The events of the 1590s had suddenly brought home to more thoughtful Castilians the harsh truth about their native land – its poverty in the midst of riches, its power that had shown itself impotent…  For this was not only a time of crisis, but a time also of the awareness of crisis – of a bitter realization that things had gone wrong.  It was under the influence of the arbitristas that early seventeenth-century Castile surrendered itself to an orgy of national introspection, desperately attempting to discover at what point reality had been exchanged for illusion….

The arbitristas proposed that Government expenditure should be slashed…

Most of the arbitristas recommended the reduction of schools and convents and the clearing of the Court as the solution to the problem.  Yet this was really to mistake the symptoms for the cause. MartínGonzález de Cellorigo was almost alone in appreciating that the fundamental problem lay not so much in heavy spending by Crown and upper classes – since this spending itself created a valuable demand for goods and services – as in the disproportion between expenditure and investment.  ‘Money is not true wealth,’ he wrote, and his concern was to increase the national wealth by increasing the nation’s productive capacity rather than its stock of precious metals.  This could only be achieved by investing more money in agricultural and industrial development.  At present, surplus wealth was being unproductively invested – ‘dissipated on thin air – on papers, contracts, censos, and letters of exchange, on cash, and silver, and gold – instead of being expended on things that yield profits and attract riches from outside to augment the riches within.  And thus there is no money, gold, or silver in Spain because there is so much; and it is not rich, because of all its riches….’

The Castile of González de Cellorigo was…a society in which both money and labour were misapplied; an unbalanced, top-heavy society, in which, according to González, there were thirty parasites for every one man who did an honestday’s work; a society with a false sense of values, which mistook the shadow for substance, and substance for the shadow.

J.H. Elliott, Imperial Spain:  1469-1716

Austerianism is predicated on the belief that money, and not production, is true wealth.  But if we look at the four great hegemonic empires to arise since the advent of capitalism – Spain, Holland, England and the United States – what their histories tell us is something very different.

In 16th-century and early 17th-century imperial Spain money was conceived predominately in the form of specie — silver and gold bullion.  But by the time Holland had risen to preeminence in the 17th century and had “transition[ed] from a merchant oligarchy to a rentier oligarchy,” money began taking on a different meaning:  “houses, lands, and money at interest” And of that, Holland’s oligarchs had plenty:  “Amsterdam was the money-market of the Western World” (C.R. Boxer, The Dutch Seaborne Empire 1600-1800).

From whence did this money come from?  To put it quite bluntly, it came out of the hides of either conquered foreign peoples or of domestic workers.  C.R. Boxer, for instance, describes the condition of the latter in imperial Holland:

Although adequate unemployment statistics and other relevant materials are lacking, it is clear from numerous contemporary accounts of the Dutch Republic in its ‘Golden Century’ that economic expansion and national prosperity were accompanied by great poverty among many groups of workers, as happened later in England during the Industrial Revolution….  As early as 1566 a Leeuwarden chronicler noted that, in sharp contrast with the wealthy regents and merchants, stood the mass of the ‘humble, distressed, and hungry common people’….  The poor houses and workhouses also supplied women and children for industrial labour, and here again there is an obvious parallel with England during the Industrial Revolution.  It is true that some steps were taken to check these abuses, such as fixing the textile operatives’ working day at a maximum of fourteen hours (!) in 1646; but thirteen years later a leading Leiden industrialist noted that many workers were living in overcrowded slums, and that some were forced to burn their beds and furniture to keep themselves warm in winter!

Out of 41,561 households in Amsterdam in 1747, some 19,000 were living in squalid back premises, cellars, and basements.

State mercantilism was the dominant paradigm of the 17th and most of the 18th centuries, and the great thinkers of the time went to great lengths to craft ideologies which justified the austere conditions of the workers.  Here’s how Carroll Quigley puts it in The Evolution of Civilizations:

Economic aims and economic values were distorted and frequently reversed so that consumption was condemned as an evil, abundance abhorred, work praised as an end in itself, exporting encouraged, and poverty regarded as a good because it was the only way to keep people working.  The esteemed Sir William Petty (1662) believed that a country could get richer and richer by exporting more and more and that it would be a good thing “if the products of the labor of a thousand men could be burned” since these men could then keep their skills by having to make the goods over again.  Charles Davenant in 1698 wrote, “By what is consumed at home one loseth only what another gets and the nation in general is not all the richer, but all foreign consumption is a clear and certain profit.”  More briefly in 1673 Becker wrote, “All selling is good, all buying bad,” while in 1677 John Houghton drew a logical conclusion from these ideas by suggesting that England could get richer by inviting foreigners to come in to “consume our corn, cattle, cloths, coals, and other things.

The demise of state mercantilism and the rise of liberal imperialism (also known as liberal internationalism) towards the end of the 18th century brought about many changes which revolutionized and greatly increased production.   Money in the form of specie was replaced by the use of banknotes backed to only a fractional part of their value by specie reserves, the medieval three-field fallow system was replaced with the newer enclosed leguminous rotation systems, the craft system of manufacture was replaced by the industrial system, and man- and animal-power were replaced by water power or coal-fueled steam engines.

But one thing did not change.   And that was the abiding faith in the appropriateness of austerity for the working class.  Just like those who came before them in the state mercantilist era, all the great thinkers of the liberal imperialist age – e.g. Adam Smith, David Ricardo, and Thomas Malthus – labored long and hard to lend moral and intellectual legitimacy to the austere condition of the workers.  As Robert Heilbroner explains of the early 19th century, it was

a world that was not only harsh and cruel but that rationalized its cruelty under the guise of economic law.  Necker, the French financier and statesman, said at the turn of the century, “Were it possible to discover a kind of food less agreeable than bread but having double its substance, people would be reduced to eating only once in two days.”  Harsh as such a sentiment might have sounded, it did ring with a kind of logic.  It was the world that was cruel, not the people in it.  For the world was run by economic laws, and economic laws were nothing with which one could or should trifle; they were simply there, and to rail about whatever injustices might be tossed up as an unfortunate consequence of their working was as foolish as to lament the ebb and flow of the tides.

The laws were few but final.  We have seen how Adam Smith, Malthus, and Ricardo elaborated the laws of economic distribution.  These laws seemed to explain not only how the produce of society tended to be distributed but how it should be distributed.  The laws showed that profits were evened out and controlled by competition, that wages were always under pressure from population, and that rent accrued to the landlord as society expanded.  And that was that.  One might not necessarily like the result, but it was apparent that this result was the natural outcome of society’s dynamics:  there was nopersonal ill-will involved nor any personal manipulation.  Economic laws were like the laws of gravitation, and it seemed as nonsensical to challenge one as the other.  (Robert Heilbroner, The Worldly Philosophers).

