Part one of this series can be found here
David Ricardo
David Ricardo was born England in 1772, the son of a wealthy stockbroker who originally was from Portugal, emigrated to Holland, then finally England. David Ricardo himself would become a stockbroker, joining his father’s practice at the age of 13, but would separate from him later as both fell out over David Ricardo’s choice of a spouse. He was 21 at the time.
Ricardo struck out on his own, and in a few years, due to his keen mind and influential contacts who helped set him up he was richer than his father. Ricardo first took interest in the subject of economics at the age of 29, having stumbled on a copy of Adam Smith’s The Wealth of Nations. He liked it so much that he decided to take up formal study of the subject himself and 10 years later he produced his first set of economic articles, which immediately established his reputation as a 1st-rate economist. More articles and pamphlets over the years would only serve to burnish that reputation.
Many of the articles and pamphlets that Ricardo wrote were insightful solutions to the practical economic problems of his day and thus have little relevance for us today, but some of the theories he propounded have enduring relevance.
Principal among Ricardo’s enduring contributions is arguably his Theory of Comparative Advantage, which almost is the most important contribution to International Trade theory. To understand the Theory of Comparative Advantage, perhaps it is best to start with the Theory of Absolute Advantage produced earlier by Adam Smith.
The essence of the Theory of Absolute Advantage is that a country needed to produce an item more cheaply than another country to be able to export that item to the other country. David Ricardo now came up with this brilliant insight: In a situation where country A produced everything more cheaply than country B, there was still room for both countries to trade if country A focused on making what it was much better at making than country B, leaving the other item to country B to make even though country A was better at making this as well. This way there would be more goods available to both countries, which they can both enjoy by trading, than what would have been available if country A had decided to make everything by itself.
An example might perhaps make the concept clearer. Suppose there are two countries A and B that produce two products, saloon cars and buses. The table below shows the number of hours required by each country to produce a single car and a single bus.
| Number of hours | Car | Bus |
| Country A | 100 | 200 |
| Country B | 600 | 300 |
It is clear that country A is better at both activities but with significant disparities in how much better. It is much better when producing cars, given that is 6 times as productive as country B but only marginally better when producing buses as it is only 1.5 times more productive. Notice that country A is more efficient when producing a car than when it is producing a bus while country B is more efficient when it is producing a bus than when it is producing a car. So country A has an absolute advantage in both categories as it is more efficient in both, while country B has a comparative advantage in producing buses since it more efficient in producing a bus than a car. If the two countries do not trade, country A will require 300 hours to produce a car and a bus, while country B will require 900 hours to produce a car and a bus making a total of four vehicles. If they trade, country A can make three cars in that same 300 hours while country B can make three buses in that same 900 hours making a total of six vehicles. The result of this is that both countries can consume more vehicles if they have a free trade agreement in place.
The Theory of Comparative Advantage has particular relevance concerning the economic challenges of sub-Saharan Africa. The theory would seem to imply that should focus on its comparative advantage and continue to be an exporter of primary commodities to the West and Asia, while importing manufactured goods from those same places. While this is helpful to some extent as it enables Africa to lay its hands on badly needed industrial goods that Africa currently cannot make, adhering to the theory wouldn’t augur well for Africa’s long-term development. If Africa is to get out of its current economic morass, it would need to change the structure of its economy by moving away from primary production to the production of manufactured goods, thus violating the Theory of Comparative Advantage.
Ricardo’s work elucidating the concept of diminishing returns in agriculture also has enduring relevance, particularly as regards the small-scale, subsistence practices prevalent across Africa. Perhaps most importantly, with his exclusive focus on trying to divine economic laws, he was the first to turn economics into a science.
Thomas Malthus
Few people in the history of economic thought have stirred up more controversy than mathematician, clergyman and economist, Thomas Malthus. Born in 1766, Malthus would etch his name in history with the publication of An Essay on the Principle of Population in 1798 in which he first proposed his theory about population growth outstripping the growth of the subsistence needed to maintain population growth. I have already discussed Malthus, his theory, the criticisms thrown at it and its relevance for the contemporary African situation in another post, so I will not rehash that here. Instead I will highlight another notable contribution of his.
