The nastiness of the Great Recession of 2008 and its slow-growth aftermath in the rich countries was hailed on the far left as being (at long last) the actual last crisis of capitalism. (I gently reply to them: So you have said, my dear friends, about every downturn since the Panic of 1857.) The Great Recession, nasty though it was, had a half dozen equally nasty cousins among the forty or so recessions since 1785. It caused less in human pain than, say, the depressions of the 1840s or the 1870s or the 1890s. And the Great Depression of the 1930s was much worse than any of these. The margin for surviving a depression in former days, even in comparatively rich countries, was much narrower. Before the full fruits of the Great Enrichment, real incomes were much lower than they were by 2007, and provision for unemployment insurance was weak—admitting that “friendly societies” in, say, Britain did part of the job, and that families often could take in Uncle Fred, bankrupted after one of Colorado’s mining booms.
Yet in each of the forty-odd recessions since 1785, big or small, the real income of the poor and of the average wage earner was higher after the recession than it had been at the peak of the previous boom. In the three dozen or so ordinary recessions the previous peak was exceeded after the trough in about two years. Unhappily, it was not the case everywhere after the Great Recession of 2008. In the 1930s it had been even less so, disastrously, in the mismanaged recoveries from the Great Depression, especially in gold-obsessed France, Switzerland, and the United States. But in the Great Recession, despite the Schadenfreude expressed on the left, still echoing in such circles, the growth of real incomes did not stop permanently, even in the already developed and therefore necessarily slower-growing countries. Merely two years after the 2008 peak, real per-person income in the United States, for example, had grown beyond the peak (though not for the young, considering the job protections arranged by and for the middle-aged).1 In the world as a whole, real income per person was fully 10 percent higher by 2011 than before the world crisis.2 It had begun to exceed the 2008 peak by 2009. Here are some of the larger or more interesting countries arrayed by the years they took to match or exceed their previous peak in real per-person income (the peak being for most countries 2008, but 2006 for many of the worst performers):
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The eminent Marxist historian Eric Hobsbawm (1917–2012) gave in 2011 the conventional left-wing analysis of the Great Recession. In the peroration of a book republishing some of his essays, Hobsbawm decried how “the unlimited and increasingly high-tech economic growth in the pursuit of unsustainable profit produces global wealth, but at the cost of an increasingly dispensable factor of production, human labor, and, one might add, of the globe’s natural resources.”3
The details of his rhetoric—tacking on a concern for “the globe’s natural resources” with a “one might add”—show him, as Hobsbawm would have affirmed, to be an old leftist. He stopped being a dues-paying if unorthodox member of the Communist Party of Great Britain only a few months before it dissolved itself, in 1991. The “one might add” suggests a wariness toward the recent environmentalist modulation of the left, a modulation, as he suspiciously observed elsewhere in the same essay, “on a much more middle-class basis.” The environmentalist, anticorporatist, antiglobalist, usually middle-class radicals exemplified by the Occupy movement and its Spanish model, Los Indignatos, were, he wrote, “anti-capitalist, though without any clear idea of capitalism.” “It was almost impossible to identify what they proposed to substitute for it. This may explain a revival of what looks like Bakuninite anarchism.”4 From an Old Communist, “Bakuninite” is not a compliment.
But the main point of Hobsbawm’s sentence is to cast doubt on the Great Enrichment. The left after Marx and Engels has always been, as Hobsbawm himself was in all his writings, strangely alarmed by economic growth. They have been alarmed even though economic growth was what in historical fact enriched the poor, not the nationalizing policies of the old Labourites and of the Communist Party, or for that matter the war-making policies of the Conservative Party and of the fascists, or the redistributive policies of the Liberal Democrats and of the populists. The radical left and the traditionalist right see economic growth as a vine smothering the world, a monopolistic kudzu, bringing on the cultural triumph of the West. (The traditionalist right glories in the cultural triumph of the West, at any rate if the rightist is a Thatcherite Westerner.) The hard-left Indian writer Pankaj Mishra lists in parallel with Hobsbawm the usual antigrowth claims: “the cultural homogeneity, or the other Trojan viruses—uneven development, environmental degradation—built into the West’s operating software. . . . [And] the harshest aspects of American-style capitalism: the truncation of public services, de-unionization, the fragmenting and lumpenization of urban working classes, plus the ruthless suppression of the rural poor.”5 Thus Mahatma Gandhi admired the foot-treadle sewing machine but viewed it as one of the few good innovations. No electricity or flush toilets. Stop growth now.
