WEBVTT NOTE 3. James Mill, Ricardo, and the Ricardian System 1 00:00:00.000 --> 00:00:07.000 Chapter 3. James Mill, Ricardo, and the Ricardian System 2 00:00:07.000 --> 00:00:12.000 1. James Mill, The Radical's Lenin 3 00:00:12.000 --> 00:00:22.000 James Mill, 1771-1836, was surely one of the most fascinating figures in the history of economic thought. 4 00:00:22.000 --> 00:00:25.000 And yet, he is among the most neglected. 5 00:00:25.000 --> 00:00:31.760 Mill was perhaps one of the first persons in modern times who might be considered a true 6 00:00:31.760 --> 00:00:37.960 cadre man, someone who in the Leninist movement of the next century would have been hailed 7 00:00:37.960 --> 00:00:40.000 as a real Bolshevik. 8 00:00:40.000 --> 00:00:46.440 Indeed, he was the Lenin of the radicals, creating and forging philosophical radical 9 00:00:46.440 --> 00:00:50.880 theory and the entire philosophical radical movement. 10 00:00:50.880 --> 00:00:58.240 A brilliant and creative, but an insistently number two man, Mill began as a Lenin seeking 11 00:00:58.240 --> 00:00:59.920 his Marx. 12 00:00:59.920 --> 00:01:07.480 In fact, he simultaneously found two Marxes, Jeremy Bentham and David Ricardo. 13 00:01:07.480 --> 00:01:15.040 He met both at about the same time, at the age of 35, Bentham in 1808 and Ricardo around 14 00:01:15.040 --> 00:01:17.040 the same date. 15 00:01:17.040 --> 00:01:23.840 Bentham became Mill's philosophic Marx, from whom Mill acquired his utilitarian philosophy 16 00:01:23.840 --> 00:01:29.000 and passed it on to Ricardo and to economics generally. 17 00:01:29.000 --> 00:01:34.320 But it has been largely overlooked that Mill functioned creatively in his relationship 18 00:01:34.320 --> 00:01:42.040 with Bentham, persuading the older man, formerly a Tory, that Benthamite utilitarianism implied 19 00:01:42.040 --> 00:01:46.360 a political system of radical democracy. 20 00:01:46.360 --> 00:01:57.080 David Ricardo, 1772-1823, was an unsophisticated, young but retired wealthy stockbroker, actually 21 00:01:57.080 --> 00:02:02.100 bond dealer, with a keen interest in monetary matters. 22 00:02:02.100 --> 00:02:08.780 But Mill perceived and developed Ricardo as his Marx in economics. 23 00:02:08.780 --> 00:02:16.180 Until he acquired his post at the East India Company in 1818 at the age of 45, Mill, an 24 00:02:16.180 --> 00:02:22.940 An impoverished Scottish emigre and freelance writer in London lived partially off Bentham 25 00:02:22.940 --> 00:02:28.220 and managed to keep on good enough formal terms with his patron despite their severe 26 00:02:28.220 --> 00:02:31.060 personality conflicts. 27 00:02:31.060 --> 00:02:37.300 An inveterate organizer of others as well as himself, Mill tried desperately to channel 28 00:02:37.300 --> 00:02:42.420 Bentham's prolific but random scribblings into a coherent pattern. 29 00:02:42.420 --> 00:02:50.420 Bentham, meanwhile, wrote privately to friends complaining of the impertinent interference of this young whippersnapper 30 00:02:50.420 --> 00:03:01.420 Mill's publication of his massive History of India in 1818 won him immediate employment to an important post at the East India Company 31 00:03:01.420 --> 00:03:08.420 where he rose to the head of the office in 1830 and continued there until his death 32 00:03:08.420 --> 00:03:16.180 As for David Ricardo, self-taught and diffident, he scarcely acted as a great man. 33 00:03:16.180 --> 00:03:22.700 To the contrary, his admiration for Mill, his intellectual mentor and partly his mentor in 34 00:03:22.700 --> 00:03:28.520 economic theory, allowed him to be molded and dominated by Mill. 35 00:03:28.520 --> 00:03:35.300 And so Mill happily hectored, cajoled, prodded and bullied his good friend into becoming 36 00:03:35.300 --> 00:03:42.540 The Marx, the great economist that Mill felt for whatever reason he himself could or should 37 00:03:42.540 --> 00:03:44.380 not be. 38 00:03:44.380 --> 00:03:49.920 He pestered Ricardo into writing and finishing his masterpiece, The Principles of Political 39 00:03:49.920 --> 00:03:57.700 Economy and Taxation, 1817, and then into entering parliament to take an active political 40 00:03:57.700 --> 00:04:00.820 role as leader of the radicals. 41 00:04:00.820 --> 00:04:08.180 Mill was then delighted to become the leading and highly devoted Ricardian in economics. 42 00:04:08.180 --> 00:04:14.620 As a Lenin, then, James Mill had a far more active intellectual role than the real Lenin 43 00:04:14.620 --> 00:04:16.860 would ever enjoy. 44 00:04:16.860 --> 00:04:22.140 Not only did he integrate the work of two Marxes, he contributed substantially to the 45 00:04:22.140 --> 00:04:23.620 system itself. 46 00:04:23.620 --> 00:04:30.940 Indeed, in endless conversations, Mill instructed Ricardo on all manner of topics, and Mill 47 00:04:30.940 --> 00:04:38.320 looked over, edited, and undoubtedly added to many drafts of Ricardo's principles. 48 00:04:38.320 --> 00:04:43.840 We have already seen, for example, that it was Mill who first absorbed and adopted Say's 49 00:04:43.840 --> 00:04:48.740 law and passed it on to his pupil Ricardo. 