24 May, 2010Issue 12.3EconomicsHistory

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The Culture of Capital

Tom Cutterham

foerJoyce Appleby
The Relentless Revolution: A History of Capitalism
W.W. Norton, 2010
494 Pages
ISBN 978-0393068948

Joel Mokyr
The Enlightened Economy: An Economic History of Britain
Yale University Press, 2009
550 Pages
ISBN 978-0300124552

Richard Bronk
The Romantic Economist: Imagination in Economics
Cambridge University Press, 2009
400 Pages
ISBN 978-0521735155

The financial crisis goes back to the mid-20th century, when “I like Ike” echoed through a million American homes and TV adverts suddenly became the most important factor in election campaigns. “The expense of TV spots threw officeholders and their challengers into the arms of business interests.” Politicians began collaborating in a long process of deregulation that would shift the role of government from looking after citizens to fostering the growth of corporations. “The free market ideology dominating public discourse gave cover to those in government”, convincing voters they were doing the right thing. The conditions for collapse evolved from there.

This explanation is characteristic of Joyce Appleby’s book, The Relentless Revolution. Appleby seeks to bring out the connectedness of culture, politics, technology, and the economy. Indeed, each of the books under review here make a variation on the same point: understanding economic history, and economic crises, is more than a numbers game. Taken together, these books can be read as a critique of institutionalised economics based on mathematical modelling. On a meta-level, they help to reveal the cultural assumptions that have defined the modern practice of the “dismal science”.

For Appleby, “it can’t be stressed too much that capitalism is as much a cultural as an economic system.” So she discusses not just how the growth of England’s agricultural production in the 16th century created the potential for investment in new forms of manufacturing, but how “the intensification of trade triggered a public discussion that led to fresh ways to imagine the economy.” Ideas and imagination had a real effect on economic structures; at the same time, capitalism itself generated new ideas about progress and equality while undermining older values, good and bad.

The history of capitalism, then, quickly becomes global history, as the history of countries and communities becomes inseparable from that of economic change. For stretches, Appleby repeats a rather familiar tale of the rise of the West, focusing on Germany and the United States as they began to take the lead from England in the 19th century. But to the well-understood concept of globalisation, she adds a key insight: capitalism manifested differently in different places and cultures. This is particularly well observed in her accounts of India and China: here the politics of totalitarian communism and democratic pluralism have led to very different forms of integration into global markets. Regarding China, Appleby raises important doubts about whether the free market will, as many have hoped, lead the country on the road to a free politics.

Appleby is no evangelist for capitalism. She celebrates its wealth-generating effects, and links it with the rise of women’s rights, but does not miss the “wrenching social and moral pain” or the environmental damage it can cause. “The two faces of eighteenth-century capitalism” were the wonders of the machine revolution, with its brilliant entrepreneurs and rags-to-riches success stories, and the cruelties of the slave trade, as investment in human property “twisted relations among the races in a particularly ugly way”. Her aim is neither to attack nor glorify the system she describes, but to help reveal “the roles of contingency, culture, and coercion” in the history of its emergence.

Both Joel Mokyr and Richard Bronk make similar points in books published last year. The Enlightened Economy is narrower in place and time than The Relentless Revolution, and more rigorously scholarly in its approach, but it too argues that “the beginnings of modern economic growth depended a great deal on what people knew and believed, and how those beliefs affected their economic behaviour.” The question Mokyr sets himself to answering is, why did the Industrial Revolution happen first in England? His answer is of course not simple, but as well as the textbook explanations like coal and enclosures, he points to an ideology of the Enlightenment: “the drive to expand the accumulation of useful knowledge and direct it toward practical use.”

Mokyr establishes a number of different but related links between the economic transformation taking place in Britain from the mid-18th to mid-19th-century and the cultural and intellectual programme of the Enlightenment. The “formation and dissemination of useful knowledge” is perhaps the most important. He notes, for example, that standardised machine parts would have been impossible without the “rationalisation and coordination of weights and measures”. The Enlightenment’s emphasis on human rationality meant ordinary people could be relied on to make economic decisions in a free market. It promised not only the advancement of science but also the perfectibility of all aspects of human life.

But the Enlightenment was no monolithic set of ideas, nor was it confined to Britain. Mokyr sees the “great irony of European history” in the fact that the French Revolution—inspired by Enlightenment goals—led to a restriction of trade in Europe just as free trade principles, as championed by Adam Smith, were becoming dominant. In any case, Enlightenment-Age individuals soon came to recognise the dangers of the free market. Revelations that commercial bakers were using deadly chemicals in their bread “was an early example of the realization…that free and unfettered markets can at times produce socially undesirable and even dangerous results.” As Mokyr concludes, the Enlightenment influenced economic change in many sometimes contradictory ways, but it was “indispensable” to how that change worked, and it cannot be left out of the story.

If the Enlightenment provides one way of looking at the culture of capitalism, the ideas of the romantics are another. Like Appleby and Mokyr, Bronk is keen in The Romantic Economist to appreciate “the role of national institutions and cultures in determining economic outcomes”. His is not a history book, but a manifesto for a new approach to economics as a discipline. The basis of his challenge is that “creativity, imagination, and organic interdependence of people—all emphasised by romantics—have become as central to our future prosperity and happiness as the rational optimisation of trading possibilities and efficiency highlighted by standard economic theory.”

The lessons Bronk wants to be learned threaten some of the dearly held tenets of the dismal science. Most importantly, his aim would be “to explain actual outcomes after the event but not to [try to] predict them with any precision.” This would allow economists to move beyond mathematical models of human behaviour. They would acquire a new reverence for individuality, contingency, and culture. In fact their output would be very much like the economic histories I have discussed already. Both Bronk and Mokyr note their debt to Douglas North, who has been pioneering work on how “beliefs, modes of thought, and even our preferences are socially and culturally formed by our interaction with others and by institutional conditioning.” Perhaps the romantic economist is here already, in the guise of economic historian.

Most of the work on these three books was done before the economic meltdown of the last two years, though Appleby includes a closing chapter, “Of Crises and Critics”. Nonetheless, they very clearly represent a shared outlook that is alive to weaknesses, injustices, and blind spots in our economic system. They are the products of an era that had already long outgrown the triumphalism of free-market advocates who hailed “the end of history” when the Berlin Wall fell. Even before the crash, capitalism and its intellectual assumptions were increasingly vulnerable to nuanced critique.

These books are very far from prophecy or polemic. But in their emphasis on the contingent, unpredictable, and simply human factors that pervade our economic structures, they do serve as a warning to those who would put their faith in market forces or in rational, mathematical analysis of human action. Both capitalists—that is, the investment bankers, the hedge-fund managers, and the rest—and the economists who study them would have done well to heed the warning, had it only come in time. Had things been different, no doubt these books would have been read differently. Another historical contingency.

Tom Cutterham is reading for an MSt in United States History at St Hugh’s College, Oxford.