The relentless revolution: a history of capitalism Read online

  Following Smith, economic analyzers presumed a natural human psychology geared to ceaseless economic activity. Weber challenged this assumption with a single line: “A man does not by nature wish to earn more and more money, but simply to live as he is accustomed to live and to earn as much as is necessary for that purpose.”7 Weber began with an interesting phenomenon to explore: the convergence of economically advanced countries and the Protestant religion. He concluded that “the spirit of capitalism,” as he called it, could best be treated as an unexpected by-product of the Protestant Reformation of the sixteenth century. Examining the forms and sensibilities of Catholic Christendom against which the reformers had rebelled, Weber detailed how Protestant leaders taught that true Christians served God everywhere. They intruded their strenuous morality into every nook and cranny of customary society, using the scalpel of rationality to cut away the accretions of popish religion. It was the morality and rationality that Puritans brought to the world of work, Weber indicated, that had transformed the habits of people. Puritans invested work with a religious quality that aristocrats had denied it. Protestant preachers produced great personal anxiety by emphasizing everyone’s tenuous grip on salvation. This promoted an interest in Providence in which believers scrutinized events for clues of divine intentions. This intense examination of ordinary life turned prosperity into evidence of God’s favor. All these factors, Weber said, inadvertently made men and women agents of economic development.

  Driven to glorify God in all callings, cut off from the ceremonial comforts of a ritualistic religion, the Protestant became the archetypal modern man and the foe of tradition. Weber put his finger on what was wrong with all previous discussions of capitalism’s history: They started with the unexamined assumption that men and women rushed to throw off the old and put on the new. Projecting their contemporary values upon those in the past, analysts spent little time examining people’s motives because they were certain that they would naturally respond positively to the prospect of making more money even if it involved attitudes that they had never had or activities that appeared abhorrent to them. Reasoning on this assumption, they had removed all of the central puzzles about how capitalism had triumphed in the West.

  Weber rejected out of hand the existence of Smith’s natural propensity to truck and barter and criticized Marx for assuming the existence of a market mentality before there was a capitalist market. Smith made everyone a capitalist driven to seek self-improvement through the material rewards of the market. With this dependable human endowment, capitalism would emerge in the fullness of time. Marx invented a cadre of profit-driven men clairvoyant enough to imagine a world that had never existed. Weber labeled Smith’s ceaseless economic striving a peculiar form of behaving that had to be explained, not taken for granted.

  Influences on This Study

  These powerful thinkers—Smith, Marx, and Weber—have greatly influenced all subsequent analysis of capitalism. As a scholar I have long been fascinated by how economic development has changed the way we think about our material world and ourselves as well as the way we work and live. While I have learned from all these master theorists, I have been most influenced by Weber because of his emphasis on contingency and unintended consequences in the formation of capitalism. His respect for the roles that cultural and intellectual traits play in history appeals to me as well. I should also place myself on the contemporary ideological continuum. I’m a left-leaning liberal with strong, if sometimes contradictory, libertarian strains. I have always had a keen interest in progressive politics, and I believe that we are ill served by the conviction that capitalism is a freestanding system untouched by the character of its participants and the goals of particular societies. Mechanical models of the economy that emphasize its autonomy purport to be disinterested, but they actually diminish our capacity to think intelligently about the range of choices we have.

  I first started teaching in 1967 at San Diego State University, where I became interested in the history of capitalism through a circuitous route. All the American history instructors there used the same book in our introductory course. It was a collection of readings that demonstrated the origins of modern social thought through a succession of major texts from the sermons of Puritans who settled New England, through Thomas Hobbes’s Leviathan, John Locke’s Second Treatise of Government, Smith’s Wealth of Nations, Thomas Paine’s Common Sense, The Federalist Papers, and onward.

  Teaching is a great revealer of one’s ignorance. Everything seems to fit together while one is taking notes from someone else’s lecture. When the task of making sense of the past falls on you, gaps and non sequiturs stand out like hazard lights. The glaring anomaly I quickly discovered dealt with definitions of “human nature.” A term introduced to eighteenth-century public discourse, our ideas about human nature go unexamined because they spring from the commonsense notions of our society. Yet our understanding of human nature grounds just about everything else we believe, whether about politics, the workings of the economy, friendship, marriage, or child rearing. The problem that popped up in my teaching was how to account for the radical change in descriptions of human nature during the course of the seventeenth century. In the early selections in our textbook, the Puritan sermons and Elizabethan plays described men and women as thoughtless and capricious, if not usually downright wicked. Yet fast-forward a hundred years, and assumptions about basic human traits had changed dramatically.

