God is a Capitalist

by Roger McKinney

  Pre-industrial Europe

  Historians slice and dice European history into many periods - the dark ages, the medieval world, the Renaissance, the late middle ages, the Reformation, the early modern period, etc., but in terms of economic development measured as per capita income, living standards had stagnated for most of human history, as the hockey stick graph discussed in chapter 1 demonstrates. Hause and Maltby wrote in the book Western Civilization that in the middle ages, “The basic conditions of material life had changed little since the Neolithic revolution and would remain relatively constant until the industrial revolution.” But even as the period came to a close, “For most people in the eighteenth century, life was little changed from the Middle Ages and closer in its essentials to that of ancient Rome than to the early twenty-first century.” And Roman life had differed little from that of ancient Egypt.

  Historians have often depicted pre-industrial life as an impressionist painting in which contented families lacked nothing because they could raise their own food on their little plots of land beside their huts and make everything they needed at home. If they chose, they could sell excess production at the local market, but they faced no pressures from cutthroat competition, greedy capitalists or low wages. Mises wrote in Human Action that historians painted a false, idyllic image of pre-industrial Europe:

  The peasants were happy. So also were the industrial workers under the domestic system. They worked in their own cottages and enjoyed a certain economic independence since they owned a garden plot and their tools. But then “the Industrial Revolution fell like a war or a plague” on these people. The factory system reduced the free worker to virtual slavery; it lowered his standard of living to the level of bare subsistence; in cramming women and children into the mills it destroyed family life and sapped the very foundations of society, morality, and public health...

  The truth is that economic conditions were highly unsatisfactory on the eve of the Industrial Revolution. The traditional social system was not elastic enough to provide for the needs of a rapidly increasing population. Neither farming nor the guilds had any use for the additional hands. Business was imbued with the inherited spirit of privilege and exclusive monopoly; its institutional foundations were licenses and the grant of a patent of monopoly; its philosophy was restriction and the prohibition of competition both domestic and foreign.

  Friedrich Engels perpetuated the myth of the idyllic peasant life before the industrial evolution. He wrote in The Condition of the Working Classes in England in 1844, quoted by Hayek in Capitalism and the Historians, that before the onslaught of industry,

  [T]he workers vegetated throughout a passably comfortable existence, leading a righteous and peaceful life in all piety and probity; and their material condition was far better than that of their successors. They did not need to overwork; they did no more than they chose to do, and yet earned what they needed. They had leisure for healthful work in garden or field, work which in itself, was recreation for them, and they could take part beside in the recreation and games of their neighbors, and all these games – bowling, cricket, football, etc. contributed to their physical health and vigour. They were, for the most part, strong, well-built people, in whose physique little or no difference from that of their peasant neighbours was discoverable. Their children grew up in fresh country air, and, if they could help their parents at work, it was only occasionally; while of eight or twelve hours work for them there was no question.

  They were ‘respectable’ people, good husbands and fathers, led moral lives because they had no temptation to be immoral, there being no groggeries or low houses in their vicinity, and because the host, at whose inn they now and then quenched their thirst, was also a respectable man, usually a large tenant farmer who took pride in his good order, good beer, and early hours. They had their children the whole day at home, and brought them up in obedience and fear of God...The young people grew up in idyllic simplicity and intimacy with their playmates until they married, etc.

  Even as excellent an historian as Richard Pipes wrote in his book Property and Freedom that, “from the middle of the nineteenth century onward even liberals came to be troubled by the growing disparities in the distribution of wealth.” However, it was not possible for the historians to have witnessed increasing inequality in the nineteenth century because the industrial revolution shrank differences in wealth over that century. For example, the Gini ratio measures the concentration of wealth with zero indicating perfectly equal distribution and one representing maximum inequality. The Gini ratio in England stood at 0.65 near the beginning of the eighteenth century, falling to 0.55 near the end of the nineteenth, according to Nobel Prize-winning economist Robert Fogel in his book The Escape from Hunger and Premature Death, 1700-2100. The ratio in the U.S. is currently around 0.35. Fogel wrote,

  The relatively generous poverty programs developed in Britain during the second half of the eighteenth century...have given the unwarranted impression that government transfers played a major role in the secular decline in beggary and homelessness. Despite the relative generosity of English poor relief between 1750 and 1834, beggary and homelessness fluctuated between 10 and 20 percent. Despite the substantial reduction in the proportion of national income transferred to the poor as a result of the poor laws of 1834 and later years, homelessness declined sharply during the late nineteenth and early twentieth centuries.

  The fact is that government transfers were incapable of solving the problems of beggary and homelessness during the eighteenth and much of the nineteenth centuries, because the root cause of the problem was chronic malnutrition. Even during the most generous phases of the relief program, the bottom fifth of the English population was so severely malnourished that it lacked the energy for adequate levels of work.

