Combining commercial success with philanthropy and social activism, ‘Quakernomics’ offers a compelling model for corporate social responsibility in the modern world. Mike King explores the ethical capitalism of Quaker enterprises from the eighteenth to the twentieth centuries, testing this theory against those of prominent economists. With a foreword by Sir Adrian Cadbury, this book proves that the Quaker practice of ‘total capitalism’ is not a historically remote nicety but an immediately relevant guide for today’s global economy.
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Mike King is an independent researcher and writer with wide-ranging expertise.
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An Ethical Capitalism
By Mike King
Wimbledon Publishing CompanyCopyright © 2014 Mike King
All rights reserved.
QUAKERS AND COMMERCE
There are many excellent books on the early Quakers, which naturally focus on their religious beliefs, the religious and political turmoil of the period, and the emergence of George Fox as the preacher who founded the movement. Here I will simply draw out the key characteristics which were to shape the Quakers as ethical and highly successful industrialists and financiers (with occasional exceptions: they were, after all, only human).
The personality of George Fox (1624–1691) is no doubt the key to these characteristics. Fox was born into a Protestant family that had known persecution. His father was a weaver. George was taught to read and write and was apprenticed to a shoemaker and trader in sheep. His father did well and left Fox some money, so we can say that he had a rounded background as an artisan, a husbandman, a man used to ordinary people and also to trade and the proper investment of money. He has been described as 'more prosperous than all but a handful of his contemporaries' – perhaps an exaggeration, but indicative at least that he was no stranger to money and its ways. As the movement he founded became a force in British religious and political life, so too it became persecuted. The key problem for the Quakers lay in Fox's insistence that all are equal before God and that priests and churches make religiously unacceptable claims on the people – in particular the claim to deference and the claim for tithes. Under Cromwell the Quakers were protected to some degree, but with the Restoration in 1660, which brought both the monarchy and the Church of England back to power, persecution was brutal. Fox himself was often imprisoned, and his astonishing and robust vitality finally broken in Launceston Castle in 1656, even before the worst of persecutions visited on his followers.
To this day Quakers have a standing executive called 'Meeting for Sufferings', a name going back to that period of the seventeenth century when Quakers would meet to record in minute detail the persecution of their members and the action they would take to support those beaten and imprisoned and their families. Their solidarity and record keeping – initiated by Fox and Margaret Fell – were crucial to their initial survival and growth as a movement, and later became central to their business success. Margaret Fell, wife of Justice Thomas Fell, was 'convinced' (the Quaker term for conversion) early on by Fox, wrote many important Quaker tracts (one of which is believed to have been translated into Latin by Spinoza), and brought to the movement her husband's knowledge of the law. She married Fox after the death of Fell. This keen interest in the law – and the abiding by it – was also an important element in Quaker business success, and also, of course, in their efforts to change or introduce laws such as those that led to the abolition of slavery.
The scattering of Quakers across the country, away from large centres like London, prompted much letter-writing, including by Fox, whose lengthy journal includes extracts from much of his voluminous correspondence. Quakers also had a keen interest in science and the emerging patterns of thought now termed the Enlightenment, which fed in turn into an interest in education and the creation of Quaker schools round the country and abroad. To this day many prominent non-Quakers speak of their exceptional education in Quaker schools, and it is notable, for example, that the eminent Palestinian peace-maker and negotiator for the PLO, Hanan Ashrawi, was educated at the Quaker school in Ramallah. Edmund Burke, the Irish statesman and philosopher, was also educated at a Quaker school, in a pattern typical of many outstanding individuals who were not themselves Quakers.
The refusal of Quakers to swear oaths, and the many other characteristics that placed them beyond the Church of England – more so than almost any other sect – led to them facing obstacles to many livelihoods and positions of public office. The Corporation Act of 1661 for example prevented their election to any position in local government or corporations. They were thus excluded, not just from the professions, but also from the universities. In so-called corporate towns it was not possible to carry on most trades without being a freeman of the corporation, as it was known, and to do that one had to swear oaths of loyalty. Hence Quakers flocked to non-corporate towns like Birmingham. Of course non-conformists of all stripes experienced the same problems, so Birmingham attracted such men as Priestley, Watt, Boulton, Keir and Wedgwood, which group created the Lunar Society for scientific and philosophical discussion and exchange of information: a 'college' of intellectuals operating outside of the conventional system. Quakers were very much involved with groups like this.
Quakers rejected priests and churches, hymn-books and ritual. Their meetings for worship had no structure other than silence and the 'ministries' of those moved in that silence to speak of the inner light, as they called it. 'Meeting' with a capital 'M' became the term for the community at different levels, a structure later formalised as Local Meeting, Monthly Meeting (now Area Meeting) and Yearly Meeting. Meeting Houses were built, an expression of the Puritan rejection of art and icon, and in time the grand Meeting House in Euston, London was built as the UK centre for the Quaker movement.
