By the time of the Overend collapse, new orders were drying up. In fact, Overend may have been pushed over the edge because “they covered the seas with their ships” and “were incurring huge losses on their fleet of steamships.” Other casualties included the legendary railway contractors Peto and Betts. True, the most immediate victims of the panic were gullible investors and “countless swindling companies” that had sprung up to take advantage of cheap money. But the crisis of confidence forced the Bank of England to raise its benchmark interest rate from 6 percent to a crushing 10 percent, “the classic panic rate,”125 which persisted through the summer. A play called One Hundred Thousand Pounds closed after a brief run. The Times didn’t even bother to review it. The boom was over.
When news of Black Friday reached Marx via his afternoon paper, he was in his study in North London pondering a financial crisis closer to home. One Modena Villas, where he and his family had recently moved, was a pretentious affair of the kind sprouting up all over London’s periphery, far too pricey for an unemployed journalist who had long since stopped accepting assignments in order to finish his book. Marx had rationalized the extravagance as necessary for his teenage daughters “to establish themselves socially.” Now, alas, he was broke again and his rent was overdue. So, unfortunately, was Das Kapital.
For nearly fifteen years, Marx had been assuring his best friend and patron that his grandiose “Critique of Political Economy” was “virtually finished, that he was ready to “reveal the law of motion of modern society,” that he would drive a stake through the heart of English “political economy.” Now Engels, who had kept his nose to the grindstone in Manchester for fifteen years to support him, was becoming restive.
In truth, the glitter of England’s prosperity had cast a pall on Marx’s project. He had written very little since 1863. A series of windfalls had purchased temporary spells of independence, but now he was back on Engels’s dole, and, for the first time, the angelic Engels was showing signs of impatience. Marx had been putting him off with graphic descriptions of a series of afflictions worthy of Job: rheumatism, liver trouble, influenza, toothache, impudent creditors, an outbreak of boils of truly biblical proportions—the list went on and on. In April 1866, Marx confessed, “Being unwell I am unable to write.” On the day after Christmas, he complained of “not writing at all for so long.” Around Easter, writing from the seaside in Margate, he admitted to having “lived for my health’s sake alone” for “more than a month.”126
Engels suspected, accurately as it turns out, that the real source of Marx’s troubles was “dragging that damned book around” for too long: “I hope you are happily over your rheumatism and faceache and are once more sitting diligently over the book,” he wrote on May 1. “How is it coming on and when will the first volume be ready?”127 Since Das Kapital was not coming on, Marx retreated into a sulky silence.
Like a shot of adrenaline, Black Friday had a galvanizing effect that no amount of nagging by Engels had ever achieved. Within days, the prophet was back at his desk writing furiously. In early July, he was able to report to Engels, “I have had my nose properly to the grindstone again over the past two weeks,” and to predict that he would be able to deliver the tardy manuscript “by the end of August.”128
Who can blame the author of an apocalyptic text holding back until the time was right? By the time Marx was composing it, his melodramatic prophecy, “The death knell of capitalist private property sounds. The expropriators will be expropriated,” sounded almost plausible. Yet when he composed his famous penultimate chapter on “The General Law of Capitalist Accumulation,” he felt forced to fudge in order to make his case that the poor had gotten poorer. Quoting Gladstone on the “astonishing” and “incredible” surge in taxable income between 1853 and 1863, Marx has the liberal prime minister referring to “this intoxicating augmentation of wealth and power . . . entirely confined to classes of property.”129 The text of the speech, printed in the Times of London, shows that Gladstone actually said the opposite:
“I should look with some degree of pain, and with much apprehension, upon this extraordinary and almost intoxicating growth, if it were my belief that it is confined to the class of persons who may be described as in easy circumstances,” he said, adding that, thanks to the rapid growth of untaxed income, “the average condition of the British laborer, we have the happiness to know, has improved during the last 20 years in a degree which we know to be extraordinary, and which we may almost pronounce to be unexampled in the history of any country and of any age.”130
Marx’s prediction that his manuscript would be finished by the end of the summer proved wildly optimistic, but fifteen months after Black Friday, in August 1867, he was able to report to Engels that he had put the final set of galleys in the mail to the German publisher. In his note, he alluded in passing to a famous short story by the French novelist Honoré de Balzac. An artist believes a painting to be a masterpiece because he has been perfecting it for years. After unveiling the painting he looks at it for a moment before staggering back. “‘Nothing! Nothing! After ten years of work.’ He sat down and wept.”131 Alas, as Marx feared, “The Unknown Masterpiece” was an apt metaphor for his economic theory. His “mathematical proof” was greeted by an eerie silence. And in the worst economic crisis of the modern age, the great twentieth-century economist John Maynard Keynes would dismiss Das Kapital as “an obsolete economic textbook which I know to be not only scientifically erroneous but without interest or application to the modern world.”132
Chapter II Must There Be a Proletariat? Marshall’s Patron Saint
The horseman serves the horse,
The neat-herd serves the neat,
The merchant serves the purse,
The eater serves his meat;
’Tis the day of the chattel,
Web to weave, and corn to grind;
Things are in the saddle,
And ride mankind.
—Ralph Waldo Emerson, from “Ode, Inscribed to William H. Channing”1
The desire to put mankind into the saddle is the mainspring of most economic study.
—Alfred Marshall2
During the severe winter of 1866–1867, as many as a thousand men congregated daily at one of several buildings in London’s East End. When the doors parted, the crowd surged forward, shoving and shouting, to fight for tickets. From the frenzied assault and the bitter expressions of those who were unsuccessful, a passerby might have assumed that a boxing match or dogfight was starting. But there was no brightly lit ring inside, only the muddy courtyard of a parish workhouse. The yard was divided into pens furnished with large paving stones. A ticket entitled the bearer to sit on one of these slabs, seize a heavy hammer, and break up the grime-encrusted granite. Five bushels of macadam earned him three pennies and a loaf of bread.3
The men who besieged the workhouses that January were not typical of the sickly, ragged clientele ordinarily associated with these despised institutions. They were sturdy fellows in good coats. Until a few months earlier, they had been earning a pound or two a week in the shipyards or railway tunnels and highways—more than enough to house a family of five, eat plenty of beef and butter, drink beer, and even accumulate a tiny nest egg.4 That was before Black Friday brought building on land and sea and underground to an eerie standstill and an avalanche of bankruptcies deprived thousands of their jobs; before a cholera epidemic, a freak freeze that shut down the docks for weeks, and a doubling of bread prices; before the savings of a lifetime were drained away, the last of the household objects pawned, and help from relatives exhausted.
The poorest parishes were turning away hundreds every day while hard-pressed taxpayers like Karl Marx worried that the rising poor rates would ruin them too. Despite an outpouring of donations, private charities were overwhelmed. “What that distress is no one knows,” wrote Florence Nightingale, the heiress and hospital