Bourgeois Deeds: How Capitalism Made Modernity 1700-1848

Chapter 2:

It was Not Thrift
Why? One prominent explanation is thrift. It does not work.

Schumpeter defines capitalism variously at various times. His definition in Business Cycles (1939) is "that form of private property economy in which innovations are carried out by borrowed money" (I, p. 223). In other words, "we shall date capitalism as far back as the element of credit creation," by which he means fractional reserve banking—in effect any sort of money storage in which the storer is not legally or practically liable to keep all the money on hand all the time (p. 224). He notes that such institutions existed in the Mediterranean before they existed in Northern Europe, and so he would be unsurprised to find business cycles there. Capitalism on this definition forms part of a private enterprise economy, but there can be private enterprise without credit and therefore without "capitalism." The use of thrift, not its total amount, is what is at stake.

The word "thrift" in English is still used as late as John Bunyan to mean simply "wealth" or "profit," deriving from the verb "thrive" as "gift" from "give" and "drift" from "drive." But its sense 3 in the Oxford English Dictionary is our modern one, dating significantly from the 16^th century: "food is never found to be so pleasant . . . as when . . . thrift has pinched afore" (1553); "so I will if none of my sons be thrifty" (1526).

The modern "thrift," sense 3, can be viewed as a mix of the cardinal virtues of temperance and of prudence in things economic. Temperance is the cardinal virtue of self-command facing temptation. Lead me not into temptation. Prudence, by contrast, is the cardinal virtue of practical wisdom. It is reason, know-how, savoir faire, rationality. Prudence lacking temperance does not in fact do what it knows it should thriftily do. Temperance lacking prudence does not know what to do. A prudent housewife in the "Ladder to Thrift," as the English agricultural rhymester Thomas Tusser put it in 1580, "makes provision skillfully."³⁷ Without being full of skill, that is, prudent, she does not know how to be thrifty in saving tallow for candles or laying up salt mutton for Christmas.

Prudent temperance in a sense has no history, in that it is ever present in human society. The Hebrew bible, for example, speaks of thrift, though not very often, usually associated with diligence: "The sluggard will not plough in the autumn by reason of the cold; therefore shall he beg in harvest, and have nothing"; "Seest thou a man diligent in his business? He shall stand before kings" (Proverbs 20:4; 22:29). Jesus of Nazareth and his tradition used parables of thrift to point to another world, though again the parables of thrift are balanced by parables of liberality, such as changing water into wine to keep the party going. "Eat and drink," advises the Koran, "but do not be wasteful, for God does not like the prodigals" (7:31). Still again, thrift is not a major theme of the Koran.

Of course other faiths than the Abrahamic ones admire on occasion a wise thrift. The Four Noble Truths of Buddhism, to be sure, recommend that life's sorrow can be dissolved by the ending of desire, in which case advice to be thrifty would lack point. Be "thrifty" with your daily bread? Buddhism is similar in this respect to Greek and Roman stoicism, which advocated devaluing this world's lot, an inspiration to Christian saints of thriftiness early and late. But the "Admonition to Singāla" is in the entire Buddhist canon "the longest single passage . . . devoted to lay morality."³⁸ Buddha promises the businessman that he will “make money like a bee” if he is wise and moral:

Such a man makes his pile

As an anthill, gradually.

. . . . He should divide

His money in four parts;

On one part he should live,

With two expand his trade,

And the fourth he should save

Against a rainy day.

The rate of savings recommended is fully 75 percent— with no allowance for charity, which made Buddhist commentators on the text uneasy. From the camps of the !Kung to the lofts of Chicago, humans need to live within their incomes, being by their own lights "thrifty."

In England the thirteenth-century writers of advice books to Norman-English landowners start with thrift and go on to the details of husbandry. The third paragraph of The Husbandry by Walter of Henley, after a bow in the second paragraph to the passion of Jesus, prays "that according to what your lands be worth yearly . . . you order your life, and no higher at all."³⁹ And then in the same vein for five more paragraphs. The anonymous Seneschaucy, written like Walter in medieval French in the late 13^th century, instructs the lord's chief steward "to see that there is no extravagance. . . on any manor . . . . and to reduce all unnecessary expenditure. . . which shows no profit. . . . About this it is said: foolish spending brings no gain."⁴⁰ The passage deprecates "the practices without prudence or reason" (lez maners saunz pru e reyson). So much for a rise of prudence, reason, rationality, and thrift in, say, the 16^th century. Prudent temperance rose with Adam and Eve.

The prehistory of thrift, in other words, extends back to the Garden of Eden. It is laid down in our genes. A proto-man who could not gain weight readily in feast times would suffer in famine. Therefore his descendent in a prosperous modern society needs to watch his weight. Prudent temperance does not require a stoic or monkish abstemiousness. A ploughman burning 3000 calories a day had better get them somehow. One should be thrifty in eating, says Tusser, but not to the point of denying our prudent human solidarity:

Each day to be feasted—what husbandry worse!

