Part XIII. Creative Language, Creative Destruction, Creative Politics
They Warrant Not Political or Environmental Pessimism, but an Amiable Optimism
The economist Bryan Caplan has argued recently that the economist and the citizen disagree on four points.40 The economist says that: markets work well because of profits, foreigners deserve as much ethical weight as we do, production not “jobs” is the point, and things are getting better and better. The average citizen believes on the contrary that the food market needs close regulation (the discipline of publicity and profit does not suffice), that protection against the “flood” of Chinese goods is an ethically justified idea, that a football stadium “generating jobs” must be a good idea, too, and that the sky is always falling.
I would add a fifth disagreement. The average citizen does not realize that her paid work is beneficial to others. She therefore believes that only charity or volunteer work “pays something back to the community.” The economist, who looks at the economy from the eighth floor, sees markets and innovation as enormous engines of (unintended) altruism. We do good by doing well. As Smith famously put it in 1776, “As every individual, therefore, endeavors as much as he can both to employ his capital . . . that its produce may be of the greatest value; every individual necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. . . . He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.”41
Caplan argues that an economy governed on Citizen Principles will impoverish the citizens. He worries, as many have since Tocqueville and Bastiat and before, that a democratic politics can lead to disastrously protectionist and redistributive policies, as in Peron’s Argentina. He’s right. It is sadly true that democratic politics unprotected by a rhetoric of free trade and creative destruction can ruin economies. (Democracy is thus the worst system — except for all those others that have been tried from time to time.) Every agricultural economy until Holland and England and the English American Colonies was governed on a similarly self-destructive theory (though nothing like democratic). The governing theory was the Aristocratic Principle that most people exist for the comfort of a small group of lords and priests and kings. Bizarrely, the Aristocratic policy and the Citizen policy closely resemble each other in what they recommend. Against the positive-sum theory of the bourgeoisie they advocate expropriation of profit and the close regulation of markets, xenophobia, irrational projects of public works, protectionism amounting to staying forever in the same job, and a grim zero-sum belief that one person’s or one country’s gain is another’s loss — and that only charity therefore can help the poor.
The point here is that brief reign of the entirely new and more genial Bourgeois Economist’s Principles led to the modern world. Yet in many countries the civic religion recommended by the clerisy remains a version of the Citizen or the Aristocratic policy — stubbornly anti-capitalist, protectionist, anti-technological, allied with anti-Americanism. French thinkers of the 1960s, for example, wrote elaborate books on the economy without reading any books on non-Marxist economics, and little enough of Marx. Gilles Deleuze, Jean Baudrillard, Georges Bataille, and other worthies talked about the economy without an acquaintance with the best that had been thought and written about it, excepting a bit of Marx and Engels and Gramsci. The practice persists in university departments of the humanities worldwide.
And therefore it persists in a good deal of teaching worldwide. The required texts for French secondary-school students of social sciences, for example, three volumes called Histoire du XXe siècle (2005), declares that “economic growth imposes a hectic form of life, producing overwork, stress, nervous depression, cardiovascular disease, and, according to some, even the development of cancer.”42 Such an assertion contradicts the experience of the hundreds of millions of bourgeois and working-class Westerners, whose lives are spent in education up to their early-20s, and in retirement to a life of leisure twenty years longer than the life expectancy of their grandparents by their early 60s (or as early as age 50 if they are engine drivers on the French railways; and age 55 if they are managers). In 1910 a job working 60 hours a week in a factory spinning cotton in Lille might just possibly have been more stressful than one nowadays working 35 hours a week as a computer salesperson in Paris, or even a train driver. And before that, in 1810, a factory job in Lille just might have seemed less in the way of overwork and nervous depression than farm work west of Puy-de-Dôme in the Auvergne, with no work at all in late winter and hectic harvests and endless threshing, and the children starving in April. At any rate people did move from the farm in the Auvergne to the factory in Lille, with alacrity, and later a smaller distance to the Michelin factory. And then they did move, avec plaisir, from the factories to computer sales in Paris or to driving the Train à Grande Vitesse.
