The relentless revolution: a history of capitalism Read online

  THE

  RELENTLESS

  REVOLUTION

  ALSO BY JOYCE APPLEBY

  A Restless Past:

  History and the American Public

  Thomas Jefferson

  Inheriting the Revolution:

  The First Generation of Americans

  Telling the Truth about History

  (with Lynn Hunt and Margaret Jacob)

  Liberalism and Republicanism in the

  Historical Imagination

  Capitalism and a New Social Order:

  The Republican Vision of the 1790s

  Economic Thought and Ideology in

  Seventeenth-Century England

  The

  RELENTLESS

  REVOLUTION

  A HISTORY OF CAPITALISM

  Joyce Appleby

  W. W. NORTON & COMPANY New York • London

  Copyright © 2010 by Joyce Appleby

  All rights reserved

  For information about permission to reproduce selections from this book, write to Permissions, W. W. Norton & Company, Inc.,

  500 Fifth Avenue, New York, NY 10110

  Library of Congress Cataloging-in-Publication Data

  Appleby, Joyce Oldham.

  The relentless revolution: a history of capitalism / Joyce Appleby.

  —1st ed.

  p. cm.

  Includes bibliographical references.

  ISBN-13: 978-0-393-07723-0

  ISBN-10: 0-393-07723-3

  1. Capitalism—History. 2. Economic history. I. Title.

  HB501.A648 2010

  330.12’209—dc22

  2009035676

  W. W. Norton & Company, Inc.

  500 Fifth Avenue, New York, N.Y. 10110

  www.wwnorton.com

  W. W. Norton & Company Ltd.

  Castle House, 75/76 Wells Street, London W1T 3QT

  I dedicate this book to my son, Frank Appleby,

  who has been an unfailing source of comfort, knowledge,

  humor, and enthusiasm

  CONTENTS

  Acknowledgments

  1. The Puzzle of Capitalism

  2. Trading in New Directions

  3. Crucial Developments in the Countryside

  4. Commentary on Markets and Human Nature

  5. The Two Faces of Eighteenth-Century Capitalism

  6. The Ascent of Germany and the United States

  7. The Industrial Leviathans and Their Opponents

  8. Rulers as Capitalists

  9. War and Depression

  10. A New Level of Prosperity

  11. Capitalism in New Settings

  12. Into the Twenty-first Century

  13. Of Crises and Critics

  Notes

  ACKNOWLEDGMENTS

  WRITING THIS BOOK was actually fun, and even more pleasurable were the many conversations I had about capitalism with Flora Lansburgh, Jim Caylor, Linn Shapiro, Perry Anderson, Ruben Castellanos, Bruce Robbins, and Lesley Herrman. I had a band of readers to whom I am deeply, deeply indebted. Jack Pole brought to the reading of The Relentless Revolution a welcome and profound knowledge of history. David Levine, another fellow historian, was my toughest critic, but he generously praised the parts that he liked and always encouraged me to press on. Ware Myers gave me the kind of crisp advice you’d expect from an engineer with intellectual leanings. Susan Wiener, a poet and writer, read the book with sympathy and the sharpest eye for errors grammatical, syntactical, and orthographic that I have ever known. Carlton Appleby pushed for clarity and precision. My dear friend Ann Gordon brought her care for the English language to my prose. Several colleagues—Margaret Jacob, Robert Brenner, Peter Baldwin, Nikki Keddie, Fred Notehelfer, Stanley Wolpert, Jose Moya, Mary Yeager, and Naomi Lamoreaux—contributed valuable expert knowledge. My nephew, Rob Avery, saved me from making several errors about computers, as Seth Weingram did for the arcane world of finance. Karen Orren listened and read with her usual acuteness. I was fortunate in having Steve Forman as my editor at Norton, for he was a shrewd, yet sympathetic, reader of my text. My son, Frank, to whom I have dedicated this book, read each chapter with critical insight. What was even more helpful, he shared his expansive knowledge with me and never tired of talking about capitalism. Through the kindness of Peter Reill and the Center for Seventeenth-and Eighteenth-Century Studies, I found Vic Fusilero, the finest research assistant I have ever had. It’s rare that someone not only gives you an idea for a book but persists in convincing you to write it, but such is the case with Michael Phillips. After interviewing me for his radio show many years ago, he decided that I should write a book on capitalism, and so I have. I am grateful to all these friends. I may have to claim my mistakes, but I am certain that I would have had to claim a lot more without these superb readers.

  THE

  RELENTLESS

  REVOLUTION

  THE PUZZLE OF CAPITALISM

  LIKE A GOOD detective story, the history of capitalism begins with a puzzle. For millennia trade had flourished within traditional societies, strictly confined in its economic and moral reach. Yet in the sixteenth century, commerce moved in bold new directions. More effective ways to raise food slowly started to release workers and money for other economic pursuits, such as processing the sugar, tobacco, cotton, tea, and silks that came to Europe from the East and West Indies and beyond. These improvements raised the standard of living for Western Europeans, but it took something more dramatic to break through the restraints of habit and authority of the old economic order. That world-reshaping force came when a group of natural philosophers gained an understanding of physical laws. With this knowledge, inventors with a more practical bent found stunning ways to generate energy from natural forces. Production took a quantum leap forward. Capitalism—a system based on individual investments in the production of marketable goods—slowly replaced the traditional ways of meeting the material needs of a society. From early industrialization to the present global economy, a sequence of revolutions relentlessly changed the habits and habitats of human beings. The puzzle is why it took so long for these developments to materialize.

