rise of capitalism essay

Weber and the Rise of Capitalism Essay

Max Weber is known for his analysis of the factors that led to the creation of modern capitalism. In various works, he examined social, ethical, philosophical, and religious forces that shaped the system of production that emerged in Europe as well as the United States. His ideas are discussed by many modern scholars who focus on the key arguments advanced by Weber in his books.

For example, one can mention Laura Edles (2009) and Richard Swedberg (2000). It is necessary to show how these researchers discuss the rise of capitalism and Max Weber’s ideas. Overall, one can say that Laura Edles attaches importance to the influence of ethical norms and values which emerged due to the Protestant Reformation.

Additionally, this author demonstrates the way in which these values or attitudes influenced the development of various institutions which were critical for the rise and existence of capitalism. In contrast, Richard Swedberg discusses the transformation of various social institutions that facilitated the development of capitalism. His discussion is more comprehensive because it incorporates the analysis of various factors that are not related to religion or its ethical dogmas.

These are the main details that should be analyzed. In her book, Laura Edles discusses the ideological factors that led to the development of capitalism. She refers to Weber’s book The Protestant Ethic and the Rise of Capitalism . The author mentions the ideas expressed by the main leaders of the Puritan movement.

For example, one can mention Richard Baxter and John Calvin who believed that “success and profit in worldly affairs” could be a sign of God’s grace (Edles, 2009, p. 149). It should be kept in mind that wealth had to be attained through labor, rather than force or fraud. More importantly, they believed that a person should invest capital in production, rather than luxury objects and hedonistic lifestyles.

Additionally, this author refers to the arguments made by Weber who examines the ethical principles of Protestantism and their impact on the behavior of people. For example, one can speak about the assumption that labor of a person should be “an absolute end in itself” (Weber as cited in Edles, 2009, p. 153). This worldview could be critical for improving the quality of products.

Furthermore, this value system implies that laziness can be viewed as a form of sin. Thus, there is a specific set of attitudes and values that could have contributed to the rise of capitalism. Apart from that, they shaped social relations between individuals and influenced the development of various institutions.

For example, one can speak about the growing division of labor which can be explained by people’s willingness to improve the quality of their work and make it more efficient. The main strength of this analysis is that it can better illustrate the role of a specific factor on various social trends.

However, this discussion does not fully reflect the complexity of Weber’s views on the development of capitalism since he recognized the impact of other factors such as the freedom of labor and evolution of existing laws. This is one of the points that should be taken into account.

In turn, it is possible to speak about the discussion provided by Richard Swedberg who also relies on Max Weber’s ideas. This author focuses on Weber’s lecture course which is known as General Economic History . In particular, this author examines on the role of social groups and institutions that could shape the economic development of various societies.

For example, Richard Swedberg refers to the role of clans or groups that were related by kinship. The role of clans diminished in Western Europe, but they retained their influence in other regions of the world (Swedberg, 2000, p. 10). This issue is important because clans could limit the economic initiatives of separate individuals or households.

Moreover, it is possible to speak about other factors that could have played a critical part in the development of capitalism. Much attention should be paid to the existence of “calculable law” (Swedberg, 2000, p. 18). In other words, the legislation was understandable, predictable, and enforceable.

Admittedly, Richard Swedberg does not overlook the influence of ethical norms that led to the creation of capitalism. Nevertheless, this author takes a broader look at the origins of capitalism and offers a sociological interpretation of Weber’s ideas. Moreover, Richard Swedberg examines the factors that existed before the Protestant movement. This is one of the issues that should not be overlooked.

The author’s discussion is helpful because it enables the reader to understand the way in which economic development responded to various external factors. Nevertheless, one should keep in mind that each of the issues discussed in this text can be examined in greater detail. A very brief analysis of these questions can give readers only a superficial idea about the rise of capitalism, and in many cases, it is not sufficient.

This is one of the main pitfalls that should not be overlooked. While comparing these texts, one should consider several important details. Richard Swedberd tries to examine the evolution of capitalism from a sociological perspective. This is why he refers to whose portions of Weber’s work in which the functioning of social institutions is examined.

This approach is important for understanding the history of various European countries. In turn, Laura Edles examines the role of morality and religion. These factors can also be important for understanding the reasons why people could become engaged in certain economic activities and why they chose to take a different approach to their work and lifestyles. This is one of the differences that one should be taken into account.

Nevertheless, there are some similarities that should not be overlooked. In both cases, technology is not described as the main determinant of economic development. This viewpoint is often included in the different scholarly works illustrating the economic history of different societies.

Additionally, the researchers recognize there had to be a system of worldviews and assumptions shared by many people. Without them, the transformation of economic relations or social institutions would have been impossible. Thus, one can argue that these readings throw light on Max Weber’s analysis of capitalism and its origins. The readings demonstrate that the rise of capitalism can have different origins.

It is critical to consider dramatic transformation in the value system and norms of many people who changed their attitudes towards wealth, production, and trade. The analysis provided by Laura Edles (2009) and Richard Swedberg (2000) help readers get better insights into the transformation of European societies.

These readings illustrate that the transformation of value system, ethical norms and social institutions led to the creation of capitalism, at least its rudimentary forms. These are the main aspects that can be singled out.

Reference List

Edles, L. (2009). Sociological Theory in the Classical Era: Text and Readings . New York, NY: SAGE Publications.

Swedberg, R. (2000). Max Weber and the Idea of Economic Sociology . Princeton, NJ: Princeton University Press.

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IvyPanda. (2021, September 3). Weber and the Rise of Capitalism. https://ivypanda.com/essays/weber-and-the-rise-of-capitalism/

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6.3 Capitalism and the First Industrial Revolution

Learning objectives.

By the end of this section, you will be able to:

• Explain the evolution of economic theories from mercantilism to capitalism
• Analyze the ways in which mechanization challenged existing social, economic, and political structures
• Discuss the ideological responses to capitalism, including Marxism

Just as colonial empires were the crucible of new political ideas and gave rise to new forms of resistance to exploitation, they also inspired new economic ideas. Mercantilism, which advocated building a nation’s power by increasing trade through exports, had originally propelled colonization . But as people around the world gained their political freedom, they also became interested in economic freedom, and mercantilism fell out of favor. Capitalism, a system in which prices and costs, not government intervention, serve to regulate the supply and demand of goods traded for individual profit, became popular. However, not everyone agreed with this new economic order; Marxists critiqued it and proposed systems focused on equality rather than profit.

From Mercantilism to Capitalism

In 1681, the French finance minister Jean-Baptiste Colbert asked a group of French business owners led by a man named Thomas Le Gendre how the government could help them. Le Gendre reportedly told Colbert, “ Laissez nous faire ,” meaning “let us do it.” This gave rise to the concept of laissez-faire economics , which argues that market forces alone should drive the economy and that governments should refrain from direct intervention in or moderation of the economic system. The idea of laissez-faire economics was consistent with the logistical realities of global empires. It was effectively impossible for leaders in Europe to micromanage economic operations that were on the other side of an ocean. Therefore the evolution to a laissez-faire economic model might have been as much a practical necessity as an ideological shift.

Adam Smith was a Scottish political economist and philosopher best known for writing the book An Inquiry into the Nature and Causes of the Wealth of Nations (1776), often referred to by its shortened title The Wealth of Nations ( Figure 6.18 ). Earlier scholars had written about various aspects of economics, but with this book Smith became the first person to produce a comprehensive philosophical examination of the way nations should manage their economies.

In The Wealth of Nations , Smith argued that the “ invisible hand ” of the marketplace guided people when they made their own economic decisions. By doing the work that would bring them the greatest profit, he explained, people inadvertently tended to produce the goods and services most needed by society. To allow the invisible hand to work, Smith advocated the reduction of tariffs and most forms of governmental regulation. His work was based on rational choice theory , the idea that people understand their options and make rational choices that will help them achieve reasonable objectives. In Smith’s view, this form of selfishness is often good for the individual and for society.

Although Smith did not use the term, preferring to call his system commercial society , he and his supporters promoted the idea later known as capitalism , an economic system in which private individuals and companies typically own the means of production such as factories and farms, and free (unregulated) markets set the value of most goods and services based on supply and demand.

Smith was a critic of slavery . He believed slavery was inefficient and suggested it was doomed to fail if markets were truly free. Because the cost of feeding, clothing, and housing enslaved people, however poorly, was passed on to consumers, Smith also noted that goods made using enslaved labor were more expensive. Free labor could produce goods more inexpensively because the employer did not have to pay for his laborers’ upkeep. However, Smith also used rational choice theory to minimize slavery’s horrors. In The Wealth of Nations , he acknowledged that the enslaved people living in the British Caribbean were “in a worse condition than the poorest people either in Scotland or Ireland,” but he justified their suffering on the basis that “it is the interest of their master that they should be fed well and kept in good heart in the same manner as it is his interest that his working cattle should be so.”

Whether sugar plantations on which enslaved people labored were themselves capitalist enterprises has been a matter of debate among historians. One the one hand, capitalism presupposes freedom on the part of all actors engaged in an economic transaction. Merchants are free to sell what they wish at the prices they wish to charge, and consumers are free to pay the price that is set or to refuse to buy the product. Employers are free to set hours and wages for employees, and employees are supposedly free to accept the employer’s terms or hold out for better ones.

The workforce on sugar plantations, however, consisted of enslaved people who could legally be coerced to do whatever labor their owners decided for whatever compensation they chose to give (usually the minimum of food, clothing, and shelter required to keep the laborers alive). On the other hand, plantation owners behaved in much the same way as owners of other industrial enterprises, by setting production goals, for example. Many have pointed out that the highly regimented system of labor on sugar plantations was much like that in capitalist enterprises like textile factories. The debate is ongoing. What no one disputes is that the profits earned from the sale of sugar and other plantation products grown by enslaved people were often invested in capitalist enterprises, including the factories that were coming into existence in the eighteenth century.

Adam Smith’s ideas challenged the established mercantilist economic order and attracted critics. Some governmental leaders were understandably hesitant to surrender their power to the free market. They questioned the wisdom of reformers like Smith who disagreed with the favorable-balance emphasis of mercantilism . Conservative critics pointed out that while mercantilism might not have been perfect, it had delivered tremendous wealth to Europe, or at least to Europe’s ruling classes.

Other world leaders, most notably in Great Britain , rejected conservative critics and embraced Smith’s ideas, which promised greater potential freedoms and profits for the nation’s wealthiest citizens, and they became the dominant force in British economic reforms. The wealthy House of Commons leader Charles James Fox praised Smith’s ideas in Parliament, although he later admitted he had not read The Wealth of Nations and thought it far too long. In 1777, Prime Minister Fredrick North proposed a revised tax code based on Smith’s work. In 1792, Prime Minister William Pitt praised Smith’s work as “the best solution to every question connected with the history of commerce, or with the systems of political economy.”

Smith’s ideas spread across the Atlantic, and in 1807 President Thomas Jefferson wrote “Smith’s Wealth of Nations is the best book to be read.” As Smith’s ideas took root, governments reduced tariffs, cut back on economic regulations, and led their nations’ transition from the quest for favorable balances of trade to the search for personal profit.

Smith’s ideas remain influential, but modern scholars often criticize them. In contrast to his reliance on rational choice theory, they argue that people do not always behave rationally or make the best decisions. Others condemn the moral failings of the invisible hand, which sacrificed the lives and wellbeing of enslaved people, poor workers, and colonial subjects to provide elites with profit.

In Their Own Words

The wealth of nations.