James Walvin, in his book on the Quakers and their business ethics, tells us, 'Of all the heirs of the Puritan Revolution who survived into the eighteenth century, the Quakers were perhaps the most conspicuous.' While many non-conformists played a significant role in the Industrial Revolution, we will see that there is no single group as large or as consistent in its contribution – or indeed as conspicuous. Quakers looked different, and did not take their hats off. That alone led to countless attacks in the early days of their persecution. The characteristics that made them flourish included literacy, education, solidarity, equality and the yeoman instinct for hard work, thrift, husbandry ... and growth. The Quaker Business Method – a method for reaching decisions that has nothing to do with commerce – and the insistence on the acting out of conscience gave both the ethical background and a powerful group dynamic to Quaker enterprises. The ethics of the Quakers are summed up in their four 'Testimonies': Peace, Equality, Truth and Simplicity. These derive directly from George Fox's teachings, but they are also those of the Christian tradition of Christ and St Paul. However, as I hope to establish, no other single identifiable religious group in history has applied these so extensively to economic activity.
Economic Activity, Social Justice and Capitalism
In the vast literature on economics the nature of economic activity itself sometimes gets lost, or its characteristics taken for granted. By exploring the history of the Quaker enterprises we gain a vivid insight into the very nature of economic activity, that fundamental exchange of goods and services between people most often mediated through money. I define 'Quakernomics' here to be the economic activity of the Quakers, a well-documented practice of commerce, rather than a theoretical system. However, as we investigate this practice, we can test it against existing economic theories. Crucially, we are looking at how Quakernomics embodies principles of social justice, or more specifically, economic justice. We will see that the Quakers were at the heart of developments in industrial capitalism, a system that in its early days produced some spectacular and appalling examples of social injustice. To what extent were Quakers responsible for this or to what extent did they mitigate the worst effects of the Industrial Revolution, or even use it for progressive social ends?
I am using the term 'industrial capitalism' here to indicate that capitalism in a broader sense had been around a long time before the Industrial Revolution, and that its character was greatly changed by industry, meaning such things as factories, steam power and modern transport and communications. Early Quakers were often merchants, who are capitalists without necessarily requiring the methods of industrial production as the background to their trading. What they do need is capital. The work ethic of the Quakers and their simplicity of speech and life quickly led to prosperity and property, and that property soon included ownership of the industrial base of factories and transport and their financial underpinnings through banking. In other words, despite the almost otherworldliness of their conscience and spiritual practices, the Quakers were instinctive capitalists. To some sensitive ears, perhaps inclined to romantic or socialist literature, the term 'capitalism' is vaguely offensive, and cannot be associated with any good in the world. We need then some definition of capitalism as a starting point for the consideration of the Quaker businesses. In examining the various definitions put forward I prefer to start with this bare minimum:
Capitalism is the investment of a surplus for a return.
Socialists might insist that one insert the word 'private' before the word 'return', to indicate that profits accrue to individuals – capitalists – and not the community, and clearly this will be a central issue in Quakernomics. But this basic definition of capitalism can be adapted to cover major variants, such as the Soviet system, and the European post-war nationalised industries. In the Soviet economy capital – a surplus – had to be found just as in Western economies, in order to build the factories necessary for industrial production. This capital was extracted from the social order by central planning, and devoted to projects chosen by central planning, and the returns so created distributed to the people through central planning. The nationalised industries in post-war capitalist Europe were in principle not much different. In each case an existing surplus has to be taken from hoarding or circulation and devoted to buildings, machinery, stock, wages and distribution in order to produce goods for consumption.
In Quakernomics the existing surplus, or capital, was privately raised by Quakers, was privately invested in privately owned factories or banks, and the resulting returns privately held. There was nothing recognisably socialist in any of this. It was classical capitalism. So where was the economic justice in it? Where is the ethics in it?
Perhaps one of the most useful terms introduced or made popular by Marx in relation to economic justice is 'means of production'. It indicates the necessary natural or man-made resources whereby a person can sustain life and support a family, and it is of course a central Marxist contention that these means of production should be 'returned' to the worker. In considering the nature of the means of production, and who has control over them, we get to the heart of many issues in economics. We will see that as the Quakers moved from a predominantly farming background, in which they clearly owned their means of production as pre-industrial smallholders, to the position of traders and industrialists, they become the owners of the means of production for thousands, and collectively hundreds of thousands, of dependent workers.
When people own their own means of production, whether in the most basic form in a smallholding producing the bulk of food requirements for a family, or in small cottage industries, they are clearly more politically free than when their entire labour is expended via the means of production owned by an industrialist, such as in a factory. The history of economic development is that of this mass movement from self-reliant control over one's immediate means of production to the indebted reliance on the factory or land owner. The ethics of this are clear: once it is impossible for a family to own their immediate means of production, the owners of such means have various ethical obligations to their workers. The history of Quaker businesses demonstrates the keen sense of that obligation.