Recent decades, the French school text admits, have witnessed “doubled wealth” — but also “doubled unemployment, poverty, and exclusion, whose ill effects constitute the background for a profound social malaise.” Yet the unemployment in France, and the barring for example of Muslims from wealth, might perhaps be caused not by “American” capitalism but by exclusive elite education in France, and by segregation of the Muslims in Le-Corbusier-inspired high-rise concentration camps around Paris far from factories, and by heavy regulation of the terms of employment — for example, the near impossibility of firing someone in France once she has miraculously achieved a job. France ranked in 2006, according to the World Bank, 144th out of 178 countries in ease of employing workers. Germany, also then with a high unemployment rate, was 137th and South Africa, with an appalling unemployment rate (but employment laws imitated from Germany), 91st. This against low-unemployment countries such as the UK (21st) and the US (1st).43
Capitalism, according to the French instructors of the young, is “brutal,” “savage,” and worst of all (wait for it) “American.” Globalized capitalism is said to be much worse, for example, than those splendid examples of thoroughgoing socialism covering a quarter of the globe in 1970 from Cuba to North Vietnam. Many on the American left have agreed with their overseas comrades, and would advocate still, as the French schoolteachers put it “the regulation of capitalism on a global scale” — retrying yet again the glorious central-planning-with-gulags socialist experiment of 1917-1989. Such opinions have deep roots among the clerisy. In 1966, at the height of Western optimism about the future of socialism, the United Nations issued an International Covenant on Economic, Social, and Cultural Rights which did not so much as mention the right to property.44 The liberal heroes from Locke to Jefferson spun furiously in their graves.
The new alternative to central-planning socialism is environmentalism. It is taught now as a civic religion in the American schools (and with an even more fevered rhetoric in Germany and the Netherlands), the way anti-communism was in the American schools of the 1950s or nationalism in the French schools of 1890s or the great chain of being in the English schools of the 1590s. Freeman Dyson, no right-wing crank, wrote in the New York Review of Books, no right-wing rag, that “There is a worldwide secular religion which we may call environmentalism, holding that we are stewards of the earth, the despoiling the planet . . . is a sin, and that the path of righteousness is to live as frugally as possible. The ethics of environmentalism are being taught to children . . . all over the world. Environmentalism has replaced socialism as the leading secular religion.”45 The economist Robert Nelson argues that the American civic religion was once bourgeois economics, but has become progressive environmentalism.46 The left has now adopted Malthus, not on fresh scientific evidence but on the mathematical “logic” that “resources” “must” be limited. (Such evidence-free logic might be why a mechanical environmentalism appeals to so many physical and especially biological scientists.) The left’s saint has become Malthus, not Marx.
Since 1798, however, the evidence has been no kinder to the clever economist-parson Malthus than to the clever journalist-philosopher Marx. The economic historian Eric Jones notes that “economic history provides the antidote to the assumption that there is a static and readily exhaustible resource base.” Yet the “fears of these kinds are hydra-headed and astonishingly resistant to contrary evidence.”47 The new environmental left has ignored the overwhelming evidence that incomes depend on human creativity not on natural resources, that innovation has unleashed creativity in resource-poor places like Japan or Hong Kong, and that the resulting high incomes generate a demand for a better environment. By what might be called an environmental Say’s Law (“supply creates its own demand”), the creativity of innovation generates the supply of environmental improvement, and the enrichment from innovation creates the demand for the improvement by embourgeoisfied citizens. It is starting to do even in China, and already has done so in Europe and East Asia and the United States and other high-income places. The air quality of rich cities, for example, has improved radically since 1950.