50 00:04:48.740 --> 00:04:54.440 Researches indicate that James Mill may have played a far more leading role in developing 51 00:04:54.440 --> 00:05:01.180 Ricardo's magnum opus than has been believed, for example, in arriving at and adopting the 52 00:05:01.180 --> 00:05:04.460 law of comparative advantage. 53 00:05:04.460 --> 00:05:09.220 Mill's stance is surely unique in the history of social thought. 54 00:05:09.220 --> 00:05:14.820 Very often theorists and writers are anxious to proclaim their alleged originality to the 55 00:05:14.820 --> 00:05:21.060 in the skies, Adam Smith being an aggravated though not untypical case. 56 00:05:21.060 --> 00:05:26.740 But what other instance is there of a man far more original or creative than he liked 57 00:05:26.740 --> 00:05:28.300 to claim? 58 00:05:28.300 --> 00:05:34.460 How many others have insisted on appearing to be a mere number two man when in many ways 59 00:05:34.460 --> 00:05:36.860 they were number one? 60 00:05:36.860 --> 00:05:42.220 It is possible, it should be noted, that the explanation for this curious fact is simple 61 00:05:42.220 --> 00:05:50.380 and Material-Economic rather than Depth-Psychological. Mill, son of a Scottish shoemaker, was an 62 00:05:50.380 --> 00:05:56.300 impoverished Scot without steady employment, trying to make his way and raise a family 63 00:05:56.300 --> 00:06:03.540 in London. Bentham was a wealthy aristocrat who functioned as Mill's patron. Ricardo was 64 00:06:03.540 --> 00:06:10.900 a wealthy retired stockbroker. It is certainly possible that Mill's posture as devoted disciple 65 00:06:10.900 --> 00:06:17.860 was a function of a poor man keeping his wealthy mentor-disciples happy, as well as maximizing 66 00:06:17.860 --> 00:06:22.360 the public's reception for their common doctrines. 67 00:06:22.360 --> 00:06:28.340 As a preeminent cadre man, Mill possessed all the strengths and weaknesses of that modern 68 00:06:28.340 --> 00:06:29.340 type. 69 00:06:29.340 --> 00:06:37.620 Humourless, eternally the didact, but charismatic and filled with prodigious energy and determination, 70 00:06:37.620 --> 00:06:43.620 Mill found enough time to carry on an important full-time job at the East India House while 71 00:06:43.620 --> 00:06:49.020 yet functioning as a committed scholar activist on many levels. 72 00:06:49.020 --> 00:06:55.140 As a scholar and writer, Mill was thorough and lucid, committed strongly to a few broad 73 00:06:55.140 --> 00:07:02.120 and overriding axioms, utilitarianism, democracy, laissez-faire. 74 00:07:02.120 --> 00:07:08.200 On a scholarly level, he wrote important tomes on the history of British India, on economics, 75 00:07:08.200 --> 00:07:12.600 on political science, and on empiricist psychology. 76 00:07:12.600 --> 00:07:17.080 He also wrote numerous scholarly reviews and articles. 77 00:07:17.080 --> 00:07:22.920 But strongly committed, as Marx would be, to changing the world as well as understanding 78 00:07:22.920 --> 00:07:29.760 it, Mill also wrote countless newspaper articles and strategic and tactical essays, as well 79 00:07:29.760 --> 00:07:37.760 as well as tirelessly organizing the philosophic radicals and maneuvering in parliament and in political life. 80 00:07:37.760 --> 00:07:43.760 With all that, he had the energy to preach and instruct everyone around him, 81 00:07:43.760 --> 00:07:49.760 including his famous and failed attempt to brainwash his young son, John. 82 00:07:49.760 --> 00:07:54.760 But it must be noted that Mill's fierce and fervent education of John 83 00:07:54.760 --> 00:07:58.760 was not simply the crotchet of a Victorian father and intellectual. 84 00:07:58.760 --> 00:08:16.760 The education of John Stewart was designed to prepare him for the presumptively vital and world-historical role of James' successor as leader of the radical cadre, as the New Lenin. There was a method in the madness. 85 00:08:16.760 --> 00:08:24.760 James Mill's evangelical Calvinist spirit was tailor-made for his lifelong cadre role. 86 00:08:24.760 --> 00:08:28.760 Mill was trained in Scotland to be a Presbyterian preacher. 87 00:08:28.760 --> 00:08:35.760 During his days as a literary man in London, he lost his Christian faith and became an atheist. 88 00:08:35.760 --> 00:08:42.760 But, as in the case of so many later evangelically trained atheist and agnostic intellectuals, 89 00:08:42.760 --> 00:08:50.760 he retained the grim, puritanical and crusading habit of mind of the prototypical Calvinist firebrand. 90 00:08:50.760 --> 00:09:02.760 As Professor Thomas perceptively writes, this is why Mill, a skeptic in later life, always got on well with Protestant dissenters from the Anglican Church. 91 00:09:02.760 --> 00:09:10.760 He may have come to reject belief in God, but some form of evangelical zeal remained essential to him. 92 00:09:10.760 --> 00:09:18.760 Skepticism, in the sense of non-commitment, indecision between one belief and another, horrified him. 93 00:09:18.760 --> 00:09:25.760 or, perhaps, Mill understood Hume all too well, and therefore revived him. 94 00:09:48.760 --> 00:10:00.760 Mille's Calvinism was evident in his conviction that reason must keep stern control over the passions, a conviction which hardly fitted well with Benthamite hedonism. 