Each day for to feast is as ill for the purse.

Yet measurely feasting with neighbors among

Shall make thee beloved, and live the more long.⁴¹

The average English and American-English person from the 16^th through the 18^th century, then, surely practiced thrift. But this did not distinguish her from the average English or American-English person before or after, or for that matter from the average person anywhere since Eden. “'My other piece of advice, Copperfield,' said Mr. Micawber, 'you know. Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.' To make his example the more impressive, Mr. Micawber drank a glass of punch with an air of great enjoyment and satisfaction, and whistled the College Hornpipe.   I did not fail to assure him that I would store these precepts in my mind."⁴²

Thrift in the sense of spending exactly what one earns is forced by accounting. Not having manna from heaven or an outside Santa Claus, the world must get along on what it gets. The world's income must equal to the last sixpence the world's expenditure, "expenditure" understood to include investment goods. So too Mr. Micawber. If he spends more than he earns he must depend on something turning up, that is, a loan or gift or inheritance. He draws down his credit. In the meantime his diminishing balance sheet—what he owns and owes—pays to the last sixpence for his punch and his house rent.

Thrift in the sense of earning much more than one spends, and thereby accumulating assets in that balance sheet, is again a matter of accounting. You must expend everything you earn somehow, on bread or bonds house-building or whatever. But of course you can expend foolishly or well, on bombs or on college educations. If you refrain from silly consumption of Fritos and other immediate consumption goods, "abstaining from consumption" in the economist's useful way of putting it, you necessarily save, that is, add to your hoard buried in the back garden or to a bank account or to your investments in educations or roadways or battleships.

There is nothing modern, I repeat, about such accounting. It comes with life and the first law of thermodynamics, in the Kalahari or in Kansas City. In particular the pre-industrial European world I am here contrasting with modern times needed urgently to abstain from consumption, "consumption" understood as immediate eating and other immediate expenditures that are not investments in a future. Yields of rye or barley or wheat per unit of seed planted in medieval and early modern agriculture were only 3 or 4—they are over 100 now. The low yields forced Europeans to refrain from a great deal of consumption if they did not want next year to starve. One quarter to one third of the grain crop went back into the ground as seed in the fall or the spring, to be harvested the next September. In an economy in which the grain crop was perhaps 1/2 of total income, that portion alone of medieval saving implied an aggregate, social saving rate of upwards of 12 percent. The usual rate of saving in modern industrial economies is seldom above 10 percent.

Furthermore, trade in grain was restricted in climatic extent, so grain storage even for consumption in people's mouths, and not just for investment in next year's seed, was also high by modern standards. Grain storage amounted to another desperate form of saving, crowding out more modern forms.⁴³ In recent times if the grain crop does poorly in America the world market easily supplies the difference from a different clime. In the late Middle Ages grain did flow from the Midlands to London or from Burgundy to Paris. But it began to flow to Western Europe in large amounts from as far away as Poland only gradually in the 16^th and 17^th century, through the efforts of thrifty Dutch merchants and shipbuilders, and only in the 19^th century from as different a clime as Ukraine or, finally, from North and South America or even Australia. Until the 18^th century therefore the grain crops here and there in the relevant and narrow market area tended to fail together. The potato famine of the 1840s was the last replay of a sort of undiversified catastrophe that was commonplace in the 1540s and more so in the 1340s. In such circumstances you stored and saved, in gigantic percentages of current income, or next year you starved.

Such scarcities were broken in the New World of British Americans. They ate better than their Old-World cousins within a generation of the first settlements.⁴⁴ That was not hard: their English cousins were passing then through the worst times for the workingman since the early 14^th century.⁴⁵ Plentiful land, at any rate out on the literal frontier, made it unnecessary to save so much in grain, and freed the sum for other investments. Yet wait: although the North American English became even as a colony well off by British standards, British North America was by no means the home of the industrial revolution. It was too small, too tempted by agriculture, too far away. The northeast of the United States, like southern Belgium and northern France, was to become a close follower, in the 1790s and 1800s. But the leaders, from the 1760s, were northwest England and lowland Scotland, lands of grindingly necessary thrift.

The point is that there is no aggregate increase in thrifty savings to "explain" the modern world. Thrifty saving is not peculiar to capitalism, and has nothing to do with an alleged rise of prudence or greed or anything else in the childhood of the modern world. Actual saving was high before modern times, and did not change much with modern capitalism.

