more forcefully.
More importantly, the laissez-faire policies that the British government applied to the problem, from an explicitly evangelical worldview, made things worse. Even Chalmers, who died not long after, admitted that this crisis was an exception and called for intervention. In the face of this moral failure compounded by policy failure, and lacking Chalmers, its guiding light, evangelical political economics fell swiftly from favor.
Quakers, to their credit, were famously heroic in their response to the Irish crisis. They were present in Ireland already in numbers large enough to form a yearly meeting and had already been ministering to the poor of Ireland for generations. They laid no blame, gave abundantly from their hearts and their purses, made no conditions, abided no corruption in the administration of their relief, and they were fair.
One more factor turned the tide against evangelical political economy in mid-19th century—in a word, optimism. Evangelical political economy was, in its essence, pessimistic because the human battle against sin was a losing battle. One looked to the cross for victory, not to markets, the government or social programs. Eventually, those whose hopes rose on the new economy chose the optimism of the classical economists over the ineffectual moralizations of the evangelicals.
Science was taking off, and so was its brother, technology—solving problems, improving living conditions, promising and delivering on a new idea: progress. The Origin of the Species gave progressives the theory of social evolution, a framework for understanding progress. Quantum mechanics seemed to deepen the old Newtonian laws of physical determination with a new language of energy. Dr. John Snow proved that the horrible cholera epidemic of 1854 in London had scientifically definable causes, where the terrible cholera epidemic of 1830 had prompted the same kind of evangelical moralizing that had labeled the crash of ’25 a divine visitation.
In the late 1850s, two other events helped to redirect economics and Quaker culture during the second half of the century. In the economic sphere, the Limited Liability Act of 1855 allowed limited liability to companies of more than 25 members. This made large amounts of personal financial capital available to build large-scale industrial companies without needing charters from Parliament. The United States had always been more friendly to the idea of limited liability and it gained momentum from Jacksonian populism in 1830s, which saw it as a mark of economic democracy. However, since corporate charters were regulated by the states, laws clarifying limited liability moved forward in a more haphazard fashion than in the UK, but by mid-century, the practice of limiting liability for shareholders was widespread.
Meanwhile, in 1859, John Stephenson Rowntree, then just 24, submitted Quakerism Past and Present as an essay for a prize offered to the Friend who could most effectively address the problem of Quaker decline. Within a year, London Yearly Meeting began revising its discipline along the lines he had suggested, ending, among other things, the practice of disowning members for marrying out of meeting and a host of other infractions. British Quakers were finally emerging from their quietist shell.
The New Poor Law stayed on the books for decades, however, and the basic assumption that the poor were responsible for their own plight remained unshaken until the Quaker Benjamin Seebohm Rowntree published his landmark book, Poverty: A Study of Town Life, in 1901.
Evangelicalism in America.
Things were somewhat different in America. Here, the evangelical movement lagged behind that of Great Britain in terms of when it really took hold. Moreover, Friends in America had never become the huge economic force that they had in England and had always been much more diverse in their economic pursuits and status. Many American Friends were still farmers through the 19th century and many were small business tradespeople. Philadelphia had its very rich Quakers and many of them turned evangelical, but the main current of evangelicalism flowed west among Friends of much more modest means. Also, because social welfare was the responsibility of the states, national public policy toward poor relief did not really take shape until the New Deal.
This diversity has made it much more difficult for me to follow all these trails to outline the history of Quakers and capitalism in the U.S. This is one of the areas in which I would hope other Quaker historians might fill in the gaps.
The next transition
In the next post, we will look at the second major period of transition in Quaker economic history, which began with the great conferences in Richmond, Indiana, and Manchester, England, in the early 1890s, and ended with World War I and the Conference of All Friends in 1920. In economics, Seebohm Rowntree’s book ushered in a new understanding of the causes of poverty and the structure of capitalism, and the last and decisive step was taken in legalizing the limited liability corporation, a technology that was destined to deconstruct the great Quaker fortunes of the past two hundred years.
