This is Who made our minds? my Thursday essay probing the greatest, cruellest and most beautiful minds of the past 5,000 years, inspired by my book, The Soul: A History of the Human Mind (Penguin 2024). Coming up: Confucius, the first humanist; Pascal’s wager; The Hammer of Witches
WHEN I HEARD that a seven-year-old American girl had set up a lemonade stand to raise money to help pay for her own brain surgery, the world I thought I knew entered a fairy-tale dimension.
Like Oliver Twist asking for more gruel and the Little Match Girl warming her hands around her last match (before she died of exposure), Liza Scott of Birmingham, Alabama, was charging twenty-five cents a glass of homemade lemonade, to raise the money to pay for the surgery she needed to save her life.
I wondered how this was possible in the wealthiest nation on Earth. That was not a question for those who hailed Liza as a bold example of can-do America. Her lemonade stand, which she opened in early 2021, attracted more donations than sales: Liza raised US$12,000 in a few days, a great return on her investment of a little stall made of cartons and a supply of homemade lemonade.
Her mother, Elizabeth, a baker, praised her daughter’s efforts and thanked God: ‘I find comfort in knowing that God always provides.’
Liza said: ‘It’s better than begging.’
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Once upon a time, when I was young and naive, I had assumed capitalism was a financial ‘system’ in which ‘capitalists’ raised ‘capital’ to start and build businesses, ‘expand the pie’, employ workers, invest in training and research and so on. I had not thought of it as a belief system, like a religion or ideology.
Capitalism, so it seemed to me, had no ‘mind’ or moral compass, no manifesto or catechism, no prophet or dictator who issued encyclicals or Five-Year Plans. Saying you ‘believed’ in capitalism was like saying you believed in profitability or avarice or limited liability. Capitalism was a process, not a belief system. And the process of capitalism had no inherent interest in our wellbeing unless we compelled it to – as distinct from the ideologies of communism or fascism which promised perfectible worlds and created Hell on Earth.
Capitalism ‘works’ – as in, it benefits most people – if capitalists are partly regulated, fairly taxed and their profits partly redistributed. And therein lies the strength and danger of capitalism. In its purest, unregulated form (such as the laissez-faire strain of nineteenth-century Britain and 20th century America), it crushes everything in its path – the weak, the sick, the disabled, the poor. It does this not because it is inherently cruel or malicious. Like a bacterium, capitalism is indifferent to the consequences of its unchecked proliferation.
Free of any constraints, capitalists advance unopposed towards monopolistic control – at which point, rid of rivals, they’re free to do as they please: pay their workers a pittance, strip them of their benefits, employ children in sweatshops and so on.
Capitalism destroys as it creates, argued the great Austrian economist Joseph Schumpeter (1883–1950). His notion of ‘creative destruction’ benefited the real economy if the human casualties of redundant technology were redeployed and retrained rather than slung onto the scrapheap of the chronically unemployed.
In their regulated form, capitalism and trade have created more wealth for more people than any other social mechanism in the history of humankind, the outstanding example being the thirty-year economic miracle between 1950 and 1980.
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Regulated capitalism is a modern phenomenon, however. For much of the Industrial Revolution, capitalism was unrestrained and venerated as a cure-all ideology, a ‘belief system’. Wealthy owners of capital were thought to be morally ‘good’, as George Orwell observed of the decade before World War I:
‘There never was, in the history of the world, a time when the sheer vulgar fatness of wealth . . . was so obtrusive as in those years before 1914 . . . The extraordinary thing was the way in which everyone took it for granted that this oozing, bulging wealth of the English upper and upper-middle classes would last forever, and was part of the order of things . . . Before the war the worship of money was entirely unreflecting and untroubled by any pang of conscience. The goodness of money was as unmistakable as the goodness of health or beauty, and a glittering car, a title, or a horde of servants was mixed up in people’s minds with the idea of actual moral virtue.’
Beneath the surface gossamer of this obscene inequality clanked the ‘iron laws’ of laissez-faire economics, which prevailed throughout the nineteenth century and were worshipped as if they existed in an exalted reality beyond the reach of humankind to amend.
Before World War I, those blessed by unfettered capitalism – the rich – were deemed good, successful and somehow wholesome. Those damned by it – the poor – were dirty, sinful and deserving of their plight. A family might prosper one moment and be ruined the next. Charity remained the chief form of welfare. Government intervention was frowned upon and deemed helpless before the ‘natural law’ of the free market: trade cycles, price fluctuations and unemployment. The gospel of complete market freedom gave rise, perversely, to its opposite: crushing monopoly and grotesque inequality.
