The relentless revolution: a history of capitalism (66 page)

Capitalism’s History Recapitulated

The origins of capitalism’s flaws can be detected in its history, when things commercial moved from the periphery in premodern aristocratic societies to form the center of modern ones. Bargaining was as old as human association, but it had always been contained within the interstices of societies largely run by warriors. When Europeans traversed routes to the Indies, they found exotic Asian ports where they could buy silks and spices. Going in the other direction, they encountered a new world with two continents bracketing dozens of tropical islands. Lucrative trades sprang up, demonstrating that Europeans already had impressive savings to invest in foreign ventures.

The aristocracies that supported European monarchies in the sixteenth century looked down upon merchants because of their absorption with making money, but they liked the challenge of expanding European influence and power. They believed unquestioningly in human inequality. Some few were born to head diplomatic missions, serve the law or the church, advise kings, and lead armies; the remainder were the hewers of wood and drawers of water, not to mention the farmers and servants who lived lives of drudgery. As an urban group merchants fell somewhere in between these categories, respected for their skill and money but demeaned for their lack of distinguished family ties.

In the seventeenth century, in England at least, attitudes began to change as buying and selling things became more prevalent. When the primitive agricultural system yielded to improved techniques for raising food, larger harvests brought down food prices. At the same time, many of the farmers’ children were no longer needed on the farm and moved into rural industries or left to pick up city trades or thicken the distribution networks of England’s unified market. In the eighteenth century practical applications of scientific knowledge succeeded in getting steam to drain mine pits, power factories, and drive locomotives. These changes ran athwart the mores embedded in the laws, religion, and popular lore of the day. Proponents of economic developments marshaled arguments to justify the novel practices. They depicted the incipient capitalist system as natural, liberating, progressive, and rewarding. Once they secured belief for this view, capitalists had the ideological punch to disrupt settled communities and their values.

Scarcities continued to characterize Western societies in the eighteenth century because population began to grow in the 1730s and 1740s. Still, in cities buyers found objects of delight and usefulness, from maps and travel books to jewelry and clothing decorated with precious stones; exotic foods like sugar, coffee, and cocoa; and fascinating contrivances like eyeglasses, scientific instruments, and pocket compasses. The exultation at human inventiveness that had become part of the spirit of capitalism started to take hold of the public imagination. Invidious comparisons between the West and the rest of the world entered public discourse.

After the end of the seventeenth century, there were no more famines in England, and they became less severe elsewhere in Western Europe. The dreaded plague, which had revisited Europe with regularity since the Black Death of the fourteenth century also made an exit after its 1723 visit. That sense of life’s precariousness that justified the invasive authority of fathers, magistrates, and kings would now slowly fade. Calls for greater political participation, religious toleration, and personal mobility grew louder as market participants acquired, or seized, the freedom to move outside the skein of social prescriptions. Short-term individual goals replaced old worries about the future. The aggregation of such decisions set prices and rates without anyone’s taking responsibility for their consequences.

The celebration of the individual inventor—homo faber—gained ground as the initial experiments with steam turned into a revolution in production processes. The industrial era began in earnest in the nineteenth century, gaining momentum as it moved out from England to France, Germany, and the United States. By the end of the century the magic of the steam engine had been overtaken by the wizardry of electricity. Chemistry joined physics as a handmaiden to industry. Eager investors promoted a sustained search for new inventions, which led in time to organized research. This meant a constant delving into the qualities of the natural world and its elements, as they studied reactions to heat, cold, stress, compression, tension, and gravitational force. This work infused a wondrous quality into the material universe as it was replacing an earlier spirituality. Some called it the disenchantment of the world. While this constant bombarding of nature with questions began with natural philosophers, inventors came right behind them to commercialize their findings and diffuse their impact.

The social world that wound around the repetitions of each year’s seasonal tasks and holidays morphed into one of constant variation. Change, always something to be feared, acquired a Janus-like quality. It could actually bring improvements; it could also obliterate long-standing ways of being in the world. To keep the economy developing required men and women to take risks, think innovatively, and accept changes that made their lives very different from those of their parents. New too was the idea of people’s earning their place in society regardless of family origins. Social mobility, which seems so ordinary a concept to us, was an abomination in a society structured around the statuses of nobility, gentility, commoner, and servant—the dependent many and the independent few.

The ambition that played an essential role in inducing people to be more productive could be sustained only if there was room on the higher rungs of the social ladder. While statuses had supported stasis, striving promoted expectations of moving up and fears of moving down or being pushed there. Once uprooted from the old agrarian order, men and women learned crafts like shoemaking, worked in construction, formed the human ligaments of commerce, or were drawn into factory work. Two new classes emerged to take the place of the old ranks: those of workers and employers. Working with your hands was further distinguished from working with your brains. While these positions were open to all claimants as the old statuses were not, social mobility had its limits. But geographic mobility increased as farm people found work in rural industry and then in the cities. The more adventurous left Europe altogether to find a place and perhaps a fortune in South and North America. Capitalism benefited enormously from its association with political freedom, even as it created new forms of control. Factories replaced the home and the shop as work sites. Those who built, ran, and invested in them acquired power. Yet they held fiercely to the ideology of individualism, independence, and human rights that accompanied their rise to predominance.

Capitalist ideology battened off the concept of human nature. It specified rights as universal that prompted those dispossessed to agitate to enjoy the fruits of their labor and liberties. Yet the legal traditions of Europe distinguished sharply between the rights and privileges of masters and servants. Employers tried to maintain these old legal advantages, even as their employees saw themselves as the bearers of rights. Domestic consumption also became more important to capitalist economies. The supply side warred with the demand side. Producers wanted to keep wages low and hours long when making goods, but they needed to have customers well paid and interested in shopping when it came time to sell those goods.