Quakers & Capitalism—Friends and evangelical political economics
March 16, 2011 § 3 Comments
Joseph John Gurney and Thomas Chalmers
England has had three legal systems for taking care of the poor since Queen Elizabeth I reformed the punitive Tudor system, which was breaking down in the face of the decline of monasticism and the wider medieval social structure. Her reforms (1597 and 1601) created a national poor law system for England and Wales that used the parish as the administrative structure and supplied funds through a compulsory land tax levied at the parish level. It put people who couldn’t work into poorhouses, subsidized the labor of the able-bodied poor, put vagrants in a House of Correction, and arranged apprenticeships for pauper children. The British colonists brought this system with them to North America.
The assessment system itself began to break down in the face of industrialization, which drew large numbers of rural poor into the cities to work in the new factories, straining the urban parishes with heavy taxes and overwhelming responsibilities. By the time of the depression of 1825, which I mentioned in the previous post, the assessment system was ramping up to meet the growing demand and spreading on the heals of increased poverty to areas like Scotland, while its shortcomings were becoming more and more unacceptable. Thomas Malthus, the extremely influential evangelical minister and early political economist, had published his landmark work An Essay on the Principle of Population in 1798 and had added five more editions by 1825. David Ricardo, the classical economist, published his hugely influential Principles of Political Economy and Taxation in 1817, having been inspired to enter the field after reading Malthus.
The debate about how to care for the poor and reduce or eliminate poverty was on. Pressure was mounting to act and the nation was becoming ready to embrace radical reform. Many looked to greater state intervention because local resources were so inadequate, and many agreed that a national system was required to help smooth out the vagaries of local organization. Evangelical political economists like Malthus resisted this trend, however, believing that aid to the poor only encouraged the very sins that had made them poor in the first place—laziness, vices like gambling and drink, and sex—having more kids than they could support. They also felt that mandatory taxes and a state-sponsored distribution system undermined the moral character and opportunities of the rich. They insisted that the spiritual needs of the giver—that is, themselves—were at least as important as those of the receivers—the poor. Each act of charity, to be a genuine act of conscience, had to be voluntary, spontaneous and discriminating. You had to be involved for benefit to accrue. The real obligation was to God, not to the poor. Institutionalizing charity denied the rich the blessing they might receive and denied the poor the opportunity for the kind of personal contact that could ignite a conversion.
Into this exciting environment came the Reverend Thomas Chalmers, a brilliant, charismatic, innovative and energetic man who’d become a zealous evangelical after a personal conversion experience. Of his character, the Wikipedia entry says this: “He was transparent in character, chivalrous, kindly, firm, eloquent and sagacious; his purity of motive and unselfishness commanded absolute confidence; he had originality and initiative in dealing with new and difficult circumstances, and great aptitude for business details.”
Like Malthus and his other evangelical peers, Chalmers believed that poverty resulted from flawed moral character and that private voluntary charity was the solution. Already famous in Great Britain for his theological writings, he solidified his reputation as a political economist by testing his ideas in the field in what amounted to an early 19th century faith-based initiative. When the Scotsman took over the very poor parish of St. John in Glasgow in 1819 after four years at another church, the British system of compulsory tax assessment for the poor was gaining ground in Scotland. Chalmers believed that this approach actually made things worse and proposed a voluntary approach involving radically reorganizing the parish and applying a rigorous program of family visitation, counseling and monitoring to enforce moral rectitude. In four years, he reduced annual pauper relief in the parish from ₤1,400 to ₤280. The astounding success of his program greatly impressed the rest of the political and political economic elites, especially when they looked at the numbers rather than the huge organizational effort involved. Chalmers himself burned out from the work load and, in 1823, having ‘made the numbers,’ left his extremely demanding life running this operation and accepted a chair in moral philosophy at St. Andrews. This was the seventh academic offer made to him in his eight years in Glasgow. His lectures and writings influenced political economic thinking and policy for the next 25 years and beyond.