But why the solitary focus of the liberal imperialists on increasing production if austerity meant increased production was not to bring about a general rise of domestic prosperity?  The increased production, as Hannah Arendt explains, was not to enhance domestic consumption, but to create a surplus of goods and money for export.  The imperialist expansion of the 19th century had

been touched off by a curious kind of economic crisis, the overproduction of capital and the emergence of “superfluous” money, the result of oversaving, which could no longer find productive investment within the national borders….

After the financiers had opened the channels of capital export to the superfluous wealth, which had been condemned to idleness within the narrow framework of national production, it quickly became apparent that the absentee shareholders did not care to take the tremendous risks which corresponded to their tremendously enlarged profits.  Against these risks, the commission-earning financiers, even with the benevolent assistance of the state, did not have enough power to insure them:  only the material power of a state could do that.  (Hannah Arendt, The Origins of Totalitarianism).

And thus the age of liberal imperialism was born.  Britain, France, Germany, Belgium and the United States would come to rule over vast empires, either by direct rule or by establishing client states, and by the time of the Versailles Treaty it was possible for Thorstein Veblen to assert that “the present economic and political order rests on absentee ownership.”  Absentee ownership could take two forms, either as loans to the colonies and neo-colonies or as direct investment in these faraway places.  “The imperialist policies of the Great Powers, including America,” Veblen explains, “look to the maintenance and extension of absentee ownership as the major and abiding purpose of all their political traffic.”   In “all these civilized nations,” he adds, “the security of property rights has become virtually the sole concern of the constituted authorities,” who “at any cost” will strive to make the world safe for “that Democracy of Property Rights on which the existing political and civil order is founded.” (Thorstein Veblen, “Review of John Maynard Keynes, The Economic Consequences of the Peace”).

Making the world safe for the “Democracy of Property Rights,” as Arendt pointed out, requires extensive use of the state’s instruments of violence:  the police and the military.  In liberal imperialism, however, this is never openly admitted.   The result is that, as Reinhold Niebuhr explains, the “moral attitudes of dominant and privileged groups” are thus “characterized by universal self deception and hypocrisy” (Reinhold Niebuhr, Moral Man and Immoral Society).  And since “inequalities of privilege are greater than could possibly be defended rationally, the intelligence of privileged groups is usually applied to the task of inventing specious proofs for the theory that universal values spring from, and that general interests are served by, the special privileges which they hold.”  Classical and neoclassical economics are perfect examples of this.  As Niebuhr goes on to explain:

Practically every moral theory, whether utilitarian or intuitional, insists on the goodness of benevolence, justice, kindness and unselfishness.  Even when economic self-seeking is approved, as in the political morality of Adam Smith, the criterion of judgment is the good of the whole…


Rationalism in morals may persuade men…[to] condone their egoism as a necessary and inevitable element in the total social harmony.  The egoistic impulses are so powerful and insistent that they will be quick to take advantage of any such justifications.  The utilitarian movement of the nineteenth century had the laudable purpose of persuading men to achieve by diverting egoistic impulse to the most inclusive possible social objectives.  It was significant that it merely provided the rising middle class with a nice moral justification for following its own interests.


Thus, for instance, laissez faire economic theory is maintained in an industrial era through the ignorant belief that the general welfare is best served by placing the least possible political restraints upon economic activity….

When economic power desires to be left alone it uses the philosophy of laissez faire to discourage political restraint upon economic freedom.  When it wants to make use of the police power of the state to subdue rebellion and discontent in the ranks of its helots, it justifies the use of political coercion and the resulting suppression of liberties by insisting that peace is more precious than freedom and that its only desire is social peace.

The “universal self-deception and hypocrisy” manifest themselves in foreign relations as well as domestic relations.  As Kevin Phillips explains in Wealth and Democracy, the

openness of the world economy from 1870-1913 – reexamined with interest as the debate over the next great globalization heated in 2000 – was less a phenomenon of global fraternity than a projection of British power and its demand that investment and export opportunities remain open….

The notion that Britain did this through laissez-faire rather than government activism is a Victorian fairy tale.  From 1845 to 1870, laissez-faire dominated British domestic policy in the sense of denying any role for government in aiding the masses in ameliorating poverty.  Globally, however, Britain spent huge sums on the principal supervisory force that watched its world commerce – the Royal Navy.  Steel development had more than a little to do with the navy; India was run by mercantilist precepts; the Bank of England was charged with maintaining the pound sterling; and the British government subsidized transatlantic steamers and telegraph cables and bought half the shares in the Suez Canal Company.  With that kind of laissez-faire, Britain built an empire and projected the globalization regime of open sea-lanes, open ports, and (relatively) free movement of investment.

After WWII the baton of liberal imperialism was passed from Great Britain to the United States, and the US became the senior partner, with the other “civilized nations” playing the role of junior partners, in keeping the globe safe for “that Democracy of Property Rights.”

The quest of privileged groups for absolute domination and control over not just domestic affairs, but also the planet, runs like a thread through the capitalistic era, which began about 500 years ago.  In the successive installments of this series, I would like to explore how the belief that money is true wealth came to dominate elite thinking in Holland, Great Britain and now the United States, and how this belief undermines the very success of the imperial projects undertaken by the privileged groups in these countries.


Money is not true wealth (Part II – The Dutch Republic 1477-1806 and revolution in the Netherlands 1747-1848)


The richest eschews a vain parade of wealth

And entertains the poor with friendship and with care

…Where the farmer so rich…the sailor so beloved

The humblest servant as merry as his master

–SIMON STIJL, Rise and Flourishing of the United Netherlands (his description of the Dutch Republic in the 3rd quarter of 18th century)


Every nation has its national mythology, and the Netherlands is no exception.  As Simon Schama points out, many Dutch still see “themselves frozen in the attitudes of Hals’ guild deacons and de Hooch’s interiors, a maritime community of God-fearing burghers dwelling in piety and liberty” (Simon Schama, Patriots and Liberators:  Revolution in the Netherlands 1780-1813).  The rub, however, is this, and again the Dutch prove no exception to the rule:  national mythologies are unfailingly more fiction than fact.

The Dutch Republic was the first great capitalistic empire.  But the transition from feudalism to capitalism was neither natural nor spontaneous.  The blooming of capitalism would require a revolution of morals.

As Robert Heilbroner points out:  “In earlier societies the integration of the individual into the life of the community is clearly seen as arising from feelings of positive affect (family ties, friendship, communal observances, etc.), or under duress of communal pressure (scorn, ostracism) or coercive authority” (Robert Heilbroner, Behind the Veil of Economics).  But in a capitalistic society, Heilbroner continues, it is “the ‘necessity’ of employment, despite the contractual freedom that set it so decisively apart from the status of serf or slave,” that would become the instrument of social compulsion.

