Luddites and the battle for workers’ rights

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I never studied the Luddites, so this article by Michael Coren for Quartz was a good excuse to learn about them. However, he and Clive Thompson draw off-the-mark conclusions from the Luddite rebellion (Thompson’s article in Smithsonian). It appears that before Marx espoused seizing the means of production, Luddites settled for destroying the means of production. Talk about cutting off your nose to spite your face.

Coren and Thompson make the valuable distinction that Luddites wanted to maintain their lifestyle as technology encroached on their trade rather than simply hating technology. It wasn’t the fact that the loom existed, it was that the loom existing meant fewer people were need to do the same amount of textile work, and the simplicity of the machine meant more people were capable of doing the labor (lowering wages as more people competed for the job). They wanted to use minimum wages, minimum prices for goods, and phased introduction of production-improving technology to retard the free market and protect their jobs for the simple reason that it had been their trade for a long time.

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While one can sympathize with people wanting to protect their livelihoods, here are a couple analogous situations to show how ridiculous allowing the Luddites to do this would have been:

  • Horse and buggy manufactures destroying car factories, because cars put them out of business.
  • Camera makers petitioning the government to slowly phase in cameras to smartphones, because not enough people would buy cameras.
  • Telephone switchboard operators wanting to tax any company who switched to an automatic system of connecting calls.
  • A minimum wage enforced for people mowing lawns with mechanical push mowers, because the people with gas mowers have “an unfair advantage”.

The articles then pivot into standard criticisms of the industrial revolution including, “factory workers got paid less to produce more”, “factory conditions were dirty and dangerous”, and the old standby, “the factory owners kept an unfair amount of the profit”. This is a complicated issue, but as long as people were free to choose to work in those factories, they were actually benefiting much more than by taking the Luddite approach. In essence, the Luddites were just mad that all of a sudden they had to compete with a better (lower cost / more efficient) way of doing what they did. If some foreigners had come along who could hand weave 4x as fast as the Luddites, the only possible assumption is that they would have conspired to kill those foreigners. It wasn’t the machines, it was the competition!

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Now, let’s examine the economics of the industrial revolution, with my standard disclaimer that I am not an economist, though I have read a number of books on the subject.

Did textile factory workers get paid less than the Luddites were making for the same level of production? Without even looking up the numbers, there are two ways of knowing the answer is yes. First, the more skill required to do a job, the fewer people can do it, so the price a person can charge for doing that job is higher. A simple example is the salaries of a paramedic, a nurse, a general practitioner, an internal medicine specialist, and a spinal surgeon. As the level of skill required increases, so does the price a person with that skill can charge. Second, the factory owners did not employ the Luddites. If the Luddites had wanted wages equal to whatever the factory workers got, there would not have been any Luddites, just former hand weavers absorbed into the new method of production.

Now, are those lower wages a “bad thing”? The short answer is NO. Every person in society benefited from lower prices of textile products due in part to factory workers being paid less to produce more. In much the same way, every person in society is hurt by protectionist policies (tariffs, minimum prices, licenses to practice), because they result in higher prices for every consumer of that product. Again, without looking it up, I can guarantee the price of a mass-produced t-shirt is less than the price of a hand loom-spun t-shirt. That improves my quality of life and the lives of everyone else, because I can get a t-shirt and still have all the money I didn’t have to spend on a hand loom shirt, which I will then spend on something else.

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Furthermore, the people accepting those factory jobs were IMPROVING their standard of living. It didn’t matter if the place was dirty or dangerous, it was a better option than what they had before. The Luddites were not just angry at the factory owners, they were also angry that the people “below” them on the socioeconomic ladder could now do what they had been doing. Let’s imagine that tomorrow morning, we all wake up and are genius stock market analysts. The hedge funds, mutual funds, ETF managers, and brokers would all throw a fit. They would have to devalue their services, but each of us suddenly able to play the stock market wisely or buy broker services at a fraction of the current price would benefit. Society would adjust, and we would carry on.

Regarding the objection about profits, the only “unfair” profit is that which is won via forced labor or government-protected monopoly prices. If workers were willing to work for $1/hour, 12 hours/day, 6 days/week, despite dirty and sometimes dangerous factories, that was fair (note: arbitrary numbers). It would be UNFAIR to force them to work for no less than $2/hours if that takes away the incentive of the factory owner to keep the business open, take the risks necessary to grow, or results in some of them being laid off. It would be UNFAIR to tell someone, “You cannot have this job, because these other people don’t want to compete with you.” If a business owner tried to artificially depress wages, his competitors would quickly steal his best employees. Working the other way, an owner might voluntarily raise wages (a la Henry Ford) in order to create more customers for his product.

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Corporate profits are NOT personal income. This is why the corporate income tax is double taxation (when paired with a personal income tax or capital gains tax). Major corporations are easy targets, because they seem rich and far away, amorphous concepts ripe to attack. In reality, while companies may keep cash reserves for rainy days, they are constantly distributing and reinvesting any profit. There are no Scrooge McDuck pools of money collecting “just because”. The worst part about claiming “unfair” profits is that it opens the Pandora’s box of who decides what is and isn’t unfair. The free market, that collection of individual and voluntary transactions, that invisible hand, does a much better job of determining fairness, because it factors in each of our choices into an infinitely complex system better than any fallible government fairness tribunal ever could.

So, if you want to compare the advances of A.I. and robotics to the incorporation of machines and techniques that sparked the industrial revolution and the most rapid improvement in the human condition ever, be wary of championing the Luddites. Many of our current jobs will not exist in 100 years, but to hastily conclude that is a bad thing is as dangerous as it is short-sighted.

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About Chris Fountain

Start small, but think BIG.
This entry was posted in Finances & Economics, Free Market, Uncategorized and tagged , , , , , . Bookmark the permalink.

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