Economist Magazine Takes on Capitalism … And Whiffs
By Staff News & Analysis - November 04, 2014

Capitalism through the ages … A grand tour … Experts look back at the economic system that dominates the Western world … The editors define capitalist systems as having secure contracts, property rights and markets with flexible prices, and surviving long enough to make big investments worthwhile. The story of such systems begins early. Through most of pre-industrial history Malthusian logic reigned; workers laboured in subsistence agriculture and productivity gains quickly led to unsustainable population growth. Yet now and again civilisations broke this mould and developed economic features that were recognisably capitalist. – The Economist

Dominant Social Theme: Capitalism is what economists say it is.

Free-Market Analysis: The Economist has just published a review of an interesting-sounding book entitled The Cambridge History of Capitalism, edited by Larry Neal and Jeffrey Williamson (Cambridge University Press, 1,400 pages, £150.)

The magazine's review provides us a cogent summary of the book, which is actually a collection of contributed essays, and then alludes in some puzzlement to the price of the book, which Economist editors consider high. This is because the book reads more as if it were written for a general lay audience than a specialist one.

Our puzzlement is different, however: We wonder what the authors even mean by "capitalism." Admittedly we haven't read the book, but we have mentioned our difficulties with the term "capitalism" before.

Many claim that capitalism is the operation of the marketplace in practice. But as this book catalogues, according to The Economist review, the historical capitalism being analyzed by the book's various authors sounds like many other "isms" including socialism, fascism and corporatism.

Here's more:

… For readers whose interest has been piqued online, the anthology provides an appealing way to learn about a range of subjects. "The Cambridge History of Capitalism" is an excellent example of the genre. In two volumes edited by two eminent economic historians, Larry Neal and Jeffrey Williamson, the collection provides a wide-ranging tour of capitalism.

Michael Jursa of the University of Vienna examines the mercantile spirit of Babylonians in the first millennium BC. Peace and good governance (including investment in things such as irrigation systems) enabled a sustained rise in agricultural productivity to take place. This in turn boosted population growth and freed workers from the land, allowing for the development of specialised urban trades.

Ancient capitalism was a distant varietal. In ancient Greece income grew at between 0.07% and 0.14% per year—outstanding by the standards of all but the past three centuries. Manufacturing took place on a small scale. Though capital occasionally meant machinery—waterwheels, for example—technology was not systematically applied to production. Most capital was held in the form of land and slaves.

When Malthusian dynamics do reassert themselves, shifting political conditions are typically to blame. Persia's control of Babylon weakened those who depended upon commercial activity for their wealth, eventually contributing to a long decline. And the destruction of the western Roman Empire led to a political and economic fragmentation that made western Europe an economic backwater for half a millennium.

Trade may be instinctive, but the institutions of capitalism are a product of social evolution. The rise of the West seems to have had little to do with local smarts or work ethic. Indeed, some of the earliest capitalist innovations in Italy—like rules on issuing credit—were imported from the Abbasid caliphate, which ruled much of the Middle East from the eighth to the 16th century, reckons Sevket Pamuk of the London School of Economics.

The above explanations refer to influences on capitalism as well as its building blocks including "rules on issuing credit" and "capital held in the form of land and slaves." Yet from the standpoint of anarcho-capitalism (itself a problematic term), underlying assumptions are seemingly without definitive analysis.

In fact, slavery was not "capitalist" but very obviously a manifestation of state power. "Rules" of credit issuance are also obviously imposed from above rather than agreed-upon voluntarily. And so it goes … Here's more from the review:

As the second volume shows, it was in the West that capitalist institutions flourished, especially from the late 17th century. Government intervention went hand-in-hand with growth. Robert Allen of Oxford University credits Alexander Hamilton, a Founding Father of America, with sowing the seeds of prosperity by supporting public investment in infrastructure. Prussia established universal primary education by 1763, thereby creating a workforce capable of boosting economic development.

