Sven Beckert is Laird Bell Professor of History at Harvard University. His most recent book is Capitalism: A Global History.
In this week’s conversation, Yascha Mounk and Sven Beckert explore the origins of capitalism, how this triggered the Industrial Revolution, and whether today we’re in late stage capitalism.
This transcript has been condensed and lightly edited for clarity.
Yascha Mounk: The scale of your ambition in this book is monumental. It really is to tell a one-volume history of global capitalism. What do you think are the misconceptions that smart readers, smart thinkers, and smart listeners to this podcast are likely to have about capitalism before they read your book?
Sven Beckert: That is an excellent question, Yascha. I think there may be three misconceptions about capitalism that are not universal, but broadly shared. One is that you can understand capitalism purely on an entirely abstract level, that somehow there is a way to understand the mechanisms of how capitalist economies work and to identify the essence of these mechanisms and leave it at that.
While it is important to think about what capitalism is on the most general level, the book is fundamentally a history of capitalism. It is a history of really existing capitalism, a history of capitalism in action. What you see very rapidly when you start researching that history is that, while the general characteristics of capitalism are universal to capitalism in all places and at all times, capitalism changes drastically over the past 500 or 1,000 years.
You can only understand capitalism from a historical perspective. This is the first common misunderstanding about capitalism: that it can be understood purely from an abstract perspective, when it really needs to be understood historically.
That is why we do history, because we believe that we can understand the world in ways that are fundamentally different and perhaps even better than understanding it from a purely timeless and abstract perspective.
The second misconception about capitalism that is very pronounced is that capitalism can be understood by looking only at European history, and perhaps including the history of the United States as well. The rest of the world is often seen as not really mattering to the history of capitalism. If it matters at all, it is because the rest of the world can see its own future by looking at the European or North American experience.
My book fundamentally disagrees with that. It argues that capitalism can only be understood from a global perspective.
The third misconception is that many people who think about capitalism are drawn to industry—to the big machines, the textile industry, steelmaking, car manufacturing, and whatever came later. They are also very much drawn to understanding capitalism from the perspective of cities, because cities, of course, are also a product of the capitalist revolution as it unfolded in the past couple of centuries.
Mounk: You write a book about the history of the American railroads or you write a book about the history of Manchester.
Beckert: Exactly—Manchester, or look at the Pittsburgh Steelers, or you write a history of the Ruhr, or of Alsace and the cotton industry there. Of course, this is very important to the history of capitalism. Do not misunderstand me. Much of the history of capitalism actually unfolded in agriculture, and it unfolded in the countryside, where most of the world’s people lived until very recently.
This is the third common misunderstanding of the history of capitalism: to see it as entirely an urban and industrial story, and in that way to exclude much of the human population and much of planet Earth from the narrative of the history of capitalism.
Mounk: I want to come back to some of those assumptions over the course of our conversation. It is going to be hard to summarize a thousand-page book in one podcast conversation, but tell us a little bit about what the accurate history of capitalism is. Some of the textbooks about capitalism or economics are probably going to start with the invention of the spinning jenny, the invention of the steam engine, or perhaps the first railroads in England in the 18th or 19th century.
You start in a number of different places and much earlier on, and you say that there are “islands of proto-capitalism” that arise long before the textbooks usually start the story. What is significant about those islands of capitalism? What makes them meaningful precursors of the system we are talking about and living in today?
Beckert: The starting point of the book, and I think of any kind of productive thinking about capitalism, is that capitalism is not the natural order of things. Organizing economic life along capitalist logic is a revolutionary departure from much of human history. We need to start by seeing the world we live in not as natural or as the kind of economic logic that animated economic life throughout human history, but as a very particular moment in human history.
Once we accept that, we need to think about the questions of where it starts, when it starts, and how it starts. There are many explanations for that question. Some people have argued that it is something about Protestantism that made people more capitalist. Others have argued that it is a peculiar kind of class relation in the southern English countryside that created the conditions for the transition to capitalism.
All of these approaches tend toward seeking a small kernel, a small essential element from which capitalism eventually sprung. Some people see it in the Industrial Revolution. Once modern machine production came about, they argue, this is when capitalism began in the late 18th or early 19th century. I think this is completely mistaken.
