Dear Reader: This is a crude draft as of August 15, 2018. The three asterisks or the bold

[Polanyist writer in Landes, Mokyr volume, contradicted in the same volume]

In view of plain evidence on the presence of hired workers from the earliest times, commonplace after 2100 BCE, and elaborate transactions in land from the earliest times recorded in clay, Polanyi’s hypothesis that ancient Sumer or the central and northern Mesopotamian states were entirely or even largely non-market societies has not paid off. So it was with all of his searches for marketless societies. Late in his life, claims Peter Drucker rather implausibly, Polanyi himself admitted so.⁶⁸ The word has gotten out to the more alert readers. Jean Baechler in a brilliant work of 1971 noted that “the Assyrian tablets dating from the twentieth and nineteenth centuries B.C. . . . reveal a complete commercial network run by genuine capitalists.”⁶⁹

$Chapter 4:

Yet He Was Right About Embeddedness

And yet the failure of Polanyi’s search for an earlier society entirely free of the damned economists’ and capitalists’ markets does not imply that his more fundamental point was mistaken. His point was that markets are, as the modern sociologists express it, “embedded,” which is merely to say that marketeers are people, too. It was a point that Adam Smith devoted his life to making, though many of his followers have managed to forget it. Smith fiercely opposed for example the characterization in Bernard Mandeville (and before him in Hobbes and before him in Machiavelli) of people as disembedded maximizers. Max Weber’s notion of verstehen, the understanding of meanings in societies, is just as “scientific” as causal analysis, and just as necessary for a wholly scientific sociology or history or economics. Across cultures and for most of human history, Polanyi argued, material exchange had meaning far beyond individual want-satisfaction. That’s right. Think of your taste in furniture for your pied a terre apartment in the lower west side in New York. Polanyi argued that trade affirmed and strengthened the social values of the larger community. Yes. Think of your gas grill for neighborhood cookouts in Wilson’s town, Illinois or your plasma TV for the Superbowl party in Riverside, California. Polanyi said that trade occurs with a meaning and in a manner that will not be fully understood by merely Samuelsonian economists (most whom in fact have never actually read Adam Smith, and to whom it is fresh news that Smith wrote also a book called The Theory of Moral Sentiments). To be sure.

In other words, Polanyi was in this matter on to something—I say so as an economist who was for decades hostile to such views, and hadn’t read Polanyi with much care, or even Adam Smith beyond a few snippets. I am still I think justified in my lofty disdain for the anti-market burden of Polanyi’s work, and especially the anti-market theme in the otherwise distinguished work of his followers like the great classicist Moses Finley or the great political scientist James C. Scott or the great economist Douglass North, or on a lower scholarly level the numerous Polanyi-influenced people who have not gotten beyond The Great Transformation. None of them, I declare, got the facts right. They all thought markets “arose” recently—though on the contrary markets had in fact already arisen anciently, in the twentieth and nineteenth centuries BCE, as Baechler put it, or for that matter in the fiftieth century BCE outside the caves of people in southeastern Africa speaking full language.

Yet Polanyi’s extra something, that markets are embedded, humbles even the proud economist. It is for example the main point of the present book. Headline: Longtime Anti-Polanyist Admits Polanyi Had Basic Idea Right. The economist Arjo Klamer has developed a context for markets rather similar to Polanyi’s, but free of Polanyi’s passionate and evidence-violating distaste for the market.⁷⁰ The agora, the marketplace, as Klamer puts it, where mutually advantageous trades take place, is prominent in all societies. But it is flanked of course by the private oikos, the household where children are raised, and the polis, the government where a monopoly of violence is exercised. Klamer points also to what he calls the Third Sphere—that is, a third public sphere additional to the public spheres of agora and polis, a sphere for a cultural commons in which “people realize social values like community, a sense of identity, solidarity, neighborhood, country, security, conviviality, friendship and so on.”⁷¹ Thus embedding, the barbeque, the Superbowl party, the Kaffeeklatsch in which women tell the story of their tribe: meaningfully. You could also call it, and Klamer does, the conversation of the culture. In other words, the Third Sphere depends (as the other spheres also do) on Klamer’s master concept, the “conversation”—the conversation about being an American male or a Dutch merchant or a person who values modern art or an executive developing trust in a business relationship. Akira Okazaki of Japan Airlines played cards endlessly with fisherman from Prince Edward Island in Canada during the 1970s to develop a backhaul business in bluefin-tuna-on-ice for the sushi market back home.⁷² Talk, talk, talk. Realize social values. And do a little business on the side.