An Inquiry into the Nature and Causes of the Wealth of Nations is better known by its shortened title The Wealth of Nations . Published by the Scottish scholar Adam Smith in 1776, it was probably the first comprehensive study of economic philosophy. Always controversial, it remains an influential work today. As you read this excerpt from it, look for Smith’s definition of the “invisible hand.”

As every individual, therefore, endeavors as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. —Adam Smith , The Wealth of Nations

• How would you explain the idea of the invisible hand in your own words?
• What are some potential benefits and drawbacks to a society’s reliance on the invisible hand?
• Do you always act in your own economic best interests? Do others? Does the invisible hand work better for some people than others? Why or why not?

Mechanization

In the late 1700s, western European nations began to adopt mechanization , the use of machines to replace the labor of animals and humans. Mechanization set the stage for the Industrial Revolution , a transition away from societies focused on agriculture and handicraft production to socioeconomic systems dominated by the manufacture of goods, primarily with machines.

People in many places, including China, Egypt, India, Greece, and Rome, had made limited use of machinery in the ancient past; however, most goods were produced by skilled artisans for local consumption. Beginning in the mid-1600s, the British enjoyed an agricultural revolution that allowed smaller numbers of farmers employing fewer farm laborers to produce a surplus of food, and that in turn led to a population increase.

In the 1700s, entrepreneur s in England found a way to make use of unemployed or underemployed farm laborers and their families. These entrepreneurs provided farm families with raw materials and asked them to produce finished goods in their cottages, a system that became known as cottage labor . Rural women spun wool or flax into thread, and men then wove it into woolen cloth or linen. Some farm families made bonnets from straw. Other people made nails, knit hosiery, or made lace. The entrepreneur collected their finished products, paid them for their labor, and sold the finished goods in towns and cities. Because the farm laborers were not skilled artisans, they could not command high wages, and the entrepreneurs reaped great profits.

In time, entrepreneurs began to gather laborers together in one location, a factory . This decision gave them greater control over production because they could hire managers to supervise the workers’ labor. It was also easier to install machines in factories than in laborers’ cottages (although laborers might be provided with or rent relatively small machines, such as knitting frames, for their cottages). Factories came to be concentrated in towns and cities. As work moved to urban areas, so too did men and women who could not find work on farms. By the late 1700s, British business owners, supported by government policies inspired by Adam Smith, were setting up factories and hiring many of these migrant workers.

During the Industrial Revolution, factories increasingly relied on machine power, most importantly the steam engine . A steam engine uses heat to transform water into steam, which expands and drives a piston to perform work. Hero of Alexandria, in Egypt, produced the first steam engine when he created the aeolipile, a simple turbine that powered toys, around the year 70 CE. Steam engines remained little more than curiosities until 1698 when the English inventor Thomas Savery used the world’s first commercial steam engine to pump water out of mines and to supply water for industrial water wheels. By 1776, British factories were powering some of their operations with improved steam engines designed by the Scottish engineer James Watt .

Locomotives and boats powered by steam engines soon delivered raw materials to the factories and transported finished goods to consumers. In 1807, American inventor Robert Fulton began operation of the first successful commercial steamboats. In 1812, Matthew Murray , an English industrialist, opened the world’s first successful steam locomotive line. Several inventors produced steam-powered vehicles that could travel on roads, but the heavy weight of steam engines and the poor conditions of most roads doomed them to failure and kept steam engines in the factories, waterways, and railroads.

Industrialization, motivated and enabled by capitalism , created tremendous wealth for business owners and middle-class professionals, but their profits often came at a high cost to workers. The production of goods shifted from the handiwork of highly skilled middle-class artisans to mechanized production done by low-paid unskilled laborers. Workers did enjoy access to new consumer goods made cheaper by industrialization, but to afford those goods they had to work long hours, in difficult and often dangerous conditions. Perhaps most importantly, workers lost control over their working conditions. Farmers and artisans, particularly those who owned their land or shops, were free to decide how and when they worked, whereas factory owners carefully regulated every aspect of their workers’ professional and even personal lives. For example, the 1848 employee handbook for the Hamilton Manufacturing Company stated that “the company will not employ any one who is habitually absent from public worship on the Sabbath, or known to be guilty of immorality.”

Some workers rebelled against industrialization, which threatened their status as skilled laborers. Beginning in 1811, a secretive group of British textile workers calling themselves Luddites began destroying textile machinery, rioting, and setting fires in response to the industrialization of their workplaces ( Figure 6.19 ). They took their name from the mythical Ned Ludd , a worker who supposedly destroyed a mechanized loom rather than submit to industrialization. As the Luddite movement grew, so did the legend of Ned Ludd, until some workers claimed that King Ludd lived in Sherwood Forest and fought corrupt industrialists, much as Robin Hood had opposed corrupt authorities during the Middle Ages. The Luddites did not argue in favor of a specific ideology or a grander purpose. They were simply angry that industrialization was destroying their traditional way of life, and they fought back with every tool at their disposal.

British leaders reacted quickly to the Luddites, with some calling them a mob worthy of execution. In 1812, the poet and peer Lord Byron responded by pointing out that these same people worked the fields, produced the goods, and served in the armed forces of the British Empire. Byron argued that the mob “often speaks the sentiments of the people” and warned “it is the mob” that “enabled you to defy all the world and can also defy you when neglect and calamity have driven them to despair.” He urged the British government to respond to the protesting workers with “conciliation and firmness” rather than violence. Most British business and political leaders disagreed with Byron and worked to suppress the rebellion. Parliament made industrial sabotage a capital offense. British authorities hanged many Luddites and exiled more to prison colonies. By 1816, the industrialists had defeated the Luddites. Today, “Luddite” is often used as a generic description of anyone opposed to technological change.

Dueling Voices

The luddites.

The Luddites were British factory workers who engaged in the destruction of machines, rioting, and vandalism to resist industrialization. Following are excerpts from two primary sources on the Luddites, describing separate incidents and written from different perspectives.

West Riding of Yorkshire The complaint of John Sykes of Linthwaite . . . taken upon oath this 6th day of March 1812 before me Joseph Radcliffe Esquire one of His Majesty’s Justices of the Peace in and for the said Riding - Who saith that between one and two o clock this Morning a number of people came to the door of his said Master’s dwelling house and knocked violently at it, and demanded admittance or otherwise they would break the door open—to prevent which this Examinnant opened the door and 30 or more people with their faces blacked or disguised came in and asked if there were any amunition guns or pistols in the house and where the Master was, on being told he was not at home they secured or guarded every person of the family and then a number of them took a pound of candles and began to break the tools and did break 10 pairs of shears and one brushing machine the property of his said Master, that one of them who seemed to have the command said that if they came again and found any machinery set up, they would blow up the premises, soon after which they all went away— Sworn before me — Joseph Radcliffe [The mark of John Sykes] —An account of machine-breaking at Linthwaite, Yorkshire, March 1812

Sir We mentioned some frames to be removed today from 10 miles off. They came totally unmolested. The soldiers did not go near the village, and the constables had no interruption whatever. We have been concerned to see these instances of removing frames because it must leave some of the country people without the means of work, but it will at the same time open their eyes to the consequence of their own proceedings. For some time before these troubles broke out, in many places a fifth of the frame workers were out of employ, and this naturally induced some hosiers (not perhaps of the first reputation) to give them particular kinds of work at reduced prices; and the hosiers who were giving the higher prices found themselves undersold in certain articles at the London Market. This again brought about new arrangements, which soured the whole body of workmen . . . resentment against those hosiers who paid the under price has been the leading feature up to the present day. They have seldom made free with other property altho’ opportunities at all times have presented themselves, and in one instance lately at Clifton, some cloths that one of the frame breakers brought away, were carefully sent back again the following day. —A letter sent to London from a magistrate describing the situation in Nottingham, February 1812

• What are the key similarities and differences between the two accounts?
• Why do you think they provide such different views of the Luddites?
• Was the Luddite rebellion a reasonable response to the challenges posed by industrialization? Why or why not?

Karl Marx was a highly controversial intellectual and revolutionary. Born in 1818 in Trier, in what is now Germany, he grew up as the son of a successful lawyer and was baptized into the Evangelical Church when he was six years old. As a young man, he studied law at the University of Berlin, where a professor introduced him to the philosophy of Georg Hegel . Marx quickly embraced Hegel’s idealistic universal history, which suggested the world is progressing through conflicts toward greater freedom. After completing his education, he worked as a journalist and writer.

In 1848, Marx published The Communist Manifesto with his co-author Friedrich Engels . In the book, the two argued that “the history of all hitherto existing society is the history of class struggles.” Their idea, that recognizing the class struggle between workers and the ruling class is central to understanding societies, is also known as Marxism ( Figure 6.20 ). In addition to laying out their vision of history, Marx and Engels predicted that society would eventually replace current economic systems with socialism , a system in which the public, not private companies or individuals, owns the means of production. In their view, socialism was one phase of the transition from the private ownership characteristic of capitalism to the completely classless society of communism . They called for the forcible overthrow of current societies, a statement many communists around the world embraced as a declaration of war on capitalism . The ideals of communism were inspired by the abuses of capitalism that often exploited workers.

Link to Learning

Karl Marx published The Communist Manifesto with his co-author Friedrich Engels in 1848. Many writers from across the political and ideological spectrum inaccurately portray the ideas in The Communist Manifesto to support their own ideas or to paint their opponents in a negative light. Consider reading The Communist Manifesto for yourself and drawing your own conclusions about what the work says and what it might mean to you.

Marx’s book Das Kapital , published in 1867, is one of history’s most often cited sources on economics and politics. In Das Kapital , Marx argued that the bourgeoisie , members of a social class that owned the means of production, were primarily motivated by the desire to exploit labor. In his view, employers paid wages to their workers, also known as the proletariat , that were far less than their labor was worth. They then kept the excess value produced by wage earners, in a process Marx argued was unfair to the workers. Employers used their profits to purchase additional resources and to buy political influence to ensure that the law would support the wealthy instead of the workers. The wealthy became unfit to rule as they increasingly leveraged their growing economic and political power until workers were left powerless and in poverty. Eventually the capitalist system would collapse, and the workers would reclaim control of society.

The Past Meets the Present

Marx on capitalism and communism.

Karl Marx died almost 150 years ago, but his ideas remain widely debated. In 1867, Marx published the first volume of Das Kapital , and it quickly reached a wide audience among those interested in history, economics, and politics. After his death in 1883, Fredrich Engels, his co-author on The Communist Manifesto , published the second and third volumes of Das Kapital based on Marx’s notes. In this quote from Das Kapital , Marx explained his view of the origins of capitalism.

The economic structure of capitalist society has grown out of the economic structure of feudal society. The dissolution of the latter set free the elements of the former . . . [T]he historical movement which changes the producers into wage-workers, appears, on the one hand, as their emancipation from serfdom and from the fetters of the guilds, and this side alone exists for our bourgeois historians. But, on the other hand, these new freedmen became sellers of themselves only after they had been robbed of all their own means of production, and of all the guarantees of existence afforded by the old feudal arrangements. And the history of this, their expropriation, is written in the annals of mankind in letters of blood and fire. —Karl Marx , Das Kapital

Long after Marx’s death, his ideas continued to provide inspiration for people dissatisfied with inequality between social classes and angered by injustices. In 1917, revolutionaries in Russia, inspired by Marx’s ideas, overthrew the government and established a new communist society that became the Soviet Union and existed until 1991. Subsequent communist revolutions gave rise to governments that still exist in China, Vietnam, North Korea, Cuba, and Laos. Even in capitalist countries, communist and socialist political parties exist and are often quite popular with voters. Senator Bernie Sanders of Vermont proudly calls himself a socialist, although as many have pointed out, he does not seek to overthrow capitalism or advocate public ownership of the means of production.