… This history emphasises that the capitalism upon which Western wealth was built was not particularly laissez-faire. Without the cheap cotton produced by African slaves, reckons Gareth Austin of the Graduate Institute in Geneva, the industrial revolution would have been less revolutionary. Western businesses benefited from conquest: during the mid-19th-century Opium Wars with China, governments supported the drug-smuggling activities of firms like Jardine Matheson.

Wow. We don't find Alexander Hamilton to be an effective proponent of capitalism, at least not of the market-based, laissez-faire version. Certainly public investment in infrastructure has proven to be problematic from a 21st century point of view and we have no great sympathy or admiration for the "benefits" of public schooling, either.

Generally, the book that The Economist is alluding to seems to suffer from certain lapses of logic. After all, when government intervenes in the market, then the results must be said to be generated by the threat of force, or actually by force.

When market results are affected by force, then the results are not voluntary. When the results are not voluntary, the Invisible Hand of competition is not operative. When the Invisible Hand is not operative, then PRICES ARE BEING FIXED.

When prices are fixed, the result is inevitably a queue, a scarcity or both. Goods and services are mal-distributed. Efficiency is affected. Prosperity is diminished. How is this market-based capitalism? And why does The Economist review emphasize so much government interference.

Here's the Wikipedia definition of capitalism: "Capitalism is an economic system in which trade, industry, and the means of production are largely or entirely privately owned and operated for profit."

We tend to agree with this. But this Economist review and indeed the book itself, judging by the review, seems to muddy the lines between the Invisible Hand and the interference of government mandates.

In fact, this review seems to imply that capitalism is simply a lesser version of socialism, one that includes considerable taxation, regulation and state activism.

The review alludes to how Internet publishing has sparked a revival of compendiums that include essays by various authors. From our point of view, a more important advance provided by 'Net publishing is the raising of significant issues glossed over for decades by the mainstream media.

In this case, the Internet has allowed numerous intelligent lay-people to reevaluate the term "capitalism." And it allows us and others to ask once more, what is capitalism? And of course, corollary questions such as what kind of tax base is suitable to a capitalist system and how much responsibility should the state take in such a system?

After Thoughts

Our "bottom line" is simple. Before writing such books – and reviews – we would propose, someone should offer a logical definition of what capitalism actually IS. Fortunately, what we call the Internet Reformation is beginning to provide the answer. Unfortunately, you won't find it in this review.

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  • Jose L

    Astonishingly, this kind of muddled, unclear, misplaced understanding of even the most basic principles of our civic structure and social institutions permeates throughout so much of the intellectual discourse in the West today on nearly every topic and issue – from economics to the law to art to medicine. People simply have no grasp of the basic foundation on which the premises they work from operate – and that’s why it’s so easy for the gatekeepers of knowledge in media and education to misinform and to perpetuate their agenda. The only antidote to this madness is self-education and critical and comparative analysis, particularly between the mainstream and the alternative voices. Thank you for this excellent insight.

    • john cummins

      The antidote is that for those of us out of school and private, better yet, homeschooling for those still of “age”, with a hopeful immediate collapse of the state schools…

  • Capitalism: People trying to sell products or services to other people with limited government interference.

  • Tad

    Isn’t “capitalism” a major meme of the elites that has been assigned the role of “bad bank” into which is deposited all of the evils associated with international corporatism? For the elite globalists, capitalism is the social-economic system that gave rise to the bourgeoisie, and which stands in direct opposition to the eventual imposition of global fuedalism. The last thing an elitist captive publication like the Economist would do is attempt to clearly define what is meant by “capitalism” in any historical context. Rather, the goal is to promote it as the causal agent responsible for the economic and social depredations of the elites through captive government-protected institutions such as central banking, regulatory agencies, wars, IMF, BIS, World Bank, etc., while simultaneously ensuring that all “blame” is assigned not to the elites (who exist only in the minds of conspiracy theorists) but to the disposable strata well below them, such as “Wall Street”, “corporations”, and “tycoons”. Upward mobility is the single most aspiational result of capitalism in the West. And it must be crushed from the human experience to make way for global fuedalism. That is the mission of the Economist. To expect anything different is to misunderstand the contemporary political narrative. Thank you for the opportunity to comment.

