In textile factories, they were called "scavengers." The typical scavenger was about six years old, and the child's job was to reclaim loose cotton that fell under the machinery. Because the machines kept operating, terrible injuries were commonplace. History points to child labor during the Industrial Revolution as a heart wrenching indictment of the capitalist system – or, rather, specific historians who have been influential have done so. History itself actually frowns upon their interpretation because it is a lie.

Defenders of the human richness that was the Industrial Revolution commonly counter tales of child labor by referring to the lack of options that existed beforehand. For example, in his book Human Action, the iconic economist Ludwig von Mises eloquently stated: "It is a distortion of facts to say that the factories carried off the housewives from the nurseries and the kitchen and the children from their play. These women had nothing to cook with and to feed their children. These children were destitute and starving. Their only refuge was the factory. It saved them, in the strict sense of the term, from death by starvation."

But a more penetrating insight about child labor in the Industrial Revolution is less commonly heard. Namely, there were two very distinct forms of child labor in 19th century Britain: free-labor children and parish or "pauper" children. Free-labor children lived at home under the authority of parents or guardians. Parish children fell under the authority of government. Both types of children worked but there was a world of political and social distinction between the two categories. In his essay "Child Labor and the British Industrial Revolution," the free-market economist Lawrence W. Reed explained that the parents "often refused to send their children into unusually harsh or dangerous work situations." Quite apart from the natural bonds of love that make parents protective of offspring, there were solid economic reasons for parental caution. A child whose arm was shredded by machinery could not make a living. Instead, he might well become a drain on the family purse.

Parish children did not have protective adults; they had government officials or their equivalent. (Parishes functioned as de facto arms of government.)

Parish workhouses existed in Britain long before the Industrial Revolution. In 1601, the Poor Relief Act paved the way for parish officials to collect property taxes to provide for the "deserving poor." In 1723, the Workhouse Test Act was passed to prevent false claims of poverty. Any able-bodied person who wished to receive poor relief was expected to enter a workhouse; its harsh conditions would presumably act as a deterrent. About the same time as the Industrial Revolution (circa 1760-1840), attitudes toward the poor underwent their own revolution. The Napoleonic Wars (1803-1815) not only bled Britain of money; they also created a flood of injured and unemployable men who returned from battle. Those men had families who were plunged into poverty. Between 1795 and 1815 the tab for Britain's poor relief quadrupled. Meanwhile, the cost of mere subsistence soared because of political machinations such as the Corn Laws, a series of trade laws that artificially preserved the high price of grains produced by British agriculture. Many people could not afford a slice of bread.

But sympathy for the poor was in short supply. Historian Gertrude Himmelfarb's definitive book The Idea of Poverty chronicles the shift in attitude toward the poor during that period; it turned from compassion to condemnation. An 1832 government report basically divided the poor into two categories: the lazy who sucked up other people's money and the industrious working poor who were self-supporting. The Poor Law Amendment Act of 1834 instructed parishes to establish "Poor Law Unions" with each union administering a workhouse that continued to act as a deterrent by 'virtue' of its miserable conditions. Correctly or not, statesman Benjamin Disraeli called the act an announcement that "poverty is a crime."

Pauper children were virtually imprisoned in workhouses. And nearly every parish in Britain had a "stockpile" of abandoned workhouse children who were virtually sold to factories. Unlike parents, bureaucrats did not view poor children as loved or otherwise valuable human beings. They were interchangeable units whose presence was a glut on the market because there would always be another poor child born tomorrow. Private businessmen who shook hands with government did not have clean fingers, either. Factory owners could not force free-labor children to take dangerous, wretched jobs but workhouse children had no choice and so they experienced the deepest horrors of child labor. The horror was not because of the free market or capitalism; those forces, along with the family, were among the protectors of children. Child laborers were victims of government, bureaucracy and businessmen who used the law unscrupulously.

It is no coincidence that the first industrial novel published in Britain was Michael Armstrong: Factory Boy (1840) by Frances Trollope. The main character Michael was apprenticed to an agency for pauper children. Nor is it coincidence that the most famous child laborer, Oliver Twist, was not abused by his parents or a private shopkeeper, but by brutal workhouse officials in comparison to whom Fagin was humanitarian. At the age of twelve, with his family in debtor's prison, Oliver Twist's author, Charles Dickens, became a pauper child who slaved at a factory. As Reed observed, the "first Act in Britain that applied to factory children was passed to protect these very parish apprentices, not 'free labor' children." The Act was explicit in naming parish children because the weight of abuse rested on their shoulders.

Reed commented further on parish children: "It was these children on whom the critics [of the free market] were focusing when they spoke of the 'evils' of capitalism's Industrial Revolution. These youngsters, it turns out, were under the direct authority and supervision not of their parents in a free labor market, but of government officials. Most were orphans; a few were victims of negligent parents or parents whose health or lack of skills kept them from earning sufficient income to care for a family. All were in the custody of 'parish authorities'."

Nevertheless, socialist reformers successfully petitioned government to remedy child labor abuses for which the government itself was responsible. Government snatched freedom and food from the mouths of those children who were unfortunate enough to come under its authority. It was the marketplace and the private sector that allowed free-labor children to edge toward independence and to eat. Once again, the disease of government masqueraded as a cure.