So too actual greed. In characterizing capitalism in 1867 as “solely the restless stirring for gain, this absolute desire for enrichment, this passionate hunt for value” Marx was quoting MacCulloch’s Principles of Political Economy (1830): “This inextinguishable passion for gain, the auri sacra fames [‘for gold the infamous hunger’], will always lead capitalists” (quoted in Capital, Vol. I, p. 171n2). In 1904 Max Weber, writing when the German Romantic notion that medieval society was more sweet and egalitarian than modern capitalism was beginning to crumble in the face of historical research, thundered against such an idea that greed is "in the least identical with capitalism, and still less with its spirit." "It should be taught in the kindergarten of cultural history that this naïve idea of capitalism must be given up once and for all." In his General Economic History (1923) he writes, "the notion that our rationalistic and capitalistic age is characterized by a stronger economic interest than other periods is childish."⁴⁶ Auri sacra fames is from The Aeneid, Book III, line 57, not from Benjamin Franklin or Advertising Age. The lust for gold "has been common to all sorts and conditions of men at all times and in all countries of the earth."⁴⁷

And so too actual luxury, the opposite of thrift. "Depend on it, sir," said Samuel Johnson in 1778, "every state of society is as luxurious as it can be. Men always take the best they can get," in lace or food or educations.⁴⁸ Marx noted cannily that "when a certain stage of development has been reached, a conventional degree of prodigality, which is also an exhibition of wealth, and consequently a source of credit, becomes a business necessity. . . . Luxury enters into capital's expenses of representation."⁴⁹ True. Otherwise it would be hard to explain the high quality of lace on the collars of black-clad Protestant Dutch merchants in paintings of the 17^th century, or indeed the market for the expensive oil paintings in their hundreds of thousands representing the merchants and their world.

Readers of the magnificent historical Chapters 25-31 in Capital, at any rate those who credit what Marx says there, will find all this hard to believe. Marx's eloquence persuades them that someone writing in 1867, very early in the professionalization of history, nonetheless got the essence of the history right. The history Marx thought he perceived went with his logic that capitalism, drawing on an anti-commercial theme as old as commerce, just is the same thing as greed. Greed is the engine that powers his "equation" (as he imagined it to be) of M  K  M'. That is, money starting as an amount M gets invested, through thriftiness, in Kapital, which is intrinsically exploitative, generating surplus value appropriated by the capitalist to arrive at a new, higher amount of money, M'. And then again and again and again, fix this when all’s set to get the quotation right "endlessly."⁵⁰ The "endless"/"never-ending" word, by the way, which was echoed during the Dark Ages in rural monkish economic theory and still resonates in Marx-influenced notions of capitalism, originated twenty-four centuries before Marx in the Greek aristocratic disdain for commerce. People of business, declared aristocratic Plato and aristocrat-loving Aristotle, are motivated by apeiron, unlimited, greed.

For all Marx's brilliance—anyone who does not think he was the greatest social scientist of the 19^th century has not read enough Marx—he got the history almost entirely wrong. Whatever the value of his theories as a way of asking historical questions, on almost no important historical fact can you rely on Marx. This is not some special Marxian fault. The same is true of the other practitioners of merely philosophical history before the facts started arriving in bulk at last, during the 20^th century: Hume, Rousseau, Smith, Hegel, Tönnies, Durkheim, and even, a late instance, on many points Max Weber, and still later Karl Polanyi got the historical facts quite wrong.⁵¹ The theory of capitalism that educated people still carry around in their heads springs from Marx, St. Benedict, and Aristotle, in the rhetoric of these eloquent men. It is economically mistaken. And the point here is that it is historically mistaken as well.

The myth of Kapitalismus is that thrift among the bourgeoisie consists precisely in the absence of a purpose other than accumulation for its own sake, solely the restless stirring for gain. Thus the late Robert Heilbroner: "capitalism has been an expansive system from its earliest days, a system whose driving force has been the effort to accumulate ever larger amounts of capital itself."⁵² Thus Weber, too, in 1904: "the summum bonum of this ethic [is] the earning of more and more money. . . . Acquisition . . . [is] the ultimate purpose of life."⁵³ Weber here, contrary to the thundering just quoted, retails Marx, money-to-capital-to-money. Declared the man himself in 1867, "Accumulate, accumulate! This is Moses and the prophets!"⁵⁴

At the level of individuals there has never been any evidence for the historical change that is supposed to characterize modern forms of greedy thrift. The chief evidence that Weber gives in The Protestant Ethic and the Spirit of Capitalism is a humorless reading of Benjamin Franklin's Autobiography. Like many other readers of Franklin, especially non-American readers, Weber took the checklist of virtues a young man used to discipline himself as the man's essence. He failed to note Franklin's actual behavior as a loving and passionate friend and patriot, or his amused ironies about his young self.⁵⁵ Weber modified the pointlessness of the Marxian impulse to accumulate, accumulate by claiming that "this philosophy of avarice" depends on a transcendent "duty of the individual toward the increase of his capital," becoming a "worldly asceticism."⁵⁶ But his Franklin, who after all had lost most other traces of his ancestors' Calvinism, whether spiritual or worldly, quite by contrast with his abstemious young friend and enemy John Adams, for example, abandoned at age 43 "endless" accumulation and devoted the rest of his long life to science and public purposes. So much for "ever larger amounts of capital itself" or a "duty toward the increase of capital" or "accumulate, accumulate."

