Quakers & Capitalism: A Brief Recap

September 9, 2011 § 5 Comments

It’s been a while since I published an essay in the Quakers and Capitalism series, in which I’ve been digesting a book in progress, a sketchy and rather schematic history of the influence that Friends and capitalism have had on each other. Because of the piecemeal nature of blog posting, I have found myself losing track of my progress and of the arc of the whole; I imagine my readers may have, too. Also, I had fallen behind in creating pdf files of these postings. Thus, before I go on, I’ve decided to offer a brief (well, medium-sized) recap of the project so far.

I have also finished and reorganized the pdf files for each ‘chapter’ in the book. The summary below has links to the respective files and they are also listed as links on the page labeled Quakers & Capitalism—The Book, accessible from the navigation column to the left of the posts. Reading those pdf files in order will give you the main thread of the book. Note that there are several appendices. I’m not satisfied with their style and formatting—I think they’re ugly, in fact, though properly Quaker plain, I suppose—but I did not want to delay while I experiment with style.

I have divided this history of Quakers and capitalism into three main periods: the 1650s, 1700 to 1900, and the 20th century. These are separated by major periods of transition, periods lasting roughly a generation in which external forces collide with forces within Quakerism to transform both capitalist culture and Quaker culture in a symbiotic relationship. During these periods of transition, Quaker fortunes and their relationship with the world around them completely change. Here’s the sketchy outline, with links to their respective essays:

  • Introduction — Introducing John Bellers as perhaps the second most well-known Quaker in history, a man of extraordinary talent and intelligence who had a tremendous impact on Western culture, yet is almost completely unknown among his own Quaker community. Why? Introducing the idea of cultural amnesia regarding economics among Friends, the almost utter lack of meaningful economic testimony (until very recently, at least), notwithstanding our almost indispensable role in creating and developing the capitalist system, and the need for a ministry of teaching and prophetic examination of Quaker economic history.
  • Quakers & Capitalism — Introduction

    • The 1650s — Early Friends (who were mostly yeoman farmers and small trades people) assail the world order with revolutionary fervor in the Lamb’s War, challenging some aspects of economic life, notably in the practices of plain speech and refusing hat honor, but somewhat indirectly, as their focus was essentially religious and aimed primarily at the church. Friends absorb the leaders and members of both the Diggers and the Levellers, more radical egalitarian social movements, but do not absorb their ideas.

    Quakers & Capitalism — The 1650s

      • First major transition (1661 – 1695) — Externally, the persecutions, and internally, the establishment of gospel order, completely transform Quaker culture and Quaker economics. After the Restoration, the state tries to stamp the movement out and seizes vast amounts of Quaker treasure over roughly thirty years. Friends respond to these external pressures by reorganizing—or perhaps organizing would be a better description—instituting structures and processes for internal discipline. Notwithstanding the intense economic assault, however, Friends emerge from this period as a class of wealthy merchants poised to create not quite single-handedly the first truly new platform for creating wealth since the invention of agriculture: industrial capitalism. This extraordinary feat—not just thriving in the face of economic oppression, but ending up in a position to change the world, after all—was a cultural miracle.

    First Transition: Persecution and Gospel Order

    • 1700 – 1900: The Double-culture Period
      • The 18th century — During the 18th century and on into the 19th century, Quakers make many of the indispensable technological innovations upon which industrial capitalism depends, including coke smelting, cast steel, and the railroad. They build many of the key industries, establish many of the most important companies, build its financial infrastructure, develop new modes of organization, and pioneer humane treatment of workers. At the same time that they are engaging the world of business, industry and commerce with incredible energy and invention, they are withdrawing from engagement with the world in virtually every other area of life. Friends maintain this double culture for two hundred years. In England, they become fabulously wealthy; in America, they do pretty well.
      • John Bellers and Quaker responses to Industrial capitalism — Already by 1700, the new industrial economy was creating a new class of the poor: industrial workers, people who had left the land or their village to work in the new urban factories. One extraordinary Friend, John Bellers, saw the problem and proposed a solution: Colledges of Industry. In several pamphlets over 25 years, he brought his ideas to Friends and to Parliament. Both declined to act on them. He made many other significant contributions to Western civilization, as well, only to be virtually forgotten by his own people for two hundred years.

    Quakers & Capitalism — The Double-culture Period

    Quakers & Capitalism — Quaker Contributions to Industrial Capitalism

      • Minor transition (1800 – 1828) — Two new ideologies, or domains of western thought, are born as fraternal twins around 1800— evangelical theology and the new ‘science’ of political economy. Thomas Malthus, in particular, was both an evangelical minister and one of the first progenitors of political economy; in his work, the two are fused into one approach to wealth and poverty. Evangelical political economy dominates economic policy in competition with classical economics; Malthus, the evangelical minister, and David Ricardo the investor, (and married to a Quaker, though a Jew converted to Unitarianism himself), embody this rivalry in the early 1800s, though they are personal friends. Joseph John Gurney and Thomas Chalmers make the most influential connection between evangelical Friends and evangelical political economy; these hugely influential figures also are friends.
      • The 19th century — Quakers fragment under the influence of evangelicalism and some evangelical Friends partially reengage with economic/social issues, notably becoming leaders in the philanthropical movement that is the signature response to capitalism’s collateral damage in the Victorian period.