95 00:10:00.760 --> 00:10:09.760 Cadre men are notorious Puritans, and Mille puritanically disliked and distrusted drama or art. 96 00:10:09.760 --> 00:10:11.180 for Art. 97 00:10:11.180 --> 00:10:17.280 The actor, he charged, was the slave of the most irregular appetites and passions of his 98 00:10:17.280 --> 00:10:24.380 species, and Mill was hardly the one to delight in sensuous beauty for its own sake. 99 00:10:24.380 --> 00:10:29.680 Painting and sculpture Mill scorned as the lowest of the arts, only there to gratify a 100 00:10:29.680 --> 00:10:33.080 frivolous love of ostentation. 101 00:10:33.080 --> 00:10:39.400 Since Mill, in a typically Benthamite utilitarian manner, believed that human action is only 102 00:10:39.400 --> 00:10:43.880 rational if done in a prudent, calculating manner. 103 00:10:43.880 --> 00:10:50.320 He demonstrated in his History of British India a complete inability to understand anyone 104 00:10:50.320 --> 00:10:59.320 motivated by mystical religious asceticism or by a drive for military glory or self-sacrifice. 105 00:10:59.320 --> 00:11:05.160 If Amell Cowder is right and Scottish Calvinism accounts for Smith's introduction of the 106 00:11:05.160 --> 00:11:23.160 and the Labor Theory of Value into Economics, then Scottish Calvinism even more accounts for James Mills' forceful and determined crusade for the Labor Theory of Value and, perhaps, for its playing a central role in the Ricardian system. 107 00:11:23.160 --> 00:11:33.160 It also might explain the devoted adherence to the Labor Theory by Mills' fellow Scott and student of Dugald Stewart, John R. McCullough, 108 00:11:33.160 --> 00:11:40.080 A prime and particularly successful example of Mill the Cadre man at work was his role 109 00:11:40.080 --> 00:11:46.120 in driving through Parliament the Great Reform Bill of 1832. 110 00:11:46.120 --> 00:11:51.440 The centerpiece of Mill's political theory was his devotion to democracy and universal 111 00:11:51.440 --> 00:11:58.460 suffrage, but he was sensibly willing to settle temporarily for the Reform Bill, which decisively 112 00:11:58.460 --> 00:12:28.460 The Theory of Money and Credit 113 00:12:28.460 --> 00:12:44.460 was in the offing. But Mill, through friends and allies placed strategically in the press, was able to orchestrate a deliberate campaign of press deception that fooled and panicked the Whigs into passing the bill. 114 00:12:44.460 --> 00:12:56.460 The campaign of lies was engaged in by important sectors of the press, by The Examiner, a leading weekly owned and edited by the Benthamite radical Albany von Blank, 115 00:12:56.460 --> 00:13:07.460 by the widely read Morning Chronicle, a Whig daily edited by Mill's old friend John Black, who made the paper a vehicle for the utilitarian radicals, 116 00:13:07.460 --> 00:13:12.460 and by The Spectator, edited by the Benthamite S. Rintoul. 117 00:13:12.460 --> 00:13:23.460 The Times was also friendly to the radicals at this point, and the leading Birmingham radical, Joseph Parks, was owner and editor of the Birmingham Journal. 118 00:13:23.460 --> 00:13:37.460 Not only that, Parks was able to have his mendacious stories on the allegedly revolutionary public opinion of Birmingham printed as factual reports in the Morning Chronicle and the Times. 119 00:13:37.460 --> 00:13:44.460 So well did Mill accomplish his task that most later historians have been taken in as well. 120 00:13:44.460 --> 00:13:57.460 Ever the unifier of theory and praxis, James Mill paved the way for this organized campaign of deception by writing in justification of lying for a worthy end. 121 00:13:57.460 --> 00:14:06.460 While truth was important, Mill conceded, there are special circumstances in which another man is not entitled to the truth. 122 00:14:06.460 --> 00:14:12.460 Men, he wrote, should not be told the truth when they make bad use of it. 123 00:14:12.460 --> 00:14:24.460 Ever the Utilitarian. Of course, as usual, it was the utilitarian who was to decide whether the other man's use was going to be good or bad. 124 00:14:24.460 --> 00:14:39.460 Mill then escalated his defense of lying in politics. In politics, he claimed, disseminating wrong information, or as we would now say, disinformation, is not a breach of morality, 125 00:14:39.460 --> 00:14:59.460 A decade and a half later, John Arthur Roebuck, one of Mill's top aides in the campaign, and later a radical member of parliament and historian of the drive for reform, 126 00:14:59.460 --> 00:15:15.460 John Arthur Roebuck, one of Mill's top aides in the campaign, and later a radical member of parliament and historian of the drive for reform, admitted that to attain our end, much was said that no one really believed. 127 00:15:15.460 --> 00:15:29.960 Much was done that no one would like to own. Often, when there was no danger, the cry of alarm was raised to keep the House of Lords and the aristocracy generally in what was termed a state of wholesome terror. 128 00:15:29.960 --> 00:15:45.960 In contrast to the noisy orators who appeared important in the campaign, Robach recalled, were the cool-headed, retiring, sagacious, determined men who pulled the strings in this strange puppet show. 129 00:15:45.960 --> 00:15:53.960 One or two ruling minds to the public unknown manipulated and stage-managed the entire movement. 