Much discourse has power relations. Klamer is not supposing, nor am I, that conversations are always sweet. Habermas et alii.

The anthropologist Alan Page Fiske has developed still another balanced version of embeddedness, which can be partially matched to Polanyi’s and Klamer’s categories—as all of them can, I would point out, to the much older tradition in Europe of the seven principal virtues, or to the four sprouts of ethical character in Confucianism. In his Structures of Social Life Fiske speaks of "market pricing" as one of his four "elementary forms."  The other three—communal sharing [you get meat because you belong to Our Crowd], authority ranking [I am the chief, so I get more meat], equality matching [we're all in this together, so let's make the amounts of meat exactly equal for everyone]—do not involve prices, that is, exchange rates between two different things, meat for milk, arrow points for cave paintings. The society must somehow decide on the prices, “the ratios of exchange.” Fiske accepts, contrary to Polanyi, that in any society with markets—and as an economic historian I attest that most societies have them, and Fiske the anthropologist and Klamer the economist think so, too—the “market decides, governed by supply and demand.”⁷³ Fiske cleverly points out that the succession of four communal-authority-equality-market correspond to stages of human maturity up to about age 8, when kids finally get beyond item-by-item equality and accept exchange, your frog for my jackknife.⁷⁴ And even more cleverly he points out that the succession also correspond in the theory of scaling to categorical scales (in/out), ordinal (higher/lower), interval (same amounts), and ratio (“Archimedean ordered fields,” such as Fahrenheit temperature??? Is this correct? ).

Here is how the various groupings lie down together:

Fiske, Polanyi, Klamer, and the Virtues

Polanyi’s categories Klamer’s spheres Fiske’s forms: The question The seven principal virtues
Provisioning oikos Communal sharing “Who is ‘us’?” Love, Temperance
Redistribution polis Authority ranking “Who’s in charge?” Courage, Faith
Reciprocity not a perfect correspondence Equality ranking “Who or what Justice, Faith

with Klamer’s Third Sphere counts as equal? Klamer: (humility); Hope

Modern market agora Market pricing “What are the Prudence

ratios of exchange?”

***Source: Fiske, Structures (1991 [1993]), pp. 46-47; Polanyi 1944, DDDD; Klamer 2006; McCloskey 2006, p. PPP.
The market and its bourgeoisie is supported by much more than Prudence Only, though obviously that is its central virtue, just as Courage is the central virtue of an ideal aristocratic society, and Faith that of an ideal Christian one. But anyway the categories of Klamer, Fiske—and what I am calling the seven principal virtues (they date in this full form from Aquinas’s teacher Gregory the Great)—firmly reject the Polanyian notion that the market is hostile to all human values, and is a merely modern pathology. They do so by embedding economic life in human life generally, as in fact Aquinas and the other urban monks of the thirteenth century were busy doing—and Polanyi himself wanted to do, minus the detestably bourgeois bits. All actual bourgeois people have non-market relations in their lives, and the market itself is embedded. Only stick-figure parodies like Marx’s Mister Moneybags or Dickens’ Paul Dombey (until the very end of the book, when he realizes his humanity) or Sinclair Lewis’ George Babbitt (ditto) do not see the embedding. Nor sometimes in truth do actual bourgeois of our acquaintance notice the embedding of their lives, at least when they are misled by the rhetoric of Greed is Good, and He Who Dies With the Most Toys Wins. Perhaps the better word for the embedding is “entangling,” because the different spheres talk to each other and parody each other in endlessly complicated ways. Such is Homo loquens.

In The Purchase of Intimacy (DDDD) and earlier books the sociologist Viviana Zelizer has detailed the entanglement of market matters with the Third and other spheres. [Use her Economic Lives to exposit].

Anyway the bourgeois man belongs to a religion or tribe or clan, and always to a family and usually to the Third Sphere of his town. The economists Peter Boettke and Virgil Storr have recently written on such “sophisticated embeddedness,” and their master Ludwig von Mises wrote to a similar effect.⁷⁵ The non-market relations often radically alter the deals the bourgeois makes. The novelist of the modern bourgeoisie, Thomas Mann, speaks of the protagonist of Buddenbrooks (1901) as entangling the sacred and the profane: “Sometimes, entirely by accident, perhaps on a walk with the family, [Tom Buddenbrooks] would go into a mill for a chat with the miller, who would feel himself much honored by the visit; and quite en passant, in the best of moods, he could conclude a good bargain.”⁷⁶ The community of believing Muslims, the umma, was for hundreds of years after the death of the Prophet a minority in the various Arab conquests outside the Arabian peninsula itself.⁷⁷ You dealt differently with a fellow resident of the House of Islam—he paid less taxes, he could not be your slave, he could not charge you interest. Needless to say such theories became with use tattered around their edges, for example in the matter of charging interest or enslavement.⁷⁸ But the sacred mattered.