Where do Friends fit in all this? So far, my researches have found little to indicate specifically what Quakers, and especially, evangelical Quakers, thought of evangelical political economy. It seems that Friends shared their moral-economic worldview to a large extent, but not its harshness of tone or cold-heartedness in practice. Wealthy Friends were morally paternalistic themselves and they shared with these evangelical thinkers a commitment to personal and spontaneous giving. And I know that Chalmers became friends with the Gurneys and other Quakers, whom he called “the most serviceable philanthropists we met with.” [The Age of Atonement: The Influence of Evangelicalism on Social and Economic Thought, 1785-1865, Boyd Hilton, p. 59. This book is the source for much of my thinking in this area and is a great resource.] Gurney and his sister Elizabeth Fry accompanied Chalmers when he testified before a Select Committee on the State of the Poor in Ireland in 1830, presumably because they shared his views. Evangelical Friends also shared these men’s extreme nervousness about their own spiritual health and the moral dangers of wealth. J.J. Gurney claimed that the most “salutary chastisements” he had received from God had “arisen out of being . . . a ‘monied man,’” [Hilton, p. 116 n.3, quoting Gurney’s journal] and, as I said in the previous post, he reported “feeling the Lord to be near to us” during the severe economic crisis of 1825, expressing the belief that market collapses could be times of visitation.
The clearest evidence that Chalmers and his ideological brethren spoke to the evangelical Quaker condition that I’ve found is a book published in 1853 by Joseph John Gurney titled Chalmeriana, or, Colloquies with Dr. Chalmers (available from Google Books). Gurney speaks very glowingly of Chalmers in this little book, praising his modesty and religious humility, the earnestness of his faith, his stellar character as a man, the effectiveness of his poverty program, and, especially, the intellectual power and moral force of his extraordinary mind. They clearly had a deep regard for each other.
I think it’s fair to say that at least they shared many of the essentials of evangelical faith and its general implications for economic practice. And I don’t think it goes too far to say that Gurney represents in large degree his evangelical Quaker peers in these matters.
One crucial area of difference does peek through, however. Chalmers is preoccupied with judgment and with justice as the primary attribute of God, and he was a self-avowed predeterminist. Gurney gives equal weight to God’s goodness. Chalmers looks at the cross and the Atonement and sees God’s judgment.. Gurney sees a divine gift of love. In one section of the book, the two men are discussing the work of several other writers on the moral attributes of God. Chalmers is warning against reducing God’s character to the single quality of benevolence when justice (that is, judgment) is (to Chalmers) obviously more important. Gurney, though, argues: “Surely, that [the atonement of Christ; emphasis is Gurney’s] is where justice and benevolence meet; where God has displayed at once his abhorrence of sin and his mercy to the sinner.” In the dialog Gurney records, Chalmers veers away from Gurney’s point without responding to it.
To generalize, though acutely conscious of sin and of the sinner’s desperate need for Atonement, evangelical Friends remained more optimistic, more open to God’s goodness. Precisely in the Atonement did they see God’s goodness most clearly demonstrated. This, I think, made evangelical Friends much less willing to leave people in their suffering as the necessary road to contrition and conversion, and made them much more willing to minister to sufferers in their need. The work of Elizabeth Fry, J. J. Gurney’s sister, is instructive here. Once awakened from her life as a rich, unreligious, even frivolous (in her own eyes) ingénue, she ends up in the Newgate prison wards trying to help real people. Her tools are the classic evangelical ones: literacy, moral exhortation and the Bible. But her hands are dirty and her heart is burning with care.
Non-evangelical Friends, on the other hand, in their quietist passivity, had not the motivation of the missionary to get them into the world with the same fervor. Their inwardness tended to keep them out of philanthropy and movements for social reform. At the other extreme, super-evangelicals, especially leaders in America of the pre-millennialist holiness movement that emerged in the 1870s and ‘80s from the evangelical awakening of mid-century, these Friends saw relief work as the devil’s work and abandoned the poor to the wrath of God’s judgment. According to Professor Hamm in The Transformation of American Quakerism, this point of view was quite influential among American evangelical leaders for quite some time, though Friends in the benches tended to be more moderate in their theology and compassionate in their views.