But the hydra keeps growing new heads, against the evidence. A leading spokesman for the environmental left, Paul Ehrlich, wrote inThe Population Bombin 1968 that “The battle to feed all of humanity is over. In the 1970s and 1980s hundreds of millions of people will starve to death in spite of any crash programs embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate.”48 After Ehrlich’s firm scientific prediction in 1968 the world death rate (and soon the birth rate) fell sharply. The economist Julian Simon, who articulated the economic findings from the 1950s to the 1990s against the population-bombers — and famously won a wager with Ehrlich against the notion that we were running out of mineral “resources” — wrote in 1996 that the bombers “are reduced to saying that all the evidence of history [that in modern conditions population growth is good for people, not bad, and itself results in lower, not still higher, population growth] is merely ‘temporary’ and must reverse ‘sometime,’ which is the sort of statement that is outside the canon of ordinary science.”49
The bombers, though, are hard to embarrass with evidence, and carry on railing against motherhood. Many of them are fine scientists in their own fields. They become unsteady, though, when they venture into economics. The paleontologist Niles Eldridge, for example, quoted in 1995 with approval a geologist at Columbia who had predicted in the 1960s on the basis of “simple measures of the volumes of the great sedimentary basins” that the world would run out of recoverable petroleum in the mid-1990s.50 After the 1960s, in fact, oil reserves grew worldwide, which by 1995 Eldridge knew. Yet he did not draw the appropriate lesson in economics from the error, or from Ehrlich’s or the Club of Rome’s similar errors during the same era, which he also quoted with approval. He didn’t see that in a world in which people respond to economic incentives, and to environmental worries, too, the mechanical extrapolation of economic variables is not going to work well. For example, it didn’t from the 1960s to the 1990s. Oil got expensive, and oil companies spent more to uncover previously unknown reserves. Infant mortality went down, birth control cheapened, and mothers had fewer children. A path to a fuller life through education opened up, and young people took it.
In 1830 Macaulay asked, “On what principle is it that, when we see nothing but improvement behind us, we are to expect nothing but deterioration behind us?”51 On what principle indeed. Ehrlich’s 1968 book sold famously, and he continued well into the new millennium to defend the propositions that the Green Revolution and the fall in the world’s the birth rate and the rise of life expectancies and such triumphs of environmental reversals as the banning of spray-can propellants eroding the ozone layer and the banning of soft coal dirtying the cities are temporary and must reverse sometime, and that we have seen our best days and will see nothing but deterioration before us. Nonetheless, the environmental left has won the rhetoric. By now for instance, without evidence or much reasoning, the debate is closed about such a vague and questionably ethical idea as “sustainability” (which entails imposing burdens on present-day poor people in aid of a distant future generation likely to be very much richer), just as in the 1950s the discussion about such a vague and questionable idea as “progressive taxation” was closed without evidence or much reasoning.52
The economists have long tried to provide the reasoning and evidence — to the point where convinced environmentalists have in vexation stopped listening to them, so painful is the experience, and have stopped trying to show that the economists are wrong scientifically or ethically. Allyn Young, the economist responsible for inspiring the new generation of growth theorists in the late twentieth century, wrote thus in 1928 (he died prematurely, and his influence was tenuous until recently revived):
No analysis of the forces making for economic equilibrium, forces which we might say are tangential at any moment of time, will serve to illumine this field, for movements away from equilibrium, departures from previous trends, are characteristic of it. Not much is to be gained by probing into it to see how increasing returns show themselves in the costs of individual firms and in the prices at which they offer their products. . . . The counterforces which are continually defeating the forces which make for economic equilibrium are more pervasive and more deeply rooted in the constitution of the modern economic system than we commonly realize.53
One can only agree, and affirm that such agglomerating and upscaling models are plausible. My economist colleagues (and especially my future-economist undergraduate students) are very, very smart. Their models properly deny, for example, the environmentalists’ Malthusian notion that increasing population results in such strong diminishing returns to inputs of labor that people are going to be driven by a Population Bomb back to $3 a day. On the contrary, say the economists following Allyn Young (and I agree: otherwise I lose my union card), the natural resources that environmentalists obsess on are unimportant constraints in a modern world. The “ultimate resource,” as the economist the late Julian Simon put it, is brain power.54 And therefore when the world has become educated and free, and when the implacable populist hostility to bourgeois innovation has faded, then it is quite true that success breeds more success. There develop, the economists put it, those “economies of scale.” Virtuous spirals.
