The Magazine

A Capital Ship

Profits and losses in the history of markets.

Sep 27, 2010, Vol. 16, No. 02 • By ELIZABETH POWERS
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The Relentless

A Capital Ship

‘A Goldsmith in His Shop’ by Petrus Christus, ca. 1450

The Metropolitan Museum of Art / Art Resource

A History of Capitalism
by Joyce Appleby
Norton, 494 pp., $29.95

Two hundred years ago, explaining to his contemporaries how capitalism worked, David Ricardo gave an example of the theory of comparative advantage in trade: Portugal and England could both produce wine and cloth, but each would fare better economically by specializing in the one it could bring to the market more efficiently and cheaply. Such specializations continue to fuel the capitalist economic system. The processor of my husband’s iPad, for instance, is designed by Apple in Cupertino, California, and manufactured by South Korea-based Samsung Electronics Co. Another South Korea-based company, LG Display and Japan’s Seiko Epson Corp. make the LCD display while Taiwan-based Wintek Corp. makes the glass overlay necessary to detect touches of users’ fingertips.

The examples of South Korea and Taiwan bring out an aspect that Ricardo, who died in 1823, could hardly have envisioned. The present comparative advantage enjoyed by South Koreans and Taiwanese, unlike that of the Portuguese wine producers, does not depend on a traditional commodity native to their homelands, unless it be small and dexterous hands. For the amazing integration of production and markets to work and bring an iPad to your local retailer, all a country needs are the legal protection of property rights (including intellectual property or shares in a corporation), the outlawing of monopoly protection, a good internal transportation and communication system, secure labor, supplies, and customers. Not to put too fine a point on it, is it any wonder that there is probably not a single component of any high tech product owned by readers of this review that was made in South America or (excluding Israel) the Middle East?

Why that is the case is the real history of capitalism, an economic system that, about 500 years ago, began to upend the traditional foundations of society, predicated for millennia on pervasive scarcity. By introducing innovation, initiative, and risk-taking into human endeavors, capitalism has freed mankind from the priorities of subsistence, security, and status imprisonment and set us on an unpredictable path of wealth-creation, disestablishment of traditional authority, and social mobility. How that happened and why it was the West that initiated the process is Joyce Appleby’s subject.

An established academic historian, Appleby joins the ranks of recent economic popularizers, notably William J. Bernstein and Timothy Brook. Like them, she begins with what is acknowledged to be the point of capitalist takeoff, 1500, when certain circumstances allowed Western Europe to escape the seemingly cyclical historical pattern of feast and famine. Improvements in agriculture reduced the percentage of the population required to feed a country, traditionally between 80 and 90 percent, creating surplus labor (and, eventually, consumers). These improvements occurred at a time when European merchants discovered the trade winds and began to tap the riches of the Indies and the Americas and bring new products to the homes of Dutch burghers. After the laws of the heavens were revealed in the 17th century, inventors were able to “capitalize” on the scientific revolution and unlock the secrets of nature’s workings. The harnessing of steam power in England by the 19th century was a great step forward for mankind, and it’s been nonstop progress ever since.

Appleby is very good on the long view, particularly on the transformation of the traditional social world. Though a self-identified “left-leaning liberal with strong, if sometimes contradictory, libertarian strains,” she is not nostalgic about what has been lost, especially not “the straitjacket of custom.” Her account is refreshingly free of Marx and is appreciative of the gains produced by the freeing-up and application of human enterprise. Appleby’s strength is the quick, concise summary, reflecting capitalism’s “relentless” history. 

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