Deirdre McCloskey on the “great enrichment” of the global economy – Full Interview | VIEWPOINT

Deirdre McCloskey on the “great enrichment” of the global economy – Full Interview | VIEWPOINT


Michael: Okay. Well, we’re so happy to have
Deirdre McCloskey here, the eminent economic historian, on the occasion of the publication
of the third volume of her trilogy on the “Bourgeois Virtues.” Deirdre: Praise the Lord!
Michael: “Bourgeois Equality.” We’re going to just talk very briefly here and talk about
the book. My first question. What do people commonly misunderstand about capitalism in
the past 200 years of economic history? Deirdre: Well, it’s in the very word. Both the left
and the right think that capitalism has to do mainly with the accumulation of capital,
so piling brick on brick and bachelor’s degree on bachelor’s degree. And it’s true that that’s
a feature of the last 200 years. Unfortunately it’s also a feature of the last 200,000 years.
Humans have always accumulated. There’s not anything strange about the rate or amount
of accumulation in the last 200 years. What’s bizarre is the amount of innovation, the amount
of what I call market-tested betterment, and that’s just exploded. As Matt Ridley says,
ideas started having sex, and the baby ideas had sex, and the grandbaby ideas had sex,
and just more and more. And then that made the capital investment worth doing. So capital
in capitalism is just the intermediary. It’s not the real cause. The real cause is technical
and some institutional change, and that in turn was caused by the notions of equality
in what used to be called liberalism. Free people equal before the law and equal in social
standing. Michael: What about the role of institutions? Deirdre: Well, as I said, institutions
like capital are mostly intermediate causes. Institutions change largely in response to
good ideas. You develop the telegraph, and that makes centralized stock exchanges sensible,
and the smaller regional stock exchanges get less important. But it’s the innovation, it’s
the telegraph that determines the institution, usually not the other way around. Now, there
are institutions in the modern world that were new ideas and important. For example,
the idea of the research university embodied in the University of Berlin, 1910. But mainly
it was an ethical and ideological change that made the institutions possible. The institution
of free press only came…well, it in fact came about as a result of the invention of
the steam press, the circular press, which could produce tremendous numbers of copies.
And that made advertising the main support of the newspapers, whereas in the 18th century,
the main support was political parties, including the government itself, so there was not free
and independent press in the 18th century as there came to be. So the institution of
the free press needed the first amendment in the United States, and that’s an institution,
but mostly it was intermediate in the same way that capital is. You’ve got to have the
capital, you’ve got to have the bricks to make the building. But if all you had was
the bricks or the institutions, you would run into very sharply diminishing returns.
It’s innovations, ideas, that’s what made the modern world. Michael: So it seems as
if innovation and ideas could happen anywhere at anytime. Why do you think that his happened
where it did and when it did? Deirdre: That’s crucial. If you were in 1600, you’re going
to make a bet about where an industrial revolution, or what’s more important, a great enrichment
of the 19th and 20th century was going to happen. You would have bet on China, if you
could have imagined such an amazing series of events because China in 1600 had by far
the most advanced capitalist economy in the world. It had the most important technologies.
It invented most things. China, China, China. So why this funny little corner of northwestern
Europe, why was it the first? Well, I believe it was the first because of the idea of equality
before the law and equality of social standing. It’s not what I call French equality in honor
of Rousseau. It’s not outcome equality, which is the way we usually think about equality.
No, no. It’s equality of opportunity. And the idea, as the English say, that everyone
can have a go. “Have a go,” it’s an English expression. And it’s hard to convey how unable
to have a go people were in earlier times. You were a woman. You were a serf. You were
placed in the great chain of being, as it was called, and you were not allowed to have
a go. You, in fact, indeed, the bourgeoisie itself had guilds and protections of various
sort to prevent people from enterprising. Michael: What role do you think the Protestant
Reformation played in all this? Deirdre: Well, the old story is that of the great Max Weber,
an economist and sociologist. In his marvelous book “The Protestant Ethic and the Spirit
of Capitalism,” 1905, which is that it was the doctrine of salvation that made Calvinists
anxious and made them more enterprising than Catholics. But that’s been proven wrong over
and over again. The economics is wrong. The theology is wrong. The history is wrong. Uncle
Max got it wrong. But yet another feature of the Protestant Reformation, I think, was