• What is capitalism, as described in this excerpt from Das Kapital ? According to Karl Marx, what are its origins?
• How does Marx’s view of history agree or disagree with what you know about history?
• Are Marx’s ideas still relevant today? Why or why not?
• What would Marx say about the history of the world since his death? Have events since 1883 supported or undermined his arguments?

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World History Project - 1750 to the Present

Course: world history project - 1750 to the present   >   unit 4, read: the emergence of industrial capitalism.

• READ: Class Structure
• READ: Rise of the Proletariat
• READ: Responses to Industrialization
• READ: Ottilie Baader (Graphic Biography)
• READ: Child Labor
• BEFORE YOU WATCH: Capitalism and Socialism
• WATCH: Capitalism and Socialism

First read: preview and skimming for gist

Second read: key ideas and understanding content.

• What two elements does the author use to define capitalism at the beginning of this article?
• What are credit and interest, and why did they become more common in this period?
• What is a bank, and how did the idea of a bank get to Europe?
• What are bonds, and how did the English government get involved in issuing bonds?
• How did joint-stock companies help stimulate trade?
• How did joint-stock companies help stimulate empire?
• What two elements did capitalist individuals and joint-stock companies combine in order to produce things and make profits?

Third read: evaluating and corroborating

• Throughout this article, the author points out that capitalism was a major innovation, but they also point out that some elements of capitalism had been around for a long time. Viewed through the production and distribution frame, what was new about capitalism around 1750?
• You heard a lot about industrialization in the last unit, and you’ve encountered some information about reform movements in this unit. How do you think capitalism helped create a need for reform movements in the Long Nineteenth Century?

Overview of New Economic Systems

Introduction, innovations in finance.

• Private individuals or groups of individuals invest their money (“capital”) in assets or in companies, making them owners or part owners
• Labor, raw materials, and finished products are exchanged on a free market where the buyer and seller agree on prices

Empire and finance

From the middle class to the free market, want to join the conversation.

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The Industrial Revolution & the Rise of Capitalism

Introduction.

• People who do not know their past cannot fully understand the main principles of society
• Every period in history has a certain impact on people’s thoughts
• Industrial Age still has a great influence on modern people
• The perception of wealth significantly changed during the Industrial Age
• The emergence of Capitalism along with the Industrial Revolution
• The perception of wealth and business has changed since the times of the Industrial Age

The Industrial Age

General information.

• The Industrial Age started in Great Britain in the 18 th century
• The number of factories and plants was rapidly growing
• In production, the main focus was on the separation of standardization and labor
• The optimization of production and maximization of profits for businesspeople
• Many companies appeared during the Industrial Revolution
• The Industrial Age quickly spread to the whole of Europe (Hartwell, 2017)

Main Features

• The transition from manual production to mechanization
• The focus on active consumption and mass production
• The rapid development of technology
• A considerable economic growth
• The improvement of the overall quality of people’s lives
• The development of Capitalism

Disadvantages

• The limited access of the working class to the goods they were producing
• The growing power of wealthy people in the sphere of economy
• The increasing social stratification
• It was very difficult for poor people to start their own business
• Task separation
• The decreasing control over the competition
• It was almost impossible for low-income people to improve their financial situation (Mantoux, 2013)

Main Peculiarities

• Capitalist society appeared in the 18 th century
• The first reason for the occurrence of Capitalism is the rapid development of technologies
• The second reason is the increasingly growing population
• Positive changes in the agricultural sector
• The increase in the economic growth
• Capitalism and Socialism are incompatible due to major differences between them (Hudson, 2014)

Disadvantages of Capitalist Society

• The increasing control over resources by wealthy people
• The growing chasm between the working class and the upper class
• The introduction of certain rules and restrictions on factories and plants
• The reduction of the government control overproduction
• Fewer opportunities for poor people to become successful
• The growing indignation of the working class
• The increasing environmental pollution (Mantoux, 2013)

Contemporary Society

Capitalism today.

• The main principles of Capitalism have not changed since its occurrence
• The focus on consumption and mass production has become even stronger
• Environmental pollution has become a major problem
• The negligence towards safety restrictions
• The suppression of democracy
• The increasing propaganda
• The problem of social inequality remains (Amin, 2014)

The Perception of Wealth

• A survey regarding the business people’s perception of money, wealth, and the process of production was conducted
• The age of participants was from 27 to 38 years
• 90% of respondents agreed that the increased consumption is one of the main features of progress
• 60% of respondents believed that it was more efficient to focus on the quantity of production rather than on quality
• 80% of respondents admitted that it was very difficult for people from the low and middle classes to become successful
• 60% of respondents agreed that in modern business, people are not regarded as resources
• Almost all the respondents admitted that maintaining a competitive advantage is crucial in modern business (Amin, 2014)
• Industrial Revolution caused many changes in the sphere of business.
• Capitalism changed people’s perception of business, wealth, and production.
• The key features of capitalism are profitability, social stratification, task separation, and the decrease in the government control.
• Employee effectiveness fully depends on employee happiness.
• The increasing number of employers focus on creating a positive work environment.
• Still, many employers regard their subordinates as resources.

Amin, S. (2014). Capitalism in the age of globalization: The management of contemporary society (2nd ed.). London, UK: Zed Books Ltd.

Hartwell, R. M. (2017). The industrial revolution and economic growth (Vol. 4). Abingdon, UK: Taylor & Francis.

Hudson, P. (2014). The industrial revolution . London, UK: Bloomsbury Publishing.

Mantoux, P. (2013). The industrial revolution in the eighteenth century: An outline of the beginnings of the modern factory system in England . London, UK: Routledge.

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Capitalism Has Become An Ideology In Today's America. Here's How It Happened

Rund Abdelfatah

Ramtin Arablouei

Capitalism: What Is It?

A demonstrator holds a sign reading "I love capitalism" during a protest against California's stay-at-home order in 2020. Capitalism started as an economic system; it has become an ideology in the modern United States. Robyn Beck/AFP via Getty Images hide caption

A demonstrator holds a sign reading "I love capitalism" during a protest against California's stay-at-home order in 2020. Capitalism started as an economic system; it has become an ideology in the modern United States.

The Throughline team has been thinking about capitalism a lot these days. It's hard not to when so many people are struggling just to get by.

Capitalism is an economic system, but it's also so much more than that. It's become a sort of ideology, this all-encompassing force that rules over our lives and our minds. It might seem like it's an inevitable force, but really, it's a construction project that took hundreds of years and no part of it is natural or just left to chance.

So here's what we did. First, we wanted to look at what makes American capitalism distinct, if it is even distinct ? Is it uniquely individual, uniquely efficient, uniquely cutthroat? Like, these are all the things that we've been thinking about a lot.

A young girl interacts with an employee maintaining one of tanks at New Jersey SEA LIFE Aquarium inside the American Dream mall in East Rutherford. Michael Loccisano/Getty Images hide caption

A young girl interacts with an employee maintaining one of tanks at New Jersey SEA LIFE Aquarium inside the American Dream mall in East Rutherford.

And so we brought together three REALLY DIFFERENT experts who come at these questions from REALLY DIFFERENT points of view.

Bryan Caplan's an economist and adjunct scholar at the Cato Institute, Vivek Chibber studies Marxist theory and historical sociology, and Kristen Ghodsee is an expert in what happened after the fall of communism in Russia and Eastern Europe.

And we had a conversational round of analysis that led us from colonial times, through waves of innovation and American development to the American Dream Mall in New Jersey.

We compared the happiness index in countries to see crazy things like how much happier people in Denmark report that they are, compared to Americans.

But that's not all. We wanted to dive deeper into the dominance of Capitalism in the 20th century American mindset .

What's the role of government in society? What do we mean when we talk about individual responsibility? What makes us free? 'Neoliberalism' might feel like a term that's hard to define and understand. But it's the dominant socio-economic ideology of both major American political parties — Republican and Democrats — no matter how much partisan rhetoric might be geared towards absolute division.

And this ideology, this belief in free markets, deregulation, and privatization can be traced back — pretty directly — to a group of men meeting in the Swiss Alps.

On April 10, 1947, a group of 39 economists, historians and sociologists gathered in a conference room of a posh ski resort at Mont Pelerin, Switzerland. Glasses clinked. Cigars burned. A mission statement was written.

And from that meeting, they would start an organization called The Mont Pelerin Society, MPS. The ideas discussed in that room more than 70 years ago would evolve and warp and, this is no exaggeration, come to shape the world we live in. Those ideas have dominated our economic system for decades. In the name of free market fundamentals, the forces behind neoliberalism act like an invisible hand, shaping almost every aspect of our lives.

From the TV advertisements we all grew up watching to the way the internet is understood today.

Capitalism: What Makes Us Free?

That's not all. We're also dropping a third episode on Capitalism this coming Thursday, July 8. For that episode, we explore how religion and capitalism joined forces to change the way we think about our work, our society, and ourselves — the Prosperity Gospel.

To receive it when it drops subscribe here in Apple Podcasts or wherever else you get your pods.

We will keep fighting for all libraries - stand with us!

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Literature and the rise of capitalism; critical essays mainly on the sixteenth and seventeenth centuries

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Capitalism in the USA 1900 to 1940

How did the Great Depression in the USA bring about a crisis of capitalism?

Background and focus

It is important to understand that the focus of THIS section is almost in direct contrast to the previous topic.

Previously, learners were required to understand how the USSR had developed. WE now look at Capitalism and

its development in the US. Learners MUST understand that this topic, along with the previous one, will set them

up for studying the bipolar nature of the globe in Grade 12. So, pay attention, and make notes for next year.

Having looked at socialism (and the USSR) in the previous topic, we now investigate capitalism as it developed

in the USA.

We study the crisis of capitalism that occurred as a result of the Great Depression. At the time of conception,

Roosevelt’s New Deal was criticised by some for bringing in socialism. Learners must analyse these criticisms,

which relate to the New Deal Programmes that were set up to bring about relief, recovery and reform.

Could Roosevelt’s form of state intervention to create jobs, as well as the welfare system he set up, be

considered socialist reform, and did he thereby undermine the capitalist system in the USA?