130 00:15:53.960 --> 00:16:01.320 They used the others as their instruments, and the most cool-headed, sagacious and determined 131 00:16:01.320 --> 00:16:06.440 was the master puppeteer of them all, James Mill. 132 00:16:06.440 --> 00:16:11.560 Although he worked as a high official for the East India Company and could not run for 133 00:16:11.560 --> 00:16:19.220 Parliament himself, James Mill was the unquestioned cadre leader of the group of ten to twenty 134 00:16:19.220 --> 00:16:26.820 Philosophic Radicals who enjoyed a brief day in the sun in parliament during the 1830s. 135 00:16:26.820 --> 00:16:33.180 Mill continued to be their leader until he died in 1836 and then the others attempted 136 00:16:33.180 --> 00:16:36.260 to continue in his spirit. 137 00:16:36.260 --> 00:16:41.560 While the philosophic radicals proclaimed themselves Benthamites, the aging Bentham 138 00:16:41.560 --> 00:16:45.940 had little to do personally with this million group. 139 00:16:45.940 --> 00:16:51.820 Most of the parliamentary philosophic radicals had been converted personally by Mill, beginning 140 00:16:51.820 --> 00:16:58.500 with Ricardo over a decade earlier, and also including his son, John Stewart, who for a 141 00:16:58.500 --> 00:17:02.260 while succeeded his father as radical leader. 142 00:17:02.260 --> 00:17:09.100 Mill, along with Ricardo, also converted the official leader of the radicals in parliament, 143 00:17:09.100 --> 00:17:19.220 The Banker and later Classical Historian George Grote, 1794-1871 Grote, a self-educated and 144 00:17:19.220 --> 00:17:25.940 humorless man, soon became an abject tool of James Mill, whom he greatly admired as 145 00:17:25.940 --> 00:17:29.180 a very profound thinking man. 146 00:17:29.180 --> 00:17:34.980 As Mill's most faithful disciple, Grote, in the words of Professor Joseph Hamburger, was 147 00:17:34.980 --> 00:17:41.140 is so inoculated, as it were, that for him, all of Mill's dicta assumed the force and 148 00:17:41.140 --> 00:17:44.020 sanction of duties. 149 00:17:44.020 --> 00:17:53.900 The Millian Circle also had a fiery cadre lady, Mrs. Harriet Lewin Grote, 1792-1873, 150 00:17:53.900 --> 00:17:59.980 an imperious and assertive militant whose home became the salon and social center for the 151 00:17:59.980 --> 00:18:02.340 parliamentary radicals. 152 00:18:02.340 --> 00:18:09.140 She was widely known as the Queen of the Radicals, of whom Cobden wrote that had she been a man, 153 00:18:09.140 --> 00:18:12.140 she would have been the leader of a party. 154 00:18:12.140 --> 00:18:18.160 Harriet testified to Mill's eloquence and charismatic effect on his young disciples, 155 00:18:18.160 --> 00:18:23.420 most of whom were brought into the million circle by his son, John Stuart. 156 00:18:23.420 --> 00:18:29.220 A typical testimony was that of William Ellis, a young friend of John, who wrote in later 157 00:18:29.220 --> 00:18:35.500 After years of his experience of James Mill, he worked a complete change in me. 158 00:18:35.500 --> 00:18:40.260 He taught me how to think and what to live for. 159 00:18:40.260 --> 00:18:43.100 2. 160 00:18:43.100 --> 00:18:47.500 Mill and Libertarian Class Analysis 161 00:18:47.500 --> 00:18:54.740 The theory of class conflict as a key to political history did not begin with Karl Marx. 162 00:18:54.740 --> 00:19:01.060 It began, as we shall see further below, with two leading French libertarians inspired by 163 00:19:01.060 --> 00:19:02.060 J.B. 164 00:19:02.060 --> 00:19:09.700 Say, Charles Comte, Say's son-in-law, and Charles de Noyer, in the 1810s, after the 165 00:19:09.700 --> 00:19:13.140 restoration of the Bourbon monarchy. 166 00:19:13.140 --> 00:19:19.820 In contrast to the later Marxist degeneration of class theory, the Comte de Noyer view held 167 00:19:19.820 --> 00:19:26.420 showed the inherent class struggle to focus on which classes manage to gain control of 168 00:19:26.420 --> 00:19:28.660 the state apparatus. 169 00:19:28.660 --> 00:19:34.100 The ruling class is whichever group has managed to seize state power. 170 00:19:34.100 --> 00:19:40.660 The ruled are those groups who are taxed and regulated by those in command. 171 00:19:40.660 --> 00:19:45.900 Class interest, then, is defined as a group's relation to the state. 172 00:19:45.900 --> 00:19:52.200 Interest rule, with its taxation and exercise of power, controls and conferring of subsidies 173 00:19:52.200 --> 00:19:59.440 and privileges, is the instrument that creates conflicts between the rulers and the ruled. 174 00:19:59.440 --> 00:20:06.140 What we have then is a two-class theory of class conflict, based on whether a group rules 175 00:20:06.140 --> 00:20:09.860 or is ruled by the state. 176 00:20:09.860 --> 00:20:15.780 On the free market, on the other hand, there is no class conflict, but a harmony of interest 177 00:20:15.780 --> 00:20:24.060 between all individuals in society cooperating in and through production and exchange. 178 00:20:24.060 --> 00:20:30.100 James Mill developed a similar theory in the 1820s and 1830s. 179 00:20:30.100 --> 00:20:36.860 It is not known whether he arrived at it independently or was influenced by the French libertarians. 