Classical Organizational and Management Theory

Between 1760 and 1860, technological progress, education, and an increasing capital stock transformed England into the workshop of the world. The industrial revolution, as the transformation came to be known, caused a sustained rise in real income per person in England and, as its effects spread, in the rest of the Western world. Historians agree that the industrial revolution was one of the most important events in history, marking the rapid transition to the modern age, but they disagree vehemently about many aspects of the event. Of all the disagreements, the oldest one is over how the industrial revolution affected ordinary people, often called the working classes. One group, the pessimists, argues that the living standards of ordinary people fell, while another group, the optimists, believes that living standards rose.

At one time, behind the debate was an ideological argument between the critics (especially Marxists) and the defenders of free markets. The critics, or pessimists, saw nineteenth-century England as Charles Dickens's Coketown or poet William Blake's "dark, satanic mills," with capitalists squeezing more surplus value out of the working class with each passing year. The defenders, or optimists, saw nineteenth-century England as the birthplace of a consumer revolution that made more and more consumer goods available to ordinary people with each passing year. The ideological underpinnings of the debate eventually faded, probably because, as T. S. Ashton pointed out in 1948, the industrial revolution meant the difference between the grinding poverty that had characterized most of human history and the affluence of the modern industrialized nations. No economist today seriously disputes the fact that the industrial revolution began the transformation that has led to extraordinarily high (compared with the rest of human history) living standards for ordinary people throughout the market industrial economies.

The standard-of-living debate today is not about whether the industrial revolution made people better off, but about when. The pessimists claim no marked improvement in standards of living until the 1840s or 1850s. Most optimists, by contrast, believe that living standards were rising by the 1810s or 1820s, or even earlier.

The most influential recent contribution to the optimist position (and the center of much of the subsequent standard-of-living debate) is a 1983 paper by Peter Lindert and Jeffrey Williamson that produced new estimates of real wages in England for the years 1755 to 1851. These estimates are based on money wages for workers in several broad categories, including both blue-collar and white-collar occupations. The authors' cost-of-living index attempted to represent actual working-class budgets. Lindert's and Williamson's analyses produced two striking results. First, they showed that real wages grew slowly between 1781 and 1819. Second, after 1819, real wages grew rapidly for all groups of workers. For all blue-collar workers--a good stand-in for the working classes--the Lindert-Williamson index number for real wages rose from 50 in 1819 to 100 in 1851. That is, real wages doubled in just thirty-two years.

Other economists challenged Lindert's and Williamson's optimistic findings. Charles Feinstein produced