Capitalisn’t: How Capitalism Became Global

Sven Beckert: It's not just like a force of nature. I think that would be a totally wrong way of thinking about capitalism. I think we should think about it as a human-made order that we also can shape and create in ways that is conducive to the well-being of as many people as possible.

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Bethany McLean: I'm Bethany McLean.

Phil Donahue: Did you ever have a moment of doubt about capitalism and whether greed’s a good idea?

Luigi Zingales: And I’m Luigi Zingales.

Bernie Sanders: We have socialism for the very rich, rugged individualism for the poor.

Bethany: And this is Capitalisn’t, a podcast about what is working in capitalism.

Milton Friedman: First of all, tell me, is there some society you know that doesn’t run on greed?

Luigi: And, most importantly, what isn’t.

Warren Buffett: We ought to do better by the people that get left behind. I don’t think we should kill the capitalist system in the process.

Bethany: What is capitalism? It's more difficult to get a clear answer than you might think. Wikipedia says, "Capitalism is an economic system based on the private ownership of the means of production and their use for the purpose of obtaining profit, and typically includes things like profit motive, capital accumulation, competitive markets, commodification, wage labor, and an emphasis on innovation and growth." What does that mean? It's not even clear that we can describe capitalism by what it isn't. Is China capitalist?

Luigi: Probably the two most famous quotes about capitalists, one from Adam Smith, "It's not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interests." In this view, capitalist is fundamentally an engine that channels self-interest into prosperity. But of course, there is the other view, Karl Marx's view, that is the opposite. It is a machine that converts power into profits. Or as Marx said, "Capitalist comes dripping from the head to foot, from every pore with blood and dirt."

Bethany: Who better to explore this complex topic than Sven Beckert, who is the founder of Harvard's program on the study of capitalism, and who is a Pulitzer finalist for his previous book, Empire of Cotton. His new book is an 1101-page tour de force entitled Appropriately Enough, A Global History of Capitalism.

Luigi: One of the innovative aspects of this book is that it takes a very global view of capitalists instead of one that, at least traditionally, was Eurocentric. He begins his book not with the Industrial Revolution or with Adam Smith, but back in the 12th century in the Yemeni city of Aden. Beckert argues that the free market was made by charter, courts, tariff, and force, and he has written, the state made the market. He also argues that capitalists thrives on the liberal and illiberal regimes alike.

Bethany: Beckert's book raises questions that are critical to our time, as what some would argue are capitalism's flaws rise to the surface. He calls the process of capitalism one of ceaseless accumulation. Is capitalism inherently ethical, or does it require separate moral foundations? Is it compatible with freedom, or does it bend toward coercion and inequality? Is it perpetual growth, or is it headed for a ceiling? [music]

Sven Beckert, welcome to Capitalisn't. In your new book, A Global History of Capitalism, you attempt, over 1,000 pages, to define something that has historically been quite difficult to pin down. What is capitalism? I'll ask you that question to start. What is capitalism? Why is something so seemingly basic so hard to understand?

Sven: I think you are right that capitalism is difficult to understand or even sometimes difficult even to notice because we live in a world that is deeply structured by capitalism. Sometimes it's like the fish in water. It's hard to really understand and even notice the kind of mechanisms and the processes that you are surrounded by. We need to start with the insight that capitalism is a particular economic logic that emerged at a particular moment in time.

Then, of course, what this implies is that in order to understand capitalism, you need to understand it from a historical perspective. Of course, there needs to be something that holds the entire thing together that allows us to speak about capitalism when we look at, let's say, the mid-17th-century Caribbean and when we look at Great Britain in the 1850s and Detroit in the 1950s and maybe Shenzhen today in the 2025s.

What holds all of these very different kinds of capitalisms together is that capitalism is an economic logic that is defined by privately owned capital that is productively invested in order to produce more capital. I think that is the kind of most basic logic of capitalism, and that brings together all these different specific articulations of capitalism at various moments in time throughout history.

Luigi: I read particularly the first part of your book, very much as an illustration of Polanyi's ideas that markets at beginning were kind of isolated and society was dominating. You have these islands that society kind of ostracized markets and limited them to islands, physical islands, or simply ports that were islands. Slowly, these islands take over the world. Is my reading correct, or am I over-interpreting?

Sven: I start out with talking about capitalists without capitalism. I'm searching out where this capitalist logic comes from, and you can clearly find it in merchant communities in the first half of the second millennium. You can also find it in merchant communities earlier. I'm not claiming that this logic emerged at this particular moment in time. You find this logic in many, many different parts of the world. As you say, it's quite marginal to economic life more broadly on planet Earth.

