For the next two years, Churchill and Lloyd George, now Chancellor of the Exchequer, formed a partnership that ended, once and for all, “the old Gladstonian tradition of concentrating on libertarian political issues and leaving ‘the condition of the people’ to look after itself.”186 The new president of the Board of Trade did not wait to be sworn in before sitting up an entire night and writing the prime minister a long letter outlining his personal policy wish list. After the briefest of rhetorical flourishes—“Dimly across gulfs of ignorance I see the outline of a policy which I call the Minimum Standard”187—Churchill defined his minimum in terms of five elements and listed them as his legislative priorities: unemployment insurance, disability insurance, compulsory education to age seventeen, public works jobs in road building or state afforestation in lieu of poor relief, and nationalization of the railways.
The recession that followed the panic of 1907 gave Churchill’s proposals immediacy. Unemployment among trade union members, which was 5 percent at the end of 1907, doubled within a year. Alfred Marshall had shown that rising unemployment was usually caused by falling business activity. Now Beatrice demonstrated that unemployment, in turn, was a major cause of poverty. There was, however, no consensus that the government should, or could, intervene. Churchill intended to challenge the conventional wisdom. Aware that what he proposed far exceeded anything Asquith, the prime minister, had in mind, he urged the Liberal government to follow Germany’s example and introduce unemployment and health insurance: “I say—thrust a big slice of Bismarckianism over the whole underside of our industrial system, & await the consequences whatever they may be with a good conscience.”188 He “is definitely casting in his lot with the [cause of] constructive state action,”189 Beatrice exulted, while concluding that “Lloyd George and Winston Churchill are the best of the [Liberal] party.”190 She appreciated Churchill’s “capacity for quick appreciation and rapid execution of new ideas, whilst hardly comprehending the philosophy beneath them.”191
Eventually the whole reform effort was swallowed up by the Liberals’ struggle to wrest the veto from the House of Lords. What is remarkable is how much of it was passed, remarks William Manchester: “Before the ascendancy of Churchill and Lloyd George, all legislative attempts to provide relief for the unfortunate had failed.”192
Webb lost the battle over social insurance, which was far less expensive than direct provision of services. But ultimately she won the war of the welfare state. She and Sidney had provided the rationale for the “assumption by the state of responsibility for an increasing number of services, administered by a growing class of experts, and supported by an expanded apparatus of the state.”193 The Minority Report was one of the first descriptions of the modern welfare state. Lord William Beveridge, the eponymous author of the 1942 Beveridge Plan who worked on The Minority Report as a researcher, later acknowledged that his design for the post–World War II British welfare state “stemmed from what all of us had imbibed from the Webbs.”194
Chapter IV
Cross of Gold: Fisher and the Money Illusion
These dear people, always starting their new experiments in such deadly earnest; taking themselves so seriously; really believing that they are getting better and better, wiser and wiser—certain that they are getting richer and richer—every year, every month, every day . . . Oh! It is fine, Mrs. Webb: it is fine.
—H. Morse Stephens1
“To America . . . when they might go to Russia, India or China. What taste!” a Tory acquaintance sneered when Beatrice and Sidney announced that they were off to New York in the spring of 1898.2 As the putdown implied, the Webbs were traveling not as tourists but social investigators. Nonetheless, Beatrice went on a shopping spree, scooping up “silks and satins, gloves, underclothing, furs and everything a sober-minded woman of forty can want to inspire Americans and colonials with a true respect for the refinements of collectivism.”3 If she was going to tour the world’s social laboratory, she intended to dazzle the locals.