The antigrowth left, with the antigrowth right, is mistaken. (It does not mistake, though, that the fruits of the Great Enrichment have made the proletariat into a petty bourgeoisie, lamentably uninterested in revolution, and in its vulgar way now able to enjoy the goods and services formerly available only to the better sort of people. And it has made the poor into department-store and now Walmart customers, lamentably uninterested in making their women spin their yarn and weave it into cloth by hand.) Growth’s “high-tech” feature, in Hobsbawm’s way of putting it, makes certain laborers “dispensable,” true—which is to say that people move from wretched assembly-line jobs at Ford near Detroit or at Volvo near Gothenburg to better jobs standing in a white coat monitoring robots, at the higher wages made possible by the higher tech. Or, mainly, they move to jobs outside the auto industry, the real rewards of which are now higher because people can buy the radically cheaper stuff made by the robots.
And if their new jobs are not higher paying it may be because the United Automobile Workers of America or the IF Metall union of Sweden had been able to extract monopoly profits from the company and therefore from consumers. Robert Reich, a reliable source of sweetly leftish errors of facts and ethics, declares that “the decline in unionization [of private companies] directly correlates with the decline of the portion of income going to the middle class.”6 But paying selected workers on the auto assembly line more than they can earn elsewhere, at the expense of other, sometimes poorer, workers buying autos, is hardly a formula for raising up the working class, or for that matter the middle class.
Walter Reuther, president of the United Auto Workers long ago, replied to a young manager enthusiastic about robots on the assembly line, “Tell me, those wonderful new robots—will they go out and buy cars from your company?” Reuther’s, and Reich’s, argument, though well intentioned, is fallacious, the “productionist” fallacy: trickle up. Employees of the auto companies are a trivial share of the auto-buying public. You can’t create prosperity merely by buying from your own employer, hoisting yourself up by your bootstraps. The left’s trickle-up economics is as illogical as is the right’s trickle-down version.
The robots themselves are made by people who buy cars. Compared with horses, cars themselves are “robots.” Yet the advent of cars did not produce mass unemployment because of insufficient demand for the output of blacksmiths and horse traders. Fundamentally, all tools—a blast furnace and a spinning jenny, or for that matter an Acheulean hand ax or a Mycenaean chariot wheel—are “robots,” that is, contrivances that make labor more productive. Reich listed in 2014 the usual lineup of villains allegedly driving down American wages: “Automation, followed by computers, software, robotics, computer-controlled machine tools and widespread digitization, further eroded jobs and wages.”7 No they didn’t. They raised real wages, correctly measured, according to the common sense that a human supplied with a better tool can produce more. If Rosie the Riveter gets better tongs to insert the rivets she gets higher wages, because employers have to compete for the now more productive worker, and can give her children more to eat. If everyone gets better tools they move out of old jobs and produce more for everybody in their new jobs with the new tools.
After all, the point of an economy is production for consumption, not protection of existing jobs using old tools—horses, candles, hand-controlled drill presses. Any contrivance substitutes for raw labor, as does the cactus spine that the Galapagos finches use to dig grubs out of tree bark. The finches use “robots.” In Afrikaans the word “robot” means what it means elsewhere, following its coinage from Czech (the original meaning is “required work”). But it is also the normal Afrikaans word for “traffic light.” The traffic light substitutes for the labor of a policeman with white gloves on a pedestal. And such substitutions are good, in the third act, for workers as a whole, not bad.