I would take issue with one part of your description of that, and that is capitalism is not defined by the existence of markets. As far as we know, markets have existed in all human societies. Humans have traded with one another as far as we know throughout all of human history. I don't think markets are such a definitive of capitalism.

Bethany: In your book, you also chronicle how capitalism is mutable and has changed not only over time but in place. Is there a simple answer to why capitalism has thrived under both liberal and illiberal regimes? Is there a difference in the type of capitalism that has thrived in each regime?

Sven: That is probably one of the most striking findings in the book. Capitalism is an economic logic that it has a quota, as we discussed, but it's institutional embeddedness, it's political embeddedness, it's reliance on various kinds of labor regimes, it's very political territorial organization suggests to me that capitalism is fundamentally undogmatic. If you think about the 1750s, it draws to a significant degree on the labor of enslaved people in the Caribbean, but it can also-- capitalism can thrive in a world in which people are paid wages.

There is a whole diversity of labor regimes. Capitalism can thrive in a world in which there are large monarchical states, or there are city-states, or there are empires like the British Empire or the French Empire, or there are large nation-states like the United States, or again, small city-states like Singapore today. Again, a whole variety of territorial arrangements go perfectly well with the expansion of capitalism. The upshot of all of that is that capitalism is undogmatic. In that way, capitalism is quite different from many of the people who write about capitalism.

Luigi: Going back to markets, of course, markets exist before capitalists, but I see, and maybe I'm wrong here, but I see capitalists as the market starts to influence a greater, great part of society because in the old days, the market was isolated. I come from nearby Venice. There is the original ghetto in Venice where the Jews were confined, where they were lending. It was a very active marketplace, but was limited and limited in a city that was already a merchant city like Venice. In the grand scheme of society, they were super limited.

What we observe in modern time is the takeover of markets. Recently, we have interviewed Tim Wu. I don't know if you know him, but has written a book about the extraction economies. Basically, he says that the ultimate stage is that now even the marketplace has been privatized because it's owned by platforms. That's, in my way, the ultimate stage of capitalism where the market expands everywhere up to this point.

Sven: No, I totally agree with you. That is historically exactly accurate. Markets are also always political constructions. They also rely on the powers of the state. That's another important argument that this book tries to make is to show how important the state is to this capitalist revolution, and how important the state is to the expansion of capitalism. Indeed, I argue at one point, you might take issue with that, Luigi, but I argue at one point that capitalism is, in a way, the most status economic civilization, perhaps, except for Soviet communism.

Bethany: If that's true, if the state is essential to capitalism, how do you think about capitalism's relationships to what most people consider free markets, which is some sort of ideal market that exists without the state? Then also, what sort of responsibility does the state have for capitalism if it is ultimately a construct of the state?

Sven: The idea that capitalism is a state of economic life in which the state could, even conceivably, be absent, is a theoretical construct that has almost nothing to do with the real history of capitalism. It is a very powerful construct. I think you're absolutely right. It's the notion that structures also contemporary political conversations in important ways. I have to tell you, as a historian, from a historical perspective, why that might be theoretically conceivable in some way, so I even doubt that, but maybe it is in an economics textbook, but historically, capitalism has never existed as a pure market.

Luigi: To be fair to my colleagues, probably all economists agree that the state has a very important role, which is the one to define and enforce property rights, which, especially historically, were not well-defined. Without that intervention, you couldn't have a capitalist. I don't think that anybody I know, at least, think that [crosstalk]

Sven: Very true. It's probably not so much in the economics profession, but in the public sphere, that sometimes this idea circulates, that somehow there is a foundational conflict between the state and capitalism, which I think is not the case, that the state is constitutive of capitalism. Historically, if you look at the last 500 years, you see a massive expansion of the state, and at the same time, you see a massive expansion of capitalism. Historically, there must be some kind of relation between the one and the other.

Bethany: I agree with Sven, Luigi. I have to say that perhaps more accurate definition of capitalism is confined to the economics department. Definitely not the general public or probably the journalistic sphere, where we would consider capitalism in the state to be antithetical.

Luigi: If I can bring you to something slightly different, I was very intrigued by your story of China. Let me tell you the way I interpret it, and tell me how far off I am. If I understood correctly, what you're saying is China was a much better developed society. In particular, was much better able at taxing farmers because they could assess the value of the land, etc. It didn't need as a state very much of the revenues from trade. Most states in the past were financing themselves through tariffs, a bit like Trump wants to do now.

As a result of the independence of merchants, they were able to stop merchants when the merchants were too disruptive to society in a way in which England, certainly Venice, the Netherlands, etc., could not do. The peak of this is when, and I don't know, I think it's in the 1500s, when there's this big expedition of China to Africa. Then the emperor says no more, and they destroy the ships and basically stop explorations because they prioritize stability over if you want growth.

