The Way to Wealth

Print Friendly, PDF & Email

Economic historian Deirdre McCloskey sets out to undermine economists’ explanations of the Industrial Revolution. She aims to leave standing her own theory, which has much to do with liberty.

McCloskey was educated in economics at the University of Chicago. She is a professor at the University of Illinois in economics, and also in history, English, and communications. She argues that causes relating to these other fields, not economics, triggered economic history’s biggest event.

That event was the beginning of sustained growth. The world had seen growth before — in China and Egypt, among the Phoenicians and the Venetians — but it had always petered out, sapped by war or bureaucracy or population growth or some lack of essential fuel. Then, in Holland in the 1600s, things started to stir in a new way, and in England in the 1700s, things started really to happen. Industrial civilization birthed itself.

Why? Why there? Why then?

Capitalism was there. But as an explanation, it is not good enough. “It wasn’t ‘capitalism’ that was new in 1700,” McCloskey writes. “Markets and nonagricultural property and a townliving middle class in charge of them are very old. The market economy, contrary to what you might have heard, has existed since the caves.”

Liberty? “My libertarian friends want liberty alone to suffice, but it seems to me that it has not,” McCloskey writes. Liberty was part of it.

She calls the other part bourgeois dignity, or the creation of “a businessrespecting civilization.”

The thesis is not proven in this book. Then again, it is only the second of six projected books. Book one was “The Bourgeois Virtues: Ethics for an Age of Commerce” (2006). Book three will be “The Bourgeois Revaluation: How Innovation Became Virtuous, 1600– 1848.” Her attempt at proof comes later. The effort here is to consider the rival explanations and knock them down.

Some explanations are purely economic. Capital accumulation is one. Maybe the British just piled up more capital than any previous people, through either thrift or imperialism. Except that the records don’t show that. In any case, the actual amount of capital needed to start the Industrial Revolution was small. “The first innovations of the Industrial Revolution,” writes McCloskey, “relied on retained earnings, trade credit and modest loans from cousins and scriveners and solicitors.”

So it wasn’t capital. Nor was it trade, because trade had existed long before the Industrial Revolution. China had trade. Phoenicians had it. Rome had it. Venice had it. Canals? China had canals. Roads? Rome had roads. An island with easy access to the sea? Japan had that. Movable type? Korea had it before Gutenberg.

Many factors helped. Some might be necessary causes. Given all of them, what makes up the sufficient cause? In 1905, sociologist Max Weber made a famous case for “The Protestant Ethic and the Spirit of Capitalism.” McCloskey attacks that case for puritanical hard work by making hash of Weber’s portrait of Benjamin Franklin as a dour workaholic — a complete misreading of Franklin’s “Autobiography,” she says. Weber imagined Franklin as a dour proponent of “a penny saved, a penny earned,” which is not how Franklin lived his life.

Science is a better candidate as the match that lit the Industrial Revolution. But, McCloskey argues, the science of Newton and others “had practically no direct industrial applications” in the 1700s. The spinning jenny was not based on new science. The blast furnace was put to use well before anyone really understood the science of it. Many inventions followed this pattern.

Economist Douglass North and others have made a case for England’s Glorious Revolution of 1688, which created a constitutional monarchy. McCloskey thinks that the revolution was important, not because it changed institutions (North’s argument), but because it changed the political rhetoric about wealth creators. There was more focus on the needs, concerns, and problems of entrepreneurs — more attention to them, tending to elevate them relative to aristocrats or soldiers or priests. It was a public discourse more in their language and tending more toward celebrating their successes and value.

These are each parts of an explanation, and McCloskey moves past them too quickly. Steven Johnson’s book about Joseph Priestley, “The Invention of Air: A Story of Science, Faith, Revolution and the Birth of America” (2009), shows the connections in the 1700s between the scientific dabblers and Protestant radicalism. Also political radicalism. The ferment of political, religious, and scientific ideas clearly had something to do with the “relentless experimentation” that quickened the pace of economic change after 1700.