Thomas Paine, in his 1795 pamphlet Agrarian Justice, pointed out that the Native American knew nothing of the wretchedness experienced by a whole swath of humanity under so-called civilisation – the part generally called the working poor. Those who lived by hunting and gathering didn't know affluence either, but the issue was that the agricultural methods of civilisation could support ten times the population of the hunter-gatherer ... but only some of them in great affluence. One could not reverse civilisation in the pursuit of an end to wretchedness, but one could compensate the ordinary person for the loss of their birthright, that is land. Paine says:
It is a position not to be controverted that the earth, in its natural uncultivated state was, and ever would have continued to be, the common property of the human race. In that state every man would have been born to property. He would have been a joint life proprietor with the rest in the property of the soil, and in all its natural productions, vegetable and animal.
With the Enclosures Acts, colonisation and other means whereby the ordinary person is deprived of access to land an injustice is created. On this basis Paine believed that every owner of cultivated land 'owes to the community a groundrent'. No original right to property can be discerned in history: land was always cultivated by collective human labour. He says however: 'The value of the improvement so far exceeded the value of the natural earth, at that time, as to absorb it; till, in the end, the common right of all became confounded into the cultivated right of the individual.' Hence the system of landed property throws everybody else 'out of their natural inheritance.' The unlanded person has no immediate means of production. Paine's solution to this injustice? To pay every person, at the age of 21, the sum of £15, to be taken from a national fund.
Paine's solution has never been attempted, but his arguments identify a source of economic injustice. In the days of their persecution the Quakers suffered the 'distrainment' of their lands and goods as a punishment that often deprived them of their means of production. Quakers who were farmers were driven off, not by Enclosures Acts, but because they refused to pay tithes. In other cases magistrates punished Quakers by confiscating workmen's tools. Hence Quakers found themselves in the position of the majority under what Paine calls 'civilisation' – without a livelihood. Like so many others this meant a drift into towns and cities where employment was offered, but in the case of Quakers, they rapidly became the employers. Quakers, as originally merchants and yeomen, were used to being 'landed', that is to having private property, and, as they became wealthy industrialists and bankers, the extent of that property raises this question of economic injustice for their employees. Crucial to this, particularly as the Industrial Revolution was underway, is the problem of low or subsistence wages. We shall later use this issue as a touchstone for exploring the ideas of key economists from the eighteenth century to now.
The Protestant Work Ethic: Weber and Tawney
This is a book about economics, not religion. Ethically practiced economics is not just the preserve of the religious, and neither is unethically practiced economics the preserve of the godless. If the ideas of Quakernomics are not transferable to non-religious groups then there is little point to this book. But, in considering the history of Quaker businesses, we have to consider the role of religion from time to time, especially as it may have had a formative role in the Industrial Revolution itself.
Excerpted from Quakernomics by Mike King. Copyright © 2014 Mike King. Excerpted by permission of Wimbledon Publishing Company.
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Table of Contents
Foreword by Sir Adrian Cadbury; Acknowledgements; Introduction; PART I: BACKGROUND; Chapter 1: Quakers and Commerce; Chapter 2: Industrial Capitalism; Chapter 3: Contrasting Cultures in 1845; PART II: THE QUAKER ENTERPRISES; Chapter 4: The Darbys of Coalbrookdale; Chapter 5: Quakers in Light and Heavy Industry; Chapter 6: Quakers in Science, Chemicals and Pharmaceuticals; Chapter 7: Quakers in Foodstuffs and Luxuries; Chapter 8: Quakers in Trading, Banking and Finance; Chapter 9: Quakers in Culture; Chapter 10: The Quaker System; ILLUSTRATIONS: QUAKER TRACES IN LONDON; PART III: QUAKERS, SOCIETY AND SOCIAL JUSTICE; Chapter 11: Quakers in Public Life; Chapter 12: Industrial Welfare and Quaker Lapses; Chapter 13: Quakers and Other Ethical Capitalists; PART IV: INDUSTRIAL ETHICS AND ECONOMIC THOUGHT; Chapter 14: From Mercantilism to Marshall; Chapter 15: Karl Marx; Chapter 16: George, Veblen and Schumpeter; Chapter 17: The Austrian School; Chapter 18: Keynes, Tawny and Galbraith; Chapter 19: Economics in Fiction; Chapter 20: Ayn Rand; Chapter 21: Milton Friedman; Chapter 22: Quakernomics and the Credit Crunch; Chapter 23: Quakernomics and Economic History; PART V: CONCLUSIONS; Chapter 24: Ethical Capitalism; Notes; Index
What People are Saying About This
‘Fascinating, highly relevant and opportune, this book is a powerful exploration of history showing how ethical behaviour has been – and can be – an effective route to wealth creation and growth.’ —Carlota Perez, author of ‘Technological Revolutions and Financial Capital’ and Centennial Professor at the London School of Economics
‘“Quakernomics” presents a refreshing new way of thinking about economic activity, one which links the pursuit of profit with social justice.’ —David Vogel, Haas School of Business, University of California, Berkeley