July 28, 2018 Dear Reader

Part 3:

Material Causes Do Not Work

Chapter 19:

Modern Growth is a Factor of at Least Fifteen
One result of the bourgeois virtues and their new prestige was modern economic growth. Right through to the neoclassicals of the 1870s and into the mid-20^th century it was viewed as small, coming from specialization and trade. Smith, Mill, Marshall, even Keynes posited a little-growth backdrop, being falsified as they wrote.
Locke sank into a swoon;

The Garden died;

God took the spinning-jenny

Out of his side.

Yeats, “Fragments” (1928),

The Collected Poems of W. B. Yeats

(Macmillan, 1956), p. 211)

But Adam Smith wrote two books on bourgeois virtues. The Theory of Moral Sentiments makes one set of arguments, centered on temperance (or self command, as he calls it). The other and more famous book makes the arguments for Prudence in its own terms. Had capitalism not succeeded materially to the extent it in fact has we would not be discussing bourgeois virtues. They would still merit discussion, but they would not get it. Indeed, without the material success of capitalism the gigantic class of educated people who spurn it would instead be tilling the land and minding the kitchen. Consider then the prudential side of the bourgeois experience.

The heart of the matter is fifteen. Fifteen, or more, is the factor by which real income per head nowadays exceeds that around 1700 in Britain and in other countries that have experienced modern economic growth.³⁵⁸ You, oh average participant in the British economy, are fifteen times better supplied with food and clothing and housing and education than your remote ancestors. If your ancestors lived in Finland, it is more like a factor of 29, the average Finn in 1700 being not a great deal better off in material terms than the average African at the time. If your ancestors lived in the Netherlands it is only a factor of 10 or so, since in 1700 the Netherlands was the richest (and the most bourgeois) country in the world, 70 percent better off than the soon-to-be United Kingdom. If in Japan, the factor since 1700 is fully 35.³⁵⁹ If South Korea, the factor merely in the past half-century, since 1953, when income per head, despite access to some modern technology, was about what it had been in Europe 450 years before, is almost 18, crammed into a four decades instead of, as in the British case, stretched out over two centuries.

The statistics are not perfect. “Real income” means what the nation as a whole earns, abstracting from mere inflation—it’s the stuff we have, not the mere dollars. That’s why economists call it “real.” True, what is measured by stuff (which covers non-stuff stuff like education and entertainment) doesn’t include all of human happiness and doesn’t measure what it measures perfectly well. Stuff unimaginable in 1700 now crowds our lives, from air conditioning to anesthesia. That makes the factor of fifteen an understatement. And to mention the other direction of bias, the forests primeval and the hosts of golden daffodils are more rare---if on the other hand more cheaply reached by people with more leisure and travel funds to reach them. Nor is the income per head divided out perfectly fairly, then or now.

But the factor of increase could be ten or twelve or thirty-five, rather than fifteen, and leave the heart of the matter undisturbed. Conservatively measured, the average British person has about fifteen times more bread, books, transport, and innocent amusement than the average person had three centuries ago. Nor have the poor gotten poorer, as people are always saying. On the contrary, the equality of distribution has improved. The poorest have benefited the most from modern economic growth. No previous episode of enrichment approaches it—not China or Egypt in their, primes, not the glory of Greece or the grandeur of Rome.

The fact is in rough outline not controversial, though its magnitude is not something that people suspicious of capitalism know on their pulse. If you ask the average regular reader of The Nation how much better off in material ease the average American was in the time pf President Clinton as against the time of President Monroe he will come up with a figure such as, perhaps, 50 percent or even 200 percent—not, as is the case, 2100 percent, a factor of nearly 22, which is the American history.

The gigantic enrichment of all—the average person as well as the captain of industry—who allow capitalism and the bourgeois virtues to do their work is one argument in favor of them. It is so to speak a practical justification for the sin of being neither soldier nor saint. You may reply, and truly, that money isn’t everything. But as Samuel Johnson replied, “When I was running about this town a very poor fellow, I was a great arguer for the advantages of poverty; but I was, at the same time, very sorry to be poor.”³⁶⁰ Or you may ask the inhabitants of India (average per capita income in 1998 in 1990 dollars $1,746) or China ($3,117) whether they would have liked an American income at that time ($27,331). Or you can note the direction of permanent migration.

Britain was of course first. And Britain was also first in the study of economics, from the political arithmeticians of the seventeenth century through David Hume, Adam Smith, T. R. Malthus, David Ricardo, John Stuart Mill, and the British masters of the subject in the early 20^th century. Economics was for long a British and even disproportionately a Scottish subject; only after the Second World War did it become mainly American. What is extremely odd is that the British economists did not recognize the factor of fifteen as it was happening. The economists’ theories took useful account of little changes—a 5 per cent rise of income when cotton textiles grew or a 10 per cent fall when Napoleon ruled the Continent. But they did not notice that the change to be explained, 1780 - 1860, was not 10 percent but 100 per cent, and was on its way to that 1,400 per cent relative to 1700. Only recently has the inquiry into the nature and causes of the wealth of nations begun to recognize this astonishing oversight.

In 1954 Joseph Schumpeter was scornful of the classical economists for their failure to see what was happening. Malthus and Ricardo "lived at the threshold of the most spectacular economic development ever witnessed. . . . [yet] saw nothing but cramped economies, struggling with ever-decreasing success for their daily bread."³⁶¹ Their student John Stuart Mill even in 1870 "had no idea of what the capitalist engine was going to achieve" (same place).

To restrict attention to what Mill could have known, between 1780 and 1860, dates covering the classic industrial revolution, British national income per head doubled, though population also more than doubled. A much larger nation was much richer per head, early in the factor of fifteen. In his Essay on the Principle of Population (1798) the Anglican priest and economist T. R. Malthus predicted the opposite. Malthus told a great truth about earlier history. In medieval England during the centuries before 1348 a rising population had become poorer, and in Elizabethan England the impoverishment happened again: more Englishmen meant less to go around per head. But in late Georgian and early Victorian England a rising population became, richer, much richer. The fact was contrary to every prediction of the economists, those “dismal scientists,” in Carlyle’s phrase (who called them so, by the way, not at all on this account, as is commonly believed, but because they were opposed to a paternalistic slavery).³⁶² Most economists believed then as now that there’s no such thing as a free lunch. And therefore they saw nothing in prospect c. 1830 but misery for the working man and riches for the landowners.

The economists, in other words, did not notice that something entirely new was happening 1780 1860. Economists have been even in our time a little slow to grasp the extent of modern economic growth. As the demographer Anthony Wrigley put it a while ago, “the classical economists were not merely unconscious of changes going on about them that many now term an industrial revolution: they were in effect committed to a view of the nature of economics development that ruled it out as a possibility.”³⁶³ At the moment (say, 1848) that John Stuart Mill came to understand an economy in equilibrium the economy grew away from the equilibrium. It was as though an engineer had satisfied himself of the statics that kept a jumbo jet from collapsing as it sat humming on the tarmac, but failed to notice when the whole thing proceeded to launch into dynamic flight.

