Fjordman: The Birth of Capitalism

Fjordman’s latest essay has been published at Vlad Tepes. Some excerpts are below:

The Ottomans used a centralized power structure to extract a large proportion of the resources of the empire to use for military aggression, but they were successfully rebuffed by European states. The problem with an overly centralized power structure with high tax rates is that over time it will lead to economic and technological stagnation. Successful innovation requires some degree of decentralization, which could be found in regions of Western Europe with many free cities, from northern Italy via the Netherlands and Flanders in the Low Countries to England and northern Germany. This is where we encounter the development of capitalism.

The Ancient Economy: Evidence and Models, edited by J.G. Manning and Ian Morris, is a collaborative effort of various scholars on the economies of Egypt, the Near East and Greco-Roman Antiquity. The ancient world was not “capitalist” in our sense of the word. Slavery lessened incentives to develop labor-saving technology. People lacked a tradition of carrying on a sustained effort to produce a technological solution to a felt need (they had no “research-and-development” labs) and often suffered from a certain prejudice against work of the hands.

In the Greco-Roman world, wealth should preferably come from the land. Commerce was considered barely socially acceptable whereas industry was widely looked down upon. Sustained growth per capita requires sustained technological improvement. Roman economic growth was very slow because technological progress was slow — not necessarily nonexistent, but slow. There are few indications of what we might call a capitalist concept of making calculated investments in better technology in order to improve future productivity.

Western wealth began to grow with urban growth and commerce in the twelfth century and accelerated during the Renaissance into the seventeenth and eighteenth centuries with the development of a relatively autonomous class of professional merchants. Friedrich von Hayek (1899-1992), an Austrian and later British economist and philosopher, identified a new individualism provided by Christianity and the philosophy of Classical Antiquity which was developed during the Renaissance. He explains this in his classic The Road to Serfdom:

“From the commercial cities of Northern Italy the new view of life spread with commerce to the west and north, through France and the south-west of Germany to the Low Countries and the British Isles, taking firm root wherever there was no despotic political power to stifle it….During the whole of this modern period of European history the general direction of social development was one of freeing the individual from the ties which had bound him to the customary or prescribed ways in the pursuit of his ordinary activities….Perhaps the greatest result of the unchaining of individual energies was the marvellous growth of science which followed the march of individual liberty from Italy to England and beyond….Only since industrial freedom opened the path to the free use of new knowledge, only since everything could be tried — if somebody could be found to back it at his own risk — and, it should be added, as often as not from outside the authorities officially entrusted with the cultivation of learning, has science made the great strides which in the last hundred and fifty years have changed the face of the world.”

Modern economic growth has roots back to the medieval period. Initially, “the West’s achievement of autonomy stemmed from a relaxation, or a weakening, of political and religious controls, giving other departments of social life the opportunity to experiment with change. Growth is, of course, a form of change, and growth is impossible when change is not permitted. Any successful change requires a large measure of freedom to experiment. A grant of that kind of freedom costs a society’s rulers their feeling of control, as if they were conceding to others the power to determine the society’s future. The great majority of societies, past and present, have not allowed it. Nor have they escaped from poverty.”

Read the rest at Vlad Tepes.