The Americanization of the World did not become a best seller for another year or two, but the Webbs were surely familiar with the views of its author, William Stead, editor of the Pall Mall Gazette. Stead was convinced that Britain’s economic future was tied to its former colony. The two economies were more intertwined than in the eighteenth century, when America was a British dominion, or in the 1860s, when the Union blockade of Southern ports during the American Civil War led to the terrible cotton famine in Lancashire. In the last quarter of the nineteenth century, imperial preferences notwithstanding, Britain imported more raw materials from the United States than from her own colonies.4 The term “American invasion” was coined by British journalists more than half a century before the French revived it in the 1960s.5
In 1902, a London newspaper complained:
The average citizen wakes in the morning at the sound of an American alarum clock; rises from his New England sheets, and shaves with his New York soap, and Yankee safety razor. He pulls on a pair of Boston boots over his socks from West Carolina, fastens his Connecticut braces, slips his Waterbury watch into his pocket and sits down to breakfast . . . Rising from his breakfast table the citizen rushes out, catches an electric tram made in New York, to Shepherds Bush, where he gets into a Yankee elevator, which takes him on to the American-fitted railway to the city. At his office of course everything is American. He sits on a Nebraska swivel chair, before a Michigan roll-top desk, writes his letter on a Syracuse typewriter, signing them with a New York fountain pen, and drying them with a blotting sheet from New England. The letter copies are put away in files manufactured in Grand Rapids.6
William Gladstone, the Liberal prime minister, had long predicted that the United States would inevitably wrest commercial supremacy from Britain. “While we have been advancing with this portentous rapidity,” he observed in 1878, “America is passing us by as if in a canter.”7 In 1870, the most basic yardstick of average living standards, national income (GDP per person), was 25 percent higher in Britain. But for the next thirty years, the most basic measure of an economy’s productive power and the key determinant of the average level of wages, nation income GDP per worker, rose nearly twice as fast in the United States.8 One reason was that British citizens invested more than half their annual savings in America each year, more than at home and many times as much as in neighboring European countries.9 The earnings from these investments added to Britain’s national income in any given year, while the investments themselves enabled American business to modernize. Another reason was that the United States was the chosen destination of more than half of all British and an even larger fraction of Irish emigrants, almost 8 million men, women, and children over three decades. Canada, by contrast, attracted fewer than 15 percent of British emigrants even though its culture felt more “English.”10 Average incomes and living standards in the two countries had converged in the 1890s, prompting Gladstone, the British prime minister, to refer to Britain and the United States as a “momentous” example “to mankind for the first time in history of free institutions on a gigantic scale.”11
The speed with which the United States had transformed itself from a predominantly rural, agrarian society to a predominantly industrial, urban one, and had become the global symbol of economic success, could not help but astonish. When Alfred Marshall toured the country in 1875, farming and, to a lesser extent, mining were the principal sources of American income. By the time the Webbs visited, wages and profits from manufacturing had grown to three times those from agriculture. Between 1880 and 1900, the annual income generated by America’s largest industries quadrupled. Income from printing and publishing in the United States jumped fivefold, machinery and malt whisky, fourfold; iron and steel and men’s clothing, threefold. Electrification, refrigeration, new cigarette making, milling, distilling and other machinery, entirely new industries based on products derived from oil and coal, the extension of rail, and telegraph links to virtually every community produced a revo
lution in the scale, structure, and reach of American firms. Remington (1816), Singer (1851), Standard Oil (1870), Diamond Match (1881), and American Tobacco (1890) were born. The era of mass distribution, mass production, and scientific management—big business, in short—had arrived.12
Beatrice and Sidney were more interested in the machinery of American government than in the operations of American business. Their first stop was Washington, D.C., an unfortunate choice given that the capital was gripped with war fever. An uprising in Cuba, Spanish repression, and the sinking of the USS Maine in Havana Bay, blamed on Spain, had ignited a powerful grassroots movement in favor of military intervention. Prowar sentiment wore down opposition by business and religious leaders and the Republican president, William McKinley. Beatrice and Sidney sat with more than a thousand spectators in the visitors’ gallery of the House of Representatives when President McKinley signaled his change of heart. Beatrice was appalled by the House and unimpressed by the Senate. She formed a more favorable opinion of Teddy Roosevelt, undersecretary of the navy, who was a leading proponent of war. She found his talk “deliciously racy” when he was telling stories of life on a Western ranch, though she was disappointed that he spent most of their lunch “breathing forth blood and thunder” and seemed utterly indifferent to local government, the subject of her next book with Sidney.13
New York did not suit Beatrice any better.