And as instruments of social compulsion go, it is not at all clear whether necessity is any less of a slave master than the whip, as Hanna Arendt observes of Great Britain, which was to become the world’s second great capitalistic empire:

For the liberation of the labourers in the initial stages of the Industrial Revolution was indeed to some extent contradictory:  it had liberated them from their masters only to put them under the stronger taskmaster, their daily needs and wants, the force, in other words with which necessity drives and compels men and which is more compelling than violence.

–HANNAH ARENDT, On Revolution

If necessity was to replace the whip as the instrument of social coercion, then the old morality of Medieval Christianity would have to go, and it was the wave of Christian humanism which swept western Europe in the late 15th and early 16th centuries, followed by the Reformation, which was to provide the new morality.  As Jonathan I. Israel explains in The Dutch Republic:  Its Rise, Greatness, and Fall 1477-1806:

During the first half of the sixteenth century, western Europe, both Protestant and Catholic, was swept by new attitudes, and a new approach, to the problem of poor relief.  There were several factors behind this change.  Partly, it was a response to humanist criticism of monks and friars and the principle of unrestricted giving of alms, and charity, to beggars.  Partly, it was an inherent result of the Reformation which, by sweeping away the Catholic clergy, and confiscating Church property and revenues, left a large gap in urban welfare…

Both the administration and the aims of welfare changed.  Late medieval religiosity accorded a sacred value to poverty, begging, and giving alms, which the new humanist philosophy of poor relief was unwilling to share.  Priority was now assigned to checking the growth of poverty, vagrancy, and idleness, so the new approach tended to be much more questioning, if not outright hostile, to begging and alms-giving.

As to the libertine, democratic and pluralistic impulses of the new Christian humanism and the early Dutch Reformation, these proved ephemeral.  They rapidly gave way to the more authoritarian drumbeat of Calvinism, as Israel explains:

Doctrinally, the strength of Calvinism, which by the 1550s had eclipsed (but also absorbed) the Buceran and Zwinglian strands of the Reformation in northern Europe, sprang from its clear, systematic exposition, above all in Calvin’s great work, the Institutes, its ability to provide that stable and orderly structure, both in dogma and organization, needed to counter the fragmentation, and proliferation of theological tendencies, so characteristic of the early Netherlands Reformation.


From the late 1550s Calvinism emerged as the strongest force in Netherlands Protestantism.  With its clear doctrines and formidable structure it made it possible for Protestantism in the Low Countries to organize into a more powerful movement than had been seen previously.

The Netherlands’ rising merchant class was quick to single out and seize upon those aspects of the new Calvinist faith which served its interests.  Calvinism’s muscularity challenged the old feudal order, dominated as it was by aristocratic landowners in alliance with the Catholic Church, and opened up new political vistas which the prosperous burghers were quick to exploit.  Here’s how C.R. Boxer, writing in The Dutch Seaborne Empire 1600-1800, puts it:

When the States of Holland formally renounced their allegiance to King Phillip II of Spain in 1581, they also enacted a law forbidding the town councilors to consult with the representatives of the guilds (from whom they had originally sprung in the Middle Ages) or of the civic guards (as such) on any provincial matters.  The regents thus took advantage of the struggle with Spain to consolidate their position as a self-perpetuating burgher-oligarchy and to exclude the ordinary citizens from any direct say in either the local or the provincial administration.

This near monopoly of political power of the rising capitalists proved devastative for the ordinary citizens.  As Boxer goes on to explain, it meant that the

 lot of the ordinary manual worker was hard; and the infrequency of overt unrest was due rather to the absence or weakness of the workers’ organizations than to the ‘paternal and enlightened regime of the upper-middle-class dictators’, as claimed by Professor G. J. Renier.  It is true, however, that class differences in the Dutch Republic, as elsewhere, were usually accepted as an aspect of the eternal scheme of things.  Moreover, the urban proletariat were unarmed, and the burgher militia or civic-guards could be relied on to obey the orders of the regents in the event of any conflict with the grauw.


Hard as were the living conditions of the industrial and agricultural workers, the life of the seafaring communities was even harder….  Despite the phenomenal growth of Dutch shipping and maritime enterprise between 1585 and 1650, there seems to have been a surplus of sailors for most of this period, and, perhaps for the next sixty or seventy years.  During this time a Dutch skipper could usually count on mustering a crew despite the low wages and the spartan rations which were the general rule.


When (in 1629) some leading Amsterdam shipowners claimed, correctly enough, that during the twelve-year truce the Dutch had secured the lion’s share of the carry-trade of Europe thanks to their low freights and superior techniques, they forbore to add that this had been achieved largely by the owners economizing on the number and the rations of their crews.  Other contemporaries were franker.  Van Meteren, in his chronicle of 1599, observed that the North Sea herring fishery was such a hazardous and uncertain occupation that ‘neither the English nor anyone else’ would sail in it for the low wages and the poor food which the Dutch fishers accepted.  Another chronicler observed a few years later that the Dutch ‘skippers…were so economical in their feeding, that they save our shipowners at least a third of the expenses in men and rations, which other nations demand in greater quantity and better quality’.


It will be apparent from the above, and from the abundant travel-literature of the 17th and 18thcenturies, that the life of a Dutch sailor was apt to be nasty, brutish and short.

There would be no religious toleration in the new Dutch Republic.  The “Reformed Church was now the public Church, which meant that it had the backing of the State, and civic authorities” (Israel).   Religion was viewed as “an indispensable prop to the social order” and people were urged to conform to the public religion “for the sake of society and the state.”  Jews and Catholics, as well as more liberal Protestants like the Anabaptists, Mennonites and Lutherans, quickly found the practice of their religion outlawed.

Armed thusly with a religion and a morality which celebrated austerity, allowing this conviction to easily be dispensed with when it came to their own behavior, and with a near-monopoly of political power, the “transition from a merchant oligarchy to a rentier oligarchy” was to be a rapid one, so much so that the sublime nationalistic cant about “a maritime community of God-fearing burghers dwelling in piety and liberty” becomes nothing short of a cruel joke upon the great Dutch unwashed.

The driving force behind Dutch capitalism, after all, was a combination of “love of gain” amongst the capitalists with the threat of unemployment and starvation for the sailors, industrial workers and agricultural workers.  As Schama points out, the Dutch political and economic scene for the next two centuries would be dominated by the capitalist-oligarchs (an entrenched, hereditary “mercantile partriciate”) and the Orangists (“the nobility of the landward provinces”).  The “grauw (an altogether more expressive term of abuse than rabble or canaille),” those of lower social rank, would be “deemed a negligible political quality.”

The economic consequence of these moral and political arrangements was to make the Dutch Republic very rich and powerful.  That is, at least, until the rest of Europe’s rising merchant and industrial class, in the latter half of the 17th century, finally caught onto the wonders of capitalism and state mercantilism.   This latter denouement proved devastating for the Dutch Republic, and its “Golden Century” quickly gave way to the “Periwig Period.”  As Boxer explains, when “the protectionist measures adopted by neighbouring countries from the time of Colbert onwards effectively stimulated the consumption of their own manufactured goods at the expense of the Dutch exporters, the Dutch industrialists could not fall back on increased internal demand, nor was it possible greatly to increase their sales in the tropical dependencies.”

The Dutch Republic’s shooting star thus came tumbling back to earth just as quickly as it had blasted into the empyrean.   The immediate result was the destruction of the merchant and industrial elite and the concomitant rise of the “colossal wealth of the great bankers and financiers” (Schama).    The Dutch newspaper, De Borger, stated (19 October 1778) that the economic decline of the nation had reached such a pitch that it seemed as if “the body of the Commonwealth would shortly consist of little more than rentiers and beggars – the two kinds of people who are the least useful to the country.”   As Schama explains:

The role of the capitalist, hitherto inextricably linked with trade through the commission business, gradually reverted to more purely banking and broking functions.  Attracted by higher rates of interest than those prevailing at home, concentrations of capital detached themselves from the  entrepôt and were invested in foreign loans, or lending short with a quick turnaround.  Amsterdam thus became predominately – though by no means exclusively – a financial centre.


Amsterdam remained established as the cash till of Europe, to which states and princes might resort for handouts at rates of interest appropriate to their desperations….  [W]hile wealth was being unquestioningly generated in the eighteenth-century United Provinces, it was being diffused to a narrower base of population than in the century before 1680….  Like France, albeit for different reasons and in a very different fashion, the Republic was becoming simultaneously a richer and poorer nation.


More significantly, the close association of Dutch financial operations with the expansion of British power and strength was…alleged to amount to a virtual subsidy for the means of inflicting damage on Dutch shipping [or on] lucrative trade with the French and Americans.

The effect on everyone but the great bankers and financiers was economic devastation.  As James Boswell wrote from Utrecht in 1764:

Most of their principal towns are sadly decayed, and instead of finding every mortal employed, you were met with multitudes of poor creatures who are starving in idleness.  Utrecht is remarkably ruined.  There are whole lanes of wretches who have no other subsistence than potatoes, gin and stuff which they call tea and coffee; and what is worst of all, I believe they are so habituated to this life that they would not take work if it should be offered to them … you see, then, that things are very different here from what most people in England imagine.  Were Sir William Temple to revisit these Provinces, he would scarcely believe the amazing alteration which they have undergone.

Here’s how Boxer explains the Periwig Period:

The lack of initiative and enterprise in so many Dutch industries, and to some extent in Dutch agriculture, afforded a striking contrast to the state of affairs a hundred years previously, when Dutch entrepreneurs, industrialists and technicians were in the van of commercial and technical progress in the Western World….

The contemporaries who bemoaned the economic decay of the Dutch Republic in the last half – more especially in the last quarter – of the 18th century were inclined to place the principal blame on the allegedly self-satisfied and short-sighted rentiers and capitalists, who preferred to invest their money abroad rather than in fostering industry and shipping at home and thus relieving unemployment.


From being directly concerned with overseas trade in one form or another, as they had been for the most of the 17th century, some of them had not only become rentiers but rentiers who tended to invest much of their capital in foreign funds.  It was confidently asserted in the House of Commons in 1737 that the Dutch held about 22.7 per cent of England’s public debt.


But whether Dutch capital was invested at home or abroad, it was lent to bankers and to brokers of commercial bills, or invested in land or in colonial West Indian mortgages, rather than in developing home industries or in fostering Dutch shipping.  Amsterdam was the money-market of the Western World; but many of the regent-oligarchs were wealthy rentiers and high financiers who stood apart from the merchant class from which they had sprung.


The merchant-bankers and the wealthy rentiers might never have “had it so good’, but the condition of the poor seems to have been even worse than it was a century previously, particularly in the inland towns.  Boswell’s description of Utrecht in 1763 anticipated an observation by Luzac twenty years later:  ‘Nobody who has any feeling, and some love for his fatherland, can walk through the inland towns with dry eyes.’  In 1792 another eyewitness deposed:  ‘Everywhere we look attentively around us we find the sad truth confirmed that the well-being of that class of people who lead a working life is steadily declining.’

And here’s how Israel describes the blissful nirvana the Dutch rentier-oligarchs lived in:

Dutch society in the eighteenth century was a society dominated by the rentier.  Whether regents, nobles, descendants of mercantile families who had abandoned commerce, or heirs to money made in manufacturing but no longer involved in active business, most of the wealthy in the eighteenth century Dutch Republic were men who had no active economic role.  The lived, often in great affluence, in elegant rural villas, as well as fine town houses, employing cooks, servants, coachmen, and gardeners, on the interest and dividends paid on the States of Holland bonds, obligations, colonial company shares, and deposits in foreign funds, often the Bank of England.

But dark clouds were slowly gathering on the horizon for the great bankers and financiers too.  Their perverse and opportunistic brand of Calvinism, which sanctified their position in the social and economic order and gave them moral and intellectual legitimacy, slowly came under fire, as Israel explains:

Diderot, after spending six months in Holland, in 1774, wrote In his Voyages d’Italie et de Hollande(Paris, 1775) that the Dutch nation ‘est ennemi de la philosophie et de la liberté de penser en matière de religion; cependant on ne persécute personne’, adding that disbelievers in Christianity are ‘plus rares et plus haïs’ than France….

Ultimately, the principal preoccupation of the later Dutch Enlightenment was the decline of the Republic and how to achieve national regeneration.

No feature of the later Dutch Enlightenment was more typical than the profound awareness of economic decay and its effects on Dutch society.  Luzac and De Pinto dedicated their largest books to this subject and it permeated every facet of Dutch writing in the period.  Especially characteristic was the special emphasis given to what were deemed the moral roots of Dutch decline.

Here’s how Stephen Toulmin summed up the changing Zeitgeist:  “there has since 1776 been a growing perception that…inequalities cannot be justified by appeals to ‘the Nature of Things’ or ‘the Will of God’ “ (Stephen Toulmin,Cosmopolis:  The Hidden Agenda of Modernity).