Many fine scholars have taken in with their mother's milk a belief that modern life is unusually devoted to gain, and that thrift is therefore something recent, dirty, and bourgeois, though lamentably profitable. "The unlimited hope for gain in the market," writes the otherwise admirable political theorist Joan Tronto, "would teach people an unworkable premise for moral conduct, since the very nature of morality seems to dictate that desires must be limited by the need to coexist with others."⁵⁷ But running a business, unlike professing at a university, would teach anyone that gain is limited. Dealing in a market, unlike sitting in the Reading Room of the British Museum writing burning phrases against the market, would teach that desires must be limited by the need to coexist with others. The tuition of a market society in scarcity, other-regarding, and liberal values works as an ethical school. As the historian Thomas Haskell put it in 1985, "contrary to romantic folklore, the marketplace is not a Hobbesian war of all against all. Many holds are barred. Success ordinarily requires not only pugnacity and shrewdness but also restraint," that temperance.⁵⁸

Even so fine an historian as Alan Macfarlane believes the Aristotelian /Marxist/ Weberian lore: "the ethic of endless accumulation," he writes, "as an end and not a means, is the central peculiarity of capitalism."⁵⁹ If it were, the miser would be a strictly modern figure, and not proverbial in every literature in the world. Give example from China. "In this consists the difference between the character of a miser," wrote Adam Smith in 1759, "and that of a [thrifty] person of exact economy and assiduity. The one is anxious about small matters for their own sake; the other attends to them only in consequence of the scheme of life which he has laid down for himself."⁶⁰ Accumulate, accumulate is not a "scheme of life" in the ethical sense that Smith had in mind.

At the level of the society as a whole there is "unlimited" accumulation, at any rate if war and rapine and rats do not intervene. Corporations, having legally infinite lives—though in truth one in ten die every year—are to be sure sites of accumulation. The individual economic molecules who make up the river of capitalism may not always want to accumulate beyond age 43, but the river as a whole, it is said, keeps rolling along. True, and to our good. The machines and improved acreage and splendid buildings and so forth inherited from an accumulating past are good for us now.

But there is no historical case for "accumulation, accumulation" being peculiar to capitalism. Old buildings are not novelties. Infinitely lived institutions like families or churches or royal lineages existed before modern capitalism, and were themselves, too, sites of accumulation. Thus improved acreage spread up the hillsides under the pressure of population before the Black Death. Thus the medieval cathedral were raised over centuries. Thus Oxford colleges were built, and endowed in real estate, itself accumulated investment in drains and fencing and barns.

"The bourgeoisie," wrote Marx and Engels in 1848, "during its rule of scarce one hundred years has created more massive and colossal productive forces than have all the preceding generations together."⁶¹ It was a prescient remark. But the classical economists from Adam Smith to Marx were writing before the upsurge in real wages of British and Belgian and American working people in the last third of the 19^th century, and long, long before the explosion of world income in the 20^th century. They imagined a moderate rise of income per person, perhaps at the most by a factor of two or three, such as might conceivably be achieved by Scotland's highlands becoming similar to capital-rich Holland (Smith's view) or by manufacturers in Manchester stealing savings from their workers (Marx's view) or by the savings generated from globalization being invested in European factories (John Stuart Mill's view). But the classical economists were mistaken.

The prehistory of thrift was revolutionized around 1960 when economists and economic historians realized with a jolt that thriftiness and savings could not explain the industrial revolution. The economists such as Solow and Abramowitz discovered that only a smallish fraction even of recent economic growth can be explained by thrift and accumulation. At the same time the economic historians were bringing the news that in Britain the rise in savings was too small to explain much a all. Simon Kuznets and later Charles Feinstein provided the rigorous accounting of the fact. It was anticipated in the 1950s and 1960s by numerous British economic historians, in detailed studies of banking and manufacturing. Peter Mathias summarized the case in 1973: "considerable revaluation has recently occurred in assessing the role of capital." ⁶² That is no overstatement.

The classical and mistaken view overturned by the economic historians of the 1950s and 1960s is that thrift implies saving which implies capital accumulation which implies modern economic growth. It lingered in a few works such as Walt Rostow's The Stages of Economic Growth (1960), and most unhappily in what William Easterly (2001) has called the "capital fundamentalism" of foreign aid, 1950 to the present. The belief was that if we give Ghana over several decades large amounts of savings, leading to massive capital investments in artificial lakes and Swiss bank accounts, and give Communist China not a penny, Ghana will prosper and Communist China will languish.⁶³
Chapter 3:

Nor Was It Original Accumulation,

or the Protestant Ethic

We are back to what actually happened 1700-2000—and, once it was fully recognized, what killed the notion among most economists and economic historians that thrifty saving was the way to massive and colossal productive forces—a rise of income per person by a factor of, let us say, 15. Again: what then explains it?

New thoughts, what the economic historian Joel Mokyr calls the "industrial enlightenment." It was ideas of steam engines and light bulbs and computers that made Northwestern Europe and then much of the rest of the world rich, not new accumulations from saving.⁶⁴ Accumulation of physical capital is not the heart of modern capitalism, as economic historians have understood since their researches of the 1950s and 1960s and as economists have understood since the calculations by Abramowitz and Solow in the 1950s, and before them the calculations by G. T. Jones in 1933.⁶⁵ Its heart is innovation.