180 00:20:36.860 --> 00:20:42.320 It is clear, however, that Mill's analysis was devoid of the rich applications to the 181 00:20:42.320 --> 00:20:48.680 The History of Western Europe that Comte, Du Noyer and their young associate, the historian 182 00:20:48.680 --> 00:20:52.240 Augustin Thierry, had worked out. 183 00:20:52.240 --> 00:20:58.040 All government, Mill pointed out, was run by the ruling class, the few who dominated 184 00:20:58.040 --> 00:21:01.400 and exploited the ruled, the many. 185 00:21:01.400 --> 00:21:06.880 Since all groups tend to act for their selfish interests, he noted, it is absurd to expect 186 00:21:06.880 --> 00:21:11.860 the ruling clique to act altruistically for the public good. 187 00:21:11.860 --> 00:21:17.740 Like everyone else, they will use their opportunities for their own gain, which means to loot the 188 00:21:17.740 --> 00:21:24.820 many and to favor their own or allied special interests as against those of the public. 189 00:21:24.820 --> 00:21:31.740 Hence Mill's habitual use of the term sinister interests as against the good of the public. 190 00:21:31.740 --> 00:21:37.620 For Mill and the radicals, we should note, the public good meant specifically laissez-faire 191 00:21:37.620 --> 00:21:44.620 of Fair Government, confined to the minimal functions of police, defense and the administration of justice. 192 00:21:44.620 --> 00:21:54.620 Hence Mill, the preeminent political theorist of the radicals, harked back to the libertarian commonwealth men of the 18th century 193 00:21:54.620 --> 00:22:02.620 in stressing the need always to treat government with suspicion and to provide checks to suppress state power. 194 00:22:02.620 --> 00:22:09.620 Mill agreed with Bentham that if not deterred, a ruling elite would be predatory. 195 00:22:09.620 --> 00:22:19.620 The pursuit of sinister interests leads to endemic corruption in politics, to sinecures, bureaucratic places and subsidies. 196 00:22:19.620 --> 00:22:26.620 Mill lamented, Think of the end of government as it really is, in its own nature. 197 00:22:26.620 --> 00:22:49.620 Never has libertarian ruling class theory been put more clearly or forcefully than in the words of Mill. 198 00:22:49.620 --> 00:22:52.620 There are two classes, Mill declared. 199 00:22:52.620 --> 00:22:58.620 The first class, those who plunder, are the small number. They are the ruling few. 200 00:22:58.620 --> 00:23:05.620 The second class, those who are plundered, are the great number. They are the subject many. 201 00:23:05.620 --> 00:23:09.620 Or, as Professor Hamburger summed up Mill's position, 202 00:23:09.620 --> 00:23:17.620 politics was a struggle between two classes, the avaricious rulers and their intended victims. 203 00:23:17.620 --> 00:23:34.620 The great conundrum of government, concluded Mill, was how to eliminate this plunder, to take away the power by which the class that plunder succeed in carrying on their vocation has ever been the great problem of government. 204 00:23:34.620 --> 00:23:49.620 The subject many, Mill accurately termed the people, and it was probably Mill who inaugurated the type of analysis that pits the people as a ruled class in opposition to the special interests. 205 00:23:49.620 --> 00:23:56.620 How then is the power of the ruling class to be curbed? Mill thought he saw the answer. 206 00:23:56.620 --> 00:24:03.620 The people must appoint watchmen. Who are to watch the watchmen? The people themselves. 207 00:24:03.620 --> 00:24:14.620 There is no other resource, and without this ultimate safeguard, the ruling few will be forever the scourge and oppression of the subject many. 208 00:24:14.620 --> 00:24:25.620 But how are the people themselves to be the watchmen? To this ancient problem Mill provided what is by now a standard answer in the Western world, 209 00:24:25.620 --> 00:24:33.620 by all the people electing representatives to do the watching. 210 00:24:33.620 --> 00:24:41.620 Unlike the French libertarian analysts, James Mill was not interested in the history and development of state power. 211 00:24:41.620 --> 00:24:45.620 He was interested only in the here and now. 212 00:24:45.620 --> 00:24:51.620 And in the here and now of the England of his day, the ruling few were the aristocracy, 213 00:24:51.620 --> 00:25:13.620 The English aristocracy was the ruling class. The government of England, Mill charged, was an aristocratical engine, wielded by the aristocracy for their own benefit. 214 00:25:13.620 --> 00:25:31.620 Mill's son and ardent disciple at that time, John Stewart, argued in a million manner in debating societies in London that England did not enjoy a mixed government, since a great majority of the House of Lords was chosen by 200 families. 215 00:25:31.620 --> 00:25:47.620 These few aristocratic families therefore possess absolute control over the government, and if a government controlled by 200 families is not an aristocracy, then such a thing as an aristocracy cannot be said to exist. 216 00:25:47.620 --> 00:25:57.620 And since such government is controlled and run by a few, it is therefore conducted wholly for the benefit of a few. 217 00:25:57.620 --> 00:26:04.300 It is this analysis that led James Mill to place at the center of his formidable political 218 00:26:04.300 --> 00:26:11.020 activity the attainment of radical democracy, the universal suffrage of the people in frequent 219 00:26:11.020 --> 00:26:14.180 elections by secret ballot. 