Economics for the Nation
The British historical economists produced a specifically conservative brand of social and economic reform.
America and Britain are facing a litany of crises that, unaddressed, will leave them both poorer, less stable, and therefore less secure. The problems we face are both deep-seated, with roots going back decades, and more immediate, made acute by recent events. We are seeing domestic stagnation and stratification, concurrent with an increasingly unstable geopolitical environment, set to worsen over the coming decades.
Cultivating and implementing a political economy equal to the task before us is vital if we wish to regain a measure of prosperity that allows the common man and woman to live decent lives of security, stability, and relative harmony in an increasingly chaotic and dangerous world.
In 1893, economic historian W.J. Ashley articulated the conservative approach to political economy, arguing that it “is not a body of absolutely true doctrines, revealed to the world at the end of the last century... Political Economy was not born fully armed from the brain of Adam Smith or any other thinker; its appearance as an independent science meant only the disentanglement of economics from philosophical and political speculation.” The ideas of the Edwardian era British historical school of economics that emerged from this approach, and the milieu around Conservative politician Arthur Steel-Maitland, offer a rich depository of ideas that can provide inspiration for facing the challenges of today.
The problems of social division rooted in economic upheaval and cultural churn, combined with increased international competition and instability, were as much features of the late nineteenth and early twentieth centuries as they are in our time. As historian E.H.H. Green argues in his books, the U.K.’s Conservative Party developed and engaged in a conservative brand of collective, communitarian thought and ideological development in response to material and cultural changes of the day. The goal for thinkers and intellectually engaged politicians was to lay out a philosophically conservative style of social reform that charted a path between liberal individualism and socialist collectivism.
The British historical school of economics was influenced by the thought emanating from Bismarckian Germany and German historical economists like Gustav von Schmoller and Friedrich List. The leading historical economists were William Cunningham, W.J. Ashley, H.S. Foxwell, L.L. Price, and W.A.S. Hewins. These figures gained serious intellectual traction from the 1880s on, but saw their approach gain political support during the Edwardian era. Their criticism of classical economics was fundamental and led to attacks on the iniquities of classical liberalism and socialism. The key idea they took from Germany was that, according to Cunningham, “individual competition is only a beneficient force when the conditions under which it acts are carefully regulated.”
Hewins, Ashley, and Price had emerged from an intellectual scene centered around the Oxford college of Balliol. The Oxford scene also produced a number of notable men who would go on to be socially reforming Conservative politicians. This included Alfred Milner, Leopold Amery, and J.W. Hills, who became “one of the leading Conservative supporters of State social reform, being a member of the National Anti-Sweating League, an architect of the Conservative ‘Unauthorised Programme’ of 1908, and a leading figure in the Unionist Social Reform Committee (USRC),” established by Arthur-Steel Maitland in 1911.
Green demonstrates how these reformist conservative thinkers and politicians approached the issue of political economy through an idealist lens, a stream of thought that had trickled over from Germany. As I’ve written elsewhere, this philosophical perspective saw the individual as an ethical being whose highest good was the realization of the potential inherent to our condition. The lives of the individual and nation were intertwined, with each cultivating the other, forming an organic entity. The realization of individual potential was made possible by society and the nation into which we are born. This lays the ground of our social, cultural, political, and economic life. National citizenship, as part of an “ethical organism”, provided what the minor but philosophically representative author Arthur Boutwood called “freedom for duty,” the commitment of one’s life to the common good.
For these thinkers, “true freedom could only come through co-operative acts that were born out of a recognition and realization of mutual needs and goals,” according to Green. Idealist conservatives believed the nation and its political expression in the state were bound by mutual, reciprocal duty to the individual citizens in their families and communities. The state’s role was to ameliorate socio-economic cleavages of class and rank, achieving its “moral conception” by setting the conditions for the people to extend themselves to their utmost ability in achieving the good life. Meanwhile, Boutwood and the British historical school argued that those in need had a right to be helped, a right that is rooted in their citizenship and national membership.
These were the intellectual waters in which the historical economists swam. It is easy to see why they criticized the ahistorical, abstract deductive approach to economics of the classical school, which they saw as producing principles grounded in a false mathematical certainty that emphasized the “science of wealth” as the ultimate end of the endeavor and diminished the social, political, cultural, and even geographic ground from which it grew. This meant that the classical school had, as Cunningham wrote in 1885, “lost touch with the actual phenomena of the present day.”
In reality, as Ashley wrote, “economic conclusions are relative to given conditions.” Foxwell agreed, writing “that the nature and direction of this social evolution are a far more important object of study than elaborate and complicated deductions.” Furthermore, according to Cunningham in 1909, “with the rise of nationalities in modern times the nation has come to be a convenient unit, both for political and economic purposes.” For the historical economists, man was no isolated liberal subject. We are born into families and communities that reach back and forward in time and place. They saw that trusts, trade unions, and imperial states as characterizing economic life. One need only adapt this to our managerial, oligarchic, and oligopolistic economic system today, set within a world of increasingly competitive civilizational states, to see the relevance.