Sven: The big puzzle is, as you described earlier, the world is full of these islands of capitalists. There are many thriving merchant communities in many parts of the world. There is something happening on the European continent that is quite unique, and that is that in the 15th century and then also especially in the 16th century, these European merchants now do something that nobody else in the world does, and that is they are able to project their capital into the far reaches of the Atlantic Ocean, first off the coast of Africa and then off the coast of the Americas and then into the Americas. They also begin to insert their capital in more meaningful ways into agrarian and then also industrial production on the European continent itself.

The question is then, what enables merchants to do this? My explanation of this divergence, which makes Europe really quite different in the 16th century from merchant communities elsewhere, is that these European merchants build a coalition with the state, and they align themselves with state power that allows them to break down some of the geographic barriers to the expansion of their economic logic, but also to break down some of the social barriers to the expansion of their logic.

This is a slow process. This is not something that's happening overnight. It's something that takes many decades and even many centuries to develop, but there is, I think, no similar development in other parts of the world. The merchant communities of China and India, and the Arab world, were strong. They were rich. They had accumulated capital. They were actually much superior in manufacturing, especially India and China. There was nothing in the water. There was nothing in the culture that made them categorically different from merchant communities in Europe.

What made them categorically different eventually was this weird alliance that emerged between state power and the power of merchants in 15th and 16th century Europe that now propelled Europe on a trajectory that is quite different from those of other parts of the world. Why is this so? This actually, ironically, has something to do with the relative weakness of European states and the relative weakness of European merchant capital, which is something, Luigi, you also already mentioned, these European states were not as bureaucratically capable, and they were also relatively small territorially, relatively small. They spent a hell of a lot of money fighting each other in wars. That made them deeply dependent on the people who could mobilize resources for this warfare, namely the merchants.

At the same time, the European merchants were hemmed in because they understood very well that the riches of the world were to be found in Asia, in India, and in China, but the problem they encountered was that between India and China, there was also a powerful community of merchants in the Muslim world, and they tried to get around that. They went around it by going into the Atlantic Ocean because they did believe that if they go west, they would find a sea route to India, which obviously Christopher Columbus was most prominent among them, but this didn't happen.

There was also a certain structural weakness within European merchant communities. That drove them into the arms of the state, also in ways unlike what was happening in other parts of the world. Just to end this story, Christopher Columbus is a great person to focus on because he's both a Genoese merchant. He combines his energies with those of the Iberian crown. It's this joint project of Genoese merchant capital and the Iberian crown that brings European state power, but also, of course, the investments of European merchants into the wider Atlantic world.

Luigi: Now, one of the big advantages of starting capitalism so early as you do is that you can ask the question about what is the role of capitalists in triggering the Industrial Revolution, because if you have the two coincides, then you cannot speak about cause and effect, but if they do not coincide, then you can ask the question. What is your answer? Because I couldn't grasp it very clearly from the book. Is really capitalists the cause of the Industrial Revolution or not? Why don't you answer?

Sven: Great point, Luigi. Great point. Look, this is crystal clear to me. So much of our thinking about capitalism basically starts with the Industrial Revolution. It's as if capitalism is born at the moment of Industrial Revolution. This is totally wrong. Capitalism is not the child of the Industrial Revolution, but the Industrial Revolution is the child of capitalism. The Industrial Revolution, as you know, begins in cotton textiles. There is already a vibrant trade in textiles, mostly brought from India to Europe, to West Africa, then also to the Americas. There is already significant capital accumulation that came out of international trade. There are new possibilities of organizing production that began in the sugar industry of the Caribbean.

All of this combines at this particular moment in time. Some artisanal entrepreneurs, some small-scale entrepreneurs, some of them with very little capital at their disposal, some even just being skilled workers, they now see this opportunity. If we reorganize the production of cotton textiles, there's going to be a huge market for this. They do. Eventually, they find a way to drastically improve productivity of the cotton spinning and then also cotton weaving. This is what launches the Industrial Revolution. This is inexplicable in my mind. It's inexplicable if you don't embed it within this longer history of capital and the kinds of global connections that it produces.

You cannot understand the British Industrial Revolution just by looking at Lancashire. I actually think you understand almost nothing about the Industrial Revolution by doing that. You need to understand it out of a conjuncture of global events that have been in the making for several hundred years, that now focus, concentrate on this one particular point, this one particular place in the world, and launch what is perhaps the most impactful change in economic organization and production ever in global history. That is my argument, Luigi.

Bethany: In both your previous book, Empire of Cotton, and this one, you weave in racism and stories of plunder and expropriation. Are those core to capitalism? Can you have capitalism without plunder, or does capitalism require a kind of plunder in order to thrive?