Political discontent with the rentier oligarchs first became apparent in 1747-1749 with the Doelisten, “albeit in tones of stammering reservation rather than revolutionary  boldness” (Schama).   The nobility and commercial (now rentier) patriciate laid aside their longstanding animosities, formed an alliance and forcefully put down the popular protest by the Doelisten.   “The settlement imposed by the Stadholder on the Republic equally reflected his wish to leave well alone.  Instead of confronting the regencies of Amsterdam and the maritime provinces, he was content with the merest trimming in return for an acknowledgment of his authority as Captain- and Admiral-General….  Touch one perquisite, he was warned in Amsterdam, and the whole wormy edifice might crumble.”  The Stadholder was “complacent in leaving the most obvious venalities in being” (Schama).

William Bentinck warned the prince or Stadholder, William IV, that his association with the rentier patriciate and autocracy was bound, in the long run, to damage his standing with the people as a whole:

The foundation of all government is the trust reposed by the people in their governors.  At the present [1749] that confidence is entirely extinguished.  Complaints are universal and all the complaints fall on the Prince….  The nation sees that the Prince did not make proper use of the power given to him.  Those persons who almost brought down the state are still in office, they and their allies are well received by the Prince, some continue in the same improper manner as in the days of the earlier anarchy.

The prince, however, ignored these warnings.

One of the heralds of the later Dutch Enlightenment, Isaac de Pinto, “was already predicting, in the 1760s, the disaster that would ensue for Dutch society, and its elite, should the state and the VOC [United East India Company] encounter difficulties” (Israel).  As Israel explains:  “The Dutch civic elite of the mid-eighteenth century…held an astonishingly high proportion of their assets in paper securities.  This meant, at least in Holland and Zealand, the country’s wealthy were to a high degree dependent on the state, and the VOC, for sustaining their wealth.”

And the collapse of the state was not long in coming.  From 1781 to 1813 the Netherlands was wracked by revolt and revolution.   The great banker and financier Henry Hope, archetypical of those who “were prepared to subvert the national interest to protect their dividend,” when the French and their Batavian republican allies entered Holland in January 1795 “packed his bags for England” (Schama).  As Schama observes:  “Between 1780 and 1813 the Netherlands was despoiled of its colonies, routed at sea, invaded four times (twice unsuccessfully); driven to the edge of bankruptcy; and finally forced to drain the dregs of its misfortune by becoming mere departments of the French Empire.”  The unrest would continue for another 35 years.  “Representative government would have to wait until the bloodless coup of 1848 before becoming finally entrenched in Dutch political institutions” and “the alliance between national sovereignty and constitutional politics first announced in the gusty rhetoric of the Batavian National Assembly was realized.”

But rising from the ashes of the Dutch phoenix was the next great global capitalistic empire, the British, which I would like to discuss in my next post.  As Israel explains:

Britain was able to compensate for declining exports of manufacturers to northern Europe, through selling more in her fast-growing American colonies and tightening her grip over Ireland, Portugal, and the Portuguese Atlantic trade with Brazil, as well as India and large parts of the Caribbean.  The United Provinces simply lacked the vast imperial power, large navy, and populous colonies necessary, in the new circumstances, to sustain economic growth along the lines achieved by Britain.  By 1760, as the Amsterdam Sephardic Jewish economic writer Isaac de Pinto (1717-87) noted, every one of the main props of the Dutch Golden Age economy – long-distance trade, Baltic commerce, the herring and whale fisheries, and industry – had been largely ruined, the only exception being the still flourishing East India traffic.  Even the Surinam trade was in terminal decline by the 1760s.


Money is not true wealth (Part III – The British Empire and its demise: 1815-1945)

Once rationalism raised the intellectual stakes, Catholics could not go on playing by older, more relaxed rules:  if formal rigor were the order of the day in physics and ethics, theology must follow suit….

In the Library of the Convent of Ste. Geneviève, near the Pantheon in Paris, is a manuscript entitled Traité de l’autôrité et de la réception du concile de Trente en France.  It describes the struggle, after the Council of Trent, to uproot the “pernicious heresies and errors” of Protestantism, and paints a revealing picture of the intellectual position of the Catholic Church in early 18th-century France….  [I]ts final pages show how far the demand for “undeniable foundations” had made its way into Catholic theology by 1725.  Looking back, the author credits the Council with anachronistic motives, which are intelligible only if already, in the 1570s, it could invoke the principles of a philosophical rationalism that was invented in the 1630s.  The ambition of the Counter-Reformation, it tells us, was “to prove invincibly our most fundamental belief.”

–STEPHEN TOULMIN,  Cosmopolis:  The Hidden Agenda of Modernity


In my last post, I gave a short recounting of how, during the latter Dutch Enlightenment, the wheels started coming off the religious ideology which had been used to lend moral and intellectual legitimacy to Dutch capitalism.  The “most fundamental belief” of Dutch capitalism, I endeavored to demonstrate, was a combination of “love of gain” amongst the capitalists with the threat of unemployment and starvation for the sailors, industrial workers and agricultural workers.

If this fundamental belief of capitalism was to survive into Modernity and The Age of Reason, then its apologists, just like those of the Catholic Church who had come before and shown the way, would have to find “undeniable foundations” for their belief.  And these would have to be found not in the old revealed truths of Calvinism, but by invoking the principles of philosophical rationalism.  This chore fell to the new champions of British capitalism:   Adam Smith and his disciples.

In this way market fundamentalism was born, progress declared its offspring, and the “love of gain” of the capitalists rationalized.

Here’s how Wikipedia describes “the wonderful world of Adam Smith,” as Robert Heilbroner called it — “Smith’s panegyric of a free and unfettered market”:

Barter is characterized in Adam Smith’s “The Wealth of Nations” by a disparaging vocabulary: “higgling, haggling, swapping, dickering.” It has also been characterized as negative reciprocity, or “selfish profiteering.” By placing barter as the original “state of nature”, Smith is thus asserting that self-interest and greed are at the centre of all successive forms of economic exchange.

Peter Turchin elaborates in War and Peace and War:

During the twentieth century, the ideas of Mandeville, Smith, and many others have been developed and systematized into what is now known as “the theory of rational choice.”  The core of the theory is the postulate that people — “agents” — behave in such a way as to maximize their “utility function.”  In principle, the utility function could be almost anything, but in practice almost all applications of the theory in the mainstream economics equate utility with material self-interest.  In the most basic version, the utility is simply the dollar amount that an agent expects to get as a result of a certain action.  The agent then should perform the action that yields the greatest payoff — this is what “maximizing utility” means.  Agents that behave in ways that maximize their utility function are “rational.”