The Industrial Revolution, the machine production itself, is the most meaningful offspring of capitalism, but not the beginning of capitalism. I argue, and I show in the book, that capitalism really begins with the first people who used a capitalist logic in organizing their economic lives. These people are merchants—people who did not become rich because they plundered others or forced them to work for them, but also not people who engaged only in subsistence agriculture and lived off the land.
These are people who had capital, invested capital in trade, and hoped to generate more capital that they could then invest in further business enterprises. I see merchants as the crucial originators of the capitalist revolution. These merchants have been around for a very long time. This is hardly something novel. But they have always been marginal to economic life on Earth. There have been merchant communities for a very long time, but they have been very marginal to economic life. I begin the story of capitalism with these merchant communities, which can be found in many different parts of the world.
Mounk: Some of these merchant communities are in places where you might expect them to be in a more Western-centric reading—Venice and Genoa and those kinds of commercial republics that were very prosperous in the late Middle Ages in Italy and Europe. Others are much farther afield, in India, China, and elsewhere.
Beckert: Everybody knows about the Medici. Everybody knows about the Fuggers. Of course, they mattered. It is not that they did not matter. But if we look around the world, we find merchant communities in many different parts of the world. We find them in West Africa. We find them in China. We find them in India.
The book actually starts in a most unlikely location: the port of Aden in modern-day Yemen. I trace the history of this merchant community in this town in the 10th, 11th, and 12th centuries. You see these merchants already being quite modern actors. They are recognizable to us. We understand what they do even now, 900 years later. But when they were alive and practiced their trade, they were total outsiders. They were very marginal to how much of humanity lived at that particular moment in time.
Mounk: Those merchants existed well before that, right? What is it that makes those merchants proto-capitalist in a way that a trader a thousand years earlier in China or in the Roman Republic or elsewhere would not have been?
Beckert: You could legitimately write about all of them. I just had to start at some point in time. These people who employed a capitalist logic in their economic lives have existed for a very long time. I start around the year 1000 because at this point there were many more of them. I also write about them because I need to show, and I do show, how out of these communities modern capitalism emerges.
There were capitalists in the 11th century, and there were capitalists certainly in the 6th and 9th centuries, but there was no capitalism. We have capitalists without capitalism, but it is these capitalists who eventually build something that is more recognizable as capitalism.
Mounk: How does that happen? For now, we have these islands of people operating by capitalist logic, able to accumulate very significant wealth, but they are disconnected from each other. There is no real connection, for the most part, between those traders in Venice and the ones in China and so on. Is the next phase that they start to be in communication with each other and begin building connections among themselves?
Beckert: This is the very logic of their existence. They always connect places to one another. In that way, they are very different from all other economic actors, such as a feudal lord in the French countryside, who does not necessarily connect to people economically elsewhere in the world. These merchants always connect to one another, and they engage in astounding amounts of long-distance trade. They connect the Arabian Peninsula with the western coast of India. They connect the city of Cairo with what is now southern France. The West African merchants connect the forest belt of West Africa all the way into Europe. They build astoundingly extensive economic connections across large spaces.
In the 15th and 16th centuries, something happened that had never happened before. This occurred within a small subset of these merchant communities—the merchant communities of Europe—who before then were neither particularly rich nor particularly well-connected, nor particularly capable of building institutions in which to embed their economic lives.
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In the 15th century, they sought a way around the very powerful merchant communities of the Arab world and the Middle East in order to directly access trade with India, which was the center of the global economy, along with China. At the same time, European states, which were very splintered and fought many wars with one another, sought new resources to fund these wars and to buy the weapons needed to battle one another.
A kind of coalition emerged between these European states and this particular group of merchants—namely, European merchants. This coalition propelled them first into the Atlantic world, off the coast of Africa, to places like the Canary Islands, Cabo Verde, and other such places. Eventually, by 1492, it propelled them across the Atlantic all the way to the Americas.
Mounk: When you go back to Amerigo Vespucci and others, they are, in a way, an expression of this coalition between merchant families with deep experience in navigating the seas, building ships, and all those things. They were financed by the monarchies—in this case, by the Spanish monarchy—in order to undertake those voyages.
Beckert: There is a kind of merging of the interests of these expansive merchant communities and the interests of the expanding European states. What these merchants then do, in coalition with the states, is build all kinds of new islands of capital. Cabo Verde, for example, becomes a kind of plantation economy. Potosí becomes the source of much of the silver that eventually propels the global economy. The Caribbean islands, first the island of Barbados, become a kind of plantation economy dedicated to the production of sugar.