Sven: In the end, I don't know. I don't have a good answer to that because we can't run a gigantic experiment. We can only--

Bethany: No counterfactuals, right?

Sven: We can only try to come to terms with, understand, and chronicle the history as it actually unfolded. We can see a variety of things. For one, we can see there are many capitalist economies. If you think about the word after the late 19th century, this is a word basically without plantation slavery. I understand slavery persists in various forms, in various parts of the world. The kind of plantation slavery that is so important to the capitalist revolution since the 1600s, that is clearly not a central part of the global capitalist economy in 1900, and it's certainly not a central part of the capitalist global economy today.

Capitalism can exist without slavery. This is point number one. Can capitalism exist without colonialism? Yes, it can exist without colonialism. It is true that for a long moment in the history of capitalism, colonialism plays a very important role. If you look at the world today, you wouldn't want to argue that colonialism is a major factor in explaining contemporary capitalism. Yes, capitalism can exist without colonialism. In a way, that is a natural experiment. We can see that.

That said, we can also see that historically, at a certain moment in time, both slavery, colonialism, but then also the dispossession of lands, for example, from Scotland to the Americas and everywhere in between, it plays a very important role in the history of capitalism. Now, let us ask the question of why that is so. Why is that kind of extra market coercion so important at a particular moment in the history of capitalism?

The reason for that is the capitalist revolution is a very difficult project, which is also why it unfolds so slowly over so many centuries. It is such a radical departure from how many people on planet Earth organized their economic lives previously that it was very hard to spread this logic into new geographic areas and into new spheres of social and economic life. That's where we see the coercion in this history coming in. Just think about all these European elites, these aristocratic elites, many of whom were very reluctant to share their power with upstart merchants because they really drew great profit from exploiting the local peasants and taking away their products.

They were often quite reluctant to let the logic of capitalism spread into new spheres of economic life. Just think about all these people who, all around the world, engaged in subsistence production, who were very reluctant to suddenly become wage workers in some factories. You can trace that in many, many different situations. For example, I write a lot about the Scottish cotton textile industry in the late 1700s. One of the main problems that manufacturers in Scotland faced was how do we get people to work in factories because people did not like working in factories. Indeed, many were afraid of working in factories.

What clearly was very helpful to these manufacturers was when people in the Scottish Highlands and elsewhere lost access to their land and therefore had no choice but to end up working in the factories. The same in India. When the British in the 1840s or 1850s tried to build cotton plantations in India that were supposed to produce cotton not by enslaving the workers like in America, but by paying them wages. It was almost impossible to find these people to come to work on these cotton plantations because they much preferred to engage in their own subsistence agriculture in the villages where they came from.

There was a discussion among British merchants in the 1830s and 1840s in India, "Maybe we need a little bit of coercion to bring people into cotton agriculture." This is all just to say that this is a radical transformation in economic life and in life more broadly. That explains why coercion plays such an important role in certain moments of the history of capitalism, but at certain moments.

If you think about dispossession, now the question is, where are we now? Dispossession is certainly a very important theme in the history of capitalism, and you find it at many different moments in the history of capitalism. In some ways, you can even find it today as we learn the newest kid on the block, artificial intelligence, is being fed by the collective labor of all of us that we have produced over generations and that so far has not been renumerated because the books and articles and everything we write is being fed into these machines to produce what is then called artificial intelligence.

It's really based on our human intelligence that we labored very hard for and did not get compensated for when it was used for other purposes. This process, in some ways, is also ongoing, even though it looks very different from the land dispossessions that you find in the Scottish Highlands in the 1760s or so.

Bethany: This might be a slightly butchered question because I'm thinking about a couple of different things. You use the word global and you use the word unpredictable a lot to describe capitalism. If we think now, some would argue that we're in a period of capitalistic excess, but if the state and capitalism are inextricably bound up, does the state then bear any responsibility for the direction of capitalism, or because it is unpredictable and global, is it too much for any one state? Are we living with the laws of unintended consequences if any one state attempts to structure the future of their brand of capitalism?

Sven: not necessarily. I do emphasize, as you also just pointed out, I do emphasize very much how capitalism changes quite drastically over time. Its institutional embeddedness changes significantly over time. The golden age capitalism of the 1960s is very different, let's say, from the more laissez-faire capitalism of the United States in the 1920s. A significant role in facilitating that change over time is certainly state policy.

For example, we talked earlier about the importance of slavery to the early history of capitalism. There was widespread belief, if you read British merchants or British parliamentary debates, there was widespread belief in the early 19th century, even that this commercial capitalist economy could not survive without also drawing upon the labor of enslaved people. Then we see massive rebellions against slavery, both in a place like Saint-Domingue and present-day Haiti. The American Civil War has also been seen as a slave rebellion. There are lots of slave rebellions on various Caribbean islands.