220 00:26:14.180 --> 00:26:19.580 This was Mill's long-run goal, although he was willing to settle temporarily in what 221 00:26:19.580 --> 00:26:26.480 the Marxists would later call a transition demand for the reform bill of 1832, which 222 00:26:26.480 --> 00:26:30.640 which greatly widened the suffrage to the middle class. 223 00:26:30.640 --> 00:26:37.300 To Mill, the extension of democracy was more important than laissez-faire, for to Mill, 224 00:26:37.300 --> 00:26:44.000 the process of dethroning the aristocratic class was more fundamental, since laissez-faire 225 00:26:44.000 --> 00:26:50.160 was one of the happy consequences expected to flow from the replacement of aristocracy 226 00:26:50.160 --> 00:26:53.280 by the rule of all the people. 227 00:26:53.280 --> 00:27:00.480 In the modern American context, Mill's position would aptly be called right-wing populism. 228 00:27:00.480 --> 00:27:07.520 Placing democracy as their central demand led the million radicals in the 1840s to stumble 229 00:27:07.520 --> 00:27:13.480 and lose political significance by refusing to ally themselves with the anti-corn law 230 00:27:13.480 --> 00:27:19.460 league, despite their agreement with its free trade and laissez-faire. 231 00:27:19.460 --> 00:27:25.600 For the millions felt that free trade was too much of a middle class movement and detracted 232 00:27:25.600 --> 00:27:31.460 from an overriding concentration on democratic reform. 233 00:27:31.460 --> 00:27:37.320 Granted that the people would displace aristocratic rule, did Mill have any reason for thinking 234 00:27:37.320 --> 00:27:41.820 that the people would then exert their will on behalf of laissez-faire? 235 00:27:41.820 --> 00:27:46.320 Yes, and here his reasoning was ingenious. 236 00:27:46.320 --> 00:27:52.200 While the ruling class had the fruits of their exploitative rule in common, the people were 237 00:27:52.200 --> 00:27:54.520 a different kind of class. 238 00:27:54.520 --> 00:27:59.760 Their only interest in common was getting rid of the rule of special privilege. 239 00:27:59.760 --> 00:28:05.280 Apart from that, the mass of the people have no common class interest that they could ever 240 00:28:05.280 --> 00:28:09.160 actively pursue by means of the state. 241 00:28:09.160 --> 00:28:14.460 Furthermore, this interest in eliminating special privilege is the common interest of 242 00:28:14.460 --> 00:28:21.120 of All, and is therefore the public interest, as opposed to the special or sinister interests 243 00:28:21.120 --> 00:28:22.840 of the few. 244 00:28:22.840 --> 00:28:28.720 The interest of the people coincides with universal interest and with laissez-faire and liberty 245 00:28:28.720 --> 00:28:30.940 for all. 246 00:28:30.940 --> 00:28:38.260 But how then explain that no one can claim that the masses have always championed laissez-faire, 247 00:28:38.260 --> 00:28:45.100 that the masses have all too often loyally supported the exploitative rule of the few. 248 00:28:45.100 --> 00:28:50.740 Clearly because the people in this complex field of government and public policy have 249 00:28:50.740 --> 00:28:56.540 suffered from what the Marxists would later call false consciousness and ignorance of 250 00:28:56.540 --> 00:28:59.860 where their interests truly lie. 251 00:28:59.860 --> 00:29:06.220 It was then up to the intellectual vanguard, to Mill and his philosophic radicals, to educate 252 00:29:06.220 --> 00:29:12.300 and organize the masses so that their consciousness would become correct and they would then exert 253 00:29:12.300 --> 00:29:20.560 their irresistible strength to bring about their own democratic rule and install laissez-faire. 254 00:29:20.560 --> 00:29:26.260 Even if we can accept this general argument, the million radicals were unfortunately highly 255 00:29:26.260 --> 00:29:32.840 over-optimistic about the time span for such consciousness-raising, and political setbacks 256 00:29:32.840 --> 00:29:40.280 in the early 1840s led to their disillusionment in radical politics and to the rapid disintegration 257 00:29:40.280 --> 00:29:46.800 of the radical movement. Curiously enough, their leaders, such as John Stuart Mill and 258 00:29:46.800 --> 00:29:53.040 George and Harriet Grote, while proclaiming their weary abandonment of political action 259 00:29:53.040 --> 00:30:00.240 or political enthusiasm, in reality gravitated with astonishing rapidity toward the cozy 260 00:30:00.240 --> 00:30:17.440 3. 261 00:30:17.440 --> 00:30:23.780 Mill and the Ricardian System Much has been recently revealed about James 262 00:30:23.780 --> 00:30:29.440 Mill's formative and shaping role over his friend Ricardo's system. 263 00:30:29.440 --> 00:30:36.340 How much of Ricardianism is really Mill's creation? Apparently a great deal. One thing 264 00:30:36.340 --> 00:30:43.480 is certain. It was Mill who took from J. B. Say the great Say's Law and converted Ricardo 265 00:30:43.480 --> 00:30:50.660 to that stand. Mill had developed Say's Law in his important early book Commerce Defended 266 00:30:50.660 --> 00:30:58.980 1808, written shortly before he met Ricardo. Ricardo faithfully followed Say's law, and 267 00:30:58.980 --> 00:31:05.100 while in Parliament consistently opposed expenditure on public works during the depressed year 268 00:31:05.100 --> 00:31:12.660 of 1819. And we have seen that Mill and Ricardo together managed to kill the publication of 269 00:31:12.660 --> 00:31:18.880 Bentham's pre-Keynesian True Alarm in 1811. 