Of course, if you think up a waterpower-driven spinning machine you need some savings to bring the thought to fruition. But another of the discoveries of the 1960s by economic historians was that the savings required in England's heroic age of mechanization were modest indeed, nothing like the massive "original accumulation of capital" that Marxist theory posits. Early cotton factories were not capital-intensive. The source of the industrial investment required was short-term loans on inventories and loans from relatives—not savings ripped in great chunks from other parts of the economy.

The classical and Marxist idea that capital begets capital, "endlessly," is hard to shake. It has recently revived a little even among economists, in the form of so-called "new growth theory," an attempt to give M  K  M' a mathematically spiffed-up form. The trouble is that, as I have noted, savings and urbanization and state power to expropriate and the other physical-capital accumulations that are supposed to explain modern economic growth have existed on a large scale since the Sumerians. Yet modern economic growth, that wholly unprecedented factor in the high teens, is a phenomenon of the past two centuries alone. Something happened in the 18^th century that prepared for a temporary but shocking "great divergence" of the European economies from those of the rest of the world.⁶⁶

The marxisant analysis is that what happened is the "original accumulation of capital." The original or primitive accumulation was according to Marx the seed corn, so to speak, or better the starter in the sourdough, in the growth of capital. We're back to thrift or savings, not by historical fact but by blackboard logic. "The whole movement," Marx reasoned, "seems to turn on a vicious circle, out of which we can only get by supposing a primitive accumulation, . . . an accumulation not the result of the capitalist mode of production, but its starting point."⁶⁷ As the economic historian Alexander Gerschenkron put it in 1957, with characteristic sarcasm, it is "an accumulation of capital continuing over long historical periods—over several centuries—until one day the tocsin of the industrial revolution was to summon it to the battlefields of factory construction."⁶⁸

Looking at the thrift necessary for an accumulation in a cheerful way, the starting point was a supposed rise of thriftiness among Dutch or especially English Puritans. Marx characterized such tales as praise for "that queer saint, that knight of the woeful countenance, the capitalist 'abstainer'."⁶⁹ We can join him for a moment in disbelieving the optimistic tale, noting further, and contrary to his own pessimistic tale, as I have said, that abstention is universal. Saving rates in Catholic Italy or for that matter Confucian China were not much lower, if lower at all, than in Calvinist Massachusetts or Lutheran Germany. According to recent calculations, in fact, British investment in physical capital as a share of national income was strikingly below the European norm—only 4% in 1700, as against a norm of 11%, 6% as against 12% in 1760, and 8% against over 12% in 1800.⁷⁰ Britain's investment, though rising before and then during the industrial revolution, showed less, not more, abstemiousness than in the less advanced countries around it. The evidence suggests, in other words, that saving depends on investment, not the other way around. When in 19^th century the rest of Europe started to follow Britain into industrialization, its savings rates rose, too. And its markedly higher rates during the 18^th century did not cause it then to awaken from its medieval slumbers. Saving was not the constraint. As a great medieval economic historian, M. M. Postan, put it, it was not "the poor potential for saving" but the "extremely limited" character in pre-19^th-century Europe of "opportunities for productive investment."⁷¹

Marx's notion in Capital, on the contrary, was that an original accumulation was a sine qua non, and that there was no saintliness about it. The original accumulation was necessary because (Marx averred, wrongly) masses of savings were necessary, and "conquest, enslavement, robbery, murder, briefly, force, play the greater part."⁷² He instanced enclosure in England during the 16th century (which has been overturned by historical findings that such enclosure was minor) and in the 18th (which has been overturned by findings that the labor driven off the land was a tiny source of the industrial proletariat, and mainly in the south and east where in fact little industry was going on). He gave a large part then to regulation of wages in making a proletariat in the 16th century (which has been overturned by findings that half of the labor force in England as early as the 13th century already worked for wages). And then to the slave trade: "Liverpool waxed fat on the slave-trade. This was its method of primitive accumulation" (which has been overturned by findings that the alleged profits were no massive fund).⁷³ Later writers have proposed as the source of the original accumulation the exploitation by the core of the periphery (Poland, the New World).⁷⁴ Or the influx of gold and silver from the New World—strange as it is then that imperial Spain did not industrialize. Or the exploitation of workers themselves during the Industrial Revolution, out of sequence. Or other loot from imperialisms old and new. Or, following on Marx and Engels’ assertion in the Manifesto, even 17^th-century piracy.

None of these, it has been found, make very much historical sense. Such findings are in truth not very surprising. After all, conquest, enslavement, robbery, murder---briefly, violence---has characterized the sad annals of humankind since Cain and Abel. Why didn't earlier and even more thorough expropriations result in an industrial revolution and a factor of fifteen or twenty or whatever in the welfare of the average Briton or American or Taiwanese? Something besides thrifty self-discipline or violent expropriation must have been at work in northwestern Europe and its offshoots in the 18^th century and later. Thrifty self-discipline and violent expropriation have been too common in human history to explain a revolution unique to Europe gathering force around 1800.