The mistake the economists made, believing they had a completed theory of the social laws of motion, was to overlook ingenuity. In 1787 the dissenting preacher, political radical, and insurance actuary Richard Price was therefore optimistic:

It is the nature of improvement to increase itself. . . . Nor are there, in this case, any limits beyond which knowledge and improvement cannot be carried. . . . Discoveries may, for aught we know, be made in future time which, like the discoveries of the mechanical arts and the mathematical sciences in past time, may exalt the powers of men and improve their state to a degree which will make future generations as much superior to the present as the present are to the past.

Price 1787

By 1830 an historian like Thomas Macaulay, respectful of the economics of his day but with a longer view, could see the event better than could most of his economist friends. He wrote:

If we were to prophesy that in the year 1930 a population of fifty million, better fed, clad, and lodged than the English of our time, will cover these islands, that Sussex and Huntingdonshire will be wealthier than the wealthiest parts of the West Riding of Yorkshire now are, . . that machines constructed on principles yet undiscovered will be in every house, . . many people would think us insane.³⁶⁴

Later in the 19^th century and especially in the socialist days of the 20^th century it was usual to deprecate such optimism, and to characterize Macaulay in particular as hopelessly “Whiggish” and progress-minded and pro capitalist. That he was, a bourgeois to the core. But Whiggish and progress-minded and pro-capitalist or not, he was exactly correct, even in his estimate of British population in 1930 (if one includes the recently separated Irish Republic, he was off by less than 2 per cent). The pessimists of his times, both economists and anti economists, were wrong, though as always fashionable—Schumpeter remarks in this connection that "pessimistic views about a thing always seem to the public mind to be more 'profound' than optimistic ones."³⁶⁵ The economic optimists of the 1830s and 1840s, as Schumpeter called them, Henry Carey in the United States and Friedrich List in Germany, with engineers like Charles Babbage in England, "saw vast potentialities looming in the near future."³⁶⁶ It makes one suspect the pessimists nowadays.

In the suggestive jargon of statistics, the startling rise of income 1700 or 1780 to the present can be called the “first moment,” the average change. There’s little historical disagreement about the first moment, at least in its order of magnitude. Macaulay was correct in prospect and so are the dozens of economic statisticians who have confirmed it in retrospect. Few doubt that by the third decade of Victoria’s rule the ordinary English person was better off than eighty years before, and was about to become still better off.³⁶⁷ And no one doubts that the average modern English person is vastly better off than her great-great-great- . . . [say it eight times, my dears] grandmother.

The second moment is the variability of the change, its pattern of acceleration and deceleration. Second moments are more difficult to measure. You can know the average height of British women more exactly than you can know its variability. As Simon Kuznets, the economist who pioneered the historical study of national income, once said, perhaps too gloomily, during our period “the data are not adequate for testing hypotheses concerning the time patterns of growth rates.”³⁶⁸ An error of plus or minus 20 per cent in measuring income c. 1700 may not matter much for the 1,400 percentage points of change to the present, but will matter a great deal in deciding whether working people in fact paid for the incessant French Wars of the eighteenth century. It’s how historians earn their living, quarreling about whether the first generation of workers in modern industry were exploited to get it, or whether late Victorian Britain failed economically, or whether socialism when it came to Britain finally in 1946 was a good idea or a bad one. But the point is: waves there were, but the flood was unstoppable.

When did it start? Various emblematic dates have been proposed—the famous day and year 9 March 1776, when Adam Smith’s The Nature and Causes of the Wealth of Nations provided a rhetoric for the age; the five months in 1769 when Watt took out a patent on the separate condenser in his steam engine and Arkwright took out a patent on the water frame for spinning cotton; or 1 January 1760, when the furnaces at Carron Ironworks, Stirlingshire, were lit. It sometimes seems that each economic historian has a favorite date, and a story to correspond. Elizabeth Carus Wilson spoke of “an industrial revolution of the thirteenth century”: she found that the fulling mill (that is, a machine for thickening wool cloth) was “due to scientific discoveries and changes in technique” and “was destined to alter the face of medieval England.”³⁶⁹ Looking at the matter from 1907, the American historian Adams could see a “movement from unity into multiplicity, between 1200 and 1900, . . . unbroken in sequence, and rapid in acceleration” (1907: 498). The economic historians Eric Jones and Joel Mokyr have taken a similar long view of European exceptionalism.³⁷⁰ The most widely accepted period for It, whatever exactly It was that led to the factor of fifteen, is still the late eighteenth century, and recent work on China has suggested that until 1800 there was not much exceptional about Europe.³⁷¹ New quantifiers in the 1980s concluded that the “take off” in Britain was exaggerated by the pioneering generation of quantifiers.³⁷² Growth could be faster for the late comers. Sweden and Switzerland could adopt what Britain and Belgium had invented. But the first industrial nation, rather unsurprisingly, was slow in coming. A hard coming we had of it.

If the onset of modern economic growth fed on itself, then its start could be a trivial accident. Yet one might wonder why then it did not happen before. “Sensitive dependence on initial conditions” is the technical term for some “nonlinear” models---a piece of so called “chaos theory.” But history under such circumstances becomes untellable.³⁷³ Joel Mokyr identifies another pitfall in storytelling (1985c: 44): rummaging among the possible acorns from which the great oak of the industrial revolution grew “is a bit like studying the history of Jewish dissenters between 50 B.C. and 50 A.D. What we are looking at is the inception of something which was at first insignificant and even bizarre,” though “destined to change the life of every man and woman in the West.”

Anyway it happened slowly, at a stately pace. Britain was no factory in 1860. Even cotton textiles, growing apace, could not absorb all the many workers in agriculture. John Clapham made the point in 1926, observing that still in 1850 half the population was in employment untouched by “the first industrial revolution.” As Maxine Berg and Patricia Hudson have noted, some technologically stagnant sectors (building, say) saw large expansion, some progressive sectors little or none (paper); some industries working in large scale units did little to change their techniques (naval shipyards early in the period), some in tiny firms were brilliant innovators (the metal trades).³⁷⁴ Big factories in the famous sectors were not the whole of the factor of fifteen. And steam power in Britain increased by a factor of fully ten from 1870 to 1907, long after the dark satanic mills first enter British consciousness.³⁷⁵ Perhaps, to get back to the puzzle, that is why it was largely invisible to economists and some others watching it—though not to many possessed of common sense and eyes to see. Macaulay wrote in 1830, “A single breaker may recede; but the tide is evidently coming in.”³⁷⁶ Arthur Hugh Clough did not have praise for capitalism in mind—though the son of a cotton manufacturer, he was extremely dubious about the whole thing, like most Romantics ---but his verse captures it well:

For while the tired waves, vainly breaking,

Seem here no painful inch to gain,

Far back, through creeks and inlets making,

Comes silent, flooding in, the main.

Productivity change was fast in textiles, 1780 1860. A piece of cotton cloth that was sold in the 1780s for 70 or 80 shillings (two months’ wages for a workingman) was by the 1850s selling for around 5 shillings (a few days’ wages), on its way to a few minutes’ wages by now. In the process cotton cloth moved from fashionable to commonplace, in the manner a century and a half later of nylon (first called “artificial silk”) and other synthetics. A little of the decline in the price of finished cotton cloth was attributable to declines in the prices of raw cotton itself after the introduction of the cotton gin (invented in 1793) and the resulting expansion of cotton plantations in America. But in other ways the price of inputs rose: by 1860, for example, wages of cotton workers had risen markedly. Why then did the price of manufactured cloth fall? It fell because organization and machinery were massively improved in cotton textiles, 1780 to 1860.

The case is typical in showing more about the second moment than one might at first think knowable. It shows for example that productivity growth slowed in cotton, because power weaving, which came late, was apparently less important than power carding of the raw wool and power spinning of the wool into yarn. And it shows that invention is not the same thing as innovation (cf. Chapman and Butt 1988). The heroic age of invention ended by the late 1780s, by which time Hargreaves, Arkwright, Kay, Crompton and Cartwright had flourished. But the inventions saw steady improvement later—one of the main findings of quantitative economic history is that the pattern is typical, invention being only the first step (the same is true, for example, of railways, which improved in scores of small ways right into the twentieth century, with large falls in real costs). The real cost of cotton textiles had halved by the end of the eighteenth century. But it was to halve twice more by 1860.

Few sectors were as progressive as cotton textiles. Productivity in iron grew a half to a third as fast. Productivity is not the same as production. The production of iron increased enormously in Britain 1780 to 1860—by a factor of 56, in fact, or at 5.5 per cent per year (Davies and Pollard 1988; “small’ growth rates,” as you might think 5.5 is, make for big factors if allowed to run on: 5.5 per cent is explosive industrial growth by historical standards, a doubling every 72/5.5 = 13.2 years; thus South Korea since 1953).

The expanding British industry crowded out the iron imported from Sweden and proceeded to make Britain the world’s forge. But the point is that it did so mainly by applying a somewhat improved technology (puddling) to a much wider field, not by the spectacular and continuous falls in cost that cotton witnessed. The cost of inputs to iron (mainly coal) changed little from 1780 to 1860; during the same span the price of the output (wrought iron) fell from £20 a ton to £8 a ton. The fall in real costs, again, is a measure of productivity change. So productivity in wrought iron making increased by a factor of about 2.5, an admirable factor of change. Yet over the same years the productivity in cotton textiles, we have seen, increased by a factor of 7.7.

Other textiles imitated the innovations in cotton (Hudson 1986), significantly cheapening their products, though less rapidly than the master industry of the age: as against cotton’s 2.6 per cent productivity growth per year, worsteds (wool cloth spun into a thin yarn and woven flat, with no nap to the cloth) experienced 1.8 per cent and woolens 0.9 per cent (McCloskey 1981b: 114). Coastal and foreign shipping experienced rates of productivity growth similar to those in cotton textiles (some 2.3 per cent per year as compared with 2.6 in cotton). The figure is derived from North’s estimates for transatlantic shipping during the period, rising to 3.3 per cent per year 1814 60 (1968). Again the “low” percentage is in fact large in its cumulative effects: freights and passenger fares fell like a stone, from an index of around 200 after the Napoleonic Wars to 40 in the 1850s. Canals and railways experienced productivity growth of about 1.3 per cent (Hawke 1970). Transportation was therefore among the more notably progressive parts of the economy.

But many other sectors, like iron as we have seen, experienced slower productivity growth. In agriculture the productivity change was slower still, dragging down the productivity of the economy as a whole; taking one year with another 1780 1860, agriculture was still nearly a third of national income. Productivity change varied radically from one part of the economy to the other, as it has continued to do, one sector taking the lead in driving up the national productivity while another settles into a routine of fixed technique, computers taking over the lead from chemicals and electricity. Agriculture itself, for example, came to have rapid productivity change in the age of the reaper and the steam tractor, and still more in the age of genetic engineering in the twentieth century. But from 1780 to 1860 textiles and transport were the leaders.
Chapter 20:

It was Not Thrift
Why? One prominent explanation is thrift. It does not work.

Schumpeter defines capitalism variously at various times. His definition in Business Cycles (1939) is "that form of private property economy in which innovations are carried out by borrowed money" (I, p. 223). In other words, "we shall date capitalism as far back as the element of credit creation," by which he means fractional reserve banking---in effect any sort of money storage in which the storer is not liable to keep all the money on hand all the time (p. 224). He notes that such institutions existed in the Mediterranean before they existed in Northern Europe, and so he would be unsurprised to find business cycles then. Capitalism on this definition forms part of a private enterprise economy, but there can be private enterprise without credit and therefore without "capitalism." The use of thrift, not its total amount, is what is at stake.

The word "thrift" in English is still used as late as John Bunyan to mean simply "wealth" or "profit," deriving from the verb "thrive" as "gift" from "give" and "drift" from "drive." But its sense 3 in the Oxford English Dictionary is our modern one, dating significantly from the 16^th century: "food is never found to be so pleasant . . . as when . . . thrift has pinched afore" (1553); "so I will if none of my sons be thrifty" (1526).

The modern "thrift," sense 3, can be viewed as a mix of the cardinal virtues of temperance and of prudence in things economic. Temperance is the cardinal virtue of self-command facing temptation. Lead me not into temptation. Prudence, by contrast, is the cardinal virtue of practical wisdom. It is reason, know-how, savoir faire, rationality. Prudence lacking temperance does not in fact do what it knows it should thriftily do. Temperance lacking prudence does not know what to do. A prudent housewife in the "Ladder to Thrift," as the English agricultural rhymester Thomas Tusser put it in 1580, "makes provision skillfully."³⁷⁷ Without being full of skill, that is, prudent, she does not know how to be thrifty in saving tallow for candles or laying up salt mutton for Christmas.

Prudent temperance in a sense has no history, in that it is ever present in human society. The Hebrew bible, for example, speaks of thrift, though not very often, usually associated with diligence: "The sluggard will not plough in the autumn by reason of the cold; therefore shall he beg in harvest, and have nothing"; "Seest thou a man diligent in his business? He shall stand before kings" (Proverbs 20:4; 22:29). Jesus of Nazareth and his tradition used parables of thrift to point to another world, though again the parables of thrift are balanced by parables of liberality, such as changing water into wine to keep the party going. "Eat and drink," advises the Koran, "but do not be wasteful, for God does not like the prodigals" (7:31). Still again, thrift is not a major theme of the Koran.

Of course other faiths than the Abrahamic ones admire on occasion a wise thrift. The Four Noble Truths of Buddhism, to be sure, recommend that life's sorrow can be dissolved by the ending of desire, in which case advice to be thrifty would lack point. Be "thrifty" with your daily bread? Buddhism is similar in this respect to Greek and Roman stoicism, which advocated devaluing this world's lot, an inspiration to Christian saints of thriftiness early and late. But the "Admonition to Singāla" is in the entire Buddhist canon "the longest single passage . . . devoted to lay morality."³⁷⁸ Buddha promises the businessman that he will “make money like a bee” if he is wise and moral:

Such a man makes his pile

As an anthill, gradually.

