What potential did Europe develop in the early modern period that enabled it to dominate the late modern world? There are two complementary answers to this question: modern science and capitalism.
- Yuval Harari, Sapiens
This is the third part in a five-part series on how we're failing capitalism. In this post we'll look at the big ideas that makes capitalism tick.
The five parts to the series are:
The five parts to the series are:
Bridges of shared values
The school where I taught during the last seven years had a politically conservative student body, generally. A student dressed up as failed Obamacare for halloween one year, numerous computers sported Trump stickers, and just about the only Hillary reference was "Hillary for Prison" on a handful of computers and t-shirts.
While I found that frustrating at times because my personal politics aren't aligned with those, I am very grateful to have been challenged in my thinking and to have grown to appreciate the humanity and logic of the opposing view. It's because I worked with and taught libertarians, non-Trump conservatives, and Trump supporters that I feel that I've come to a more sustainable perspective on many things, including capitalism. We don't need free market ideologues to become environmentalists to create a better future, but we may need to build bridges of shared values so that we can reach solutions faster together.
Capitalism's winning formula
I like the dreams of the future better than the history of the past.
- Thomas Jefferson, in a letter to John Adams
The following sections will detail out what we're looking at as Capitalism's winning formula. There are two important notes to point out up front:
- This discussion is NOT based on economics; it's based on the underlying human traits that make the economics possible.
- While more modern examples of the following ideas are available, it has been much easier to present these ideas in a somewhat book report form on Yuval Harari's Sapiens. The majority of these details and ideas are his, and I am grateful for his clear and educational writing style.
Capitalism's winning formula:
- Envision a rich future.
- Invest in exploratory research (science).
- Invest in the production of something worthwhile that benefits the consumer.
- Pay back your creditors.
- End up richer.
Economic History of the World (from Sapiens)
None of this formula is possible without a willingness to envision, a willingness to explore, a willingness to trust, and a stable judicial system willing protect authentic contracts. The state provides the stable judicial system, but the rest is up to any of us.
Envisioning a richer future
In the late 1480s, Columbus requested that the Kind of Portugal finance an expedition westward across the Atlantic to discover a trade route to India. Columbus' vision was that such a route existed and that there would be a big return on the King's investment. The King said no - his advisors told him that he wasn't likely to get a good return on that investment.
So Columbus went to the new King and Queen of newly formed Spain, and they also said no. Their advisors also thought that it would be a waste of money. A few years later, though, they agreed to finance his voyage. They didn't really expect him to even return, but the opportunity to potentially one-up Portugal made it worth a try.
The age of imperialism thus gained serious momentum starting with a vision of a future that would pay back more than it would cost to get there.
Someone has to pay for it
The first English settlements in North America were established in the early 17th century by joint-stock companies such as the London Company, the Plymouth Company, the Dorchester Company, and the Massachusetts Company.
Although in school I learned about different companies participating in the imperialist expansion of European nations during the age of exploration (like the East India Company), I've always had it in my mind that it was the governments of the nations themselves that did the financing. While this was sometimes true, as in the case of Columbus, it was much more common that exploration was privately funded with the hope of high returns.
Until the age of exploration, wealth was a fairly fixed thing - a nation either had it or took it from someone else who had it. Production increased globally throughout time, but this was due to demographic expansion; per capita increase did not really occur (Sapiens). People willing to risk financing (ad)ventures changed this.
Exploration (i.e., Science)
The discovery of America was the foundational event of the Scientific Revolution. It not only taught Europeans to favor present observations over past traditions, but the desire to conquer America also obliged Europeans to search for new knowledge at breakneck speed.
- Yuval Harari, Sapiens
I often think of technology when I think of the Scientific Revolution. The development of scientific processes led to new technology, and technology was the magic that manifested control. But scientific knowledge itself can be fortifying and empowering, and scientific knowledge is a major key to capitalism's success.
In 1500, the average person living in China was wealthier than the average person living in Europe, and "in 1775 Asia accounted for 80 per cent of the world economy" (Sapiens). China had the world’s largest fleet, both in size and number of ships, and China had explored the coastline of South Asia all the way to eastern Africa prior to Columbus' voyage. Admiral Zheng He explored oceans, but he never conquered or colonized.