None of these is an economic explanation. None focuses on the economists’ prudential and utility-maximizing man, whom McCloskey calls “Max U.” Max U acts on the rule of Prudence Only, and McCloskey argues that it took more than that to create the world’s first Industrial Revolution.

“Prudence is a virtue,” she writes. “It is a virtue characteristic of a human seeking purely monetary profit — but also of a rat seeking cheese and of a blade of grass seeking light. Consider that temperance and courage and love and justice and hope and faith are also virtues, and that they are the ones defining of humans.”

Those are all virtues involved in the great revolution. But what unleashed them all? “It was words,” McCloskey writes.

What words? The words of the scientists and scientific tinkerers; of such writers as Defoe and Locke; of the religious dissenters; of the Levellers, who had argued during the English Civil War of the 1640s for religious toleration and natural rights; and of merchants who learned from Holland in the 1600s a new dignity of commerce and trade.

It was also the time when the discipline of economics was being invented. Around 1700, in several places in Europe, “strikingly modern defenses of free markets” were written.

“Nothing remotely like their thought can be found earlier in Europe,” McCloskey maintains, “and only glimmers elsewhere.”

All this is asserted and outlined, with most of the argument saved for a later book. Still, there is enough presented to be tantalizing. “Bourgeois Dignity” has some fine arguments — and a lot of them. It has 46 chapters. Often it wanders to illustrate a point, or to inject a personal thing. For example, when talking about trade protection, and what a bad idea it is, McCloskey mentions former CNN journalist Lou Dobbs, a protectionist: “Dobbs majored in economics at Harvard College, but didn’t understand; to be quite fair, though, I majored in economics, too, a couple of years earlier — and I also didn’t understand, until returning to the same point in graduate school and then teaching it and then writing books about it: drink deep, or taste not the Pierian spring . . .”

“Taste not the Pierian spring” is a reference to Alexander Pope’s “Essay on Criticism,” a reference you have to get on your own; and there are a number of such references in the book. At one point McCloskey says, “Economists and historians who believe themselves to be quite exempt from any philosophical influences are usually the slaves of some defunct philosopher of science a few decades back — commonly a shaky logical positivist nearly a hundred years back.” Here she is mimicking John Maynard Keynes famous statement that “practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

The quotations are many. McCloskey quotes economists Paul Collier, Robert Lucas, Israel Kirzner, F.A Hayek, Joseph Schumpeter, and Frédéric Bastiat; Leveller John Lilburne; Tammany Hall pol George Washington Plunkitt; anthropologist Marshall Sahlins; sociologist Ferdinand Tönnies; historians Christine MacLeod, Joyce Appleby, and Jack Hexter; novelist Jane Austen; essayist Michel de Montaigne; philosophers Alain de Botton, José Ortega y Gasset, John Stuart Mill, Friedrich Engels, and Karl Marx; and the Roman worthy Marcus Tullius Cicero. All this by page 25 — and she keeps it up to page 450.

Meanwhile, she takes jabs at rival academics. In arguing that the huge increase in output during the Industrial Revolution cannot be explained by capital investment, she writes, “Our economist colleagues . . . want very much to go on believing that the quantity of output depends not on ideas independent of material causes but mainly on the labor applied and most especially on the masses of physical and human capital present, Q=F(L,K) — so lovely is the equation, so tough and masculine and endlessly mathematizable.”

This is a jab from a woman who famously used to be a man.

Some readers will get annoyed at her presumed indiscipline. One crabby fellow wrote at Amazon.com that McCloskey’s first “Bourgeois” book was “rambling, confused (or, at least, confusing), idiosyncratic, grandiose and self-serving.” I confess that I tried the first book and gave it up, and that some of those labels might be pasted on McCloskey’s current book. It is not, however, “confused.” If it occasionally rambles, it does so entertainingly. It is intelligent, and it is not dry. I enjoyed it, and am awaiting Book No. 3.

Leave a Reply

Your email address will not be published.