There was a list of conditions that existed in 4 phases:

1.     The growth of Capitalism during the 19 and 20 centuries in the US.

2.     The conditions that led to the Great Depression.

3.     The policies that attempted to address the Great Depression.

4.     The criticisms of the New Deal.

This section includes the following:

-· the nature of capitalism in the USA

Online Resource:

http://www.newhistory.org/CH07.htm [Accessed: 10/02/2015]

http://www.goodreads.com/book/show/8723692-american-colossus [Accessed:10/02/2015]

 - entrepreneurial and competitive; with rugged individualism; free market; and with minimal state control over business;

”¢ the American dream of individual possibilities - ‘rags to riches’;

Online Resources:

http://www.publicagenda.org/press-releases/hard-work-is-essential-for-achieving-the-american-dream-but-is-it-enough-americans-are-divided-according-to-a-new-survey [Accessed: 10/02/2015]

https://www.youtube.com/watch?v=OvJ8YDma7Wk [Accessed: 10/02/2015]

Ӣ capitalist boom of the 1920s: strengths and weaknesses in the US economy;

Ӣ USA society in the 1920s;

Source: http://rationalrevolution.net/images/income_1918_1929.png [Accessed: 10/02/2015]

Ӣ Wall Street crash of 1929: reasons for and economic and social impact;

Black Tuesday – 29 October 1929

Source: http://rationalrevolution.net/images/income_1929_1932.png [Accessed: 10/02/2015]

http://www.economicshelp.org/blog/76/economics/wall-street-crash-1929/ [Accessed: 10/02/2015]

http://www.historylearningsite.co.uk/Causes_of_the_Great_Depression.htm [Accessed: 10/02/2015]

Causes of the Great Depression

1.Credit boom

2.Buying on the margin

3.Irrational exuberance

4.Mismatch between production and consumption

5.Agricultural recession

6.Weaknesses in the Banking Sector

Source: http://www.economicshelp.org/blog/76/economics/wall-street-crash-1929/

Source : http://newsimg.bbc.co.uk/media/images/40459000/gif/_40459863_wall_street_boom_gra416.gif                          [ Accessed: 10/02/2015]

http://history-world.org/great_depression.htm [ Accessed: 10/02/2015]

Ӣ E lection of Roosevelt: offering a New Deal;

Source : http://image.slidesharecdn.com/usdepthstudy1-140929100512-phpapp01/95/usa-depth-study-new-deal-62-638.jpg?cb=1412003186 [ Accessed: 10/02/2015]

The New Deal...as proposed by Franklin D Roosevelt encompassed the following:

http://education-portal.com/academy/lesson/franklin-d-roosevelt-and-the-first-new-deal-the-first-100-days.html [Accessed: 10/02/2015]

http://education-portal.com/academy/lesson/the-second-new-deal-social-programs-and-their-resistance.html [Accessed: 10/02/2015]

https://www.youtube.com/watch?v=X60Nei2560w [ Accessed: 10/02/2015]

The Agencies

Collections in the Archives

Know something about this topic.

Towards a people's history

The New History of American Capitalism

Since the start of the 2000s, historians have renewed their interest in capitalism, two Harvard professors observe in their new book, American Capitalism: New Histories. One of the primary contributing factors for this, according to Sven Beckert and Christine Desan, is the expanding tide of market forces following the fall of the Berlin Wall, the collapse of the Soviet Union, and the end of the Cold War. “Capitalism of a wide variety of institutional and ideological stripes, now characterizes all developed countries,” they observe.

In this excerpt from the book’s introduction, Beckert and Desan look to how scholars in history, law, and political science are redefining capitalism in light of the American experience. Essayists write on such diverse subjects as markets, selling of slave clothing, the Gilded Age, women’s rights, money and finance, risk management in the twentieth century, and modern agriculture.

By Sven Beckert and Christine Desan

The new history of American capitalism builds on these disciplinary trends in history, economics, political science, and law; indeed, it would be unimaginable without them. At the same time, it represents a distinctive departure.

First—and most basically—the history of American capitalism, along with the essays gathered here, reinstalls political economy as a category for analysis. Economic life, all the authors agree, is crucial to understanding the history of the United States. But rather than taking the subject as given, they explore it as politically constituted. If “the market” is neither a discrete phenomenon nor marginal to human experience, then basic structures of governance become important. Rather than assuming that exchange for profit naturally produces a particular infrastructure for transactional activity, new scholarship asks what forces shape modern patterns of economic activity and how those patterns sort people and resources. Instead of reproducing conventional dichotomies, current historians of American capitalism contest the line between public and private that had seemed to neatly divide politics and markets, states and economies.

"The new history of American capitalism targets the lived experience of people and groups as they assimilate—and reshape—the political economy they engage"

The connection between markets and political order has been a perennial topic for writers on capitalism, from Progressive historians who argued that elites used the advantages of wealth to skew political structures in their favor to consensus historians who found more widespread support for a market-oriented liberal political order. Echoes of this debate lingered through the late twentieth-century scholarship that sought to locate and date the American “market revolution,” contending over the visions of political voice and material development embedded in agrarian, “republican,” and “liberal” orientations. Capitalism scholarship revisits many traditional questions with the tools generated by the innovation of past decades, including the relationship between money and power, commerce and politics, exchange and social status. Its effort is to find new ways of exploring how institutions, political movements, and legal formations like debt, contract, and property come into being and inflect material and ideological life.

Other writing identifies as transformative a radical redesign of money and finance that, during the Enlightenment, institutionalized the self-interested activity of investors as the compass for public systems. That experiment generated particular turmoil recently when a series of actions, many profit-driven, others unwitting, accelerated financialization.

Second, the new history of American capitalism targets the lived experience of people and groups as they assimilate—and reshape—the political economy they engage. No generic truck and barter here; scholars find instead distinctive regimes of interaction and peculiar modes of relation. They study capitalism in action.

This new focus lies at the intersection of two legacies from the historiography traced above—historians’ tendency to expand their subjects of study and their orientation toward methodologies tuned to the experiential dimension. Capitalism scholars today are interested in the narratives created by the interplay of a broad variety of actors, from those who organize businesses to those who consume, trade, plant, and work. They focus on actually existing capitalism, not the ideal types developed by various social scientists during the past two centuries.

One of the prime foci of social history, for example, was the history of labor. The history of capitalism picks up that interest but moves beyond wage labor in an industrial setting. Recent histories look at enslaved workers, sharecroppers, and other nonwaged workers and shift attention from the industrial cities of the Northeast to the nation as a whole. That approach allows scholars to interrogate the connections between slavery and the unfolding of capitalism. The project has undermined one of the deepest dividing lines of American historiography, between Southern and Northern history. The effect is to restore the centrality of violence and coercion to the history of capitalism while problematizing both liberal and Marxist understandings of capitalism as defined by its reliance on wage labor. At the same time, historians have reconceptualized commodification, sale, and ownership, recasting the market as a place of colliding human ambitions, fantasies of wealth, modes of resistance, acts of brutality, tenderness, and heroism.

Slavery’s relocation into capitalism is only the beginning point for a group of scholars studying racialization as an enduring American strategy for the coercion and control of labor, particularly African American labor. Race and capitalism is an expanding area, reaching subjects as varied Jim Crow, migration, urban studies, the carceral state, and black property rights movements. Approaches vary greatly, but many scholars attend closely to the subjects who receive, impose, resist, or recast race as a category. Their work erodes the image of exchange between equally situated agents and locates it in a field of power and culturally constructed valuation.

New histories reach other actors in the political economy, including shoppers, businesspeople, financiers, and traders. Thus Liz Cohen, in her Consumer’s Republic, looks at the ways consumers helped construct a new kind of political economy—through both individual preferences and politically informed collective action. By following the lines that join purchasers to those who market to them, fund production, and organize economic exchange, scholars have rediscovered financiers, industrialists, and managers, considering them not only as economic actors but also, and especially, as political, ideological, and cultural agents. Slave traders and New York financiers, Boston merchants, and Pittsburgh industrialists feature prominently in many of these accounts.

These accounts not only bring diverse actors into the narrative, they do so to quite different effect than older histories. Alfred Chandler’s approach, for example, sometimes presented businesspeople as almost powerless actors who could do little more than watch as modernity restructured American business enterprises. By contrast, new historians of capitalism present businesspeople as influential actors, but situate them within social networks. Scholars draw on Pierre Bourdieu, among others, to investigate how businesspeople accumulated not just wealth but cultural and political capital. The work on the rise of right-wing politics in the United States after the 1970s, for example, makes such political activities and identities of businesspeople visible, and sees them as crucial to the emergence of a new kind of political economy.

A third point of departure in the new literature concerns the production of knowledge. Sometime in the twentieth century most historians lost faith in the notion that they were intermediaries; it no longer seemed possible to conceive of the historian’s task as only translating the mysteries of a distant world for those in the present. Now the ways of knowing that held together a particular time, its events and ideas, mattered as well. Equally important was a historian’s own interpretative agency, her mode of creating coherence, which inflected the narrative in innumerable ways. History’s journey from self-identifying as an objective or naively empirical project wound through the pragmatism of the Progressive era, the critical existentialism of the mid-twentieth century, the efflorescence of social constructivism and the cultural turn in the 1970s and 1980s, through postmodern and postcolonial arguments about the subject.

One of the legacies of that debate is that historians of capitalism routinely subject to scrutiny narrative perspectives and conceptual orthodoxies, both their own and those of others. Modes of organizing and conveying knowledge themselves have become worthy subjects for query. The history of “disciplines, genres, paradigms, and other forms of representation” joins the study of social, cultural, political, and economic phenomena.

Drawing on an influential stream of pioneering works, scholars now problematize in particular the isolation of the economy as a subject matter and economics as a discipline. They have interrogated the relationship of the discipline of economics with the subject it studies and considered how models and images of the market claimed to communicate reality. Timothy Mitchell, for example, explores how the parameters of economic expertise shape the questions the discipline investigates, while others have scrutinized how data and statistics come to represent the authenticity of phenomena. Those studies amplify the argument, notably articulated by feminist scholars who early recognized that household labor had been read out of the record, that determinations about what is identified, measured, and counted create the “real economy.” As Susan Buck-Morss observed about the visualization of economic data, “In the crossing of the supply-demand curve, none of the substantive problems of political economy are resolved, while the social whole simply disappears from sight.”

In concert with that sensibility, capitalism scholars have interrogated the structures of belief, assumption, and culture that underlie the ascendance of credit, the embrace of speculation, and the legitimation of self-interest as a driver of human behavior. Legal and institutional scholars similarly seek to dereify categories that organize or enable exchange, including property, contract, money, and the classical dichotomy that divides the “real economy” economy itself from its “nominal” counterpart.

"New historians of capitalism present businesspeople as influential actors, but situate them within social networks"

Finally, the new history of American capitalism has often taken a more global perspective. That trend draws on the emergence of global history as a thriving research field, one in which economic issues play a central role. Flows of capital, labor, and science linked developments across oceans; trade bound national economies to one another; and financial institutions grounded in particular places colonized the capitalist global economy as a whole, connections that were overlooked by more locally focused histories.

Capitalism has not observed boundaries, and now neither do those studying it. Scholars currently working on American capitalism emphasize transnational flows of capital, people, ideas, and institutions, whether they are looking at trade relations in early America or considering the transnational history of neoliberalism. The rich literature on “varieties of capitalism” has fed that comparative perspective. And more recently, histories of various commodities—sugar, rice, tobacco, indigo, and cotton—have embedded the history of American capitalism in a larger global story of the spread and intensification of capitalism.

Within such a global perspective, however, the emphasis on understanding capitalism as a political economy counterbalances some of the more enthusiastic globalization narratives. No matter what the scale of analysis—local, regional, national, or global—the new history of American capitalism’s insistence on the importance of the state sees the global market not as an area outside public authority but as one shaped by rules, laws, treaties, and the distribution of power between states. Globalization and state formation constitute one another.

In the process of engaging these issues, historians of American capitalism have reimagined both the spatial divisions common to Americanists and the temporal frame of American history. The focus on capitalism has brought the history of the antebellum North and South into one narrative, for example, while scholars have attempted to integrate the West more broadly into an understanding of American capitalism. Similarly, issues raised by the history of capitalism transcend firm temporal markers such as the Revolution, the Civil War, or the New Deal, even as those events shape political economy in important ways. The project to understand how capitalism both observes and obviates borders at the global level has had, it seems, an impact even in the most local matters.

This volume is deeply indebted to long-running conversations between and within the disciplines. It is also indicative of changing understandings of American capitalism and approaches to exploring it. Invited to discuss the phenomenon of American capitalism according to their own lights, our authors spread out across the last three centuries of the American experience. They emphasized developments emblematic of the modern political economy such as bond markets, corporations, the concerns of wage labor, and the Commerce Clause, but they focused as well on subjects outside the traditional repertoire, including slavery, the rights of women, the utopian claims of late-nineteenth- century monopolists, and rationales that recast capitalism as a matter of state. As they worked, they created new approaches to American capitalism.

