Capitalism as natural no more

By Charles Zhu

The economist idol Adam Smith said capitalism was a natural outgrowth of human nature and inevitable, but Joyce Appleby sees its rise as unlikely from the start.

The historian of capitalism in the Anglo-American world makes a dramatic break from conventional economic thinking in her new book The Relentless Revolution: A History of Capitalism.

She says that capitalism was “a startling departure from the norms that had prevailed for 4,000 years,” one that permitted a new mentality where private individuals could pursue profits.

This theory follows in the footsteps of Joseph Schumpeter, the Austrian economist who said modern economic systems “incessantly revolutionize the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”

Indeed, capitalism is driven by waves of entrepreneurial innovation, a “perennial gale of creative destruction.”

Capitalism first surfaced in the Netherlands, but it was Britain that would be its true cradle.

By the late 18th century, the number of the British farmers had dropped from 80 percent of the population to half due to advances in commercial agriculture. The transformation helped create the huge pool of surplus labor on which capitalism feeds.

Appleby reviews a generation of economists who, long before Adam Smith, built a case that the elements of any economy are fluid. This realization – a revolution of the mind – totally changed perceptions of usury and joint stock companies.

“There can be no capitalism … without a culture of capitalism,” she writes.
She exposes the ignominious forces that have been created to support profits, like the African slave trade and the Dickensian sweatshops.

However, she focuses most on capitalist enterprise and innovators from James Watt to Josiah Wedgwood and such “industrial leviathans” as Vanderbilt, Rockefeller, Henry Ford and Carnegie in the US, and Thyssen, Siemens and Zeiss in Germany.
She devotes her final chapters to how capitalism has evolved in the postwar era in the US, Japan, France, Germany, Singapore, Taiwan and South Korea. Many success stories reveal that government intervention can play a positive role in sustaining capitalism.

Yes, even in the aspiring laissez-faire US.

In the period between 1941 and 1960, the US government increased its support of research and development 13 times until it was funding 64 percent of the national efforts. It helped fund research at IBM that brought many technological breakthroughs such as the Internet.

She also touches on the recent financial crisis, a particular moment in the history of capitalism. But rather than blame it all on Wall Street executives for their exorbitant compensation packages or the government for deregulating its financial system, she simply notes the need for some government control of these excesses.

Most of all, Appleby is optimistic about the future.

“There is no reason to think that societies won’t continue to modify and monitor their economies in pursuit of shared goals,” she writes.

While her capitalism is a relentless revolution, it is not a mindless one.