Introduction
In the 19th century, the UK and France were undergoing rapid transitions in their modes of production from preindustrial systems to industrialized economies. This was accompanied by rapid urbanization, which led to an increase in construction projects, and an expansion in urban employment.
The exploitation of the masses by a minority of wealthy elites worsened with industrialization, as the latter were able to earn more income and accumulate more wealth than ever before. The more wealth and income they acquired, ‘the more they feel it necessary to gain in addition. They look upon every opposition to their wishes as an uprising against economic order in general’ (Small 1923, 722).Unfortunately, ‘the growth of modern industries in Germany’ during the 19th century ‘led to social evils similar to those which had occurred in Britain’ and France, as ‘reports from the provincial authorities’ indicated that in ‘the manufacturing districts of Prussia the labor of children was being exploited in a disgraceful manner’ (Henderson 2006, 22). Additionally, a large population of factory workers in German-speaking territories were experiencing long working hours, low wages, ‘harsh factory discipline,’ and bad housing conditions in cities, with many living in slums (ibid.: 38). These conditions only worsened with the intensification of competition between factory owners, which led to workers experiencing exhaustion and incurring various health problems. There was a great deal of concern about the pace of urbanization in Prussia and other German states, which resulted in a decline of the rural population alongside large increases in the number of urban dwellers, in addition to many other changes associated with the rapid transition from a preindustrial system to an industrialized one. There was also growing dissatisfaction with the narrow views and ideas being put forth by classical economics.
In particular, theorists of the GHSE, who rigorously sought out solutions for the social and economic inequality and injustices being caused by these rapid transformations, rejected the classical economists’ defense of universal economic laws and their reduction of man into an abstract, self-interest-oriented, one-dimensional entity, arguing that such 48 An Overview of the Fundamental Features of the GHSE practices were in contradiction with the realities and organic development of social and economic life. They believed that political economy needed to be reformed in light of the prevailing misery and poverty of their time, as well as the inability of classical orthodoxy to resolve persistent social and economic issues. In response, nearly all theorists associated with the GHSE sought to develop a system of political economy that would have a predisposition toward achieving common welfare. They were trying to find ways to alleviate the destructive outcomes of rapid urbanization and industrialization and improve the condition of craftsmen, peasants, and factory workers.This chapter presents some of the well-known contributors to the GHSE and explains the main arguments they put forth against methodological individualism, the laissez-faire doctrine, the deductive method, the ahistorical and value-free nature of classical economics, and socialist ideals. It also discusses their support for ethical historical economics, the inductive approach, methodological collectivism, the national economy, and the use of statistics in political economy. Overall, this chapter highlights the fact that unlike classical economics, theorists of the GHSE aimed to develop sensible economic policies and reforms that would address the common needs of all social classes in order to achieve the common good. Gaining a proper understanding of the methods, approaches, ideas, and principles supported by the well-known contributors to the GHSE is necessary in order to demonstrate the important role that this school of thought played in the development of economic thought and education in the US from the 1870s until the beginning of WWI.
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