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Foreign Affairs (May/Jun 2015): 136-144.
What Caused Capitalism?: Assessing the Roles of the West and the Rest
by Jeremy Adelman
What Caused Capitalism? Assessing the Roles of the West and the Rest
Jeremy Adelman The Cambridge History of Capitalism, 2 vols. EDITED BY
LARRY NEAL AND JEFFREY G. WILLIAMSON. Cambridge University Press, 2014,
1,205 pp. $260.00.
The Enlightened Economy: An Economic History of Britain, 1700-1850 BY
JOEL MOKYR. Yale University Press, 2012, 550 pp. $35.00.
Empire of Cotton: A Global History BY SVEN BECKERT. Knopf, 2014, 615 pp.
$35.00.
Once upon a time, smart people thought the world was flat. As
globalization took off, economists pointed to spreading market forces
that allowed consumers to buy similar things for the same prices around
the world. Others invoked the expansion of liberalism and democracy
after the Cold War. For a while, it seemed as if the West's political
and economic ways really had won out. But the euphoric days of flat talk
now seem like a bygone era, replaced by gloom and anxiety. The economic
shock of 2008, the United States' political paralysis, Europe's
financial quagmires, the dashed dreams of the Arab Spring, and the
specter of competition from illiberal capitalist countries such as China
have doused enthusiasm about the West's destiny. Once seen as a model
for "the rest," the West is now in question. Even the erstwhile booster
Francis Fukuyama has seen the dark, warning in his recent two-volume
history of political order that the future may not lie with the places
that brought the world liberalism and democracy in the past. Recent
bestsellers, such as Daron Acemoglu and James Robinson's Why Nations
Fail and Thomas Piketty's Capital in the Twentyfirst Century, capture
the pessimistic Zeitgeist. So does a map produced in 2012 by the
McKinsey Global Institute, which plots the movement of the world's
economic center of gravity out of China in the year 1, barely reaching
Greenland by 1950 (the closest it ever got to New York), and now veering
back to where it began.
It was only a matter of time before this Sturm und Drang affected the
genteel world of historians. Since the future seems up for grabs, so is
the past. Chances are, if a historian's narrative of the European
miracle and the rise of capitalism is upbeat, the prognosis for the West
will be good, whereas if the tale is not so triumphal, the forecast will
be more ominous. A recent spate of books about the history of global
capitalism gives readers the spectrum. The Cambridge History of
Capitalism, a two-volume anthology edited by two distinguished economic
historians, Larry Neal and Jeffrey Williamson, presents readers with a
window into the deep origins of capitalism. Joel Mokyr's The Enlightened
Economy explains how capitalism broke free in a remote corner of western
Europe. And in Empire of Cotton, Sven Beckert, a leading global
historian, offers a darker story of capitalism, born of worldwide empire
and violence.
WESTWARD HO!
The conventional narrative of the making of the world economy is
internalist- that is, that it sprang up organically from within the
West. The story goes like this: after the Neolithic Revolution, the
global shift from hunting and gathering to agriculture that occurred
around 10,000 bc, the various corners of the globe settled into roughly
similar standards of living. From China to Mexico, the average person
was more or less equal in height (five feet to five feet six inches) and
life expectancy (30 to 35 years). Societies differed in their
engineering feats, forms of rule, and belief systems. But on the
economic front, they boasted common achievements: advanced metallurgy,
big walls, and huge pyramids.
If there were tragedies, they entailed plagues and blights more than
man-made catastrophes. This is not to say that the Mongol conquest of
Baghdad in 1258 was polite; of the city's one million people, more than
200,000 were killed, and the Tigris is said to have run red with blood.
But horrific episodes such as this did not determine social well-being,
measured as income per person over the long run. That figure remained
remarkably constant until about 1500. In this sense, the world was flat.
About this portrait, there is consensus.
Where there is debate is over what came next. Some say that groups of
Europeans, especially northern Protestants, began to be rewarded for the
improved productivity that stemmed from their individualistic habits.
Others argue that Europeans stumbled on the right balance of good
governance and benevolent self-interest. Either way, late-medieval
Europeans found the formula for success, banked on it, and turned it
into what, by the nineteenth century, would be known as capitalism.
