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PIONEERS OF CAPITALISM: The Netherlands 1000-1800
Maarten Prak and Jan Luiten van Zanden
ISBN 978-0-691-22987-4
In the 17th century, what today we call Holland was the
richest country in the world. The Netherlands, the authors contend,
provides an interesting model for the study of how feudalism
disappeared and capitalism took its place. They settle on the notion
that productivity is defining. Whether Smithian or Marxian, economic
growth is necessary for capitalism to flourish (Liz Truss might
agree). Their introduction asks a series of questions: “Was there a
major economic cycle in The Netherlands between 1300 and 1800…?”,
“The new history of capitalism has… stressed the link with
slavery…did slavery play such a role in the rise of capitalism in
The Netherlands?” “Does the triumph of capitalism lead to the
erosion of…values and norms…?” They point out that at the core of
the debate about capitalism is the question of inequality, cite
Piketty as an example but also refer to Sam Bowles’s The Moral
Economy. He employs an example which may suggest that the “greed
is good” culture might not be inevitable in a capitalist economy: UN
diplomats have the right to park where they like. They get tickets
but don’t have to pay the fine. Egyptians and Bulgarians get lots of
tickets but the Dutch, British, Swedish and Canadian delegations
have a clean record. Does this suggest finer moral discrimination is
compatible with capitalism? Maybe it simply means these people are
such fargone conformists they can’t park in a restricted area even
when they’re given dispensation. Prak and van Zanden stress that
Bowles interprets this behaviour as a function of the “civic
cultures of many of the long-standing capitalist economies”,
speculating that capitalism can co-exist with good citizenship or
even be founded on it. However, Bowles is a neo-Marxist. They could
have cited another of his examples: the imposition of fines on
parents in a nursery in Haifa who were late in collecting their
children. The parents didn’t arrive on time, they doubled the period
of lateness. Bowles’s conclusion was that they had lost a sense of
autonomous obligation and saw lateness as just another commodity
they could buy. Far from upholding the notion that capitalism and
good citizenship can go hand in hand, this suggests that when the
market (price) rules, people lose the sense of moral duty (which is
recognising the needs and rights of others) and see everything as a
commodity (including other people).
There is a hint here of what is bubbling away under the surface of
this detailed and fascinating book: maybe the relatively benign
conditions out of which capitalism grew in The Netherlands point to
the possibility of a gentler, more humane, less divided, more
morally cognizant capitalism. Prak and van Zanden are liberals. They
are clearly not relaxed about gross inequality, but on the other
hand they entertain an obscure admiration for some aspects of
capitalism. The question is, does the evidence they muster uphold
the argument they subtly advance?
There was significant economic growth in The Netherlands from 1350.
Some economists see a cyclical pattern: periods of growth followed
by shrinkage. Elements of capitalism were responsible. Well-being is
measured in many ways. During the period from 1350 to 1800 there
were some negative signs, but also some positive: serfdom and
slavery were rare, women didn’t suffer excessively, the common folk
had some possibility to express themselves. Prak and van Zanden see
a “remarkable picture”: the market economy had created a “broad
growth in prosperity”. How did an exploitative, extractive system
accomplish this. The subsequent seven chapters attempt to solve the
conundrum.
Yet is there a conundrum? Broadly-based prosperity can co-exist with
desperate poverty, as it does in most countries of today’s Europe
and in the U.S. It can also be compatible with relatively liberal
civil institutions but concentration of power. Taking the view that
if capitalism can provide broad prosperity, it’s a success, is a
very low requirement. It dismisses the essential question: why is
the relation between employer and employee necessary? What evidence
is there that co-operative relations are less efficient? The
relation between employer and employee is one of power. What is its
basis? Simply that employers have the resources. What would we say
to the notion that because men have the resources, they should have
power over women? Wouldn’t that be a moral outrage? Prak and van
Zenden’s conundrum arises from their contention that because early
capitalism in The Netherlands didn’t drive the mass of people into
destitution, it defies the critics who focus on inequality.
People trusted in markets. Interest rates are a good guide. Interest
rates were low in The Netherlands in the fourteenth and fifteenth
century. Financial institutions were strong. Property rights were
well-established. Farmers had a fair degree of autonomy. Voila. More
evidence for the positive effects of markets. Are markets
characteristic of capitalism? If all goods and services were
produced co-operatively, would there be no market? Markets, as Adam
Smith pointed out, require at least some degree of division of
labour: if people produce principally for their own needs, they
don’t have much surplus and they don’t produce high levels of one
thing. However, what is produced by co-operatives can be exchanged
in a market just as easily as what is produced by a capitalist
business. It isn’t markets which characterise capitalism but the use
of State power in defence of property, even if that property is
relatively widely distributed. Capitalism isn’t and has never been a
system of “free markets”. It has always been rigged in the interest
of employers and investors. It relies on the State to do the
rigging. The authors effectively acknowledge this:
“City councils, typically dominated by merchants and entrepreneurs,
were sensitive to the interests of business and pursued probusiness
policies…”
If markets did the work alone, why would City councils have to be
biased in favour of capitalists? Markets have a more or less
mystical significance in capitalist apologetics. They are supposed
to be “free”, but where is the advance capitalist society with a
free market in labour? All States have heavy-handed legislation to
prevent labour using the market to get the best price, which is what
markets are supposed to be about. Capitalist are great advocates of
markets until they threaten their wealth, then they call on the
State to shut them down.
Prak and van Zanden evoke what they call “a coordinated market
economy”. What they mean
is that “urban governments” ie the State “organised” certain
aspects of the economy and society, education and health for
example. There’s a contradiction between the coordination and the
market. A market is governed by price but when the State provides
education it’s recognising an arena in which the price mechanism
doesn’t work. J.K.Galbraith used to argue that there wasn’t, nor had
there ever been, a society where, in and through the operation of
the market alone people were housed, educated, their health looked
after, they were given security in old age, their streets were lit,
they had roads to drive on, trains to travel on etc. The arena in
which the price mechanism fails is vast. In fact, so extensive that
without some other form of social provision, the entire system would
collapse. A genuine free market economy wouldn’t last ten minutes.
In 1609 an ordinance was passed which effectively nationalised the
banking system. The request to do so came from the merchants,
anxious that speculation might throw the whole system into chaos.
You couldn’t have a clearer example of capitalists needing the
State.
The book gets really interesting when it looks at how Dutch
capitalism behaved abroad. The authors recognise that State
restrictions were imposed on domestic capitalism, but once the Dutch
East India Co was established in 1602 the gloves were off. The Dutch
behaved like standard colonisers.They enslaved, they used
concubinage and they threw in the sea any idea of a free market. The
Banda genocide of 1621 was an appalling example of conquest, based
on racism in pursuit of lucre. The Dutch insisted the Bandanese
trade only with them. The people of the islands could get better
prices from the English or the Javanese. For their desire to trade
to their advantage, they were slaughtered. The Dutch commanders
thought it necessary “to populate it (Banda) with other people.” The
authors don’t conceal any of this, but it doesn’t seriously disrupt
their underlying suggestion that a benign form of capitalism might
be possible.
They discuss varieties of the system, for example “coordinated
market economies” versus “liberal market economies” ie Germany on
the one hand the UK on the other. The former, they say is more
stable, the latter more innovative. Yet surely this misses the
points: employment is a moral outrage and the State is always
intrusive and often brutal.
The “inequality possibility frontier” is part of the current
economic literature. It means that in rich countries there is more
for the few to cream off
and so greater leeway for inequality than in poor countries.
The authors recognise that capitalism has entailed significant
inequality. In 1722 in Leiden 92% of households had no taxable
income. Recall that in the previous century Holland was the richest
country in the world.
In their conclusion the authors argue that distributing the rewards
of “growth” broadly gives people an “incentive”; but how is growth
arrived at? By creating gig jobs, by exploiting the resources of
poor countries, by fuelling global heating, by switching emphasis
from public services to profit-seeking, maybe even by the growth of
internet porn? Prak and van Zanden don’t force their argument. They
are reserved and suggestive, yet the drift of the book is that the
evolution of Dutch capitalism may point to a way forward. The
problem is that their evidence, excellently marshalled, shows that
capitalism was inevitably colonial, that it made use of slavery,
that it has driven millions into poverty and been responsible for
colossal violence. Joseph Conrad, whose self-conscious politics were
conservative, explored in his fiction
the human cost of making the pursuit of material wealth the
essence of life and concluded it’s not a pretty thing. Capitalism is
not a pretty thing. That there are more or less benign versions is
beyond doubt, but what is their in our nature which justifies the
existence of either employment or the State?
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