Chinese ship compared to Columbus' (source)
Now consider that Columbus' contemporary, Vasco de Gama, circumnavigated Africa around 1500 to reach a direct route to India. By 1850, the British had control of India, using about 180,000 linguists, scientists, troops, diplomats, business people, and families to subjugate 300,000,000 Indians. How was it possible for 180,000 foreigners not much better equipped technologically than the locals, to colonize and rule nearly 2000 times their own number?
The British empire knew India better than most Indians.
Expeditions were financed to develop the fields of linguistics, botany, geography, and history. "Without such knowledge, it is unlikely that a ridiculously small number of Britons could have succeeded in governing, oppressing, and exploiting so many hundreds of millions of Indians for two centuries" (Sapiens). And exploit they did. Just one example: 10 million Bengalis, a third of the population India's richest province, died as a direct result of British policies.
I report this one of very many available stories to not only implicate science in the exploitations of imperialism, but to also highlight the foundational role that science plays in capitalism. Countries were providing the protection for these expeditions in the form of military participation, but joint stock companies were providing the capital.
The key factor was that the plant-seeking botanist and the colony-seeking naval officer shared a similar mindset. Both scientist and conqueror began by admitting ignorance - they both said, 'I don't know what's out there.'
- Yuval Harari, Sapiens
Trust
Credit enables us to build the present at the expense of the future. It's founded on the assumption that our future resources are sure to be far more abundant than our present resources. A host of new and wonderful opportunities open up if we can build things in the present using future income.
- Yuval Harari, Sapiens
Funding in the age of exploration, just like funding now, depends on trust. Trust that the returns will be greater than the investment. Trust in the vision of a richer, brighter future. Trust in the systems that ensure integrity.
One of the most controversial, ideological, and powerful perspectives provided by Adam Smith on capitalism also relies on trust: "by becoming richer I benefit everybody, not just myself."
[The rich] are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.
- Adam Smith, The Wealth of Nations, my emphasis
And to provide a final example of the need for trust in the capitalist system, consider Smith's take on the rule of law. Just as the Dutch won the trust of financial systems by repaying loans on time and by enforcing private property rights, Smith argued that justice and the rule of law were necessary to ensure the proper functioning of the economic system. The rule of law was a system that we could trust to ensure contracts were honored.
Bridges of shared values
The school where I taught during the last seven years had a politically conservative student body, generally. A student dressed up as failed Obamacare for halloween one year, numerous computers sported Trump stickers, and just about the only Hillary reference was "Hillary for Prison" on a handful of computers and t-shirts.
While I found that frustrating at times because my personal politics aren't aligned with those, I am very grateful to have been challenged in my thinking and to have grown to appreciate the humanity and logic of the opposing view. It's because I worked with and taught libertarians, non-Trump conservatives, and Trump supporters that I feel that I've come to a more sustainable perspective on many things, including capitalism. We don't need free market ideologues to become environmentalists to create a better future, but we may need to build bridges of shared values so that we can reach solutions faster together.
Capitalism's winning formula
I like the dreams of the future better than the history of the past.
- Thomas Jefferson, in a letter to John Adams
The following sections will detail out what we're looking at as Capitalism's winning formula. There are two important notes to point out up front:
- This discussion is NOT based on economics; it's based on the underlying human traits that make the economics possible.
- While more modern examples of the following ideas are available, it has been much easier to present these ideas in a somewhat book report form on Yuval Harari's Sapiens. The majority of these details and ideas are his, and I am grateful for his clear and educational writing style.
Capitalism's winning formula:
- Envision a rich future.
- Invest in exploratory research (science).
- Invest in the production of something worthwhile that benefits the consumer.
- Pay back your creditors.
- End up richer.
Economic History of the World (from Sapiens)
Envisioning a richer future
In the late 1480s, Columbus requested that the Kind of Portugal finance an expedition westward across the Atlantic to discover a trade route to India. Columbus' vision was that such a route existed and that there would be a big return on the King's investment. The King said no - his advisors told him that he wasn't likely to get a good return on that investment.
So Columbus went to the new King and Queen of newly formed Spain, and they also said no. Their advisors also thought that it would be a waste of money. A few years later, though, they agreed to finance his voyage. They didn't really expect him to even return, but the opportunity to potentially one-up Portugal made it worth a try.
