THE INDUSTRIAL REVOLUTION, PART 4
of Benefit
There are a couple of items, however, that I think I must bring forward. One of them
deals with the question of wages as it relates to men who went to work in the early factories
and mills in England, and of course it has been claimed that they were paid such a very,
very small wage indeed. This is one of the prime areas of contention, I think, and in
In order to understand what the wages actually were, we can't merely state them. We have
to go back and find out what the purchasing power of money was at the time the Industrial
Revolution began. You see, the important thing is to realize that money has no fixed value.
And therefore, it isn't the number of dollars or pounds that you are paid that matters so
so much as what you can buy with it after you get it.
And in order to understand the actual amount of earnings that men working in the Industrial
Revolution period got, we must not just talk in terms of the coins or the money that they
received, we have to talk in terms of what they were able to purchase with whatever it
was that they were paid.
Now to set that matter straight, let me point out that at this time, and we're going back
now to the period of 1760 to 1830, at this time Great Britain was using a coinage system
that was based on pounds, shilling and pence. Most of the money in circulation was metallic.
There were a few paper five-pound notes or notes of larger denomination. Actually they
were very large. The British made five- and ten-pound notes that often had to be folded
over many times before you could put them into your pocket or into a purse. Most of
the money was simply coins. There were some gold coins in circulation. The gold florin
and gold eagles were in use. Much of the coinage was silver, the shilling is a silver piece,
and of course there were not only shillings but there were six penny pieces, some of those were
silver and some copper, and then there are three penny pieces, usually copper, penny and half penny
and even farthing pieces which are also usually copper. So you have a great amount of coinage that
Much of Great Britain did not enjoy anything in the way of a coin wage. Servants, for example,
usually worked for room and board. Apprentices might work for many years without ever being
This will come as a surprise to you, but I can assure you that according to the evidence
we have, if that man were to present his penny at a wayside inn, where he could be admitted
There were some inns that wouldn't even tolerate him coming through the front door.
But if there was an inn that more or less catered to lower class people, and he could
get in there with his one penny, that beggar could buy room and board for a week.
Now, of course you understand he didn't get a private room and maid service and fresh
linens and three meals a day.
On the contrary, he had an opportunity of sleeping on the floor in the common room with
others who could afford such luxury. Also, he would have one meal a day, probably at
noon and undoubtedly consisting of black bread, gruel, and possibly a bit of meat or fish
as the inn could afford. And that would be it. For six or seven days, he could sleep
Keep on the floor, inside, and he would have one meal a day, for one penny. Now, that's
not sumptuous fare. But think of the difference between having that and having nothing. And
that is the condition that preceded the Industrial Revolution. The British people en masse had
nothing. And then suddenly, as industry began to develop, more and more men and women, and
and even children found themselves going to factories and mills and putting in their labor,
and being paid a regular wage. Now that you understand the purchasing power of money, I'm
ready to tell you what the wage rate was. The average wage rate at the time the Industrial
Revolution began, notably 1760, came to about 6 pence a week. Now, in fact, we have a song
to Orbit over the terrible low wage. But actually, when you consider the purchasing power, it
really wasn't that low a wage. Remember that here, at that time, one penny would buy room
and board for a week. What would six pennies buy? Obviously, six pennies would get you
to a better room and probably two or three meals a day and you'd have money left over.
Now that is the kind of purchasing power that was released. I have found a couple of instances
where workers got a little less than that. I found one case where a child was paid three
pence a week. And that's the lowest I've found. Now the average wage, as I've indicated,
was around six pence. But there were many people who got more than that. For skilled
Labor, the industrialists would pay more. And there are stories of workers who got possibly
ten, twelve pence or a shilling or even two shillings even at the beginning of the Industrial
Revolution. A shilling is twelve pence. By the time the Industrial Revolution has gone
up to 1830 and we are beginning to find government intervening, you will find that the wages
have risen to the point where the average worker, instead of getting six pence, is now
getting two shillings, which is the same as twenty-four pence, and many workers are getting
much more than that. In fact, there are some workers getting as high as twenty shillings
a week as opposed to two, depending on their skills. So this whole development in increased
wages occurred before the government got in to regulate wages, and this was done as a
as a result of the natural workings of the laws of supply and demand operating in an
unimpeded marketplace.
So that is actually what happened.
So once more when you take a look at it, you see that the businessmen who have been accused
of every kind of cruelty and every kind of inhuman practice were actually engaged in
doing the best they could.
Now, where do these reports come from that make us feel that the businessman is such
a sub-human, indifferent to human misery type of person? Where does it come from? Well actually
we know. You see, right around 1830, the opposition to the factories and mills, largely engendered
in the pulpit and by writers of the time who were excoriating the entire process, built up to such
a crescendo that a man appeared on the British scene whose name is Michael Sadler who has gone
down in history as a major factor in bringing a number of the conditions supposed to exist in
factories to light. Michael Sadler listened to the reports in his community and talked with his
Mr. Sadler was a respectable citizen. He had had a good education. He was a man of some means, and after listening to all of the reports that he'd heard and hearing his own minister attack the factories and the factory system, so-called, Mr. Sadler and some of his friends went into parliament in London and laid a complaint against the businessmen
and the factory owners, charging them with every kind of malpractice and cruel and inhuman treatment
that you've heard me mention and that you've heard mentioned in books and periodicals.
