[Paleopsych] TLS: John Gray: The global mirage

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John Gray: The global mirage
The Times Literary Supplement, 2.6.7

    THE SPIRIT OF CAPITALISM. Nationalism and economic growth. Liah
    Greenfeld. 541pp. Harvard University Press. £30.95. 0 674 00614 3.

    Marxists and market liberals like to see themselves as deadly
    adversaries, but they have a remarkably similar view of the world.
    Both subscribe to a version of determinism in which economic forces
    are the motor of history, and nationalism and religion are secondary
    or marginal factors. Both look forward to a universal civilization in
    which the cultural identities of the past have withered away, or else
    retreated into private life. If Marxists and neo-liberals differ, it
    is on a point of detail - the question of which is the more productive
    system, central planning or the market economy - that history has now
    settled. In their crudely rationalistic understanding of history,
    politics and culture, and their quasi-religious faith that a radiant
    future is near at hand, the two ideologies are at one. As Liah
    Greenfeld puts it in the opening chapter of The Spirit of Capitalism:
    Nationalism and economic growth, "Curiously, Marxism, abandoned in the
    lands traditionally dedicated to its propagation and proved wrong by
    experience, is remarkably similar to the dominant Anglo-American view
    of the world."

    The affinities between the two philosophies are not confined to the
    textbook and the lecture hall. They are strikingly similar in
    practice. Both have supported massive programmes of social
    engineering, while steadfastly denying mounting evidence of their
    human costs and perverse consequences. Like the Communists in the
    1930s who cast a benignly sightless eye on the millions of lives
    ruined or ended by Stalinism, Western free-marketeers have chosen to
    ignore the vast social havoc and personal misery that has resulted
    from neoliberal shock therapy in post-Communist Russia. At the same
    time, both Marxists and neoliberals have been thoroughly unprepared
    for the actual course of events. The disintegration of the Soviet
    state was very largely a result of the power of nationalism - a force
    that neither ideology has ever managed to encompass. It was not its
    manifest economic failures or its repression of intellectual
    dissidents, its endemic corruption or the devastation it wrought on
    the environment that brought the Soviet Union down. It was nationalist
    popular resistance in Poland and the Baltic states, together with
    defeat in Afghanistan and the unintended consequences of Gorbachev's
    far-fetched schemes of economic reform. The centrality of nationalist
    movements in the events leading up to the Soviet collapse was not
    perceived in the West, which - in a fateful coincidence whose damaging
    consequences we are still suffering - was dominated by a free-market
    ideology as primitive and reductive in its view of nationalism as
    Marxism has ever been, if not more so.

    In neoliberal ideology, modern capitalism embodies the moral culture
    of individualism. By contrast, Greenfeld maintains that modern
    capitalism owes its existence to nationalism. In a tour de force of
    social theory and historical interpretation, she argues that modern
    economies came about not through the emancipation of the rational,
    utility-maximizing individual but from the emergence of national
    consciousness. Contrary to Marxist and neoliberal determinism, there
    is nothing inevitable about economic growth. Like nationalism itself,
    it is a historical accident. Taking England, France, Germany, Japan
    and the United States as case studies, Greenfeld provides historical
    evidence for the thesis that "the spirit of capitalism", which
    generates economic growth, is a by-product of the collective rivalry
    inherent in nationalism.

    The Spirit of Capitalism echoes Max Weber's celebrated argument that
    modern capitalism is a product of "the specific and peculiar
    rationalism of Western culture". According to Weber, market exchange
    can be found in all societies, but in capitalism it is organized so
    that it can be subject to exact calculation, and only in capitalism is
    economic life oriented towards continuous growth. Famously, Weber
    suggested that the emergence of growth-oriented economies owed much to
    Protestantism, which supposedly put a high value on worldly success.
    Greenfeld believes this was not an unreasonable hypothesis for Weber
    to have advanced; even so, citing a number of studies showing that
    early Protestantism did not revalorize economic activity in the ways
    Weber suggested, she rejects it. The spirit of capitalism flows from
    the collective sentiment of nationality, she believes, not from
    religion. Here Greenfeld builds on an earlier work of her own,
    Nationalism: Five roads to modernity (1992), to argue that nationalism
    signifies much more than the post-Westphalian sovereign state. It is
    the basis of modern society. "Nationalism", she writes, "is a form of
    social consciousness, a way of cognitive and moral organization of
    reality. As such it represents the foundation of the moral order of
    modern society, the source of its values, the framework of its
    characteristic - national - identity, and the basis of social
    integration in it."

    The Spirit of Capitalism is an immensely refreshing book, not least in
    its destructive impact on the determinism that underpins recent
    neoliberal theories and policies. Three implications of Greenfeld's
    argument are worth stressing. Firstly, the link between capitalism and
    individualism, taken for granted by Marxists and neoliberals, is an
    accident of history, not a universal law. A culture of individualism
    may have been present in the first exemplar of a modern economy,
    seventeenth-century England, and successfully transplanted into
    countries such as the US and Australia.

    It did not exist in anything like the same form in France or Germany,
    later converts to capitalism, and it was wholly absent in the most
    astonishing conversion to capitalism - that of nineteenth-century
    Japan. By the start of the twentieth century, the chief feature of
    capitalism - sustained economic growth -was securely established in
    countries where moral cultures varied enormously, and which have shown
    no tendency to converge on Anglo-American individualism since that
    time.) The strength of capitalism is due to its successful reshaping
    of individual motivation on a new collective model. The vulgar Whig
    view that the triumph of market capitalism is owed to the superiority
    of its individualist values, which was so stridently trumpeted in the
    fast-receding go-go days of the 1990s, is a myth.

    Secondly, Greenfeld's book deals a death-blow to the legend that there
    is anything uniquely rational about the type of economic activity that
    produces economic growth. Quite to the contrary, Greenfeld - following
    Weber - argues persuasively that utility-maximizing agents would not
    engage in the pursuit of unending growth. Economic growth is a benefit
    to nations, not necessarily to individuals. A rational
    utility-maximizer would find nothing compelling in a life of incessant
    striving. Indeed, in terms of pure economic self-interest, such a life
    is plainly irrational. As Greenfeld puts it:

    A Homo economicus, motivated solely by self-interest and rational in
    the sense of strictly economic rationality . . . could not be
    attracted to profit for profit's sake - which, we are reminded by
    Weber, "from the point of view of the happiness of, or utility to, the
    single individual, must appear entirely transcendental and absolutely
    irrational" - and thus could not find the idea of economic growth

    The spread of capitalism from England to France and Germany, and
    beyond Europe to the United States and Japan, cannot be explained by
    any increase in the economic rationality of individuals. It is as a
    result of the increasing power of a mode of collective consciousness
    in which individual economic rationality is subordinated to the power
    and dignity of the nation.

    These two points suggest a third regarding the pretensions of
    economics. At present, the expertise of economists is more widely
    sought by governments than that of any other social scientists; but
    the prestige of economics as a discipline derives chiefly from its
    remoteness from any actual society. Economists have aped natural
    scientists in their fondness for mathematical modelling, but, unlike
    those of natural scientists, the models of economists are notably
    lacking in predictive power. This is only to be expected, since the
    very respects in which economics as currently practised most resembles
    the natural sciences are those in which it is most humanly
    unrealistic. In the real world, human beings do not maximize or
    optimize the satisfaction of their wants; they stumble along, their
    actions guided not by any calculation of utility but by their sense of
    self-identity, the meaning or lack of it they find in their daily
    activities, and whatever solidarity they can call up with others.
    Economic life is not a free-standing sphere of activity, but an
    outgrowth of the religious, political and moral life of those who
    engage in it. This fact, so strikingly absent from the minds of most
    economists today, was a truism to Adam Smith. It is hardly accidental
    that his great inquiry into the nature and causes of economic growth
    should be entitled The Wealth of Nations. Like other practitioners of
    political economy in the eighteenth and nineteenth centuries, and in
    sharp contrast with most economists nowadays, Smith had a highly
    developed sense of history, and rarely mistook his own theoretical
    constructions for social facts. Writing of the state of the economics
    profession in the United States towards the end of the nineteenth
    century, Greenfeld observes:

    The idea of science among American intellectuals who professed
    themselves economists could not reflect the nature of their social
    subject matter, of which they were ignorant; nor could it reflect a
    deep understanding of the activity of natural scientists, of which
    they were ignorant as well.

    One might add that the conception of the method appropriate to the
    study of economic activity to which the majority of economists
    subscribe today does not reflect a familiarity with the history of
    their own subject - of which they are also ignorant.

    By returning the study of capitalism to the intellectual disciplines
    where it belongs - sociology and history - Greenfeld's book deserves
    to bring about a paradigm shift in the understanding of economic
    growth. That is not to say her argument must be accepted as it stands.
    She is right to argue that capitalism is not the product of any one
    religion, but it seems cavalier to suggest (as she sometimes comes
    close to doing) that religion has not been a major influence on
    economic development. There are doubtless many reasons why Russia has
    not managed to achieve a modern market economy, but the
    anti-capitalist moral culture of Russian Orthodoxy must surely be
    important among them. On the other hand, one should not make the
    mistake of thinking that Russia never experienced a period of rapid
    economic growth - it did precisely that towards the end of the
    nineteenth century. It is therefore a reasonable question why this
    achievement was not sustained. Greenfeld's answer is that the sense of
    national identity in Russia was not linked with success in economic
    competition with other countries as it was in England, France and
    Germany. But one might equally well reply that national consciousness
    was never as highly developed in Russia as it was in England or
    France, say. After all, Russia remained a land empire, unlike these
    other countries, and the Russian State remains to this day an imperial
    construction. If Russia has not achieved sustained economic growth,
    one reason may be that it has not become a nation state.

    A salient fact about our current circumstances is that in much of the
    world the modern State has collapsed. A monumental project of
    nation-building is under way in China, which is reflected in the rapid
    economic growth that has been recorded in some parts of the country.
    But in much of post-Communist Russia and parts of former Yugoslavia,
    large areas of Africa, much of the Middle East and parts of Asia such
    as Afghanistan and Pakistan, there is nothing resembling an effective
    modern nation state. In any future that can be realistically foreseen,
    it is extremely unlikely that there will be nation states in these
    parts of the world. If economic growth is a by-product of national
    consciousness, their future is bleak. Greenfeld comments that much of
    what is seen as globalization "is a reflection of the specific
    American tradition - its peculiar business ethic, which condones and
    encourages competition on an individual basis, and which is a product
    of the nature and development of American national consciousness".
    Greenfeld is right to note the absurdity of the belief that singularly
    American practices and values can be made universal. But her argument
    has wider, and - for some people, at least - more disturbing

    The popular idea of globalization was based on the belief, propagated
    by neoliberal ideologues and endorsed by the majority of economists,
    that economic growth is a result of the adoption of free markets.
    Today's evangelists for globalization are at one with Marx's disciples
    in believing that history is a process of convergence on a single
    economic system. In this view, we are on the brink of a new era, in
    which the rising prosperity achieved by some capitalist countries over
    the past few centuries will be replicated worldwide. If Greenfeld is
    even half right, this is a delusion: global capitalism is a mirage,
    just like Communism.

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