very important, which was the change in church governance. And this is expressed among the
Puritans, the so-called congregationalists of England and Holland and parts of Germany
and Massachusetts, who chose their own ministers, you see. It wasn’t some hierarchy telling
them. They chose their own ministers. And then the more extreme example of this in the
16th century is the Anabaptists, who had hardly any ministers at all. They would have spiritually
excited people who might lead the congregation. And then in the 17th century, the English
Quakers, who really had no one in charge. To this day, the Society of Friends simply
gets together and sits in a circle and waits until the Holy Spirit descends. So it was
church governance that made people think that they could do it themselves. They didn’t need
to have kings and hierarchies. And this kept being reinforced by various other…we have
the Reformation, we have reading, which was very important in making the Reformation work.
We have the Revolt, the Dutch Revolt against Spain in the late 16th century that extended
into the 17th. We have the various revolutions in England, the English Civil War, the 1640s,
which gave birth to remarkably egalitarian ideas that people are people, and you should
leave them alone and they shouldn’t be instructed and bossed around, which was an extremely
radical idea in the 17th century. And then the Glorious Revolution of 1688, which I think
is overemphasized sometimes, and then the American Revolution and the French. All those
Rs, I call them the Four Rs, resulted in a revaluation of the bourgeoisie. It’s not so
much that the internal psychology of inventors and merchants changed. That was pretty much
the same as it always had been. What did change is the attitude of the rest of the society.
People were willing to give merchants and inventors rope to hang themselves or to help
the society as a whole. So I call it the bourgeois deal. You let me, a bourgeois, open a new
hairdressing salon, and in the long run I’ll make you rich. Michael: And you’re saying
that Catholics like me who have enjoyed the Great Enrichment therefore should feel somewhat
happy about the Protestant Reformation? Deirdre: Well, the fact is, and this was one of the
many criticisms of Max Weber, is that many of the entrepreneurs of the 16th and 17th
century were Catholic. For example, in Amsterdam in Holland, the Catholics fleeing from Antwerp
were one-third of the entrepreneurs of Amsterdam. In the south of France, there were many Protestant
entrepreneurs and many Catholic entrepreneurs. So his whole idea, which is a little unsurprising
in Max Weber, a north German Protestant viewing with disdain south German Catholics like Bavarians.
It’s a little bit unsurprising that he came up with this heroic story about the Protestants.
But it’s not their doctrines, it’s their church organization that really showed people that
they could do it themselves. Michael: There are many gifts of the Spirit. Deirdre: There
are many gifts of the Spirit, but the greatest of these is love. Michael: Let’s change gears
for a minute and talk about income inequality. Deirdre: Yeah. Michael: Your view is that
as long as the condition of the working class is improving, we shouldn’t care so much about
income inequality. Deirdre: Yes. Equality is not a coherent, ethical program. What?
We’re all to be the same height? We’re all to be the same weight? We’re all to be the
same IQ? If you’re smarter than me, as I think you are, we’re to pound nails into your head
to make you stupider so that you’ll be equal to me? Michael: There are people who would
like to do that. Deirdre: I know. Well, I don’t know. I’m surprised to hear that. So
equality is a silly program. It doesn’t have any ethical sense to it. Whereas raising up
the poorest in our society, which should be the conservative and libertarian goal, that
works. That’s something that you can express in public policy and can make work. It doesn’t
involve foolish things like increasing the minimum wage to $15 an hour. It involves freeing
up the economy. And so that’s where it came from. It came from this amazing modern enrichment
from an average in the world of, in modern terms, $3 a day consumed and earned to in,
say, the United States now, $130 a day. That’s the magnitude we’re talking about, a factor
of 30, a factor of 100 in some cases. That’s what we need to explain, and that’s not to
be explained by capital or institutions or trade unions or government. It’s explained
by human ingenuity unleashed. Michael: Are you concerned at all if the gap between the
rich and the poor gets large enough, even if the material conditions of the working
class are improving, that that in some way makes the working class distrustful of the
system, less apt to take risks? Deirdre: The problem is that we mustn’t encourage envy
because envy is insatiable. Shakespeare’s famous sonnet on this one, he says in effect,
when I think of how much brighter this man is or how his face is more handsome than mine,
that sonnet embodies envy as a nasty and stupid way of going about life. So we’ve got to work
against envy. But here’s an important economic fact. Real equality of real comfort has increased
in the last 40 years and certainly in the last 100. If you focus on wealth, monetary
