We should call it the “Great Fact,” argues University of Illinois at Chicago economist Deirdre McCloskey. “It” is the Industrial Revolution that, starting in Great Britain in the late 18th century, produced a 16-fold expansion in per capital wealth throughout the world. With that explosion in wealth came longer life spans, better health care, and the greatest improvement in human welfare the world has yet seen.
This explosion was not caused by government plans or at the behest of church leaders. It was the result of a force that has since become derided by those who claim to care about progress — free enterprise capitalism. In this festive season, we should reflect on its great gifts to mankind.
Journalist Matt Ridley’s most recent masterpiece, The Rational Optimist: How Prosperity Evolves (2010), briskly and engagingly retells the story: The voluntary exchange of ideas that has characterized humanity since its earliest days reached a critical mass in the early 19th century, enabled by a rare combination of circumstances — “capital, freedom, education, culture, and opportunity,” as Ridley describes it — that was made possible by the existence of free enterprise capitalism.
The benefits were quick to accrue. As Ridley notes, an historian noted as early as 1835 that “the wonderful cheapness of cotton goods [was now benefitting] the bulk of the people…a country wake in the nineteenth century may display as much finery as a drawing room in the eighteenth.” It was not long before increases in wealth led to improvements in human health. Life expectancy rose, child mortality fell, and medical innovation exploded — and continue to do so to this day.
None of this would have been possible without the rise of capitalism in the 18th century. As McCloskey has documented, that century saw the rise of what she calls “bourgeois ethics and virtue.” In all previous eras, and in most of the rest of the world even during that century, commerce — the voluntary exchange of goods and ideas — was regarded as gauche, an occupation for those of low station.
The rise of a bourgeois code of ethics changed all that. By recognizing the value of virtues like hope and courage in the entrepreneur, it led to recognition of the vital role such individuals play in benefiting all of society.
Thus, merchants went from being a despised class, often of suspect ethnic origin and guilty of sins like avarice, to becoming the heart and soul of respectable society. Commerce came to be seen as soul-lifting and fundamentally virtuous.
Indeed, it is no coincidence that McCloskey — upon whom my organization, the Competitive Enterprise Institute, bestowed its 2013 Julian L. Simon Memorial Award — titled two of her most influential books The Bourgeois Virtues (2007) and Bourgeois Dignity (2011). And it is that dignity that provided the unique combination of circumstances Ridley celebrates. As America’s history parallels that development, the nation has never known an era in which commerce was belittled – at least, until now.
Today, however, despite the massive and demonstrable benefits it has brought to the Western world, and is now bringing to the vast mass of the rest of humanity, free enterprise is under assault. We saw it most readily in the reaction to the financial crisis, as the financial system specifically, and capitalism more generally, were blamed for problems caused by the misdeeds of a few bad actors and the shortsightedness of government regulators. Bankers, the popular narrative went, brought down the economy to satisfy their greed, not caring about the consequences.
From these alleged sins, mea culpas followed — from those who had nothing to apologize for. Few stood up for capitalism in either the political or business worlds. Perhaps this was inevitable, as the creep toward corporatism of the Clinton/Bush years may have eroded what was left of bourgeois virtue in the business world. The allure of cronyism is tempting indeed. And few politicians have ever understood capitalism, anyway.
Yet, it is not too late to stop the rot. Real capitalists — the risk-taking entrepreneurs who start new businesses and those who invest in their ventures — need to stand up in defense of everything they do. They need to tell the world how proud they are of what they do every day, and how much poorer the world would be without it. If they need a New Year’s resolution, this is it.
They need to exemplify the bourgeois virtues — hope, courage, love, faith, prudence, temperance, and justice — in everything they do. They need neither apologize nor kowtow to their critics. Trying to buy the friendship of environmental groups and other anti-capitalist ideologues is as useless as buying indulgences for sin was in the medieval world. Instead, they should point to the cornucopia of benefits they bring to America and the world — jobs being not the least.
Capitalism has a long and proud history. It should have just as long and proud a future.