    • davidnrobyn

      Excellent, Tad.

  • nailheadtom

    A basic fact of human existence is that for an individual to become more wealthy than other individuals he must somehow exchange his products and services profitably for something of value with others. This is what capitalism is all about. Normally, no single individual can increase his wealth by not only satisfying the wants of others, he must also employ other individuals to assist in the supply of the goods or services that satisfy those wants. In order for capitalism to flourish the members of society must not only be willing to give something up in exchange, they must also be willing to be part of the production process. If an entrepreneur is going to sell automobiles, he’s going to need workers who regularly show up to assemble them as well as customers that are willing to buy them. The Protestant work ethic, a value system that considers the non-worker as a detriment to society, is the glue that holds capitalism together. The fact that this value is not universal bothers its adherents. People that don’t leap out of bed every morning and head off to the salt mine are regarded as parasites or bums rather than as individuals that don’t buy in to the prevailing commercial mania.

    Capitalism is a technique of multiplying the efforts of an individual entrepreneur. Like every other human institution it’s had both positive and negative effects on human life.

    • davidnrobyn

      You forget that labor is a good. People exchanging their labor for things they want are participating in the capitalist system. Every voluntary exchange implies that both parties think they’re getting the better of the deal. That even holds true in sweatshops. The factories that Dickens so decried were way better places to be than the hinterlands from which the laborers came. Those laborers voted with their feet. The same with Asian factories. I’ve lived there, and let me tell you, if a factory were to open in say, Pakistan, and offer a wage of $1 (sixty rupees) an hour, they’d get a line of applicants stretching from Lahore to Karachi. And if they were told they had to work six 12s, they’d say, “No sweat!” (pun intended).

    • davidnrobyn

      And further, any system that allows people to choose not to “head off to the salt mine” must be offering another means of subsistence. In the absence of voluntary exchange, this must be involuntary appropriation/redistribution. In this case, working a job is working for the DIFFERENCE between the wages and public assistance. But remember, time is a good too. Parasites are only recognizing this when they choose to accept the dole at say, half what they could be making at a job. Remember what Alfie Doolittle said about work: “It takes up your whole day!” But the sad fact of the matter is, in many cases, the percentage is much higher than that. In some cases, it’s over 100%.

  • Capitalism: defending one’s investment in getting more for less?
    Capitalism: extending a tangible worth by growing it.

    I feel everything in the world of a polarised and alloyed mentality can serve dual purpose. Nothing has but the meaning and purpose you give it. A split mind attempts to mix mutually contradictory purpose and loses all sense of foundation amidst its own convoluted spin. In believing its own spin dresses up in cleverness or pomp but has no real presence – as coercive and deceptive strategies reveal obvious.

    In a ‘seller’s market’ which is where a sense of lack, scarcity or insecurity is bought into or believed true in the terms framed, one can sell ideas that seem to answer the lack in the short term, yet capture and disconnect the sucker from their true nature, sustenance and wits.

    The drive to sell to get operates the cultivation and herding of marketshare, mindshare.
    Pyramid schemes pattern energy in consolidating tyrannous hierarchies.
    After a while it is accepted as the human condition.
    Of consciousness and society.

    But Maslow’s pyramid is upside down and inside out.
    EVERYTHING extends its foundation and NOTHING can be unlike its foundation.
    Once a split minded and devious thinking could be sold in exchange for promise of power and protection, a false foundation HAD to subvert every natural impulse to the mentality of a polarised struggle for survival. Because a lie HAS to struggle in asserting itself to survive AGAINST all that would expose it.

    Everyone protects their investments. But to invest in a lie is to identify falsely.
    Identity theft is the market of scammers. All trying to sucker each other or shifting alliances that sucker another, or protect against being suckered by others. Maybe wake up to find we are all suckers to identity theft.