People who were very poor, did not have much power, were often illiterate, they affected a huge transformation in global capitalism. They helped create a capitalism without plantation slavery. This is also the case for 20th-century capitalism. In the late 19th century sees the emergence of a powerful labor movement. That labor movement, organizing industrial workers, had a significant impact on the structure of especially post-1945 capitalism in Europe and the United States. Thanks to a variety of political interventions.

In a way, my story should give us a certain confidence that we can shape this order. It's not just like a force of nature. It's not like a godly order, and we just adjust to whatever this godly order demands of us. That would be a totally wrong way of thinking about capitalism. We should think about it as a human-made order that we also can shape and create in ways that is conducive to the well-being of as many people as possible.

Luigi: I would go even farther. I would say that whenever you hear capitalist, that if you change an epsilon, capitalist, as we know, will end, is a fake claim. Capitalist goes on. In fact, to some extent, an inspiration is the pressure from a democratic system made capitalists work for everyone. The big successes of capitalists, at least when you think about the broader set of the population, comes with a conjunction with a democratic system. It's not that capitalists can need a democracy to exist, but need democracy, my view, to exist in a positive way, the way to work for everyone.

Sven: No, I totally agree with you. The history of capitalism, not just of the last 100 years, but of the last 500 years, really shows that to be the case. If we think about the 20th century, just think back to the 1950s in the United States, when we have a marginal tax rate of up to 93%, we have a very powerful union movement. We have a significant compression of social inequality in the United States.

At the same time, we have really quite spectacular economic growth. Yes, I totally agree. That should encourage us. In the neoliberal era of the last 50 years, so many have given up the idea that we can shape the society in which we live because we are, in the end, just handmaidens of the market as God. The history of capitalism shows this exactly not to be the case, and that we can actually shape the world, and we can shape capitalism in a variety of ways.

Bethany: A philosophical question that your book made me ponder, I thought that capitalism, at least as it evolved in Europe and America, ended up subverting the traditional definitions of aristocracy and the traditional inheritance of aristocracy. Now, it seems to be creating its own form of an aristocracy of the very wealthy around the globe. Is that a natural evolution of capitalism? Based on your answer that you just gave, no, we can reshape that then. Do you think that's a fair reading?

Sven: Look, I think capitalism is categorically different from an aristocratic or feudal society because in an aristocratic and feudal society, what, in the end, counts is to whom you were born. There's really not much you can do to your social status. Once you were born to a feudal lord, it's categorically different from being born to a peasant family. That's different in capitalism. This is one of the emancipatory effects of capitalism. Capitalism does allow for social mobility. You can be born to the peasant, and you can become a rich woman or a rich man. Not that this typically happens, but conceptually, it's possible, and historically it's true, too.

I write about this example of a Swiss cotton worker in the 19th century who is just a skilled worker, and by the end of his life, he owns a number of factories. This is hard to imagine in the feudal order. There is something categorically different here about capitalism. It does create possibilities for social mobility, at least conceptually. What we see, of course, is that there is a tendency of capital to concentrate in fewer and fewer hands. Of course, once this happens, those people who come to control such great resources are developing ideologies and ideas and legitimations for why the world is structured in this particular way. Why they must have almost everything, and everybody else has very little.

This is just the ideology, and things can change. Just think about it. In 1861, there was a significant accumulation of wealth in the American South. What did this wealth consist of? It consisted largely of enslaved workers. Fast forward to 1865, those property rights are abolished. There is a significant redistribution of social wealth. There are many, many other examples for that in history.

Yes, I think there is a tendency within capitalism to concentrate economic resources. There is clearly a preference among entrepreneurs for monopoly. I don't think that comes as a great surprise to anybody teaching at a business school, but there are also historically ways to limit that. The state, again, has historically played a very important role in that. It becomes, of course, politically more difficult because economic power also translates then into political power, as we see so well now in the United States and other parts of the world.

Luigi: Sven, to your point of the feudal order based on birth, when I was a little kid in Italy, I interacted with some older, richer people. They will ask you how you were born. Of course, they didn't want a detail because they wanted to know basically what family was coming from, because that was the most important thing. This was not in the Middle Ages, but it was a few years ago.

I want to actually end with a more provocative question because you define capitalists as an expansion of the market sphere everywhere. I don't see why you don't identify feminists as intrinsically capitalists, because at the end of the day, the role of women in society is based on tradition. The more you expand, the family is part of tradition. The fact that, at least historically, the tasks were allocated in a very uneven way was the result, not of market forces, was the result of traditions. As the market forces come in, as women go to work, this crumbles down. Isn't a capitalist essentially feminist?