This is something world-historically new because these places are now further islands of capital, similar to those that had existed for several centuries before, but these new islands of capital are completely dominated by the logic of the merchants. They become the first truly capitalist societies because everything in these societies is oriented around the logic of investing capital, accumulating capital, and making more capital. This is the moment in which the capitalist revolution is taking off.
As you notice, this is taking off in a globally connected world. It is not just about Europe. It is not just about Florence. It is about connecting all of these places to one another, creating the dynamic of the capitalist revolution at this particular moment in time. What is truly novel is that much of the capital the merchants had invested in the past was invested in long-distance trade. They bought cheaply and sold dearly. They bought spices in India and sold them for large sums in Cairo or Amsterdam or elsewhere.
Now their capital goes into organizing production to produce more of the things they want to trade. For the first time ever, they come to dominate production. They are the ones who organize the production of the commodities they sell on global markets. That is totally novel, and this sets into motion the logic of the capitalist revolution that, at first very slowly but by the 19th century very rapidly, spreads all around the world.
Mounk: We are on the cusp of a mechanical revolution, of what we would usually call the Industrial Revolution. Before we get there, there is not a bright line dividing the period before the Industrial Revolution and after it. There is technological progress throughout the 16th, 17th, and 18th centuries.
When we place ourselves just at the cusp of the invention of the spinning jenny, the steam engine, and all those innovations, to what extent is the system you are describing capitalist? In what ways is this meaningfully a capitalist system? What elements that we would think of today as the obvious ingredients of a capitalist system—and I take your point that there is not one capitalist system, as it has changed and transformed over time—were not yet present at this historical juncture?
Beckert: That is an excellent question. As I said earlier, capitalism does not emerge at one historical moment fully formed. It slowly expands. Capitalism is not so much a thing as it is a process, and it takes centuries to create the world in which we live today. In a way, capitalism even today is still in the process of its own emergence. There is still the spread of capitalist logic into new spheres of human life.
Before the Industrial Revolution, much of economic life on planet Earth still followed a totally different logic. Capitalism, in some ways, is expansive. It is very important to world history, but it is still quite marginal to the economic life of most people living on planet Earth.
Mounk: How is the economic life of most people determined? It is feudalism. For people who are not historians, who are used to living in a world made by capitalism, what does it concretely mean to live in a world that is not shaped by capitalism?
Beckert: This is the problem. We live in capitalism like fish in water, so it is very difficult to see it. The capitalist logic is a radical departure from previous human history. The vast majority of people on planet Earth, well into the 19th century, lived in subsistence-oriented economies in which they produced for themselves and maybe for local exchange. For example, I grow a lot of wheat, you grow a lot of corn, and I exchange some of my wheat for your corn.
Mounk: There’s still people living like that in the United States, but I think it’s spelled W-E-E-D, not W-H-E-A-T.
Beckert: That is perhaps true. The capitalist revolution is ongoing. This is how the vast majority of people on planet Earth lived. Many people also lived as dependents of rulers or religious authorities. These rulers or religious authorities forced the peasants to give up some of the things they produced. They might even have accumulated a lot of wealth. If you travel through Europe today and see all these castles and beautiful churches and other buildings, this is partly because these institutions were able to dispossess people. They took some of the product that others produced and consumed it.
This is completely different from modern capitalism. In modern capitalism, people who have capital invest that capital productively, not just to show off their wealth, but to enable further accumulation of capital. If you look at the world before 1900, you see that this capitalist logic has moved into areas of economic life that were previously not dominated by it. For example, a vast plantation sector had emerged in the Americas, in which huge quantities of sugar, coffee, rice, indigo, and later cotton were produced for European consumers.
This production followed a capitalist economic logic. In the European countryside, or to some degree in the North American countryside as well, people manufactured goods under the auspices of merchants. The merchants controlled these producers, acquired these goods through market exchanges, and sold them into long-distance markets. This occurred in many different parts of the world.
The stunning thing about this world is that there was not much technical innovation. Often we think of capitalism as being driven by technical innovation, but we do not see much of that here. There were no great gains in productivity at this time. What we do see is a huge redistribution of the wealth of the world from certain areas into others. For example, the beneficiaries of the radical recasting of production in the Caribbean were not the Africans forced to work on these plantations, nor the Indigenous people of Latin America, but rather the European merchants who accumulated great wealth by dominating this form of production.
