In lieu of an abstract, here is a brief excerpt of the content:

  • Response
  • Joyce Appleby

The topic of culture and capitalism is hot. I recently attended a conference on “Power and the History of Capitalism” at the New School and discovered there a group of young British and American scholars from a variety of fields who are bearing down on it with great verve. One of them, Peter Knight of Manchester University, runs “The Culture of the Market Network,” which promotes interdisciplinary research on 19th-century America.

As Hendrik Hartog so elegantly explains, such a subject would have seemed like an oxymoron in the intellectual milieu of the 1980s. Front and center now, the subject of culture and capitalism has yet to be fully plumbed, as both Hartog and Hans Eicholz have shown.

Hartog’s own writings in American legal history reveal how capitalism and mobility worked together to challenge legal traditions based on the assumption of stable communities. From his studies has emerged a capitalist mindset. Diverse as the economic world in which they operated, market participants displayed what Hartog calls “a peculiar kind of cosmopolitanism.” A historian couldn’t ask for more interesting material.

Eicholz, in his incisive critique of my work, asks what it means to ascribe the origins of capitalism to culture. He evidently fears that scholars might ignore the insights of economists if they insistently invoke culture to explain the market. His review of the Austrian tradition points to the importance they assigned to purposeful behavior. It, not maximization of material interests, drove economic development, the Austrians said, but an unintended orderliness issued from equally unintended consequences. Here lies the intellectual conundrum.

Eicholz acknowledges that capitalism emerged from an unpredictable matrix of motives, means, and measures, but he points to the fact that the constancy [End Page 14] of purposeful behavior in market transactions over time has produced ordering processes. The dependence of capitalism upon these, for him, means that markets are not “historically contingent in the same way as ideas and values.” Culture must yield to a more positivistic phenomenon. The economy is not only distinct, but different from, the society and political milieu in which it operates.

By establishing parameters and observing the rule of ceteris paribus, economists have built powerful models to track economic transactions. They can predict the price of wheat in the Chicago exchange after a drought in Minnesota or the impact of the minimum wage on restaurant workers in New Jersey, working with the residuals of participants’ decision making. This can be useful, but historians are mainly concerned with change, particularly transformational change. Let me take the example of the recent rise of financial services in the American economy to make my point.

Between 1980 and 2005, financial services grew from 11% to 20% of GNP! Assets of $12 trillion in 1980 went to $140 trillion—a tenfold increase in twenty-five years. Financiers’ power increased as well. As debtholders, they pressured CEOs to produce profits sooner rather than later. “Long term” lost value as a goal. At the same time, they responded to low rates of interest by creating asset-based securities tied to real estate, blowing the bubble in housing prices up to the bursting point that ushered in the Great Recession of 2007–2008.

There are obvious factors we could introduce to explain all this: deregulation, high rates of savings in Asia, government encouragement of home ownership, banks’ switch from partnerships to corporations, and the willingness of pension fund managers to take on risk. Self-interest, game theory, and the psychology of the trading floor can be adduced as causes. Historical contingencies abounded. The unintended consequences of purposeful behavior had a field day. Laws of supply and demand operated throughout the debacle, but without being very helpful to those who want to explain it as the historical phenomenon it has now become.

Both Hartog and Eicholz raise the issue of capitalism and morality. Where capitalism belongs on a moral spectrum of institutions never settles down for me. I have called it amoral. Yet that judgment doesn’t comprehend the historic role of enterprise. Economic developments in 17th-century England revealed the capacity of ordinary people to be responsible and consistent in their market dealings. It promoted small-bore...

pdf

Share