True, the market tends to be prudent, and on that count, if not on all counts, tends to be radically egalitarian in the matter of whom it deals with. A beggar’s dollar commands as much bread as a millionaire’s. In contrast to allocation by beauty or social class or Party membership or racial preference or bureaucratic edict, the baker doesn’t care to whom he sells the loaf. That feature of the market has recommended it to the egalitarians among true liberals in a long line from David Hume and Adam Smith to Milton Friedman and Robert Nozick and Deirdre McCloskey. Prudence is indeed as I said the central virtue of the agora, as courage is of the polis and love of the oikos. But, I repeat, the market can be influenced by motives other than prudence only. An elderly mother buys a second house for the warm months close to her children, but worries whether it is prudent, and quarrels with her beloved daughter over the mix of cash and affection in the matter. Love and prudence are entangled. Merchants and inventors and corporate executives are people, too. A bourgeois life, I say yet again, involves non-market realms, as does any human life. That is what Polanyi got right. But markets play their entangled part, and in a great city the markets and the bourgeoisie running them have always played a great part. That is what Polanyi got wrong.

&Chapter 5:

“Bourgeois” and “Capitalist”

are Fighting Words,

But Shouldn’t Be

The master words in our tale, “bourgeois” and “capitalist,” acquired their present meanings late, and largely from Marx and his followers.⁷⁹ One could object in the style of some Polanyans that to apply the terms to medieval Europe, much less to second-millennium BCE Mesopotamia, is anachronistic. I think not, not so long as the two are used colorlessly and scientifically and non-contextually. Most modern historians, such as Philip Curtin and Fernand Braudel, agree.

The word “bourgeois” is merely a French version of the Germanic root of words like “borough” and “Edinburgh,” that is, a townsman. A “Burger” in German is, like all similar Germanic-origin words borrowed even into the Romance languages, such as Italian borghese or French bourgeois, a free citizen of a chartered city.⁸⁰ That is, he voted and mattered, as his wife and his apprentices, not to speak of the laborers hired by the day, did not. Charter by charter, slowly, the voting townsman in the European Middle Ages became independent of the system of lord and peasant in the surrounding countryside. By the grace of the Emperor or the lord-bishop the townsman would remain independent of feudalism, and yet remain bourgeois—unless indeed he was corrupted into seeking feudal lordship for himself. In a wider society honoring only the noble he had to resist the temptation of vanity to commission a noble genealogy from the heralds, as for example bourgeois Shakespeare did, or to buy his nobility, as did the playwright NNNN Beaumarchais (Pierre-Augustin Caron, son of a clockmaker, at the turning point against aristocracy and in favor of Figaro), or to take on wholesale the values of an aristocracy, as the bourgeois-origin noblemen of Florence and Venice, and later even Switzerland, most spectacularly did.

So let’s be colorless in the definition. “Bourgeois,” says the Historical Thesaurus of the Oxford English Dictionary, is in fact the earliest English name still in use for what was earlier called the “meanalty” (as in “mean” in all its sense, before 1548), the moyen people (1481), back to the Old English adjective medstrang; and what was later called the middling folk (1692).⁸¹ You may if you wish use another word, yet keep the aspidistra flying: free denizen, freeman, townsman, citizen (“a man of trade, not a gentleman,” said Johnson’s Dictionary), cit (the term of contempt for a bourgeois, as early as 1644, and in Marvell 1674, “O ye addle-brain'd cits!”), burgess, middling sort (1692), privileged town-dweller (Elias 1939, p. 187), social classes I, II, and III (non-manual), National Readership Survey classes A, B, and C1, a member of the middle station, or of the middle class (the last a surprisingly late coinage, entering the language in 1745 with “electrify” and “turnpike road”). If “bourgeois” bothers you I nonetheless wish you would accept the tactic here of re-valuing a despised class. I employ it for its ethics and its politics, to undermine the automatic sneering against the way most of us live: “Daddy, you’re so bourgeois!” says the highly educated teenage daughter. [Abbreviated riff on such words, geuzenamen, from BV.] But please feel free to use any of these alternatives in place of the shameful word throughout the book. “Class X” if you wish.