Sven: I don't know about that. Yes, that is important. Capitalism, in its pure form, in the sense that it structures all economic relations, all social relations, has never existed and perhaps cannot exist because, in the end, at all moments in history so far, capitalism has rested on a sphere that is outside the market. The family is clearly one of the most important spheres outside the market.

In 1981, there was a group of French feminists who calculated how much of economic output in France in 1981 is produced outside the market within families, namely mostly by women, like child-rearing, cooking, cleaning, and all these things. They come to the conclusion that about one-fifth of all economic activity in France in 1981 is produced outside the market, namely within families.

This might be diminishing now. The market is certainly making inroads into the family, but I think it still remains, to a significant degree, also a rhyme outside the market. Yes, we started out talking about what is capitalism, and we defined the logic of capitalism as the kind of process of ceaseless expansion and ceaseless accumulation, but I think there are also certain boundaries. The preconditions of the ability to organize economic life along this logic is also the existence of a rhyme outside this logic.

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Bethany: If you're enjoying the discussions Luigi and I have on this show, there's another University of Chicago Podcast Network show you should check out. It's called Entitled. International lawyers Claudia Flores and Tom Ginsburg have traveled the world getting into the weeds of global human rights debates. On Entitled, they use their expertise to explore the stories and the thorny questions around why rights matter and what's the matter with rights. Subscribe to Entitled. Part of the award-winning University of Chicago Podcast Network.

I was really curious about one thing he said. I remember from a previous paper that you wrote about the Medici empire in Florence back in the Middle Ages. Your argument is that the combination of the state and capitalism, when the aims of both became the same, ended up actually breaking the system, and that was dangerous. I thought it was really interesting that he made this argument that the state and capitalism evolved simultaneously, and that one of the reasons you saw a more aggressive form of capitalism, perhaps a more successful form of capitalism, come out of Europe, first, is because the state so desperately needed the merchants and needed capitalism, and there was this twining of the two. I thought that perhaps contradicted your point of view, but maybe I don't understand your point of view well enough, and I'm curious to know what you think of that.

Luigi: No, it doesn't. I was simply saying that in the case of the Medici, they made their fortune in a competitive market like lending, but then they used this fortune to completely capture the state to their own advantage in a way that was very rapacious and opportunistic. They got concessions for the mines, they got concessions for this, they got concessions for that, and they survived long-term as a powerful family because they transformed their money into power. The secret of the most successful states, like the Republic of Venice or the Republic of the Netherlands, or later England, was that the capture was by, if you want a class, not an individual or a family like the Medici.

Yes, they were at the service of a community. There is no doubt that they were driven by the interest of the merchants. Think about the way in which England got involved in colonial India was because the East India Company started to conquer India, and then they had to basically rescue them at some point and bring the army. There is clearly a role played by the merchant in shaping England, but it was more a community rather than a family. That probably made things a little bit better.

Bethany: Why? Why would that make things better? Wouldn't that actually make it worse? I'm hammering away at this because it does seem to me to be perhaps indicative of where we are today in the sense that in the US, the government and business are, I think, more enmeshed than they've been in previous administrations. I'm trying to figure out if the past, either Beckert's view of the manifestation of capitalism in England, might be more where we are, or if we're back in a Medici-like era. If there is a difference in the outcome, then that seems to me to be important.

Luigi: No, I think it's very important. I guess is how important is the pushback of other categories in the sense that there is no doubt that in England, the merchants were dominant, but they were not the only force. There was a pretty strong agricultural lobby that was pushing the opposite direction. From this, if you want competition among lobby, you had a better outcome than a complete domination by one group. In Venice, for a while, you had a pretty good outcome, but maybe eventually became too in one-looking and not sufficiently open to new innovation or new lobby, or new ideas.

Bethany: What else stood out to you? I liked that he didn't have an easy answer when he talked about capitalism in the state, that the state can change, the state might be unpredictable, but that doesn't obviate the state's rule in trying to set the guardrails for what this looks like. That's actually maybe about as good an answer as you could have, even if it's not crisp or ideological.

Luigi: One thing that I actually buy from his narrative, which I think is interesting, is people did not have a notion of the power of accumulation in the past because it was so difficult to do it in a world in which basically labor is not very mobile. You can't buy land. How can you become rich? How can you see yourself accumulated to become richer? The example that he gives of the Barbados is fascinating because all of a sudden, you have literally a clean slate.