Evangelical political economics dominated discourse and policy in England into the middle of the 19th century. By then, several factors had began to erode its influence over policy, with the horrible Irish famine as a crucial turning point. We will turn to this history in the next post. But the moral philosophy of evangelical political economic thinking has never disappeared and has periodically regained the allegiance of some politicians in America, as we well know. In the hands of Herbert Hoover (a Quaker), Ronald Reagan and George W. Bush, this moral economic philosophy has played a major role in American public policy.
Quakers & Capitalism — Evangelical Political Economy
March 9, 2011 § 2 Comments
How evangelicalism shaped 19th century Quaker economics – Part 1
In 1825, Great Britain entered an economic depression comparable in severity to the crash of 1929 in America. Hundreds of firms went bankrupt and the Bank of England itself came close. The collapse came out of the blue. Thomas Robert Malthus, of ‘Malthusian theory’ fame, an evangelical cleric and pioneer economist, had predicted cyclical collapses, but no one had seen this one coming. Theories about its causes and ideas for its cure buzzed in the parlors of the business and intellectual elites and occupied the journalists and pamphleteers.
In his journal, Joseph John Gurney recorded “feeling the Lord to be near to us” during that time. (Descended from Hugh de Gournay, one of the Norman nobleman who came to England with William the Conqueror, his family had started with huge land grants from William in Norwich and Suffolk. They founded the Bank of Norwich in 1770, which was for a time the second largest bank in England after the Bank of England. Around 1809, the family bought a large billbrokering business, a firm that either lends money or finds lenders for borrowers; for forty years, Overend, Gurney and Company was the largest broker of loans in the world. In 1896, Gurney’s Bank merged with Backhouse’s Bank and Barclays Bank of London and several other Quaker provincial banks to form what is now Barclays Bank.)
The two schools of political economy current at the time—classical and evangelical—approached these cyclical downturns differently, in terms of how they analyzed their causes, how they would manage the system in times of crisis, and how they treated those who suffered from their fallout. In 1825, evangelical thinkers dominated this economic discourse.
Gurney himself believed, along with his evangelical peers, in a providential God who watched human events and sometimes intervened according to a divine plan. Like them, mindful of judgment, he watched out for temptation and hoped for atonement. The financial crisis of 1825-26 was surely a moral test; but mostly it was seen as a judgment against those who had already surrendered to avarice and ambition. Gurney no doubt experienced God’s nearness as, first, the searing heat of financial losses, which naturally turned him inward to reflect on his own moral character; and then, when his fortune ultimately survived, as the cool refreshing draught of escape from ruin and at least partial reassurance of his moral uprightness. His fortune was saved; he was saved. Many of his fellow capitalists were not.
For moderate evangelicals like Gurney, God’s providence was systemic: both nature and markets ran according to God’s plan for the world’s government and for human judgment, but not every little event was an act of specific divine intervention. Adam Smith’s famous “invisible hand”—the natural tendency of markets to efficiently set prices on their own, without government interference—this was actually the invisible hand of God at work. The fact that the actions of individuals powered the mechanisms of the market and gave it direction made the system an inherently moral one. Market policy therefore required a moral philosophy and this evangelical philosophy required not only that you leave God’s mechanisms alone but also that you leave individuals to choose their actions and suffer their judgment.
Such a moral philosophy naturally encouraged moral speculation, especially when bad things happened: cholera epidemics and market downturns pointed toward sins as causes, so the evangelical economists would search for the culprit sins behind these events. As the system tended to be general in its chastising effects, hurting lots of people and society in general, so the more moderate evangelical political economists tended to be somewhat general in their attributions of moral cause and they tended to differ when they got down to specifics.