Reprinted from American Capitalism: New Histories with permission of Columbia University Press, Copyright 2018.

About the authors

Christine Desan is Leo Gottlieb Professor of Law at Harvard University and co-founder of the Program on the Study of Capitalism. She is the author of Making Money: Coin, Currency, and the Coming of Capitalism (2014).

Related Reading:

The Clear Connection Between Slavery and American Capitalism Rediscovering Schumpeter: The Power of Capitalism It Came in the First Ships: Capitalism in America

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Does capitalism have a future? A review essay of Peter Boettke’s The Struggle for a Better World and Daniel Bromley’s Possessive Individualism: A Crisis of Capitalism

Ilia murtazashvili.

Graduate School of Public and International Affairs, University of Pittsburgh, Pittsburgh, PA 15260 USA

In this review essay, I compare and contrast Peter Boettke’s The Struggle for a Better World (Mercatus Center, 2021) and Daniel Bromley’s Possessive Individualism: A Crisis of Capitalism (Oxford University Press, 2019). Each of these books considers the future of capitalism. Boettke’s Struggle sees capitalism as the only morally and economically justifiable system but that continual effort is necessary to ensure the capitalist enterprise succeeds. Bromley’s Crisis sees capitalism as a spent force that no longer does what it was meant to do—namely, improve the economic well-being of households. There are surprisingly many points of agreement in these books, most notably a concern for the downtrodden in society and an appreciation for the legitimation crisis confronting capitalism. There are also important differences that will give anyone interested in the future of capitalism much to ponder. Boettke sees unconstrained government as the primary threat to legitimacy; Bromley identifies the possessive individualism that lies at the heart of our current capitalist system as the source of the crisis. Both books make a significant contribution to our understanding of the institutions governing capitalist economies and powerful arguments as we contemplate the future of capitalism.

Introduction

Does capitalism have a future? In this review essay, I compare and contrast two books that offer sweeping, insightful accounts of the past, present, and future of capitalism. Peter Boettke’s The Struggle for a Better World ( 2021 ) (hereafter Struggle ) is an eloquent defense of liberalism—a “doctrine of economic and political life grounded in the recognition that we are one another’s dignified equals, and that justice demands equal treatment of equals” (p. 7). Liberalism is about power for the people, not the privileged elites. Boettke’s collection of essays offers a superb defense of capitalism grounded in an appreciation for the way that spontaneous order makes the best use of the human imagination and a deep concern for the damage done when government becomes unshackled Leviathan.

Daniel Bromley’s Possessive Individualism: A Crisis of Capitalism ( 2019 ) (hereafter Crisis ) sees capitalism as a spent force because its concern with improving the well-being of households has been replaced by its singular focus on profiting by what Bromley calls “wrangler capitalists” – those capitalists who specialize in buying, selling, and reorganizing businesses (pp. 55–56). According to Bromley, the problem is possessive individualism: an overwhelming concern is to “stay focused on controlling costs,” much like what a comptroller does (p. 23). Economics used to be concerned with how households provide for themselves but has become preoccupied with the atomistic individual. Did, as Boettke suggests, and as Deirdre McCloskey and Art Carden ( 2020 ) have persuasively argued, liberalism make us better and richer humans? Not so, for Bromley. We have more stuff, but what about the quality of our working lives? For many workers, the current situation is nothing to gloat about.

Each author speaks from a position of credibility as a scholar and institution builder. Boettke has done as much as anyone to advance contemporary Austrian economics. Bromley is known for work in the tradition of the so-called old institutionalists, such as John Commons. There are important differences between the traditions. For one, Austrians and institutionalists differ in their beliefs about general economic truths: Austrians think there are such truths but question whether mathematical formalism is the way to find them, while institutionalists, especially the old institutionalists, find such truths chimeral (Boettke et al., 2003 ).

Despite differences in their perspectives, these books have much in common. The shared framework should not come as much of a surprise. Though institutionalism is sometimes contrasted with institutionalism in economics, Austrians, as Boettke ( 1989a ) explains, are and always have been institutionalist. Austrian institutionalists such as Hayek and Mises are completely in agreement with the old institutionalists (and the new version) that the structure and scope of economics ought to be concerned first and foremost with “the consequences of alternative institutional arrangements” (Boettke, 1989b , p. 78). Simply put, Austrian economics is institutional economics (Palagashvili et al., 2017 ).

Besides a shared concern with institutions, each of these books recognizes a legitimacy crisis. Boettke’s Struggle begins by noting that trust in public institutions of governance, private institutions of finance and commerce, and social institutions of community are confronting a severe stress test. For example, George Floyd’s murder cannot be tolerated in a liberal society. Rust Belt cities such as Detroit and Pittsburgh continue to grapple with economic malaise, despair, and addiction. True radical liberals, as Boettke explains, have inherited a problematic past and face a troubling present. There is no shortage of interesting work pointing out how we are so much better off now than in earlier centuries. But pointing out how economic freedom is associated with wealth does not really explain why there is so much anger, and the fact is that much of the world remains extremely poor. Boettke knows not all is well in society, though liberalism is not the problem.

Bromley’s Crisis is motivated in part by the recent electoral victory of populist leaders, including Donald Trump. Trump is a grifter, but this surprising victory was not a cause of the crisis. Trump, in Bromley’s words, is “merely a noxious messenger” (p. 232). Bromley contends that people are angry because managerial capitalism, with its emphasis on cutting costs, has failed them.

John Meadowcroft ( 2019 ) explains that James M. Buchanan was especially concerned with the status of the status quo. So too are Boettke and Bromley’s books. But their understandings of the causes differs. Boettke argues that public misconduct, not private misconduct, ruins nations. Unshackled Leviathan is the problem. For Bromley, the problem is capitalism.

My goal in this review essay is to consider where these books differ in their understanding of capitalism, their diagnosis of the problem giving rise to the legitimation crisis, and their suggestions about what ought to be done. It is not to choose one argument over another. Each of these books masterfully weaves together insights gained through the authors’ decades of careful inquiry on the nature of capitalism. Each shows a masterful understanding of institutions. I hope that anyone especially optimistic about capitalism will take Bromley’s critique seriously and that anyone especially optimistic about government’s ability to solve the problem will consider carefully Boettke’s impassioned arguments.

The rest of this essay is structured as follows. First, I suggest that an important difference is that Struggle focuses on capitalism as exchange of goods and services, while Crisis places much more emphasis on the transition from merchant capitalism to industrial, then financial, and then managerial capitalism. By the time we get to managerial capitalism, goods and services are still exchanged, but labor has far less bargaining power under the current system of capitalism than under previous ones. Next, I consider differences in how these books conceptualize the problem: Boettke’s issue is with government, while Bromley’s is with possessive individualism. Finally, I contrast the two authors’ advice about the future.

Capitalism or capitalisms?

Boettke’s Struggle places Adam Smith at the forefront. One might think this is an obvious starting point since we are concerned with economies. But anyone familiar with the typical PhD program’s course sequence in microeconomics will know that Smith is treated as a footnote in a course devoted mainly to proving one’s mathematical chops.

But ignoring Smith has significant costs, especially if we are concerned with vulnerable people. In Boettke’s hands, Smith becomes a figure much like Johnny Cash: someone profoundly concerned with the voiceless and the downtrodden. Liberalism, as Boettke explains, means extending a hand to strangers in order to lift the dispossessed and the desperate out of poverty. 1 Smith’s Wealth of Nations argued that individuals should be free from domination and that those who are more powerful should not determine the material conditions of those who have less power because no society can flourish if the greater part of its members are poor and miserable. This is the central theme in the liberal tradition. F.A. Hayek understood the liberal project as the abolition of privileges of the few that kept down the many. It is a point made explicitly in the 1956 edition of The Road to Serfdom “The essence of the liberal position is the denial of all privilege, if privilege is understood in its proper and original meaning of the state granting and protecting rights to some which are not available on equal terms to others” ( 1956 [1994], p. xxxvi). In addition, in The Constitution of Liberty , Hayek states that the “true contrast to a reign of status is the reign of general and equal laws, of the rules which are the same for all, or, we might say, of the rule of leges in the original meaning of the Latin word for laws – leges that is, as opposed to the privi-leges ” (emphasis original, Hayek, 1960 , p. 154). Buchanan believed that the struggle for political liberalism is an effort to free individuals from the ruling elite. Boettke favorably references McCloskey’s Why Liberalism Works ( 2019 ) in noting that true liberalism means no racism, no imperialism, no unnecessary taxes, and no slaves at all. 2

Boettke’s essays ( Crisis is a collection of essays bookended by a wonderful introduction and conclusion) are exceptionally useful as a corrective to any argument that classical liberalism supports oppressive institutions such as slavery and segregation. Others have debunked such arguments (see, for example, Fleury and Marciano 2018 ). Struggle is not a direct response to those criticisms. Rather, it shows that Smith was an ardent defender of consent as a general organizing principle and an enemy of privilege as a means of organizing economic activities.

But could Smith have foreseen the evolution of capitalism? And should we place blame on government when capitalism and democracy seem so intrinsically bound up that it seems impossible to even separate them? 3 Bromley’s Crisis recognizes that the capitalism that Smith understood so well has changed a great deal since his time. And we know that the core of Bromley’s book is to analyze the transition from merchant capitalism to industrial capitalism to financial capitalism and, finally, to the managerial capitalism of today. These gradual shifts are characterized by “the primacy of a central personified medium—the entrepreneur of merchant capitalism, the engineer of industrial capitalism, the banker of financial capitalism, and the wrangler of today’s managerial capitalism” (emphasis original, p. 55). 4

Bromley’s description of capitalism is significant and useful, especially when we consider that Smith introduced new ideas about how we think about capital and capitalism. 5 Before Smith wrote about it, capital was a sum of money that was to be invested or had been invested. But then it became the things themselves – the goods traded. Conceptualizing of capital as physical things and capitalism as exchange was a historical sleight of hand, one with important consequences: it makes us lose track of the changes in capitalism since we become concerned with physical things rather than legal relationships and the rules governing capitalism.

Smith’s novel approach to capital and capitalism meant that the conversation about capitalism was often less institutionally rich than it could have been. This does not mean Smith had no role for institutions. Gary Anderson and Robert Tollison ( 1982 ) showed that Smith was critical of the English East Indian Company. Smith believed the problem was government failure rather than a market failure. And Nathan Rosenberg recognized Smith’s preoccupation with establishing the conditions under which market mechanisms operate most effectively and that tree operation of “certain impulses, motivations, and behavior patterns were calculated to thwart, rather than to reinforce, the beneficent operation of market forces” ( 1960 , p. 569). Institutions, including government ones, are necessary because cooperation is not inevitable. Rather, Smith’s institutionalism, like Boettke’s, focuses on the political side of the institutions governing capitalism as the problem. 6 Thus, when Smith speaks of capitalism requiring an appropriate constitutional framework, it is mostly about ensuring that the government limits its activities – a view quite similar to Boettke’s Struggle . Bromley, in contrast, is much more interested in the evolutionary stages of capitalism, and the consequences of these shifts.

What changes ought we to be concerned with? The rigid hierarchies of precapitalist relations came under pressure as labor’s bargaining power improved as a result of plague and warfare in the fourteenth century. By the end of the fourteenth century, most agricultural laborers had become quasi-independent agricultural entrepreneurs who were no longer willing to underwrite wars. Copyhold emerged as an institution – and with it, rental contracts to use land replaced in-kind payment for privileges to use land. Now lords held the king’s land and independent families held the lord’s land. Copyhold put us on the road to fee simple, the most complete property right. 7 This institutional development enabled the rise of merchant capitalism and the entrepreneur, but much would be lost as capitalism evolved. Workers lost control of their means of production (labor) with the rise of industrial capitalism and the factory system and the accompanying separation between owners of capital—commercial land, sophisticated machines, large factories—and owners of labor power. Labor then became a commodity to be bought and sold just like any other factor of production. McCloskey’s Bourgeois Dignity ( 2010 ) concerns how we talk about entrepreneurs. Bromley’s concern is with the rise of a body of compliant laborers whose lives are very different from those of entrepreneurs.