This is the world we have before the Industrial Revolution. There are not great productivity gains. Economic growth is very slow, but the capitalist logic has now infused some parts of economic life on Earth. It is still somewhat on the margins, but less so than in the year 1200, when the merchants of the Arab world were dominant.
Mounk: That is an interesting implication of the way you tell the story. If you think capitalism is about the Industrial Revolution in Manchester and all of those things, then there are big debates about how quickly and to what extent it improved the living standards of average workers in Britain. I studied history as an undergraduate in Cambridge, and the first paper I read in my first term there was 18th- and 19th-century British social and economic history.
The first two weeks of my university education were all about relatively detailed, to me at 18, arcane articles about whether the standard of living of the average English worker had gone up from 1800 to 1850, and what evidence we have about that from increasing height or records about how much they were able to eat and all of those things. Broadly speaking, if you start the story in 1750 or 1800, you then have this incredibly rapid improvement in the standard of living. It is clear that living standards have vastly improved and transformed—initially in Britain and other parts of Europe and North America, and now across the world.
You associate capitalism with those improvements. Part of the implication of your story is to be more skeptical about that, to say that you can perhaps decouple those two things to some extent—that you start having this capitalist or proto-capitalist revolution well before you get those jumps in productivity.
How connected are those? Is it the case that they are really unconnected, or is it the case that what you see with those forms of redistribution in the 16th, 17th, and 18th centuries is the accumulation of capital that may be extractive and involve a lot of violence and injustices, but that actually allows people in the north of England to invest in new technologies and factories and all of those things? Is that what leads to the mechanical progress that results in rising living standards? Take us through the next stage of this history and tell us how connected these two things are, or are not, in your mind.
Beckert: They are deeply connected. You are right, and this is important to emphasize, that in the long term, looking at this problem from the perspective of the last 500 or 1,000 years, capitalism has led to the most astounding increase in human productivity and the most astounding economic growth in world history. There is no other form of economic life that has even remotely produced anything like this.
It is impossible to explain this rapid increase in human productivity and economic output by starting only with the moment in which it happens. You cannot understand the Industrial Revolution—which occurred in the late 18th and early 19th centuries—without understanding the earlier history of capitalism that made it possible. As I said before, capitalism was not born with the Industrial Revolution. The Industrial Revolution is the most important offspring of the capitalist revolution. It is a result of the capitalist revolution, and therefore we need to think about it in longer terms.
The Industrial Revolution begins principally with the recasting of the production of cotton textiles in British factories. Everything about the possibility of the emergence of this new industry is linked to the global connections that had been created in the decades or centuries before. It is connected to this earlier form of capitalism.
For example, why did the British want cotton textiles? Because for centuries they had traded with India and had acquired very high-quality cotton textiles from South Asia, which they also used to trade for enslaved workers on the African continent. There was already a market for cotton textiles before the British ever started producing them themselves. There was an incentive to replace imports with local production.
A second factor was the essentially unlimited supply of raw cotton that could feed these machines. Why was there such an unlimited supply of raw cotton? Because it was possible to force enslaved Africans to grow this cotton on another continent. British agriculture could remain as it was because the cotton was not sourced locally—it was sourced elsewhere.
Furthermore, because Britain and other European powers had already expanded their influence into many different parts of the world, they had the ability to dominate trade in the cotton textiles that came out of British factories. By the 1850s, India was already the single most important market for British cotton textiles.
The Industrial Revolution is a fundamental event in human history and in the history of capitalism, but it cannot be explained in isolation. It must be embedded within a broader global story—one that reaches much further back in time.
Mounk: That is a nice way of putting it, that some of the ways in which people place the Industrial Revolution at the heart of the story posit it as both cause and effect. They are trying to explain a change out of a change, in a way that is a little puzzling. There is always the question of what the prehistory is. Some of those answers involve capital accumulation; some involve chance invention. Some involve a very slow increase in the background conditions that make such change possible until a threshold is suddenly hit. But it can be mysterious where this threshold comes from.
Your story offers a cause of the effect that is sufficiently different, but it seems somewhat less puzzling. What impact does the Industrial Revolution then have? If you are talking about capitalism as a process rather than as a thing that is unchanging, then the rapid change in the mode of production that comes with mechanization and those inventions propels that process forward in a very significant way. Tell us what that looks like in the 19th and early 20th centuries.
