An Era of Laissez-Faire?
Today, the adoption of new technologies or the decision to export would be seen, even for some free market politicians, as an area for government to create incentives or forms of support. State intervention did play a vital role in the development of the UK economy and industry and can be seen, for example in the extensive regulations introduced during the eighteenth century relating to the regulation of production, labour, the movement of people, trade and interest rates. However, a great deal of this regulation was abolished in the first half of the nineteenth century (Harris, 2004), reflecting questions about the role of the state and a significant shift towards laissez-faire and belief in free trade, competition and their connection to individual liberty. As the processes of industrialisation continued to unfold, questions around the role of government persisted and the nineteenth century continued to balance a tension between laissez-faire and state intervention (Brebner, 1948).
Harling and Mandler (1993) trace the emergence of laissez-faire government in Britain to the end of the French wars in the early nineteenth century. Public disapproval of the state as serving the interests of those close to it restricted its legitimacy and created pressure to reduce the burden of taxation that could be justified in times of war. In what Harling and Mandler present as a move to maintain the general social order, and in an era where expectations on governments for social and economic intervention were relatively few, laissez-faire was a way of reducing expenditure popularly perceived as being unnecessary and responding to calls for ‘cheap government’: a government that did less, and therefore spent less required, less contribution in the form of taxes (recall Del Boy in Only Fools and Horses and his view that he would contribute nothing to government and expect nothing in return).
The second half of the nineteenth century was a time of wide-reaching political change. Between 1852 and 1886, with changes including an expanding electorate, the UK moved from a Parliamentary government, where the cabinet governed subject to the support of the House of Commons, to governments selected by political parties that held electoral mandates and attempted to achieve internal ideological consensus (Hawkins, 1998). This changed political debate, moving it, to some degree at least, further outside Parliament and to the development of party machinery across the country. At this time, the two main political parties were the Conservatives (also known as the Tory Party, which had moved away from some elements of laissez-faire capitalism, including the recognition of trade unions) and the Liberal Party (which had emerged out of a coalition of Whigs and free trade advocates and who had dominated politics for many years previously). As the century moved on, and by the 1880s, both parties broadly adopted ‘the prevailing Victorian preference for curtailing government in favour of local autonomy and economy’ (Pugh, 2002: 60), albeit with protectionist tendencies lingering within the Conservatives.
Nonetheless, the extent to which laissez-faire can be used to characterise much of nineteenth-century Britain requires further consideration (in this discussion we omit consideration of government behaviour in overseas parts of the Empire, see Hobsbawm, 1968). As Polanyi (2001) established, the economy is embedded in society, and therefore in political, cultural and social institutions, and ‘free markets’ can never be entirely free. UK political and legal institutions were necessary for the effective functioning of the ‘free’ market and had been an important aspect of the industrial revolution. Bennett (2014) argues that one of the primary advantages for the UK in its industrial development was a result of how its institutions encouraged entrepreneurship through the rule of law and property rights together with a broadly legitimate, stable ruling elite. This produced a ‘positive “business enabling environment’” (p. 77).
Invariably, as social and industrial changes arose, the state responded with regulations. Examples of legislation affecting matters of industry
The Nineteenth Century 21 and business development include interventions in factories, railways, communications, mines and so on (see Brebner, 1948). There were also different forms of intervention beginning to be introduced later in the nineteenth century, such as the increasing emphasis on technical education, which served as a means to improve the efficiency of labour (Tomlinson, 1994). However, in general, government did not involve itself with how businesses were run (e.g. not pursuing significant antitrust legislation). Further, passing legislation does not mean that it is effectively enforced. For example, limited resources devoted to a system of inspection and practical problems of identifying breaches limited the impact of legislation entered into the statute books (Bartrip, 1983). Bendix (1956: 37) cites an 1833 Commission of Inquiry into evasion of the previous factory legislation that commented on how parents with a tradition of, and a financial interest in, their children working were inclined towards misrepresenting these children’s ages to avoid child labour legislation. Problems of effective enforcement of the factory acts was a particular problem in small workshops employing under 50 people, which were not covered by the acts until 1867. While acknowledging the increased intervention found on the statute books, Bartrip (1983: 83) concludes that there were clear distinctions between that and the ‘the degree of intervention actually felt on the factory floor and at the coal-face.’
However, this was beginning to change, for example in the development of civil government and its budgets and in the enforcement of regulations in terms of its effectiveness and the number of inspectors (Harris, 2004). In this way, central government intervention began to increase in terms of calls for it to intervene in industry and of its impact when it did so. This included in relation to business-related regulations, especially those providing consumer protection such as the Weights and Measures, Merchandise Marks or Sale of Goods Acts. There was less emphasis on protecting labour, at least until public outcry over working conditions prompted government action (e.g. in the largely ineffectual Shops Acts of the early twentieth century, see the following discussion).
In trying to make sense of the tensions between laissez-faire and state intervention, it is helpful to follow Brebner’s conclusion (1948: 69) that ‘in the historical view, neither laissez faire nor state intervention was the engine of change in nineteenth-century Britain. Instead, both were constant accompaniments of the basic force—industrialization.’ Politics remained a vital means by which society responded to and sought to shape significant changes and, ultimately, the state came to have greater influence in wider sections of society and the economy. In understanding how this mixed political picture related to small businesses, it is also useful to consider small business voice and political influence at a more local level.
22 The Nineteenth Century