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The British economists Adam Smith (1723–1790) and John Maynard Keynes (1883–1946) shared certain ideas about the uses of the free-market capitalist system. They believed it should serve, not enslave, the people. Nor should it benefit the top 0.01 per cent, as it does today, at the expense of the broader public.
Free-market capitalism was a financial system founded on enlightened self-interest, on the ‘propensity to truck, barter, and exchange one thing for another’, as Smith famously observed. Trade was an ancient, inherent willingness to bargain, to haggle, to negotiate, not an ideological dividing line. It was an act of enlightened self-interest, meant to deliver a living for the many, not the few. Trade civilised humankind, and even distinguished humans from animals:
‘Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog,’ Smith observed. ‘It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.’
Smith favoured progressive taxation and ‘combinations’ (trade unions) that raised labourers’ wages; he believed poverty a scourge that could be cured. Conservatives in the 1790s ‘thought his ideas were dangerously radical’, as the journalist Will Hutton has shown. In fact, Smith ‘would have hated being appropriated for the Conservative cause’.
Smith identified the division of labour as the handmaiden of wealth creation - for the many, not the few. ‘It is the great multiplication,’ he declared, ‘of the productions of all the different arts, in consequence of the division of labour, which occasions, in a well-governed society, that universal opulence which extends itself to the lowest ranks of the people.’
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A century and a half on, Keynes refined and adapted many of Smith’s ideas. The father of macroeconomics, Keynes impressed on governments the idea that fiscal stimulus and monetary intervention were needed to alleviate the misery of economic downturns. Markets alone were inadequate to the task of spreading wealth, Keynes noted, and limited government intervention was seen, by any rational observer, as essential and humane – and a fair return on our taxes – and not as ‘socialist’ or ‘communist’.
The great forge of Keynes’ ideas, which we cannot explore in detail, was the aftermath of World War I. He saw, as no one else did, the catastrophic economic consequences of the Versailles peace settlement of 1919. The victors (Britain, France and their allies) framed their desire to punish Germany ‘as a problem of theology, of politics’, Keynes noted. They saw victory ‘from every point of view except that of the economic future of the States whose destiny they were handling’.
Keynes was mortified by the likely economic impact of the punitive damages the Allies intended to inflict on Germany. He recommended instead a program of concerted government investment to rebuild a world broken by war.
If his ideas had been adopted, it is highly likely we would have avoided the Great Depression and World War II. In the twenty-first century, a second Great Depression was averted after the 2008 financial crash thanks to the re-exertion of Keynesian economics in the form of fiscal stimuli.
Keynes recognised the power of the ideas of thinkers who preceded him, as he famously identified in the closing chapter of his greatest work, The General Theory of Employment, Interest and Money (1936):
‘Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.’
Whether we’re aware of it or not, those of us living in Western countries are indebted to Adam Smith and John Maynard Keynes for the relative prosperity that we tend to take for granted. Smithian and Keynesian ideas have probably done more to civilise the world than those of most philosophers or theologians.
Whatever else they did – and they transformed the world as they knew it – Smith and Keynes never lost sight of the human cost of bad economic policy. Surrendering to the brutal forces of laissez-faire capitalism as if they were ‘natural’ and beyond the intervention of humankind, was not their recommended path.
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That, however, is the recommended path of capitalist zealots and ‘growth’ fetishists, whose ideology is every bit as uncompromising as that of the hardline socialists and communists they despise. Their obsession with the ‘purity’ of the free market, very low taxes and minimal government intervention acquired a kind of religious fervour in the 1980s.
Back then, American and British conservatives responded to any suggestion that the government might intervene in the market for the sake of the general wellbeing – such as by curbing monopolistic power and regulating banks and finance – with howling accusations of ‘Socialist!’ and ‘Communist!’.
An ideological adherence to the principles of laissez-faire capitalism permeated their think tanks, political committees and local councils, and ran deep in the blood of Western ‘conservatives’. (That term is clearly a misnomer, because a pure free market ‘conserves’ nothing.)
