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Source link: http://archive.mises.org/14601/the-1822-refutation-of-the-spitalfields-act-of-wage-and-price-controls/

The 1822 Refutation of the Spitalfields Act of Wage and Price Controls

November 11, 2010 by

In 1824, the Spitalfields Act of wage control for silk weavers was repealed after being in force for 50 years. The act was essentially a disaster that devastated the industry and the workers. FULL ARTICLE by Anders Mikkelsen

{ 13 comments }

Fephisto November 11, 2010 at 12:19 pm

There isn’t an article devoted to the act in Wikipedia, but it is included in the history of Spitalfields in Wikipedia.

And, more or less, it’s casually mentioned as this odd curiousity.

P.M.Lawrence November 11, 2010 at 11:10 pm

The author (or, more likely, the editor) has got the title wrong. “Refutation” simply isn’t what happened, the Act was repealed – not the same thing at all.

It is interesting to note that masters apparently didn’t rent machine time to journeymen and journeymen didn’t build their own machines.

On closer inspection, that is quite natural. Anybody with the resources to do that would have been better off by becoming a master too.

It strikes me that the “evils” of the Act are overstated, precisely because it only had local application, so the work (and workers) really did have the option of moving away. That means that the only actual costs were related to the loss of amenity from not being so near the commercial centre of London, and any transitional costs of relocation.

Free labor and the introduction of machinery, on the other hand, allow manufacturers to expand and provide regular work for laborers during bad times and also allow for the competition that will drive up wages during good times [emphasis added].

Note that these are necessary but not sufficient conditions for those results. Without other economic features, those results do not actually occur, even though they become possible. Instead, you can get things like a jobless recovery, and so on.

pfarthing6 November 12, 2010 at 1:44 am

The assumption that workers would have been paid better in good times is wishful thinking. It doesn’t happen, or happens only rarely. When profits are high, the owners pockets are full. When profits are low, the owner’s pockets are not so full. At all times, workers are paid as little as possible for the required qaulity of work that they do in order to ensure the operation of the business. That was true then, it is true now.

The only time this is different in when one considers a workers co-op or other “worker owned” business models. Full Sail Brewery for instance. For all other standard bussiness models, in bad times, workers get the sack or reduced pay/benefits, and in good times, new workers get hired at the most minimum wage possible, including master workers, forcing a new higher, though a master to work his way up to that level, but by then a bad time will hit of course.

This is the whole impetus behind labor unions, for better or worse, and until a new system evolves where the worker shares both the benefits and the risks of capital, nothing will change.

Inquisitor November 12, 2010 at 7:10 am

“The assumption that workers would have been paid better in good times is wishful thinking. It doesn’t happen, or happens only rarely. When profits are high, the owners pockets are full. When profits are low, the owner’s pockets are not so full. At all times, workers are paid as little as possible for the required qaulity of work that they do in order to ensure the operation of the business. That was true then, it is true now.”

Nope, they’re paid as much as is required to bid them away from competing employers. On the reverse side, they pay as little as possible for the goods they demand. This sort of one-sided thinking astounds me at times. If labour markets are not competitive, I hope you know where to look for the cause.

P.M.Lawrence November 12, 2010 at 10:25 am

Nope, they’re paid as much as is required to bid them away from competing employers. On the reverse side, they pay as little as possible for the goods they demand. This sort of one-sided thinking astounds me at times. If labour markets are not competitive, I hope you know where to look for the cause.

That first sentence is wrong because it is presented as an absolute, whereas it only applies under full employment; with less employment than that, that effect is correspondingly lower because the unemployed are available and are not being competed for so much. Even if the last sentence acknowledges that labour markets might not be competitive, the first sentence doesn’t – and should.

I’ve already expressed elsewhere my views that unemployment is promoted by poor tax/benefit interactions that encourage downsizing and discourage hiring more than those would be at the optimal levels of a functioning free market – an externality. A virtual Pigovian subsidy approach would be the fastest and cheapest cure for this, according to the research of Professor Kim Swales of the University of Strathclyde and his colleagues (in the UK), the research of Nobel winner Professor Edmund S. Phelps, McVickar Professor of Political Economy at Columbia University (in the USA), and my own research (in Australia – see this and following, or my Henry Tax Review submission).

Pfarthing6 November 12, 2010 at 2:59 pm

I’ve often thought that mandating a reduced workday could be a good solution. Most wage earners only work the 8 hour day (at a single job anyway), they are penalized in taxes to do otherwise. However, corporate workers, those on salary, often work far more than 40 hours a week. That’s become the norm actually. That means they are doing the work of more than one person. Also, because of the negative consequences of intense job competition, people often mistrust the idea of hiring another worker to help out for fear that their job will be put in jeopardy.

If we then mandated that all “workers”, not owners mind you, would be limited to a 6 hour day, that would then seem a positive impetus for companies to higher more people. And if on top of that, payroll and other taxes were reduced, that could be a win for everyone.

Inquisitor November 12, 2010 at 6:14 pm

“I’ve already expressed elsewhere my views that unemployment is promoted by poor tax/benefit interactions that encourage downsizing and discourage hiring more than those would be at the optimal levels of a functioning free market – an externality. A virtual Pigovian subsidy approach would be the fastest and cheapest cure for this, according to the research of Professor Kim Swales of the University of Strathclyde and his colleagues (in the UK), the research of Nobel winner Professor Edmund S. Phelps, McVickar Professor of Political Economy at Columbia University (in the USA), and my own research (in Australia – see this and following, or my Henry Tax Review submission).”

