Postscript to the National Conventions: “You Didn’t Build That” and the History of American Capitalism
Both parties’ national conventions are over, after significant fanfare. And each sought to outdo the other on praise for capitalism. At the Republican National Convention, speakers repeatedly pushed back against Pres. Obama’s “you didn’t build that” remark. (By now, everyone knows he wasn’t referring to owners building their businesses, themselves, but instead was talking about the public infrastructure that businesses rely on – right?) At both conventions, speakers time and again lauded the virtues of capitalism, and linked businesses with democracy and freedom.
I’ve been reading about the historical transition to capitalism for a project on capitalism and families. The historical record at the very least undercuts any easy association among capitalism, democracy, and freedom. It also backs Obama’s point in spades about the critical necessity of government action to support a market economy. A few choice points from historians on these issues:
• Capitalism succeeded in spite of – not because of — democracy. As historian Charles Sellers points out in his excellent Market Revolution, until the nineteenth century America was largely an agrarian society, and its path toward industrial capitalism was by no means pre-ordained. Through the first half of the nineteenth century, voters repeatedly sought to halt the progress of capitalism and preserve a subsistence economy. A market economy, they thought, would subvert a focus on the basics in favor of a focus on luxuries; cause citizens to be overly dependent on banks, who would encourage them to borrow in good times, then relentlessly demand payment in hard times; and eat up citizens’ free time by encouraging relentless accumulation. Capitalists found ways to subvert anti-capitalist electoral mandates, including by using the two-party system to focus the public’s interest on other controversies while quietly accomplishing their objectives. (Sound familiar?)
• Wage labor was seen as bondage rather than freedom. At the birth of the U.S., owning and working one’s land was equated with freedom and independence; wage work and capitalism were seen as inducing a harmful dependency on others that was considered undesirable in a free and equal country. How the meaning of wage labor became associated with freedom rather than bondage is a complex story, parts of which are laid out both in Joyce Appleby’s Capitalism and a New Social Order and Amy Dru Stanley’s illuminating From Bondage to Contract.
• Development of capitalism in the U.S. required massive government support. At the beginning of the nineteenth century, most of the country was beyond the viable reach of markets because it was too expensive to move goods over land. Almost all the funds needed to build the great canals that allowed market access to the nation’s interior came from public funds, as well as a major proportion of the money for the highways and railroads that linked up much of the rest of the country to markets. Government action was also required to stabilize money and credit, to legalize the corporate form, and to adopt laws that favored economic development and capital accumulation (see Sellers, Market Revolution on these points). And of course, as Morton Horwitz points out in Transformation of American Law, the transformation to capitalism couldn’t have happened without courts rewriting the common law in favor of capitalists, including by abolishing entails (limiting property to one’s descendants) so that land could be freely sold; simplifying the requirements for transferring ownership; rolling back the enforcement of equity and fair value in contracts in favor of a policy of enforcement of contracts and “caveat emptor;” limiting the liability of stockholders for corporate debts and protecting corporations from interference by the state. It’s no wonder that Charles Sellers called judges the “shock troops” of American capitalism.
I recognize the political realities that impede a more nuanced discussion of capitalism and its history, but can we do any better than the one we’ve been having? Can we, for example, accept that with the many benefits that capitalism brings (including a higher average standard of living, more consumer choice, more incentive for productivity), come certain risks (of increased income inequality, of too much attention to market goods and not enough to non-market goods, of the risk of government capture by capitalist interests), that good government should address? The Democrats have done slightly better on this than the Republicans, but not by much.
Photos: (Obama) By Blake Coughenour (http://www.flickr.com/photos/il3lake/2371365230/) [GFDL (http://www.gnu.org/copyleft/fdl.html) or CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0/)], via Wikimedia Commons from Wikimedia Commons; (Romney) By c.berlet/publiceye.org http://www.publiceye.org/gallery (Own work) [CC-BY-SA-3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons