The relationship between grain prices and wages during the industrial revolution had a significant impact on the economic theories of the time. Lower grain prices led to cheaper bread, which in turn allowed industrial capitalists to pay their workers lower wages that were just enough for them to survive. This concept played a pivotal role in shaping the economic theories that justified wage levels during the industrial era.
Impact of Grain Prices on Wages
Lower grain prices had a direct effect on the cost of living during the industrial revolution. As bread was a staple food, its affordability was crucial for the working class. Industrial capitalists took advantage of the lower bread prices by adjusting workers’ wages accordingly. By keeping wages at a subsistence level, they ensured that their labor costs were minimized, thereby maximizing their profits. This practice was not only common but also supported by prevailing economic theories of the day.
Ricardo’s Iron Law of Wages
David Ricardo, a prominent classical economist, introduced the iron law of wages, which posited that wages naturally gravitate towards a subsistence level. According to this theory, any temporary increase in market wages would lead to a population boom among workers, subsequently increasing the labor supply. The heightened supply would then drive wages back down, potentially even below the subsistence level, leading to malnutrition and disease among workers. This cycle would continue until the labor force reduced enough for the market wage to rise above the natural wage. However, Ricardo’s theory suggested that the economic forces would always pull wages towards the minimum required for subsistence.
Economic Liberalism and Classical Economists
The ideas of economic liberalism were championed by what came to be known as classical economists. These thinkers were among the first to analyze the economics of industrial capitalism critically. Their theories gained popularity in Great Britain and influenced economic practices across Europe. Figures such as Jean Baptiste Say and Frederic Bastiat further modified and expounded upon these ideas on the Continent, contributing to the broader school of thought.
Jeremy Bentham’s Utilitarian Influence
Parallel to the classical economists, Jeremy Bentham, a British philosopher, laid the foundations for another stream of economic liberalism through his utilitarian philosophy. Bentham argued as early as 1789 in his “Principles of Morals and Legislation” that the greatest happiness for the greatest number should be the guiding principle of conduct. This principle influenced economic thinking by suggesting that policies should aim to create the most significant benefit for the most significant number of people, often justifying the pursuit of profit and efficiency seen during the industrial revolution.
Questions for UPSC
1. How did the iron law of wages as proposed by David Ricardo justify the low wage rates during the industrial revolution?
2. In what ways did the economic theories of classical economists align with the interests of industrial capitalists?
3. How might Jeremy Bentham’s utilitarian principles have influenced legislative and economic policies during the industrial era?