The factory system was not the only development. Financial capitalism—which came because industry at a massive scale required financing on a grand scale—introduced rapid movement of liquidity around the world. But that was not the end. In managerial capitalism, “the wrangler rules. The entrepreneur of merchant capitalism surrendered his autonomy to the engineer of industrial capitalism. The engineer was soon pushed aside by the money managers and bankers of financial capitalism. Now, it seems reasonable to suggest that the financial wizards are answerable to the wrangler. Someone very meticulous is now minding the store” (Bromley, p. 82).

Bromley then shifts to an argument that scholars interested in collective action will appreciate. He describes firms as hedgehogs and households as foxes. Hedgehogs know one thing and foxes know many. Households, under managerial capitalism, have to know many things, and some even have to hold several jobs. The firm, however, is an artificial construct with a singular goal: to lower costs. It is for this reason that the hedgehogs dominate the foxes; the foxes have no chance. Walmart and Amazon are too big to resist. The foxes face a much larger collective action problem, one that is exacerbated by the massive scale of capitalism.

Boettke’s essays do not focus as much as Crisis on the historical evolution of capitalism; rather, they focus on the importance of freedom of choice. Struggle defends significant figures such as Ludwig von Mises, Hayek, and Milton Friedman. Bromley counters the arguments of the great defenders of capitalism. Freedom of choice—not being forced to work a specific job—is a narrow conception of freedom. Freedom to choose means little if the choice set, which is shaped by institutions, is not of our choosing. Bromley puts it this way: living is good (we have more stuff to consume), but what about work life? Capitalism is thriving in some parts of urban areas, but anger with the current situation is especially pronounced in rural areas in the United States, Britain, and Western Europe. And outside of those countries, many countries have experienced little improvement in material conditions in the past several centuries. Some workers may enjoy the life of the fox, moving from job to job in the gig economy, but for many, there is despair: “The unavoidable consequence of possessive individualism is that capitalism no longer comprises a source of hope. It has evolved into a system—an ‘ism’—without a compelling moral basis for its continuation” (Bromley, p. 123).

These books thus differ in what they mean by capitalism: trade in goods and services (in Struggle ) or trade in labor (in Crisis ). However, each aspect of capitalism is significant, and so they are in a sense complementary contributions. Trade in goods and services has its benefits, though the increase in goods and services available to us comes with greater vulnerability for households excepting their greater consumption choices. Together, the books offer profound insight into the productive power of capital and its costs.

Another reason to praise Boettke’s and Bromley’s books is that they move beyond Thomas Piketty’s ( 2014 ) concern with the empirical relationship between inequality and capitalism in at least three ways. First, they remind us that any attempt to relate capitalism to inequality leaves out important changes in the nature of capitalism over the past several hundred years. This is significant because unless we understand which capitalism we are talking about, we may misdiagnose the problem. Second, Boettke and Bromley each recognize that anger and illegitimacy are based not on inequality but on vulnerability. They disagree about their source of the problems: for Boettke, vulnerability is a result of government or regulation; for Bromley, capitalism – specifically, what he calls wrangler capitalism (and before it, industrial capitalism – is the reason households struggle to find meaningful employment). Third, it is abundantly clear that the wealth tax suggested by Piketty and increasingly supported by politicians is a magic bullet. Rather, our focus, if we agree with Boettke, is that we ought to be concerned with political institutions (why should we expect that the revenues will be spent addressing the real problems?). And if we agree with Bromley, we ought to direct our concern to economic institutions, not simply fiscal policies (why should we expect a wealth tax will solve the problem of vulnerability, if managerial capitalism remains unimpeded?).

One term that does not come up much in either book is neoliberalism, and for good reason: the term is often used as a pejorative to criticize a certain group of economists. 8 Critics of “neoliberalism” would do well to consider carefully specifying what kind of capitalism they are talking about and whether they have accurately diagnosed the problem they see, and whether it works. 9 Bromley’s work suggests their concern is not so much with the recommendations of scholars such as Friedman as with the specific institutional features of capitalism as we currently experience it, while Boettke suggests that the problems they see may be government failures rather than problems with supposedly laissez-faire economic policies.

Is unshackled Leviathan or capitalism the problem?

Each offers a diagnosis of the problem. In Struggle , the diagnosis is public predation. In Crisis , it is possessive individualism and the collective action problem confronting workers in their dealings with firms.

In chapter 2 of Struggle , “Economics and Public Administration,” Boettke contends that an institutional framework is necessary to realize gains from exchange because of the paradox of government: addressing private predation opens the possibility of public predation. The fundamental cause of development—as viewed by scholars from Mises to McCloskey—is ideas about what to produce and how to produce it, as well as idea about what kinds of rules make savings and capital accumulation safe. That is, idea about how to govern ourselves.

Chapter 5 of Struggle (aptly titled “Is State Intervention in the Economy Inevitable?”) argues that government intervention in the economy is not inevitable but probable without restraints on government, given that the demand for state intervention is constant. Chapter 6 is a clearly written essay that eloquently argues that government overspends because it has too much power. Nor is the problem with the people. One of the things that comes out in this book is Boettke’s deep appreciation for the role of institutions as an explanation of our current situation. As Boettke explains, “Blaming public unions for asking for improved benefits from their members or blaming elected officials for responding to those demands in order to win votes is like criticizing a wasp for stinging you when you step on its nest. The problem isn’t the people; it is the institutional regime that produces the pattern of behavior” (Boettke, p. 126). Like Bromley, Boettke is concerned above all with institutions and their consequences.

Boettke, as we know from his Public Administration in the Classical Liberal Tradition (Aligica et al.,  2019 ), written with Paul Dragos Aligica and Vlad Tarko, is deeply appreciative of Vincent and Elinor Ostroms’ vision of public administration. The essays of Struggle show the evolution of many of the ideas in the earlier book. In the emergent view of public administration, the idea of a unitary state populated by omniscient and benevolent expert bureaucrats is rejected in favor of a view of government populated by ordinary individuals who have limited knowledge and respond to incentives. This is the Ostromian vision. The implication is clear: we ought to adjust our expectations of what to expect from bureaucrats. Public entrepreneurs are the ones with the vision required to make changes, though making changes requires that these entrepreneurs and those who they interact with have some autonomy. The problem is not government. Our central problem is that government has gotten out of hand and that we have collectively moved away from the Ostromian vision of self-governance as the unifying theme of public administration.

Most of the examples in Boettke’s book are examples of unshackled Leviathan doing bad things. This is most obvious in his reflections on the evils of what Geoffrey Hodgson ( 2019 ) calls “big” socialism: central planning. But so too are there many significant examples of government predation, including in policing—arguably one of the most significant examples of the predatory state in society. 10

Turning to Crisis , we direct our gaze to the problems arising from capitalism. Central to Bromley’s diagnosis of the problem is the parable of the fox and the hedgehog. As noted above, managerial capitalists are the hedgehogs; households and workers are the foxes. The foxes of the world have to deal with increasing atomization: “In a fully atomized world, the flowering of meritocratic processes then tends to threaten political coherence and a shared sense of purpose within a community. Meritocracies reward merit, but they also begin to generate institutional arrangements—public policies—that tend to reinforce such self-interested inclinations” (Bromley, p. 16).

Bromley points to economics as the dubious enabler of the hedgehogs. Economics shifted its concern from organization to the atomized individual. It was originally concerned with how individuals and societies organize to provide for themselves. The two key organizations are the household (which is natural) and the firm (which is artificial). But then formalism took hold, and the maximizing individual became sovereign. Possessive individualism is the view that individual rationality and the sanctity of the consumer are the most significant building blocks of the economy. This view overlooks that there had to be organizations in order for there to be something to trade. As far as I can tell, Bromley and Boettke are fully in agreement on the problems that arise from the Max U or “man as machine” approach in much of economics. 11

Crisis offers up possessive individualism as the cause of the current dissatisfaction with capitalism. Bromley engages a topic of concern to many in the Austrian tradition: do markets make us more virtuous than we would otherwise be? 12 Bromley summarizes the case that markets make us moral as follows. Market economies come to be composed of individuals who are socialized to master the virtuous character traits of market societies. These acquired traits are inevitable consequences of the need to orient one’s actions toward mutually advantageous social interactions, which are the reason why societies adopted markets in the first place.

Bromley’s response to the markets-as-moral-spaces argument is that its proponents are concerned only with buyers and sellers seeking to exchange commodities or services in a normal market. However, the desire to engage in market transactions is not itself a virtue, as many exchanges are repugnant and many choices are not good even for the individuals doing the choosing. Most significantly, most of these market transactions reapportion wealth rather than create new wealth.

Any focus on buying and selling is thus incomplete. Labor has been commodified, and many workers cling to the belief that they need choice. But workers now have fewer choices and much less bargaining power. The hedgehog dominates under managerial capitalism, and many foxes do not even know it, and when they do, they cannot really do much about it. This is not a problem that arises from government. Rather, it is a problem of capitalism; more fundamentally, the problem is that the ideology of possessive individualism has been wielded to justify the institutions that give rise to the anger that has contributed to deplorable phenomena such as Trumpism.

These books are also an invitation to additional empirical research. Bromley offers sweeping critiques of managerial capitalism, with a masterful institutional analysis of our current situation. But many of the contentions are empirical ones. Does the market erode social capital? Mark Pennington and John Meadowcroft ( 2008 ) find that spontaneous order produces bridging and bonding social capital. Art Carden recently notes that Walmart is not as bad as it seems, contrary to corporate dystopia narratives in the tradition of John Kenneth Galbraith’s New Industrial State ( 1967 ). While Walmart is one of the largest firms in the world by profits, its profits are only about one-tenth of one percent of US GDP (Carden, 2021 ). Carden’s empirical studies provide further evidence that Walmart is actually good – there is less hunger (Courtemanche & Carden, 2011 ), more art and leisure (Carden & Courtemanche, 2009 ), and no decline in social capital, such as club membership, in communities with a Walmart (Carden et al., 2009 ). One might see this as empirical evidence in support of Boettke, though for reasons noted, Bromley is certainly on to something, as the anger with the current work situation is still palpable, despite low prices.

It is straightforward to see how Bromley and Boettke differ. It is certainly true, as Boettke claims, that goods being reshuffled and reallocated in response to changes in prices can be a good thing—even a great thing, as we know from Amazon Prime getting many of us through the COVID-19 pandemic or from how the supply lines for toilet paper and paper towels came through despite the hoarding behavior of some customers. But what if we replace goods and services in the above account with workers reshuffled and reallocated in response to changes in prices? After all, the definitive change in capitalism as we moved from merchant capitalism to industrial capitalism is that the worker became a fictitious commodity. Foxes are not simply buying goods and services; they are goods and services. The point here is not to choose a side, but to note that the Industrial Revolution ensured that the question of what is being purchased would become not only about the stuff we want, but about labor.