Nothing in historical science turns on the word. The “bourgeoisie” (1707) in my usage for social science is merely what’s left over when you have subtracted from all the men the rent-earning aristocrats (with the gentry) and the tithe-earning clerics (sometimes with the secular clerisy, that is, the intellectuals and the bureaucrats) and the lower-wage-earning peasants and proletarians. Women in some cities could run businesses independently, especially if widowed, in which case they, like the abbesses and the queens in other spheres, are to be accorded in the accounting an honorary maledom, having the heart and stomach of a bourgeois, and a bourgeois of Holland, too. Notice that the other classes are defined here in a similarly colorless way, so that nothing is conveyed for example by the word “peasant” except “hard manual worker in agriculture”—not as the more colorful, if often as I have said factually mistaken “member of a closed corporate community” or “carrier of Gemeinschaft from the glorious Germanic past.” B = Total Men – A – C – P – P’. The hard manual/lower clerical/lower service workers, nickel and dimed, are the Ps, the peasants if in the country or proletarians if in the town. We can include or not include the Clerisy depending on our purpose. The Clerisy has mainly come from the Bourgeoisie itself, like Thomas Cromwell in some accounts, and Lenin for sure, and has always straddled. Antonio Gramsci noted in 1932 that “every social group. . . creates together with itself, organically, one or more strata of intellectuals.”⁸² Most of the jobs for intellectuals are paid for by the bourgeoisie, and the jobs are held by their sons, and lately by their daughters.

But another gigantic scholarly controversy looms. You can see that I don’t want to use “bourgeois” to mean “stupid, greedy, uncultivated,” as it has been commonly used by some scholars and many journalists since Rousseau and especially since the disappointed revolutions in Europe during 1848. That is, I do not want to prejudge the main question at issue in the series of books called “The Bourgeois Era,” which is whether the bourgeoisie and its markets and innovation have been good or bad for us, and whether they deserve to be encouraged, or to be regulated, or to be shot.

Writing in 1935 the great liberal Dutch historian Johan Huizinga noted that “in the nineteenth century, ‘bourgeois’ became the most pejorative term of all, particularly in the mouths of socialists and artists, and later even of fascists.” As Jules Renard put it, "The bourgeois man is someone who does not have my ideas. And what a devilish sound the word ‘capitalistic’ has assumed! So repulsive, in fact, that even those who are firmly convinced that personal and inherited property is the basis of all culture and that it is not within human power to replace the existing system of production with a better one, no longer dare to call themselves ‘capitalists’.” Or as Huizinga put it, “How useful it would be from time to time to set up all the most common political and cultural terms in a row for reappraisal and disinfection. . . . For instance, liberal would be restored to its original significance and freed of all the emotional overtones that a century of party conflict has attached to it, to stand once again for ‘worthy of a free man.’ And if bourgeois could be rid of all the negative associations with which envy and pride for that is what they were [as peasant and aristocrat] have endowed it, could it not once more refer to all the attributes of urban life?”⁸³

If one insists on using the word “bourgeois” as, say, Jean-Paul Sartre and Simone de Beauvoir used it, to mean the worst and most inauthentic types of town life in France c. 1950, then of course it is not going to be much of an intellectual feat to conclude that bourgeois life leads straight to. . . well. . . the worst and most inauthentic types of town life in France c. 1950. But I urge you to use the word not as a term of contempt, but scientifically and colorlessly, to mean “owners and managers in town, risk takers or word workers, large or small in their wealth.”

The intellectual historian John Pocock provides the key to why Rousseau was so vehement against the bourgeoisie and so insistent that it was not the body of citoyens. The word bourgeoisie meant in pre-Revolutionary France, and indeed in traditional Europe generally, a class having special rights, rights for example to appear in a favorable court in case of disputes.⁸⁴ Not everybody had such rights, because not everyone belonged to the corporation under the charter of the free Imperial city of Worms, say. The rights, Rousseau reckoned, were like the outrageous right enjoyed by the French aristocrats of Rousseau’s time to be entirely free of taxes. The very words “freedoms” or “liberties,” especially in those plural forms, connoted special rights granted by charter. The earliest occurrence in the OED is from the Pipe Roll of the 13^th year Henry II’s reign (1166-7), about the libertate of the burgenses, paying forty marks for the King’s charter. In other words, a "freeman of the City of London," enjoying the “liberty” of the place, was not merely some barrow boy. He was better than you and me. No wonder Rousseau, that early enemy of privilege (though of bourgeois origin himself), preferred a “citizen” to a “bourgeois.”

