The relentless revolution: a history of capitalism (36 page)

These new patterns of consuming behavior created their own challenges to producers. Up to this point capitalist enterprises had responded pretty much to a demand that was steady, what economists call inelastic. People spent the largest part of their household budgets on food, shelter, and clothing. Manufacturing and extractive industries bought machinery and equipment, predicated on calculable needs. All that changed when the important buyer became an ordinary man or, more likely, woman. With the fascinating new items getting cheaper, more people found the money to buy them—if they wanted to. There was the rub: the uncertainty in optional spending, spending out of desire rather than need. By the beginning of the twentieth century, consumers were spending considerable amounts of money on inessentials like fashion accessories, upholstered furniture, electrical conveniences, cars, and entertainment paraphernalia. Demand reflected not just purchasing power but what we might call preference power. Those firms catering to consumers had to deal with tastes or, worse, fads that came and went with dizzying speed.

Anything as important as the new consumption tastes had to develop its own experts. Soon they appeared in the form of advertising agencies devoted to spreading information and inciting desire. The need to advertise arrived simultaneously with popular magazines and radio shows that became the means for paying for both media. Print advertisements and radio commercials, since they involved grabbing the public’s attention, put a premium on colorful pictures, persuasive voices, and psychological savvy. A popular magazine,
Good Housekeeping
, established an experimental station to test new household items in 1900. Soon it was giving a “seal of approval” to its advertised products. Electric outdoor signs had become visible in big cities by 1910. Promoting products and producing entertainment worked interactively to create a popular culture in which people were as likely to whistle a commercial jingle as a romantic ballad.

Marketing too became important as firms competed with one another to get their soap or shampoo, medicine or road maps, handbags or hosiery at “the point of sale” in department stores, pharmacies, and grocery stores. Brand names vied for buyers’ loyalty. Some became so well-known that people turned them into common nouns like “hoover” and “kleenex.” Ad campaigns lobbed new lines into public discourse like “I’d walk a mile for a Camel” or descriptions of soap as being “99&44/100th percent pure.” Whole new industries emerged to give advice about what to buy. Catering to customers’ tastes became imperative, as did extending credit through charge accounts and installment plans. Chain stores appeared at the beginning of the twentieth century, often enticing customers with extended credit. Schools even helped train children to become wise consumers with programs that encouraged savings for spending.
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An inconclusive debate raged throughout the twentieth century on whether advertising manipulated buyers by implanting fake needs and false expectation or whether consumers used their purchasing power to get the market to give them what they wanted.

Despite the activism of a whole generation of labor organizers, the labor market in the United States remained pretty much unfettered by regulations, though a convergence of interests in the 1910s led states to pass workers’ compensation laws. These took conflicts over on-the-job accidents or illnesses out of the courtroom and created prepaid insurance to take care of workers’ losses.
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Employees and employers shared costs and accepted limited liability. Even though unions picketed plants, went out on strike, and campaigned vigorously for the eight-hour workday and a decent wage, they rarely triumphed. Most companies had difficulty seeing their employees as citizens or prospective buyers of their goods. Much more to their liking were company union, towns, and company-run stores, where they could control their work force.

The United States moved into a consumer-dominated economy a decade or two before other capitalist countries.
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Typical of his probusiness bias, AFL president Gompers was quick to see an opening for labor in industry’s new capacity to turn out goods, especially when they produced more goods than demand registered in the market. Mass production, after all, was profitable just because it produced so many of the same things. Gompers saw that workingmen and women had an unexploited potential as buyers rather than as mere elements of production. The prevailing view about how wages were set, propounded in the early nineteenth century, argued that employers would always push wages down to the minimal amount a family needed for subsistence. This “iron law of wages” operated that way through much of the nineteenth century, but if wages rose, it was possible to see that this could stimulate the whole economy.

Marx had seen the downward pressure on wages as central to the industrial system and part of the reason why it could not sustain itself. Marxist labor leaders in Europe and the United States confidently believed that capitalism was doomed to extinction. Gompers, no theorist, took a different tack about the frequent layoffs and long workweeks endured by laborers. Working men and women, he said in 1887, needed “more”: more money, more leisure, more freedom. He clearly had caught the spirit of capitalism when he emphasized, “We do want more, and when it becomes more, we shall still want more. And we shall never cease to demand more until we have received the result of our labor.”
²²

Gompers’s “more” campaign explained that treating laborers as the cultural and social creatures that they were would solve businesses’ central conundrum of being able to make more goods than there were buyers for them. Younger economists agreed with Gompers as they deserted the labor theory of value for one that highlighted demand. Wages, if still sporadic, did in fact go up; the eight-hour workday was becoming common without a drop in the average wage rate. Gompers was not alone in recognizing that the economy had fundamentally shifted from a basis in scarcity to one driven by plenty. The American economist Simon Nelson Patten in his 1907 study
New Basis of Civilization
added intellectual firepower to the notion that the age of abundance had arrived.

This question brings to mind economic debates in late-seventeenth-century England, when the idea that popular spending might have an impact on the economy first surfaced. Then those in foreign trade actively stimulated new tastes with their imports of colorful calicoes. They waxed eloquent about the unlimited wants of human beings. It was not the inelastic demand of food and shelter that was going to drive the economy forward, they said, but the elastic demand for superfluous goods like a third or fourth blouse. Standing fiercely against this cheerful commentary were the manufacturers for whom ordinary people appeared as lazy, improvident, tardy, accident-prone, and surly laborers. Three centuries later the tension between these two groups of capitalists plays out in battles over protective tariffs, minimum wage laws, and expanded social benefits. Yet the ever-growing productive capacity of capitalist economies makes it even more imperative to choose between keeping wages down or enhancing the purchase power of workingmen and women.

