When we learn about the Industrial Revolution in school, we hear about coal, steam engines, maybe the powered loom. But another revolution in capitalism occurred before that, in what historians now call the Industrious Revolution, which re-organized people, not machines. Before the Industrious Revolution of the 18th century, people worked where they lived, whether a farm or a shop. Earlier manufacturing, like textiles produced through “cottage industry,” relied on networks of farmers who spun fibers and wove cloth. They worked on their own; they were not employees. In the Industrious Revolution, manufacturers gathered workers under one roof, where the work could be divided and supervised. For the first time, home and work were separated. Workers no longer controlled how they worked, and received a wage, not the profits of their efforts.
Louis Hyman is an economic historian and an associate professor at Cornell University's School of Industrial and Labor Relations.
Today we are going through what some are calling a Second Machine Age, but as in the 18th century, the re-organization of people matters as much as, if not more than, the new machines. And this time we’re moving out of factories and sometimes back into our homes. It’s been happening for 40 years, but computers and other technologies are accelerating it quickly, just as the steam engines accelerated the Industrious Revolution.
In this second revolution, the employee receiving a regular wage or salary has begun to disappear, replaced by independent contractors, consultants, temps, and freelancers. On the one hand, there will be remarkable opportunities for people to create, to produce, in satisfying and profitable new ways. This revolution will decouple manufacturing from the factory, and services from the office. Every small producer can reach the global market. We can return to the home workshop. We can use 3-D printers to produce niche products at small scale. Large jobs can be sent over the Internet to automated factories. Office workers, in turn, can offer their skills through even better versions of platforms like ODesk.com, which connects service providers worldwide.
All sorts of exciting technologies will reinforce this industrious revolution, but it is not the technology that deserves our attention. It is the people whose lives will be turned upside down. Scholars and activists are concerned about this rise in precarious work, but instead of fighting the work, we need to understand how to empower workers to take advantage of this revolution—before it is too late.
The first industrious and industrial revolutions inaugurated several centuries of social dislocation, as well as unprecedented economic growth. Not until the mid-20th century, in the heyday of post-war capitalism, did we find a way to create economic security in a wage-work economy: a steady paycheck, health insurance, and home ownership. But, almost as soon as these happened, they began to go away.
We should use this coming crisis as an opportunity to return to our core American values. An older American Dream, the Jeffersonian vision of independent farmers, was promoted by the federal government in the 19th century through the Homestead Act, which provided farm land to our citizens. It was a way to push back against the rise of wage labor, which was seen as dependent and an antithesis to American values.
In today’s digital economy, we need a comparable act that empowers us to make our own way in business. While we often discuss the American Dream in terms of consumption, there is another American Dream that is more visceral: control over one’s work. The longing many Americans feel for owning their own business, the celebration of entrepreneurship in our culture, and our homesteading heritage are not just about money—or buying houses. Yet for several generations we have made it easy to own a home, but hard to own our own businesses.
Workers don’t need land, but they do need other kinds of support—health insurance, skilled education, maybe even a basic income—to take the risks upon which success depends. A minimum safety net enables maximum risk taking, unleashing the true growth potential of capitalism. Rather than thinking of these as the last gasps of a defunct welfare economy, we should instead see them as the first steps toward a flexible economy.
Providing economic security, while not inhibiting this second industrious revolution, will therefore be the labor challenge of the 21st century. Flexible workers should have a safety net to allow them to pursue their ambitions.
Freed of some of their fear, people could find out what they can do. Even today, only a third of Americans go to college. Most of us haven’t had the chance to truly find out what we are capable of. Many will find they can do nothing particularly impressive, but my suspicion is that there is far more untapped talent than we can imagine.
Not all will succeed. Yet a safety net that allows someone to try to find rewarding work—this matters much more than, say, helping that person mortgage a house. It can help assure not just material comfort but spiritual success, something that our 19th-century ancestors fought unsuccessfully to preserve as they moved into dehumanizing factories and offices.
We can re-claim that legacy with a new kind of capitalism for the 21st century. It is time to divert the money we have used to support home ownership into supporting work ownership. We can start by diverting the tax benefits (about $175 billion per year) for home ownership into the new safety net, to empower the new flexible workers, who can, with their own money, buy houses if they want them. Home mortgages, as the financial crisis has shown us, do not create stability. We can expand health insurance and higher education, and even edge our way toward a guaranteed minimum income.
We can also learn from the success of home lending to re-think how we provide capital to small businesses. The Small Business Administration’s flagship lending program, 7(a), accounts for only 0.65 percent of all small loans. It is, in effect, a rounding error. Yet the financial institutions that could lend so much more to small business are awash in excess funds at an inconceivable level of $2.58 trillion. As always, the federal government’s power to re-channel private capital outweighs its power to spend. Our federal insurance programs have made it easy to lend for consumption, as with a home mortgage, but not for investment. Banks that can easily re-sell a mortgage find it cumbersome to re-sell a business loan—even though it is small business that drives our economy.
Let’s re-balance the lending incentives to make it as easy for Americans to own their work as to own their own houses, using private capital for small business just as we did with houses. Channeling capital into business, rather than housing, will create an unprecedented boom, not only in economic growth but in quality of life.
Whatever the path forward, we need to stop fixating on propping up a world of security that is tied to a job. Embracing the new reality of flexible work, rather than fighting it, we can find a way to provide a new American Dream that is, in essence, the oldest one of all: independence.
For the Future of Work, a special project from the Center for Advanced Study in the Behavioral Sciences at Stanford University, business and labor leaders, social scientists, technology visionaries, activists, and journalists weigh in on the most consequential changes in the workplace, and what anxieties and possibilities they might produce.