Internalists argue that capitalism was born European, or more
specifically British, and then became global. A system of interconnected
parts and peoples, it radiated out from a few original hot spots and
over time replaced the "isms" it encountered elsewhere. "Replace" is
actually a bland way of putting it. Champions of capitalism would say
"liberate." Marxists would call it a "conquest." But the story line is
the same: Europe exported its invention to the rest of the world and in
so doing created globalization.
CAPITALISM RISING
The internalist story remains the most familiar way of explaining the
breakout from the long post-Neolithic durée. The Cambridge History of
Capitalism goes so far as to argue that elements of capitalism have
existed since prehistoric times and were scattered all over the planet;
the traits of the individual optimizer were sown into our dna. Clay
tablets recording legal transactions with numbers offer proof of some
Mesopotamian capitalist plying his wares. Relics of trading centers in
Central Asia trace the primitive optimizer to the steppes. True, for
millennia, capitalists were uncoordinated, fragile, and vulnerable. But
the origins of capitalism go as far back as archeologists have found
remnants of organized market activity. As Neal explains in his
introduction, "The current world economy has been a long time in the
making."
In this rendering, the survival of capitalists is a bit like that of
early Christians: often in doubt. Just as Christians had to make
Christendom, imperiled and scattered capitalists had to defeat predatory
rulers and rentseeking institutions in order to make capitalism. In The
Cambridge History of Capitalism, it was the Italian city-states that
first departed from the old order. Although they were vulnerable to
rivals and tended to favor oligopolies, these polities laid the
groundwork of institutions and norms that in the fifteenth century would
pass to mercantile states of the Atlantic-Spain and Portugal- and then
the Netherlands, France, and England. Freed from a Mediterranean Sea
crowded with Ottoman fleets and North African corsairs, the Atlantic
upstarts unleashed themselves on the world's oceans. In the internalist
account, what was important was getting a virtuous cycle going: creating
institutions, such as the legal defense of private property, that
rewarded entrepreneurial behavior and letting this profit seeking
reinforce those institutions through people abiding by laws and paying
taxes. The virtuous cycle lifted capitalists from trading with one
another to coordinating with one another, thus creating a system of
rules and norms to sustain the returns of profit-seeking pursuits. These
moneymen put the "ism" in "capitalism."
Then came a second leap forward with the Industrial Revolution and the
spread of the printed word, which, Neal writes, dissolved the "obstacles
to imitation." European societies began to emulate one another. From
pockets of accumulation and ingenuity emerged coordinated and,
eventually, integrated processes. Coal, timber, draperies, and flatware
filled European trade routes.
Afterward, according to this story, capitalism went global, as European
actors and institutions fanned out to join forces with the huddled
capitalists in Asia, Africa, and Latin America from the seventeenth to
the nineteenth century. But here's the rub: beyond Europe, capitalism
had weaker domestic roots, and so it yielded more conflict and tension
in the periphery than in the heartland. Local societies resisted change
and resented being viewed as backward, condemned as hewers of wood and
drawers of water. The globalization of European capitalism has been an
uneven and bitter process. Only a few in the periphery, such as Japan,
got the mimicry right; these exceptions help confirm the norm that
capitalism is best built from the inside out.
FROM SCIENCE TO WEALTH
There are other ways of explaining how capitalism started in Europe and
diffused. Mokyr, for instance, has championed the view that capitalism
owes its existence to the cognitive, cultural, and intellectual
breakthrough that came about as the scientific revolution swept Europe
in the seventeenth and eighteenth centuries. More than any other
scholar, he has connected the shifting attitudes to and uses of
technology to economic change, crediting the rise of capitalism to an
alliance of engineers and investors, tinkerers and moneymen. When those
people finally joined forces in the middle of the eighteenth century,
the obstacles to growth came crumbling down. In The Enlightened Economy,
Mokyr goes further:
A successful economy . . . needs not only rules that determine how the
economic game is played, it needs rules to change the rules if necessary
in a way that is as costless as possible. In other words, it needs
meta-institutions that change the institutions, and whose changes will
be accepted even by those who stand to lose from these changes.
Institutions did not change just because it was efficient for them to do
so. They changed because key peoples' ideas and beliefs that supported
them changed.