  Most of the marvelous machines that transformed human effort began with simple applications of steam and electricity. How many people had watched steam lift the top off a pan of boiling water before someone figured out how to make steam run an engine? Couldn’t someone earlier have begun experimenting with lightning? The dramatic success of eighteenth-and nineteenth-century innovations compels us to wonder why human societies remained fixed for millennia in a primitive agrarian order. How can it be that brilliant minds penetrated some of the secrets of the cosmos but couldn’t imagine how to combat hunger? The answer that the times were economically backward is of course semantic and doesn’t really help us pierce the conundrum of great civilized accomplishments in the face of limited economic productivity.

  Starting with these questions, I am going to explore the benchmarks in capitalism’s ascent, looking at how this system transformed politics while churning up practices, thoughts, values, and ideals that had long prevailed within the cocoon of custom. This is not a general study of capitalism in the world, but rather a narrative that follows the shaping of the economic system that we live with today. Nor does it cover how various countries became capitalistic, but rather concentrates on those specific developments in particular places that gave form to capitalism. My focus is on economic practices, of course, but it can’t be stressed too much that capitalism is as much a cultural as an economic system. A new way of establishing political order emerged. People reversed how they looked a
t the past and the future. They reconceived human nature. At a very personal level, men and women began making plans for themselves that would once have appeared ludicrous in their ambitious reach. Tucked into this account will be an examination of how different societies have responded to the constant challenges ushered into their lives during the past four centuries.

  If we were to visit ancient Florence, Aleppo, and Canton, we would be astonished by the rich array of foods and goods for sale in their vast bazaars, souks, and markets. We would marvel at the beauty of their churches, temples, and mosques, as well as the merchants’ elegant city houses and the country homes of the nobility. We would discover a population of talented artisans, knowledgeable statesmen, shrewd traders, skilled mariners, and energetic people everywhere. Yet they all were in thrall to an economic system so limited in size and scope that it could barely feed them. They accepted as normal that they would regularly suffer from drastic shortages of all kinds of goods because it had always been so.

  Scarcity in Traditional Society

  Traditional societies around the globe were built on the bedrock of scarcity, above all the scarcity of food. Whether in ancient Egypt or Greece, Babylonia or Mongolia, it took the labor of upwards of 80 percent of the people to produce enough food to feed the whole population. And because farmers often didn’t even succeed in doing that, there were famines. All but the very wealthy tightened their belts every year in the months before crops came in. The fear of famine was omnipresent. Hungry subjects tended to be unruly ones, a fact that linked economic and political concerns. The worry about famines, which most adults shared, justified the authoritarian rule that prevailed everywhere. Few doubted that those vulnerable to food shortages needed to be protected from the self-interested decisions that farmers and traders might make about what to do with the harvest if they were left to themselves.

  To prevent social unrest, rulers monitored the growing, selling, and exporting of grain crops. Where there were legislatures, they passed restrictive laws. Hemmed in by regulations, people had few opportunities to make trouble—or undertake new enterprises. Most manufacturing went on in the household, where family members turned fibers into fabric and made foodstuffs edible. Custom, not incentives, prompted action and dictated the flow of work throughout the year. People did not assign themselves parts in this social order; tasks were allocated through the inherited statuses of landlord, tenant, father, husband, son, laborer, wife, mother, daughter, and servant.

  Despite the great diversity of communities around the world, they conformed in one way: Their population grew and retrenched like an accordion through alternating periods of abundance and scarcity—the seven fat and seven lean years of the Bible. You can see this “feast or famine” oscillation in the construction record of European cathedrals. Most of these magnificent structures took centuries to complete, with a spate of years of active building followed by long periods of neglect. When there was a bit of surplus, work could resume, only to be succeeded by stoppages during times of acute scarcity.

  If we could go back in time, we would probably be most surprised by the widely shared resistance, not to say hostility, to change. Novelty has been so endemic to life in the modern West that it is hard for us to fathom how much people once feared it. The effects of economic vulnerability radiated throughout old societies, encouraging suspicions and superstitions as well as justifying the conspicuous authority of monarchs, priests, landlords, and fathers. Maintaining order, never a matter of indifference to those in charge of society, was paramount when the lives of so many people were at risk.

  The wealth of the Western world has created something of a safety net against global famine, but there are still societies whose powerful traditions echo those of premodern Europe. Through our engagement with the Muslim world we now also recognize the hold of ideas about honor, the separation of male and female roles, the importance of female virginity, and the submersion of each person’s desires into the will of his or her community. Recent terrorist attacks have prompted many Westerners to hope that improved economies might otherwise engage the young men who carry out the violence. More jobs would certainly be welcome, but such a response bears the traces of our capitalist mentality. What we don’t sufficiently weigh are the powerful ties of shared rituals and beliefs and how threats to them affect people. Men and women in traditional societies see our concern about efficiency and profits as fetishes. These preoccupations of ours are as distasteful to them as they were to men and women in sixteenth-century Europe.