    Quakers & Capitalism — Evangelicalism and Political Economy

      • Major transition (1895 – 1920) — A number of external forces combine with new trends in Quakerism to end the double-culture period and usher in the spirit of liberal engagement with the world that characterizes much of Quaker culture in the 20th century. Quakers had cut a deal with the powers that be: leave us alone and we’ll leave you alone. Now the deal was off.

    Second major transition: The Corporation, the Great War, Liberalism and the Social Order

    This last transition period is a complex one and deserves a little more treatment. For one thing, the fragmentation of Quaker culture in the 1800s means that the forces unleashed at the turn of the century affect different communities differently. You can’t really tell just one story, as I have been trying to do so far. And these forces are so many and so complex that it’s hard to treat them properly in a format like a blog. But here goes:

        • The rise of corporate capitalism — The laws governing the limited liability corporation are finally settled definitively in the 1890s in both America and Britain and the modern corporation is born—a business owned by shareholders rather than private families and so big as to require management. Over time, this innovation deconstructs the great Quaker fortunes in Great Britain.
        • The emergence of the social sciences, including the science of economics — New kinds of thinking are brought to bear on social problems. The Quaker Benjamin Seebohm Rowntree of the Rowntree chocolate dynasty plays a central role in proving scientifically that the poor are not poor because of poor character but because of structural inequities in capitalism itself. In England, the rise of New Liberalism gives birth to a new political party and inaugurates the welfare state, in which, for the first time, government tries to protect the citizenry from capitalism’s downside.
        • Classical economics takes the field — Classical economic theory eclipses evangelical political economy, which was already in decline. However, the spirit of evangelical political economy—the blame for poverty on character (sin), the reliance on private and faith-based solutions for social ills, and the dread of government intervention—lies dormant.
        • The rise of liberalism — The Richmond Conference in America in 1887 and the Manchester Conference in England in 1895 mark the beginning of ‘liberal’ Quakerism, in which ‘liberal’ ideas, especially the scientific study of the Bible, transform and galvanize British Friends and the Hicksite branch of American Quakerism. FGC and FUM (then Five Years Meeting) are born. Rufus Jones introduces a new historiography of Quakerism in which the faith is recast as “mystical” and Fox’s phrase “that of God in everyone” is understood anew as a kind of neo-Platonic divine spark; it becomes over time the central tenet of liberal Quakerism.
        • The Great War — For the first time in two hundred years, Friends are persecuted for their convictions of conscience. This helps to decisively pull Quakers, especially young adult Friends, back into engagement with the world. AFSC is born.
        • The rise of ‘social concerns’ — London Yearly Meeting explores the relationship between war and the social order and, in 1918, approves the Foundations of a True Social Order, a decisive departure from the hands-off attitude toward the social order maintained during the double-culture period and a fairly radical indictment of capitalism as one of the factors leading to the Great War. The document and the debate are carried forward into the first Friends World Conference in 1920 in London. Quaker culture enters the modern era.

    I’ve not yet written one of these transition essays, on the rise of liberalism. I have a lot of new notes from recent research that I need to digest first. And I’ve only just begun to research the economic history of Friends during the twentieth century. In a subsequent entry, I do want to outline the subjects and the people who I think figure prominently in 20th century Quakerism, and I invite any readers who know any of these subjects or people in some depth to contribute. It’s going to take me a while, a long while, to finish this project alone. I welcome collaboration.

Quakerism & Capitalism — Transition (1895-1920): The Limited Liability Corporation

June 30, 2011 § Leave a comment

When London Yearly Meeting approved the Foundations of a True Social Order after discussing the report of the Committee on War and the Social Order during the 1918 sessions, the sense of the meeting was that the social order—that is, capitalism—had played a key role in causing the war that was still crippling an entire generation. In the Foundations, one can see this relatively new awareness of capitalism as a system with potentially horrible social consequences reaching beyond a narrow focus on the war to include labor and industrial relations as well (the British Labour Party was constituted in the same year). In fact, British Friends declared that nothing less than the ‘personality’—the personhood of the human—was at risk in the ways that the system treated its participants.

Personhood was central to the discussion in part because full legal ‘personhood’ had been conferred decisively upon the limited liability corporation in Britain and America only twenty years before. In that short time, the new technology had completely transformed the capitalist system. It was also completely transforming British Quakerism.