And as a practical matter a pile of physical capital financed from, say, Piet Heyn's seizure of the Spanish treasure fleet in 1628 would by 1800 melt away to nothing. It does not accumulate. It depreciates. The confusion is between financial wealth in a bank account, which is merely a claim by this person against that person to the society's real wealth, and the society's real wealth in a house or ship or education. Real wealth is what needs to be available for real investment. You can't build a factory with pound notes, or dig a canal with gold coins. You need bricks and wheelbarrows and skilled people to wield them. Mere financing can hardly be the crux, or else the Catholic Church in its command of tokens of wealth would have created an industrial society in 1300. Or Philip II—who after all was the principal beneficiary of those treasure fleets that the English and Dutch privateers preyed on—would have financed an industrial revolution in Spain. So any original accumulation supposed to be useful to any real industrialization must be available in real things. But "what you possess [in real, physical things] will pass, but what is with God will abide" (Koran 16:96). "These lovely [earthly] things" wrote St. Augustine, "go their way and are no more. . . . In them is no repose, because they do not abide."⁷⁵ A real house made in 1628 out of Piet's profit would be tumbled down by 1800, unless in the meantime its occupants had continued to invest in it. A real educated person of 1628 would be long dead, a real machine would be obsolete, a real book would be eaten by worms. The force of depreciation makes an original accumulation spontaneously disappear.

This is not to say, note well, that conquest, enslavement, robbery, murder play no part in European history. A Panglossian assumption that contract, not force, explains, say, the relation between lord and peasant defaces the recent work on "new" institutionalism, such as that of Douglass North.⁷⁶ But, pace Marx, modern economic growth did not and does not and cannot depend on the scraps to be gained by stealing from poor people. Stealing from poor people, when you think about it, could hardly explain enrichment by a factor of fifteen. Would you do well by robbing the homeless people in your neighborhood, or by breaking into the residence of the average factory worker? Does it strike you as plausible that British national income depended much on stealing from an impoverished India? If it did, why did real income per head in Britain go up sharply in the decade after Britain "lost" India?

Modern economic growth has not depended on saving, or on stealing to get the saving. Turgot and Smith and Mill and Marx got the story entirely wrong, rather unsurprisingly considering the stately pace at which the economies they were looking at were improving, at least by contrast with the frenetic pace after 1848 and especially after 1948, and then most of all after 1978. "All the authors [who] followed the Turgot-Smith line," wrote Schumpeter as the frenzy was becoming apparent, "[were] at fault in believing that thrift was the all-important (causal) factor."⁷⁷ Most savings for innovation, Schumpeter had noted twenty years earlier, "does not come from thrift in the strict sense, that is from abstaining from consumption. . . but [from] funds which are themselves the result of successful innovation," in the language of accountancy "retained earnings."⁷⁸ The money for any massive innovation—as against the savings in the strict sense—comes, he argues, from banks using "money creation". (The somewhat mysterious phrase means simply the loans far beyond the gold in their vaults that bold bankers can make, on the assurance that not everyone wants their gold back at the same time.)

The causal factor has depended instead on the invention of entirely new ways of propelling ships or making shoes. And nowadays it depends, if your country is as Gerschenkron put it, "relatively backward," on leaping over the slow early stages of invention and investment by adopting what has already been invented, getting now cell phones instead of laboriously investing in land-lines and then laboriously inventing substitutes. Money creation, or the 50 percent savings rates typical of present-day China, finances the leaping. The money creation in any moderately well run economy is routinely available: it is simply credit, belief in the future, and again that assurance that not everyone will run to the bank today. What was not routinely available in the 18^th century was the stock of inventions. This is why China and India can now grow at rates inconceivable in the 18^th and early 19^th centuries, before the inventions were well launched. They can merely take them off the shelf. It is why in the late 19^th century Sweden and then Japan in the early 20^th century and South Korea in the late 20^th century caught up so very quickly. What needs to be explained is not that the Swedes and Chinese could get rich quickly by gaining access to the well-stocked shelves of inventions from the steam engine to the LED screen, but how the shelves got well stocked in the first place.

"Capitalist production," Marx declared, "presupposes the pre-existence of considerable masses of capital."⁷⁹ No it doesn't. A modest stream of withheld profits will pay for repairing the machines and acquiring new ones, especially the uncomplicated machines of 1760. In 1760 the most complicated "machine" in existence was a first-rate ship of the line, itself continuously under repair. And so far as the starter is concerned, it is very small, the starter in sourdough bread, and could come from small change anywhere, not only from some great original sin of primitive accumulation.