Beckert: The Industrial Revolution at first unfolds in a very small part of the British Isles, principally in Lancashire, but also in some parts of Scotland. It is a tiny part of the world, and it remains concentrated in this tiny part of the world for one generation, maybe almost two. It then spreads—the cotton textile industry spreads to Belgium, to France, to Prussia, to Saxony, to Italy, to the young United States. It spreads to Egypt, to Mexico, and to various other parts of the world.
What is really key, however, is not that people invented a new way of making cotton textiles and then produced ever more of them. That alone would not have been an industrial revolution. What happened is that this ability to increase production, to increase economic output, and to vastly increase human productivity spread to other industries.
By the 1830s, the cotton industry in Great Britain is still very large and remains an important economic sector, but it is no longer the core of the British economy. The focus moves to other things such as coal mining, iron and steel production, and then the railroads, which are a huge sink of capital investment but also a market for coal, steel, and machinery.
The real core of the Industrial Revolution is not the sudden increase in productivity or the recasting of production in one particular industry, namely cotton, but the fact that the revolution becomes a permanent condition. It never stops, and it does not stop to this day. There is always something new. It begins with railroads, steel, iron, and machinery, but by the later 19th century it includes more science-based industries such as chemicals and electrical machinery.
The Industrial Revolution also spreads to other parts of the world in more substantial ways. Both the United States and Germany become much more important to the Industrial Revolution, and even more important than Great Britain itself. With the Industrial Revolution, as we can now see in retrospect, this is the beginning of a state of constant revolution in the technologies of production, in productivity, and in total economic output.
Mounk: That permanent revolution can be thought of as an expansion of capitalism across a number of different dimensions. There is geography: it starts in one part of northern England and then spreads to other areas. In terms of industry, it starts with cotton and then moves to steel, coal, and the railroads. It can also be understood in terms of realms of human life and activity.
To name one relatively contemporary example, dating was not really part of a capitalist process, but now most people meet each other on online dating apps for which they pay subscriptions. In some ways, a realm of human life that had been outside of the capitalist sphere has now been more firmly subjected to market forces.
Beckert: Both processes happen. There is an increase in productivity and more or less constant economic growth. Of course, there are economic crises, but if looked at in the long term, it is astounding economic growth.
There is also the process in which the logic of capital that we spoke about at the start of this conversation—the one we saw in merchant communities in West Africa and the Arabian Peninsula, in Florence, and elsewhere—was once very marginal to economic life on Earth. This logic spreads at first slowly, but then in the wake of the Industrial Revolution ever more rapidly, into all kinds of forms of life.
People throughout much of human history produced the food that they ate and manufactured many of the things they consumed, such as clothing and shoes. As we all know, that became ever less prevalent, and ever more parts of economic life, but also life more broadly, became subsumed under this logic. When it comes to dating, it also becomes subject to investments of capital for the returns on that capital and for its growth. That is clearly the animating force of the capitalist revolution.
Mounk: What is the role of finance in all of this? Something like the Monte dei Paschi Bank in Siena was founded a very long time ago. When we were talking about the conquest of the Americas, you needed substantial capital in order to invest in those sea voyages. That capital was provided by monarchs, who often needed money that they either raised from their subjects or borrowed from rich people, even at the time.
The role of finance, and the primacy of finance in the capitalist system, really accelerates in the second half of the 20th century. As you describe it, it is now one of the characteristic features of this stage, this particular shape of capitalism. Tell us a little bit about how finance slowly grows as an element of this process and then becomes so dominant over the course of the last decades.
Beckert: That is an excellent and very important question. In some ways, the world we live in today with regard to finance has more in common with the world of the very early history of capitalism than with the moment of the Industrial Revolution that we just discussed.
Merchant capital and associated finance capital, including the banks you mentioned, were absolutely at the core of the early capitalist revolution. The East India Company, for example, which was the most important company worldwide for a very long time, was closely associated with these accumulations of capital among merchants and bankers in cities such as Amsterdam, London, and elsewhere.
International trade required significant capital investments, and the only people in the pre-modern or even medieval world who possessed these kinds of accumulations of capital were merchants and their associated financiers—the bankers.
With the Industrial Revolution, something changed quite fundamentally. For the first time, people could invest in production even if they had limited capital resources. Starting a cotton mill was not a particularly expensive endeavor. For the first time in world history, people could accumulate capital and become rich not from trade or banking primarily, but from investing in production itself. This early production, in various industries at various times, was extremely profitable. People earned very high returns on their capital.