Another difference worth noting is about embracing people with open arms. Libertarians will love Boettke’s characterization of welcoming strangers with an open hand. 13 Bromley’s perspective is a bit more nuanced. The reason why people want to come to countries such as the United States is not that they do not have market freedom. Many African countries have an abundance of market freedom, but that is not enough to provide political order. Nor is it clear that the open hand comes without costs. George Borjas ( 2016 ) has made this point in reflecting on immigration. Nor is xenophobia or racism the obvious reason why people support Trump, as some workers have rational reasons to worry about their situation with inflows of people (Murtazashvili et al., 2021 ). But this should be clear enough from any economics lesson on immigration, since the argument is about net benefits from immigration, not that every single person is better off with new entrants into the labor force. And we cannot necessarily rely on government to address the challenge that comes with new migrants to a region, as those who are left out do not always feel they have much voice in politics. Possessive individualism is part of the reason people want to leave one place; and in their destination, its pernicious effects on politics mean that those people may be subject to the same forces of insecurity and instability brought on by wrangler capitalists. Bromley’s point is that today’s immigrants might be the disaffected Rust Belt workers of tomorrow, and we ought to spend more time thinking about why the disaffected Rust Belt workers might be concerned about immigration beyond merely asserting that they are economically irrational or xenophobic racists.

What is to be done?

Struggle leaves no uncertainty about what is not to be done: “There is no justice to be achieved from socialism, only equality in misery and despair as daily life devolves into one of economic deprivation and political terror” (Boettke, p. 7). The case is made more fully in Boettke’s collection of essays titled Calculation and Coordination ( 2001 ). Socialism ought to be eliminated from the menu of potentially desirable organizational forms of economic, political, and social life. Chapter 13 (“Rebuilding the Liberal Project”) is more constructive in suggesting that the liberal project cannot be saved by repackaging a fixed doctrine of eternal truths. True liberalism faces a threat from conservative movements on the right and socialism on the left. In the US and the UK, the populist threat comes from both the Left and Right. Liberalism above all is about toleration. The answer to populism is toleration. Cosmopolitanism is the answer to populism. Boettke’s argument is a case for freedom to choose. 14 One of the reasons openness is justified is, per Julian Simon ( 1981 ), that the ultimate resource is human imagination.

Boettke’s concluding chapter provides one of the most eloquent defenses of the liberal society as an open society. Libertarian champions of economic freedom would do well to consider Boettke’s nuanced perspective on the current situation. At best, we have pockets of liberal commerce that raise living standards tremendously. At worst, we have power and privilege. There is a growing concern about global inequality. In the end, the struggle of ideas is about correcting two misconceptions: (1) the rich get rich at the expense of the poor, and (2) the poor do not get rich faster than the rich get richer. Critics point to neoliberalism as the problem. Boettke explains why we ought not to do that.

For Bromley, inequality is the intended result of possessive individualism, which compels individuals to pursue a livelihood strategy, including the types of jobs we choose and what we collectively expect of our workers, based on the celebration of rights and the illusory idea of being free to choose. Despite many individuals believing that individualism is the only and right way to organize society, they seem not to realize that they are at the mercy of capitalist firms equally committed to possessive individualism, and that when push comes to shove, the capitalists mostly win. Consumers, as Bromley notes, are often all too eager to denounce China for predatory trade policies while filling up their minivans with abundant clothing, toys, and plastic products from China. Lower prices are a good thing. But Bromley argues that that is not a good reason, but rather an excuse. The more honest reason why consumers continue the endless quest for bargains is the “enduring culturally prized urge toward persistent low-cost acquisitiveness” (p. 237).

Bromley is not engaging in Marxist false consciousness theorizing. Rather, it is an empirical statement that many of the policies individuals support contribute to the vulnerability of workers and that the fact that they have more choice does not eliminate the more general precarity of their work situation. Low-cost acquisitiveness has costs.

One might of course respond that individualism is not necessarily bad, especially when we think of individualism as inquisitiveness and hard work. Certainly the empirical literature finds that individualism is associated with greater wealth (see, for example, Williamson and Mathers 2011 ). Bromley’s criticism is different. Freedom has come to mean aggressively pursuing self-interest and desiring to make sure others do not have what we enjoy. Possessive individualism is not the social capital that Boettke and colleagues have so clearly shown to be significant in responding to crises (Boettke et al., 2007 ). Overcoming possessive individualism – crass individualism – requires us to recognize that we can reconstitute a market economy in the interest of greater equality and other-regarding behavior. The capitalist firm must be transformed into a public trust. However, this will not be sufficient. Improved livelihoods will also require that the possessive individual be reimagined.

Bromley notes that the word “community” is now used to separate us into silos, a practice facilitated by identity politics. Rather than separating ourselves, it is crucial to recognize that personhood requires a community that acknowledges one’s personhood. It requires engagement. But managerial capitalism denies the relevance of community. Mindless and numb workers are the new automatons. Ultimately we need exchange on equal terms since under managerial capitalism the fox always loses.

These books also discuss the future of economics as a science. One of Boettke’s contributions is demonstrating the ongoing significance of the classical liberal tradition. Economics has lost its way in its search for clever research designs and its focus on mathematics. Paradoxically, that makes it challenging for us to understand how people behave since the assumption of maximization eliminates volition (as well as makes challenge consideration of time, uncertainty, and ignorance).

Bromley is perhaps more critical of economics, especially the kind that sees efficiency as a guide to policy. To quote Bromley: “Efficiency is not and cannot possibly be a design criterion. The only approach to meaningful institutional change is to: (1) focus on careful diagnosis of problematic settings and circumstances; (2) entertain new ideas that seem most promising in solving a particular problem; (3) embrace the most reasonable of those possibilities; and (4) then undertake ex post monitoring and assessment as the new policies are allowed to run their course” (p. 123). Anyone who agrees with Peter Leeson’s ( 2020 ) and Yoram Barzel’s ( 2002 ) eloquent defense of the idea that maximization is a critical concept to economists ought to consider Bromley’s explanation why utility maximization cannot provide a guide for human action and why efficiency can never explain why we choose a specific policy. Rather, we need to appreciate that the process of institutional change is one of realizing our collective and shared futures through a process of reasoning about what works, what does not work, and how things can be better. 15

Is capitalism a liberal emancipatory project worth saving? Or is it a spent force? Boettke does a masterful job clarifying what capitalism does well, explaining the problems arising from centralized-government intervention in the economy, and reminding us of the evils of socialism. But all is not well in the kingdom. Work life is not great, and while nobody doubts that the Bourgeois Deal contributed to riches, it only made some rich. And anger in places such as the rural United States is not simply a consequence of unrestrained government. Capitalism is to blame, according to Bromley, but it is not Adam Smith’s capitalism. Managerial capitalism puts workers in a bind, and collective action does not favor the fox.

Despite these differences, there are similarities between Boettke’s Austrian institutionalism and Bromley’s old institutionalism. Each author sees institutions as the central concern for economics. Boettke is also a self-professed disciple of mainline economics, which includes public choice (clearly concerned with rules) and the Ostroms’ polycentric view (also concerned with rules). Still, one discerns a richness in Bromley’s analysis of institutions that one does not see as often in much of the mainline tradition, except perhaps for McCloskey’s work and, arguably, Boettke’s work on socialism. The greatest strength of Boettke’s essays may be in the institutional criticism of socialism, and Bromley’s most significant contribution is to discern the institutional problem with managerial capitalism. 16 In my view, these are complementary insights that counsel humility when assessing capitalism and socialism.

The institutional approach of these books has profound policy significance. Much of the current conversation in the post-COVID economy is about infrastructure—some version of a new Marshall Plan, but for the rich countries. This simplistic application of Keynesian reasoning, as these books make so clear, is insufficient because it does not appreciate that the problem is institutional. Boettke and Bromley differ in their diagnosis of the problem; they agree that institutions are the key, and neither proposes a magic bullet. They understand that the process of institutional change is a struggle. Boettke and Bromley also appreciate the significance of ideas in the process of institutional change. Ideas give rise to beliefs, and changes in beliefs ultimately lead to changes in institutions. Their appreciation for ideas, along with history, is too often pushed aside in economics these days.

There is an important difference when it comes to spontaneous order. Boettke, like the great Austrians before him, appreciates spontaneous order. Hayek famously divided orders into planned and spontaneous orders. Hayek of course followed Menger’s distinction between organic and pragmatic orders. Austrian economists tend to see spontaneous orders as the more interesting aspect of social science, while old and new institutionalists tend to see directed orders as more significant, in part because such orders vary so much. Hayek also thought spontaneous order was the most interesting aspect of social science. Bromley shows why there is much we do not understand about the planned orders that are so important to capitalist economies and that there is nothing simple about understanding why and how planner orders work. But Boettke does not succumb to the view that only spontaneous order is interesting or try to define everything as a spontaneous order. Unlike many of the earlier Austrians, who were content to praise the virtues of the market, Boettke has a deep appreciation for Vincent Ostrom’s insights into public administration and therefore appreciates the problem of explaining the success of directed orders. Thus, each book can be thought of as a major contribution to institutionalism, however we define it.

Anyone interested in the future of capitalism will be better off after reading these books. The books could be read as a defense of markets and criticism of government by an Austrian–public choice economist versus an impassioned criticism of capitalism by a disciple of the progressive John Commons. But that would be a mistake. Each book illustrates a deep commitment to institutional analysis and offers a wealth of knowledge about how to compare institutions. They both put institutional analysis at the forefront of economics, where it should be. There is no Max U in either of these impressive books. The perspectives are very much complementary. The battle for the future of capitalism is indeed a battle of ideas, and the ideas in these books give us much to reflect on.

Acknowledgments

I had the idea to write this essay after a book talk by Dan Bromley at the Center for Governance and Markets at the University of Pittsburgh in March 2021. Mark Pennington served as a discussant for the seminar, and his willingness to engage Dan’s book constructively was a breath of fresh air. Mark’s constructive dialogue reminded me how much can be gained by carefully considering work with which we disagree. Since I had been reading Pete Boettke’s book at the time, it seemed natural to continue that conversation by comparing and contrasting these books. I thank Rosolino Candela for encouraging me to write this piece and for offering extensive and thoughtful suggestions on the essay. Thanks to Nick Cowen, Rabih Helou, and Jen Murtazashvili reding and commenting on the essay and Art Carden for sharing some of his recent work on Walmart that fit nicely with the themes of this essay. Most importantly, thanks to Dan and Pete for their mentorship over the years and for inspiring so many of us.

1 See also William Easterly’s ( 2020 ) brilliant essay on Adam Smith’s anticolonialism.

2 Boettke might also have added W.H. Hutt to the list of liberals against racism, as Hutt’s impassioned critique of apartheid was based on an appreciation for consumer sovereignty (Magness et al., forthcoming ).

3 Randall Holcombe’s ( 2018 ) concept of political capitalism also gets at Bromley’s concern about the close relationship between economic and political elites in capitalist democracies.

4 One could, as Aligica and Tarko ( 2015 ) suggest, simply do away with the notion of capitalism and recognize that we are dealing with capitalisms: crony capitalism, state capitalism, and so on. Bromley’s classification of capitalisms is a useful complement to the ones familiar to those in the public choice literature.

5 Two excellent books on the meaning of capitalism and the significance of legal rules are Geoffrey Hodgson’s Conceptualizing Capitalism (2015) and Katharina Pistor’s The Code of Capital ( 2019 ).

6 If there’s a limitation with Smith’s view, it may be that he did not anticipate how well self-governance works when people have these conflicts of interests. Peter Leeson’s Anarchy Unbound ( 2014 ) shows just how well it works, and why.

7 Though much attention is paid to fee simple, the most significant conclusion of the property rights approach regardless of school of thought—Austrian, public choice, or Ostromian—is that the most appropriate property regime is one that evolves in response to local conditions (Harris et al., 2020 ).