What did happen in the 17^th and 18^th centuries, it would appear, is so to speak an original accumulation of inventive people, such as James Watt and Benjamin Franklin. Such people sought bourgeois and thrifty ways of making and doing things, turning away from the projects of honorable display characteristic of an aristocratic society. By the 18^th century they were launched on careers of producing a wave of gadgets that has not yet ceased rolling over us. An original accumulation of habits of free publication and vigorous discussion created, as Mokyr argues in The Gifts of Athena (2002), "a world in which 'useful' knowledge was indeed used with an aggressiveness and a single-mindedness that no other society had experienced before. . . . It was the unique Western way."⁸⁰ We do not yet know for sure why this happened in northwestern Europe and did not happen elsewhere until later, and then in plain imitation of northwestern Europe, though many economic historians suspect that Europe's political fragmentation leading to comparative freedom for enterprise was important.⁸¹ (Yet against this the German lands fragmented entirely up to 1871 were not places of much innovation in machinery, though very much so in music and philosophy.) What did not happen was a big rise in European thrift.
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So nothing much changed from 1348-1700 or from 1700 to 1848 in the actual circumstances of thriftiness. And the modest changes did not matter much. Individual Dutch and English speaking people who initiated the modern world exercised personal thrift—or did not, as they still do, or do not. But changes in aggregate rates of saving drove nothing of consequence. No unusual Weberian ethic of high thriftiness or Marxian anti-ethic of forceful expropriation started economic growth. East Anglian Puritans learned from their Dutch neighbors and co-religionists how to be thrifty in order to be godly, to work hard in order, as John Winthrop put it, "to entertain each other in brotherly affection." ⁸² That’s nice, but it is not what caused industrialization—as indeed one can see from the failure of industrialization even in the Protestant and prosperous parts of the Low Countries, or for that matter in East Anglia itself. The habits of thriftiness and luxury and profit, and the routines of exploitation, are humanly ordinary, and largely unchanging. Modern economic growth by contrast depends on applied ingenuity in crafting gadgets, what the economic historian Nathan Rosenberg has called the invention of how to invent. This in turn appears to depend on free societies, at any rate when the ingenious gadgets need to be invented, not merely borrowed as the USSR and the People’s Republic of China were able to do. The first modern economic growth, that is, did not depend on massive investment or an original accumulation of capital.

What did change 1600-1848, however, and dramatically, was the high- and low-cultural attitude towards thrift. Thriftiness and other specifically economic virtues, such as prudent calculation of costs and benefits or an admiring attitude towards industrial novelties or an acceptance of ethically acquired profits, became first in Holland and then at last in England, and even a bit earlier in England's remote American colonies and in England's impoverished neighbor, Scotland, fully respectable, honorable, admired, permitted, encouraged, not obstructed and disdained. This was unique in world history, and the change did have stupendous economic consequences. A change in the superstructure determined a change in the base. David Hume in 1741 . . . .

Away from northwestern Europe and its offshoots c. 1848 the economic virtues were still not respectable, at any rate in the opinion of the dominant classes. Right up to the Meiji Restoration of 1867, after which things in Japan changed with lightning speed, leading opinion scorned the merchant. In Confucian cultures more widely the merchant was ranked as the lowest of the classes: in Japan, the daimyo, the samurai, the peasant, the craftsman, the merchant. A merchant in Japan and China and Korea was not a "gentleman," to use the European word, and had no honor.

Likewise c. 1600 in England.

Georg Simmel claimed in The Philosophy of Money (1900, 1907) to detect a "psychological feature of our times which stands in such a decisive contrast to the more impulsive, emotionally determined character of earlier epochs . . . . Gauging values in terms of money has taught us to determine and specify values down to the last farthing."⁸³ In a word, thriftiness reigns now, as against the warm non-calculativeness of earlier folk. This is false, a piece with Weber's claim that a rise of rationality characterizes the modern world. The Great War was soon to make such optimistic Euro-centrism look strange indeed. Some "rationality." Ernest Renan, professor of Hebrew at the Collège de France from 1862, most famous for his claim that Jesus was a good chap if a trifle primitive and oriental, had declared that "we must make a marked distinction between societies like our own, where everything takes place in the full light of reflection, and simple and credulous communities," such as those that Jesus preached in.⁸⁴ After the events of the 20^th century in Europe, which exhibited irrationality, impulse, credulousness, and shockingly little of the full light of reflection, one stands amazed that anyone can still believe in the unusual rationality or prudence or thriftiness of the modern European world.

In fact people always and everywhere have been more or less rational and more or less impulsive, both. They exhibit the seven virtues, and the numerous corresponding vices, all. In medieval Europe one can see in Walter and the Seneschaucy, among by now thousands of other sources, the pervasiveness of a money economy. In 1900 Simmel had little way of knowing how wrong his notions of the "rise of the money economy" were to prove in actual as against philosophical history. At that time only a few lone geniuses like Frederick Maitland had it right. It has subsequently been discovered that everything was for sale for money in olden times, for instance husbands and eternal salvation. People in 1300 thought of values down to the last farthing.

