The European Dream

by Jeremy Rifkin

  Even though the concept of the modern market economy originated in Europe, it found its fullest expression in America. Europeans, early on, had mixed feelings about capitalism. Americans never did. America has long been regarded as the bastion of capitalism. So unwavering has been our faith in capitalist dogma that the idea of America and capitalism has come to enjoy a tautological status.

  Americans may be the only pure capitalists left in the world. Adam Smith’s idea of an unfettered marketplace where individual sellers and buyers compete to maximize their property holdings is the primary playing field for living out the American Dream. Were the capitalist arena to be seriously compromised, the American Dream would suffer. That’s why Americans are so fiercely loyal to the tenets of capitalist theory. They are the alpha and omega of our way of life, without which the American Dream would be an impossibility.

  The capitalist market is not held in as high esteem by Europeans. It is the very different set of historical circumstances that led Europeans to temper their enthusiasm for capitalism while Americans became its most ardent champion.

  The Struggle for Free Markets

  As mentioned earlier, a spate of new technologies in the early modern era in Europe shortened distances traveled, sped up exchanges, and decreased transaction times, making possible much bigger markets. Feudal governing institutions were too small and parochial to manage the new potential reach of human activity. In fact, these same institutions, for the most part, saw larger markets as a potential threat and acted to thwart them.

  By the late medieval era, more than one thousand towns had sprung up throughout Europe. The towns had graineries, shops, and inns, and were served by local craftsmen. They produced a variety of goods and services requiring expertise not available on every manorial estate. Masons, fine weavers and dyers, metalworkers, and armorers, and later the broiderers and glovers, the scriveners, the upholsterers, and the hatters, clustered together in these prototype urban areas, establishing “free cities”—regions independent of the reach of the local lords. If a serf, for example, were to escape his lord and flee to a city and remain there for a year and a day, he was deemed to be free, having passed from the jurisdiction of his lord to the jurisdiction of the city burghers.1

  Each craft industry established a guild to regulate the activity of its members. The guilds were responsible for maintaining quality standards for their industry, determining how much would be manufactured and sold, as well as the fair price for the sale of their goods and services. The guild economy operated by custom, not by market forces. The point was not to make a profit but, rather, to maintain a way of life. Guilds opposed an open market, free labor, the commercialization of land, and competitive prices—all of the essential hallmarks of a modern economy. For more than four centuries, the guilds fought off the emerging capitalist class by using city codes and regulations to enforce their will. Craft guilds were not abolished in France until 1791, England in 1813 and 1814, Austria and Germany in 1859 and 1860, and Italy in 1864.2

  In the sixteenth century in England, an independent merchant class was beginning to challenge the guilds’ control over the production of goods and services. Economic conditions in England, and later on the Continent, were making the guild system increasingly untenable. The wave of land enclosures was freeing up peasants, providing a new exploitable workforce. Advances in transportation—the laying down of better roads and improvements in river navigation—were making it easier to move raw materials and finished goods between the countryside and towns. A burgeoning population was demanding more goods at cheaper prices.

  The textile guilds were the first to be hurt by the new market forces being unleashed. Rogue merchants began to skirt guild controls and urban jurisdictions by dispersing work to cheaper labor in the countryside—called the “putting-out” system. New breakthroughs in technology and the organization of work led to a “division of labor,” substantially reducing the costs of manufacturing goods and the time necessary to produce them. The new production model was better able to meet the upsurge in consumer demand.3

  The new method of doing business had a second, more profound effect. Under the guild system, the masters and journeymen owned their own tools, giving them control over production. The new class of independent merchants began to “take possession directly of production,” providing the tools and machinery used by their rural labor force.4 Poor cottagers engaged in the putting-out system for weaving were among the first to feel the full effects of the new capitalist way of conducting business. Living at the very margins of poverty, a cottager was often unable to pay for the purchase of material in advance of the sale of his cloth and had to seek credit from the merchant employer. That generally meant pledging his most valued asset, his loom, as security against a money advance for the raw material he needed. If unable to pay off the debt, he would have to forfeit his loom to the merchant employer, putting the means of production directly into the hands of the capitalist—further strengthening his position vis-à-vis the craftsmen.5

  By providing the raw material and the tools necessary for production and by controlling the transport of supplies and finished products between country and town, the new merchants were able to exercise far greater control over labor costs. Already destitute, desperate, and without any other means to make a livelihood, peasant workers had little choice but to accept the conditions of employment imposed on them by a fledgling capitalist class. The guilds, for their part, could not compete with either the pace or the volume of production or the price of the finished products.