Some individuals who started out as skilled workers in the cotton industry could accumulate so much capital that by the end of their lives they owned their own cotton mills. They were rich in certain ways. This ability to accumulate large amounts of capital in production itself continued well into the 20th century. Think of Henry Ford. Henry Ford did not like bankers or finance. He financed his expanded production entirely from retained earnings.
This marked the rise of the industrial capitalist, and merchants became less central to global capitalism. However, this has now shifted again. By the 1970s, and especially in recent decades, finance capital and merchants have become much more important again to global capitalism. In this way, the system connects back to the very early history of capitalism. The period during which industrial capital held the leading role in global capitalism, in retrospect, was quite short—just a hundred or a hundred and fifty years or so.
Mounk: I take the point about industrial capital, that this is not, by and large, how people make their fortunes today. I am sure there are some people who have made their fortunes in industry and manufacturing. There are probably a good number of them in China and in Vietnam and in places where much of the world’s production happens. But those are not the people at the very top of the Forbes list of the richest people.
I am trying to understand how different the situation today is from back then. It is striking that the very richest people in the world today, by and large, are not people who have inherited money. They are not people who went to Wall Street at the age of 21 or 22 after getting an economics degree at Harvard or Stanford. They are people who founded their own companies. Of course, they borrowed money to found those companies and had investors.
I do not know enough about those earlier titans of industry to know whether they did the same, but I would imagine that at some point Henry Ford took out a loan from a bank or took investments from other people in his company as well. When you think about how Elon Musk has made his money or how Mark Zuckerberg has made theirs, is the role of finance so much more central to their story than it was in the rise of Henry Ford?
Beckert: I do not know how to measure that exactly. There is a lot of inequality in capitalism, as we know from Thomas Piketty, and this inequality has sharpened in the past few decades. A capitalist economic order, unlike a feudal economic order, always contains within it the possibility of social mobility. At all moments in time, we can see in a capitalist economy that people with modest resources have struck it rich.
In the 18th and into the 19th century, merchants and financiers were clearly the central actors within the capitalist economy. They were the ones who struck it rich. They were the ones who dominated production. They organized textile production in the countryside or sugar production on the plantations. This changes in the 19th century, when mechanics and people with technical skills begin to create dynamic enterprises and accumulate significant amounts of capital in industrial production. They become the central actors within the capitalist economy.
Today, there is still production. You are absolutely right about China and Vietnam; that is absolutely true. But think about the textile industry today or the shoemaking industry. You have a few globally active brands that are, broadly speaking, agglomerations of finance capital or merchant capital, and you have hundreds of thousands of producers in all corners of the world who actually make these shoes. The power relation is very clear. The large brands, which often do not produce anything themselves but simply organize production, dominate the industry. The manufacturers themselves are quite powerless.
This does not mean that people do not make money producing things today. They do make a great deal of money. But the relative power, if we think about capitalism as a system in which there are merchants, industrialists, and bankers, has moved toward merchant capital and finance capital in recent years and away from the General Motors and Henry Fords of the world.
Mounk: That is really interesting. I am struck by the fact that many people who write about the history of capitalism or who are critics of capitalism are attracted to the term late capitalism or late-stage capitalism. It is not a term that, so far as I know, you use, or at least use very much. Is there a kind of naive assumption buried in that term that, in a nearly neo-Marxist way, capitalism is about to founder and about to end, that you are skeptical of?
How do you think about this widespread talk about late-stage capitalism? Is there any way of knowing whether we are toward the end of this remarkable story, in the middle of it, or only at the very beginning? Will the next thousand years of human history continue to be driven by this process playing out?
Beckert: We do not know. The future will, for certain, be full of surprises, for better or for worse. You are absolutely right that I do not use the term late-stage capitalism. People who have written about capitalism have been describing its late or latest stages for more than 150 years. Predictions about the end of capitalism have been made since at least the mid-19th century, and they have always been described as imminent. None of that has happened.
You could argue that the full force of the capitalist revolution only occurred after the first predictions of its immediate demise. Having looked at the history of capitalism globally and across a thousand years, I see a great deal of energy and an ongoing ability to innovate in this system of organizing economic activity, even today.