  Anti-capitalist writers of the nineteenth century may have been fooled by the upper-class propaganda from the end of the fourteenth century. The disasters that had unfolded in that century caused the upper classes to seek refuge in nostalgia for a fictional past through art and literature which presented idyllic visions of happy peasants toiling near beautiful castles, much as plantation owners in the U.S. South once depicted the happy slaves enjoying their mild labor in the cotton fields. Such visions are found in the Tres riches heures du Duc du Berry, an illustrated prayer book from the middle ages.

  However, the factory owners in nineteenth century England could not force people to work in their factories. They could only entice laborers with slightly higher wages or better working conditions. By the standards of the upper classes and those of today, the conditions were abysmal, but the fact that people chose to work in those conditions proves that their alternatives were worse, unless we want to portray the working classes are irrational. Hayek explained in Capitalism and the Historians that the success of capitalism partly inspired the fantasy portrayals of pre-industrial life:

  The very increase of wealth and well-being which had been achieved raised standards and aspirations. What for ages had seemed a natural and inevitable situation, or even as an improvement upon the past, came to be regarded as incongruous with the opportunities which the new age appeared to offer. Economic suffering both became more conspicuous and seemed less justified, because general wealth was increasing faster than ever before.

  However, Hayek added that ideology played a major role as well: “[B]ecause the theoretical preconceptions which guided them postulated that the rise of capitalism must have been detrimental to the working classes, it is not surprising that they found what they were looking for.” In other words, many historians were Marxists whose dogma insisted against overwhelming evidence to the contrary that industrialization had enslaved workers and made their lives miserable.

  Much of the anti-capitalist writing in England originated in Germany from socialists. What became known as the Historical School dominated history and economics in Germany for the sixty years preceding World War I. Professors took pride in calling themselves “socialists of the
chair.” They exerted a great deal of influence on historians in the U.K. and U.S. Socialists made up the bulk of members of the “institutional” school in the U.S. “The whole atmosphere of these schools was such that it would have required an exceptional independence of mind for a young scholar not to succumb to the pressure of academic opinion. No reproach was more feared or more fatal to academic prospects than that of being an ‘apologist’ of the capitalist system,” wrote Hayek. Accurate history would have to wait for another generation in which economists would become interested in history.

  Some historians assumed that cries for reform proved that industrialization had made worker’s lives worse, but another likely explanation reaches back to ubiquitous envy. As Schoeck wrote, people rarely envy those in positions so far above them that they have little chance of lifting themselves to that level. That explains the acceptance for millennia of the vast inequities between the nobility and the masses. Among the masses, everyone was equally destitute, but as soon as one of their own raised his head above the crowd in terms of wealth, envy erupted from his neighbors who lopped it off. Workers in industrializing Europe did not envy the nobility, who had always been wealthy, but their own neighbors who dared to achieve a better life. Peasants would rather all were poor than suffer the envy of seeing another peasant do better.

  However, when Ms. Cooke Taylor investigated the conditions of workers in a Lancaster factory, she said, quoted by Haeyk, “Now that I have seen the factory people at their work, in their cottages and in their schools, I am totally at a loss to account for the outcry that has been made against them. They are better clothed, better fed, and better conducted than many other classes of working people.”

  If historians and social reformers got the living conditions of factory workers wrong, they went even farther astray with medieval life. Late medieval reality diverged cruelly from the historian’s candy land. In the middle ages, the Malthusian model of economic growth strangled the world in a death grip. Productivity in agriculture improved very slowly, with developments such as the horse collar causing great advances. As a result, the population would often grow until it outstripped the capacity of the land to feed the people. Then famine, soaring prices and mass starvation reduced the number of mouths to feed. The Netherlands experienced its last famine in the middle of the sixteenth century. Much of the rest of Europe would endure this vicious cycle for another two centuries.

  Peasants

  Most of Europe struggled to survive in villages surrounded by open fields. The village leaders apportioned the available land according to family size, determined the crops to be grown, the farming methods, and which plots were to remain unplowed. Peasants and small farmers worked the land that belonged to the nobility, the state or the Church as sharecroppers, meaning they paid a portion of the crop as rent. A contract from the late eighteenth century France described in Hause and Maltby’s Western Civilization gave the marquis who owned the land 85 percent of the crop. Peasants paid heavy taxes and mandatory tithes out of their meager revenues. They supplemented their income with small gardens near their homes and livestock such as pigs and chickens. When they slaughtered a pig, they usually bartered the best cuts of pork for items they could not make at home then made soups and stews of the fatty remnants.

  Families rarely bought anything at markets. Men made their own tools, furniture, and housing, and wove cloth from the yarn spun by the women, who then sewed the clothing for the family. Children worked alongside their parents at the earliest age because the whole family needed the income from their labor in order to survive.

  Robert Fogel estimated that European agriculture in 1700 could produce enough food for only 80 percent of the population to have enough calories to perform labor for a day. The remaining 20 percent were reduced to begging and were able to acquire only enough calories to sustain a short walk each day from where they slept to the place where they begged. Many of the calories people ate provided little nourishment because disease prevented their bodies from absorbing the nutrients according to Hause and Maltby.