Getting more people and agglomerating them into cities becomes in the models therefore a good thing, not bad, if the people have more going for them than strong backs and the ability to reproduce. Goldstone notes that “by the late twentieth century, in every 20 years [over any one generation, that is] the number of people being born was greater than the entire population of the world 200 years before.”55 In each generation we have more chances of a Socrates, an Ibn-Khald?n, an Admiral Zheng He, an Isaac Newton, a James Watt than in all generations before 1800. Africa’s genetic diversity (all the rest of us came from merely 1000 or so Africans, on account of the “founder effect,” as the population geneticists call the falling away of lineages in small populations) implies that when over the next fifty years or so Africa acquires a European standard of living it is going to dominate world culture, producing ten Mozarts and ten twenty Einsteins.56
But observe: without the dual ideas of the dignity and liberty for ordinary life and extraordinary innovation, no innovation is going to occur, no one is going to get properly educated, and we are back in the world of lives poor, nasty, brutish, and short (though by no means solitary) — a bomber’s Malthusian world in which diseconomies to labor input overwhelm economies of scale.
Changing social ideas, in short, explain the Industrial Revolution. Material and economic factors — such as trade or investment or exploitation or population growth or the inevitable rising of classes or the protections to private property — do not. They were unchanging backgrounds, or they were consequences of the rhetorical change, or they were beside the point, or they were weak, or they had already happened long before, or they didn’t actually happen at the time they are supposed to have happened, or they required the dignity and liberty of ordinary people to have the right effect. And it seems that such material events were not in turn the main causes of the ethical and rhetorical change itself. On the contrary, for largely non-economic reasons, the prestige of a bourgeois prudence rose around 1700 in the way northwest European people talked, within an economic conversation still honoring a balance of virtues. Economic prudence gradually came to be thought of as virtuous, though merely one among the virtues of a good townsperson.
If pro-innovation ideas of the elite caused the Industrial Revolution, and if elite artistic and intellectual turned against innovation after 1848, as it did, first in nationalism and then in socialism, and then in national socialism, and finally in environmentalism, why didn’t the turn bring to a halt the Industrial Revolution?
One reply is that a split developed between the elite and public opinion, in a new world in which public opinion came to matter as much as elite opinion. The clerical elite despises advertising and advocates central planning and believes we are doomed by population bombs and the destruction of the environment. Other people don’t. Many artists and at length professors moved to the left, and developed a socialist and at length an environmentalist rhetoric. Others of them moved to the right, and developed an elitist rhetoric against public opinion itself.
In economic scholarship an emblem of the elite’s scorn for bourgeois virtues is the treatment of Friedrich Hayek, the great libertarian economist from Austria, a naturalized Briton. Mention of Hayek can to this day evoke ignorant sneers on the left and center even of economics. While he was still at the London School of Economics, an internationally famous economic scientist, the equal in scientific reputation at the time of J. M. Keynes, he wrote, in 1944, an attack on the then immensely fashionable socialism, The Road to Serfdom. In Europe no one much minded such a popular book. But when the book appeared in the United States it caused a furor, partly because a long précis of it appeared in the vulgar and steeply right-slanting Reader’s Digest. In 1950 Hayek was denied an appointment in Economics at the University of Chicago because of The Road, and spent his years at Chicago in the Committee on Social Thought.
But lawyers and at length educated businesspeople adhered to the market values that Hayek admired, against both left and right. In the United States the Eisenhower administration in the United States was an emblem of the split. Elite opinion sneered at Ike and his economic policies — Eisenhower’s cabinet was called “eight millionaires and a plumber” (the Secretary of Labor, Martin P. Durkin, had been the president of the plumbers’ union). But the bourgeois policies stayed, and worked pretty well.