Their rusted-on faith in a feebly regulated, ultra-low-tax economy, the lauded ‘trickle-down’ benefits of which have failed to accrue, is traceable to the Chicago school of economists of the 1950s whose ideas would supercharge the policies of President Ronald Reagan in the United States and Prime Minister Margaret Thatcher in the United Kingdom. The Chicago school’s luminaries were Milton Friedman, George Stigler and Aaron Director; their acolytes included Keith Joseph, the intellectual who engineered the Thatcherite revolution in Britain.
The economist credited with inspiring their ideas was an Austrian-born British immigrant called Friedrich August von Hayek (1899–1992), a professor of economics and the founder of the Mont Pelerin Society, an international gathering of scholars whose point was ‘to contribute to the preservation and improvement of the free society’. Friedman et al. attended its inaugural meeting in 1947. To better understand the trajectory (and tragedy) of the world economy between the early 1980s and the 2020s - and show how ‘capitalism’ became an ideology - we need briefly to enter Hayek’s mind.
Friedrich von Hayek was a free-market ideologue posing as a rationalist. He longed for the return of the principles of laissez-faire capitalism of the late Victorian age. He argued that any attempt by government to foster a more equitable society would circumscribe individual freedom and inaugurate the slide towards totalitarianism, as he wrote in his most famous work, The Road to Serfdom (1944):
‘Few are ready to recognize that the rise of fascism and naziism was not a reaction against the socialist trends of the preceding period but a necessary outcome of those tendencies . . . As a result, many who think themselves infinitely superior to the aberrations of naziism, and sincerely hate all its manifestations, work at the same time for ideals whose realization would lead straight to the abhorred tyranny.’
The idea that ‘socialism’ led inexorably to fascism infuriated those who believed that the defence of open, equitable democracy was precisely why they went to war against Hitler and why they loathed Stalin. To be told that pursuing those goals had helped create the totalitarian system so many had risked their lives to defeat struck a painfully exposed nerve.
A blind spot fogged Hayek’s mind that a closer study of history might have cleared: it was not ‘socialism’ that led to Hitler and Stalin but the human and economic destruction wrought by World War I, which itself was partly the result of the obscene inequality and mass poverty spawned by laissez-faire ‘liberalism’ in the pre-war era, precisely the economic model that Hayek applauded.
In Hayek’s mind, a government’s chief and only function was to enable ‘the individual’ to do as he or she pleased within the law. Here is Hayek the nineteenth-century free-market ideologue in full cry:
‘Though we neither can wish nor possess the power to go back to the reality of the nineteenth century, we have the opportunity to realize its ideals . . . If in the first attempt to create a world of free men we have failed, we must try again. The guiding principle that a policy of freedom for the individual is the only truly progressive policy remains as true today as it was in the nineteenth century.’
Hayek seems oblivious to the fact that the nineteenth century was not ‘free’ for most people, either economically or politically.
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Hayek nursed a special loathing for ‘planners’ and ‘planning’: the moment a government sat down to ‘plan’, he argued, it was bound to restrict the freedom of capitalists to do as they pleased and gum up the liberal world order in unintended and sinister ways.
Unless checked, all government planning tended towards tyranny, Hayek warned. Any attempt to regulate the excesses of free-market capitalism threatened his laissez-faire ideal, and would inculcate in the state a ‘planning mindset’ that must only accelerate the slippery slide to fascism.
For Hayek, the only acceptable kind of planning was that which promoted unchecked wealth accumulation and market power. We’ve seen the disastrous results of this in Britain, in the beleaguered attempts to privatise ‘natural’ monopolies (such as the railways and water supply), the tyranny of league tables over services where the ‘human inputs’ are intangible and immeasurable (education and health), and the pitting of small businesses and vast corporations on a playing field as level as a fault line.
Not even Thatcher – a more pragmatic, less ideological, leader than many realise – dared to privatise the railroads, the health service and the post office. And yet when she said, ‘One [cannot] buck the market,’ countless otherwise sentient people seemed spellbound by the market’s mysterious power. The truth is, Thatcher knew when to apply the brakes, and dared not privatise monopolies or national treasures. The market, for her, was eminently ‘buckable’.
It seems astonishing that we must state an obvious point in reply to Hayek: all governments, whether of the left or the right, ‘plan’. Their annual budget is a plan. Their policies are plans. Their very appeal (or not) to voters is a promise based on a plan.
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The opening sentences of Milton Friedman’s Capitalism and Freedom (1962) assails us with a burst of free-market zealotry that drains the reader’s respect for the coherence, if not the efficacy, of his ideas.