. . . . He should divide

His money in four parts;

On one part he should live,

With two expand his trade,

And the fourth he should save

Against a rainy day.

The rate of savings recommended is fully 75 percent— with no allowance for charity, which made Buddhist commentators on the text uneasy. From the huts of the Aborigines to the lofts of Chicago, humans need to live within their incomes, being by their own lights "thrifty."

In England the thirteenth-century writers of advice books to Norman-English landowners start with thrift and go on to the details of husbandry. The third paragraph of The Husbandry by Walter of Henley, after a bow in the second paragraph to the passion of Jesus, prays "that according to what your lands be worth yearly . . . you order your life, and no higher at all."³⁷⁹ And then in the same vein for five more paragraphs. The anonymous Seneschaucy, written like Walter in medieval French in the late 13^th century, instructs the lord's chief steward "to see that there is no extravagance. . . on any manor . . . . and to reduce all unnecessary expenditure. . . which shows no profit. . . . About this it is said: foolish spending brings no gain."³⁸⁰ The passage deprecates "the practices without prudence or reason" (lez maners saunz pru e reyson). So much for a rise of prudence, reason, rationality, and thrift in, say, the 16^th century. Prudent temperance rose with Adam and Eve.

The prehistory of thrift, in other words, extends back to the Garden of Eden. It is laid down in our genes. A proto-man who could not gain weight readily in feast times would suffer in famine. Therefore his descendent in a prosperous modern society has a weight problem. Prudent temperance does not require a stoic or monkish abstemiousness. A ploughman burning 3000 calories a day had better get them somehow. One should be thrifty in eating, says Tusser, but not to the point of denying our prudent human solidarity:

Each day to be feasted—what husbandry worse!

Each day for to feast is as ill for the purse.

Yet measurely feasting with neighbors among

Shall make thee beloved, and live the more long.³⁸¹

The average English and American-English person from the 16^th through the 18^th century, then, surely practiced thrift. But this did not distinguish her from the average English or American-English person before or after, or for that matter from the average person anywhere since Eden. “'My other piece of advice, Copperfield,' said Mr. Micawber, 'you know. Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.' To make his example the more impressive, Mr. Micawber drank a glass of punch with an air of great enjoyment and satisfaction, and whistled the College Hornpipe.   I did not fail to assure him that I would store these precepts in my mind."³⁸²

Thrift in the sense of spending exactly what one earns is forced by accounting. Not having manna from heaven or an outside Santa Claus, the world must get along on what it gets. The world's income must equal to the last sixpence the world's expenditure, "expenditure" understood to include investment goods. So too Mr. Micawber. If he spends more than he earns he must depend on something turning up, that is, a loan or gift or inheritance. He draws down his credit. In the meantime his diminishing balance sheet—what he owns and owes—pays to the last sixpence for his punch and his house rent.

Thrift in the sense of earning much more than one spends, and thereby accumulating assets in that balance sheet, is again a matter of accounting. You must expend everything you earn somehow, on bread or bonds house-building or whatever. But of course you can expend foolishly or well, on bombs or on college educations. If you refrain from silly consumption of Fritos and other immediate consumption goods, "abstaining from consumption" in the economist's useful way of putting it, you necessarily save, that is, add to your hoard buried in the back garden or to a bank account or to your investments in educations or roadways or battleships.

There is nothing modern, I repeat, about such accounting. It comes with life and the first law of thermodynamics, in the Kalahari or in Kansas City. In particular the pre-industrial European world I am here contrasting with modern times needed urgently to abstain from consumption, "consumption" understood as immediate eating and other immediate expenditures that are not investments in a future. Yields of rye or barley or wheat per unit of seed planted in medieval and early modern agriculture were only 3 or 4—they are over 100 now. The low yields forced Europeans to refrain from a great deal of consumption if they did not want next year to starve. One quarter to one third of the grain crop went back into the ground as seed in the fall or the spring, to be harvested the next September. In an economy in which the grain crop was perhaps 1/2 of total income, that portion alone of medieval saving implied an aggregate, social saving rate of upwards of 12 percent. The usual rate of saving in modern industrial economies is seldom above 10 percent.

Furthermore, trade in grain was restricted in climatic extent, so grain storage even for consumption in people's mouths, and not just for investment in next year's seed, was also high by modern standards. Grain storage amounted to another desperate form of saving, crowding out more modern forms.³⁸³ In recent times if the grain crop does poorly in America the world market easily supplies the difference from a different clime. In the late Middle Ages grain did flow from the Midlands to London or from Burgundy to Paris. But it began to flow to Western Europe in large amounts from as far away as Poland only gradually in the 16^th and 17^th century, through the efforts of thrifty Dutch merchants and shipbuilders, and only in the 19^th century from as different a climate as Ukraine or, finally, from North and South America or even Australia. Until the 18^th century therefore the grain crops here and there in the relevant and narrow market area tended to fail together. The potato famine of the 1840s was the last replay of a sort of undiversified catastrophe that was commonplace in the 1540s and more so in the 1340s. In such circumstances you stored and saved, in gigantic percentages of current income, or you starved.

These scarcities were broken in the New World of British Americans. They ate better than their Old-World cousins within a generation of the first settlements.³⁸⁴ That was not hard: their English cousins were passing then through the worst times for the workingman since the early 14^th century.³⁸⁵ Plentiful land, at any rate out on the literal frontier, made it unnecessary to save so much in grain, and freed the sum for other investments. Yet wait: although the North American English became even as a colony well off by British standards, British North America was by no means the home of the industrial revolution. It was too small, too tempted by agriculture, too far away. The northeast of the United States, like southern Belgium and northern France, was to become a close follower, in the 1790s and 1800s. But the leaders, from the 1760s, were northwest England and lowland Scotland, lands of grindingly necessary thrift.

The point is that there is no aggregate increase in thrifty savings to "explain" the modern world. Thrifty saving is not peculiar to capitalism, and has nothing to do with an alleged rise of prudence or greed or anything else in the childhood of the modern world. Actual saving was high before modern times, and did not change much with modern capitalism.