And certain institutions and countries stored the idea of bourgeois dignity and liberty, which could re-emerge easily after the pessimism about innovation in the decades following the 1930s had passed. Economics itself went through a flirtation with socialism, 1933-1981, and then returned strongly to its true-liberal roots. Non-elite opinion in the United States (see Reader’s Digest), and to a lesser degree even welfare-state Britain, was always a reservoir of anti-socialist opinion. A world without a United States might have permanently turned after 1945 against the Industrial Revolution, just as a world without Britain and Holland would not have developed bourgeois dignity and liberty in the first place.57
A deeper reply is that the turn to the left, and many of the turns to the right, did in fact stop the Industrial Revolution, at any rate in the places where anti-innovation was well and truly tried. To be sure, in 1945 it looked like market societies were exhausted, and that giving socialism and the welfare state a serious trial even in the United States was in the cards. The best economists, such as Joseph Schumpeter, Alvin Hansen, John Maynard Keynes, Oskar Lange, Paul Samuelson, and Abba Lerner, thought at the time — with greater or lesser pleasure at the thought — that the world was moving from capitalism to socialism, whether or not the embattled democracies survived. Many people were impressed by the Soviet successes of the 1930s, whatever their human costs, and were very impressed by Stalin’s victory over Hitler. They could not see that in the longer run, when opportunities for imitation had been used up, central-planning socialism could not achieve real innovation. Among students of the Soviet experience only a few, such as G. Warren Nutter and Alexander Gerschenkron and Abram Bergson, stood in the 1950s and 1960s against the prevailing elite opinion that socialism in Eastern Europe had successfully forced fast growth superior to what capitalism would have achieved there.58 It was later discovered that after the heroic age of the 1930s the Soviet growth rate fell steadily, reaching such low levels in the 1980s that the growth of productivity relative to inputs was negative.59 Indeed, in 1995 the World Bank economists William Easterly and Stanley Fischer reckoned that only in the 1950s was Soviet total factor productivity greater than zero.60 The capital input in Soviet ideology was treated as a free good, and consequently was overused, in “extensive growth.” Build giant factories and full speed ahead.
Nonetheless as late as 1984 John Kenneth Galbraith was writing that “the Soviet system has made great material progress in recent years is evident both from the statistics and from the general urban scene. . . . One sees it in the appearance of solid well-being of the people on the streets [Galbraith did not perhaps spend much time in the provinces]. . . and the general aspect of restaurants, theaters, and shops. . . . Partly, the Russian system succeeds because, in contrast with the Western industrial economies, it makes full use of its manpower.” In 1985 the great economist Paul Samuelson wrote that “what counts is results, and there can be no doubt that the Soviet planning system has been a powerful engine for economic growth. . . . The Soviet model has surely demonstrated that a command economy is capable of mobilizing resources for rapid growth.” In 1989 Lester Thurow asked, “Can economic command [that is, the industrial policy that Thurow advocated] significantly. . . accelerate the growth process? The remarkable performance of the Soviet Union suggests that it can. . . . Today the Soviet Union is a country whose economic achievements bear comparison with those of the United States.”61 When a few years later the USSR collapsed and the Soviet statistics were at length opened — or indeed when earlier in the early 1960s the crops had failed — Nutter and Gerschenkron and Bergson were proven correct. (Hard political turns to the right, too, could and did stop industrial revolutions. Nationalist central planning in aid of Lebensraum was just as crippling as socialist central planning in aid of steel and farm tractors.)
But the still deeper reply is that once the cat of dignity and liberty was out of the bag she was hard to stuff back in. It was not impossible locally, as in Argentina or in Poland for a while, but the cat was on the prowl. We can if we work hard at it kill her with war and tyranny and protectionism and anti-innovation. But it will be difficult.