Where Simmel is correct, however, is again that attitudes and commonplace rhetorics about prudence and temperance did change, 1600-1800. The Low Countries were in their greater time the point of contrast. Well into the 18^th century Holland served as a model for the English and Scots of how to be thrifty and bourgeois, and certainly how to talk it.

The rising class in the English 16^th and 17^th century was not only the bourgeoisie, but the gentry, viewed as one of two classes of "gentlemen"—the leading characters in novels by Fielding and Austen standing just below England's exceptionally tiny aristocracy. Yet a mere hundred years after Shakespeare the English, surprisingly, were very busy transforming themselves from admirers of the aristocracy into admirers of the bourgeoisie. Even the gentry and aristocracy, who for centuries had had in fact a sharper eye for profit than their lordly rhetoric would allow, became frankly businesslike about their land holdings, culminating in Farmer George III. In the 1690s, with a Dutch king, the William of William and Mary, the British proceeded to adopt Dutch institutions such as a central bank and a national debt and a stock market, and undertook to cease being inconstant, rash, vainglorious, light, and deceiving (they retained "suspicious and despising of foreigners”), make sure this is anticipated or at least to cease talking about it. Evidently something changed during the late 17^th century in the evaluation of prudent temperance as against courageous hope, and so the evaluation of thrift.

The admiration had long-term consequences. The behavior of the elite changed some, but its theory of behavior, once hostile to bourgeois values, changed more. The King did not believe any longer, if he ever had, that he could seize by right the riches of the City of London. The effective rulers of Britain became more and more mercantilist (c. 1700) and then free trading (c. 1840)—anyway more and more concerned with national profit and loss. As Montesquieu put it in 1748, "other nations have made the interests of commerce yield to those of politics; the English, on the contrary, have ever made their political interests give way to those of commerce."⁸⁵ Well. . . not "ever," but by 1748, often. Such an ordering of ideas was second nature to the Dutch in 1600. It had to be learned by the British. The British became known as unusually calculating, instead of as before unusually careless in calculating. The actual change in individual behavior was not great. The rest of the world was repeatedly shocked by the aristocratic/peasant brutality of British soldiers. A little if rich island did not paint a quarter of the world red by sweet bourgeois persuasion. But the change in rhetoric was great and permanent and finally softening.

A long-evolving orthodoxy in English history claims that on the contrary England long espoused a "gentlemanly capitalism" hostile to bourgeois values.⁸⁶ Right through late Victorian times and beyond, it is said, capitalism was trammeled by estate-yearning and polo-loving. It seems a dubious claim. True, in Britain always the aristocracy and gentry have a prestige amusing or puzzling to Americans and other advocates of the bourgeois virtues. In 1726 a young Voltaire visited an elderly William Congreve, long after he had been enriched by plays that Voltaire admired greatly. The English playwright said to Voltaire that he preferred to be thought merely a retiring gentleman, not a literary artist. Voltaire delivered the sharp reply that had Congreve had the misfortune to be merely a gentleman Voltaire would not have troubled to seek him out. As Hume noted in 1741 “while these notions prevail, all the considerable traders will be tempted to throw up their commerce, in order to purchase . . . privileges and honor.”⁸⁷ But from 1741 to the present the quantitative judgment in Hume’s “all” has proven to be mistaken. Not anything like “all” have lusted after noble privilege, and in any case those translated to the honor of “Sir Roderick” or “Lord Desai” have been replaced from below by hordes of new bourgeois.

It has always seemed a trifle strange to lament the economic "failure" of the first industrial nation, which has remained from 1700 to the present one of the richest countries in the world.⁸⁸ From the time of atmospheric steam engines to the present, England and Scotland together have been world centers for invention: modern steel, radar, penicillin, and magnetic resonance imaging, to name a few.⁸⁹ A surprisingly high percentage of world inventions still come out of little Britain. And as the great leftwing historian E. P. Thompson pointed out early in the debate about gentlemanly capitalism, the landed aristocrats themselves, and their protective belt of gentry, came to be bourgeois in values. They labored at high farming the way their financiers in London labored at deal making and their manufacturing countrymen in Lancashire at spinning cotton. They respected and honored such labor. No lofty anti-economic sentiments for them.

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There are many tales told about the pre-history of thrift. The central tales are Marxist or Weberian. Both are mistaken. Accumulation has not been the heart of modern economic growth, or of the change from the medieval to the early-modern or from the early-modern to the fully modern economy. If you personally wish to grow rich, by all means be thrifty, and thereby accumulate—though a sunder bet is to have a better idea and be the first to invest in it. But if you wish your society to be rich, you should urge an acceptance of creative destruction and of wealth obtained by innovation. You should not urge thrift, not much. You should rather work for your society to be free, and thereby open to new ideas, and thereby educable and ingenious, and thereby very rich. "Thrift" has been much honored, especially in American civic theology. But like many other of the sacred words, such as "democracy" or "equality" or "opportunity" or "progress," its rhetorical force turns out to be more important historically than its material force. Time for the old tales of thriftiness to be retired.