The relentless revolution: a history of capitalism (19 page)

Getting a moribund monarchy to reform the country’s agriculture was a daunting effort, but the physiocrats pushed ahead. In their many pamphlets, they urged the diversion of investments from manufacturing and trade to farming.
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Correctly noting the benefits in Great Britain coming from a free trade in grain, they made that, along with a single tax, their rallying cry. In the 1770s, when the baron de Turgot became the king’s principal minister, he liberalized by fiat the domestic market in grain. Nature was not on Turgot’s side; bad harvests undermined his effort and played right into the hands of his many opponents. In the end the physiocrats, despite their friends in high places, were too few, too theoretical, and too weak to overcome institutional resistance to all forms of change within old regime France.

Retrospectively, we can see that the physiocrats were attempting to do by command what English entrepreneurs had done for themselves by taking advantage of lax law enforcement to weave together local commercial connections into a national market. The larger point is important. Self-assertive individuals did the innovating in England whether they were improving farmers and landlords, joint-stock trading company managers, interloping merchants, cheese mongers, or professional lenders. They had no larger vision, and they bungled as often as they hit their mark. It often took several generations of trial and error to fashion an optimal operation, but English economic ventures succeeded not only in producing impressive results but, even more important, in demonstrating the unexpected social benefits of allowing men and women to make their own self-interested choices.

While slower, the way capitalism actually came into being was more enduring because it educated and changed ordinary people as it expanded. Change by authority is dependent upon the ruler or group. Those endowed with political power can find other interests or have successors who do not share their goals, as was demonstrated by the Ming dynasty emperor who sent out Zheng He to explore the east coast of Africa. This point having been made, it is well to add that once capitalism had emerged as the dominant economic system, capitalists acquired power as a new class of entrepreneurs that used its power to suppress labor unrest. They left untouched the old master-servant laws that were highly prejudicial to workers as well as laws that interpreted labor organizations as felonious conspiracies. Capitalism didn’t eliminate oppressive upper classes. It just changed the basis upon which they stood. The ladders for social mobility were spread about the landscape more generously, but those without capital suffered as had those without inherited status earlier.

In England, mercantilism came back into favor in the eighteenth century, but in actual practice, most enterprises had already escaped legal restraints. Mercantilists took advantage of the fierce international rivalries of the eighteenth century to argue for applying high tariffs to imports to strengthen the national industries and, not so incidentally, to help manufacturers by using higher prices to discourage purchases of foreign goods, usually described as luxuries. It was perhaps this crusade that led the philologist Samuel Johnson to comment that patriotism was the last refuge of the scoundrel! Mercantilists might have shaken their heads in disbelief that self-seeking men and women could establish order in the market, but they didn’t have much success convincing others.

Upper-class conservatives could slow the rate of change, and the poor could invoke a higher law of charity, but the momentum was with private enterprise. When food prices skyrocketed, as they still did when harvests failed, there was much talk of a commonwealth in which the concerns of the vulnerable had first priority. In the end, long-term relief came in the form of improved agricultural techniques. The laws against engrossing, forestalling, and regrating stayed on the books until the end of the eighteenth century, but they fell into desuetude as those marketing food crops did pretty much what they wished with the abundant harvests they had learned to produce.

Certain intellectual developments that were critical at the threshold of economic change became less important after capitalism had become established. Japan offers an instance of this. In 2006 Japan adopted for the first time a jury system. The idea of amateur participation in the judicial system ran so counter to deep-rooted prejudices against questioning authority that the government had to launch a massive public relations campaign to teach men and women how to behave on a jury. Few Japanese wanted to challenge others or give vent to their own opinions in public, the very stuff of jury deliberations. Such cultural traits may not appear as inhibitions of economic advance, but they would have been at the outset. By contrast, at the end of the seventeenth century, Englishmen and-women were already habituated to vociferous, public debates on everything from salvation to the bad manners of the poor. Questioning authority proved critical to getting novelty accepted. Once capitalist practices had been established for all to see, authorities might adopt them, as did Japan in the late nineteenth century. The initial reform of economic institutions proved to be a messy, noisy, contentious business. Nobody knew exactly what was happening. Copying a finished product can be orderly, even predictable.

In addition to intellectual openness, the elusive quality of trust played a critical role in the early years of capitalism. Almost everyone who has studied trade in its first flush of expansion has commented upon how hard it was for merchants to trust distant agents and customers. Sending their wares and payments through labyrinthine networks of commerce often seemed like playing the lottery. Typically, European merchant firms sent their children, cousins, and in-laws as agents to Tenerife or Batavia or Port-au-Prince to watch out for the family interests. England had some conspicuous advantages in laying a foundation of trust because the country had a pretty homogenous population of close to six million. While people in different regions spoke dialects, English was a lingua franca. The various doctrinal disputes among Protestants and between Protestants and Catholics had pretty much disappeared into conformity to the Church of England by the end of the seventeenth century. Periodicals carried news from one region to another. The king in Parliament, meaning the monarch and members of the House of Lords and the Commons, spoke for the whole. People took property disputes to court increasingly throughout the eighteenth century. The English were a litigious people, but they trusted their institutions to adjudicate their interests fairly.

The English Civil War had divided the elite, but when William and Mary took the throne, a new and more pragmatic generation had taken over direction of the country. English laws had long protected property, but after 1689 “the rights of Englishmen” became a rallying cry for the English as well as their North American colonists. While the upper class supported draconian laws for crimes against property, and Catholics and dissenters were excluded from holding office, Englishmen and-women mingled more freely across lines of class and status than their peers elsewhere. Sharing opinion in print took much of the poison out of conflict and made possible the emergence of a consensus about religion, the economy, and the constitutional balance between king and Parliament. These things provided deep underpinnings for trust. The English shared the same prejudices and pride, and somehow these shared convictions even taught them to trust foreigners.

