The Wealth Explosion
Bourgeois Dignity: Why Economics Can’t Explain the Modern World, Deirdre N. McCloskey, University of Chicago, 571 pages
By Brian C. Anderson
For most of history, existence was a grind, at least for the vast majority—though a short grind, for dying young was the norm. Food was scarce and rudimentary, work was drudgery, and the elements were a daily threat. Little changed: you could expect to do the same kinds of things that your great-grandparents did and subsist on a miserable $3 a day. Then, around 200 years ago, beginning in the Netherlands and in Britain with the Industrial Revolution but swiftly spreading to other countries, and then to the four corners of the globe, life began to get better in breathtaking ways. Today, the average American consumes roughly $127 every day in nourishment, housing, energy, and countless amenities unimaginable in 1800. He typically lives until he’s 80, not 40. His horizons are considerably more expansive than those of his ancestors.
What caused this historical mutation? In Bourgeois Dignity, the second of six planned volumes on the genesis and development of the modern capitalist world, Deirdre McCloskey, an economist at the University of Illinois at Chicago, argues that most traditional economic models—from expanding trade to capital accumulation—fail or provide at best a partial account of what happened. Much of Bourgeois Dignity is about debunking these theories.
Pace Max Weber, for instance, thrift doesn’t cut it. As McCloskey points out, human societies from “the Garden of Eden” on have been thrifty because survival required it. Pre-industrial Europe needed to be particularly frugal because of persistently lousy yields of wheat, barley, and oats. Further, as measured by savings rates, British thrift during the Industrial Revolution was actually a bit lower than the European average.
Foreign trade wasn’t the engine of the West’s spectacular growth, either. Trade may help economies expand, but it doesn’t get you anywhere close to the 1,600 percent growth in need of explanation. Moreover, trade, like thrift, was nothing new. “Exports grew, sometimes explosively, in many other times and places—the Silk Road, for example, when political unity was established in central Asia,” McCloskey observes. “Why not trade-powered industrialization, from Sumer on?”
The Marxist-Leninists were more wrong still in claiming that the wealth explosion was due to imperialism. Sure, individual British colonialists might have made a lot of money out of exploiting Indians or southern Africans. Few if any material benefits flowed to the British people from empire, however. “They got bananas on their kitchen tables … that they would have got anyway by free trade … or at a slightly higher cost if trade had not been entirely free,” writes McCloskey. “They got employment for unemployable twits from minor public schools. Above all—to go beyond the material realm—they got the great joy of seeing a quarter of the land area on world maps and globes shaded in British imperial red.” The financial cost to the British for such pride was in fact massive, burdening a public that “paid and paid and paid.”
McCloskey takes particular relish in demolishing a more recent, much-debated growth theory. Economist Gregory Clark’s sociobiological hypothesis, articulated in his 2007 book Farewell to Alms, contended that as the British bourgeois multiplied the nation’s poor and unsuccessful died off. The result: an elite race that spread economic vitality throughout Britain during the Industrial Revolution and then exported it to the world. Not only does Clark fail to give any quantitative evidence for his master-race argument, but McCloskey shows that he also ignores the obvious fact that many non-English people have climbed aboard the wealth rocket, as the South Koreans and the Chinese have done over the last few decades.
Theory after theory of modern growth is examined and found wanting in Bourgeois Dignity. Over hundreds of pages, McCloskey wanders deep into the thickets of contemporary debate among economic historians, and the general reader might find himself yearning to tear free after learning, comprehensively, why abundant coal didn’t drive the Western take-off, nor did the slave trade, or protection of private property, or transport, or other factors frequently advanced as causes.
What remains standing after these rival theories fall, McCloskey maintains, is a profound shift in ideas: long scorned as vulgar, the merchant and the manufacturer and the inventor began in northwestern Europe two centuries ago to enjoy respect and institutional protection, a new “dignity and liberty.” “An old class of town dwellers, formerly despised by the clergy and the aristocracy and the peasantry, began to acquire a more dignified standing, in the way people thought and talked about it, in European rhetoric about middle-class activities,” she says. “And along with a new dignity the bourgeoisie began to acquire a new liberty.” This “Bourgeois Revaluation” has brought—and continues to bring—astonishing material improvement to societies that have experienced it and, more importantly, new “imaginings of possible lives,” in McCloskey’s evocative phrase.
