Thinking about Capitalism

This course provides a historical introduction to thinking about how capitalism works, and about its political, moral, and cultural prerequisites and effects. For the most part, our approach is historical, trying to understand what the great debates of the past were about, with an eye to thinking about their current resonance and ramifications. We provide a working definition of “capitalism,” discuss the history of the term, and learn why it is plausible to argue that societies first became capitalist in the 17th or 18th centuries.

In thinking about how modern intellectuals have evaluated capitalism, we must keep in mind the premodern traditions that formed the backdrop against which modern thinkers developed their ideas. Commerce and moneymaking were regarded with suspicion in two of the great traditions of the West. In the civic republican tradition, which went back to ancient Greece, commerce was seen as ignoble, and the pursuit of economic selfinterest was seen as a threat to civic virtue and the protection of the polity. In the Christian tradition, wealth was seen as promoting pride and hence impeding salvation, and the lending of money at interest was condemned as “usury.” In medieval Europe, the stigmatized activity of lending money was permitted to Jews, who were seen as beyond the community of the saved.

In the 17th century, the Christian and civic republican traditions were subject to fundamental criticism by Thomas Hobbes, especially in his Leviathan (1651). Hobbes also pioneered an approach to social analysis based on exploring the passions and the ways they could be put to socially positive uses through institutions. Hobbes’s great importance, for our themes, lies in his emphasis on this-worldly happiness as the goal of government; and for his early explorations of the role of self-love in human affairs; and for his abandonment of the notion that the role of government is to guide us to some shared purpose, some highest ideal, be it religious holiness or civic virtue

In the 17th century, the Dutch Republic provided an example of a highly commercial society with increasing national power. The Dutch East India Company, which transported luxury goods from what are now India and Indonesia to Europe, became the most important commercial enterprise in the world. To conduct their overseas trade, the Dutch developed into a major naval power. Thus commerce and national power were interlinked, leading European thinkers to reformulate the civic republican tradition in a more commercial direction.

In his Letters on England (1734), Voltaire argued that commerce provides a means for people of different orientations to cooperate.

Enlightenment thinkers debated the moral status of material well-being. Voltaire argued that the abundance created by commerce was the basis of civilization. Rousseau countered that material progress had increased inequality and undermined virtue.

In The Wealth of Nations, Adam Smith explained how a competitive market could channel self-interest into socially beneficial directions.

Smith argued that capitalism diverged from his competitive model, with each economic group trying to use its political power to promote its own interest. He urged policymakers to promote competitive markets that served the general interest.

Smith's influence was probably greatest in arguing against government's direct economic involvement, but Smith, in fact, believed that a well-functioning government was the only source of many essential functions for a commercial society.

You explore Smith's views on how a capitalist society could make people better and better off—but that lack of the rule of law, or inequality before it, could cause commerce to lead to immoral outcomes.

Edmund Burke offered a conservative analysis of the hazards posed by some forms of capitalism. His Reflections on the Revolution in France (1790) remains the most influential work of conservative thought ever published.

Justus Möser is an example of a conservative in a largely precommercial society, for whom the spread of international capitalism was a threat to existing ways of life.

This lecture introduces you to Hegel's ideas about capitalism, individuality, and how institutions foster individuality.

You encounter two voices in the early debate over free international trade: Alexander Hamilton, who made the case for protecting "infant industries," and Friedrich List, who developed Hamilton's ideas into a national industrial policy.

Alexis de Tocqueville's Democracy in America explores the propensity toward individualism and materialism in America and the countervailing influence of republican institutions and religion.

Karl Marx and Friedrich Engels concluded that industrial capitalism profited only the wealthy while leading to the material and moral degradation of the masses. Nevertheless, in The Communist Manifesto (1848), they also recognized capitalism's achievements and possibilities.

Marx spent most of the decades after The Communist Manifesto working on his comprehensive analysis of the capitalist economy. Although he provided a searing portrait of the industrial factory's degradation of labor, he overlooked the trends that argued against his theory.

The British poet and cultural critic Matthew Arnold was concerned about "Philistinism"—spiritual and cultural narrowing in a capitalist society and the spill-over effect of applying a narrowly utilitarian, market mentality to other areas.

In the last third of the 19th century, a newly unified Germany went through a process of capitalist transformation, leading to debate about capitalism's social, cultural, and political ramifications.

Georg Simmel, Max Weber, and Werner Sombart offered three different perspectives on the cultural and spiritual effects of the spread of capitalism and its ideas of rationality and calculation.

You examine the cultural sources of disparate group success under capitalism, with special focus on Weber's The Protestant Ethic and the Spirit of Capitalism (1905) and Sombart's The Jews and Modern Capitalism (1911).

Joseph Schumpeter was among the most wide-ranging analysts of capitalism. But unlike most mainstream economists of his day, Schumpeter focused on the role of entrepreneurs, whose dynamism, he believed, caused resentment of capitalism.

You examine Vladimir Lenin's idea that capitalism fosters imperialism and related arguments by the British liberal John Hobson and Marxists Rudolf Hilferding and Rosa Luxembourg, before taking up a refutation offered by Schumpeter.

This lecture looks at the critiques of the Weimar Republic's liberal democracy by political analyst Carl Schmitt and sociologist Hans Freyer, who argued that capitalist democracy posed a threat to effective government and national power.

This lecture looks at ideas about the importance of markets introduced by Ludwig von Mises and further developed by his student, Friedrich von Hayek, whose "neo-liberal" approach focused on individual liberty and the restriction of government. Hayek's theories about the roots of Fascism and the link between anti-Semitism and anticapitalism are also examined.

You focus on Schumpeter's version of the notion that capitalism ignites processes that destroy its institutional foundations—set forth in his Capitalism, Socialism, and Democracy.

Perhaps the most important transformation of capitalism in the mid-20th century was the development of welfare-state capitalism. This lecture explores its origins and the varieties of welfare-state capitalism that developed after World War II.

This lecture examines Hayek's conception of the links between capitalism and Liberalism, which called into question many of the premises of those who wanted to use the welfare state to shape society.

During the 1960s, Herbert Marcuse's most influential work analyzed contemporary capitalism's ability to keep the masses quiescent by manipulating their needs.

In the 1970s, Daniel Bell argued that America had entered a postindustrial age and that capitalism undermined the work ethic, frugality, and deferred gratification that it depended on.

This lecture examines some useful conceptual frameworks for thinking about the links between capitalism and the family.

You explore James M. Buchanan's critique of Keynesianism based on public choice theory and Mancur Olson's explanation of how the logic of collective action could lead to economic stagnation.

This lecture explores the origins and nature of the newest era of globalization and puts it into historical perspective.

An interpretation of modern history argues that the processes that made capitalism possible also led to changes in personal identity that made nationalism attractive.

You examine capitalist societies from five perspectives—political structures, types of welfare states, developmental strategies, forms of business, and extent of equality.

Why has capitalism been so productive and innovative, and why has it outlasted its competitors, such as Socialism? You look at some recent thinking on this and at some intrinsic tensions in capitalism.