A Tale of Two Factories: Equity, Economic Freedom, and the Modern Factory

by Gregory Rehmke · Published January 7, 2015 · Updated February 26, 2020

People in Ireland and Chile today, and in Hong Kong, Singapore, South Korea, and Taiwan, are not better people than those who lived and worked there fifty years ago. But for some reason people in these countries today are far more productive and prosperous.

Men and women who go to work each day in retail stores, offices, factories, farms, fisheries, and mines earn higher wages, save more of their income, and produce more goods and services that other consumers and companies nearby and around the world want to purchase.

Workers at farms and factories in China over the last thirty years and India over the last twenty years have also gained skills that enabled higher productivity and higher wages. And with higher wages these workers and their families can purchase more and better food, clothing, and shelter.

An earlier post (North & South: Freedom, Equity, Prosperity and Turmoil (plus Romance), recommended the BBC miniseries of Elizabeth Gaskell’s historical novel, North and South. The book explains the economic progress of 1800s factory workers who enjoy higher pay and better food, though they suffer in economic downturns. The factory system in the north of England led to huge population gains as higher wages allowed for larger families as child mortality rates fell. But the BBC miniseries (often streaming Netflix or Amazon Prime) barely mentions how textile factories dramatically lowered the cost of clothing. The rich continue to wear their fine and expensive linens, but those with middle and lower incomes could afford more clothes.

The debate over the Industrial Revolution and the factory system is at the heart of the freedom vs. equity Lincoln-Douglas topic. Factories are dangerous and pay low and unfair in North and South, as in most other movies set in industrializing economies. There are the masters who own the factory, the means of production, and financiers and landowners who seem to do little but live on their incomes from invested capital and land. Then there are the workers whose long hours seem barely enough to support their families.

North and South is better than most novels and BBC miniseries in portraying factory owners and managers thoughtfully and sympathetically as well as factory workers and union organizers. Plus North and South, the book especially, gives readers a glimpse of improving living standards.

Students tend to learn that the factory system in England and America made life worse for women and children, and wages were pushed down by capitalism and “cruel competition” until governments stepped in with regulations on hours and working conditions. This historical narrative is misleading at best.

Here is historian Stephen Davies briefly recounting the economic gains for workers through the 19th Century.

…over the course of the 19th century, average per capita income in the United Kingdom rose by a factor of six. To put this in perspective, prior to the industrial revolution, it typically took 300-400 years for the standard of living to rise by a factor of 0.5. Why did this explosion of human flourishing take place?

Here are some brief articles on the historical debate over the factory system and living standards. Readers can skip ahead to two videos below of modern factories in the U.S. and Honduras.

• The Industrial Revolution: Working Class Poverty or Prosperity? (by L. Reed)

• Child Labor and the British Industrial Revolution (by J. Majewski)

• Facts about The Industrial Revolution (by L. von Mises)

• The Rise and Fall of England: 7. The Industrial Surge (by C. Carson)

• Industrial Revolution and the Standard of Living (by Clark Nardinelli)

• Meet the Old Sweatshops: Same as the New (pdf) (B. Powell)

Here is a interesting article on China’s rising rural living standards, funded by migrant workers sending money home from their factory jobs: Chinese factory workers cash in sweat for prosperity.

And here is a video of that factory prosperity process in action in Honduras, from AEI Values and Capitalism: How do you take down poverty? One toy block at a time.

The video below offers another perspective from a modern factory, in this case a tomato processing plant run by Morning Star in California. The key value of factory workers is not just their hard work and physical dexterity, but also their problem-solving abilities. When employees have the curiosity and motivation to puzzle out the production process, they can figure out and suggest improvements.

Factories look static in movies and books, but in reality, each year dozens or hundreds of small and large improvements are made, each improving quality or speed, lowering costs, improving safety, or reducing waste.

Here is an Economic Growth study guide from the Library of Economics and Liberty, with links to various articles and scholars.

Below is the Reason.tv video on Morning Star, titled “I, Tomato” (from Leonard Read’s classic article “I, Pencil”)

I, Tomato: Morning Star’s Radical Approach to Management