    So drawn into the drama of the game that few pause long enough to discern what they are truly doing and why. It runs like a template. There are moneylenders in the template who would interpose between a natural need being fulfilled so as to usurp the relational unfolding of growing trust and uncovering true synchronicity through extending communication.

    The ‘coercive will’ operates primarily through insinuating and propagating definitions that frame everything in its own image. It owns the mind in which one thinks – until the identity theft is uncovered.

    In a system where all aspects of it reinforce all other aspects of itself there is no real alternative but from a different foundation – only redistributions of assemblages in complex … but increasing hollow… presentations.
    What is the foundation? Is it not the lie that sets everything else up as a means to prevent and deny its own exposure?
    The last or indeed the never thing one would meet or allow to be?
    Yet is that not exactly what is being revealed on our Big Screen of a world; our foundation exposed? – and its inevitable results or consequences.
    There is a true foundation to our existence. I don’t ask you to believe it and certainly not to think or define it. But its re-cognition to awareness occurs exactly where a lie is seen as a lie, a wish as a wish, a story as a story. Because in that instant one is no longer identified within its frame. Now you can ‘believe’ and live out from that which Is you – beneath all that seemed real before.

    Regardless of whatism, extending a tangible worth by growing it, operates in conscious alignment with Life-Purpose.

    Recognizing what one is NOT is part of more truly knowing who you ARE. When the foundation shifts – all else shifts with it. Integrating and accepting may lag – but everything has changed without anything ‘external’ having to change.

    Needs met, has been so materially defined as to deny the need of our own consciousness for a manually managed mechanical imposition upon us by powers set above communicability.
    So one aspect of need that I put forward is for consciousness responsibility – for what passes as conscious is a conditioned reaction. Foundations are not ideas to impose – but qualities to make manifest – to give witness to.
    Without the old foundational belief – the template crumbles. We have to ‘re-learn’ how to live, relate, communicate. How to recognize and release a falsely identified investment and focus wholly on that which really embodies the Life as each is inspired or enthused and amused to pursue. Is that more frightening than Armageddon? If so, at least one understands why humanity self-destructs.

  • Dave Meekhof

    There is no capitalism without the other C word…competition. As governments are used to beat down competition, so too does capitalism get beat down, unrecognizable, in search of an altered definition.

  • Gil G

    Why denounce slavery as “well that’s not Capitalism?” Did Americans have Africans shipped halfway around the world for laughs and giggles? Nope it’s because Americans believed that’s was the most profitable to get work done. After all, being a slave didn’t mean life was automatically horrid. Roman slaves could be given quite a lot of responsibility and be well cared for. Likewise many Americans were noticing slaves could have it better than non-slaves hence the “wage slavery” movement. Not to mention the children who lived a short life sweeping chimneys or working down in coal mines with a pick and shovels weren’t slaves and were to free to leave at any time. But those children had no better to go? Tough luck kiddo.

    • Dave Meekhof

      Holy craparoonies! You equate individual limitations on choice to slavery? And maybe freedom to choose isn’t necessary so long as the captors treat their victims well? Who ARE you?

    • nailheadtom

      In ante-bellum America, slaves were an expensive piece of property and their owners were mindful that their productivity and value be maintained. They were also encouraged to reproduce. In spite of the fact that this state of affairs terminated a century and a half ago, it remains, for political reasons, a daily feature of American discourse. At the same time, the near-extermination of the natives for the purpose of taking their property is a minor topic of discussion that seldom comes up in the arena of public affairs.

      • davidnrobyn

        I’ve heard (maybe this is apocryphal) that with the large influx of Irish in 1848-9, they were put to work doing the dangerous work while the slaves did the less-dangerous work. The rationale: Irishmen were cheap and expendable, while slaves were expensive. Any truth to this?