Now, I grant it was made clean by wiping out the locals and bringing in slaves, but it's a moment in which you actually have no social boundaries. You experience for the first time the power of accumulation. Once you understand that power, then you try to apply everywhere. This message that capitalism was born in islands, physically and metaphorically, and then expanded, and you slowly conquered the rest of the world. You've seen an island. What can you do without any social constraint? Then you can try to have the same lack of constraint everywhere else.

After all, the beginning of capitalism was laissez-faire, laissez-passer, which I later learned that actually was laissez-nous faire, laissez-nous passer, which nous is us, the entrepreneur. Let us do what we want. This is the beginning of capitalism, which is, in a sense, is the extrapolation of, "Oh, let to ourselves in Barbados. We can make a lot of money. If you let us do the same here, we can make a lot of money as well."

Bethany: Let us do what we want is awfully close to Silicon Valley's modern mantra of move fast and break things, right?

Luigi: Absolutely. You know the expression that nothing changes.

Bethany: Everything changes and nothing changes.

Luigi: Exactly.

Bethany: That point of his was one of the reasons I was prepared not to like him. Not necessarily because it's true, but because it felt ideological, and it felt even a little bit catering to some of the forces of our world that capitalism was born of plunder and conquest. I actually really liked what he said on the podcast, that just because that played such a pivotal role in capitalism's development, and it inescapably did, but that doesn't mean that that's capitalism today, because he isn't fixed on a definition of this thing that is always mutable and changing.

Looking at it through the lens of history, yes, it did. Slavery played a role in capitalism. It absolutely did. You can't avoid that. Then he also was unwilling to say, "You need slavery for capitalism to continue." Actually, I really appreciated that nuanced way of thinking about it.

Luigi: Yes. If we had more time, I would like to push him on the following point. In the book, he seems to attribute a lot of things to capitalists, like races, patriarchy. I asked the question about patriarchy, but I had a question about races, for example, to say, look, "Societies are racist whether they are capitalists or they are not capitalists." In a sense, the Soviet Union was racist. A lot of primitive society are very racist. I don't think that races is essential to capitalists.

Now, capitalists is not necessarily anti-racist. The question is whether capitalists makes races worse or better. With races, my line, which is very much a Chicago line, is that actually makes races less bad in society because the people who are racist are penalized, and what matters is what is the marginal investors. As long as the marginal investor is not racist, you don't feel the impact of races as much than in a non-capitalist society. I don't know what he would have thought.

Bethany: My guess is that he wouldn't have answered it independent of time and context. In other words, in the American South, when cotton ruled and slavery was how cotton producers produced their cotton, capitalism, probably the capitalist nature of cotton probably made racism worse. In--

Luigi: Sorry. I agree with you. I distinguish between races and slavery.

Bethany: Okay. All right.

Luigi: No. That's a very good example because, to some extent, slavery existed everywhere. For example, I was not aware until recently, and thanks to the sensitivity that's developed in the United States, I started to ask about, in Italy, when there was slavery and when there was not slavery. Now, the pope made slavery of a Catholic or a Christian illegal, but if it wasn't a Christian, you could have a slave.

There were slaves in Italy, pretty advanced age. In the Renaissance, for example, was not unusual to have a slave that initially were actually from Central Asia, especially women. Later on, when Constantinople was conquered by the Turkish, then they started to impose some slaves from Africa, but was mostly domestic slaves. Now that this is trying to condone slavery, what I'm saying is slavery was marginal in society, and so the brutality and the scale were very limited.

Capitalists basically took the slavery that was present everywhere in the world, because there was basically no state in the world in which there was slavery, and brought it up on a scale so massive. It was terrible. At some level, if you want to be positive, it created a backlash. That's one of the reasons why there was a resistance to slavery, but maybe it would have happened anyway. I don't know. The point is, there is no doubt in my view that capitalists made slavery much worse. When it comes to discrimination, I think discrimination-- competitive capitalists make discrimination less bad.

Bethany: I struggle with that, but I think the part of that is because I'm not sure-- Going back to our earlier episodes on meritocracy, I'm not sure many of the places that would consider themselves meritocracies actually are, given what we see about people choosing other people who played the same sports as they did in college for the right job. If capitalism-- maybe it's back to that Adam Smith quote or our discussion about Adam Smith, if capitalism worked in this beautifully idealistic way, then I would think it would be very anti-discrimination of any kind. I don't think we see the pure manifestation of capitalism in action very often-

Luigi: It is true, but--

Bethany: -because I don't think we see pure meritocracies in action very often.

Luigi: There is never pure meritocracy, but it is a fact that the University of Chicago, that, as you know, was founded much later than the most famous university on the East Coast, hired a disproportionate amount of Jewish faculty. Not out of love for Jewish people, but because they wanted to catch up to University in the East. The University in the East tended to discriminate against Jewish people. If you wanted to have good faculty that were available on the market, most of them were Jewish. The competition among universities reduced the effect of races. Now, this is not universal. It's not everywhere, but I think it is an interesting fact.