270 00:31:18.880 --> 00:31:25.200 In expounding Say's law, Mill was carrying on and developing the important Turgot-Smith 271 00:31:25.200 --> 00:31:28.920 insights on saving and investment. 272 00:31:28.920 --> 00:31:33.680 But most of the rest of Mill's economic legacy was a disaster. 273 00:31:33.680 --> 00:31:38.120 Much of it was the heart and soul of the Ricardian system. 274 00:31:38.120 --> 00:31:46.060 Thus in a forgotten early work, The Impolicy of a Bounty on the Exportation of Grain, 1804, 275 00:31:46.060 --> 00:31:52.220 Mill sets forth the essence of Ricardianism from the actual content to the characteristic 276 00:31:52.220 --> 00:32:00.420 disastrous methodology of brutal and unrealistic oversimplification, and to a holistic concentration 277 00:32:00.420 --> 00:32:07.140 of unsound macro-aggregates unrelated to the actions of the individual, whether consumer 278 00:32:07.140 --> 00:32:10.740 or businessman, in the real world. 279 00:32:10.740 --> 00:32:17.340 People churns out chunks of alleged interrelations between these macro-aggregates, all seeming 280 00:32:17.340 --> 00:32:23.900 to be about the real world, but actually relevant only to deeply fallacious assumptions about 281 00:32:23.900 --> 00:32:28.260 the never-never land of long-run equilibrium. 282 00:32:28.260 --> 00:32:34.600 The methodology is essentially verbal mathematics, since the statements are only the implicit 283 00:32:34.600 --> 00:32:41.480 churning out of what are really mathematical relations, but are never admitted as such. 284 00:32:41.480 --> 00:32:47.900 The use of the vernacular language adds a patina of pretend realism that mathematics 285 00:32:47.900 --> 00:32:50.280 can never convey. 286 00:32:50.280 --> 00:32:55.440 An open use of mathematics might at least have revealed the fallacious assumptions of 287 00:32:55.440 --> 00:32:58.200 the model. 288 00:32:58.200 --> 00:33:04.080 Ricardo's exclusive concern with long-run equilibria may be seen from his own declaration 289 00:33:04.080 --> 00:33:11.920 of Method. I put those immediate and temporary effects quite aside and fixed my whole attention 290 00:33:11.920 --> 00:33:17.960 on the permanent state of things which will result from them. 291 00:33:17.960 --> 00:33:24.480 Unrealistic oversimplification compounded upon itself is the Ricardian vice. Both the 292 00:33:24.480 --> 00:33:31.220 Ricardian and the say Austrian methodology have been termed deductive, but they are really 293 00:33:31.220 --> 00:33:33.300 pulls apart. 294 00:33:33.300 --> 00:33:40.500 The Austrian methodology, praxeology, sticks close in its axioms to universally realistic 295 00:33:40.500 --> 00:33:47.260 common insights into the essence of human action, and deduces truths only from such 296 00:33:47.260 --> 00:33:51.900 evidently true propositions or axioms. 297 00:33:51.900 --> 00:33:58.540 The Ricardian methodology introduces numerous false assumptions, compounded and multiplied 298 00:33:58.540 --> 00:34:04.780 into the initial axioms, so that deductions made from these assumptions, whether verbal 299 00:34:04.780 --> 00:34:11.440 in the case of Ricardo, or mathematical in the case of the modern Valrassians, or a blend 300 00:34:11.440 --> 00:34:18.900 of both as in the Keynesians, are all necessarily false, useless and misleading. 301 00:34:18.900 --> 00:34:26.700 Thus, in his essay on a bounty on grain, James Mill introduces the typically Ricardian error 302 00:34:26.700 --> 00:34:34.780 The power of melding all agricultural commodities into one, corn, that is, wheat, and claiming 303 00:34:34.780 --> 00:34:38.860 corn to be THE basic commodity. 304 00:34:38.860 --> 00:34:44.700 With corn now adopted as a surrogate for all food, Mill makes the sweeping statement that 305 00:34:44.700 --> 00:34:51.820 the most scientific principle of political economy is that the money price of corn regulates 306 00:34:51.820 --> 00:34:54.940 the money price of everything else. 307 00:34:54.940 --> 00:34:56.580 Why? 308 00:34:56.580 --> 00:35:03.060 Here Mill introduces a typically and brutally drastic variant of Malthusianism. 309 00:35:03.060 --> 00:35:10.060 Not just that there is a long-run tendency for population to press on the means of subsistence 310 00:35:10.060 --> 00:35:16.580 so that wage rates are pushed down to the cost of subsistence, but more, in a typically 311 00:35:16.580 --> 00:35:25.000 Ricardian confusion of the non-existent long-run equilibrium with constant everyday reality, 312 00:35:25.000 --> 00:35:33.040 that wage rates are always set by the price of corn, a surrogate for food or subsistence 313 00:35:33.040 --> 00:35:35.000 in general. 