  The introduction of the factory into Europe further eroded the power of the master craftsmen and their guilds. In the latter half of the sixteenth century, factory manufacture came to England. Paper mills, ironworks, cannon factories, and, later, textile factories introduced the idea of centralizing all of the production tasks under one roof with a common energy source—first using water and windmills, and later using coal and steam-powered machinery. Factory manufacture required large sums of capital—often several thousand pounds or more—well beyond the means of even the wealthiest master craftsmen. Only the new class of merchant capitalists could afford the cost of this new kind of manufacturing model.6 Historian Maurice Dobb makes the point that “the subordination of production to capital, and the appearance of this class relationship between capitalist and the producer is, therefore, to be regarded as the crucial watershed between the old mode of production and the new.”7

  Master craftsmen were finding it difficult to stem the capitalist tide. Many simply gave up and became paid employees in the new capitalist factories. Others fought back by putting up as many firewalls as they could in an effort to prevent the new merchant capitalists from breaking out of the countryside and into larger trading markets. For example, notes the late economist and historian Robert Heilbroner, “Over a journey of a hundred miles, a traveling merchant might fall under a dozen different sovereignties, each with different rules, regulations, laws, weights, measures, money.”8

  Toll stations added still another formidable obstacle to regional and national trade. At every border and jurisdiction there were toll stations. In the fourteenth century, reports Heilbroner, “there were said to be more than thirty toll stations along the Weser River and at least thirty-five around the Elbe; along the Rhine, a century later, there were more than sixty such toll stations . . . ”9 Along the Seine in France, there were so many toll stations in the late fifteenth century “that it cost half its final selling price to ship grain two hundred miles down the river.”10 Heilbroner makes the telling point that only England enjoyed a unified internal market in the late Middle Ages, which in large measure accounts for its emergence as Europe’s first great economic power.11

  Still, while the guilds and local towns could more effectively control the conditions of commerce within their city walls and immediate surroundings by exclusionary and protectionist tactics, it proved far more difficult to control external trade. Towns and guilds banded together in
an effort to curtail the new capitalist enterprise burgeoning in the rural countryside. The nascent merchant capitalists fought back using every means at their disposal to break through the barriers and create national markets.

  Europe found itself in the throes of a great struggle between a new commercial order and an old economic regime. New technologies were radically altering spatial and temporal realities. The old social economy, based on controlling production, fixing prices, and excluding competition from the outside, was too provincial to accommodate the range of new technologies that were making possible greater exchange of goods and services between more people over longer distances. The new technologies gave birth to a capitalist class hell-bent on exploiting their full potential. They found their commercial model in self-regulating free markets.

  What was missing was a new, more expansive, and agile political framework that could impose its will on the thousands of local municipalities and force the elimination of local tolls and tariffs and countless other statutes and codes that maintained an aging medieval economy. In addition, there was a need to establish a common language, a unified educational system, a single police force, and other centralized mechanisms to make viable a nationwide internal commercial trading market. It was this need, says Karl Polanyi, “which forced the territorial state to the fore as the instrument of the ‘nationalization’ of the market and the creator of internal commerce.”12

  The Rise of the Nation-State

  The nation-state is a relatively new institution for governing human society. Some scholars date its origins no further back than the American and French revolutions in the late eighteenth century, while others suggest that its roots extend even further back to England in the twelfth and thirteenth centuries. The popular conception of the nation-state is of an organic creation rooted in common culture, language, and customs that evolved over time into a modern state formation. Although there is a germ of truth to the notion, in reality the nation-state is more of an “imaginary community”—an artificial construct largely created by political and economic elites to foster more expansive national trading markets and to secure overseas colonies. That’s not to say that there aren’t exceptions to the rule. Certainly, some of the nationalists’ ethnic struggles in the post-communist era in Central and Eastern Europe have less to do with expanding markets than with preserving ethnic identities. Still, for the most part, the nation-state and national markets emerged together, each feeding the other in a symbiotic relationship. National markets increased the pace, speed, flow, and density of exchange of property between people, while the territorial nation-state created and maintained the rules and regulations necessary to ensure an efficient flow of property over a unified and expansive geographic plane.

  The genius of the nation-state lay in its ability to provide a new collective identity for the growing numbers of autonomous free agents who made up the world of private property relations in self-regulating markets. It did so by establishing itself as a near mirror image of the self-interested market maximizing individuals of the nascent capitalist economy. Like each of the autonomous individuals who claimed sovereignty over his own personal property domain, the nation-state claimed a similar right of sovereignty over the larger territory of which all the individual free agents were a part. And, like its citizens, the nation-state claimed its autonomy as an equal among nations and defended its right to protect the property under its control as well as to compete with other nation-states—through trade or war—for contested territory.

  The difficult challenge for the budding nation-state was how to eliminate all the internal pockets of resistance to free trade in a national market while at the same time enlisting the emotional support of its subjects—later its citizens—in the collective tasks of society, including the collection of taxes and the conscription of armies to protect its national interests. This was no easy matter since, in many ways, the Enlightenment idea of the detached, self-interested, autonomous agent—operating only with his own material self-interest in mind and determined to optimize his own property holdings—seemed strangely at odds with an effort to forge a collective sense of common purpose and identity. How does the nation-state convince millions of newly emancipated individuals to give up some of their autonomy and freedom to the state?

