The legend of the free labour market

In a piece on the death of liberalism last week, Ed West wrote:

English liberalism….grew out of parliamentary tradition [and] a free market in land and labour…

I wouldn’t normally take issue with a tangential line in an article which was mostly about something else but this idea that there was once a time when this country had free and unregulated markets is a persistent one. I’ll leave someone else to deal with land, if they feel inclined, but when it comes to labour, state intervention in the market is nothing new.

Almost as soon as the feudal laws tying people to the land started breaking down governments began to legislate. The Statute of Labourers in 1351 is usually regarded as the first labour legislation in English Law. It was enacted during the labour shortage after the Black Death and its purpose was to stop workers moving from their home villages to look for work to hold down the price of labour. Economic conditions made it almost impossible to enforce but it set the tone for subsequent labour legislation and common law which, by and large, worked in favour of employers for the next 500 years.

Simon Deakin explains the development of the employment relationship since the middle ages:

[N]ot only is the contract of employment a more recent innovation than many have thought, but….its essential features owe as much to legislation as they do to the common law of contract. The widely-held belief that there was a coherent account of the employment relationship in private law prior to the growth of the social legislation of the welfare state is false, the result of viewing case-law of the eighteenth and nineteenth century through the lens of a later period.

From the standpoint of the 21st century, we look back at the history of work and see it in our own terms. But, although the feudal system disappeared relatively early in English history, the idea that workers were tied to a particular place and a particular lord was a long time dying. Where we think of employers and employees, our forebears thought of masters and servants. Nowadays, we use the word servant to refer to household staff but, until recently, it was a general term for a worker. It was still in common use in the late 19th century. The trade union in the famous Taff Vale case of 1901 was the Amalgamated Society of Railway Servants, which, nowadays, strikes us as a slightly odd name for a union,

From the 16th century until 1875, employment was government my Master and Servant laws dating from the Elizabethan Statute of Artificers but reinforced during the eighteenth and nineteenth centuries by further legislation. As Deakin notes, the original laws contained some degree of protection for workers but this was eroded by the subsequent legislation which, at the same time, increased the penalties for servants.

The important thing to understand about master and servant law, though, is that workers were subject to criminal sanctions for breaches of their contracts while masters were only subject to the civil law. You don’t need to think about that for too long to see the lop sidedness of it. Workers of limited means had to pursue employers through the courts, while employers had the entire law enforcement apparatus of the state at their disposal. As if that wasn’t enough, as Paul Johnson notes:

A master sued by a worker could be a witness in his own defence, but until 1867 a worker prosecuted by an employer could not give any evidence on his own behalf.

Hardly free and equal parties to a contract then. The deck was very much stacked against the employee.

The penalties for breach of contract were harsh. Imprisonment with hard labour, fines and even, on occasion, beatings. Criminal prosecutions under master and servant laws were common, says Johnson, averaging about 10,000 a year in the mid-nineteenth century. These were concentrated among the working classes in the industrial districts, so:

The annual chance of a working-class household suffering criminal prosecution for breach of labour contract lay between 1 in 150 and 1 in 200 – a sufficiently high rate for knowledge of the risk to be well known within working class communities.

Suresh Naidu and Noam Yuchtman studied the master and servant prosecutions during the nineteenth century and found that most were brought for absconding.

The typical goal of a prosecution was to use the threat of incarceration and hard labor to prevent workers from leaving an employer, and to pursue and punish those who were not deterred.

The threat of prosecution was credible; not only were prosecutions common but they were also largely successful.

The use of the word absconding for what we would now describe simply as leaving your employer before your contract is up reflects the attitudes of the time. It shows that the masters, supported by the law, considered their workers to be tied to their boss and to their workplace.

Masters were therefore using the criminal law to reduce wage competition by preventing workers from leaving their employment to look for work elsewhere.

[T]he widespread use of criminal prosecutions suggests that, indeed, employers valued the ability to legally bind workers even in a modern, industrial economy.

