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A Capital Ship

Profits and losses in the history of markets.

Sep 27, 2010, Vol. 16, No. 02 • By ELIZABETH POWERS
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The preeminent industrial powers of the nineteenth century—Great Britain and its two rivals, Germany and the United States—transformed the physical world. They laid iron tracks across thousands and thousands of miles. They built enormous factories to which they drew millions of men and women, most of them recently off the farm. They collected capital in banks, consumed coal, finished steel, dug minerals from the earth, leveled hills, diverted the water from rivers into canals, and generally displayed the previously undetected strength and ingenuity of human beings. Despite the impersonality of all these changes, particular people brought them about: swashbuckling heroes of enterprise and the workingmen and women whose lives industrialization had turned upside down. A few men so completely grasped the dynamics of capitalism that they established firms that are still among the world’s largest.

When she gets to the 20th century, however, her account becomes distorted. It mixes social and political history with a history of technology, a parade of wonders, with one marvelous invention succeeding another. Reflecting her view that capitalism is “a cultural system rooted in economic practices,” it also becomes something of a tale of woe (she ends with the financial crisis of 2008), as country after country throughout the world is drawn into the quest for profit (in particular China and India), bringing with it environmental destruction and other human costs. Capitalism is even faulted for the plight of Zimbabwe. Though Appleby concedes that individual ingenuity is an engine of capitalist progress and that capitalism tends to erode social differences, she believes that government must play a larger role in solving the problems now facing us, whether it be global warming or the inability of Africa to climb out of its despond. In other words, instead of continuing to encourage people to do their own thing and thereby come up with solutions to these problems, we should return to the patriarchal world—now to be ruled by far-seeing elites—from whose yoke capitalism freed us.

It is a familiar litany of liberal hysteria, and it points up the divide between liberals and conservatives. The divide concerns the nature of progress. Appleby favors progress, because it destroyed all the ancient patriarchal institutions, reservoirs of evil practices that impeded human progress. Yet it is evident that great numbers of humans, despite material advance, remain greedy, self-serving, and contemptuous of people who aren’t like themselves, not to mention that they make bad decisions. This lack of moral improvement must be the fault of the economic system. Thus, the need for state intervention to make us better people.

Material affluence has, of course, improved our manners, as Scottish economists noted two centuries ago. At base, however, capitalism is morally neutral: There is no Good, only goods. In the market everything is fungible, with the emancipation of slaves and women on par with freeing up the energy in a block of coal. The former simply liberated two groups of humans for productive economic work and turned them into consumers. Likewise, such vaunted liberal values as openness and toleration enable the economic system to expand market shares. Progressives like Appleby confuse the moral and the material. Thus, they can be expected to be in the vanguard, whether it concerns the acquisition of fine material goods or the rejection of yesterday’s mores.

Conservatives favor progress, too, insofar as it unlocks human potential and gives tools to individuals to craft their own destiny. Nothing in the Chinese or Islamic empires at the height of their glory shows a glimmer of interest in either. In the merchant towns of Western Europe, however, long before Columbus sighted Hispaniola or Newton discovered the universal laws of motion, there was continuous agitation against rulers for individual and civil rights. Thus, by the 17th century, property ownership, rights of self-defense and inheritance, contract enforcement, and so on were firmly established in some places in the West, particularly in the places that counted in the emergence of capitalism, Holland and England. And insofar as a country establishes such institutions, the more open it will be to the entrepreneurial spirit: Japan, Taiwan, South Korea. Otherwise, include it among the Have-Nots. Appleby notes, but gives short shrift to, institutions.

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