Noise noise nothing but noise . . . In the city your senses are disturbed, your ears are deafened, your eyes are wearied by a constant rush; your nerves and muscles are shaken and rattled in the streetcars; you are never left for one minute alone on the road, whether you travel by ordinary car or Pullman; doors are opened and slammed, passengers jump up and down, boys with papers, sweets, fruits, drinks, stream in and out and insist on your looking at their wares or force you to repel them rudely; conductors shut and open windows; light and put out the gas; the engine bell rings constantly, and now and again the steam whistle (more like a fog-horn than a whistle) thunders out warning of the train’s approach.14
She shared none of Marshall’s or the Americans’ love of technology and the mobility that modern technology implied. Not only the trains and skyscrapers but the “perfectly constructed telephones, skilled stenographers, express elevators, electric signals of all descriptions” left her cold. She was forced to acknowledge the “all-pervading and all-devouring ‘executive’ capacity of the American people” but attributed it to Americans’ ready acceptance of “pecuniary self-interest as the one and only propelling motive.” She quickly decided that a short attention span (“impatience”) was the greatest flaw in the national character and was inclined to think that the speed of travel, of communication, and of American life in general—the “noise, confusion, rattle and bustle”—were merely so much wasted energy. “All this appreciation of mechanical contrivances seems to us a symptom of the American’s disinclination to think beforehand,” she commented.15 She did not connect, as Marshall had, “nervous energy” with the zeal to manage, organize, and get things done or the love of risk with innovation or social mobility.
When Beatrice and Sidney went west a few weeks later, their first stop was in Pittsburgh. At Carnegie Steel, the “vast wealth-producing machine” that eventually became U.S. Steel, she was struck by the extent to which the technology had replaced labor. Henry Clay Frick gave Beatrice a tour of the Homestead, Pennsylvania, steel plant. He told her that Carnegie Steel had tripled its output while cutting the payroll from 3,400 to 3,000 in the space of a few years. She described
acres of shops filled with the most powerful and newest machinery. The place seemed almost deserted by human beings. The great engines, cranes and furnaces were struggling and panting, seemingly without the aid of man. It was only now and again that one espied a man enclosed in a little cabin, swinging midway between the ground and the rafts of the shed, and working some kind of electrical machine whereby millions of horse power was set in motion and directed . . . We gathered that the great technological advances in labour-saving had been made in the past ten years, largely in the application of electric power to work new automatic machinery. The “traveling buggies” which replaced labour in moving the great masses of steel in and out of the rolling mills; the automatic machinery by which a single man swinging on a moving arm, opened the furnace door, lifted out the heated mass of steel, and swung it on to the buggy; and the automatic charging of the furnaces themselves with cradles of scrap steel also by a single man, were all introduced within the last six years.
She shrewdly attributed the phenomenal success of the Carnegie business less to “the mechanical contrivances”—which were accessible to steelmakers anywhere in the world—than to superior management and organization. She noted that all the owners were working members of the privately held firm that displayed “a lavishness towards all the brain-workers,” who were provided with “elegant homes . . . outings to Europe, and endless treatings at home.”16
The city, on the other hand, was
a veritable Hell . . . which combines the smoke & dirt of the worst part of the Black country with the filthy drainage system of the most archaic Italian city. The people are a God-forsaken lot . . . tenements built back to back—crazy wooden structures crammed in between offices 20 stories high, streets narrow & crowded with electric trains rushing through at 20 miles an hour—altogether a most diabolic place with the corruptest of corrupt American governments.17
She saw what Charles Philip Trevelyan had warned her about before she arrived: Andrew Carnegie, whom she called “the reptile,” and other Pittsburgh tycoons may have “given a Park or two, a free library or so,” but had otherwise left the city “severely alone.”18 From Pittsburgh, Beatrice rushed to Chicago, Denver, Salt Lake City, and San Francisco. By the time she sailed to Hawaii on her way to New Zealand and Australia, she was convinced that the rest of the world had very little to learn from America’s social experiment.