The harshest of punishments were only carried out in a minority of cases. Usually workers were ordered back to their masters or were forced to pay compensation for the masters’ losses. After the law was reformed in 1867, fines became more common although, as Naidu and Yuchtman point out, as most of these workers were poor, the effect of a fine may simply have meant that they later ended up in prison for being unable to pay it. Nevertheless, the last two decades of master and servant law seem to have been a little less brutal.

Screen Shot 2014-11-03 at 16.41.28

Fines replaced beatings and imprisonment. The late Victorian period was so much more humane!

When criminal prosecution for breach of contract was abolished in 1875, wages rose. They rose fastest in the areas where there had previously been the most prosecutions. There can be little doubt that the law had done exactly what the masters intended it to do; intimidate workers to the point where they were too scared to leave their employers and find better paid jobs.

Until 1875, then, the imbalance of power between workers and their employers wasn’t just economic; it was legal too. That balance only began to shift towards the end of the 19th century, at first with health and safety laws and later with trade union and employment protection. For most of the period since the middle ages, though, labour law was firmly on the side of the employer.

Those who complain about employment law often say that the government has no business meddling in the labour market. In fact, governments have been meddling in labour markets for almost as long as they have existed.

As Deakin says

One of the most powerful ‘creation myths’ attending current debates is the claim that the social legislation of the welfare state was imposed upon a pre-existing order of private law whose coherence and functioning was thereby undermined.

Close analysis shows that there was no period of laissez faire, during which the labour market was governed by the general precepts of private law.

The myth that there was a time before The Fall, when the state didn’t meddle in the affairs of free men, is persistent, especially on the libertarian right. When it comes to labour law, though, it is just that, a myth. State intervention in the labour market is nothing new. The only aspect that is relatively new is its intervention on behalf of employees.

The pre-20th century labour market was not without its red tape, it’s just that the red tape was used to bind the servants, not the masters.

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11 Responses to The legend of the free labour market

  1. Good post, Rick.

    Hopefully one day the “servants” (workers) will become the masters.

  2. Left Outside says:

    Love stuff like this. Great post, I didn’t know about lots of this legislation.

    You should definitely read The Great Transformation if you haven’t already, if you want more stuff on the planning of the market. http://www2.dse.unibo.it/ardeni/papers_development/KarlPolanyi_The-Great-Transformation_book.pdf

  3. Dave Timoney says:

    It’s worth noting that the law used to govern employment since the Middle Ages was part of a wider institutional and legal framework that sought to govern the behaviour of workers in all aspects of their existence. Though this was retrospectively romanticised as organic community and noblesse oblige, it clearly sprang from the conviction that the lower orders remained essentially chattels if not formally serfs.

    The notion of a clear distinction between “work” and “outside work” is also a relatively recent invention, and one that remained fuzzy in many economic sectors until after WW2 (e.g. agriculture and domestic service). While the neoliberal era has seen “reform” in the cause of employment “flexibility”, this has been paralleled by intrusive social legislation and ideological diktats governing where workers can live (the bedroom tax), how they should behave (strive not shirk), what they should spend their money on (porridge) and even how many children they should have (two at most).

    It should never be forgotten that the idea that “free men” refers to all men (let alone women), is historically wrong. The free have always been a minority of the population, ever since Magna Carta first enshrined their class interests. The state doesn’t meddle in the affairs of free men, nor is it hypocritical in claiming to be in favour of a free labour market – i.e. a market in labour for the benefit of the free. Though we assume that the arrival of electoral democracy has made us all “free”, the truth is that in the eyes of the state that category remains as restricted as ever.

  4. Simon Jones says:

    So when people say UKIP want to take us back to the 50s, they actually mean the 1350s!

  5. John says:

    You had better be careful, Rick.
    If you keep on like this, you may be accused of being a – SHOCK, HORROR!!!! – Socialist !!!!
    Your analysis could be applied to the occupied Palestinian Territories, where Israeli citizens are subject to Israeli civilan law but Palestinians are subject to much harsher and less fair military law.
    I hope you and all your readers have a happy holiday season and a great new year.

    • Rick says:

      John, I’ve been accused of being socialist and even Marxist. I’ve also seen this blog described as neo-liberal and an insight into the thinking of the boss class! Oh, and I’ve also had fascist, though it took about 5 years of blogging before Godwin’s Law kicked in.