In the literal second act of Ibsen’s Pillars of Society (1877), one of the pillars, Karsten Bernick, the owner of a shipyard in Norway, scolds his foreman, Aune:
BERNICK. You don’t know how to work with the new machines I had installed—or, better, you won’t work with them. . . . Progress has to come from me, or it won’t come at all.
AUNE. I also want progress, Mr. Bernick.
BERNICK. Yes, for your own narrow faction, for the working class. . . .
AUNE. What right do technology and capitalism have to introduce all these new inventions before society’s trained a generation in how to use them? . . . I can’t stand seeing one good workingman after another turned out to go hungry, all on account of these machines.
BERNICK. Hm. When printing was invented, a lot of scribes went hungry.
AUNE. How’d you like it, Mr. Bernick, if you’d been a scribe at the time?8
Aune articulates the program on the left to educate an entire generation of people to work with all conceivable robots before any are installed and tried. He believes the future can be laid down because we already know how it will turn out. Aune’s program would stop the enrichment of the working class (the “narrow faction” constituting 90 percent of Norwegian society, then as now). By contrast, Bernick articulates the program on the right to let the bourgeoisie install whatever labor-abridging device it wishes and afterward train the workers, a bet on progress without quite knowing how it will turn out. In society’s third act Bernick’s has turned out to be the better program, because we pay the Bernicks to have such ideas, punishing them with bankruptcy when they are wrong. The Bernicks push for an unknowable future, which in the event has been massively good for the workers.
And indeed in the literal fourth act of the play an ethically renovated Bernick meets with gratifying cooperation from Aune:
BERNICK. I gave you too little time. [The ship under repair] needs a more careful job.
AUNE. Will do, Mr. Bernick. And with the new machines!
BERNICK. That’s the way. But take special care and pains with it now. There’s a lot with us that could stand some careful, painstaking renovation.9
It’s a happy ending, a trifle twee. But after all the new machines are in fact necessary for the happy result of enriching the workingmen.
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The business profit that the left abhors—”in the pursuit of unsustainable profit,” said Hobsbawm—is indeed temporary, “unsustainable.” That’s good, not bad, and is the reason why profits on American industrial capital fell from their “unsustainable” levels of about 15 percent per year after World War II, when the United States was the only big industrial economy left standing, down to a normal level of about 10 percent per year on the capital sum invested from the 1960s on, a level typical since industrialization began two and a half centuries ago. The reward for venturing, for example, on robotization—that is, toolmaking—has been eroded time and again, I say again, by competition driving down the rewards to the inventors of weaving machines and rolling mills and assembly lines, and leaving the fruits for the rest of us in much cheaper clothes and girders and automobiles measured by the labor time to buy them.
The left speaks as though such competition among capitalists for the dollar of the worker-consumer, keeping down profits on capital, is a bad idea. From both the socialist left and the nationalist right the feeling seems to be that competition by businesspeople vying to give you what you want is the same thing as competition by violence. The feeling misleads. Marshall Field of Chicago formulated the motto of his department store as “Give the lady what she wants.” Giving the lady what she wants in a manner better than Goldblatt’s or Carson, Pirie, Scott is not an act of violence. It is an act of seduction, a form of love, admittedly a self-interested form. Harry Gordon Selfridge, trained in Chicago by Field, continued after 1909 the seduction in his London store, becoming rich by competing for the love of the ladies with his new business plan, driving down the price of glamour.10
In The Ladies’ Paradise (1882–1883), set in fictional 1864–1869, Zola makes a central character out of the perfected department store, a betterment dating from the 1850s, such as Le Bon Marché (“the good deal,” still on offer). The owner of the bettering store, M. Octave Mouret, is describing to a Baron Hartmann (= Haussmann) how he is driving the old-fashioned sellers of fabrics out of business. The implied author uses a cup of anticapitalism (from the author of Germinal), a dose of misogyny, a pinch of regional prejudice, and a soupçon of anti-Semitism. (The passage, however, is from the pen also of the defender of Captain Dreyfus; it is in free indirect style, and cannot be taken as a straightforward report on the opinions of Zola himself.) Mouret boasts, “Why, we can sell what we like when we know how to sell! There lies our triumph.” The implied author continues:
And with his southern spirit, he showed the new business at work. . . . From counter to counter the customer found herself . . . yielding to her longing for the useless and the pretty. . . . Right at the summit appeared the exploitation of woman. . . . It was woman that they were continually catching . . . yielding at first to reasonable purchases for the household, then tempted by their coquetry, then devoured. . . . Through the very gracefulness of his gallantry, Mouret thus allowed to appear the brutality of a Jew. . . .