  The new view of men and women can most easily be found in Smith’s Wealth of Nations. Yet Smith took his opinions about human nature for granted. Listen to him: “The principle which prompts to save is the desire of bettering our condition, a desire which tho generally calm and dispassionate, comes with us from the womb, and never leaves us til we go into the grave.” He speaks of the “uniform, constant, and uninterrupted effort of every man to better his condition.”8 Where, I wondered, had Smith got this view of people as fundamentally rational and self-improving? Certainly it bore little resemblance to the characters that Shakespeare created or to Puritan conviction that “in Adam’s fall did sin we all.” Being in England for a year’s sabbatical, I became a permanent fixture at the British Museum, where I began reading in a new genre, the writings about commerce that began appearing in pamphlets, economic tracts, broadsides, and advice books from the 1620s onward. Following this paper trail through the rest of the century, I discovered abundant clues about the break with conventional opinions about human nature. I saw that most authors tangled up their policy recommendations with assertions about human tendencies or what they often called the natural order of things.9

  Capitalism as a Cultural System

  Economic systems do not exist in isolation; they are intimately and crucially intertwined in their country’s laws and customs. Capitalism, even though it relies on individual initiatives and choices, is no different. It impinges on society constantly. Social mores channel desires and ambitions. Social norms help determine family size, and family size influences population dynamics. Neither the landlords, nor laborers, nor merchants, nor manufacturers were—or are—purely economic actors. They all had complex social needs and played many different roles in society as parents, subjects, neighbors, and members of a church, political party, or voluntary association. We could consider contemporary entrepreneurs, corporate managers, bankers, and large shareholders of stocks and bonds as now constituting something of a capitalist class with common interests in their financial well-being, particularly protecting capital from taxation and enterprises from regulation. Yet these men and women are not just capitalists. They’re parents, athletes, gun owners, Catholics, evangelical Protestants, members of AA, lovers of the good life, naturalists, environmentalists, and patrons of the arts.

  One of the principal arguments of this book is that there was nothing inexorable, inevitable, or destined about the emergence of capitalism. So why make such a big deal about this? Why insist that the seeds of capitalism were not planted in the Middle Ages or t
hat a capitalist mentality was not hardwired in human beings? Why? Because those notions aren’t true. The powerful propulsive force of capitalist ways, once a breach with tradition had been made, is largely responsible for giving an aura of inevitability to their arrival on the human scene.

  Societies that are resistant to capitalist ways today appear unnatural. Yet Europeans actually deviated from a global norm. Another important point: We should not make the first capitalist transformation a template for all others because that course of events could never be duplicated. Nor did countries that adopted a capitalist system, after England had shown the way, have to have the same qualities needed for the initial breakthrough. The same holds true for countries becoming capitalist today. Copying is not the same as innovating.

  Because capitalism began in England with the convergence of agricultural improvements, global explorations, and scientific advances means that capitalism came into human history with an English accent and followed the power trail that England projected around the globe in the eighteenth and nineteenth centuries. This meant that the market economy retained a bit of foreignness for those for whom English and, by extension, capitalism are second languages. For England’s neighbors and rivals, there was little choice but to imitate what the French in the eighteenth century called the English miracle. Other societies have elaborated their own variants of capitalism, often trying to protect certain customs and habits from capitalist imperatives. The people of Africa, the Middle East, India, and the East Indies had capitalism thrust upon them as Western Europeans arrived to exploit their resources. Still others, like the native people of North and South America, retreated into their communities when Europeans threatened their way of life and they were made strangers in their homelands.

  Appreciating that capitalism is a historical development and not a discovery of universal principles brings clarity about one thing: The experience of the first capitalist country was unique. The range of possibilities for other countries remains to be discovered. Because capitalism as an economic system impinges upon the whole society, each country has and will transform its values and practices in its own way. The roles of culture, contingency, and coercion, so critically important in the history of capitalism, should not be obscured. Not only has the market changed with every generation, but the possibilities for capitalist development have been and still are many and varied.

  In its forward thrust, capitalism acquired champions who insisted on the natural quality of capitalism. All cultures are natural in that they draw upon inherent human qualities and there are many potentialities planted in the human breast. Not all human qualities are called into play in every culture. Culture is a selecting mechanism, choosing among the diverse human skills and propensities to fashion a way for people to live together in a specific location at a certain time. A growing field in biology, epigenetics, studies how particular environments activate certain genes in human beings that can then be passed on to their progeny. Without the environmental trigger, the gene remains inert. This suggests that there is a very intricate interchange between our biology and our culture, one that goes well beyond the familiar nature-nurture relationship. All people may be self-interested, but what interests them depends a lot upon the society in which they have been reared.

  Our present method of analyzing economies obscures their entanglement with society and culture. Professional economists analyze capitalism with mathematical precision. Building mathematical models to explain how markets behave, they tend to ignore the messiness that any set of social relations is bound to produce. All the economists’ precise projections assume ceteris paribus—all other things remaining equal—but they rarely do. Philosophers use the word “reify” to indicate when a concept is being talked about as a real thing rather than as a way of talking about something. Economists talk about their subject as though it were a unitary thing rather than a mixed bag of practices, habits, and institutions. I am conscious of this danger and want to avoid skating too close to reification. When I make “capitalism” the subject of a sentence, I will be thinking of capitalists as those who use their resources to organize an enterprise or a cluster of business and corporation operators devoted to producing for a profit.