Still, if the new rhetoric of innovation is what caused the modern world, then it is possible — not logically inevitable, but possible — that losing the ideology can lose the modern world. In other words, the Age of Innovation might have led to anti-capitalist ideologies that destroyed innovation. In fact, it did, in fascism and communism, and in a longer-running form in the clerisy’s disdain for the bourgeoisie. All were annoyed reactions to innovation. The worry is the old one of “the cultural contradictions of capitalism,” as Daniel Bell put it in 1978, anticipated by Schumpeter’s gloomy prediction in 1942 — one of the darkest years of a dark decade — that the future lay with socialism, and Hayek’s of 1944 that the clerisy were advocating a road to serfdom, or Aron’s in 1955 that Marxism was the “opiate of the intellectuals.” Expressed as hope rather than worry the reversion in rhetoric to central planning socialism is Karl Polanyi’s “great transformation,” the “double movement” in which society reacts against innovation and reestablishes a suitably embedded and conservative economy under central government control.
By now you will know that I would regard a loss of bourgeois and innovative rhetoric as a deep worry, not a hope, and that one purpose of my hopeful sestet on “The Bourgeois Era” is to argue against accepting such a loss. We need bourgeois rhetoric. Bourgeois innovation supported by the rhetoric has elevated the poor of the world. On the scale of actual relief of poverty from let-it-rip innovation practiced in England in the nineteenth century and nowadays in places like China and India, the dribbles of personal or religious charity, or government-to-government foreign aid, have been negligible, and often enough have perversely damaged the poor.
On the other hand, for the same reasons I have adduced here for not believing that efficiency gains are the heart of past economic growth, I do not believe that the inefficiencies of welfare states are greatly to be worried over — so long as innovation is not restricted. Harberger triangles are not the way to wealth, and consequently their loss from economically inefficient arrangements is not greatly to be lamented. The Swedish economy, for all its questionable payments to able-bodied people who decide not to work (one out of seven Swedes of working age in 2005 were on full disability), retains a good deal of innovative dynamism. The welfare state, we know by now, has not in fact been the first step on the road to serfdom. Not yet at least. Western European social democracy is surely democratic, and (recent anti-immigrant movements aside) has obviated the alternative of fascism.62
Yet reverting to full-scale, central-planning socialism of the sort many of the clerisy still pine for on old socialist grounds or on new environmental grounds would be a catastrophe, judging from results of actually existing socialism that prevailed over large swathes of the world during the twentieth century. It would be scientifically strange to ignore the material and spiritual failures of full-blown socialism from 1917 to 1991, or to ignore the present-day examples to the contrary in China and India, or to ignore the beginning of it all in the rhetorical change on the shores of the North Sea around 1700.
We need to strengthen the rhetoric of innovation. That does not mean celebrating “greed is good,” which I argued at length in The Bourgeois Virtues is a childish and unethical rhetoric — however popular on Wall Street and in the Department of Economics. Strengthening the rhetoric means celebrating innovation and respecting market deals. We must not worship them. That would be in Abrahamic terms idolatry. But we must not, either, cast them out as Baal or Mammon.
Take for example the fraught issue of CEO compensation in the United States. Richard Nardelli was perhaps not worth every dime of the $50 million a year he earned for running Home Depot into the ground, or for the comparable amount he got during the descent of Chrysler into bankruptcy. On the other hand, few economist can be found who care very much. We economists have long pointed out, and correctly, that CEO pay even of the grotesque variety is a trivial percentage of the earnings of the companies involved. And yet in rhetorical terms the non-economists are right. The danger, many people argue, is that the grotesque salaries and the ego-pleasing rides on corporate jets and the vacation perks for the family paid for by suppliers to the corporation undermine the faith in innovation. That matters.