Before leaving New York, Beatrice had sought out a number of educators and economists. With the sole exception of Woodrow Wilson, later the president of Princeton University, American academics impressed her unfavorably. After a lunch at Columbia University, she compared one economics professor to “a superior elementary school teacher” and described the campus as “something between a hospital and the London polytechnic.” Yale was nothing more than “a pretty little conventional university.” About the economist who would become the author of the Sherman Antitrust Act, she grumbled that “from his appearance, manner and speech I should have taken him for a pushing and enterprising manager of a store in a Western city.”19
• • •
Irving Fisher, the newest member of the economics faculty at Yale, was by no means mediocre or dull. His eyes sparkled with intelligence, his handshake was firm, he had the build and bearing of an athlete, and his face was boyishly handsome. At thirty years old, he was the only American economic theorist that Cambridge and the rest of England and the Continent took seriously. Alfred Marshall and Leon Walras, the French mathematical economist, considered him a genius.20
Named after Washington Irving, the author of “The Legend of Sleepy Hollow,” Fisher was born in Saugerties, a farming community in New York’s Hudson Valley, two years after the end of the Civil War. His grandfather was a farmer. His father, George Fisher, was a high-minded Evangelical minister. His mother, Ella Fisher, a former pupil of George Fisher’s, was a strong-willed, devout young woman. When Irving was one year old, his father, who had recently graduated from Yale’s divinity school, was offered a pulpit in Peace Dale, Rhode Island.
Peace Dale was a smaller, more picturesque version of Henry James’s imaginary New England mill town in The Ambassadors. Like Woollett, Massachusetts, the town in which Irving Fisher spent his childhood was prosperous, paternalistic, and steeped in New England Evangelicalism. The town’s leading citizen and benefactor was Rowland Hazard III, a Quaker, who had inherited the woolen mills his father had established and had founde
d a chemical company himself. Hazard was considered a progressive employer, having instituted profit sharing for his employees, and, on handing the reins of his business to his sons, he plunged into a second career as a political reformer. One of his daughters, Caroline, eventually became the president of Wellesley College. Hazard built the Congregational church and invited George Fisher to become its first pastor. Thanks to Hazard’s patronage, Irving grew up in a rambling parsonage within sight of the Atlantic among “plain terms” and “honest minds.”21
When Irving was thirteen, his father abruptly left his congregation and his family for a Wanderjahr in Europe, visiting great universities and cathedral towns. When he returned, a spirit of restlessness impelled him to take up temperance with great zeal, and he soon plunged his parish into bitter controversy. When his flock refused to support him, he resigned and moved his family into a cramped tenement in New Haven, Connecticut, where he enrolled Irving in a public school. For two years, the Fisher family relied on relatives for support.
When George Fisher finally found a new pulpit, it was 1,200 miles away on the Missouri-Kansas border. Missouri, Alfred Marshall wrote in 1875, was “full of swamps, negroes, Irishmen, agues, wildly luxuriant flowers & massive crops of . . . Indian corn” and St. Louis was a singularly “unhealthy town.”22 But neither heat nor humidity had deterred waves of migrants from the East who were attracted by rising wheat prices and appreciating farmland. Cameron, Missouri, was a jumble of rail yards, warehouses, feed lots, a few wide streets bordered by large houses, and at least one dozen churches. In the fall of 1883, when George Fisher left New Haven, he expected to send for his wife and younger son the following spring. Irving, now sixteen, went with his father as far as St. Louis, where he was to live with George Fisher’s sister and brother-in-law, a professor at Washington University. Fisher had arranged for his son to finish high school at an elite Congregational preparatory school. His fervent hope was that his gifted older son would attend Yale and ultimately train for the ministry there.