“Once have the woman on your side,” whispered he to the baron, and laughing loudly, “you could sell the very world.”11
Unlike Balzac or Dickens or many other of the clerisy, Zola was not anticapitalist out of mere ignorance about how trade-tested betterment worked. In his laboriously gathered notes for The Ladies’ Paradise (he spent a month wandering in Le Bon Marché and its competitors overhearing conversations and interviewing its staff) he wrote, “A department store [smashes] all the small commerce of a neighborhood . . . but I would not weep for them, on the contrary: for I want to show the triumph of modern activity,” of which Zola in his rational optimism by 1882 approved. The local drapers, like the local hardware stores facing Menards and Home Depot, “are no longer of their age, too bad for them!”12 And good for the consumer.
The sociologist Georg Simmel—about the economy often more penetrating than his contemporary Max Weber—noted in 1908 that “usually, the poisonous, divisive, destructive effects of competition are stressed” (though it is creative destruction):
But, in addition. . . . competition compels the wooer who has a co-wooer, . . . to go out to the wooed, come close to him, establish ties with him. . . . To be sure, this often happens at the price of the competitor’s own dignity and of the objective value of his product [that is, by driving down the price]. . . . [Yet] it achieves what usually only love can do: the divination of the innermost wishes of the other, even before he himself becomes aware of them. . . . Modern competition is described as the fight of all against all, but at the same time it is the fight of all for all.13
The text above is an excerpt from Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World, the third volume of Deirdre McCloskey’s trilogy on the ethical and historical origins of modern prosperity.
Notes
See Measuring Worth.
Short 2012, especially his chart “Real GDP per Capita Percent Off High,” extrapolated into 2013; and for international comparisons, 2008–2012, http://data.worldbank.org/indicator/NY.GDP.PCAP.CD.
Hobsbawm 2011, p. 419 (the last page). I knew Hobsbawm a little when we were colleagues in the Department of History at Birkbeck College back in 1975–1976, and I have long admired his historical scholarship, without always agreeing with it.
Hobsbawm 2011, p. 417.
Mishra 2011, p. 12.
Reich 2014.
Reich 2014.
Ibsen 1877 (1965), p. 43.
Ibsen 1877 (1965), p. 117.
Postrel has written the book on glamour (2013).
Zola 1882–1883 (1992), pp. 68–70.
Quoted in Kristin Ross’s introduction to Zola 1882–1883 (1992), pp. xi–xii; the italics are Zola’s.
Simmel 1908 (1955), pp. 61–62; his italics.
Since 1776, there has been a 3,000% explosion in the average real income per person in the world.
Nothing earlier came remotely close.
It was caused not by the usual suspects of investment or exploitation, but by liberty inspiring a flowering of human creativity—in the arts and sciences, and in the economy.
Though Brazilians and many other Latin Americans are uneasily aware that their economies lag some, and sometimes a lot, the Great Enrichment is nonetheless evident everywhere from the Border to Tierra del Fuego, from Santiago in Chile to Recife in Brazil.
The Latin Lag can be overcome. Brazil, like much of Latin America, needs essential liberalism to do it.
Check out my new book, Liberdade: 100 Conversation Starters on Liberalism, Latin America, and Brazil