Economics as a discipline acquired a certain cohesion with Adam Smith’s masterful
Wealth of Nations
. Throughout the nineteenth and twentieth centuries, economics, like other studies of society, became a profession. The subject acquired enough precision to lay out its major theorems in algorithms and stochastic statistics. I am deeply suspicious of this precision when it is applied to anything larger than a single rate or measure. A country’s economy is embedded in its culture, which embraces a hotchpotch of qualities at play in collective life. “At play” is the right phrase here, for the culture of everyday life is composed of lively sensibilities, convictions, expectations, aversions, taboos, secret pleasures, transgressive acts, conventional attitudes, and forms of politeness. Such disorder would never fit into an equation. Social science predictions generally carry the caveat that they will hold ceteris paribus—“if all else remains equal.” But all else rarely remains the same.

Many scholars do not believe that capitalism existed until there were concentrations of capital in industrial plants with a new proletariat as the work force. The term for them is synonymous with industrialization. For others, capitalism is as old as the first civilization when men and women stored wealth for some future enterprise. I think capitalism began when private investments drove the economy, and entrepreneurs and their supporters acquired the power to bend political and social institutions to their demands. For England this had happened by the end of the seventeenth century. Those who promoted the market economy were greatly aided by a public discourse about how nations grow wealthy. Efficiency, ingenuity, disciplined work, educated experimentation all became part of a new ethic. While these new ways of looking at the world of work had to coexist for a long time with the older values that stressed status, stasis, and communal obligations, the ideal of productivity finally became dominant. Where earlier talented young men might have aspired to be courtiers or even clergymen, as the eighteenth century opened, careers in manufacturing, finance, retailing, and foreign trade beckoned.

There can be no capitalism, as distinguished from select capitalist practices, without a culture of capitalism, and there is no culture of capitalism until the principal forms of traditional society have been challenged and overcome. But it must be said—and is not often enough said—that the mores of a more traditional organization of society do not die out with the dominance of capitalism. Rather they regroup to fight again with new leaders and new causes. Any history of capitalism must contain the shadow history of anticapitalism, sometimes carried out in the name of a new theory, but often as a reexpression of values that prevailed before the eighteenth century.

In describing in great detail how the capitalist system supplanted a venerable, established order, I want to stress the difficulty of such a development. I want readers to resist the temptation to bring capitalism onto the historic stage as something inevitable, because it was not. The number of societies today that won’t make the attitudinal and practical adjustments required of an industrial economy should reinforce this point. Social institutions, like the family, religious faith, or types of political regime—autocratic or anarchic—can exert great independent influence on economic decisions. Taking hold in the West was a way of talking about economic relations that assumed that economic progress was inexorable, and capitalism a force not to be blocked, but the irregular patterns of development during the past four centuries indicate that some traditional societies have found the power to put the brakes on changes that threaten their way of life. The variety of arrangements in the world today—even within capitalist economies—cautions against talking about universals and uniformities that might occur in the natural world but rarely do in the social realm.

Capitalism was never just an economic system. It impinged on every facet of life and was itself influenced by every institution or identity that shaped its participants. It created new cultural forms, stimulated new tastes, and introduced a whole new vocabulary for discussing the impact of private enterprise on the welfare of the society as a whole. In time traditional ways of acting and thinking lost their controlling power. They became options, to be chosen as matters of taste. A different, dominant ethos took shape, not so much making people freer as turning economic freedom and individual rights into values considered fundamental. Once its amazing power to generate wealth was detected, most countries, at least in the West, wanted part of the action. When capitalism emerged in eighteenth-century England, it was relatively easy for other countries to copy English innovations. They could also discriminate between what they wished to copy and what they found distasteful in the modernizing dynamic of. French capitalism was not exactly like the English original, or German capitalism a replica of how the French adapted this enriching economic system to their ways.

THE TWO FACES OF EIGHTEENTH-CENTURY CAPITALISM

B
EFORE THERE WERE
factories under roofs, there were factories in the fields. As with oil in the twentieth century, sugar could only be produced in a few favored spots, such as Brazil and the islands of the Caribbean. And again like oil, it was in demand everywhere. The lure of profits from raising such a precious commodity drew Spain’s European rivals to the tropical parts of the New World, where they developed an intensive kind of agriculture, using slave labor. Over the course of three hundred years, eleven million African men and women were shipped like cattle to the Western Hemisphere. Although England dominated the trade during its heyday in the eighteenth century, France, Portugal, Spain, Denmark, and the Netherlands participated in the traffic in human beings. This is the ugly face of capitalism made uglier by the facile justifications that Europeans offered for using men until they literally dropped dead. Hypocrisy, they say, is the homage vice pays to virtue. In this case, hypocrisy left a bitter legacy. To assuage consciences over such a massive injustice, Europeans made invidious racial comparisons that have outlasted slavery by more than a century.

A much more benign, even awe-inspiring chapter in the history of capitalism paralleled the brutal days of the sugar plantations. Starting in the eighteenth century, a succession of ingenious men discovered how to make natural forces push, pump, lift, turn, twirl, smelt, and grind all manner of things. There was never any thought of importing slaves into Great Britain, but the high cost of workers’ wages proved to be a powerful incentive to find alternative sources of energy.