Or we could, you know, just let markets work for once rather than contriving new regulations, taxes and scientistic management approaches for them. Full employment is a stupid notion anyway. “Full employment” by what standard?

P.M.Lawrence November 13, 2010 at 8:48 am

Why did you write “or”? The material and links I provided are about “let[ting] markets work for once rather than contriving new regulations, taxes and scientistic management approaches for them”. The point is that they are currently being interfered with (by the tax/welfare interactions), and doing those things would undo that interference. If you meant, just get rid of the tax/welfare interactions, that doesn’t work because it simply reverts to a Vagrancy Costs externality unless and until people separately regain private resources and adjust to having them.

Pfarthing6 November 12, 2010 at 2:47 pm

The article assumes that workers will be “given” more money, naturally, when profits are high. Anyone who believes that is “high” themselves. This goes against all business practices to keep production costs down. The cost of labor is a production cost. You just don’t go raising your production costs simply because you’re making more money, do you?

Profits are for owners. Wages are for workers. Owners pay workers a wage that is as low as possible to get the work done in a satisfactory manner. That sometimes includes some regular eval+raise to keep moral up and to stay somewhat competitive.

For some people, in some jobs, in some industry, I will grant that there is a lot of competition for good workers. That doesn’t apply to the majority of workers though and it’s important that people who believe in free market principles adjust themselves to that fact.

I’ve been working since I was 17 years old and that’s added up to 26 years now. In all of that time, at absolutely no place I’ve ever worked, as a plain old “body” as a “laborer”, have I ever been given more money just because there were more profits being made. NEVER! I can tell you that is true of everyone I know that’s worked in any non-professional capacity. The only time non-professional people have received more money is when they caught wind that the company was doing better and stuck their neck out to ask for a raise, or were given a promotion to a job that was “worth more” to the owner.

And not everyone can be a professional at something. We need people to pickup the trash, to flip our burgers, to sling our coffee, to pick our fruit, to do all sorts of things that take very little skill. These people are entitles to share in the profits of the company that they are working for. Without them, the company would not/could not exist!

There is really very little reason for McDonald’s to pay a burger flipper more money simply because profits are up. They might stay competitive with Burger King or Jack in the Box, but if the handful of fast food joints out there all know how much they pay their burger flippers, and they do, and there are plenty of unemployed people waiting for that job, and there are, believe me, the burger flipper isn’t going to be getting more money when profits are up, though they might be getting reduced wages if profits are down. There may be some variance in there, a few cents or something, one way or the other, but for the most part, it’s part and parcel with business operations to keep costs of production down and not have those costs vary too much.

So, while I believe that free market principles have their place, history proves that workers tend to not reap much of the benefits of their labor. If you don’t believe it, check out how people were treated during the early days of the Industrial Revolution. There were no labor laws, no minimum wage, no taxes. Read up on the working conditions and how “happy” workers were back then. You might find it quite enlightening.

On the other hand, Labor Unions have their ills, I wouldn’t deny that. They stifle creativity and productivity. Worker co-ops on the other hand, which is what I mentioned, require labor to share the risk and require owners to share the profits. This is not only equitable but also respects private property rights. The workers are shareholders, so part of the property is theirs. They are stake holders then. That means that they have a vested interest in being productive and seeing that the company does well. It also means they get to realize the true value of their labor and be compensated appropriately, not just hope that all the cards will fall into place. The current management/labor setup does not lend itself to this whatsoever and isn’t the way forward to the greater liberty of the individual.

Inquisitor November 12, 2010 at 6:15 pm

So many, many unsubstantiated assertions.

“So, while I believe that free market principles have their place, history proves that workers tend to not reap much of the benefits of their labor. If you don’t believe it, check out how people were treated during the early days of the Industrial Revolution. There were no labor laws, no minimum wage, no taxes. Read up on the working conditions and how “happy” workers were back then. You might find it quite enlightening.”

Sorry, what “history”? Whose?

“Worker co-ops on the other hand, which is what I mentioned, require labor to share the risk and require owners to share the profits. This is not only equitable but also respects private property rights. The workers are shareholders, so part of the property is theirs. They are stake holders then. That means that they have a vested interest in being productive and seeing that the company does well. It also means they get to realize the true value of their labor and be compensated appropriately, not just hope that all the cards will fall into place. The current management/labor setup does not lend itself to this whatsoever and isn’t the way forward to the greater liberty of the individual.”

By all means, let them compete in the open market with other, non-state supported alternatives. If they cannot survive, they simply are not efficient entities and those who value economic efficiency will move from them. If they are, all the better. No need for any government involvement at all. In fact, it can rid itself of “doing” something.

Anthony November 13, 2010 at 12:09 am

If workers don’t tend to reap much of the benefit of their labour, why is it that “workers” in this century can afford more luxuries than at any point in the history of the human race? That seems like a benefit to me.

Propose any voluntary system that you want, and you will have my best wishes… but if you ask the government to fix things using force and compulsion you are always making things worse. Economics in One Lesson is a great primer for this sort of dicussion.

Thedo November 12, 2010 at 9:54 am

So when I consider my recent job that had my employer match my 401k contributions before the US economy went bust to where my employer wouldn’t match my contribution—I’m just thinking wishfully? Well, you got me, I guess.

Pfarthing6 November 12, 2010 at 2:51 pm

401K? Ha! That is wishful thinking!!!

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