  Capitalism’s Distinctions

  The word “capital” helps define my tack on this historical cruise. Capital is money destined for a particular use. Money can be socked away in the mattress for a rainy day or spent at the store. Either way, it is still money. It becomes capital only when someone invests it in an enterprise with the expectation of getting a good return from the effort. Stated simply, capital becomes capital when someone uses it to gain more money, usually by producing something. We can add an “ism” to “capital” only when the imperatives and strategies of private investments come to dominance as they did first in England and the Netherlands, next in Western Europe, and then in the American colonies. Outside these areas, capitalism moved next to Eastern Europe and Japan. In our own day capitalist practices hold sway through most of the world.

  Capitalism of course didn’t start out as an “ism.” In the beginning, it wasn’t a system, a word, or a concept, but rather some scattered ways of doing things differently that proved so successful that they acquired legs. Like all novelties, these practices entered a world unprepared for experimentation, a world suspicious of deviations from existing norms. Authorities opposed them because they violated the law. Ordinary people were offended by actions that ran athwart accepted notions of proper behavior. The innovators themselves initially had neither the influence nor the power to combat these responses. So the riddle of capitalism’s ascendancy isn’t just economic but political and moral as well: How did entrepreneurs get out of the straitjacket of custom and acquire the force and respect that enabled them to transform, rather than conform to, the dictates of their society?

  Many elements, some fortuitous, had to be in play before innovation could trump habit. Determined and disciplined pathbreakers had to persist with their innovations until they took hold well enough to resist the siren call to return to the habitual order of things. It’s not exactly a case of how small differences can have large impacts through a chain of connections. The better simile would be breaking a hole in a dike that could not be plastered up again, after letting out a flood of pent-up energy. But breaking that hole required curiosity, luck, determination, and the courage to go against the grain and withstand the powerful pressures to conform.

  Just as the capitalist system has global reach today, so its beginnings, if not its causes, can be traced to the joining of the two halves of the globe. Europe, Africa, and Asia had been cut off from the Americas until the closing years of the fifteenth century. Even contact between Europe and Asia was confined to a few overland trade routes used to transport lightweight commodities like pepper and cinnamon. Then European curiosity about the rest of the world infected a few audacious souls, among them Prince Henry the Navigator. Prince Henry never left Portugal, but he funded a succession of trips down the west coast of Africa. Merchants, enticed by a trade in gold and slaves along the western Africa coast, increased the number of voyages. Soon Portuguese ships were rounding the Cape of Good Hope on their way up the east coast of Africa. By the beginning of the sixteenth century, the Portuguese had established strongholds on both African coasts and across the Indian Ocean to the Indian subcontinent itself. Simultaneously another Portuguese, Ferdinand Magellan, leading a Spanish expedition, circumnavigated the globe in 1517.

  Seventy years before these Portuguese voyages, a Ming dynasty emperor sent out seven great expeditions from China. Led by Zheng He, who must have been a brilliant commander, the expeditions involved more than twenty-seven tho
usand sailors and two hundred vessels, the largest of them weighing fifteen hundred tons. (Columbus’s first voyage, by contrast, involved a crew of eighty-seven and three ships weighing no more than one hundred tons.) From China these flotillas sailed through the East Indies, past Malacca, Siam, Ceylon, across the Indian Ocean, and down the east coast of Africa, possibly going as far as Madagascar. Sailors grew herbs on the ships’ broad decks and managed to return from Africa with a couple of giraffes. Greatly aided by the magnetic compass, the Chinese voyages advertised the technological sophistication of the Chinese. Yet after three decades the expeditions stopped.

  After Bartolomeu Dias rounded the Cape of Good Hope in 1488, dozens of similar caravels followed in his wake, bringing Europe into continuous contact with the East Indies. The seafaring Portuguese had only whetted the appetite of European adventurers. This shift in European travel to Asia, starting overland from Italy, to countries on the Atlantic Ocean had profound consequences. In the next century, Spain, Portugal, France, England, Sweden, Denmark, and the Netherlands permanently eclipsed the commercial dominance of the Mediterranean countries. The Atlantic became the new highway for world travelers, leaving behind the city-states of Genoa and Venice.

  In these different responses of equally capable Chinese and Portuguese mariners we have one of history’s great riddles. Why the retreat of the Chinese and the Europeans’ rush to “see the world”? The Chinese had long demonstrated more interest in trade than men in Portugal, so monetary motives don’t help us. Looser political control probably enabled many more Portuguese to act on their own impulses, even if royal purses were needed to bear the expense of the first exploratory voyages. In the absence of certain knowledge, we are free to rush in and tell stories that confirm our biases. Western storytellers have emphasized the intrepidity of their explorers, the readiness of Europeans to move away from their customs. Such explanations of the differences in the societies of East and West won’t bear up under serious scrutiny. The story is more interesting than that.