The age of imperialism thus gained serious momentum starting with a vision of a future that would pay back more than it would cost to get there.
Someone has to pay for it
The first English settlements in North America were established in the early 17th century by joint-stock companies such as the London Company, the Plymouth Company, the Dorchester Company, and the Massachusetts Company.
Although in school I learned about different companies participating in the imperialist expansion of European nations during the age of exploration (like the East India Company), I've always had it in my mind that it was the governments of the nations themselves that did the financing. While this was sometimes true, as in the case of Columbus, it was much more common that exploration was privately funded with the hope of high returns.
Exploration (i.e., Science)
The discovery of America was the foundational event of the Scientific Revolution. It not only taught Europeans to favor present observations over past traditions, but the desire to conquer America also obliged Europeans to search for new knowledge at breakneck speed.
- Yuval Harari, Sapiens
In 1500, the average person living in China was wealthier than the average person living in Europe, and "in 1775 Asia accounted for 80 per cent of the world economy" (Sapiens). China had the world’s largest fleet, both in size and number of ships, and China had explored the coastline of South Asia all the way to eastern Africa prior to Columbus' voyage. Admiral Zheng He explored oceans, but he never conquered or colonized.
Chinese ship compared to Columbus' (source)
Now consider that Columbus' contemporary, Vasco de Gama, circumnavigated Africa around 1500 to reach a direct route to India. By 1850, the British had control of India, using about 180,000 linguists, scientists, troops, diplomats, business people, and families to subjugate 300,000,000 Indians. How was it possible for 180,000 foreigners not much better equipped technologically than the locals, to colonize and rule nearly 2000 times their own number?
The British empire knew India better than most Indians.
Expeditions were financed to develop the fields of linguistics, botany, geography, and history. "Without such knowledge, it is unlikely that a ridiculously small number of Britons could have succeeded in governing, oppressing, and exploiting so many hundreds of millions of Indians for two centuries" (Sapiens). And exploit they did. Just one example: 10 million Bengalis, a third of the population India's richest province, died as a direct result of British policies.
The British empire knew India better than most Indians.
Expeditions were financed to develop the fields of linguistics, botany, geography, and history. "Without such knowledge, it is unlikely that a ridiculously small number of Britons could have succeeded in governing, oppressing, and exploiting so many hundreds of millions of Indians for two centuries" (Sapiens). And exploit they did. Just one example: 10 million Bengalis, a third of the population India's richest province, died as a direct result of British policies.
I report this one of very many available stories to not only implicate science in the exploitations of imperialism, but to also highlight the foundational role that science plays in capitalism. Countries were providing the protection for these expeditions in the form of military participation, but joint stock companies were providing the capital.
The key factor was that the plant-seeking botanist and the colony-seeking naval officer shared a similar mindset. Both scientist and conqueror began by admitting ignorance - they both said, 'I don't know what's out there.'
- Yuval Harari, Sapiens
Trust
Credit enables us to build the present at the expense of the future. It's founded on the assumption that our future resources are sure to be far more abundant than our present resources. A host of new and wonderful opportunities open up if we can build things in the present using future income.
- Yuval Harari, Sapiens
Funding in the age of exploration, just like funding now, depends on trust. Trust that the returns will be greater than the investment. Trust in the vision of a richer, brighter future. Trust in the systems that ensure integrity.
One of the most controversial, ideological, and powerful perspectives provided by Adam Smith on capitalism also relies on trust: "by becoming richer I benefit everybody, not just myself."
[The rich] are led by an invisible hand to make nearly the same distribution of the necessaries of life, which would have been made, had the earth been divided into equal portions among all its inhabitants, and thus without intending it, without knowing it, advance the interest of the society, and afford means to the multiplication of the species.
- Adam Smith, The Wealth of Nations, my emphasis
And to provide a final example of the need for trust in the capitalist system, consider Smith's take on the rule of law. Just as the Dutch won the trust of financial systems by repaying loans on time and by enforcing private property rights, Smith argued that justice and the rule of law were necessary to ensure the proper functioning of the economic system. The rule of law was a system that we could trust to ensure contracts were honored.
Thank you for taking the time to read this post. If you have any thoughts you'd like to share, please comment. I hope you'll visit again to read more!
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