Businessmen are not by nature reflective; they like to act. The leviathans of industrial capitalism had worked wonders in mills, plants, and mines across the world during the nineteenth century. Proud of their own accomplishments, they had contempt for employees who would use group power to coerce concessions from them. Yet there existed a puzzle at the heart of their economy that Gompers and Patten had hit upon. Workers were both employees—an element in determining prices—and customers, with the power to drive sales with their purchases. It takes time for ideas to catch up with events. Consumer capitalism came on quickly, pushed forward by the marvels of electricity and telegraphy. What it revealed was that men and women play many roles in the economy: breadwinner, full or part-time worker, saver, spender, consumer, register of tastes, and producer of future workers. Any adequate analysis of the developing economies of the West has to probe the meaning and efficacy in all these phases of a person’s experience.

RULER AS CAPITALISTS

D
URING THE LAST QUARTER
of the nineteenth century, European nations became venture capitalists with unhappy results for them and much of the rest of the world. For the previous two hundred years the free market economy had followed the path that private investors laid out. The informal communication of the market, spoken through the language of prices and rates, directed participants to the best deal. Information itself became a material good, orienting workers, producers, and investors toward their interests. During this long gestation period, governments played a supporting role. They sponsored industrial espionage, erected tariffs, and adjudicated contracts in their courts of law. In some countries they built railroads and established national banks. Still, kings, presidents, chancellors, and prime ministers gave the high politics of diplomacy and war making the lion’s share of their attention.

European leaders were no longer willing to sit in the stands, watching their people steer this prodigy alone. They had acquired a lot of money from their wealthy subjects, and they began using it to invest in empire building, not to extract tribute as the Romans and Mongols had, but rather to command subjects’ labor and resources to make things for the market. Kings and statesmen became entrepreneurs. Much attention has been given to the challenge of accumulating capital; much less thought has gone into studying how excess capital has affected economic choices. By the end of the nineteenth century most people in the West knew that money should be making money—all the time. The idea of idle money seemed abhorrent. Rulers in this regard were no different from others. With their enhanced revenues, the heads of state for Britain, France, Belgium, Germany, and Italy turned to reckless overseas adventures. Capitalism’s unparalleled capacity to generate profits had reshaped the political landscape.

Bringing the peoples of Asia, Africa, and Latin America into capitalism’s orbit promised both power and wealth to Europe’s rulers. But, alas, capitalism hadn’t modified the intense rivalries among European nations. Thomas Paine anticipated that commerce would “cordialize” mankind, but that was not to be. Instead countries now had more money for arming themselves. More arms spawned grander ambitions. Western European countries began competing for territories abroad while Spain, France, Great Britain, and Portugal had old empires to exploit. Generating new sources of income provided the means and the motives for Europe’s rulers to engage in an international contest that ended in the disastrous First World War.

Neither the world nor capitalism would ever be the same after Western nations thrust themselves into the hinterlands of Africa in search of exotic raw materials. The difference between industrial and commercial expansion became crucial. Trade had touched only merchants, their servants, and those who lived near coasts, whereas producing goods in foreign lands involved whole populations put to work for their new masters. Typical of earlier foreign forays was the conduct of Great Britain toward China in the 1830s. Its East India Company was eager to establish a trade in opium grown in India. The Chinese government was loath to allow its people access to such an addictive drug. It prohibited the trade and expelled British merchants. Despite protests at home, the British forced their will upon China. After bombarding coastal cities, they succeeded in gaining commercial access to five Chinese ports and took control of Hong Kong. Though violent, the intrusion was limited.

Mobilizing labor abroad changed the character of capitalist enterprise, for it took more than economic incentives to ensnare the men and women found living near oil deposits and tropical forests. Harvesting tropical crops and extracting precious minerals created a need for workers close to these raw materials. Of course the factories in the fields of the seventeenth-and eighteenth-century Caribbean sugar plantations and the silver mines of Mexico and Peru offered something of a template for the new capitalist thrust to make colonies centers of production.

Governments had what companies lacked, the power to commandeer workers by extorting concessions from their compliant leaders or moving in with force where there was no recognized political order, as in much of sub-Saharan Africa. European colonies already existed on the coasts as supports to long-distance commerce. The untapped riches in the African interior stirred imperial designs. European countries began to scuffle over who would get what, with little thought of the people who lived there. Cupidity, curiosity, Christian proselytizing, and militant strong-arming came into play. Abuses, unacceptable at home, became common when capitalism moved outside its original borders. Long forgotten was how long it had taken before the forebears of the colonizers had adjusted to modern work rhythms. Their new colonial subjects just appeared to be backward, evoking little interest in their well-being from their new masters. Their resistance was met with violence.

European Missionaries to Africa

Considering the amazing reach of Western explorations, it’s quite stunning how little was known about sub-Saharan Africa before the 1850s. Somehow it had never become a candidate for colonization as had North and South America, Australia, New Zealand, Indonesia, and India. Deadly diseases, especially malaria, made it a deathtrap for Europeans. Just as remarkable, a single person, David Livingstone, opened up the eastern half of the continent.

Livingstone has one of those life records that shame mere mortals. From the age of ten until twenty-four he worked in the cotton mill of his Scottish hometown. Awakening to learning and Christianity in his late teens, he taught himself Latin, a requisite for a college education. He even contrived a way to read during his fourteen-hour shift by mounting his books on the spinning jenny. He saved enough money to go to medical schools in Glasgow and London. From there he went to South Africa as a medical missionary and soon married into a prominent missionary family. Livingstone found his twin vocations as Christian healer and intrepid explorer soon after he arrived in Cape Town in 1841. The two remained entwined for the next thirty years as he organized expeditions into “darkest Africa,” a popular designation that suggests both a lack of knowledge and the skin color of the inhabitants.