314 00:35:35.000 --> 00:35:41.400 Mill lays down the proposition that wage rates are always set directly by the price of corn 315 00:35:41.400 --> 00:35:47.560 as so obviously necessary that we need spend no more time proving it. 316 00:35:47.560 --> 00:35:49.680 That takes care of that. 317 00:35:49.680 --> 00:35:55.560 He concludes, therefore, that the wage rate is entirely regulated by the money price of 318 00:35:55.560 --> 00:35:57.760 corn. 319 00:35:57.760 --> 00:36:03.300 Mill's extreme version of Malthusianism can be seen in his statement that no one will 320 00:36:03.300 --> 00:36:09.640 hesitate to allow that the tendency of the species to multiply is much greater than the 321 00:36:09.640 --> 00:36:16.640 rapidity with which there is any chance that the fruits of the earth will be multiplied. 322 00:36:16.640 --> 00:36:24.360 Mill even goes so far, in wild extremes, as to say that, raise corn as fast as you please, 323 00:36:24.360 --> 00:36:31.560 mouths are producing still faster to eat it. Population is invariably pressing close upon 324 00:36:31.560 --> 00:36:38.240 the heels of subsistence, and in whatever quantity food be produced, a demand will always 325 00:36:38.240 --> 00:36:43.080 be produced greater than the supply. 326 00:36:43.080 --> 00:36:50.600 Another unfortunate notion contributed to Ricardo by Mill in his 1804 essay is an overriding 327 00:36:50.600 --> 00:36:56.200 focus on the behavior of a few aggregate macro shares. 328 00:36:56.200 --> 00:37:03.480 Labor was assumed to be of uniform quality, therefore all wages were pushed down to subsistence 329 00:37:03.480 --> 00:37:06.480 level by the price of corn. 330 00:37:06.480 --> 00:37:15.520 There are only three macro-distributive shares—wages, profits and rents in the Ricardian scheme. 331 00:37:15.520 --> 00:37:21.900 There is no discussion whatever of individual prices or wage rates, the proper concern of 332 00:37:21.900 --> 00:37:28.600 economic analysis, and no hint of the existence of or the need for the entrepreneur. 333 00:37:28.600 --> 00:37:35.280 Say's brilliant analysis of the entrepreneur's central role is completely forgotten. 334 00:37:35.280 --> 00:37:43.000 There is no role for a risk-bearing entrepreneur if all is frozen into a few aggregative chunks 335 00:37:43.000 --> 00:37:50.360 in long-run equilibrium, where change is slow or non-existent and knowledge is perfect rather 336 00:37:50.360 --> 00:37:52.320 than uncertain. 337 00:37:52.320 --> 00:37:58.500 Profits therefore are the net returns aggregatively received by capitalists, which could well 338 00:37:58.500 --> 00:38:03.420 be called interest or long-run profits. 339 00:38:03.420 --> 00:38:11.180 If wages, profits and rents exhaust the product, then, tautologically and virtually by definition, 340 00:38:11.180 --> 00:38:18.000 if one of the three increases and the total is frozen, one or both of the other shares 341 00:38:18.000 --> 00:38:26.260 must fall, hence the implicit Ricardian assumption of inherent class conflict between the receivers 342 00:38:26.260 --> 00:38:30.360 of the three blocks of distributive shares. 343 00:38:30.360 --> 00:38:38.000 In the mill-ricardian system, wages are fixed by the price of corn, or the cost of food. 344 00:38:38.000 --> 00:38:43.640 The cost of food, for its part, is always increasing because of the fixed supply of 345 00:38:43.640 --> 00:38:50.460 land and the alleged Malthusian necessity to move to ever less productive land as the 346 00:38:50.460 --> 00:38:54.880 population increases and presses on the food supply. 347 00:38:54.880 --> 00:39:02.720 Thus, rents are always slowly but inexorably increasing, and money wage rates are always 348 00:39:02.720 --> 00:39:08.080 rising in order to maintain the real wage at subsistence level. 349 00:39:08.080 --> 00:39:14.640 Therefore, hey presto, aggregate profits must always be falling. 350 00:39:14.640 --> 00:39:22.080 Schumpeter's blistering critique of the Ricardian system is highly perceptive and perfectly apt. 351 00:39:22.080 --> 00:39:30.800 He, Ricardo, cut that general system of economic interdependence in the market to pieces, bundled 352 00:39:30.800 --> 00:39:37.040 up as large parts of it as possible in cold storage, so that as many things as possible 353 00:39:37.040 --> 00:39:40.000 should be frozen and given. 354 00:39:40.000 --> 00:39:46.700 He then piled one simplifying assumption upon another, until, having really settled everything 355 00:39:46.700 --> 00:39:52.160 According by these assumptions, he was left with only a few aggregative variables between 356 00:39:52.160 --> 00:39:58.860 which, given these assumptions, he set up simple one-way relations, so that, in the 357 00:39:58.860 --> 00:40:03.680 end, the desired results emerged almost as tautologies. 358 00:40:03.680 --> 00:40:10.460 For example, a famous Ricardian theory is that profits depend upon the price of wheat, 359 00:40:10.460 --> 00:40:16.020 and upon his implicit assumptions, and in the particular sense in which the terms of 360 00:40:16.020 --> 00:40:22.460 While the proposition are to be understood, that is not only true, but undeniably, in 361 00:40:22.460 --> 00:40:25.420 fact, trivially so. 362 00:40:25.420 --> 00:40:31.580 Profits could not possibly depend upon anything else, since everything else is given, that 363 00:40:31.580 --> 00:40:33.420 is, frozen. 364 00:40:33.420 --> 00:40:38.660 It is an excellent theory that can never be refuted and lacks nothing save sense.