More radical evangelicals believed, however, that God micro-managed the system, intervening directly and with specific purpose in virtually all events. Thus, they saw every outbreak of cholera or market downturn as a deliberate visitation for some specific sin(s) and this emboldened them to get serious and specific with their condemnations and exhortations.
All evangelical political economists agreed, though, that, squirming under God’s plan, and always defying its purposes, lurked human sin. Every human problem had its ultimate root in sin. Social ills, like poverty and economic recessions, personal problems, like poverty and bankruptcy—you could trace them all back to sin, not just sinfulness in general, but often a particular act, trait or policy. Sin and its consequences for the immortal soul gave evangelical political economists a sense of emotional urgency that heated the discourse up far more than the rational theories of the classical economists.
The sins behind economic downturns were clear: greed, primarily, ambition, and pride. Bull markets encouraged borrowing and speculation. Encouraged by their winnings, investors got overextended. Then, when everyone realizes that they are sitting on a bubble, panic ensues, people start calling in their notes, and the system collapses. Chastised for a time, businessmen (sic) recommit themselves to prudence. But then they forget the pain, greed plants its seeds again, and the cycle starts over.
The sins behind poverty were also clear: improvidence and licentious habits—laziness, gambling, drinking, wantonness of all kinds—and, of course, sex. Sex led to overpopulation among the working classes, which led to poverty.
The cure for both poverty and what we now call the business cycle was moral tuition. The cure for economic depressions was collective repentance and a nation that hewed more closely to God’s law. The cure for poverty was personal repentance and strengthened moral character. The evangelical worldview rejected most practical approaches to poverty relief and turned instead to moral paternalism. Poor relief was actually cruel in its consequences because it encouraged idleness, and suffering was actually salutary, because it led to repentance. Far better to suppress vice and encourage industry, economy and discipline. Their material charity thus tended toward things like good clothing that could support self-respect, rather than grants of money. And, of course, Bibles, plus enough education to enable the poor to read their Bibles. One thinks immediately of Elizabeth Fry, Gurney’s sister, ministering to the inmates of Newgate Prison.
In the next post, we’ll return to Gurney and his friendship with the greatest evangelical political economist of the age, Thomas Chalmers, as a window into the distinctive evangelical mutation in the Quaker double culture of religious withdrawal and economic engagement—how it drew Friends back into the world of social and political action in crucial ways without seriously threatening the distinctives of Quaker culture.
Quakers & Capitalism — The Evangelical Transition
March 3, 2011 § 7 Comments
In this series of posts and in my book on Quakers and Capitalism, I have divided Quaker economic history into three major periods defined by the ways that Friends engaged with the world around them. These major historical periods were separated by major periods of transition, in which external forces and internal forces collided to produce a new Quaker alignment. In the first transition period, brought on by the persecutions in England in the last decades of the 17th century, the external pressures of persecution and the internal imposition of gospel order closed a period of intense apocalyptic engagement with the world and opened a period of cultural dualism, in which Friends withdrew from the world socially, politically and religiously, but channeled incredible energy outward into the world of business, commerce and finance.
Over the course of the 18th century, Friends played key roles in creating modern capitalism and the industrial revolution in England and they continued to build the new economy throughout the 19th century. The turn of the 20th century brought a second major transition, in which the rise of corporate capitalism, liberal thought and new persecutions during the First World War collided with a liberalizing movement within Quakerism. The result was a decisive turn outward, away from quietist withdrawal and into much more vigorous and creative engagement with the world and its problems, including the social fallout and political responses to capitalism’s darkside.
Right in the middle of the double-culture period, however, around 1800, Friends went through a minor period of transition brought on by the rise into cultural prominence of evangelicalism. Evangelicalism opened a door in the wall that Friends had built around themselves and allowed them to reengage with the world in certain ways without giving up their distinctive and even insular culture. More importantly with respect to a study of Quakers and capitalism, the new evangelicalism emerged and co-evolved with the new ‘science’ of economics, though the term ‘economics’ only came into use a hundred years later. Then it was called ‘political economy,’ and focused on the ways that production and consumption were organized in nation states. The first political economists, including its putative ‘father,’ Adam Smith, held chairs in moral philosophy. The first professor of political economy in England was Thomas Malthus (1805).