Bethany: Yes, it's a really interesting fact. You're right, that would have been a fascinating thing to debate with him. Again, my best guess is even thinking about the differentiation between slavery and racism, and not associating the two closely, is that you could probably find whatever example you wanted to justify the point you wanted to make, but it's still a really interesting question.

Luigi: I agree you can justify, you can find an example, but I'm trying to understand even theoretically how these things interact. Think about, for example, pollution. He talks a lot about pollution and the damage to the environment, which is, no doubt, a side effect of capitalism. However, if you look at what they've done in the Soviet Union, it wasn't clear that in a non-capitalist world, actually, you would have done much better. To what extent this is an impact of progress? To what extent it's an impact of progress without a proper understanding of people?

Take, for example, China. China polluted a lot until very recently. Now, all of a sudden, became much more aware of this, and now has done gigantic steps in trying to reduce pollution. Think about India. India is polluting an enormous amount. Many of the cities are unlivable because of pollution. You don't see a trend to fix that insight.

Bethany: I would argue, and I don't know if this is what he would argue, but just based on the intellectual foundation of his book, this idea that the state makes the market. In China, you saw this great lurch because the state set the rules. Here, where we saw pollution be out of control, it was because the polluters externalized their costs, and that's because of the rules set by the state.

It all depends in that case. That actually does, to me, reinforce this idea of his, which you and I have tossed around before, and we've thought about in other conversations, that there is no market that exists outside of the rules set by the state. Even in the case of pollution, or especially in the case of pollution, it depends on the rules set by the state.

Luigi: No, that's for sure, but the question is, what are the incentives of the state? You would expect the state in, for example, Soviet economy, to be more independent from producers, and so more sensitive to the issue of pollution, but it wasn't.

Bethany: I'm not sure I would think that because I think of your previous point, it's still progress, and it's progress whether it's capitalist progress or progress toward keeping your population safe and warm and fed, and so pollution seems to be worth the cost until it doesn't.

Luigi: Yes. I think it would have been interesting because having this discussion, to what extent is pollution a natural consequence of progress, to what extent is unique to the capitalist situation, or more importantly, is capitalists exacerbating the pollution problem or is attenuating the pollution problem?

Bethany: Depends on the rules set by the state.

Luigi: Yes. But if the state is--

Bethany: Sorry, coming back to the same thing.

Luigi: No, I understand. But if the state is part of the equilibrium in a capitalist system, if the company has so much power over the state, can they rule in such an effective way that mute the power of the state or not?

Bethany: That's back to where we began this conversation with the Medicis, and whether it's a family that controls the state or is to a mesh with the state, or whether it's a producer class that controls the state, and does it matter for the outcome, or do both come with their dangers?

Luigi: At the end of the day, this is where democracy is very important because in the States, for example, the dramatic improvement in reducing pollution in the 70s was the result of a democratic movement that started with the Silent Spring book by Rachel Carson, and the very important effects.

Bethany: Yes. Maybe it's interesting. Maybe it's that, to our ongoing conversation about democracy and capitalism going hand in hand, maybe it's that democracy gives capitalism the moral backbone that it needs that it might otherwise be lacking. I suppose I could start challenging that even as I say it in the sense that China has been able to address some of its crises through the state setting, the moral backbone, but maybe democracy is the necessary antidote to capitalism that enables it to thrive.

Luigi: Let me qualify what you just said because I think it's important. You need a state that gives a moral compass to capitalists because capitalists is amoral. It's not necessarily immoral, but it's amoral. Then the question is, what is the political system that gives the most moral compass, or is better at giving this moral compass? This is a bit ideological, but I think a true democracy is the best. If you end up in a plutocracy, this might be worse than an autocracy because occasionally the autocrats are concerned about the population, and in a plutocracy, you're not.

Bethany: I actually really like that. See, thinking out loud together, I think we got somewhere that it's satisfying to the two of us, if not to our listeners.

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Matt Hodapp: Capitalisn't is a podcast from the University of Chicago Podcast Network and the Stigler Center in collaboration with the Chicago Booth Review. The show is produced by me, Matt Hodapp, and Lea Ceasrine, with production assistants from Utsav Gandhi, Matt Lucky, Sebastian Burka, Andy Shi, and Brooke Fox. Don't forget to subscribe and leave a review wherever you get your podcasts. If you'd like to take our conversation further, also check out promarket.org, a publication of the Stigler Center, and subscribe to our newsletter. Sign up at chicagobooth.edu/stigler to discover exciting new content, events, and interviews.