Parliament, of course, listened to this accusation in amazement, stunned to believe that such
conditions could exist in England. They had no idea that things were as bad as Sadler alleged.
So, they appropriated a sum of money for an investigation, and curiously, they turned
it over to Mr. Sadler to conduct the investigation. Now, there's no doubt that Mr. Sadler meant
well. He set up offices in London, and he sent out into the various districts where
there were factories and mills operating, and he asked people in those districts to
come into his office in London and to give testimony as to the conditions that existed
in the factories in their neighborhoods. And during the entire summer of 1830, I believe
it was, 1830 to 31, people trooped into London and virtually confirmed his worst suspicions.
As a matter of fact, they said many things that were even more colorful than he had supposed.
And he tabulated all of these things, he asked a great many questions, and the people gave
The Theory of Money and Credit
that Mr. Sadler tabulated all through the summer. By the autumn he ran out of money,
and so he caused his report to be published, he gave it to the press, and he gave it to
Parliament, and this is the famous Sadler Report that almost everybody has heard about.
It wasn't until it had been published that the businessmen, the industrialists, the mill
owners and so on, even knew that their factories had been investigated. No one had gone into
to the factories, no one had talked to them. And so, in great alarm, they organized a committee,
and they went in to see Parliament, and they said, how does it happen that we British subjects
have virtually been accused and tried and condemned in the public press, and we haven't
even had a hearing? Nobody's heard our side of the story. What you say about the factories
doesn't apply to our factories. Ours aren't like that. We think that we have a right to
Well, the fact that the businessmen did this created virtually a major scandal, because
Parliament had assumed that Mr. Sadler would check both sides, and this he hadn't done.
This in fact created enough of a scandal so that it reached the ears of King William IV,
the reigning monarch of the time, and William appropriated another sum of money and ordered
a second investigation.
Now this supplemental investigation was placed in the hands of a series of men who were appointed
by the parliament to conduct the investigation. A list of questions was drafted and these
men were sent out into the districts where there were factories. They were called upon
to enter the factories and find out what the conditions were and to interview the employees
who were there. You see it had been discovered that many of the people testifying for Mr.
are computed. By no means is it a whitewash. There are conditions in the factories that,
by our standards, are intolerable. But when you view the conditions that existed prior
to the Industrial Revolutionary period, and then you get the material out of the supplemental
reports, instead of getting a general picture of businessmen engaged in a veritable conspiracy
To exploit their workers and to extract the last ounce of strength out of them that they
could for money, you have quite a different picture. Instead, what you find is the businessmen,
if anything, are being very soft-hearted. Some of them are even building schools so
that the children in their factories can get an education at the expense of the mill owner.
You find recreational facilities being provided in many cases. You find the factories constantly
being re-designed so that conditions will improve, and the businessmen are in the forefront
of trying to bring about these reforms long before Parliament ever got into the act. And
yet today, very few people have ever heard of this supplemental investigation. I hadn't
heard of it myself until a relative few years ago. I had heard about the Sadler Report as
And who hasn't? It is a report that is readily available. Anyone who studies economics, certainly
advanced economics, in our leading universities, is going to be told of and possibly asked
to read the Sadler Report. But the Sadler Report is not true. There is a supplemental
report that refutes it, at least in its major points, and nobody ever heard of this supplemental
Report.
Well, nobody is too strong.
I ran across it one day when I was reading a book entitled The Treatment of Capitalism
by the Historians.
This was a series of essays that was collected by a great economist named Friedrich Hayek.
And in this collection of essays, there is an essay by a Professor William Hutt, who
who at that time was Professor of Economics at the University of South Africa in Cape
Town. And he mentioned the supplemental reports and marveled in his essay that nobody seemed
to pay any attention to them and that they, in essence, refuted the worst charges of the
salary report. Well, I had never heard of these supplemental reports, so I wrote to
Professor Hutt and I asked him if I could get a copy. He informed me that the only copy
The Theory of Money and Credit
go into the British Museum and get a copy made of the supplemental reports. And this
was approved, and we did so, so that we became probably one of the few people, one of the
few institutions in this country to have access to the entire supplemental report, as well
as the satellite report, on microfilm. And when you read these two reports, you can detect
the difference at once.
As a matter of fact, one of the men who claimed, who hailed the Sadler Report as a great breakthrough,
at last the truth was being revealed about the unscrupulousness of the businessmen, one
such man is a man named Friedrich Engels that many people remember because he co-authored
the Communist Manifesto with Karl Marx. I have a book in which Friedrich Engels mentions
the Sattler Report and admits that the Sattler Report is not accurate and apologizes for
Mr. Sattler, saying that, well, after all, Mr. Sattler was a very devoted man and a very
fine gentleman, but you can't really rely on the Sattler Report. And yet even today,
the wage and hour laws in Great Britain and this country, and also the child labor laws
in both places, are based on the Sattler Report, and the Sattler Report has been refuted. It
is not a reliable instrument.
By no means does this mean that working in the factories and mills of England in the
latter half of the 18th century was a bed of roses. It wasn't. Conditions were hard.
The wages were small. And this is always true. Every employee that I have ever met will tell
me that he is deserving of more money than he is getting. I have yet to meet an employee
who doesn't feel that he ought to be making more. I have rarely to meet an employer who
tells me that he is overpaying his people. Or actually, I have run into that. I misstated
it. What I mean is I have rarely found an employer who says that his people are overproducing.
Instead, he will tend to feel that he is overpaying them. And they don't feel that way, but he
and so you have arguments perpetually over the question of the amount of wages that are to be paid.
And of course the proper way to resolve the wage is to put it in the free market on a competitive basis
and let the most skillful earn the greatest wage.
Incidentally, it's sound economics to pay high wages in return for top production.
That's the best kind of a wage you can pay.
The idea that you should be parsimonious in a wage is false. Sometimes the most extravagant
wage you can pay is a low wage that will discourage a worker so that you have a constant turnover
and the constant cost of replacing them. It's much better to pay a good wage to a good worker
and encourage the worker to become a better worker. High wages that are justified is the
and the Sound Economic Practice.
But of course, great many people don't understand that yet, but that is the case.
In any case, getting back to the Industrial Revolution period, what we found was that
the supplemental reports, which give, I think, about as accurate a picture of the conditions
in the factories of England around 1831, 1932 and 1933 as could be obtained, that report
is largely lacking. You can't get a copy unless you're extraordinarily fortunate, and people
don't know about it, and the consequence is they tend to believe the Saddle Report, which
is prevalent and anybody can get a copy of it. Now why is it that when the Supplemental
Report was released, the Saddle Report wasn't immediately dropped? Well, many people have
Supposed that there's some kind of conspiracy here to prevent the publishing of the supplemental
reports.
I don't think so.
Actually, it's the kind of thing that you run into with mass media all the time.
If you've got a story that indicates that a certain class of people are subhuman fiends,
that's going to make headlines.
But if you've got a story that says that these particular people are normal people, that
isn't going to make any headlines.
Of course there was a story relating to the supplemental reports, but it was undoubtedly
buried on page 17 next to an ad. Very few people ever saw it. Meantime, the Sadler Report
got and continues to receive a lot of acclaim, virtually mandatory reading in our colleges
and universities, and very few people indeed have heard of the other report. So it would
be important for you in understanding the Industrial Revolution to get your hands on
On both of these reports, read them both, compare them, and then make your own independent judgment.
What we should have detected, and which of course scholarship really confirms, is that
whenever you begin taking a particular group of people, by race, occupation, religion,
or some other type of grouping, and you attribute to everyone in that group certain characteristics,
Businessmen are not subhuman fiends. Also, they are not geniuses. They are just people.
They are neither better nor worse than you and I. They are just people trying to make
some money and trying to make money by providing goods and services that people will voluntarily
by. They don't mean to be, but it turns out that the businessmen and industrialists are
actually the great benefactors of mankind, not through any altruism on their part, not
through any design to be helpful to people. They're acting quite selfishly. And the curious
thing is, and Adam Smith saw it when he wrote his work, The Wealth of Nations, that the
The better the businessman tends to business and concentrates on producing goods and services
that people will want to buy, in essence, the more selfish he is in trying to amass
his profits, providing that he is working in a free market. Why, the better things are
for everyone. He has to treat his employees well, because otherwise he can't have a
a Profitable Business. He has to therefore supply the right kind of working conditions,
or they can't work productively. He has to see to it that accidents are minimized,
because accidents are a tremendous cost, and drive up the cost factors and reduce the profit
margin substantially. Businessmen have been in the forefront of trying to reduce costs
such as this, in order to hold prices down, in order to supply more goods and services
for more people at lower prices. And this, of course, we should learn if we take and
examine this condition. So the industrial revolution that has been held up to us as
a period of time in which terrible conditions occurred and the human situation worsened
etc., really isn't quite the way it's been painted. It actually took us forward to the
present time. Right now, of course, we are probably on the threshold of a new economic
revolution that may take us into something else, possibly even more exciting than what
we've had before. Because, while you cannot blame the industrialist of being cruel to his
Employees—excepting, of course, on occasion, men are cruel to one another and this would happen.
What you can lay at the feet of the industrialists is altogether too much willingness to cooperate
with the state and to get the power of the state behind them. Now we are moving toward a time when
perhaps we will have an economy that will be in fact a free market economy where the link or the
The marriage between business and industry and the state may be dissolved. It's something to think about.