A good deal hinges on whether the new understanding of our economic and ethical past that I have argued for here is true or false. If true, a finding that an ethical and rhetorical and ideological change made the modern world would be scientifically important. The Victorian skeptic Alexander Kinglake suggested that every church should bear on its front door a large sign, “Important If True.”63 So here. Economic history faces no more important question than why industrialization and the reduction of mass poverty first started, and especially why it continued. The continuation made us richer and freer and more capable of human achievement than our ancestors. The latest continuation — located most spectacularly in, of all surprising places for it to happen, China and India — shows that the whole world can be so.
For instance, if ideas and ethics and “rhetoric” contributed largely to such a happy result then perhaps we should point our social telescopes also towards ideas and ethics and rhetoric. Looking fixedly at trade or imperialism or demography or property law — very interesting though all of them are — will not do the bulk of the scientific job. Ideas are the dark matter of history, ignored for a century or so 1890-1980. In those days, I have noted, we were all historical materialists.
To be able to detect the dark matter we will need a new, more idea-oriented economics, which would admit for example that language shapes an economy. For such a humanistic science of economics — explored in this and related books, and which a happy few others of us are working on — the methods of the human sciences would become as scientifically relevant as the methods of mathematics and statistics now properly are.64 Such a new economic science would scrutinize literary texts and simulate on computers, analyze stories and model maxima, clarify with philosophy and measure with statistics, inquire into the meaning of the sacred and lay out the accounting of the profane. The practitioners of the humanities and the social sciences would stop sneering at each other and would get down to cooperating for the scientific task.
It will not have escaped you that there is of course a political moral, too. If the economy were understood as more than Prudence Only, then we could re-moralize it. If innovation were an upshot of desirable ethical changes, then we could respect it. The rhetorical change was itself in part a consequence of dignity and liberty. Dignity and liberty were in turn the result in part of the long perfected property rights of Europe, the inheritance from medieval liberties of the towns, the competition among states smaller than the Asian giants, the decline of serfdom outside of sad Russia, the theory of individual dignity in Protestantism and more anciently in all Abrahamic religions, the partial liberation of women outside the Mediterranean, the mind-freeing shock of the Scientific Revolution to Europe’s relatively primitive science, the uneven fall of religious and secular tyrants just when Asia was abandoning its much older tradition of toleration, the emergence of at least a tiny public sphere, the careers of quite a few open to talents, the improvements in military technology that briefly gave the West (and the Chinese) the weapons to lord it over aristocratic warriors of horse-using Steppe or elephant-using empire, the techniques of printing on paper imitated and improved from China and the Muslim world, making possible a more free periodical press and reasonably uncensored theatres and publishing houses (all imperfectly implemented 1600-1800, but startlingly novel, it seems, on the scale practiced in northwestern Europe, even allowing for recent findings that Orientalist notions of Asian backwardness are false). If the technological change was in part a consequence of a new dignity and liberty then we free humans could be modestly proud of it. If our bourgeois building was not raised on foundations of imperialism or exploitation or unequal trade (excepting the brief reign of gunboats, and that in aid of trivial parts of the bourgeois economy), then we could admire it, though self-critically. If serious innovation were not amoral, then we could practice ethics more grown-up than a right-wing Greed is Good or a left-wing Down With the Bosses.
Give a woman some rice, and you save her for a day. That’s the simplest form of what Christians flatter themselves by calling “Christian charity.” Give a man some seed and you save him for a year. That’s the plan of investment in capital, tried for decades in foreign aid without a great deal of success. But give a man and a woman the liberty to innovate, and persuade them to admire enterprise and to cultivate the bourgeois virtues, and you save them both for a long life of wide scope, and for their children’s and their grandchildren’s lives. That’s the Bourgeois Deal. When bourgeois values do not thrive, the results are poor. As the economists Virgil Storr and Peter Boettke note about the Bahamas, “virtually all models of success to be found in the Bahamas’ economic past have to be characterized as piratical,” with the result that entrepreneurs there “pursue ‘rents’ rather than [productive] profits.”65 Piratical greed, which is to say self-interested prudence without the balance of other virtues such as justice, is not good. And contrary to a widespread opinion on left and right, it is not characteristically bourgeois. Bernard Mandeville and Ivan Boesky were wrong. Prudence-only is not the virtue of an innovative society.