  The answer was to create a compelling story about a common past, one convincing enough to capture the imagination of the people and convince them of their shared identity and common destiny. The architects of the modern nation-state understood the magnitude of the task ahead of them. After Italian state unification in 1861, Massimo d’Azeglio, the former prime minister of Piedmont, was said to have remarked, “We have made Italy, now we have to make Italians.”13

  Every nation-state in the modern era has created a myth of origins complete with its own heroes and heroines and past moments of trials and tribulations often memorialized in elaborate rituals. In an increasingly disenchanted secular world, the nation-state had to establish a powerful new image of a people who shared a noble past and were destined for future greatness. At the same time, the nation-state had to create a convincing enough utopian vision of what lay ahead to win the loyalty of its subjects and, later, citizens. If the road to immortality no longer lay with accepting Christ as savior, then at least it could be found in the relentless pursuit of unlimited material wealth in the form of the accumulation and exchange of property. In return for giving one’s allegiance to the state—the litmus test being whether the citizen would be willing to give his or her life for their country—the state would uphold its side of the covenant by protecting each person’s right to own and exchange private property in a free marketplace.

  Creating a shared identity was also essential to making viable an unobstructed national market. Before there was an England, France, Germany, and Italy, what existed was a thousand different stories and traditions being lived out in little hamlets, nestled in valleys and on mountainsides across the continent. Each story was passed on in a separate language or, at least in a distinct dialect.

  A myriad of local languages, customs, and regulations for conducting commerce kept the transaction costs high for producing and trading goods and services over a wide geographic terrain. Suppressing or even eliminating pockets of cultural diversity was an essential first step in creating an efficient and seamless national market. Creating a single homogenized national myth required the often ruthless destruction or subordination of all the local stories and traditions that existed for centuries of European history.

  The success of the nation-state model owes much to the adoption of rational processes for marshaling far-flung activities. To begin with, it was necessary to establish a single dominant language in each country so that people could communicate with one another and understand shared meanings. It’s often thought that sharing a common language was indispensable to bringing people together under the aegis of the nation-state. However, that’s not generally the case. Take France, for example. In 1789, on the eve of the French Revolution, less than 50 percent of the people spoke French, and only 12 to 13 percent spoke it correctly. In northern and southern France, it would have been virtually impossible to find anyone who spoke French. At the time Italy was unified in 1861, only 2.5 percent of the population used the Italian language for everyday communication. In eighteenth-century Germany, fewer than 500,000 people read and spoke in the vernacular that later came to be the official German language, and many of them were actors who performed new works on stage or scholars writing for a small intellectual elite.14

  Much of the impetus for creating national languages had less to do with nation-state formation and more to do with the demographics facing the early print industry. Printers in the fifteenth and sixteenth centuries were anxious to expand the markets for the mass production of books. The problem was that while Latin was the official language of the Church and was used among European scholars and government officials in the palace courts, it represented too small a reading market for the new com
munications revolution. On the other hand, there were so many languages and dialects spoken across Europe that each one, by itself, would be too small a market to be commercially viable. The answer, in most countries, was to choose a single vernacular language, usually the most dominant in a region, and establish it as the language for reproduction—first in Bibles and later for works of literature and science.

  Even here, the languages that eventually became standard French, German, Spanish, Italian, and English are, in part, invented. They were usually the result of combining elements of all the various idioms spoken in a region and then standardizing the grammar.15 However, once a common language became accepted, it created its own mystique of permanence. People came to think of it as their ancestral tongue and the cultural tie that bound them together.

  Getting everyone to speak and read the new vernacular necessitated the creation of a national educational system in each country. A single educational system, in turn, created reliable and predictable standards of what was to be learned and how. Standardized national education was a wholly new phenomenon of the modern era and helped forge a national consciousness. With each generation of schoolchildren learning the same subjects, in the same way, in a common language, it wasn’t long before people began to believe that they were, indeed, part of a shared experience and a common destiny. A French minister of education, reflecting on the success of French public education, remarked that “he could consult his watch at any moment of the day and say whether every child in France, of a given age, would be doing long division, reading Corneille, or conjugating . . . verbs.”16

  There were often more subtle effects of national education besides creating a shared language and a sense of common cultural identity. State-administered public education inculcated students into the new spatial and temporal consciousness of the modern era. Schools were designed to resemble factories, and students were made comfortable with the idea of spending an entire day in a large, centralized facility with different rooms set aside for specialized learning tasks, mirroring the kind of specialization of labor and work environment they would graduate into after their education was completed. Students were also taught the virtues of punctuality and efficiency, making and keeping schedules, and being industrious, disciplined, and competitive with one another. They were made to believe that learning was an acquisitive activity, the goal being to possess knowledge that could be used to advance one’s self-interest. The curriculum was designed to prepare students for the economic tasks that awaited them in the emerging market economy. Turning out “productive citizens” became the primary responsibility of national education in every modern state.