Democratic socialists, Friedman argued, ‘are persuaded that it is possible for a country to adopt the essential features of Russian [that is, Soviet] economic arrangements and yet to ensure individual freedom through political arrangements’. This hysterical proposition implied that democratic socialists were wedded to the economic, if not biological, destruction of the middle class.
Like Hayek, Friedman opposed ‘plans’ and most government regulations – business, medical, financial – because they deprived the American people of their ‘freedom’. The common-sense rule that skilled tradesmen should be licensed, for example, offended Friedman’s idea of ‘freedom’:
‘Underlying most arguments against the free market,’ Friedman wrote, ‘is a lack of belief in freedom itself’ – which is tantamount to saying that anyone who believes in regulated capitalism is a communist. Perhaps realising this, Friedman added: ‘The existence of a free market does not of course eliminate the need for government. On the contrary, government is essential both as a forum for determining the “rules of the game” and as an umpire to interpret and enforce the rules decided on.’
If you believe in Hayek’s and Friedman’s economic vision, you will nod happily as ‘your’ national health service is sold to a private-equity consortium. You will welcome unlicensed plumbers to unblock your S-bend. You will delight in the slashing of taxes for the benefit of the rich. You will gladly buy life insurance from an unauthorised snake-oil salesman. You will smile as your landlord installs cheap, flammable cladding on your high-rise apartment block (the kind that caused the fire that killed seventy-two people in the Grenfell Tower in London in 2017). And you will trust large corporations when they say they’ll invest a low tax windfall in research, training and their workers, rather than in executive bonuses and shareholder dividends.
Those large corporations did not: between 1975 and 2018, US$47 trillion of wealth trickled up, according to the Rand Corporation, in the form of dividends and executive bonuses and share buybacks, enriching the top 1 per cent on a Croesan scale. The result, as forensically documented by the economist Thomas Piketty’s Capital in the Twenty-First Century: a yawning gap between rich and poor not seen since the decades before World War I.
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The origin of this ‘ideology’ of capitalism is grounded in a kind of bastardised religious faith, according to the great German sociologist Max Weber. The title of his most celebrated work, The Protestant Ethic and the Spirit of Capitalism (1905), said it all: the religious ‘spirit’ of the Protestant work ethic suffused the capitalist system.
Weber sourced the origins of the capitalist spirit or geist to the Calvinist theology of predestination, the core belief of the English Puritans who settled America and the Scottish Presbyterian entrepreneurs who helmed the British Empire.
According to this Puritan doctrine, the ‘Elect’ whom God had chosen for salvation were predestined for Heaven. You were either among the Elect or you weren’t, and there was nothing you could do to change camps. Confessions and indulgences and prayers for forgiveness were unavailable to a Protestant, and pointless in any case, as the fate of your soul was sealed.
If you believed this, Weber wondered, how were you supposed to live your life? Troublingly, the Puritan didn’t know if God had chosen him. And his ignorance isolated him: he was either fallen and faced perdition or he had been chosen to meet a destiny ‘which had been decreed for him from eternity’.
Despairing that he might have offended God, the Puritan spent his life scouting for ‘signs of predestined salvation’ that assured him of his special status. Wealth and prosperity he interpreted as signs that God had smiled on him, affirming his membership of the Elect, rather like ‘good karma’ reinforced the sense of entitled privilege among the Hindu elite.
That is why the Protestants who believed in predestination (chiefly the Methodists, Presbyterians and Baptists) committed themselves to ‘succeeding’ in every way possible. They worked hard, prospered and sought a prominent place in their community. They emblazoned their names on charitable causes and raised their children according to irreproachable Christian standards. They knew that ‘good works’ would not get them into Heaven – Luther had made that clear – but their membership of the Elect was a different matter.
‘Thus, however useless good works might be as a means of attaining salvation,’ Weber explained, ‘nevertheless, they are indispensable as a sign of election. They are technological means, not of purchasing salvation [as with indulgences], but of getting rid of the fear of damnation.’
God would reward the Protestant’s hard work, his charity and abstemiousness, by ensuring that he retained his place among the Elect. And why not? Had he not proven his faith? Hadn’t he curbed the ‘impulsive enjoyment’ of the fruits of his labour? Had he not resisted the temptation to idleness and luxury? Surely God wouldn’t deny him his rightful seat in the boardroom of the Elect? The more capital the Puritan accumulated, the more he rose in God’s estimation. The more charitable causes he lent his name to, the more likely it was that God would sign off on his election to heaven.