Malthus around 1820 was the first to speculate that it was possible for an economy to suffer a general depression in which there were not enough buyers for the commodities available as a result of would-be buyers saving excessively stemming from fears about future uncertainty. While this sounds like common sense to us today, such an idea bordered on heresy in the time of Malthus, and so he could not convince the leading thinkers of his day about the correctness of his position. His inability also partly stemmed from the fact that he couldn’t put across his ideas with clarity. It would be another 50 years before economists would begin to realize the brilliance of his insight, about a 100 years before they were fully immersed in dealing with the problem, and about 116 years before John Maynard Keynes proposed a solution to the problem.
In rounding up, it should be noted that David Ricardo and Thomas Malthus were best of friends though they disagreed on almost everything. They would keep up a lively correspondence and visit each other incessantly until Ricardo passed away in 1823 at the relatively young age of 51. Malthus would live up until 1834.
Robert Owen
Robert Owen lived an inspiring life of constantly going up against the odds, sometimes succeeding brilliantly, others times failing disastrously and in every instance, always believing man has what it takes to improve his situation, if he would but try.
Born into poverty in 1771, by 18, he had already set up his own albeit tiny firm manufacturing textile machinery. In his late 20s, through great daring, he had acquired a set of rundown textile mills. In roughly 15 years, he had made these mills world-famous, drawing visitors from all over Europe including royalty.
What had set Owen’s mills apart was the fact that for his time, he had taken an unusually enlightened and utterly humane approach in running his mills. For instance, the workers living quarters were kept neat with adequate waste disposal; children under the age of 10 were not allowed to work in the mills, and those over 10 not allowed to work for more than 10-11 hours a day (if this seems demonic, it could get much worse as we shall soon see); no children were punished; workers could freely express grievances, without fear of retribution (this in the 21st century would still be amazing, let alone the 19th), and there was a lovely schoolhouse for little children. To cap it all, the mills were actually profitable.
It is very hard to exaggerate how radically different Owen’s mills were compared to the typical establishment of 19th century industrial capitalism in England. At the typical establishment, 16-hour workdays were common, even for children as young as 10; Children were whipped day and night for the tiniest infractions and also to encourage them to work harder; they ate from the same trough as pigs; they were kicked, punched, sexually abused and often punished in ways that wouldn’t even be meted out to inmates of military prisons today. The great Charles Dickens poignantly captured the misery of 19th century England in classics such as Oliver Twist, Great Expectations and Hard Times.
With his heavenly mills, Owen sought to show that man was a product of his environment; improve that environment and you could turn the worst of men into the best of men. Some of his innovations would go on to be incorporated into factory legislation in a bid to create a safer and saner work environment.
Owen would try out at least two more radical ideas in his life time, both with major consequences for world history (though they didn’t start out looking that way). Shortly after the success of his mills, the country fell into the throes of a serious depression that was causing the poor to break out in deadly riots because of the hardship. In the search for a solution, the authorities happen to ask Mr. Owen for his opinion. Owen suggested that “Villages of Cooperation”, each comprising of 800-1,200 members of the poor, be set up. The members would work on farms and in factories as self-sustaining units. This level of social planning ran against the uninhibited free-market philosophy that drove England at the time, and so it was not accepted.
Owen was undeterred. As he was now rich, he decided to finance such a village with his own money in America. It was an unmitigated disaster, but from the ashes something did endure. Owen’s ideas had taken root in the working class section of England and as a result, real working cooperative societies began to sprout. These were the precursors to the modern cooperative societies that can be found all over the world including Nigeria.
Owen made one final major contribution. Drawing the leaders of the working-class around him, he would be to set up an organization called the Grand National Consolidated Trades Union. As the name suggests, this was the precursor to the modern trade unions, also found all over the world.
Owen would pass away at the age of 87 in 1858, filled with hope to the end.
Bibliography
- Heilbroner, Robert. 1965 The Worldly Philosophers: The Lives, Times and Ideas of the great Economic Thinkers. New York: Simon and Schuster