But for scientific purposes the bourgeoisie can be haute or petite, the international merchant financing hundreds of bales of China tea offloaded onto the East India Dock or the little shopkeeper in the High Street of Salisbury selling tea by the ounce. He can be a Robert Owen managing a big cotton textile mill in Lanarkshire in Scotland or a clothier named Simon Eyre (his last name is common Germanic “aristocratic, honorable”) managing a few apprentices and journeymen in fifteenth-century London. The word “bourgeoisie” is sometimes used for the haute alone (commonly so in French, for example), and you are welcome if you wish to follow that usage. God doesn’t supply human definitions. But the haute definition, again, prejudges an open scientific issue, that is, whether “capitalism” is something entirely different from provisioning in local markets. Let’s leave the issue open until we have some evidence. Let’s not close it with our choice of words.
* * * *

And I just used again, as I have freely so far, the magic word “capitalism.” I repeat: God won’t tell us how to use it. I propose, if God doesn’t mind, that we agree to use the word to mean simply “the use of markets, very widespread in Africa and Latin America 1800 CE—but not by any means unknown in China and Mesopotamia in 1800 BCE, and dating back, truth be known, to 50,000 BCE worldwide.” “Modern capitalism” is that unusually innovative and historically unique form that a market society at last took—the technical and organizational innovations, not merely the anciently common markets, or the class relations, or the size of enterprises. My proposed substitute for “capitalism”—merely “innovation”—I admit, does rather slant the case, though not in a way that violates the evidence, and certainly less than “capitalism” does. An increase in the per person ability to make goods and services valued in real terms as a factor of up to a 100 from 1800 to the present can certainly be called an “innovation” without violating the norms of language. “Capitalism” slants it much more, because it insists on the wholly erroneous conviction of the early economists (including Marx) that piling brick on brick is what made us rich. Innovation in a uniquely modern and frenetic scale is the new form of capitalism that started to take hold in seventeenth century Holland and eighteenth century England and early nineteenth century Belgium, France, and the United States. I’ll try to use “the Age of Innovation” to describe the modern world, not “the Age of Capital (-ism).” But if I slip into using Marx’s word I’ll mean just the same thing as Innovation.

There are good reasons for this likewise colorless usage. For one thing, there’s nothing automatic about growth in capital in “capitalism,” though since 1776 and especially since 1848 many people have believed there is. In particular a large scale has little to do with it. Big piles of capital, such as Spain’s from the New World, can be dissipated in aristocratic posturing financed by the center and by local elitism protected by high transport costs, as Spain’s were, despite an early start in philosophizing about laissez faire.⁸⁵ Little or non-existent piles, like young Andrew Carnegie’s or Steve Jobs’, can grow at rates far above normal, if in a time and place of innovation that permits and honors the bourgeoisie, a business civilization.

In particular there does not appear to be anything special about the use of “capital” in the so-called capitalist era. People used financial and real capital before capitalism, as for example in Mesopotamia. Profits were earned, as they were in the Athenian commercial empire. As I said, Polanyi to the contrary, markets flourished, as they did in medieval Europe. Fernand Braudel concluded his three-volume study of the matter in 1979 by noting that even in his own special sense of the linking of local markets by international and high-profit trade “capitalism” was ancient:

Throughout this book, I have argued that capitalism has been potentially visible since the dawn of history, and that it has developed and perpetuated itself down the ages. . . . It would however be a mistake to imagine capitalism as something that developed in a series of stages or leaps--from mercantile capitalism to industrial capitalism to finance capitalism, with some kind of regular progression from one phase to the next, with “true” capitalism appearing only at the late stage when it took over production, and the only permissible term for the early period being mercantile capitalism or even “pre-capitalism.” . . . The whole panoply of forms of capitalism--commercial, industrial, banking--was already employed in thirteenth century Florence, in seventeenth-century Amsterdam, in London before the eighteenth century.⁸⁶

Or, one could add, in Athens before the third century BCE or in Ur before the twentieth century BCE⁸⁷

And certainly no automatic machinery of accumulation got turned on in 1760, no “take-off into self-sustained growth” happened as a result of higher saving rates making more capital, contrary to what Walt Rostow somewhat mysteriously claimed in 1960, and now modern devisers of “growth theory” claim, too. High savings rates in Italy in the nineteenth century did not result in economic growth, until late.