Malthus was an evangelical minister. Like other evangelical political economists of the time, Malthus’s moral theology shaped his economic theory and this combination gave rise to a second major school of economic thinking that stood in some opposition to the ‘classical’ school first defined by Adam Smith in his Wealth of Nations (published in 1776). Together, these two schools shaped the issues and discourse that defined early modern economic thinking and this dynamic dialog found embodiment in two extraordinary men: Thomas Malthus and David Ricardo. Malthus and Ricardo were friends but friendly rivals intellectually, and their publishing duel helped define the field of political economy as it matured.
Ricardo was the second great classical economist, after Adam Smith. He was born Jewish and had emigrated to England with his family from Holland. But then he eloped with a Quaker, Priscilla Anne Wilkinson, and his family disowned him. He made a fortune in the stock market and ‘retired’ to write at the age of 43. He converted to Unitarianism.
(One of these days, I plan to research Ricardo more thoroughly, hoping to clarify his relationship with his wife’s family and her meeting and with Quakerism in general. Was she herself disowned for marrying out of meeting? Why did he become a Uniterian instead of a Quaker? What affect, if any, did his new religious identity and his exposure to Quakerism have on his economic thinking? If political economy was, in that time, essentially moral philosophy, and if theology was shaping the work of his primary intellectual correspondent, and he himself had undergone some kind of religious transformation, how could these factors not have helped to inform his own ideas?)
No Friends, evangelical or otherwise, contributed significantly to this new discipline of political economy until the second major transition around 1900, and evangelicalism did not alter substantially the momentum or direction of Quaker wealth-building. But it did help to shape the way that Friends approached poverty and other negative consequences of capitalist expansion during the 19th century. And Joseph John Gurney, the great evangelical Friend of his time, was a close associate and a deep admirer of one of the preeminent evangelical political economists of the age, Thomas Chalmers (1740-1847).
Evangelical political economy dominated economic policy and politics in Great Britain throughout the first half of the 19th century and its moral philosophical approach to social problems has returned to favor periodically ever since. In subsequent posts, I want to
- talk about Chalmers and explore his relationship with Gurney as a window into how evangelical thought helped to shape social and political responses to the structural violence of capitalism;
- look at how evangelical Quakerism adopted and adapted this moral philosophy;
- examine the rise and fall and periodic resurgence of evangelical political economy and the role of some Friends in that history; and
- look briefly at the different course that these issues took in America, where Friends had always been more diverse, not just theologically, but also in terms of social class, social and political geography, economic development, and relative influence over social policy.
Renewing Friends’ Testimony on Economics
February 7, 2011 § 2 Comments
One of the reasons I’ve been writing on Quakers and capitalism is that I hope to invite Friends to consider more deeply our testimony on economics (and I don’t mean our testimony on money, but on the structure and institutions and worldview of our economic system) with a fuller appreciation of our economic history as context. I believe we stand in some ways in the same relationship with capitalism as we do with penitentiaries: our ancestors played key roles in the emergence of capitalism (industrial capitalism, anyway) and its early evolution, just as we did with the penitentiary. And just as the penitentiary was, in its inception, an advance in human welfare, a positive solution to a problem, and now has become part of the problem, just so industrial capitalism brought tremendous improvements to humankind, only to become in some ways a new source of suffering and oppression. In both cases, our historical role lays upon us some kind of obligation to reform the system and minister to the victims of our legacy.
Where to start? We have four paths to walk, I think. They are somewhat independent of each other and each deserves careful consideration. In my initial thinking, anyway, these four paths to a renewed testimony on economics are:
- Starting with divine inspiration. The first impulse, of course, is to turn to our Teacher, from whom we have learned to expect continuing revelation. Spiritual renewal comes from G*d (using G*d as a placeholder for the Mystery Reality behind/within our personal and corporate religious experience, whatever that experience is). So, in addition to study, thought and discussion, we need to pray and worship and support those who are called to ministries of witness in this area.