So too actual greed. In characterizing capitalism in 1867 as “solely the restless stirring for gain, this absolute desire for enrichment, this passionate hunt for value” Marx was quoting MacCulloch’s Principles of Political Economy (1830): “This inextinguishable passion for gain, the auri sacra fames [‘for gold the infamous hunger’], will always lead capitalists” (quoted in Capital, Vol. I, p. 171n2). In 1904 Max Weber, writing when the German Romantic notion that medieval society was more sweet and egalitarian than modern capitalism was beginning to crumble in the face of historical research, thundered against such an idea that greed is "in the least identical with capitalism, and still less with its spirit." "It should be taught in the kindergarten of cultural history that this naïve idea of capitalism must be given up once and for all." In his General Economic History (1923) he writes, "the notion that our rationalistic and capitalistic age is characterized by a stronger economic interest than other periods is childish."³⁸⁶ Auri sacra fames is from The Aeneid, Book III, line 57, not from Benjamin Franklin or Advertising Age. The lust for gold "has been common to all sorts and conditions of men at all times and in all countries of the earth."³⁸⁷

And so too actual luxury, the opposite of thrift. "Depend on it, sir," said Samuel Johnson in 1778, "every state of society is as luxurious as it can be. Men always take the best they can get," in lace or food or educations.³⁸⁸ Marx noted cannily that "when a certain stage of development has been reached, a conventional degree of prodigality, which is also an exhibition of wealth, and consequently a source of credit, becomes a business necessity. . . . Luxury enters into capital's expenses of representation."³⁸⁹ True. Otherwise it would be hard to explain the high quality of lace on the collars of black-clad Protestant Dutch merchants in paintings of the 17^th century, or indeed the market for the expensive oil paintings in their hundreds of thousands representing the merchants and their world.

Readers of the magnificent historical Chapters 25-31 in Capital, at any rate those who credit what Marx says there, will find all this hard to believe. Marx's eloquence persuades them that someone writing in 1867, very early in the professionalization of history, nonetheless got the essence of the history right. The history Marx thought he perceived went with his logic that capitalism, drawing on an anti-commercial theme as old as commerce, just is the same thing as greed. Greed is the engine that powers his "equation" (as he imagined it to be) of M  K  M'. That is, money starting as an amount M gets invested, through thriftiness, in Kapital, which is intrinsically exploitative, generating surplus value appropriated by the capitalist to arrive at a new, higher amount of money, M'. And then again and again and again, fix this when all’s set to get the quotation right "endlessly."³⁹⁰ The "endless"/"never-ending" word, by the way, which was echoed during the Dark Ages in rural monkish economic theory and still resonates in Marx-influenced notions of capitalism, originated twenty-four centuries before Marx in the Greek aristocratic disdain for commerce. People of business, declared aristocratic Plato and aristocrat-loving Aristotle, are motivated by apeiron, unlimited, greed.

For all Marx's brilliance—anyone who does not think he was the greatest social scientist of the 19^th century has not read enough Marx—he got the history almost entirely wrong. Whatever the value of his theories as a way of asking historical questions, almost no important historical fact can you rely on Marx. This is not some special Marxian fault. The same is true of the other practitioners of merely philosophical history before the facts started arriving in bulk at last, during the 20^th century: Hume, Rousseau, Smith, Hegel, Tönnies, Durkheim, and even, a late instance, on many points Max Weber, and still later Karl Polanyi.³⁹¹ The theory of capitalism that educated people still carry around in their heads springs from Marx, St. Benedict, and Aristotle, in the rhetoric of these eloquent men. It is economically mistaken. And the point here is that it is historically mistaken as well.

The myth of Kapitalismus is that thrift among the bourgeoisie consists precisely in the absence of a purpose other than accumulation for its own sake, solely the restless stirring for gain. Thus the late Robert Heilbroner: "capitalism has been an expansive system from its earliest days, a system whose driving force has been the effort to accumulate ever larger amounts of capital itself."³⁹² Thus Weber, too, in 1904: "the summum bonum of this ethic [is] the earning of more and more money. . . . Acquisition . . . [is] the ultimate purpose of life."³⁹³ Weber here, contrary to the thundering just quoted, retails Marx, money-to-capital-to-money. "Accumulate, accumulate!" declared the man himself in 1867, "This is Moses and the prophets!"³⁹⁴

At the level of individuals there has never been any evidence for the historical change that is supposed to characterize modern forms of greedy thrift. The chief evidence that Weber gives in The Protestant Ethic and the Spirit of Capitalism is a humorless reading of Benjamin Franklin's Autobiography. Like many other readers of Franklin, especially non-American readers, Weber took the checklist of virtues a young man used to discipline himself as the man's essence. He failed to note Franklin's actual behavior as a loving and passionate friend and patriot, or his amused ironies about his young self.³⁹⁵ Weber modified the pointlessness of the Marxian impulse to accumulate, accumulate by claiming that "this philosophy of avarice" depends on a transcendent "duty of the individual toward the increase of his capital," becoming a "worldly asceticism."³⁹⁶ But his Franklin, who after all had lost most other traces of his ancestors' Calvinism, whether spiritual or worldly, quite by contrast with his abstemious young friend and enemy John Adams, for example, abandoned at age 43 "endless" accumulation and devoted the rest of his long life to science and public purposes. So much for "ever larger amounts of capital itself" or a "duty toward the increase of capital" or "accumulate, accumulate."

Many fine scholars have taken in with their mother's milk a belief that modern life is unusually devoted to gain, and that thrift is therefore something recent, dirty, and bourgeois, though lamentably profitable. "The unlimited hope for gain in the market," writes the otherwise admirable political theorist Joan Tronto, "would teach people an unworkable premise for moral conduct, since the very nature of morality seems to dictate that desires must be limited by the need to coexist with others."³⁹⁷ But running a business, unlike professing at a university, would teach anyone that gain is limited. Dealing in a market, unlike sitting in the Reading Room of the British Museum writing burning phrases against the market, would teach that desires must be limited by the need to coexist with others. The tuition of a market society in scarcity, other-regarding, and liberal values works as an ethical school. As the historian Thomas Haskell put it in 1985, "contrary to romantic folklore, the marketplace is not a Hobbesian war of all against all. Many holds are barred. Success ordinarily requires not only pugnacity and shrewdness but also restraint," that temperance.³⁹⁸

Even so fine an historian as Alan Macfarlane believes the Aristotelian/Marxist/Weberian lore: "the ethic of endless accumulation," he writes, "as an end and not a means, is the central peculiarity of capitalism."³⁹⁹ If it were, the miser would be a strictly modern figure, and not proverbial in every literature in the world. "In this consists the difference between the character of a miser," wrote Adam Smith in 1759, "and that of a [thrifty] person of exact economy and assiduity. The one is anxious about small matters for their own sake; the other attends to them only in consequence of the scheme of life which he has laid down for himself."⁴⁰⁰ Accumulate, accumulate is not a "scheme of life" in the ethical sense that Smith had in mind.

At the level of the society as a whole there is "unlimited" accumulation, at any rate if war and rapine and rats do not intervene. Corporations, having legally infinite lives---though in truth one in ten die every year---are to be sure sites of accumulation. The individual economic molecules who make up the river of capitalism may not always want to accumulate beyond age 43, but the river as a whole, it is said, keeps rolling along. True, and to our good. The machines and improved acreage and splendid buildings and so forth inherited from an accumulating past are good for us now.