      On your more general point, though, I think a lot of conservatives would find these laws abhorrent. It was, after all, Conservative governments that modified the law in 1867 and repealed it in 1875.

      You have a great Christmas too.

  6. Bill Wells says:

    Great summary of history of law of contract up to a certain point. It confirms that all markets needs rules but that when rules are introduced we are in the theory of second best.

    Obviously the Master Servant relationship gave monopoly power on the Master and although the Coase Theorem probably suggested that even with these distorted property rights most trades were acceptable it does mean the regulatory set up allowed exploitation.

    Since then, the move towards promoting equality across the means of exchange by allowing a more optimal balance between (labour) buyer and seller has, I believe allowed a move towards a situation where everone gains from trade. And the promotion of competitive product markets and the introduction of a comprehensive (but not generous) welfare state in the UK reduces the potential for exploitation and monopoly power even more as it allows workers to walk away and either find a job elsewhere or get benefits.

    This reliance on the law of contract in the UK labour market – until relatively recently promoted by both sides of the bargain – is essentially why employment (usually EU) legislation which is based on a different more paternalistic model tends to jar as it tends to allow the development of the sorts of insider-outsider models and segmentation which – in the adversarial industrial relations ethos of the UK tends to cause problems for the ‘outsiders’ who do not benefit from ’employment protection’ and also reduces the amount of employment/trade opportunities that are available and where both sides would benefit from the trade (e.g. jobs of more than 48 hours or jobs with variable hours).

  7. c0ryh0ffman says:

    What is most fascinating to me about this period is that, when you consider that not only could you be prosecuted for leaving your job for a better one (which generated lower aggregate wages and presumably higher aggregate levels of employment) those folks who were unemployed and could not find work were sent to the work houses and churches were outlawed from providing “outdoor relief” to the indigent poor. Yet, despite the fact that the unemployed were turned into slaves, charity was outlawed and employees were prosecuted when they left for higher wages….there were still wild swings of mass involuntary unemployment!

    • Bill Wells says:

      I think it is important to ensure that we align the timing of changes in the regulatory system and a discussion of unemployment. In trying to align these I would commend an excellent book ‘Unemployment and the Economists’ Edited by Bernard Corry.

      Quotes from this suggest that unemployment – or at least the discussion of unemployment by economists – is a relatively recent phenomenon.

      [P5] ‘…it would be wrong to say that discussions of unemployment are central to mainstream classical [basically defined by Professor Corry as 1815-1880] thought…Poverty and its causes and possible remedies did engage the classical literature but their concerns here were mainly with low-eaned incomes – often due to the casualisation of labour – and those incapable of work rather than the unemployed as such.’

      And [P52 by Jose Harris] sums the later period up to the Firs World War even more starkly – ‘One is tempted to deal briskly with theories of unemployment between 1870 and 1914 by saying that there were none. ‘Unemployment’ did ot figure as an explicit problem in any of the great canonical or semi-canonical economic works o the period. It was largely ignored by economists of the historical school, such as Cunningham, Ashley, and W.S. Hewins.’

      There is a question – which I think is also relevent now of whether economists chronicle development in society and politics rather than vice versa – [P6] ‘Much-disputed issues include: how far we can blame this lack of concern on classical macroeconomics with its, implicit at least, assumption of full employment and labour markets that cleared: how far did it mirro economic reality; or how far did it reflect the lack of empirical evidence of the actual facts about labour markets.’

      Harris’ view [P52] is that ‘The word ‘unemployment’ was coined by Marshall almost accidently in 1888, and seems to have rapidly seeped into popular usage [Comment: After the repeal of the Master Servant legislation] …but of the large number of reports, books and articles on the subject which began to pour forth from the mid-1890s none was written by an ‘academic’ professional economist. They came instead from amateurs; Beveridge, Peercy Alden, J.A. Hobsons and J.M. Robertson, none of whom had any serious standing as an economic theorist even though each was quite well-known in some other sphere.’

  8. Pingback: Workers/Servants | petersoc

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