  The typical peasant family lived in a two-room house; the walls of which they made by weaving limbs together to form a frame and then covering it with mud. For security, they cut no windows. Thatch formed the roof with a hole in the center to let the smoke from cooking fires escape because peasants could not afford fireplaces with chimneys. Packed earth became the floor. Wealthier peasants might build a barn for storing produce, but livestock shared the hut with the family in the winter to provide heat because few families could afford wood for heating.

  The law chained peasants to the land and they had to obtain permission from their lords to move to another village, marry, or acquire and dispose of land. Young men who desired to marry had to compensate their lord for his loss of labor when the peasant girl became a wife and mother. Peasants farmed strips of land scattered throughout the fields of the manor and worked together to perform the plowing, sowing and harvesting. The organization of work involved cooperation and coercion, with little room for individual initiative.

  Peasants owned a team of oxen that they grazed on common pastureland. Lords required peasants to work three or four days of the week on their property as rent payment and they appropriated most of the peasants’ surplus production. By the late medieval period, peasants had begun to pay rent in crops or cash instead of labor. Because the lords did not pay peasants for their labor, peasants took little interest in the tasks assigned them and performed as little work as they could get by with. Peasants knew that no matter how poorly they labored, the lords could not reduce their wages or discharge them. In fact, “they considered it a point of honor to cheat the seignior in the performance of the obligation,” Jerome Blum wrote in The End of the Old Order in Rural Europe.

  Tolstoy described in his novel Anna Karenina the frustrating attempts of a nobleman farmer in nineteenth century Russia to persuade his peasants to use new farming techniques that he was convinced would produce higher crop yields. The nobleman ran into the rock wall of resistance that peasants had built up centuries earlier to keep out change. Peasants fought the adoption of new crops that could regenerate the soil, increase yield and provide greater nutrition. They prevented the introduction of new breeds of sheep that offered more meat and better quality wool. Their resistance derived partly from ignorance and superstition, and partly from the certainty that the lord would appropriate the increased output that such innovations might bring. If innovation succeeded, they would fear the envy of other peasants.

  Pressure to conform exerted enormous influence on peasants, for farming methods meant more to them than merely techniques for raising food; they represented customs and traditions that had developed over centuries and had woven the fabric and rhythm of village life. “It took a strong will to withstand the criticism, and even the opprobrium, of neighbors that an innovation would bring, and to survive the ridicule if the innovation did not succeed,” wrote Baumol. Peasants lived in a culture that valued collectivism, accepted power inequality, and avoided uncertainty. But most of all, they endured intense envy from neighbors that thwarted innovation and any attempt at achieving a standard of living greater than other peasants.

  Peasant families might eat three pounds of rye or barley bread (wheat was too expensive) a day in good times, or share a pound in lean ones. Fuel for baking, wood or charcoal, was expensive so many villages baked their bread in large loaves once a month. The loaves would dry out and peasants had to break them with a hammer and soak them in liquid to make them edible. Poor nutrition ensured that their health was bad much of the time.

  The nobility

  Noblemen who attempted to improve the farming methods of peasants often failed because of peasant resistance, but few concerned themselves with innovations. Blum wrote,

  Conspicuous consumption and ostentatious display were matters of great moment to a nobleman. They could determine his social and political status among his peers and affect his own and his family’s fortunes. And
so the usual noble showed scant interest in investment in improvements to increase the productivity of his property. That would postpone present consumption, and most nobles did not think in those terms. In any event, the many petty seigniors who in the best of times barely managed to make ends meet, and who lived always in fear of ruin, could not afford to invest for future gains.

  The nobility not only controlled production, but trade as well. They rarely left surpluses for peasants to sell at markets, but relied upon markets for selling their own surplus and for purchasing goods that they could not produce on their own estates, such as luxury imports. Within the boundaries of their jurisdiction, lord’s taxed and regulated the markets. Taxes could substantially enhance a lord’s income, but in addition to the regulations, they increased the cost of trade and acted as a major hindrance to economic development. Another roadblock to development rose up in the concepts among the noble classes of what constituted honorable means of achieving wealth. According to Baumol,

  The “preferred” medieval ways to wealth were the public and private wars carried on by kings and nobles alike. Also in line with the orientation of the times were the occupations of the robber barons and of the leaders of private armies whose services were for hire and who undertook aggression on their own initiative when market demand for their services was poor. In the same period, rent-seeking was also a respectable avenue to wealth. The king’s friends at court who helped him against his enemies, who entertained him, and who provided him with various forms of amusement could hope for rich rewards in the form of generous grants of land, castles and other privileges...Destructive wars and rent-seeking activities as means to enhance wealth and power, of course, continued through the Renaissance and, indeed, they manifestly continue today.