It’s hard to exaggerate how momentous this innovation was. The modern corporation, wrote Peter Drucker, the preeminent business thinker of the 20th century, “was the first autonomous institution in hundreds of years, the first to create a power center that was within society yet independent of the central government of the national state.” * (The Company: A Short History of a Revolutionary Idea, John Micklethwaite and Adrian Wooldridge, Modern Library Edition, New York, 2003)

The idea was not new. The Limited Liability Act of 1855 (in Britain) had granted limited liability to companies incorporated under the Joint Stock Companies
Act of 1844, subject to some capital requirements. The earlier act had done away with the need to get a special charter from Parliament to form a company, requiring only simple registration. The system was further rationalized under the Joint Stock Companies act of 1856, requiring only seven people to sign a Memorandum of Association and to put “ltd” at the end of the company’s name. However, the final block was put in place when, in 1897, in Salomon v. Saloman & Co., Ltd., the House of Lords (which was then Britain’s Supreme Court) finally firmly established the separate legal identity of a company and conferred upon its directors—not just its shareholders—the ‘corporate veil’ of protection. The corporation had become the equivalent of a person before the law.

Limited liability meant that shareholders were only financially liable for the value of their own investment in the company and that, when someone sued the company, they were suing the company and not its owners or investors. It essentially made the company in some ways the equivalent of a person in terms of the law. This affected not just financial liability; it also simplified a host of other financial, legal and management problems: by wrapping responsibility up in the fiction of corporate ‘personhood’, a company’s business relations and transactions no longer had to be conducted with each of its individual shareholders as owners. All this made it possible to raise the capital necessary to form the kind of large companies that the mature industrial economy required and to run them with managerial efficiency.

The proceedings of LYM’s 1918 sessions reveal that some members of the Meeting were nervous about the very essence of this innovation: was it morally right to relieve the owners of a business from responsibility for its actions? This seemed inconsistent with moral principle. It also struck at the heart of the Protestant Spirit that had dominated Quaker business practice for two centuries (and which had only just been defined in Max Weber’s landmark book, The Protestant Ethic and the Spirit of Capitalism), in which one viewed one’s business as an expression of one’s religious calling. That only worked if you owned and ran the business yourself. It didn’t work if untold numbers of people owned the business through investment shares who then relegated the business’s operations to directors and managers, and whose legal responsibility for its actions were now severely limited.

But that debate about limited liability went nowhere. In the proceedings of the 1918 sessions, you see some Friends arguing forcefully for the moral contradictions involved, which even the supporters of the new technology had trouble refuting. But it was too late. The modern corporation had already completely taken over. It was obvious to everyone that it was now, not just a fait accompli, but also actually indispensable to the new social order.

This fact was literally demoralizing to those Friends who considered it. At just the moment when Friends had become aware for the first time of capitalism as a system with mixed moral consequences, they were forced to accept its amoral (was it actually immoral?) character. In retreat, London Yearly Meeting resolved to reform the system as best they could, responding with one of the signature acts of modern liberal Quakerism—they formed a committee. The Committee on Industry and the Social Order went on to do some of the most searching and challenging work in the history of Quaker social testimony. But Friends had effectively abandoned any direct challenge to capitalism itself on moral grounds.

Moreover, the limited liability corporation did more than challenge the moral identity of British Friends. It also destroyed their sizable fortunes. Many Quaker business owners held onto their family ownership for a long time, but eventually they virtually all went public. Cadbury, Rowntree, Lever Brothers, Barclay—one by one, Quaker owners became managers in firms that had been in their families for generations. Gradually over the course of the 20th century, the great Quaker fortunes of Great Britain dwindled in size and importance. For two centuries, Quakers had been the wealthiest, or one of the wealthiest, communities in the United Kingdom. Between the triumph of the limited liability corporation and later the influx of convinced Friends from the middle middle class, the social demographics of British Quakerism dramatically changed for the second time in its history: from yeoman farmers and small trades people in the 1650s, to industrialist tycoons during the 18th and 19th centuries, and then back again towards the middle classes during the 20th.

In America, things were quite different. The United States embraced the limited liability corporation earlier and with greater enthusiasm than the Brits, seeing the innovation as democratizing and recognizing early on how it served the already famous American entrepreneurial spirit. But corporate law was mostly a matter for the states to write, so the technology grew for a long time in a haphazard way as states variously began legalizing it and then began competing with each other for business. First New Jersey, and then, ultimately, Delaware, made corporation-friendly law a hallmark of state identity. As in Great Britain, these laws first emerged in the middle of the 19th century and finally coalesced into some sense of national policy toward the end of the century, but states have always retained the power of incorporation.

With the Sherman Act (1890) and subsequent anti-trust legislation, the federal government began finally to seriously regulate corporations for the first time and these efforts figured prominently in the rise of Progressivism in America. Then came the New Deal. But these developments hardly affected Quakerism in America, which had always been more economically diverse than in Great Britain. The rich Quakers of Philadelphia had not played the central role in creating capitalism that their British brethren had, they were not by and large industrialists, and they represented only a small portion of the American Quaker population, let alone of the American wealthy and power elite. Even as early as the War for Independence, Philadelphia Quakers had ceased to be very important to the nation’s economy. By the time of the second transition in Quaker economics at the end of the 19th century, the final codification and rationalization of corporate law had no real impact on Quaker culture in America.

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