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“It ain’t so much the things we don’t know that get us into trouble as the things we do know that ain’t so.” – Mark Twain (attributed)

What’s the one thing everyone knows about capitalism?  Why, that it started out as a mean, nasty tool of greedy industrialists. “The Industrial Revolution,” we all learned, was a terrible Moloch that devoured children, put profits before people, and though it made great fortunes (or, perhaps, partly because it made great fortunes), was a wicked development. The Industrial Revolution, we’ve all be taught, was the original sin of capitalism, necessary, perhaps (perhaps) to prime the engine of economic progress, but lamentable nevertheless.

Ask anyone: the Industrial Revolution is a stigma that no amount of societal amelioration can remove. The “factory system,” an integral part of the Industrial Revolution, was an urban nightmare, a Dickensian melodrama in which rural innocence was mauled and blighted in those horrific, unsanitary “Satanic mills” William Blake anathematized.

Once upon a time, before the advent of the factory system, workers enjoyed:

… a passably comfortable existence, leading a righteous and peaceful life and all piety and probity; and their material condition was far better than that their successors. … They did not need to overwork; they did no more than they chose to do. and yet they earned what they needed. They had leisure for healthful work in garden or field, work which, in itself, was recreation for them, and they could take part beside in the recreation and games of their neighbours … [which] contributed to their physical health and vigour. … Their children grew up in fresh country air, and, if they could help their parents at work, it was only occasionally.

Alas, this Eden, as described by Frederick Engels in a fairytale called the condition of the working classes in England in 1844,” was destroyed by the advent of the machine. “The proletariat,” writes Engels “was called into existence by the introduction of machinery:”

The consequences of improvement in machinery under our present social conditions are, for the working-man, solely injurious, and often in the highest degree oppressive. Every new advance things with the loss of employment, want and suffering.

That’s the sad story of capitalism we all imbibed with mother’s milk, or formula. No less an authority than Bertrand Russell has assured us that “the Industrial Revolution caused unspeakable misery both in England and in America. I do not think any student of economic history can doubt that the average happiness in England and early nineteenth century was lower than it had been hundred years earlier.”

As F. A. Hayek points out in Capitalism and the Historians, an extraordinary collection of essays he edited and published in 1954, “The widespread emotional aversion to ‘capitalism’ is closely connected with this belief that the undeniable growth of wealth which the competitive order had produced was purchased at the price of depressing the standard of life the weakest elements of society.” This picture of economic depredation, notes Hayek, is “one supreme myth which more than any other has served to discredit the economic system [capitalism] to which we owe our present-day civilization.”

When we move from the realm of myth-making to historical truth, however, we see that the Engels-Russell narrative, the narrative upon which we’ve all been battened, is a tissue of exaggerations, misrepresentations, and outright lies. A “careful examination of the facts,” which is what Hayek and his colleagues provide in Capitalism and the Historians (or, to give it its full title, Capitalism and the Historians: A Defense of the Early Factory System and its Social and Economic Consequences), has led to a  “thorough refutation of this belief.”

The refutation is indeed thorough, and I heartily recommend this short bracing volume to anyone still laboring under the impression that “early capitalism” was a moral enormity. Barack Obama, for instance, might have spared himself the embarrassment of his recent speech in Kansas had he taken on board some of what Hayek, T.S. Ashton, Louis Hacker, W.H. Hutt, and Bertrand de Jouvenel have to say in this brisk and fog-dispelling volume.