As Michael Allen Gillespie explains in The Theological Origins of Modernity:

What actually occurs in the course of modernity is thus not simply the erasure or disappearance of God but the transference of his attributes, essential powers, and capacities to other entities or realms of being.  The so-called process of disenchantment is thus also a process of reenchantment in and through which both man and nature are infused with a number of attributes or powers previously ascribed to God


By the end of the Enlightenment, many thinkers treated human beings as quasi-divine….  The Enlightenment (and post-Enlightenment) exaltation of human individuality is thus in fact a form of radical (although concealed) Pelagianism.  Divine or at least quasi-divine powers reemerge although always in disguise.  Nature is an embodied rational will; the social world is governed by an “invisible hand” that almost miraculously produces a rational distribution of goods and services; and history is the progressive development of humanity toward perfection.

Smith’s apotheosis of man and nature thus allowed him, as Robert Heilbroner explains, to “rationalize selfish instincts into social virtues.”   This led Smith to formulate “the laws” of the market.   “What he sought,” Heilbroner adds, “was ‘the invisible hand,’ as he called it, whereby ‘the private interests and passions of men’ are led in the direction ‘which is most agreeable to the interest of the whole society’. ”  If one “left the market mechanism alone and allowed it and the great social laws to work themselves out, it was inevitable that progress would result”  (Robert Heilbroner, The Worldly Philosophers).  Or as David Sloan Wilson put it, “Adam Smith’s metaphor of the invisible hand has long been used to convey the idea that a well-functioning society can be forged out of individual self-interest” (“The new fable of the bees:  Multilevel selection, adaptive societies, and the concept of self interest”

Here’s how Jeff Weintraub describes Smith’s panegyric of a free and unfettered market:

As we all know, Smith believes that the long-term process of socio-economic development, driven by the dynamics of the market and the division of labor, will steadily increase the overall productivity, prosperity, and “opulence” of societies over time. He also believes that the benefits of this increasing prosperity will be spread throughout the society (though, of course, unequally). In particular, he expects that, given the “natural progress of opulence,” the standard of living of the poor—by which he means the great majority of people in society—will increase steadily and significantly (as long as the market is allowed to operate unhindered). From Smith’s point of view, that consequence is one of the strongest justifications for the whole market system and its long-term developmental logic (e.g., WNpp. 22-24, 95-96, etc.). After all, “No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable” (WN p. 96).

Smith further believes that, broadly speaking, he has plenty of historical evidence for expecting an ever-increasing “universal opulence that extends itself to the lowest ranks of the people” (p. 22), and he appears confident that this conclusion follows plausibly from the overall logic of his theory. However, it’s fair to raise the question of whether or not Smith has provided an adequate and convincingtheoretical account to explain how and why this happy outcome should occur.


=> OK, here are some of the ways that Smith tries to deal with these issues.

So why aren’t workers stuck at a subsistence wage, even as the productivity and prosperity of the society around them continues to increase?

Smith does acknowledge (e.g., on pp. 85-86 of WN) that wages can sometimes sink to this subsistence level (though, for obvious reasons, they can’t stay below that level for an extended period). However, he adds (p. 86), there are “certain circumstances” that allow the normal rate of wages to go “considerably above that rate”. Clearly, he expects (and hopes) that these “circumstances” will be common, not exceptional. What are they?

Basically, he argues that labor will command a higher price, and therefore workers will have a better standard of living, whenever the (effective) demand for labor outstrips the supply of labor. Are there any “circumstances” in which this might be a steady rather than merely transitory condition? In general, that is most likely to happen in periods of continuous economic growth (the more rapid the better). And one of the factors driving this process, by the way, is that as long as the economy is humming along pretty well, every increase in the accumulation of capital will produce an increase in the demand for labor (since the capitalist who has accumulated those resources will want to put them to profitable use, for which he needs workers). Under these circumstances, the actual price of labor will remain above its natural price—not in a temporary or fluctuating way, but systematically.

(For these arguments, see especially WN pp. 86-89 & 99-104.)

All of Smith’s speculations concerning a rational, all-knowing and benevolent market – the same traits which the Scholastics had assigned to God – sounded great in theory.  But in practice they proved chimerical.

Following the defeat of Napoleonic France in 1815, Britain enjoyed a century of almost unchallenged dominance and expanded its imperial holdings across the globe.  Between 1820 and 1870 per capita GDP almost doubled.   Fabulous fortunes arose in Britain.  George Dangerfield, in The Strange Death of Liberal England, 1910-1914, described 1911 as the year of London “climbing towards its peak of plutocratic splendor, and tales of ballrooms banked high with the loot of hothouses, of champagne flowing like a sea, of bare backs, jeweled bosoms and fabulous expenditure.”

But none of this great wealth seemed to trickle down to the workers as Smith’s theory had predicted.  It should come as no surprise, then, that it was the empiricists who would be the first apostates from the free market faithful.

Simonde de Sismondi “became the first, and for a time the only, heretic among Smith’s disciples” (Jacques Barzun,From Dawn to Decadence).  As Jacques Barzun explains, Sismondi

urged factual observation in what he was the first to call “the social sciences”; and when theEncyclopedia Britannica asked him for an article on political economy, further thought and documentation led him to question the validity of liberal economics….

Sismondi had visited England and had been struck by the misery resulting from industrial progress.  Why did the seemingly beneficial production of goods by machinery bring on “poverty in the midst of plenty”?  The answer was:  free competition keeps wages low, free enterprise makes for overproduction, which leads to recurrent “crises” – shutdowns or failure entailing unemployment and starvation.

His detailed criticism of the new society includes the observation that it splits labor from capital and makes them enemies, with all the power on one side.  The idea of their “bargaining” over wages is absurd.  Tyrant and victim describes the relation, yet without cruel intent of the one or knowledge by the other of who his oppressor is.  Again, with overproduction the capitalist must seek foreign markets and precipitate national wars, while at home a class struggle goes on without end.

More recent empirical studies confirm de Sismondi’s observations.  The quasi-religious adherence to the capitalist faith had the same impact on workers in Britain as it had had in the Netherlands in the 16th, 17th and 18thcenturies.  As Şevket Pamuk and Jan Luiten van Zanden explain:

The fruits of the Industrial Revolution were spread very unevenly….  [S]ocial inequality exploded, in particular in those parts of Europe that profited most from the new industrial age (Williamson 1985). This increase in inequality came on top of an already rising inequality in distribution of income and wealth, the result of economic expansion and urbanization in the centuries before 1700. In particular in the most dynamic parts of the Continent, in England, Holland, France, levels of inequality in the 18thcentury were already very high – due to the concentration of land ownership and or mercantile wealth (Van Zanden 1995)….

“The share of British capital in the hands of the top 1 percent probably peaked in 1911-13, when that segment commanded a stunning 69 percent”  (Kevin Phillips, Wealth and Democracy).

