Capitalism & Poverty

Christianity versus Capitalism (Part 3.1)

Over the course of this series I have begun, piece by piece, to lay out an argument that it is time for Christianity to end its long-standing accommodation of capitalism. In the first article (Oct 2016), I set out to define what capitalism is, arguing that it is not merely the form of economic behaviour that simply comes naturally to people, but is in fact a very particular form of economic organisation - an economic system - that emerged in Europe in the sixteenth century and grew inexorably to cover the globe by the twentieth century. At the heart of this system is the drive towards endless accumulation and the relentless commodification of all things. In the second article (Apr 2017), I looked at the troubling historical question of whether capitalism emerged out of Christianity (as some have argued) and suggested that while there was indeed some link between religious change in Europe and the emergence of capitalism, it was in fact the decline and distortion of Christian faith that played the key role and not any ideas inherent to Christianity itself.

In this article, we turn to consider perhaps the single largest obstacle preventing many Christians from coming to a principled rejection of capitalism: that is, the reputed success of capitalism at lifting people out of poverty. There are very many serious and thinking Christians who maintain a strong critique of capitalism, but who nevertheless feel that this single great ‘fact’ - the power of capitalism to reduce poverty - ultimately trumps their concerns and warrants their continued support. Miroslav Volf, the prominent and widely respected theologian, is one example. On the one hand, Volf is quite clear that ‘This is the hour of capitalism's triumph and it is now that capitalism most needs a critique’; on the other hand, he is also convinced that ‘for all its grave inadequacies, including a trail of tears in its wake, capitalism is also helping feed and make life easier for the great majority of the world's population’ and, for this reason, deserves continued, if critical, support.

John Atherton was an English theologian who understood the dark social and ecological undercurrent of the effects of capitalism, yet, for him, the economic performance of capitalism was just too impressive to argue against:

The last 200 years, and particularly since 1945, have witnessed an outburst of economic achievements which has enabled human well-being to begin to make the historic transition from absolute want to astonishing levels of health, education and income. Between 1945 and 2000, the world economy grew fivefold, income per capita by 2.6 times and life expectancy from 35 to 58. […] The transformation of individual and social well-being since 1750 represents one of the decisive changes in human history.

This is indeed an argument that deserves serious consideration. Although, unlike Atherton, I do not think this is the single clinching point on which the whole question hinges, we must nevertheless admit that if we are evaluating an economic system from the perspective of the gospel, then surely its impact upon the last and the least must be a central consideration (although not the sole consideration).

My concern here is to challenge the very basis of this argument itself: the assumed ‘fact’ that capitalism has effected a massive transformation of human well-being since 1750 (or even earlier for some people).  This story is repeated so often that it has come to represent a core orthodoxy about the shape of modern history. Unfortunately, this is just one more example of our culture’s distorted view of history. As we shall see, this perspective relies upon a large amount of historical amnesia and a certain amount of studied blinkeredness to exclude a huge amount of contrary data. Once we start to look a bit more closely, it turns out that the trajectory of human poverty and well-being in modern history is a vastly more complicated and mixed subject. The effect of capitalism on ‘poverty’ (we will need to consider what we mean by this term) is not quite what has been represented.

There are multiple dimensions to this argument and some of it gets quite technical, so here I will merely attempt to provide an overview of the headline points that need to be taken into consideration. Even so, I have not been able to condense this story into one article, as I had originally hoped, so it will come in two parts: in this one we shall look at the first 400 years of capitalism up to the beginning of the twentieth century; in the second, we shall look at the question of poverty alleviation in much more recent times.

The rise of capitalism and the standard of living in Europe

There is no doubt that the economic transformations in Europe over the sixteenth and seventeenth centuries - what we now retrospectively call the birth of capitalism - launched an epoch of economic growth that was completely unprecedented in human history and that this achievement was itself then dwarfed by the remarkable nineteenth century economic explosion that we call the Industrial Revolution (see graph below).

With this sort of graph in front of you, it is perhaps not surprising that the general assumption is that economic growth also resulted in a consistent, ongoing rise in the material standard of living amongst European nations (and their offshoots) which has continued to the present day. But that is not at all what happened.

One of the less-known facts about the much-maligned Middle Ages is that European peasants, workers and craftsmen had experienced a steadily rising standard of living, such that by 1450 the economic gap between peasant and lord was the smallest it had ever been. Some historians refer to this rising peasant affluence as ‘the crisis of feudalism’. However, from about 1450 - the period that most economic historians date as the beginning of the rise of an international capitalist order - something startling happened in Europe. At the precise time that Europe began its sustained economic take-off, the material standard of living of the mass of the common people fell off a cliff. Indeed, for a large segment of the masses, the collapse of living standards was so dramatic that the standard of living achieved by 1450 was not again achieved until around 1850 or after.