Yet if innovation, even in a proper context of the virtues, continues to be scorned by the clerisy, as it has been by many of our opinion makers now for a century and a half, we can if we wish repeat the nationalist and socialist horrors of the mid-twentieth century. If we calculate only the disruptions of a pastoral ideal, and neglect the gains from innovation, we can remain poor shepherds and dirt farmers, with little scope for intellectual and spiritual growth. If we abandon economic principles in thinking about the environment, we can revert to $3 a day, living in huts on a hillock in the woods by Walden Pond. Now in the early twenty-first century we can even if we wish add for good measure an anti-bourgeois religiosity, as new as airplanes crashing into the World Trade Center and as old as the Sermon on the Mount.
But I suggest that we don’t. I suggest instead that we recoup the bourgeois virtues, which have made us capable, in von Humboldt’s words, of developing the highest and most harmonious of our powers to a complete and consistent whole. We’ll need to surrender the economistic idea that reshuffling and efficiency made the modern world. We’ll need instead to welcome an economics that properly celebrates ethics, rhetoric, language, creativity, innovation.
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[back] Caplan 2007, Chapter 2, "Systematically Biased Beliefs About Economics."
[back] Smith 1776 IV.ii.9, p. 456.
[back] Theil 2008, from which subsequent quotations are also drawn.
[back] World Bank, Doing Business (2006).
[back] As Marc Plattner noted in 1999, p. 6.
[back] Dyson 2008, p. 45, examining sympathetically the arguments of that ever-useful economist, William Nordhaus, in his book A Question of Balance: Weighing the Options on Global Warming Policies (2008).
[back] Nelson 2010.
[back] Jones 2003, p. 58.
[back] Ehrlich 1968., p. xi.
[back] Simon 1996.
[back] Eldridge 1995, p. 9.
[back] Macaulay 1830, pp. 186, 187
[back] Blum and Kalven 1963.
[back] Young 1928.
[back] Simon 1981 (1996).
[back] Goldstone 2009, p. 17.
[back] Compare Tishkoff and others 2009 reporting on the relationships of 2400 people from 113 separate linguistic groups in Africa.
[back] I owe these hypotheses to a discussion with graduate students in economics at Northwestern University in March 2009.
[back] Nutter 1962; Gerschenkron 1947 and a collection of his papers on Soviet growth in Gerschenkron 1962; Bergson 1961.
[back] The summary table of Answers.com at http://www.answers.com/ topic/soviet-economic-growth tells the sad story, on the basis of research by Gur Ofer (1996), Laurie Kurtzweg, James Noren, and Angus Maddison (2001).
[back] Easterly and Fischer 1995, p. 42, Table 4.
[back] The Galbraith, Samuelson, and Thurow quotations come from D'Souza 1997.
[back] As is argued persuasively by Berman 2006.
[back] Tuckwell 1902, Chp. V.
[back] Hirschman 1977; and recently Klamer 2003, 2007; Bronk 2009. But one could cite many older economists, as I have earlier, from the sainted Adam Smith to the blessed Frank Knight.
[back] Boettke and Storr 2002, pp. 180-181. Compare Storr 2006.
I thoroughly enjoyed this chapter! Well-done! I suspect that in future works you will investigate the causes of the change in rhetoric. My opinion is that the Dutch strove to implement Christian principles in the organizing of their society. They were aware of the writings of the School of Salamanca because the great Lessius taught them. Monarch had refused to implement those teachings, but in reconstructing their society after so many years of war the Dutch were the first to create the institutions that could instantiate Salamanca ideas.
Written by Roger D. McKinney on December 12th, 2010.Dear Mr. McKinney, That is a very interesting suggestion, which I shall follow up. Lessius, eh? I need education on soooo many fronts!
Written by Deirdre McCloskey on December 12th, 2010.Sincerely,
Deirdre McCloskey