No Apologies Required: The Roots of Capitalism

--“For many years,” John Chamberlain writes in his book The Roots of Capitalism,“the system we call capitalism was on the defensive. It existed in the here-and-now, and its imperfections, whether inherent or not, were plainly apparent to everybody.

“Socialism, on the other hand, was something to be attained in the future, a thing of shining colors wrapped in the gossamer tissue of a dream. Its imperfections, if there were to be such, were still concealed in the womb of time. When contrasted with a dream of perfection, capitalism was manifestly at a disadvantage.

“But,” Chamberlain goes on, “with the advent of socialist economies (Communist Russia, China) and the semi-socialist, or ‘mixed,’ systems of Scandinavia, Britain, and New Deal America (to say nothing of the ‘national’ socialisms of Nazi Germany and Fascist Italy), capitalism no longer requires apologists.”

Capitalism’s superiority, in hindsight, is obvious:  Capitalism doesn’t require force, murder or concentration camps as a matter of policy in order to attain the desired result.

Yet, many seem to think that an economic system based on private trade is the primary cause of corruption, widespread malfeasance and manmade disaster. Quick question: When’s the last time a Chipotle cashier kicked down your door and served you a burrito bowl, extra guac, at gunpoint?

Now, as we shift the binoculars to the public sector for a moment, try not paying land rent (property taxes) for a few years. Then board up those windows before the capitalists in business suits show up at your door with guns.

(Just kidding. They’ll be government goons. And the only jackets they do business in are made of kevlar, if you get my drift.)

Capitalism is a system of human cooperation (and sometimes, our favorite, creative disruption). Much like language, it was not invented by any one person. Families, tribes, villages, towns, cities and nations have all discovered, long ago, that cooperation through commerce means better lives for many people.

Alas, far too many people have had to learn the hard way, on the other hand, that widespread force, violence and conflict (AKA war) means pretty much everyone, in one way or another, is going to have a bad time.

Even so, again and again, the majority defends the system which pepper sprays, beats and shoot its customers into submission against the one system which has done more to quell violence and misery than any before it in the entire recorded history of humanity.

Government needs — and suffers no shortage of — apologists to keep the perceived legitimacy of the State intact. Capitalism doesn’t need a single apology to remain legitimate. That’s the difference.

If an idea takes force to implement, it’s 9.999 times out of ten a bad idea. Businessmen know this, so they must listen to those they are accountable to. Politicians, despots, monocrats, autocrats, tyrants, and slave-drivers, in general, pretend not to know this, so they can listen to whoever — and do whatever — the hell they want.

“Ever since the beginnings of social life,” says Chamberlain, “men have swung between extremes of freedom and coercion, of voluntary association and community compulsion, of family ‘mutualism’ and State-imposed ‘order.’ Men can live under any combination of the two extremes.

“But it seems to me obvious that they can only live creatively when cooperation is a matter of free election, of the voluntary approach.”

--Agreed. Which is why, today, we’re, respectfully, ripping out an excerpt of John Chamberlain’s brilliant book The Roots of Capitalism.

In the coming clip of Roots’ first chapter below, you’ll see…

How the haphazard Adam Smith discovered how to create “cheapness” in society…  the two geeks who inspired “laisser passer, laisser faire”… why the idea of “morality” really comes down to personal responsibility… and much more.

Read on…

The Freely Choosing Man

By John Chamberlain

Adam Smith, so it is said, once fell into a tannery pit while absorbed in explaining the division of labor to his friend and patron, the Right Hon. Charles Townshend, who is famous in history for having given King George III the bad tax advice which resulted in the American Revolution.

An absent-minded man who could roll bread and butter around in his fingers and stick the mess into a pot under the delusion that he was making tea, Smith plunged into the subject of economics almost as inadvertently as he fell into the tannery pool.

He was led into political economy, a new subject in his time, when, as part of his lecturing kit on the science of jurisprudence, he found himself dealing with the policeman’s duty to provide cleanliness, safety, and cheapness or plenty to the population of a city or a state.

On the subject of cleanliness and safety, there wasn’t much to be said beyond stipulating their necessity to economics if the energies of man are to be protected against disruption by marauders, fires, accidents, and diseases. But cheapness — or “opulence,” as Smith preferred to put it — was quite another matter.

How could cheapness best be brought about? In the world of the Eighteenth Century the authorities had set ideas on the subject. For instance, they believed that plenty was a prerogative of the few, to be conferred upon the many only within the bounds of a certain discretion.