But there is no historical case for "accumulation, accumulation" being peculiar to capitalism. Old buildings are not novelties. Infinitely lived institutions like families or churches or royal lineages existed before modern capitalism, and were themselves, too, sites of accumulation. Thus improved acreage spread up the hillsides under the pressure of population before the Black Death. Thus the medieval cathedral were raised over centuries. Thus Oxford colleges were built, and endowed in real estate, itself accumulated investment in drains and fencing and barns.

"The bourgeoisie," wrote Marx and Engels in 1848, "during its rule of scarce one hundred years has created more massive and colossal productive forces than have all the preceding generations together."⁴⁰¹ It was a prescient remark. But the classical economists from Adam Smith to Marx were writing before the upsurge in real wages of British and Belgian and American working people in the last third of the 19^th century, and long, long before the explosion of world income in the 20^th century. They imagined a moderate rise of income per person, perhaps at the most by a factor of two or three, such as might conceivably be achieved by Scotland's highlands becoming similar to capital-rich Holland (Smith's view) or by manufacturers in Manchester stealing savings from their workers (Marx's view) or by the savings generated from globalization being invested in European factories (John Stuart Mill's view). But the classical economists were mistaken.

The prehistory of thrift was revolutionized around 1960 when economists and economic historians realized with a jolt that thriftiness and savings could not explain the industrial revolution. The economists such as Solow and Abramowitz discovered that only a smallish fraction even of recent economic growth can be explained by thrift and accumulation. At the same time the economic historians were bringing the news that in Britain the rise in savings was too small to explain much a all. Simon Kuznets and later Charles Feinstein provided the rigorous accounting of the fact. It was anticipated in the 1950s and 1960s by numerous British economic historians, in detailed studies of banking and manufacturing. Peter Mathias summarized the case in 1973: "considerable revaluation has recently occurred in assessing the role of capital." ⁴⁰² That is no overstatement.

The classical and mistaken view overturned by the economic historians of the 1950s and 1960s is that thrift implies saving which implies capital accumulation which implies modern economic growth. It lingered in a few works such as Walt Rostow's The Stages of Economic Growth (1960), and most unhappily in what William Easterly (2001) has called the "capital fundamentalism" of foreign aid, 1950 to the present. The belief was that if we give Ghana over several decades large amounts of savings, leading to massive capital investments in artificial lakes and Swiss bank accounts, and give Communist China not a penny, Ghana will prosper and Communist China will languish.⁴⁰³
Chapter 21:

Nor Was It Original Accumulation,

or the Protestant Ethic

We are back to what actually happened 1800-2000—and, once it was fully recognized, what killed the notion among most economists and economic historians that thrifty saving was the way to massive and colossal productive forces—a rise of income per person by a factor of, let us say, 15. Again: what then explains it?

New thoughts, what the economic historian Joel Mokyr calls the "industrial enlightenment." It was ideas of steam engines and light bulbs and computers that made Northwestern Europe and then much of the rest of the world rich, not new accumulations from saving.⁴⁰⁴ Accumulation of physical capital is not the heart of modern capitalism, as economic historians have understood since their researches of the 1950s and 1960s and as economists have understood since the calculations by Abramowitz and Solow in the 1950s, and before them the calculations by G. T. Jones in 1933.⁴⁰⁵ Its heart is innovation.

Of course, if you think up a waterpower-driven spinning machine you need some savings to bring the thought to fruition. But another of the discoveries of the 1960s by economic historians was that the savings required in England's heroic age of mechanization were modest indeed, nothing like the massive "original accumulation of capital" that Marxist theory posits. Early cotton factories were not capital-intensive. The source of the industrial investment required was short-term loans on inventories and loans from relatives---not savings ripped in great chunks from other parts of the economy.

The classical and Marxist idea that capital begets capital, "endlessly," is hard to shake. It has recently revived a little even among economists, in the form of so-called "new growth theory," an attempt to give M  K  M' a mathematically spiffed-up form. The trouble is that, as I have noted, savings and urbanization and state power to expropriate and the other physical-capital accumulations that are supposed to explain modern economic growth have existed on a large scale since the Sumerians. Yet modern economic growth, that wholly unprecedented factor in the high teens, is a phenomenon of the past two centuries alone. Something happened in the 18^th century that prepared for a temporary but shocking "great divergence" of the European economies from those of the rest of the world.⁴⁰⁶

The marxisant analysis is that what happened is the "original accumulation of capital." The original or primitive accumulation was according to Marx the seed corn, so to speak, or better the starter in the sourdough, in the growth of capital. We're back to thrift or savings, not by historical fact but by blackboard logic. "The whole movement," Marx reasoned, "seems to turn on a vicious circle, out of which we can only get by supposing a primitive accumulation, . . . an accumulation not the result of the capitalist mode of production, but its starting point."⁴⁰⁷ As the economic historian Alexander Gerschenkron put it in 1957, with characteristic sarcasm, it is "an accumulation of capital continuing over long historical periods—over several centuries—until one day the tocsin of the industrial revolution was to summon it to the battlefields of factory construction."⁴⁰⁸

Looking at the thrift necessary for an accumulation in a cheerful way, the starting point was a supposed rise of thriftiness among Dutch or especially English Puritans. Marx characterized such tales as praise for "that queer saint, that knight of the woeful countenance, the capitalist 'abstainer'."⁴⁰⁹ We can join him for a moment in disbelieving the optimistic tale, noting further, and contrary to his own pessimistic tale, as I have said, that abstention is universal. Saving rates in Catholic Italy or for that matter Confucian China were not much lower, if lower at all, than in Calvinist Massachusetts or Lutheran Germany. According to recent calculations, in fact, British investment in physical capital as a share of national income was strikingly below the European norm—only 4% in 1700, as against a norm of 11%, 6% as against 12% in 1760, and 8% against over 12% in 1800.⁴¹⁰ Britain's investment, though rising before and then during the industrial revolution, showed less, not more, abstemiousness than in the less advanced countries around it. The evidence suggests, in other words, that saving depends on investment, not the other way around. When in 19^th century the rest of Europe started to follow Britain into industrialization, its savings rates rose, too. And its markedly higher rates during the 18^th century did not cause it then to awaken from its medieval slumbers. Saving was not the constraint. As a great medieval economic historian, M. M. Postan, put it, it was not "the poor potential for saving" but the "extremely limited" character in pre-19^th-century Europe of "opportunities for productive investment."⁴¹¹

Marx's notion in Capital, on the contrary, was that an original accumulation was a sine qua non, and that there was no saintliness about it. The original accumulation was necessary because (Marx averred, wrongly) masses of savings were necessary, and "conquest, enslavement, robbery, murder, briefly, force, play the greater part."⁴¹² He instanced enclosure in England during the 16th century (which has been overturned by historical findings that such enclosure was minor) and in the 18th (which has been overturned by findings that the labor driven off the land was a tiny source of the industrial proletariat, and mainly in the south and east where in fact little industry was going on). He gave a large part then to regulation of wages in making a proletariat in the 16th century (which has been overturned by findings that half of the labor force in England as early as the 13th century already worked for wages). And then to the slave trade: "Liverpool waxed fat on the slave-trade. This was its method of primitive accumulation" (which has been overturned by findings that the alleged profits were no massive fund).⁴¹³ Later writers have proposed as the source of the original accumulation the exploitation by the core of the periphery (Poland, the New World).⁴¹⁴ Or the influx of gold and silver from the New World—strange as it is then that imperial Spain did not industrialize. Or the exploitation of workers themselves during the Industrial Revolution, out of sequence. Or other loot from imperialisms old and new. Or, following on Marx's assertion in the Manifesto, even 17^th-century piracy.