This is a lot of entangled change and rules, and it's not easy to sort
out the causality. The key to Mokyr 's internalist argument is the
emergence of what he calls "useful knowledge," which translated science
into production. The process was far from simple. The Enlightened
Economy charts the often imperceptible steps that rewarded intellectual
innovators and aligned them with impresarios, to create circles of
"fabricants" and "savants." "Interaction" is a key word in Mokyr's
vocabulary; it's what conjugates curiosity and greed, ambition and
altruism. The big breakout came with the Enlightenment, which gave birth
to rational thought, the modern concept of good government, and
scientific insights into what produced more wealth. After that, there
was no looking back.
Internalist histories vary a lot. There are materialists, who see people
responding to incentives and opportunities to pool their money. There
are institutionalists, who insist on the primacy of property rights and
constitutional constraints on greedy rulers. And there are idealists,
who spotlight Europe's intellectual breakthroughs. Some combine
elements. But internalist narratives also share a lot. Internalists
argue that Europe's breakout was autopoietic-that is, that the causes
can be found within the system itself, one capable of maintaining and
reproducing success without depending on outside forces. In general, the
internalist story is also a cheery one. It focuses on what went right,
fits with a rise-of-the-West narrative, and tends to be confident of
capitalism's durability. If the rest poses a threat, this is mainly
because the rest seethes over lagging behind the West.
There are a couple of problems with this kind of history. The first is
that what passes for capitalist behavior is so broad that it's no wonder
one can find proof of Homo economicus from time immemorial. Charting the
rise of capitalism can be like tracking the hedge fund manager from the
hominids who marched out of Africa. Some internalist narratives rely so
much on the capitalist as the maker of the system that they define the
hero of the story in such a way that he is either unrecognizable to
historians who see more in human behavior than material self-interest or
so generic that he is hard to separate from the crowd.
The other problem involves the scale of analysis. "Britain," "Europe,"
and "the West" are notoriously imprecise and anachronistic terms. Why
some citystates and not others? Why not Spain but France? Empires seem
to drop out of Mokyr's story. When they do creep in, they play the role
of agents nonprovocateurs, promoting greed of the wrong sort: Spain
throttled capitalism because it acquired Aztec gold and then got
conquistadors hooked on precious metals and not profits, and the United
Kingdom acquired an empire in a fit of absent-mindedness-and that empire
was merely an extension of the more important domestic market.
As for explaining the fate of the followers, the lesson of internalist
theories has been "Replicate!" Catch up by copying. Borrow the script.
Free markets; protect private property. But the problem has always been
that the nature of catching up makes copying impossible. As the
Russian-born economic historian Alexander Gerschenkron noted, "In
several very important respects the development of a backward country
may, by the very virtue of its backwardness, tend to differ
fundamentally from that of an advanced country." Finally, as a new crop
of global historians has been showing, it is not so easy to isolate the
United Kingdom, Europe, or the West from the rest. When it comes to
privileged internalist variables, such as scientific knowledge or the
Enlightenment, a growing chorus of scholars is finding that West-rest
interactions set the stage for the workings of impresarios, engineers,
and philosophers. So what role did the rest play in the rise of the West?
THE ROLE OF THE REST
The internalist narrative has long been shadowed by an externalist
rival, which sees Europe's leap forward as dependent on relations with
places beyond Europe. Externalists summon a different battery of action
verbs. Instead of "coordinating" or "interacting," the system favored
"exploiting" and "submitting." The most recent externalist explanation
of capitalism is Beckert's Empire of Cotton. The book is a triple
threat: it insists that the Industrial Revolution would never have
happened without external trade, that the rise of industrialism and
factory labor would never have transpired without the spread of slave
labor, and that cotton was a commodity that made an empire and thus the
world economy. In other words, capitalism was born global because it
required an empire to buoy it.
As is the case with Piketty's datafueled bestseller, Empire of Cotton is
modest only in style. A Harvard historian known for his legendary
undergraduate course on the history of American capitalism, Beckert last
wrote a penetrating history of the New York bourgeoisie in the Gilded
Age, The Monied Metropolis, which described the immense concentration of
power in a short period of time as the United States transformed from an
agrarian society into an urban, cosmopolitan one. His newest book gives
readers the global picture of which New York was a part. Collectively,
historians have drawn up a shopping list of causal commodities. Sugar
was once seen as the driver of the early modern triangle trade. Kenneth
Pomeranz made coal famous, arguing in The Great Divergence that Europe
succeeded because British mines were close to start-up factories,
whereas China lagged behind because bituminous deposits there were out
of reach. David Landes, in The Unbound Prometheus, made even the humble
vat of grease a hidden hero of the Industrial Revolution. For Beckert,
the globalizer is cotton.
