“No manufactures for distant sale have ever yet been established in any of their towns,” wrote Adam Smith of Britain’s American colonies in his 1776 magnum opus, The Wealth of Nations. The bible of liberal capitalism, published in March of that year, painted a picture of the thirteen colonies as a land populated by a race of industrious settlers who made exceedingly efficient use of abundant natural resources but did little else. Three months later, those colonies would declare their independence of Smith’s homeland and embark upon a bold experiment which would see the creation of new nation combining the rationalist republican fervour of the French enlightenment with the reverence for individual rights and private property of the Scottish. The result would be the world’s unquestioned economic leader, whose manufactures – from Apple iPhones to Boeing Dreamliners – have left no distant shores untouched.
Alan Greenspan and Adrian Wooldridge’s Capitalism in America is a history of the eponymous phenomenon as told by two true believers, including one of its modern doyens. The unifying theme of this story is Joseph Schumpeter’s idea of creative destruction: that capitalism functions best when an economy’s capital is able to be taken away from unproductive endeavours and deployed wherever it will produce the greatest returns. According to Greenspan and Wooldridge, the United States have succeeded because they have resisted the temptation to interfere with this process. They have accepted that for new industries to flourish, others must die, and that the displacement of old ways of life is a price which must be paid.
The case is made with special reference to the ‘gilded age’ between the end of the Civil War and the turn of the century. This age of robber barons is when the United States first surpassed and then dwarfed its mother country in economic might. For the authors, the reason was simple: entrepreneurs like Andrew Carnegie and John D. Rockefeller revolutionised the industries which would power the economy into the 20th Century. They were able to do this because the system rewarded their enterprise. The authors argue that the real genius of America lay not in scientific innovation alone but in making the product of innovations usable by the average consumer; the growth of corporations which could commercialise those innovations; and embracing professional management to run those corporations. The success of this model, which prized ‘bigness’, entailed the destruction of a way of life: that of the settler-farmer. No-one can deny, however, the massive gains in productivity and overall living standards which came from this shift.
The discussion of the gilded age provides the highs and lows of this book. The description of the raw, energetic sweep of capitalism, which carried a war-ravaged agrarian republic to the domineering heights of the world economy, is the work of true believers. In the words of poet Joaquin Miller, quoted in the book, “there is more true poetry in the rush of a single railroad train across the continent than in all the gory story of burning Troy.” It is hard not to find oneself humming along to the verse.
While writing about the gilded age, the authors adopt an attitude reminiscent of Weber’s description of Catholic doctrine: “punish the heretic but indulge the sinner.” The countless sins – unethical behaviour, outright fraud, and violent union-busting – of the robber barons are rationalised and forgiven while the unionised workers fighting for better pay and conditions are described like something out of a zombie flick. The progressive lawmakers trying to rein in the excesses of capitalism are simply naïve do-gooders, interfering with the work of robber barons who ‘laid the foundation for the greatest improvement in living standards in history.’ This claim merits a closer look.
Many of the improvements in living standards that the authors cite – shorter work hours, cheaper and more nutritious food, and the reduction of communicable disease – were as much the result of checks on capitalism as of its operation. There is no doubt, for example, that Phillip Armour’s use of industrial-scale slaughterhouses and refrigerated railroad cars allowed Americans to access cheaper meat and eat better than any other people in the world. However, the meatpacking industry had notoriously low hygiene standards: during the 1898 Spanish-American war, tainted meat killed twice as many U.S. soldiers as Spanish forces. It was only after Upton Sinclair’s muckraking exposé The Jungle revealed the industry’s shocking practices, leading to the passage of the Pure Food and Drug Act of 1906 and the Meat Inspection Act of 1908, that Armour and his ilk changed their ways. This episode finds no mention at all in the book.
The authors’ argument is much more robust when the authors speak of things within their living memory: the description of West Germany and Japan’s challenge to inefficient American businesses as a pure example of creative destruction is particularly enlightening.
Any serious American policymaker would also do well to consider the authors’ recommendations for the future. The book contains an alarming account of the United States’ uniquely bloated and unproductive Social Security programme which, for all the talk of the military-industrial complex, is by far the biggest drain on the Federal exchequer. There is also a frank recognition of some of the volatile and dangerous practices of Wall Street and recommendations, such as higher capital requirements, which would prevent future stock-market volatility from snowballing into general economic calamity.
For all that, it is hard to shake the feeling that there is something missing in this book. In the opening pages the authors declare that “anyone who regards economic history as history with the politics left out is reading the wrong book.” But the authors seem to adopt a narrow view of politics: to them, politics is about what happens in the halls of officialdom and not much else. In a surprising remark dismissing Galbraith’s The Affluent Society, say the authors “writings about alienation are seldom worth the paper they are written on.” It is no wonder then that the discussion American political history in the book feels somewhat impoverished compared to the data-driven force of the economic argument. Politics is more than just government policy in aggregate. It is shaped by cultural and socio-economic undercurrents which must be given their due for a complete analysis. Alienation and popular discontent with the increasing concentration of wealth and economic power are key to understanding America’s current political malaise and consequent economic discourse.
Capitalism in America is a love letter to its titular subject. True to form, it remains blissfully unaware of the blemishes and flaws in the object of its affections. It provides a vivid description of the dazzling success of the American experiment but an incomplete picture of the forces that shaped it and so not much helpful guidance on how to rescue it. The ‘destroyed’ of the creative destruction equation have expressed their anger by giving illiberal far-left and far-right movements the keys to power. These movements, in turn, threaten to upend the liberal-capitalist consensus. Mere policy tweaks – even if right in themselves – cannot alone provide the answer. Whether the liberal order can mount an effective cultural and political defence of itself remains to be seen.