The relentless revolution: a history of capitalism (3 page)

European Divergence

There was nothing inevitable about the English moving from the agricultural innovations that freed up workers and capital for other uses to a globe-circling trade and on to the pioneering of machine-driven industry. It’s only in retrospect that this progression seems seamlessly interconnected. But it wasn’t. This appearance reflects a human tendency to believe that what happened had to happen. It is important to break with this cast of mind if we are to understand that capitalism is not a predestined chapter in human history, but rather a startling departure from the norms that had prevailed for four thousand years. Nor did commerce force capitalism into being. There have been many groups of exceptional traders—the Chinese, Arabs, and Jews come to mind—but they were not the pioneers of either the Agricultural or Industrial Revolution. We could say that a fully developed commercial system was a necessary, but insufficient, predecessor to capitalism.

To say that capitalism began in England is not to suggest that the explorations of the Portuguese and Spanish did not have an impact on the history of capitalism. These staggeringly bold adventures of the fifteenth and sixteenth centuries opened up minds and pocketbooks in England as elsewhere. But the examples of Spain and Portugal bolster the case for England’s exceptionalism. Despite sallying forth in successive expeditions, neither country modified its aristocratic disdain for work or indifference to the needs of merchants and artisans. Everything that was remarkable about Portuguese and Spanish voyages got folded back into old ways. What differed in England was that a sequence of developments never stopped. And they attracted commentary, debate, and explanations. This intellectual engagement with the meaning of economic change blocked a reversion to old ways of thinking. Novel practices and astute analysis of them are what it took to overturn the wisdom of the ages. Many countries had brilliant episodes in their history; sustaining innovation through successive stages of development distinguishes England’s performance.

Of course to start at any date is arbitrary. All historical developments have antecedents, some going back centuries. Each cut of the historian’s ax into the layers of the past proves that the roots of modern society are very deep. Yet the seventeenth century brought fundamental alterations to England, and contemporaries became acutely and astutely aware of them. At its beginning a venerable social order existed to keep in place established precepts, prerogatives, and regulations. A century and a half later capitalism had gained critical momentum against the regime of status, stasis, and royal control. From the risky ventures and trial-and-error methods of large and small entrepreneurs emerged successes so resounding that there was no turning back. Changes became irreversible and cumulative. Growth turned into development, not just expansion, but getting more from less. Capital would never again be scarce. Indeed, the Dutch became the financiers of Europe with the savings accumulated during their heyday as the world’s greatest traders.

The “rise of the West” is a very old theme in history books, one that, alas, has produced many invidious comparisons between the West and “the rest.” I certainly do not want to contribute to the hubris that this historical tradition has fostered. I think that a careful reader of this book will note the emphasis on the unusual convergence of timing and propitious precedents in my explanation of how capitalist practices became the new social system of capitalism. Focusing on England may seem a bit old-fashioned, but the latest scholarship confirms that England was the unique leader.

Recently a stimulating debate has erupted around the proposition that Europe wasn’t so different from the rest of the places on the globe before 1800. Kenneth Pomeranz has written a provocative study that details how parts of Asia enjoyed a standard of living in the eighteenth century similar to that of Western Europe. Only with nineteenth-century industrialization did there occur that “great divergence” that led to European hegemony, in his view.
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Pomeranz’s study has had a salutary effect, promoting new research and forcing a searching reevaluation of old opinions. His argument for “global economic parity” concentrates on material factors like life expectancy, agricultural productivity, and interregional trade. Intangibles like the public’s receptivity to change and the flexibility of the government responses get little of Pomeranz’s attention. Nor does he consider how various developments interacted with one another, either enhancing or discouraging successful innovations. At the cultural heart of capitalism is the individual’s capacity to control resources and initiate projects. England’s great and unexpected success forces us to look for the invisible influence at play that we might otherwise overlook.

Measures of well-being taken at one point in time don’t say much about the direction or momentum behind different economies. Many times in the past, countries have flourished for a while only to fall back to an earlier level. Only in England after the sixteenth century did the initial, enterprising successes lead steadily to other innovations.
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There, mutually enhancing economic practices escaped the confining channels of custom and gained leverage as blueprints for change. This fact impresses not as evidence of national superiority, but rather of how much contingency and fortuity played in the genesis of capitalism. In stressing the singularity of England, I am also emphasizing how surprising it is that this revolutionary new system of capitalism emerged at all.