In 1858, James Henry Hammond, a South Carolina planter-senator,
thundered on the floor of the Senate, "Cotton is king." But cotton was
not always king in the Atlantic world. For long stretches, it was a mere
pawn. Where it was king was in India. At the start of Beckert's epic
tale, in the early eighteenth century, India provided coveted muslins
and calicoes for European markets. Its cotton was grown by peasants,
along with their food crops, with enough supply to sustain an export
boom until the nineteenth century. Europe was a growing, but fringe, market.
So how did India and Europe trade places as the center of the cotton
industry? The key lies in the nature of the Atlantic trade. Beckert
locates the preindustrial origins of that trade in what he calls "war
capitalism." By this, he means the use of state power to wage war on
rivals for markets and possessions and to shove native peoples off their
land in the Americas and Africa. While Native Americans were
dispossessed, Africans were shipped-about 12 million of them-from one
side of the Atlantic to the other. Once American land, African labor,
and European capital were bonded together on the cotton plantation, a
new source of cotton could finally outmuscle the peasant household on
the Indian subcontinent. It was not internalist factors, such as local
property rights or useful knowledge, that punched through the capitalist
transformation; "a wave of expropriation of labor and land characterized
this moment, testifying to capitalism's illiberal origins," Beckert argues.
But this was not all. Manufacturers in Europe needed to keep out their
Indian competitors and create new markets. Various kinds of
protectionist policies came to the rescue, Beckert writes, "testifying .
. . to the enormous importance of the state to the 'great divergence'"
between industrializers and those that trailed behind. On the eve of the
American Revolution, the British Parliament decreed that cotton cloth
for sale at home could come only from cloth made in the United Kingdom.
Other European governments did the same.
Even protectionism was not enough. Because European domestic markets
alone could not sustain expanding factories, an export boom had to be
manufactured. Europeans gave clothes to African traders in return for
captives, pressured newly independent countries in Latin America to
throw open their markets, and eventually introduced cheap, milled
textiles to the bottom end of the Indian market. Thus subverted, Indian
peasants became estate sharecroppers producing raw cotton for export to
British mills. After the American Civil War, King Cotton fell on hard
times, because Brazilian, Egyptian, and Indian estates could hire
displaced peasants more cheaply than freed slaves. Once the traditional
bond between peasants and land had been severed in Africa, Asia, and the
Americas, cotton merchants were free to exploit the land as they saw
fit. Beckert writes that from 1860 to 1920, 55 million acres of land in
those regions were plowed for cotton. According to some estimates, by
1905, 15 million people made a living by growing cotton-about one
percent of the world's population.
The cotton industry became so competitive that it attracted arrivistes.
Japan, for example, replaced its imported textiles from British India
and the United States with raw cotton from Korea in the early twentieth
century and so became a new commercial empire in its own right. Belgium
and Germany tried the same thing in Africa. Thus was born an imperial
spasm in the name of free trade. The circle finally closed when India,
too, tried to replace imports with domestic production and economic
nationalists lobbied to free the colonial economy from British control.
In the 1930s, the original textile manufacturers in the United Kingdom
saw their business go overseas in response to labor costs and
working-class militants. Mill towns hollowed out. By the 1960s, British
cotton textile exports had shrunk to a sliver (2.8 percent) of what they
once were. The American South saw its staple flee to Bangladesh.
Eventually, Beckert writes, cotton mills in Europe and North America
were refurbished as "artist studios, industrial-chic condos, or museums."
A narrative as capacious as this threatens to groan under the weight of
heavy concepts. In fact, Beckert dodges and weaves between the big
claims and great detail. His portrait of Liverpool, "the epicenter of a
globespanning empire," puts readers on the wharves and behind the desks
of the credit peddlers. His description of the American Civil War as "an
acid test for the entire industrial order" is a brilliant example of how
global historians might tackle events-as opposed to focusing on
structures, processes, and networks- because he shows how the crisis of
the U.S. cotton economy reverberated in Brazil, Egypt, and India. The
scale of what Beckert has accomplished is astonishing.
