Freaks of Fortune: The Emerging World of Capitalism and Risk in America by Jonathan Levy (review)

The first of what I hope will be many books from Jonathan Levy, Freaks of Fortune is an intellectual history of the concept of economic risk and its management in America during the long nineteenth century (with a short epilogue that brings the story to the present). Levy, an assistant professor of history at Princeton University, took a big risk with this book, which is impressive in scope but in the end overly ambitious. The problem is with Levy’s interpretation of capitalism and his methodology, not his scholarly execution. Levy is a fine writer; save for a few dangling modifiers (139, 167), infelicitous phrases (e.g., 275), and typographical errors (e.g., 218), the book reads smoothly. He is also a diligent researcher; the number and scholarly range of the secondary sources that he leverages is commendable, if difficult to appreciate due to the lack of a bibliography. Ultimately, however, the sources prove insufficient to tame the monstrous task of understanding American capitalism through the lens of risk or its management.

Like many young historians coming out of the cultural history tradition, Levy’s thought is embedded in the social theories of Marx (210), Polyani (18), Weber (203–9), and other critics of capitalism (218, 315). Ultimately, Levy wants to critique today’s institutions and reform, or at least problematize, them by identifying and explicating past alternatives. The eight main body chapters identify and assess some of those alternatives, or “countermovements” (18) as Levy terms them, and describes their fates.

“Landed independence” (65) was a reaction to the increasing commodification of property and income risks by the insurance industry in the eighteenth and nineteenth centuries. It was not anti-commercial but it did reject corporate insurance in favor of “personal relations of dependency” and “collective strategies that coped with the burden of peril without having to commodify it” (68). Proslavery ideology took landed independence to the extreme; George Fitzhugh called slavery “nature’s mutual insurance society” (92) because slaveholders (purportedly) protected their chattels from cradle to grave. Landed independence held out a little longer than slavery but both ultimately gave way to the liberal creed of self-ownership, the law of large numbers as interpreted by a growing class of professional actuaries, and farm mortgage securitization.

The emerging financial industry was commercial in nature and hence imperfect. The Panic of 1873 and subsequent wave of insurance company and savings bank failures (like the Freedman’s) created a new countermovement, embodied by the establishment of numerous non-profit fraternal organizations and cooperatives and agrarian political movements like Populism. That countermovement gave way circa 1900 to adverse court rulings and new megainsurers, like New York Life, the Equitable, and Mutual Life, that regulators allowed to sell industrial (burial) insurance to the masses and speculative tontine policies to the other classes. New, huge industrial corporations (the infamous trusts) emerged about the same time and, led by life insurance executive and J.P. Morgan partner George Perkins, established a corporate welfare countermovement that sought to replace competition with a form of cooperation that would, in Perkins’s words, lead to “profit sharing, welfare work, pensions, accident, and benefit plans” (299).

The Great Depression battered such sanguine expectations, leading progressives and New Dealers to constitute “the nation as a risk community, thereby making baseline economic security a fundamental right of American citizenship” (313). But that countermovement also faded, beginning in the 1970s. By 2000, “the old link among freedom, self-ownership, and the personal assumption of risk” had been reinvigorated, making possible the emphasis on “corporate risk management” (315) that led to putting capitalists “in charge of taming capitalism using financial instruments of its own design” (316) and hence to the economic disaster of 2007–9.

Levy’s story is more nuanced than most but ultimately it rests on his authority, on the reader’s belief that Levy has accurately grasped, interpreted, and explicated a complex subject...