Capitalism is historical. It has a history. It is not the natural state of organizing economic life on planet Earth. Therefore, it has a beginning. As any historian will tell you, anything that has a beginning also has an end. Presumably, at some point, another form of organizing economic activity will emerge. I do not know when that will be or how it will unfold. Capitalism, for better or worse, has shown itself to be enormously dynamic.
The secret to capitalism’s dynamism has been that it is generally undogmatic. It has changed drastically in the course of the past 500 years. Things once seen as absolutely essential to capitalism have become completely marginal a few decades later. Capitalism has always connected and reconnected different forms of labor, political organization, capital, and territorial structure. It has never been dogmatically linked to just one configuration of these elements. Presumably, that will remain the case in the future.
There is one caveat. The capitalist revolution has drawn on the free gifts of nature. It has drawn tremendous energy from capturing natural resources, the productivity of the land, the unpaid labor of women, and fossil fuels. There are limits to that, as far as we know. This might become a more systemic constraint on the further expansion of capitalism.
People called it late-stage capitalism in the 1960s, and now we are more than sixty years beyond that. What are we supposed to call it now—post–late-stage capitalism? That does not make sense to me. Capitalism shifts its shape drastically. The capitalism of today looks drastically different from that of the 1960s, which looks drastically different from that of the 1920s, which in turn looks drastically different from that of the 1850s. That is all true.
But the basic logic of the organization of economic life has remained the same. So when does early stop and late start? I do not think we can tell. Future generations of scholars, a few hundred years from now, will know.
Mounk: If there is one prediction you are willing to make, it is that if we still have the capitalist system in 60 years, or 600 years, or 6,000 years, it will be very different from today. The one in 60 years will be different from the one in 600 years. Whether we will still call it capitalist, and whether it will still meaningfully be the same system, we cannot predict.
I am interested to return to some of the assumptions that you started by rebutting about capitalism and to the language you have come back to several times regarding what is at stake in denaturalizing capitalism. This is something that always struck me when I was taking various classes in graduate school and as an undergraduate. I am sometimes struck by the way my students think about it as well.
When scholars in history and sociology, and to some extent in political science, aim to demonstrate that something that appears natural is not natural, they sometimes describe it as a social construct. I am both sympathetic to that enterprise and worried that it can confuse people in certain ways. This is a side note. You have not talked about social constructs, and I think the term itself can cause particular confusion. Students often think that if money is a social construct, it somehow means it is fake or does not exist.
The example I often give is that tea is a social construct. The English word tea includes chamomile tea, whereas the French word thé does not include chamomile tea because that would be infusion or tisane. This shows that the term is a social construct; it differs depending on the cultural and social context. It does not mean that tea is not real or that it is fake.
To return to the idea of denaturalizing capitalism, one question I have is: to what extent is this surprising? Among thoughtful, educated people, how many truly believe that capitalism is a kind of God-given system with fixed attributes that never change over time? And perhaps more importantly, what follows from denaturalizing it?
Beckert: It is really important to think about that. Let me start by saying that I do not think capitalism is a social construct. Capitalism is very real. It is the most powerful process impinging upon our lives today, as well as upon the lives of our parents and grandparents before us. It is a reality, and we need to understand it as such.
The problem is that any social reality powerful within your own life and time is the hardest to see. In some ways, when we look back at Stone Age economies, or even at the feudal economy of 12th-century France, we immediately see that they are strange and different from the world we live in today. Therefore, we are quite capable of understanding them because they so clearly call for explanation.
Mounk: They would not have seemed strange to the people living in a feudal order, in the same way that capitalism does not feel strange to us.
Beckert: Exactly. We take the prevalence of markets, the fact that things can be commodified, and the fact that most of us sell our labor power in markets for wages. We take that to be how the world works and perhaps how it has always worked, but it has not. It is a radical departure from previous human history. We need to start by saying that this is not natural, not common to all of human life. It is a radical, even revolutionary, departure from the organization of economic life in the long past.
That has real implications for how we think about the present as well. Once you see that this is a world that is not natural—a world that is created, a world created by human agency, by people making certain decisions, political decisions, daily life decisions, social decisions—you see that they shape that world. If we can see that the world we live in today, the world of contemporary capitalism, is a world created by us, then we can also see that we are not merely its victims.
It is us—not individually, but collectively. People have different levels of power in creating this world, but it remains a human-created order. Therefore, this order can also be changed in ways that are more conducive to our shared interests. We are not merely victims of this order; we are also the creators of this world.