None of these, it has been found, make very much historical sense. Such findings are in truth not very surprising. After all, conquest, enslavement, robbery, murder, briefly, force has characterized the sad annals of humankind since Cain and Abel. Why didn't earlier and even more thorough expropriations result in an industrial revolution and a factor of eighteen, that nineteen hundred percent increase in the welfare of the average Briton or American or Taiwanese? Something besides thrifty self-discipline or violent expropriation must have been at work in northwestern Europe and its offshoots in the 18^th century. Thrifty self-discipline and violent expropriation have been too common in human history to explain a revolution unique to Europe around 1800.

And as a practical matter a pile of physical capital financed from, say, Piet Heyn's seizure of the Spanish treasure fleet in 1628 would by 1800 melt away to nothing. It does not accumulate. It depreciates. The confusion is between financial wealth in a bank account, which is merely a claim by this person against that person to the society's real wealth, and the society's real wealth in a house or ship or education. Real wealth is what needs to be available for real investment. You can't build a factory with pound notes, or dig a canal with gold coins. You need bricks and wheelbarrows and skilled people to wield them. Mere financing can hardly be the crux, or else the Roman church in its command of tokens of wealth would have created an industrial society in 1300. Or Philip II—who after all was the principal beneficiary of those treasure fleets that the English and Dutch privateers preyed on—would have financed an industrial revolution in Spain. So any original accumulation supposed to be useful to any real industrialization must be available in real things. But "what you possess [in real, physical things] will pass, but what is with God will abide" (Koran 16:96). "These lovely [earthly] things" wrote St. Augustine, "go their way and are no more. . . . In them is no repose, because they do not abide."⁴¹⁵ A real house made in 1628 out of Piet's profit would be tumbled down by 1800, unless in the meantime its occupants had continued to invest in it. A real educated person of 1628 would be long dead, a real machine would be obsolete, a real book would be eaten by worms. The force of depreciation makes an original accumulation spontaneously disappear.

This is not to say, note well, that conquest, enslavement, robbery, murder play no part in European history. A Panglossian assumption that contract, not force, explains, say, the relation between lord and peasant defaces the recent work on "new" institutionalism, such as that of Douglass North.⁴¹⁶ But, pace Marx, modern economic growth did not and does not and cannot depend on the scraps to be gained by stealing from poor people. Stealing from poor people, when you think about it, could hardly explain enrichment by a factor of eighteen. Would you do well by robbing the homeless people in your neighborhood, or by breaking into the residence of the average factory worker? Does it strike you as plausible that British national income depended much on stealing from an impoverished India? If it did, why did real income per head in Britain go up sharply in the decade after Britain "lost" India?

Modern economic growth has not depended on saving, or on stealing to get the saving. Turgot and Smith and Mill and Marx got the story entirely wrong, rather unsurprisingly considering the stately pace at which the economies they were looking at were improving, at least by contrast with the frenetic pace after 1848 and especially after 1948, and then most of all after 1998. "All the authors [who] followed the Turgot-Smith line," wrote Schumpeter as the frenzy was becoming apparent, "[were] at fault in believing that thrift was the all-important (causal) factor."⁴¹⁷ Most savings for innovation, Schumpeter had noted twenty years earlier, "does not come from thrift in the strict sense, that is from abstaining from consumption. . . but [from] funds which are themselves the result of successful innovation," in the language of accountancy "retained earnings."⁴¹⁸ The money for any massive innovation---as against the savings in the strict sense---comes, he argues, from "money creation" by banks.

The causal factor has depended instead on the invention of entirely new ways of propelling ships or making shoes. And nowadays it depends, if your country is as Gerschenkron put it, "relatively backward," on leaping over the slow early stages of invention and investment by adopting what has already been invented, getting now cell phones instead of laboriously investing in land-lines and then laboriously inventing substitutes. Money creation, or the 50 percent savings rates typical of present-day China, finances the leaping. The money creation in any moderately well run economy is routinely available: it is simply credit, belief in the future. What was not routinely available in the 18^th century was the stock of inventions. This is why China and India can now grow at rates inconceivable in the 18^th and early 19^th centuries, before the inventions were well launched. It is why in the late 19^th century Sweden and then Japan in the early 20^th century and South Korea in the late 20^th century caught up so very quickly.

"Capitalist production," Marx declared, "presupposes the pre-existence of considerable masses of capital."⁴¹⁹ No it doesn't. A modest stream of withheld profits will pay for repairing the machines and acquiring new ones, especially the uncomplicated machines of 1760. In 1760 the most complicated "machine" in existence was a first-rate ship of the line, itself continuously under repair. And so far as the starter is concerned, it is very small, as in sourdough bread, and could come from anywhere, not only from some great original sin of primitive accumulation.

What did happen in the 17^th and 18^th centuries, it would appear, is so to speak an original accumulation of inventive people, such as James Watt and Benjamin Franklin. Such people sought bourgeois and thrifty ways of making and doing things, turning away from the projects of honorable display characteristic of an aristocratic society. By the 18^th century they were launched on careers of producing a wave of gadgets that has not yet ceased rolling over us. An original accumulation of habits of free publication and vigorous discussion created, as Mokyr argues in The Gifts of Athena (2002), "a world in which 'useful' knowledge was indeed used with an aggressiveness and a single-mindedness that no other society had experienced before. . . . It was the unique Western way."⁴²⁰ We do not yet know for sure why this happened in northwestern Europe and did not happen elsewhere until later, and in plain imitation of northwestern Europe, though many economic historians suspect that Europe's political fragmentation leading to comparative freedom for enterprise was important.⁴²¹ What did not happen was a big rise in European thrift.
* * * *

So nothing much changed from 1348-1600 or from 1600 to 1848 in the actual circumstances of thriftiness. And the modest changes did not matter much. Individual Dutch and English speaking people who initiated the modern world exercised personal thrift, or did not, as they still do, or do not. But changes in aggregate rates of saving drove nothing of consequence. No unusual Weberian ethic of high thriftiness or forceful expropriation started economic growth. East Anglian Puritans learned from their Dutch neighbors and co-religionists how to be thrifty in order to be godly, to work hard in order, as John Winthrop put it, "to entertain each other in brotherly affection." ⁴²² That is nice, but it is not what caused industrialization—as indeed one can see from the failure of industrialization even in the Protestant and prosperous parts of the Low Countries, or for that matter in East Anglia itself. The habits of thriftiness and luxury and profit, and the routines of exploitation, are humanly ordinary, and largely unchanging. Modern economic growth depends on ingenuity in crafting gadgets. This in turn appears to depend on free societies, at any rate when the ingenious gadgets need to be invented, not merely borrowed as the USSR and the People’s Republic of China were been able to do. Even the first modern economic growth did not depend on massive investment or an original accumulation of capital.