8 Nick Cowen’s ( 2021 ) perspective offers a compelling and productive framework that eschews the desire to see neoliberalism as a bogeyman standing in for policies one wishes to criticize.

9 For an excellent discussion of the history of the term neoliberalism, see Leeson and Harris ( Forthcoming ). They also explain why there is no good reason to see Hayek as a neoliberal who only argued for market fundamentalism. Some of Hayek’s writing were very much opposed to state efforts to implement markets, as Hayek of course understood the knowledge problem of doing so.

10 Brandon Davis ( 2021 ) explicitly places the American carceral state in the framework of the predatory state.

11 Indeed, Boettke et al. ( 2003 ) contend that only the Austrians and old institutionalists truly put people at the forefront of analysis.

12 Anyone looking for a response to Bromley’s criticism would do well to consider Ginny Choi and Virgil Storr’s Do Markets Corrupt Our Morals ? ( 2019 ).

13 Ben Powell and Alex Nowrasteh ( 2020 ) make an important case that the benefits of immigration exceed its costs.

14 Ilya Somin’s ( 2020 ) discussion of foot voting fits nicely with the defense of freedom to choose: through foot voting, people can choose better institutions, including political ones, and contribute to greater political freedom. Foot voting is just limited to voting, but where one lives, among other things.

15 Bromley’s Sufficient Reason ( 2006 ) more fully develops this argument about beliefs and the process of institutional change.

16 It would probably make the most sense to accept Smith as the first institutionalist, given his concern with the constitutional rules necessary for a well-functioning market, as Geoffrey Brennan and Buchanan ( 1985 ) argued.

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David Wallace-Wells

Javier milei is a new prophet of apocalyptic capitalism.

By David Wallace-Wells

Opinion Writer

In Davos, Switzerland, this January, a new icon of capitalist resentment took the stage. President Javier Milei of Argentina won a landslide victory in November on a platform of unapologetic libertarian economics and a campaign of ready-to-meme speeches and interviews. Already, his chain saw agenda has been hitting some predictable roadblocks at home — legislative resistance , pushback from unions and ( sometimes violent ) public protest . But he arrived in the Alps very much in character, looking like a future world leader hologram projected from a certain corner of billionaire-brain social media.

“Today I am here to tell you that the Western world is in danger,” Milei began. “And it is in danger because those who are supposed to defend the values of the West are co-opted by a vision of the world that inexorably leads to socialism and thereby to poverty.” He meant the belief that governments should try to help people.

Milei, a longtime economist, spoke in an academic monotone, but his analysis was vehement, almost a mirror image of the rhetoric Greta Thunberg used when announcing herself and her brand of climate alarm at Davos five years earlier. Spain’s El País called the speech “the apocalypse according to Javier Milei,” and for 23 minutes he gave a pretty millenarian account of the precarious state of the global free market system, as he saw it, which was losing its battle, he said, against the forces of collectivism, social justice, environmentalism and feminism, which he grouped as forces of inevitable immiseration. State power was the source of all the world’s problems, Milei said, all tax was coercion, and all market outcomes just. Those assembled at the World Economic Forum had been seduced by neo-Marxism, and the war on progress and achievement had been essentially started by the women’s movement (exemplified by what he called the “bloody abortion agenda”).

Hyperbole is not rare in geopolitics, but even in a time of tumult, it is striking to see an outspoken anarcho-capitalist in the role of head of state; he is certainly the first avowed anarchist to be running a large modern government and may well be the first genuine libertarian to do so, too. In a gesture of pragmatism, Milei has taken to describing his ideology as “minarchist,” meaning that he would like to preserve only the defense and law-enforcement functions of the state. But in Argentina he has revved chain saws at rallies and once dressed as an ideological superhero of his own devising, General AnCap. And in positioning himself as a hands-off prophet at Davos, he was not afraid to look like a libertarian troll. Between neo-Keynesians and Nazis, he declared, “there are no major differences.” The same went for social democrats and fascists, progressives and communists, populists and globalists — all just different shades of statists aiming for total social control.

He was speaking as an Argentine, contorting his country’s economic history into a neat ideological narrative. But he was at Davos, he said, to offer the same prescription to the rest of the world, projecting a global vision combining entrepreneurial heroism and the end of the state as we know it — or, as he put it, “to invite the Western world to get back on the path to prosperity.”

And he was applauded — not by everyone but by many. The Wall Street Journal published an excerpt from the speech and gushed, “Milei gives the Davos crowd a spine transplant.” The conservative historian Niall Ferguson called the lecture “a magnificent defense of individual liberty and the free market economy.” The venture capitalist Marc Andreessen also celebrated Milei’s appearance, as did Elon Musk, who meme-tweeted an image of a couple having sex while watching the president pontificate onstage (commenting, “so hot rn”).

A year ago, if you had eyed the political leaders of South America and wondered who might make the biggest mark on world diplomacy in 2024, you surely would have picked Brazil’s president, Luiz Inácio Lula da Silva, who regained power in 2023 after 12 years in the wilderness. Riding back into office on a new Latin American pink tide, Lula seemed to embody a progressive alternative to the old neoliberal consensus that had fractured so visibly since he last held office.

But the exit from that old consensus has been bumpy, with no single obvious successor ideology to the one that largely governed the world between, say, the fall of the Berlin Wall and the rise of Donald Trump. This year, there are elections scheduled in countries that are home to half the world’s population — perhaps the single most democratic year in human history. But the meaning of those elections remains very much to be decided. There are Trumpy nationalists in a loose anti-elite alignment; old Western institutionalists across Europe and a continental new right still on the march; authoritarian alliances, oriented around China or Russia and their strongmen; and global leftists, like Lula, agitating for progressive solidarity across the developing world.

And then there is Milei. Flamboyant, combative, eccentric and erratic, he shares a certain style with Trump, but he’s more serious and ideologically committed. He has been praised by Vivek Ramaswamy and Matt Schlapp, as well as by Trump, who embraced Milei at the Conservative Political Action Conference and has wished him luck in making Argentina great again. But as the culture-war intellectual Sohrab Ahmari has pointed out , “Milei rejects nearly everything ‘MAGA’ populists in the United States, and analogue movements across the developed world, claim to stand for.” What Ahmari means is that Milei is not a protectionist trade warrior speaking to the losers of globalization but a radical free marketeer who believes too much has been done to console them. In this way, Milei may have more in common with the Latin American dictators of the 1970s and ’80s — his AnCap chain saw a sort of populist shock doctrine and his Ayn Rand regime a free-market junta, this time imposed not militarily but by 55.7 percent of the popular vote.

Is there a global constituency for a politics like this? In Argentina the conditions were set by an exceptional inflation crisis to punctuate a century of economic and political frustration, and the first test of Milei-ism is likely to be local, too . But globally what is most striking is how Milei’s language echoes similar language issuing forth since the beginning of the pandemic from many corners of the business elite — particularly by those who in the age of social media have anointed themselves or been anointed by public acclaim as popular philosophers of progress. You have probably heard about the war on merit; diversity, equity and inclusion as a woke mind virus; and perhaps even the case for a more urgent at-all-costs technological accelerationism. These are just the most acute expressions of a more pervasive backlash phenomenon: Many of the world’s richest people have rapidly become some of the most outspoken critics of the establishment and status quo, which they believe is almost uniformly arrayed against them.

In his “ Techno-Optimist Manifesto ,” published to much Silicon Valley applause last fall, Andreessen opened what was meant to be an infectious call for positivity with the line “We are being lied to,” which, he quickly elaborated, meant we are “told to be pessimistic.” Later, he wrote that “our present society has been subjected to a mass demoralization campaign for six decades — against technology and against life — under varying names like ‘existential risk,’ ‘sustainability,’ ‘E.S.G.,’ ‘sustainable development goals,’ ‘social responsibility,’ ‘stakeholder capitalism,’ ‘precautionary principle’” and a host of others. “Our enemy is anti-merit, anti-ambition, anti-striving, anti-achievement, anti-greatness,” he added.

Over 15 years of global disquiet, we’ve gotten used to seeing the aftermath of the financial crisis as an age of populist outrage, with those left behind rising to demand more — at least more of a voice. But if Milei is an expression of this age of populism, it is a novel form. In the paradigm pervasive in the Trump and Brexit years, elites were seen as exploitative enemies of the people; now they are enemies of greatness. And it’s a different kind of person carrying pitchforks into town.

There are two kinds of companies–those that strengthen democratic capitalism and those that undermine it

Corporate boards have a lot on their plates–and new priorities seem to pop up every day. What can be done about climate change? How can diversity, equity, and inclusion initiatives strengthen corporate culture? Is it necessary to comment on the latest global atrocity? Why is CEO pay so high compared to that of the average worker? 

In a recent report on the health of the market economy and society, Georgetown Law’s Denny Center for Democratic Capitalism identified a new question boards should be asking to better integrate long-term strategy and broader stakeholder interests: “What is our company doing to support or undermine the health of the market economy and society more generally?” 

Though it may sound like an altruistic diversion, it’s not: A company’s long-term financial success depends on a strong economy and a stable societal context.

The case for factoring market and societal well-being into long-term strategy rests on two convictions: that creating value for shareholders and strengthening democratic capitalism are not zero-sum tradeoffs when considered over longer strategic time horizons, and that corporate actions that impact society more broadly should be fully integrated into long-term strategy, not delegated to a public relations or human resources organizational silo.

In 2005, Ian Davis, then Managing Director of McKinsey & Company, made a strong case for the “both/and” view of creating value and doing good in his  Economist  essay, The Biggest Contract : “Companies that treat social issues as either irritating distractions or simply unjustified vehicles for attack on business are turning a blind eye to pending forces that have the potential to alter their strategic future. […] It is time for CEOs of big companies to recast this debate and recapture the intellectual and moral high ground.”

Societal trends and pressures can provide important inputs to corporate profitability including implications for public policy, trends in consumer preferences, and insights on employee expectations. Corporate profitability and actions that support healthy markets and societies go together, and when tradeoffs arise, they usually work themselves out over longer timeframes.

Integrated vs. One-off

As new challenges and societal issues make their way to the boardroom, boards and CEOs often find it expedient to address them individually and to the side of overall corporate strategy. It’s easy to understand the temptation of this one-off approach, but as a result, boards miss the opportunity to develop a more integrated strategic perspective. For example, boards may feel pressure to address the level of CEO compensation compared to that of the average worker. In some cases, the approach to CEO pay does need to be fixed. However, by focusing only on the CEO (or other senior officers), the board might miss the chance to revisit how the rank and file are compensated. An integrated approach would catch this and prioritize setting the right level of compensation across the company. Though short-term payroll expenses will increase, longer-term benefits should result in solid returns driven by improved productivity and culture, savings related to better employee retention, and higher quality outputs for customers.

While voluntary coalitions among investment managers or new public policies are important ingredients in addressing complex tradeoffs companies face, action from the business itself is also essential. Boards can begin by asking how their companies are strengthening or weakening democratic capitalism. Both business and society can benefit, and the time to start is now.

Bruce Shaw is the executive director of  The Denny Center for Democratic Capitalism at Georgetown Law  in Washington, D.C.

More must-read commentary published by  Fortune :

• Glassdoor CEO : ‘Anonymous posts will always stay anonymous’
• We analyzed 46 years of consumer sentiment data–and found that  today’s ‘vibecession’ is just men  starting to feel as bad about the economy as women historically have
• Housing market data suggests  the most optimistic buyers during the pandemic  are more likely to stop paying their mortgages
• Intel CEO : ‘Our goal is to have at least 50% of the world’s advanced semiconductors produced in the U.S. and Europe by the end of the decade’

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of  Fortune .

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