  All these definitions of mine make for dull reading, but clarification is worth a little boredom. I further want to distinguish between those historical developments traceable to capitalism and those that have existed in tandem with older systems. People blame capitalism for social ills that have long caused great misery. The Four Horsemen of the Apocalypse—oppression, war, famine, and devastation—come to mind. Unattractive personal motives, traits like greed and indifference to suffering, are often projected onto capitalists. Greed is as old as Hammurabi’s code. It could be said that capitalism is the first economic system that depends upon greed—at least upon the desire of bettering one’s condition, as Smith said. So, in a way, capitalism is damned for its honesty. But greed can also disadvantage an entrepreneur. Capitalists have been and still are greedy, but the distinctive characteristic of capitalism has been its amazing wealth-generating capacities. The power of that wealth transformed traditional societies and continues to enable human societies to do remarkable things.

  Capitalism has left few areas of life untouched. The most startling has been its influence upon women. It upended women’s lives in two long waves, the first abusive, the second liberating. Women in the early years of each country’s industrialization were swept up from their cottages and villages and dumped onto factory floors for twelve-to fourteen-hour days of muscle-wrenching tedium. Such long hours of labor were previously unneeded and not demanded.

  The second wave began in the nineteenth century with techniques for limiting pregnancies. The correlation between an improved standard of living and lower fertility rates has held up everywhere and has always benefited women. Today in the homelands of capitalism, couples are not even having enough children to replace their nations’ populations. Women have joined men in almost every profession and niche of the work force. Birthrates are still falling, and slowly marital roles have begun to adjust to accommodate families with two working parents.

  Exploitation is not distinctively capitalist, but wealth generating is. Yet because of its economic power and global reach, capitalist exploitation almost qualifies as a distinctive characteristic. One cannot celebrate the benefits of the capitalist system without taking account of the disastrous adventures and human malevolence that this wealth-generating system has made possible and sometimes actually encouraged. Capitalists and the governments that became sponsors of capitalist endeavors cannot be held responsible for fomenting the human catastrophes predicted in the Book of Revelation, but lots of ills in modern times must be included in its history, especially those intrinsic to its success. The inventions that led to the Industrial Revolution drew heavily upon fossil fuels, coal at first and then oil. This greatly expanded the ambit of production, freeing economies from the limitations that land for growing food and producing timber imposed. Over time the relentless revolution increased the exploitation of natural resources and the accompanying degradation of the environment. “Can the globe sustain these capitalist successes?” has become an urgent question.

  Capitalism has produced some enduring tensions, evident from the sixteenth century onward. Where the extremes of riches in a society of scarcity were usually tolerated, capitalism’s capacity to generate wealth made salient, and hence open to criticism, inequalities in the distribution of economic and political power. Similarly, government interference was acceptable when the society was at risk of starving, but no longer so when the system seemed to function better when its participants had the most freedom. This very lack of government regulation in market economies enhanced chances for cycles of boom and bust, as we know so well today. These issues will continue to surface through the history of capitalism. Finding just solutions to the problems they cause remains the challenge.

  Most decision making in the capitalist system
lies with those who have access to capital. Since these ventures almost always involve employing men and women, entrepreneurs depend upon others for labor. Workers in turn depend upon employers for the wages that support them and their families. Once separated from land or tools, ordinary men and women had no resources with which to earn their daily bread and so had to go out and sell their labor. But the way we talk about jobs doesn’t always make clear this mutual dependence. The adjective “free” as in “free enterprise” serves the ideological purpose of masking the coercion in capitalism. People may be free to take a job or not, but they are not free from the need to work as long as they wish to eat. Employers are not under the same existential restraint. Today all the “frees”—trade, enterprise, markets—have become so saturated with rhetorical overtones that I shall use these terms with care and then mainly to avoid the monotonous repetition of “capitalism.”

  Clarity about the nature of the capitalist system could enable us to make wiser policy decisions. Recognizing that capitalism is a cultural, not a natural, system like the weather might check those impulses in American foreign policy framing that assume that becoming like us is a universal imperative. Nor is the market a self-correcting system, as its apologists argue. Ideological assumptions about the autonomy of economics make it hard for us to recognize that the market serves us, not just as individual participants but as members of a society desirous of paying workers living wages, providing universal health care and good schools, as well as making humanitarian outreaches to the world. At a critical moment in the journey of capitalism to dominance, the importance of cultural influences and social considerations was dispatched to a conceptual limbo. We need to drag them back into the light.

  In this book, I would like to shake free of the presentation of the history of capitalism as a morality play, peopled with those wearing either white or black hats. Even though every history is always suffused with moral implications, historians don’t have to take sides. Still, they have to recognize how morals influence what people did in the past. Economists like to treat their subject as a science and minimize the moral overtones of wealth distribution, but neglect of people’s powerful sense of right and wrong is an evasion of reality. How could it be otherwise when economic life touches so closely our values and, by extension, our politics? With a better understanding of capitalism, people in democracies can play a much more positive, vigorous role in shaping economic institutions. To those who will disagree with my proposals in this history of capitalism, what I say may seem self-serving, so I present it as an intention rather than an accomplishment. You will have to decide which it is.