It does so by encouraging an unprecedented spirit of innovation. Capitalism, McCloskey rightly notes, goes far beyond private property, markets, and profit. All of these existed in older economic systems, yet ages went by without that dreary $3 per day limit being broken. McCloskey locates capitalism’s true revolutionary force in the impulse to invent—to come up with, say, coffee cups of various sizes that all use the same-sized lids (to borrow a famous example from Stanford economist Paul Romer) or drugs that thin blood or diminish anxiety or technologies that enable instant, inexpensive communication with a friend on the other side of the planet or send men to the moon. This process isn’t simply about making existing technologies more efficient. It’s about the creative destruction in which new products replace old, as the air conditioner replaced the 1928 electric fan or the light bulb replaced the candle. This ceaseless creativity and discovery, McCloskey says, is what you get when you honor and emancipate the bourgeoisie.
McCloskey’s positive case for the bourgeois revaluation is only anticipated in the current volume, which cites the work of political theorist John Danford and historian Tim Blanning, among others, in this light, and advances David Hume as a key transitional figure. The third book in her series—taking The Bourgeois Revaluation for its title—promises a dense historical analysis of how Europeans started to speak about shopkeepers and manufacturers without disdain and began to celebrate them. This fuller treatment may be necessary to make her historical argument completely persuasive. While McCloskey shows how each rival explanation fails to account for the wealth explosion of the last 200 years, it’s also possible, as economist Diane Coyle has suggested, that various trends working together reached a “tipping point,” triggering the growth. “In which case,” Coyle says, “all of the conventional explanations for the Industrial Revolution may have a part to play.”
The importance of McCloskey’s argument is far from merely historical, though. Too often, economists abstract away from men and women in their complex reality, positing economic actors who exist only in theory and ignoring history, social thought, emotional and spiritual commitments, and much else that makes up the fabric of the human world. A truer economics, McCloskey says, must be a “humanomics,” much closer to the political economy of Adam Smith than to the mathematical risk modeling of Wall Street, which showed its limits during the 2008 financial meltdown. McCloskey’s series represents an ambitious, and salutary, effort to reclaim economics as a human science.
Her project is also important because influential currents of our elite intellectual culture—“the clerisy,” she calls it, after Samuel Taylor Coleridge—continue to hate commercial life just as much as the European aristocracy did. The artists and intellectuals first turned against liberal innovation during the late 19th century, with ruinous consequences: “The treason of the clerisy led in the twentieth century to the pathologies of nationalism and socialism and national socialism,” McCloskey notes. These days, anti-bourgeois attitudes manifest themselves in radical environmentalism, Hollywood contempt for business, and Obama-style belief in the superiority of government service over private-sector ambition. Should such views get too much traction in American life, our future prosperity will suffer. The biggest losers will be the aspirational poor.
Another threat darkens the bourgeois prospect in America, though McCloskey doesn’t deal with it in Bourgeois Dignity. It comes not from the clerisy but from the rising power of the well-connected insider. As the University of Chicago’s Luigi Zingales argues, by allowing the concentration of power in a handful of large institutions, helping to produce the 2008 financial crisis, and by responding to that crisis with massive taxpayer bailouts of banks and big firms, the U.S. seems to be moving toward the crony capitalism that characterizes more state-heavy European nations. “This, in turn,” Zingales observes, “endangers America’s unique brand of capitalism, which has thus far avoided becoming associated in the public mind with entrenched corruption, and has therefore kept this country relatively free of populist anti-capitalist sentiment.” We need to maintain the distinction between a pro-capitalist (good) and pro-business (bad) approach to economic policy if McCloskey’s wealth creators are to remain free, publicly honored, and thus maximally innovative and productive.
McCloskey’s learning is prodigious—ranging across history, literature, and economics—though always lightly worn. She writes chattily, if at times a bit obsessively, and has a great professor’s ability to make the complex accessible. Bourgeois Dignity, like its predecessor The Bourgeois Virtues, is a tour de force. If the four subsequent volumes are on this level, “The Bourgeois Era,” as her series is named, will stand as one of the great achievements in intellectual history of our time.
Brian C. Anderson is editor of City Journal and author of Democratic Capitalism and its Discontents, South Park Conservatives, and other books.