The living conditions of the workers, meanwhile, suffered under the “new” capitalist faith.  Soaring inequality meant the workers’ standard of living would, at best, be stagnant for the next 100 years.  It would not be until after 1870, a full century after Adam Smith penned his Capitalist Bible, that the workers’ standard of living would begin to improve.  Whether quantified in terms of real wages or biological standard of living, adherence to the one true faith spelled stagnation and austerity for workers.    Charles H. Feinstein concluded that

For the majority of the working class the historical reality was that they had to endure almost a century of hard toil with little or no advance from a low base before they really began to share in any of the benefits of the economic transformation that they helped to create.

–Charles H. Feinstein, “Pessimism Perpetuated: Real Wages and the Standard of Living in Britain during and after the Industrial Revolution,” The Journal of Economic History, Vol. 58, No. 3 (Sep., 1998)

Sismondi was also correct in his observation that “with overproduction the capitalist must seek foreign markets and precipitate national wars.”    This again was 180º out of sync with classical economic theory.   “The apostles of free trade believed that commerce was a ‘grand panacea’ for the worlds ills,” Aaron L. Fridberg explains in The Weary Titan.  “By promoting global exchange they believed themselves to be unleashing a force that would eventually overwhelm national differences and unify mankind.”

So just like their Dutch counterparts before them, who also enjoyed the imprimatur of the reigning mythology, the British capitalists sought markets for their superfluous goods and capital in faraway lands. As Julia Bersch and Graciela L. Kaminsky point out:

Financial globalization is not a new phenomenon of the late 20th century. An important era of financial globalization and integration took already place in the 19th century….   London emerged as an important financial center following the Napoleonic Wars and became the undisputed international financial center in the 1870s.

William N. Goetzmann and Andrey D. Ukhov elaborate further:

The vast sums of capital invested by the British in overseas enterprises in the late 19th and early 20th centuries has been the focus of more than a century of economic discourse….  While exact estimates of British overseas investment in the 19th century vary, there is general agreement that by 1914, Britain had acquired a historically unprecedented position as a global creditor.  Between 1865 and 1914 as much British investment went to Africa, Asia, and Latin America as to the United Kingdom itself. Between 4 to 8 percent of the gross national product annually was exported annually by British investors in the years 1871—1913, a number significantly higher than the capital export of other developed nations at the time.

And as I noted in Part I of this series,  “After the financiers had opened the channels of capital export to the superfluous wealth, which had been condemned to idleness within the narrow framework of national production, it quickly became apparent that the absentee shareholders did not care to take the tremendous risks which corresponded to their tremendously enlarged profits.  Against these risks, the commission-earning financiers, even with the benevolent assistance of the state, did not have enough power to insure them:  only the material power of a state could do that”  (Hannah Arendt, The Origins of Totalitarianism).

Here’s how Jonathan Schell explains it in The Unconquerable World:

From Laissez-Faire to the Military Revolution

A parallel process of militarization occurred in the evolution of the industrial revolution….  The early champions of the free market, most of them British, had in fact looked to industry mainly to create the wealth of nations, as the title of Adam Smith’s classic book had it, not the power of nations, which had been the preoccupation of their mercantilist predecessors.  The advocates of laissez-faire declared the independence of economics from state power.  (The eventual coining of the word “economics,” identifying a distinct realm of human activity subject to its own laws, was one sign of their faith in that independence.)  The market worked best, the worldly philosophers of the late eighteenth century believed, when the government kept its hands off it.  Classical economics, in fact, “had no place for the nation, or any collectivity larger than the firm.”

Smith’s successors proceeded even further in this line of thinking.  In the early nineteenth century, the most prominent champions of the market, including the British champions of laissez-faire Richard Cobden and John Bright, contended that free trade, by breaking down or ignoring national boundaries, naturally tended to foster world peace.  The market, they ardently believed, was a solvent of national units and a pacifier of national conflicts.  “I see in the Free Trade principle,” Richard Cobden said in a speech in 1846, “that which shall act on the moral world as the principle of gravitation in the universe, drawing men together, thrusting aside the antagonism of race, and creed, and language, and uniting us in the bonds of eternal peace.”….  An unbroken thread of faith in free trade as an abettor of peace runs through the entire tradition of liberal internationalism, surviving many disappointments and continuing, if in attenuated form, to this day.


However, events did not proceed as the liberal imperialists expected – neither in Asia nor in Africa nor in the Ottoman Empire.  The economic arrangements forced upon those lands did not strengthen their governments but undermined them and drove them, one after another, toward collapse.  The Egyptian government, for example, accepted loans from Europe, spent the funds on large but unproductive public projects, and, when those failed, sought to keep up payments on the loans by raising taxes on the poor, who great discontented and rebellious.  The imperial powers then were faced with what seemed a drastic choice:  between withdrawing entirely and imposing direct rule.  They chose direct rule.

Making the world safe for “absentee ownership,” “commercialized imperialism,” “the security of property rights” or “that Democracy of Property Rights,” as Thorstein Veblen had variously called it, was costly, and became increasingly so as the empire aged.  Between 1887 and 1907, military spending doubled from 30.7 to 59.4 million pounds, and in 1907 made up 53% of all government spending outside of debt service.   Furthermore, in 1907 almost half (48.9%) of tax revenues were derived from regressive indirect taxes, rather than progressive direct taxes on property, income, profits and capital gains.  (Friedberg)

As Friedberg goes on to explain, arranging taxes so that they mostly fell on the lower orders of society was part and parcel of the capitalist faith.  “As much as in the realm of trade, contemporary arguments about fiscal policy were littered with pious references to the wisdom of the ‘ancients’,”  Friedberg notes.  “The economic historian H.V. Emy has written that the principles of British taxation ‘had remained the same from Adam Smith to John Stuart Mill’ and that the latter was still the principal authority in the last decade of the nineteenth century.  An examination of both the public record and intragovernmental sources confirms this assertion.”

Fiscal orthodoxy demanded “that direct taxes, and especially the levy on incomes, be tightly constrained,” Friedberg continues.  “Taxes on profits would, Mill warned, be ‘extremely detrimental to the national wealth’.”  “It was also generally accepted that the incomes of the wealthy should be left untouched in all but the gravest emergencies.”  Friedberg adds that:

Mill and others pointed out that attention had to be paid not just to the rate at which taxes were levied but also to the manner in which they were applied.  Arbitrary, unpredictable taxes assessed against profits and savings could disrupt the process of economic growth even if they were not imposed at an especially high rate.  Still, the greatest danger came from “excess of taxation,” which could “be carried so far as to discourage industry by insufficiency of reward.”  Even before this point had been reached, Mill warned, such excess could “[prevent] or greatly [check] accumulation, or [cause] the capital accumulated to be sent for investment in foreign countries.”