The result, Weber said, was ‘an extraordinary capitalist business sense’ that united ‘the most intensive forms of piety’ with ‘an excessive propensity to accumulation’. This wealth and abundance had the seal of God’s approval: ‘Wealth is thus bad ethically only in so far as it is a temptation to idleness and sinful enjoyment of life . . . But as a performance of duty in a calling it is not only morally permissible, but actually enjoined.’
In such a world, bohemians, atheists, artists, feminists, socialists, gays, hedonists and ‘liberals’ (of the ‘bleeding heart’ type) were manifestly not members of the capitalist Elect. They would not partake of the rapture, the fast-track to heaven. They were doomed to wait in line. God smiled on the rich tycoon as radiantly as on the little girl selling lemonade to pay for her brain surgery. In such a world, governments were redundant: God’s capitalists would provide.
Next Thursday, 19th September 2024: Confucius, the first humanist
Selected sources and further reading:
Evans, R.K. (Summer 2017) ‘“A New Protestantism Has Come”: World War I, Premillennial Dispensationalism, and the Rise of Fundamentalism in Philadelphia’, Pennsylvania History: A Journal of Mid-Atlantic Studies, 84(3), pp. 292–312.
Friedman, M. and Schwartz, A.J. (1992) A Monetary History of the United States, 1867–1960, Princeton NJ: Princeton University Press.
Friedman, M. Capitalism and Freedom, Chicago: University of Chicago Press.
Foster, L. (Winter 2003) ‘The Psychology of Prophetic Charisma: New Approaches to Understanding Joseph Smith and the Development of Charismatic Leadership’, Dialogue: A Journal of Mormon Thought, 36(4) pp. 1–14.
Hanauer, N. and Rolf, D.M. (14 September 2020) ‘The Top 1% of Americans Have Taken $50 Trillion from the Bottom 90% – And That’s Made the U.S. Less Secure’, Time.
Hayek, F.A. (1978) The Constitution of Liberty, Chicago: University of Chicago Press.
Hayek, F.A. (2007) The Road to Serfdom: Text and Documents – The Definitive Edition, Chicago: University of Chicago Press.
Holloway, K. (1 October 2021) ‘“Feel-Good” News Story or Poverty Propaganda?’, The Nation.
Hutton, W. (3 September 2023) ‘Chaos in Our Skies, Crumbling Concrete in our Schools: Grim Symptoms of a British Disease’, The Observer.
Jones, G. (2004) Multinationals and Global Capitalism: From the Nineteenth to the Twenty First Century, Oxford: Oxford Academic.
Keynes, J.M. (2016) The Economic Consequences of the Peace, New York: Skyhorse.
Keynes, J.M. (2017) The General Theory of Employment, Interest and Money, Knoxville TN: Wordsworth Editions.
Kutscher, R.E. (November 1993) ‘The American Workforce, 1992–2005: Historical Trends, 1950–92, and Current Uncertainties’, Monthly Labor Review.
Little, D. (Fall 1974) ‘Max Weber and the Comparative Study of Religious Ethics’, The Journal of Religious Ethics, 2(2) pp. 5–40.
März, E. (1991) Joseph Schumpeter: Scholar, Teacher, and Politician, New Haven CT: Yale University Press.
Neumann, F., Marcuse, H. and Kirchheimer, O. (2013) Secret Reports on Nazi Germany: The Frankfurt School Contribution to the War Effort, Princeton NJ: Princeton University Press.
Orwell, G. (1970) A Collection of Essays, London: Mariner Books Classics.
Piketty, T. (2014) Capital in the Twenty First Century, Cambridge MA: Belknap Press.
Price, C.C. and Edwards, K.A. (2020) ‘Trends in Income from 1975 to 2018’, Rand Education and Labor Working Paper, Doc No: WR-A516-1, Rand Corporation.
Reeves, J. (4 March 2021) ‘7-year-old Alabama girl helps to fund her own brain surgery’, Associated Press.
Schumpeter, J. (2008) Capitalism, Socialism and Democracy, New York: Harper Perennial Modern Classics.
Smith, A. (2003) The Wealth of Nations, London: Penguin Classics.
World Bank & Maddison (16 April 2017) ‘World GDP over the Last Two Millennia’, Our World in Data.
Weber, M. and Parsons, T. (transl.) (2001) The Protestant Ethic and the Spirit of Capitalism, New York: Routledge.