  • davidnrobyn

    “Through most of pre-industrial history Malthusian logic reigned; workers laboured in subsistence agriculture and productivity gains quickly led to unsustainable population growth.”–So THAT’S the problem the elites have with capitalism! It’s too successful, and allows the subhumans (us) to multiply beyond what our betters think appropriate!

  • davidnrobyn

    “In fact, this review seems to imply that capitalism is simply a lesser version of socialism, one that includes considerable taxation, regulation and state activism.”
    –Great observation, DB. Kind of a “Me too, but slower” socialism, as envisioned/practiced by most of the GOP.

  • jc78

    as a long-time, daily reader of the Daily Bell, but rare commenter, I first want to commend you on always cogent and thorough analyses. One question I’ve often wondered though, and thought I’d finally ask, is why do you never link to the article that you are commenting on? Is it merely a desire to NOT attract the attention of the author(s), and/or attract other possible “trolls” to flood the comments? Or a concern with IP/copyright issues? Or something else entirely? Just curious. At times I find myself wanting to dig further into the source that’s being commented on, but usually don’t end up searching for it if it’s not linked to…

    • We’d rather emphasize the analysis than the mainstream article …

      • john cummins

        hmmm, er that’s Lamestream…

  • Henry James

    “Through most of pre-industrial history Malthusian logic reigned; workers laboured in subsistence agriculture and productivity gains quickly led to unsustainable population growth”

    This extract represents an odd perspective and reads like a sermon more than any historical research which inevitably highlights
    ‘the agenda’ of mainstream media, the re-enforcement of this agenda is after all the very point of the piece.

    ‘Most of pre-industrial history’ basically means we are looking at mankind’s civilizations from roughly 4000BC to 1750AD. Wow this will be epic! And it is, if only in the ruthlessness by which it reduces that period of human civilizations to a paradigm of Malthusianism. No doubt one to which many of TPTB would like to see re-introduced.

    Now comes a stunning insight where it is claimed that workers worked and by being pre-industrial in outlook if not temporarily focused their trade in agricultural endeavours, no less!

    But here comes the rub; the gains, such as they were sought, were mismanaged when achieved. This lead to…well perhaps growth, but one which seemed erratic? However the growth was prosperous enough to maintain growth and therefore just growth.

    The author laments perhaps that the ensuing phase of growth was not a replication of the previous one. Aha! It is uncontrolled population growth which is the curse and the failing. Worse again not only was the quantity and number of new humans beyond Regal decree but the quality was often regrettably of a revolting class.

  • Danny B

    People vary hugely in intelligence, ability and motivation. A pure free market would not allow the survival or reproduction of those on the lower end of the scale. Socialism is an attempt to intercede between mother nature and those who are unable or unwilling to provide for themselves. We support our children as a matter of genetic survival. The socialists would have us supply this same support for anyone who demanded it. Democracy ( socialism lite ) always crashes because “pissing in the gene pool” is also “pissing away” motivation. As we block competition for the parasites, we block productivity. The priests and kings of yesterday are represented by the bureaucrats of today.
    Crony capitalism diminishes and blocks the efforts of the would-be actual producers. Only honest capitalism creates the
    motivation to over-produce. All those who advocate prepping are envisioning a world where they only produce for their family.

    The parasites ( beggars, bankers and bureaucrats ) absolutely depend on the over-producers to sustain them.

    There will come a day of reckoning.

  • Praetor

    It is always government has the answer. The media outlets are just an arm of the government and the global corporatists are the masters of government. In todays world who knows what Capitalism actually IS, if it exists at all. The economic system being formed in this world, cannot be categorized, we only compare it to historical evidence, of what has been, and call it that or that, but, what is forming is unknown, and technology will be the driving force, for this new unnamed economic system. Will it be beneficial or will it be harmful, to the human race as a whole. Your guess is as good as mine! The economic system of technology is a credits system, your worth, to us, is this many credits and that’s it, no more. At that point, production, free markets, supply and demand , natural law, an individuals right to choose has ended. Please, may I have more, GOVERNMENT.

    • john cummins

      yes always….please hit me