Beckert turns the internalist argument on its head. He shows how the
system started with disparate parts connected through horizontal
exchanges. He describes how it transformed into integrated,
hierarchical, and centralized structures-which laid the foundations for
the Industrial Revolution and the beginnings of the great divergence
between the West and the rest. Beckert's cotton empire more than
defrocks the internalists' happy narrative of the West's self-made
capitalist man. The rise of capitalism needed the rest, and getting the
rest in line required coercion, violence, and the other instruments of
imperialism. Cotton, "the fabric of our lives," as the jingle goes,
remained an empire because it, like the capitalist system it produced,
depended on the subjugation of some for the benefit of others.
IMPERIAL DISCONTENTS
Like the heroic capitalist rising and spreading his wings in the
internalist narrative, the distinctly unheroic empire in the externalist
narrative functions as the machine that made itself. This raises all the
same problems of circularity: empire becomes the cause and the effect of
capitalism. It also raises problems of how to join inequality and
integration, both of which lie at the heart of Beckert's book. Contrary
to the externalist precept, coercion need not be the only binding force
when power relations are asymmetric; global domination is not
necessarily inherent to capitalism. Maybe it is because the English
language lacks the right terms to describe a global order of uneven and
asymmetric parts that externalists resort to shortcuts such as "empire"
or "hegemony." Internalists, by contrast, offer a vocabulary that
accents choices and strategies, such as "creating opportunities" and
"maximizing returns."
Most historians side with a single narrative, captive to stories of
capitalism as either liberating or satanic, springing from below or
imposed from above. In order to plumb the past of global capitalism,
however, they need a stock of global narratives that get beyond the
dichotomies of force or free will, external or internal agents. To
explain why some parts of the world struggled, one should not have to
choose between externalist theories, which rely on global injustices,
and internalist ones, which invoke local constraints.
Indeed, it's the interaction of the local and the global that makes
breakouts so difficult-or creates the opportunity to escape. In between
these scales are complex layers of policies and practices that defy
either-or explanations. In 1521, the year the Spanish defeated the Aztec
empire and laid claim to the wealth of the New World, few would have
predicted that England would be an engine of progress two centuries
later; even the English would have bet on Spain or the Ottoman Empire,
which is why they were so committed to piracy and predation. Likewise,
in 1989, as the Berlin Wall fell and Chinese tanks mowed through
Tiananmen Square, "Made in China" was a rare sight. Who would have
imagined double-digit growth from Maoist capitalism? Historians have
trouble explaining success stories in places that were thought to lack
the right ingredients. The same goes for the flops. In 1914, Argentina
ranked among the wealthiest capitalist societies on the planet. Not only
did no one predict its slow meltdown, but millions bet on Argentine
success. To find clues to success or failure, then, historians should
look not at either the world market or local initiatives but at the
forces that combine them.
Alternative narratives may have to come from beyond the heartland of
capitalism itself, the home of classical fables of modernization. In the
nineteenth century, many liberals outside Europe struggled to find a
different path, because copying the West was a hopeless pursuit. Since
they could not claim histories of capitalism as their own but still
believed in the credos of liberalism, they tried to think beyond the
binary choice of coercion or free will. Juan Bautista Alberdi, the
father of Argentina's 1853 constitution and a native of the country's
cotton province of Tucumán, was devoted to free trade and opening up
frontier lands for the production of commodities. Like many global
liberals, he insisted that governments did not have to resort to
coercion to integrate supply chains. Alberdi was a fierce critic of
using war as a means to modernize, and he blasted Argentine and
Brazilian elites for colluding during the Paraguayan War of 1864-70, the
South American echo of the American Civil War. His work represents but
one example of capitalist endeavors that were neither carbon-copied nor
made out of the barrel of a gun.
The dichotomy between internalists and externalists is harmful because
it creates a pressure to rely on just one of their heroic and unheroic
duelers to explain capitalist development. In fact, the payoff from
global history comes from thinking about capitalism in multiple ways and
on multiple scales. Surely, the travails of the rest serve as a reminder
that the isms of the West are neither as inevitable nor as durable as
their chroniclers or critics believe.
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