What did change 1600-1848, however, and dramatically, was the high- and low-cultural attitude towards thrift. Thriftiness and other specifically economic virtues, such as prudent calculation of costs and benefits or an admiring attitude towards industrial novelties or an acceptance of ethically acquired profits, became first in Holland and then at last in England, and even a bit earlier in England's remote American colonies and in England's impoverished neighbor, Scotland, fully respectable, honorable, admired, permitted, encouraged, not obstructed and disdained. This was unique in world history, and the change did have stupendous economic consequences. A change in the superstructure determined a change in the base.

Away from northwestern Europe and its offshoots c. 1848 the economic virtues were still not respectable, at any rate in the opinion of the dominant classes. Right up to the Meiji Restoration of 1867, after which things in Japan changed with lightning speed, leading opinion scorned the merchant. In Confucian cultures more widely the merchant was ranked as the lowest of the classes: in Japan, the daimyo, the samurai, the peasant, the craftsman, the merchant. A merchant in Japan and China and Korea was not a "gentleman," to use the European word, and had no honor.

Likewise c. 1600

Georg Simmel claimed in The Philosophy of Money (1900, 1907) to detect a "psychological feature of our times which stands in such a decisive contrast to the more impulsive, emotionally determined character of earlier epochs . . . . Gauging values in terms of money has taught us to determine and specify values down to the last farthing."⁴²³ In a word, thriftiness reigns now, as against the warm non-calculativeness of earlier folk. This is false, a piece with Weber's claim that a rise of rationality characterizes the modern world. The Great War was soon to make such optimistic Euro-centrism look strange indeed. Some "rationality." Ernest Renan, professor of Hebrew at the Collège de France from 1862, most famous for his claim that Jesus was a good chap if a trifle primitive and oriental, had declared that "we must make a marked distinction between societies like our own, where everything takes place in the full light of reflection, and simple and credulous communities," such as those that Jesus preached in.⁴²⁴ After the events of the 20^th century in Europe, which exhibited irrationality, impulse, credulousness, and rather little of the full light of reflection, one stands amazed that anyone can still believe in the unusual rationality or prudence or thriftiness of the modern European world.

In fact people always and everywhere have been more or less rational and more or less impulsive, both. They exhibit the seven virtues, and the numerous corresponding vices, all. In medieval Europe one can see in Walter and the Seneschaucy the pervasiveness of a money economy. In 1900 Simmel had little way of knowing how wrong his notions of the "rise of the money economy" were to prove in actual as against philosophical historical research. At that time only a few lone geniuses like Frederick Maitland had it right. It has subsequently been discovered that everything was for sale for money in olden times, for instance husbands and eternal salvation. People in 1300 thought of values down to the last farthing.

Where Simmel is correct, however, is again that attitudes and commonplace rhetorics about prudence and temperance did change, 1600-1800.

The Low Countries were at the time the point of contrast. Well into the 18^th century Holland served as a model for the English and Scots of how to be thrifty and bourgeois, and certainly how to talk it.

The rising class in the English 16^th and 17^th century was not only the bourgeoisie, but the gentry, viewed as one of two classes of "gentlemen"---the leading characters in novels by Fielding and Austen standing just below England's exceptionally tiny aristocracy. Yet a mere hundred years after Shakespeare the English, surprisingly, were very busy transforming themselves from admirers of the aristocracy into admirers of the bourgeoisie. Even the gentry and aristocracy, who for centuries had had in fact a sharper eye for profit than their lordly rhetoric would allow, became frankly businesslike about their land holdings, culminating in Farmer George III. In the 1690s, with a Dutch king, the William of William and Mary, the British proceeded to adopt Dutch institutions such as a central bank and a national debt and a stock market, and undertook to cease being inconstant, rash, vainglorious, light, and deceiving (they retained "suspicious and despising of foreigners”), or at least to cease talking about it. Evidently something changed during the late 17^th century in the evaluation of prudent temperance as against courageous hope, and so the evaluation of thrift.

The admiration had long-term consequences. The behavior of the elite changed some, but its theory of behavior, once hostile to bourgeois values, changed more. The King did not believe any longer that he could by right seize money from the City of London. The effective rulers of Britain became more and more mercantilist (c. 1700) and then free trading (c. 1840)—anyway more and more concerned with national profit and loss. As Montesquieu put it in 1748, "other nations have made the interests of commerce yield to those of politics; the English, on the contrary, have ever made their political interests give way to those of commerce."⁴²⁵ Well. . . not "ever," but by 1748, often. Such an ordering of ideas was second nature to the Dutch in 1600. It had to be learned by the British. The British became known as unusually calculating, instead of as before unusually careless in calculating. The actual change in individual behavior was not great. Right up to the 19^th century the rest of the world was shocked by the aristocratic/peasant brutality of British soldiers. A little if rich island did not paint a quarter of the world red by sweet bourgeois persuasion. But the change in ideology was great and permanent and finally softening.

A long-evolving orthodoxy in English history claims that on the contrary England long espoused a "gentlemanly capitalism" hostile to bourgeois values.⁴²⁶ Right through late Victorian times and beyond, it is said, capitalism was trammeled by estate-yearning and cricket-loving. It seems a dubious claim. To lament the economic "failure" of the first industrial nation, which has remained from 1700 to the present one of the richest countries in the world, has always seemed a trifle strange. From the time of atmospheric steam engines to the present, England and Scotland together have been world centers for invention: modern steel, radar, penicillin, and magnetic resonance imaging, to name a few.⁴²⁷ A surprisingly high percentage of world inventions still come out of little Britain. And as E. P. Thompson pointed out early in the debate about gentlemanly capitalism, the landed aristocrats themselves, and their protective belt of gentry, came to be bourgeois in values. They labored at high farming the way their financiers in London labored at deal making and their manufacturing countrymen in Lancashire at spinning cotton. And they respected and honored such labor.

* * * *

There are many tales told about the pre-history of thrift. The central tales are Marxist or Weberian. Both are mistaken. Accumulation has not been the heart of modern economic growth, or of the change from the medieval to the early-modern or from the early-modern to the fully modern economy. If you personally wish to grow rich, by all means be thrifty, and thereby accumulate—though a better bet is to have a better idea and be the first to invest in it. But if you wish your society to be rich, you should not urge thrift, not much. You should rather work for your society to be free, and thereby open to new ideas, and thereby educable and ingenious, and thereby very rich. "Thrift" has been much honored in American civic theology. But like many other of the sacred words, such as "democracy" or "equality" or "opportunity" or "progress," its rhetorical force turns out to be more important historically than its material force. Time for the old tales of thriftiness to be retired.