The prospect of getting rich unleashed a rapacity rarely seen before in human society. Great wealth was to be made importing tropical plants like sugar, tobacco, tea, and cocoa to European consumers with purchasing power and addictive tastes. Rather than import these products from Asians and Africans, Europeans organized a system of plantation agriculture to raise these appetizing novelties in the New World. This trade was made possible because they could buy slaves by the millions from Africa and ship them to the Caribbean islands and Atlantic coasts of North and South America. The European exploitation of vulnerable people began with slavery in the sixteenth century and moved to on-the-site exploitation in distant countries, especially Africa in the nineteenth century. Then Germany and Italy joined Spain, Portugal, Great Britain, and France in building empires with capital investments directed to developing their colonies’ natural resources. In treating colonial laborers and their societies as so many aspects of production, capitalists dehumanized their relations with the people outside their continent.

While the belligerent rivalries of Europe were very old, the wealth generated by capitalism changed the terms of engagement in the twentieth century, enabling the countries to sustain hostilities for years. When war broke out in 1914, no one expected this outcome. Most people thought it would end in months; instead it dragged on for four bloody years. Since the competition was in part over imperial holdings, far-flung colonies were dragged into the conflict. Two decades after World War I, the Second World War began. Perhaps no greater contrast has existed than that between the sense of accomplishment at the opening of the twentieth century and the despair that reigned when the Second World War ended in an explosion of ferocious energy in 1945.

The year 1900 opened with the marvels of the automobile, electric power, and reconfigured city centers dotted with skyscrapers. Life expectancy got longer, and public health measures checked the spread of diseases that had once ravaged populations. Four decades later war had killed millions of men and women, expelled millions of others from their homes, and utterly demolished thousands upon thousands of city blocks. Men and women who had been young for the First World War entered middle age chastened. Hard times promoted serious thought. After a second world war, capitalist nations recognized the need for cooperation and created templates for international organizations of lasting value.

Between the two world wars, Europe suffered a massive decline in commerce. Known as the Great Depression just as the First World War was originally known as the Great War, this sudden deceleration of the capitalist tempo left experts in a state of shock. Dozens of economies fell into shambles. Despite efforts at ameliorating the loss of jobs and savings, most government policies fell short. It took the massive spending of the Second World War to get the capitalist system humming again, a result that vindicated the theory of John Maynard Keynes. Keynes argued that private investments alone could not pull economies out of depression. Like the biblical reference to seven fat years followed by seven lean ones, capitalism has oscillated between good and bad times, though with less predictability. The pent-up demand after World War II and the great wealth that the United States was willing to spend to help in the recovery of Western Europe and then Japan led to a golden age of a quarter century. A generation later a new matrix for recession brought to an end the bounteous prosperity of the postwar era.

People began in the 1970s to take notice of the environmental toll taken by the accelerating levels of fossil fuel consumption, a fact driven home by the emerging power of OPEC, the association of oil-producing countries. Exercising something of monopoly power, OPEC voted a dramatic rise in oil prices, making noticeable several other problems in the homelands of capitalism. The most prominent was that for the first time rising prices did not signal a period of growth, but rather one of stasis or stagnation or, in the term of the hour, stagflation. The income equalizing of the postwar period reversed, followed by a four-decade-long stretch of the gap between low and high incomes in the United States. The mutually beneficial agreements among big business, big labor, and big government grew weaker. Organized labor, the beneficiary of depression despair and postwar growth, lost its purchase on the popular imagination. Stagflation also broke up the consensus that Keynesian solutions would work for all of capitalism’s problems. As labor power waned, that of employers waxed.

While capitalist nations were taking in these troubling facts, capitalism moved into high gear with a cascade of new technologies that brought in the age of the computer, the transistor, and the Internet. Schumpeter’s “perennial gale creative destruction” blew in with a new generation of ingenious devices. Every economic downturn gives critics a chance to draft obituaries for capitalism, but they underestimate the fecundity of capitalism in promoting ingenuity and turning novel prototypes into great cash cows.

Contemporary Capitalism and Its Critics

Gordon Gekko, the business antihero in the movie
Wall Street,
said that “greed, for lack of a better word, is good,” but few agree. Alan Greenspan, for one, pointed to the dangers of an “infectious greed” while speaking to Congress in 1997 as chairman of the Federal Reserve Board. Nor is greed the only thing that people hold against capitalism. I’ve made a little list, and it includes such charges as responding to short-term opportunities to the neglect of long-term effects, dispensing power without responsibility, promoting material values over spiritual ones, commoditizing human relations, monetizing social values, corrupting democracy, unsettling old communities, institutions, and arrangements, and rewarding aggressiveness and—yes—greed.
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Two other capitalist responsibilities have cast long shadows forward: intractable poverty and a deteriorating environment. While most of the world economies have been developing nicely, sixty years of effort by the First World to stimulate prosperity in many Third World countries has ended in disappointment. Experts are regrouping to test some novel approaches to animate stagnate economies and revive failed states. Thinking more broadly, some think it’s time to correct the flaws in capitalism instead of expecting another technological spurt to divert attention elsewhere. On the agenda for the new century is a multipronged effort to halt the environmental damage that a century of population growth, fossil fuel burning, water pollution, and various other human intrusions on the planet have caused.