wealth especially, equality is moved up and down… in three countries, Thomas Piketty
found that inequality has increased in the last 30 years, and those were Britain, United
States, and Canada, not his own country of France and most of the other countries he
studied. It didn’t increase, contrary to what people think he said. He’s worried about the
future. He says, “Oh, it’s going to get worse. It’s going to get worse. The sky is going
to fall,” not that it already has fallen. So even if you study wealth, you find that
it’s not in all countries, inequality has increased. But the equality of real comfort,
of proper or helpful medical care, of having a roof over your head, of having enough to
eat, of having adequate schools, these have gotten better in the last 30 years, not worse.
This is true in Britain. It’s true in the United States. It’s true in these countries
where the wealth inequality may have increased. So I think it’s ethically incoherent, it encourages
envy, and in factual terms it’s overblown. Michael: Let’s switch gears, and let me ask
you a question about yourself. Deirdre: Indeed. Please. Michael: I believe it’s the case,
and correct me if I’m wrong, you describe yourself as quote, “a postmodern free-market
quantitative Episcopalian feminist Aristotelian.” Deirdre: Yes, I do. Michael: Would you mind
elaborating on that? Deirdre: Well, they’re all supposed to be counter to each other,
but I’m all of those and more. I think human beings are much more complicated than can
be put on a simple scale from left to right, and that’s certainly true of my politics and
my scientific opinions and my scientific methodology. For instance, I believe that to do economics
correctly you have to have the maths and the statistics and economic theory. You’ve got
to be thinking in these terms. But then you’ve also got to have experience of the world,
which can be acquired by studying Ibsen’s plays or Mann’s novels as much as it can be
by studying the numbers. So the alleged contrast between the sciences on the one hand and the
humanities in the other I think is foolish. I think with Jonathan Haidt, for example,
the social psychologist who I think agrees with me, I think that you make more progress
if you walk on both feet instead of hopping along on one. I don’t regard these as contradictory.
I’m a Christian libertarian. People say, “Oh, you’ve got to be an atheist if you’re a libertarian.”
Well, who says? I’m an Episcopalian, if you call that a Christian. Michael: Well, I think
we will. Deirdre: Thank you. You’re very kind. You’re very kind. Michael: My last question.
What can we do…so we know that the last 200 years have brought about the Great Enrichment,
and that’s been a marvelous thing for human welfare. Deirdre: Astonishing. Michael: What
can we do to ensure the next 200 are just as good? Deirdre: Well, one thing we can’t
do is have industrial policy or a minimum wage or any of the various abominations that
are friends on the left propose. Planning, government subsidies for windmills and so
forth are simply a terrible idea. I don’t think, though, that the government can stop
this. Now, that’s a kind of unoptimistic view because in 1914 government actions, war in
particular, stopped human progress or very significantly slowed it down. And that could
happen again, but I don’t think so. I think the demonstration effect of countries like
China and India, which are pulling themselves at a tremendously fast rate out of poverty,
and countries like South Korea, Taiwan, Botswana in Africa that have succeeded in pulling themselves
out of poverty through liberal policies in the old sense, not in the modern American
sense, that is, letting people have a go. Think of it this way. The social scientific
fashions and discoveries of the 19th century in Europe, nationalism, socialism. If you
like that, you might want to try national socialism. See if you like that. And eugenics,
geographic determinism, theorized imperialism, all sorts of terrible ideas were all wrong,
mistakes, a disaster. But one thing was proven in the 19th century. It was an 18th-century
idea. It was Voltaire’s idea and Tom Paine’s idea and Mary Wollstonecraft’s idea that if
you leave people alone, they’re immensely creative. And that was shown to be true in
the 19th century and still more in parts of the 20th. So I’m very optimistic about the
future. I don’t join my friends Bob Gordon and Tyler Cowen thinking, “Oh, the sky is
falling. Oh, things are going to get worse. Oh, there are headwinds.” I think that’s nonsense.
I think we’re in for an amazing century in which all the world’s people become as rich
and have as many opportunities as Americans or French people do now. Michael: I hope you’re
right, and we’ll leave it there. Thank you so much. Deirdre: Thank you. Thank you, dear.

6 Comments on "Deirdre McCloskey on the “great enrichment” of the global economy – Full Interview | VIEWPOINT"


  1. Saw a presentation on Facebook with a woman talking about gov't obstructions to starting a braiding business. Great content

    Reply

  2. What bs. You have to be blind to believe that the economy is better now than 30 yrs ago. In fact the income gap is wider than ever.

    Reply

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