Free Men, Free Markets

National Review, May 5, 2003 by Arthur Herman

The Mind and the Market: Capitalism in Modern European Thought, by Jerry Z. Muller (Knopf, 448 pp., $30)

The market starts as a physical place, a Middle Eastern souk or a midwestern mall or a square in Paris or Nairobi. Then economists turn it into an abstraction, "the market," in order to conceptualize exchanges between buyers and sellers. Now historian Jerry Z. Muller offers us the market as an emblem of a social and economic system that emerged in Europe around 1600, which the Enlightenment dubbed "commercial society" and we call capitalism. From the start, some thinkers, the most famous being Adam Smith, have been drawn to that emblematic market, with its promise of a profusion of goods, rapid interchange, and other exciting transformations. Others, the most notorious being Karl Marx, have been repulsed by it. They have devoted their energies to vilifying the market system, just as its apologists have spoken up in its defense. Between them, they have shaped a good part of the face of modern culture.

As Muller's brilliant and engaging book shows, the birth of consciousness of market capitalism is one of the key events in the history of modern thought. This is far more than a book about economics, or economists. Muller does round up some of the usual suspects, like Smith, Marx, Keynes, and Hayek. However, he also brings in Hobbes, Voltaire, Burke, Hegel, Matthew Arnold, and Gyorgy Lukacs and demonstrates how their grappling with the meaning of capitalism shaped their ideas on politics, philosophy, literature, culture, and society. If "ideas have consequences," then these are the ideas that have had an impact on us all. Certainly no other institution central to modern life has been subjected to so many systematic assaults from so many different ideological directions. Yet compared to democracy or freedom of the press, capitalism has a far better track record in delivering what its champions have promised.

As Muller shows, capitalism's earliest advocates turn up in the French and Scottish Enlightenments. They first established the link between economic and political liberty, and economic progress and values such as tolerance and intellectual advance: the foundations of classical liberalism. Then, in the post-Marxian age, the keenest appreciation of the virtues of capitalism came from a sturdy trio of Austrians -- Ludwig von Mises, Friedrich von Hayek, and Joseph Schumpeter -- and a couple of Germans: Max Weber and Georg Simmel. They asserted the connection between economic liberty and social improvement: the very thing, in the guise of "social justice," capitalism's opponents claimed to represent. Yet, paradoxically, all of these thinkers found defending the most successful economic system in history uphill work, while capitalism's enemies took advantage of its undesirable associations from the very start.

One of those was its association with the Jews. They had been Europe's most conspicuous money-making and money-lending class in the early Middle Ages. The Church's dogmas about "just price" and strictures against usury were aimed at Jews; they gave those who engaged in those occupations a cultural stigma. Capitalism's opponents have exploited that stigma ever since. Karl Marx, a Jew himself, used the standard anti-Semitic images of the Jew as selfish, greedy, and heartlessly materialistic to characterize all of bourgeois capitalism. As Muller puts it, "Jew-bashing becomes a tool for bashing the bourgeoisie."

Then came the claim that the merchant's assertion of his own interest was a moral assault on the community (this still survives in leftist rhetoric about "corporate greed"). The great achievement of the Scottish Enlightenment and the Wealth of Nations was to show that, on the contrary, the pursuit of self-interest in the marketplace actually furthered the public good, by offering a profusion of new goods and services to consumers. Instead of challenging divine law, the market followed natural law. Capitalism revealed an "invisible hand" guiding human affairs: not the hand of God but the remarkable ability of the market mechanism to coordinate the aspirations of the individual with the interactions of the collectivity.

Critics refused to be convinced. With the success of the Industrial Revolution, capitalism sprouted in every direction -- but so did the attacks. Marx and others now branded capitalists as heartless exploiters, sucking wages dry from their impoverished workers. Then, faced by the abundant evidence that industrialization raised the standard of living of those who labored in its mills and factories, critics decided that while capitalism did not plunder the workers -- on the contrary, according to Herbert Marcuse, it spoiled them into political and social somnolence -- it did plunder the planet's natural resources and environment. Muller shows that Joseph Schumpeter had the answer to that argument more than half a century ago: Far from depleting natural resources, the genius of capitalism was to make new resources out of previously useless materials -- coal, in the early Industrial Revolution; petroleum, in the age of the automobile; sand, in the age of the silicon chip.