In the early Middle Ages, when a distinctive European society was being forged in the face of Moslem beleaguerment from the East and the breakdown of Roman law within, discretion dictated a subordination of the very notion of plenty to the safety of the manor.

It is an old story, not to be repeated here, that the free yeoman gladly turned in his titles to freedom in order to gain the protection of costly armor and the well-trained horseman-knight.

When Adam Smith began his lectures on the “moral sentiments” in the mid-Eighteenth Century, the need for the chivalric order within the boundaries of any West European nation-state had long since passed. But the institutional hangover had not; despite the revolution of the Seventeenth Century in the arts of government, despite the rise of towns, the thought of plenty as a product of the uninhibited flow of energy had not really penetrated.

True, it had begun to bubble and seethe in unlikely places. In France, where the Bourbons assumed a God-given right to absorb, seize, dictate, or stop anything, the Physiocrats, led by a physician named Quesnay, were preparing their famous Tableau Economique, a chart which endeavored to explain the circulation of wealth as something analogous to the circulation of blood. Wealth could not get around in a system which exalted the tourniquet of government control over the free pumping of the heart.

The Physiocrats had the queer notion that agriculture was the one truly productive branch of economic activity, the source of all value-blood in the circulatory system. Nevertheless, despite their patent animus against industrial production — or “value added by manufacture” — as “sterile,” the Physiocrats had achieved an important insight: the “policeman” could best confer plenty on the many by leaving the producer alone.

Adam Smith knew the Physiocrats. He talked with them during his sojourn on the continent as a tutor to the young Duke of Buccleugh from 1764 to 1766. In particular, he had many meetings with Turgot, the French minister who persuaded Louis XVI to abolish forced labor and various restraints on the grain trade.

But it was not Turgot or his Physiocrat brethren, with their ideas which resulted in the slogan of “laisser passer, laisser faire,” who had originally set Smith’s mind to racing — it was a simple predilection for freedom which he had picked up at a far earlier age from his old instructor at the University of Glasgow, Dr. Frances Hutcheson.

Hutcheson, an Ulster Scot, had a passion for “natural liberty and justice,” those hallmarks of an ideal society, which he communicated to his students by lecturing to them in English instead of the Latin which had hitherto been the prescribed language of the schools.

As part of the “moral philosophy,” the concept of “natural liberty” click easily into place. Man, as an ethical integer, is either free to choose between good and bad courses within the limits of his circumstances, or he is not. If he is not free, if he can only accept what is handed to him from above (by fate, or by decree of the human agents of fate), then there is not much use in talking about morality or ethics. To make any sense of the idea of morality, it must be presumed that the human being is responsible for his actions — and responsibility cannot be understood apart from the presumption of freedom of choice.

As with the Physiocrats, economics with Adam Smith began as part of a wider science of choice; only secondarily was it a science of wealth.

Smith saw clearly that man, as a choosing animal, was a self-starter, one who could best add to the sum total of human wealth if he were permitted to act without waiting for a command from above.

Natural liberty, he was to say in Wealth of Nations, was good because it discharged the sovereign, the “police,” from the “duty of superintending the industry of private people and of directing it towards the employments most suitable to the interests of the society.”

After a century or more of describing economics as the study of wealth, the economists have finally returned to the idea that their subject is merely a subdivision of a greater and more encompassing science, the science of human choices. “Choosing,” says the fertile Ludwig von Mises in his Human Action, “determines all human decisions. In making his choice, man chooses not only between various material things and services. All human values are offered for option.”

In other words, the saint who elects to abstain from consumption affects a sales curve or an energy-disposition curve as much as the gourmand who overdoes things; every choice, whether narrowly economic or not, affects every other choice. But there can be no inhibition on choices within the orbit of any individual’s Rights without demeaning man as a moral integer, one who has the moral duty to make up his own mind between good and evil alternatives.

Thus the economic wheel, with the von Mises school, has come full circle; what began as an almost inadvertent offshoot of moral philosophy has returned to it. Choice is fundamental to economics because it is fundamental to the moral nature of man.

Today, with the evidence all about us, the virtue of free choice in the economic realm ought to be apparent to everybody. (This is not to say that it is apparent to more than a small and sometimes helpless minority.)

And, as Isabel Paterson has pointed out, the longer the circuit of human energy, the more important that no tourniquets of government dictation be interposed to burden the free pumping of the heart.

Regards,

John Chamberlain
Author, The Roots of Capitalism

Chris Campbell

Written By Chris Campbell

Chris Campbell is the Managing editor of Laissez Faire Today. Before joining Agora Financial, he was a researcher and contributor to SilverDoctors.com.