Sometimes it feels almost like artificial intelligence, as if it is out there and coming to dominate all of us. The logic of capitalism has somewhat similar characteristics to the logic of artificial intelligence. But we created artificial intelligence just as we created capitalism, and therefore we can change it in ways that are conducive to making life better.
Capitalism has the logic of needing ever more access to ecological resources, and we know that this threatens our very existence on planet Earth. Yet we are not powerless in the face of that. We can act. It also helps to see, as I said earlier, that there is not just one capitalism. Capitalism has taken very different forms at different moments in time, and it is entirely imaginable to have a different kind of capitalism in the future.
Mounk: It is this connection that I was curious about because I can see how one proposition seems to naturally flow from the other. If you think that capitalism is somehow natural or God-given in an ever-changing form, then it seems to imply that there is really nothing we can do to change or regulate it. Whereas if it is the product of these complex and contingent historical processes, it seems to invite agency. It seems to invite the thought that perhaps we can reshape it today.
It is not clear to me how strongly that inference follows from the premise. The way you describe the history of capitalism, there is both a lot of human agency involved and very little human agency involved. It is the product of the endeavors, ambitions, and decisions of millions of people across geographies and across a millennium of time. But the Medici in Italy, the factory owners in England, and the traders in China were not aiming to produce or shape the capitalist system. They were acting on their own motives and incentives in their particular moment, and they created this world.
Over the course of the 19th and 20th centuries, we have seen the ability to shape capitalist institutions in important ways. We have welfare states today in North America, Western Europe, and many other parts of the world that certainly shape capitalism. That is a very good thing. It makes the system much more humane and sustainable and allows us to harness its energy in a much better way for human good. I share some of those underlying goals.
However, one might also think that although the system is contingent, man-made, and the product of these complicated processes, it is also an incredibly powerful machine. It is a process that is, in some ways, a perpetual motion engine, pushing forward in a powerful way that we might not be able to reshape. It might not be a matter of the will of one politician, one citizen, or even all of us collectively to fundamentally reshape the system.
If the United States or Germany were to try to reshape the system in a very radical way that was not the most productive use of economic resources at the time, those countries might be outcompeted by others, and that experiment would fail. This may be one mechanism that shows why the system could be less subject to human agency than this emphasis on denaturalization might imply.
Beckert: That is an excellent point. I do not want to suggest that we just have to sit at our desks and invent a different kind of world, and that by our willpower we will suddenly bring about this world. I want us to see that much of economics has the tendency to emphasize laws that are allegedly timeless in capitalist development, as though the best we can do is read them properly and implement them properly, which will then make us wealthier collectively as a result. I do not think this is the case.
The capitalism of the 1960s, with strong welfare states and a significant presence of the state in regulating economic activities and even owning firms, is drastically different from the capitalism of the 1920s or from the capitalism in which we live today. Power is radically unevenly distributed, and certain actors have far more power in shaping our world and our economic lives than others.
To cite the most unlikely example, in an earlier moment of capitalist history that we discussed, slavery—the plantation economies of the Caribbean and the American South—was extremely important. Many people, including European observers who were not adherents, believed the world would be better off without slavery but concluded that for the capitalist economy to thrive, slave labor was unfortunately necessary. Yet slavery came to an end, and it did so very significantly because the least powerful, least educated, poorest people on planet Earth—the sugar workers of Saint-Domingue—staged a revolution that eventually led to the abolition of slavery. This was one of the most significant shifts in the structure of capitalism ever.
The same is true of the welfare state. Industrial workers, who were often poor and without much political power, gained the franchise only in the 20th century in most parts of the world. They were the ones who pushed for the expansion of the welfare state and for the recasting of capitalism. So even though there is a radically unequal distribution of power in shaping the world in which we live, in the long history of capitalism, people without access to many resources have still made a huge difference in its structure.
I think we can make a difference. The entire book, as you noted, is written as an actor-centric history. It is not a story about something that fell out of the sky, to which we are subject as passive participants in abstract economic laws. I try to show that merchants, industrialists, workers, enslaved people, and those working in the countryside all acted upon these forces and created the world in which we live today. That is the main takeaway of the book.
In the rest of this conversation, Yascha and Sven discuss why capitalism developed the way it did, and whether we should be optimistic about this economic system. This part of the conversation is reserved for paying subscribers…