England advanced economically just as it was being torn apart politically. During the seventeenth century, constitutional and religious conflicts turned into open rebellion and then civil war, followed by a republican experiment, itself brought to an end by the restoration of the monarchy. This period of divided authority coincided with the formation of a unified, national market for the country. Either because of, or despite, the protracted political turmoil, innovators and interlopers were able to defy venerable regulations about how the grain crop should be raised and marketed. When the political arrangements of 1688 restored political stability to the country, the new economic practices were firmly in place. So well established were they that old-timers complained of their being treated as customary.

Economic Change and Analysis

Most economists, when they think about history, take their cues from Adam Smith. His
Wealth of Nations
was the first great account of the economic changes England had witnessed in the two centuries before 1776, when it was published. Smith placed economic development in a long sequence of progressive steps that had evolved over time. This interpretation of the history of capitalism as moving forward effortlessly has produced the greatest irony in the history of capitalism, an explanation of its origins that makes natural what was really an astounding break with precedent. This view also depends upon people already thinking within the capitalist frame of reference. According to Smith, capitalism emerged naturally from the universal tendency of men and women to “truck and barter.” In fact it took economic development itself to foster this particular cultural trait. Smith turned an effect into a cause. For Smith and his philosophical colleagues, economic change had slowly, steadily led to the accumulation of capital that could then pay for improvements like the division of labor that enhanced productivity. No cultural adjustment had been considered necessary because underneath all the diversity in dress, diet, and comportment beat the heart of economic man—and presumably economic woman.

Because the full elaboration of economic developments in England took place over two centuries—almost seven generations of lived experience—it was possible to imagine it as the evolutionary process that Smith described. But in continental Europe industrialization came with brutal speed. Men and women were wrenched from a traditional rural order and plunged into factories within a single lifetime. Karl Marx, observing this disruption in the middle decades of the nineteenth century, could not accept the English evolutionary explanation for the emergence of capitalism. He believed that coercion had been absolutely necessary in effecting this transformation. Marx traced that force to a new class of men who coalesced around their shared interest in production, particularly their need to organize laboring men and women in new work patterns.

Separating poor people from the tools and farm plots that conferred independence, according to Marx, became paramount in the capitalists’ grand plan.
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He also stressed the accumulation of capital as a first step in moving away from traditional economic ways. I don’t agree. As Europe’s cathedrals indicate, there was sufficient money to produce great buildings and many other structures like roads, canals, windmills, irrigation systems, and wharves. The accumulation of cultural capital, especially the know-how and desire to innovate in productive ways, proved more decisive in capitalism’s history. And it could come from a duke who took the time to figure out how to exploit the coal on his property or a farmer who scaled back his leisure time in order to build fences against invasive animals.

What factory work made much more obvious than the tenant farmer-landlord relationship was the fact that the owner of the factory profited from each worker’s labor. The sale of factory goods paid a meager wage to the laborers and handsome returns to the owners. Employers extracted the surplus value of labor, as Marx called it, and accumulated money for further ventures that would skim off more of the wealth that laborers created but didn’t get to keep. These relations of workers and employers to production created the class relations in capitalist society. The carriers of these novel practices, Marx said, were outsiders—men detached from the mores of their traditional societies—propelled forward by their narrow self-interest. With the cohesion of shared political goals, the capitalists challenged the established order and precipitated the class conflict that for Marx operated as the engine of change. Implicit in Marx’s argument is that the market worked to the exclusive advantage of capitalists.

In the early twentieth century another astute philosopher, Max Weber, assessed the grand theories of Smith and Marx and found both of them wanting in one crucial feature: They gave attitudes to men and women that they couldn’t possibly have had before capitalist practices arrived. Weber asked how the values, habits, and modes of reasoning that were essential to progressive economic advance ever rooted themselves in the soil of premodern Europe characterized by other life rhythms and a moral vocabulary different in every respect. This inquiry had scarcely troubled English economists or historians before Weber because they operated on the assumption that human nature made men (little was said of women) natural bargainers and restless self-improvers, eager to be productive when productivity contributed to their well-being.

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.”
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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