- Starting with secular progressive thinking on political economics. The vitality of our economic testimony depends on being Spirit-led. Its effectiveness depends, to a great degree, on knowing the science of economics and the work of its progressive thinkers and critics. There’s lots of material here, and therefore lots to learn and lots of work to do.
- Starting from our present testimonies. We can work our way ‘laterally’ across our testimonial life from the other testimonies. This is a common and natural tack. I’ve done this myself, turning the light of the testimonies on peace, integrity, simplicity and equality on economics. This yields great fruit and I will return to this approach in some future posts.
- Starting from our foundational traditions, including, especially, the Bible. I think a lot of ‘liberal,’ ‘post-Christian,’ ‘post-traditional’ Friends overlook the Bible, partly because they just don’t know it and partly because, in some folks’ hands, they have experienced the Bible as a weapon of regressive thinking. This extends to the sphere of economics no less than other areas social and political life. In fact, I devote a lengthy section of Quakers and Capitalism to the often, though not exclusively, negative influence of evangelical thinking on progressive political economics. Nevertheless, our Christian Friends are in a position to lead the way here, because the gospel of Jesus is, at its core, a powerful progressive economic message.
I’ve been writing another book on the gospel of Jesus whose sections on his teachings on ‘economics’ have grown so much that it now looks like it needs to be its own book. The new book’s tentative title is Good News for the Poor: The Economics of Redemption in the Common-wealth of God. I’ve explored some of this material in my other blog, www.biblemonster.com, including a series on the Beatitudes, which, when you know enough about the ‘economic legislation’ in Torah, turn out to be midrashim on inheritance law and, specifically, on bankruptcy.
In fact, Christian scripture—the synoptic gospels, anyway (Matthew, Mark and Luke)—are totally saturated with economic testimony. Jesus was preoccupied with the poor and the people and social, political and religious institutions that oppressed the poor. (It’s worth noting that in Hebrew and Aramaic (Jesus’ native tongue), the word is the same for “the poor” and for “the oppressed”—ani, as in Bethany (beth ani, house of the poor/oppressed), the little town not far from Qumran where Martha, Mary, Lazarus and Simon the Leper lived.)
Jesus healed the poor and I believe that several of these healings included a social welfare dimension in the healing itself—that we too narrowly define these ‘miracles’ as medical cures of disease, and miss the innovations and reforms in community life that serve as context for his healings. Several of his other miracles also have an economic dimension. Several parables deal directly with poverty. Many of our favorite sayings of Jesus are essentially teachings about economics or have economic elements, including not just the Beatitudes, but also much of the rest of the Sermon on the Mount, and the two love commandments. The Lord’s Prayer has economics at its core. But more importantly, Jesus defined his ministry, his role as the Christ, the Messiah, in economic terms. Economic justice was the very foundation of Jesus’ ministry.
These are far-reaching claims, I know, and to some, all the more startling because these teachings often are virtually invisible to the ‘untrained eye.’ We know so many of these passages so well that it’s hard to believe such a different and radical meaning could be hiding in there. So it takes a while to make the case. I hope you’ll bear with me.
Nevertheless, I believe that Jesus’ teachings on ‘economics’ are comprehensive, far-reaching, radically progressive and totally relevant to our situation today, notwithstanding their original context in an agrarian economy very different from our own. The gospel is a great place to start when reconsidering out testimony on economics. I think I’m going to pursue this mostly in BibleMonster because that blog is dedicated to the Bible, but it will take time. For one thing, I have another theme I want to take up there, as well—what I call “spiritual ecology”: a look at how Jesus used the landscape of Palestine in his own spiritual practice (where he went in Palestine to do what and why); and also a look at the role that ecology and technology have played in the emergence and evolution of the Western religious tradition more broadly.
In the meantime, I want to lay out in BibleMonster the “economics of redemption” as I see them and bring these principles into Through the Flaming Sword as planks in a platform for a more fully developed Quaker testimony on economics. More to come . . .