As with the increasing pace of deglobalization, the move from “just-in-time” to “just-in-case” economic resiliency, and protectionist approaches to supply chains stretched too thin and too far by globalization, the historical economists saw protectionism in their day as evidence of competing powers’ desire “to organize [their] economic life… in independence of [their] neighbours,” as Cunningham put it. The classical economists were gravely mistaken, Cunningham wrote in 1904, in their view of economics in the international sphere simply as “the interests of particular individuals." L.L. Price argued in the same year against the erroneous view to which this gave rise, namely, of the economics of trade between nations as being between “non-competing groups”, motivated in the same way as the supposedly rational homo economicus individual. As a result of their ahistorical approach, classical economists had failed to recognize that changing circumstances must affect economic analysis.
The result was a decline in British economic power and competitiveness. For Price, free trade was damaging to Britain’s industrial and agricultural base through the unrestricted importation of commodities and products. He saw foreign manufacturing powers employing tariffs and cartelizing to exploit trading practices like “dumping,” which drove British producers out of foreign markets and threatened them at home as well. A contemporary example would be China’s mercantilist trade practices on a global scale, dumping among them, that created the China Shock of offshoring and deindustrialization in the U.S. and U.K., leading to trade deficits. The British historical economists argued that free trade had been a success for mid-nineteenth-century Britain because of its hegemonic geopolitical position, meaning it could “dump English manufactures on every other part of the globe for all time.” It therefore seemed that “so far as England was concerned there was a complete harmony between the cosmopolitan ideal and the national interest.” America’s elite has struggled to re-learn this lesson.
This focus on the relative decline in industrial and agricultural pre-eminence was twinned with a concern voiced by Cunningham in 1903 and Ashley in 1911 about the growth in what we now call the service sector and the rise in rent-seeking through investment income, now dubbed "financialization." These legitimate concerns demonstrate how long these problems have been extant. As those like Oren Cass do today, the historical economists saw a distinction between individual and national prosperity. As E.H.H. Green writes, they looked askance at investment income for its production of wealth in the City of London that didn’t lead to the same broad base of economic activity that came from employment in productive sectors, especially industry. Wealth production in itself, as with GDP today, was no use as a signifier of prosperity. What “mattered most was how that wealth was created and what contribution it made to national well-being.”
As with international political economy, so with the domestic. At home, laissez faire was destructive to the social bonds that comprised the organic unity of the nation. For the British historical school, the state and society were not separate, hostile entities. Cunningham wrote that “the State is the embodiment of what is common to the different persons in the nation, it expresses the spirit which each shares… we cannot represent the State as antagonistic to the individual citizens. The State is concerned with the general interest—with what is common to all.” Laissez faire economics failed for the same reasons that liberal philosophy did: its atomized conception of social relations meant that, according to Cunningham, “public objects of general good and for the common advantage, may be overlooked.” Therefore, “they should be consciously and deliberately taken in hand by public authority; and there must be some interference with private interests, favorable to some and unfavorable to others.” For “in so far as the national resources and the aggregate of individual wealth are distinct, it is desirable that the public authority should occasionally interfere.”
The need for a reassertion of the social and cultural ties that bind, that give life its meaning and reason for being, was essential. The state must play a role, as the act of governing in the interests of the common good of the average, everyday man or woman is the reason for the state to exist with any degree of justice. Socialism may provide the wrong solutions, and the twentieth century's Communist catastrophe to the tune of tens of millions dead bore out the historical school’s fears. But, presaging Tucker Carlson’s argument that leaving capitalism’s inherent rapacity unrestrained will give us socialism instead, H.S. Foxwell wrote in 1888 that “The State may become social reformer without becoming Socialist, but if the State does not become social reformer it will inevitably become Socialist.”
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Something had to be done, but something that didn’t junk all conservative principle for new liberalism. As a result, these political economists produced a specifically conservative brand of social and economic reform. Members of the historical school expressed sympathy for, and then pushed for old-age pensions, labor security laws, and other measures. Ashley and Hewins linked fiscal and social reform, backed by protective tariffs, and pushed these ideas with Arthur Steel-Maitland’s USRC, which, as Green writes, had “proposed an extension of old-age pension rights, argued for minimum wages in certain trades, sponsored several schemes for working-class housing, and was close to presenting a blueprint for a national health service.”
The British historical economists developed a system of political economy worthy of the name. They took Britain’s circumstances at home and abroad as they were. In their conception of a holistic, organic relationship between state and society, they struck far closer to the social-situatedness of economics than liberalism or socialism. In their thought, and the programs of Conservative reform they influenced, we can see the foundations of British postwar conservatism’s Middle Way, representing the continuation of Benjamin Disraeli’s romantic belief in the possibility of reconciling the two nations into which Britain was in danger of metastasizing. We would do well to learn from them in our own time.
This article is part of the “American System” series edited by David A. Cowan and supported by the Common Good Economics Grant Program. The contents of this publication are solely the responsibility of the authors.