Whatever their other qualities, the different varieties of taxation did not weight equally on all segments of the population.  As a confidential Treasury Department memorandum pointed out in 1895, indirect taxes [e.g., value added taxes] tended to fall “on the consuming masses” while direct taxes were those “levied on property or persons, of which (at any rate) by far the greatest part falls on the propertied classes.”….  The view of Conservative politicians tended to be that direct taxes should be kept low and that the two classes should essentially contribute in proportion to their numbers.  Equality of burdens, by this definition, required that indirect taxes make up the largest fraction of total resources.

But once again, the predictions of the classical economists proved wrong, stunningly so.  Beginning in 1870, and despite Great Britain’s religious-like adherence to the commandment that “thou shall not tax the rich,” its share of world manufacturing production went into a long and permanent relative decline, as this chart from Friedberg illustrates:

Percentage Shares of World Manufacturing Production





































Great Britain’s government spending at the end of the 19th century, by today’s standards, would be considered quite modest.  By one estimate the “public sector” (including government expenditure for both civilian and military programs) accounted for between 10 and 11 percent of national income during the 1880s and 1890s.  In the first decade of the twentieth century, due largely to the 94.2 million pounds spent on the Boer War, that portion had risen to 14 or 15 percent.  And yet, as Friedberg observes, on

28 April 1904, the new chancellor of the Exchequer, Austen Chamberlain, warned his colleagues that they did not “even yet realize the stringency of the financial situation.”  Chamberlain called for real reductions in spending and especially for cuts in the army and navy estimates.  He warned that “however reluctant we may be to face the fact, the time has come when we must frankly admit that the financial resources of the United Kingdom are inadequate to do all that we should desire in the matter of Imperial defense.”

These and other similar declarations by Britain’s leading financial authorities were to have a powerful impact on all aspects of national policy.


Given their assumptions about what the economic and political traffic would bear, it is not surprising that the Conservatives chose…the “sovereign remedy of retrenchment.”  As the phrase suggests, cutting spending in order to bring budgets into balance was the time-honored way of dealing with financial distress.  In this sense the Conservative response was traditional and truly “conservative.”


Government spending, in the orthodox view, was a necessary evil that was to be kept strictly limited and financed out of taxes rather through borrowing.  All taxes were believed bad, but because of their harmful effect on the process of accumulation, direct taxes on income and profits were the worst.  Indirect levies on imports that acted to protect domestic manufacturers were to be assiduously avoided.  Within these constraints resources could safely be generated without disrupting the productive mechanism.

In 1904, in a speech to a group of bankers in the City of London, Joseph Chamberlain issued the following warning and urged a change of course:

Granted that you are the clearing-house of the world, but are you entirely beyond anxiety as to the permanence of your great position?…. Banking is not the creator of our prosperity, but is the creation of it.  It is not the cause of our wealth, but it is the consequence of our wealth;  and if the industrial energy and development which has been going on for so many years in this country were to be hindered or relaxed, then finance, and all that finance means, will follow trade to the countries which are more successful than ourselves.

Chamberlain’s warning and advice were ignored.

After 1913 Great Britain would experience two world wars, a Great Depression and an unprecedented surge of popular, democratic governance.   The combined effect of these would be to finish off Britain’s rein as the world’s great hegemonic empire.   What this meant for the British plutocrats, at least until Margaret Thatcher staged their renaissance in the 1980s, was that their eye-popping day in the sun was over:

The share of British wealth in the hands of the top 1 percent began a half century of decline – from two-thirds in 1914 to just one-third by the 1960s.  During the “long” weekend of the twenties and thirties, elements of the upper class could pretend that times had not changed, but the six painful years of World War II would all but eliminate overseas investments, force the postwar devaluation of the pound, and complete the collapse of British world economic leadership.

The embarrassments of the late 1940s – liquidation of overseas assets, the perils of sterling, and financial dependence on the U.S. – made Edwardian prowess ancient history despite the passage of little more than three decades.  The size of the principal British fortunes continued the shrinkage visible in the 1930s.  In 1947, a trying year when the British current account deficit of 600 million pounds represented a brutal 6 percent of GNP, the economy was so austere — food and clothing were strictly rationed – the Princess Elizabeth got no waiver for her wedding, just an extra hundred ration coupons.

Such were the postwar levels on British wealth that dukes opened their ancestral castles to well-paying tourists.  Other formerly affluent Britons simply gave up.  John Harris, a British writer, “discovered a situation that had no parallel elsewhere in Europe:  a country of deserted country homes, many in extremis, most in surreal limbo awaiting their fate.”  He wrote – and also captured by camera – their embarrassing portrait in a book called No Voice from the Hall. (Phillips)

The classical, and now neoclassical, faithful have clung to their theories throughout all this as to a life raft in turbulent waters.  Their artful ignoring and debasement of, and at times outright hostility to, empirical data should have been the first clue that their newfound secular-scientific ontology and epistemology had some serious shortcomings.  John Maynard Keynes, writing in The General Theory of Employment, Interest and Money, put it this way:  “The classical theorists resemble Euclidean geometers in a non-Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight.”  On another occasion he commented that capitalism is “the astonishing belief that the nastiest motives of the nastiest men somehow or other work for the best results in the best of all possible worlds.”  Philosophical rationalism had no special immunities, as the Enlightenment thinkers had imagined, to the same sorts of corrupting influences that had undone the old religion.

In 1851, on the eve of the Crystal Palace Exposition held in London in 1851, Queen Victoria confided to her diary:  “We are capable of doing anything.”   Underlying this self-confidence, providing the most visible evidence of Britain’s superiority to other nations and giving the country the means and the desire to exert its will overseas, was the awesome productive engine of the British domestic economy.   Britain was “the workshop of the world,” able to produce and profit more prodigiously than any other nation in the world.  “What reasons did contemporary British observers give for their superior material success?” asks Friedberg.  “[J]udging by the outcome of some of the more important public debates of the period, most of them…believed their good fortune resulted in the first instance from wise policy, in particular from the triumph of laissez-faire notions of political economy.”

One hundred and thirty years later, on the eve of the Falkland Wars, Margaret Thatcher would express a similar self-confidence to what Queen Victoria had:   “Defeat? I do not recognize the meaning of the word.”  But unlike in Queen Victoria’s time, Britain’s awesome productive engine had long been extinguished, and in lieu of this reality Thatcher urged faith:  “Where there is doubt, may we bring faith,” she exhorted.  And the faith she evangelized was none other than a throwback to that same old-time religion of Queen Victoria’s day:  the laissez-faire notions of political economy.   So now we are left with a question:  Will this atavistic faith of Thatcher’s serve her any better than it did Queen Victoria?



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