Quakers & Capitalism — Quaker Contributions to the Emergence and Growth of Industrial Capitalism
January 28, 2011 § 2 Comments
Now we come to the material that never fails to blow Friends’ minds when I do presentations on the history of Quaker economics. When Friends hear the scale of these contributions, when they recognize the significance of some of these contributions, not only for capitalism but for modern civilization itself, they inevitably ask, why have we never heard this before? For the sheer length and scope of this list is astounding, and the impact of these developments could hardly be exaggerated.
Friends were, to a greater or lesser degree, directly responsible for the five developments that made a broad-scale economy based on industrial production possible:
- Industrial tooling materials. Quakers developed new, improved techniques for casting iron and, more importantly, invented a method for casting steel. These technologies made durable, mass-producible machine parts possible. Without them, the industrial revolution would have been more of a series of occasional local uprisings. Machines made it possible to mass produce goods for the first time in history, and cast iron made machinery possible. Cast steel made it possible to mass produce durable machines. This development exponentially accelerated the industrialization of the economy. It’s impossible to overstate the importance of these breakthroughs.
- Industrial strength transport. Friends built the first railroad in England and developed the technologies essential for its expansion: iron bridges, iron rails, steam locomotion. Horse-drawn locomotion on normal roadbeds, especially those outside of major cities, constrained the transport of everything: raw materials, prepared materials, supplies, parts, fuel, products, people, money—all moved in small quantities at a snail’s pace, when it moved at all. The problem was especially acute in the case of industrial metals like iron and steel, zinc and lead. (Quakers invented the passenger train, as well.)
- Finance. Friends formed many of the first private banks in England. Several of these banks soon became some of the largest private financial institutions in the world. The Bank of Norwich (the Gurneys) was for a long time second only to the Bank of England in its holdings. Lloyds was the first bank to diversify its holdings and invest in more than one industry. The other name in banking that everyone knows is Barclay’s, but there were other major Quaker banks, as well.
- Energy. It was shortage of fuel (wood) that had stalled the British iron industry in the seventeenth century. British Quaker iron magnates invented rotated crop coppice farming to solve this problem of dwindling virgin timber supplies for fuel. But their real breakthrough was coke, a refinement of coal, a fuel that burned hot enough to make quality steel possible. They also invented the match—for the first time in history, you could afford to let your fire go out because you could restart it easily any time you wanted. This significantly released the tremendous burden on fuel supplies.
- The industrial business model. New materials, especially cast steel, made a new kind of production possible. Friends were among the very first to develop a production model that capitalized on this material potential. The interchangeable parts plow developed by Robert Ransome in the 1720s represents the very beginning of mass industrialization. Also, Quakers created the first conglomerate, breaking out of the single family–single site business to create larger associations of many small business units in a variety of industries. Friends also played a key role in developing business associations. Finally, John Joseph Rowntree is the first person known to have engaged in industrial espionage, stealing trade secrets from his (mostly Quaker) competitors in chocolate production while interviewing them for potential jobs; he hired some of these people but he picked the brains of all.
So Friends came up with key technological innovations in such key areas as industrial materials, industrial processes, transport, energy and organization. They also built key industries and, of course, businesses in those industries. They created industries that had never existed before or introduced them to England for the first time. Here’s a partial list of the industries in whose development Friends played a significant, if not essential, role:
- banking
- iron
- coke smelting
- iron casting
- steel casting
- brass and zinc production
- lead mining
- silver mining and refining
- railroads
- canals
- porcelain
- safety matches
- chocolate
- coffee houses
- English cutlery
In the next post we’ll look at Quaker contributions in venture capital and the role of Quakers in creating the consumer economy itself, including the famous invention of the price tag.
Meanwhile, clicking here: Quaker Contributions to Industrial Capitalism—will open a document that concisely summaries some of these contributions. It’s also available on the Quakers & Capitalism—The Book page.
Through the Flaming Sword 