The graph below shows the wages of an English carpenter expressed in kilograms of wheat. It demonstrates graphically what was a widespread experience – as wealth generation turned upwards, wages underwent a dramatic decline for two hundred years, bottoming out around 1650 and not returning to the levels of 1450 until late in the nineteenth century.

There are a lot of things about which economic historians argue, but this is not one of them. Whether trying to calculate wages, dietary intake or housing standards, the story is similar. In the fifteenth century, meat and dairy represented a substantial portion of diets; from the sixteenth century consumption of meat and dairy underwent ‘an extraordinary step backwards’, diminishing over the long term and not to recover until the mid-nineteenth century. Fernand Braudel, a historian who scrupulously avoids ideological construction of history, is insistent on this point:

The paradox must be emphasized since it is often thought that hardship increases the farther back towards the Middle Ages one goes. In fact, the opposite is true of the standard of living of the common people – the majority.

	A meal of gruel in a peasant family in Holland (engraving 1653). Although Holland was then the richest region of Europe, many Dutch families were reduced to a diet that was barely adequate in terms of calories and completely inadequate in terms of nutrition.

But, of course, in the midst of such impressive economic growth and development, some people must have been getting richer. This is a time when segments of the political and aristocratic elite begin to amass vast and unprecedented fortunes and landed estates, along with a newly rising urban merchant elite, some of whom became wealthy enough to financially back governments. Also, the fortunes of many of what were described as ‘the middling sort’ (wealthy farmers and urban professionals) begin their long and continuous ascent. So the story of living standards under early capitalism is neither one of total impoverishment nor widespread wealth, but one of increasing social polarisation.

This story gets a bit more complex and hotly contested once we get to the nineteenth century and the Industrial Revolution. For some social historians, the caricatures of Charles Dickens indeed point to an important truth about the wretchedness and poverty of many workers during this period, while for some economic historians this is all hogwash: for them, the Industrial Revolution was a time of progress, rising wages and standards of living. There is no quick way to cut through this debate; a large part of it revolves around some quite technical questions about how we measure standards of living across an increasingly diverse and segmented population.

From my own reading of the history, I am fairly convinced that whereas living standards had begun to steadily rise again over the eighteenth century, many groups (but by no means all) experienced another dramatic collapse in living standards around 1780 which lasted roughly until around 1850. For some groups, such as farm labourers (the single largest employment group in nineteenth century England), the collapse in wages was truly catastrophic and is the all-important context that explains the social pressures and the British penal system that ultimately led to the creation of Australia. For some other groups, the benefits of rising wages were, to a large extent, cancelled out by the dramatic impact of over-rapid urbanisation – ‘which combined the catastrophic effects of wretched housing, unhealthy and even contaminated food, with the social upheaval which tore individuals away from their family roots and the resources of the village community.’ Braudel writes: ‘Two generations were sacrificed to the creation of an industrial base. Many historians do not wish to face up to this disturbing fact. They simply refuse to admit it.’

Whatever the case, there is little dispute that it is after 1850 - that is, very recently in the almost 600-year history of capitalism - that we begin to see the generalised and reasonably consistent rise in the living standards of northern Europeans and their offshoot societies (North America and Australasia), that has continued until the present day. This begins to sound like a more positive story, until you inquire a little more closely as to how this was achieved …

The story of rest of the world

One of the most common arguments of proponents of capitalism is to point to the ways in which living standards in the ‘most capitalist’ societies (Western Europe and North America) improved so much more dramatically than anyone else’s. As we have been seeing, that supposed improvement is not as straightforward as it has been represented; moreover, even when such rising living standards become incontestable (after 1850), it ignores the fundamental question of how this affluence was achieved.

In the first article in this series (Oct 2016), I pointed out that from the very beginning, capitalism emerged as an internationalised economic order. This means while we might legitimately speak of some countries as “capitalist” (eg. England, the Netherlands) and others as not capitalist (eg. Poland, Latin America), these countries were all being increasingly bound together in a single economic system and that system was being driven by the law of accumulation. So we cannot simply compare Western Europe with African, Eastern European, Latin American or Asian nations and conclude that capitalism provides better outcomes, because the outcomes in all these places were increasingly determined under a single economic system. Let me sketch how this played out in history.

The birth of capitalism coincided with the beginning of European imperial expansionism. This began with incursions by the Portuguese down the west coast of Africa seeking gold and slaves, sometimes by trade, sometimes by force, and often a mix of both. The slaves were being sought to grow the new cash crop of sugar in the New World, the first of a long line of European consumer booms. Very soon, Europeans found that the trading item that gained them the most slaves was guns. This began a long period of lopsided European ‘trade’ with West Africa that had disastrous consequences. Before long, African kings and chieftains along the west coast and inland found that they were trapped in an arms race with each other, in which the only way to ensure their survival against increasingly well-armed opponents was to sell slaves to Europeans. While these societies had always had something of a slave trade, from the sixteenth century onwards it grew to terrifying proportions, resulting in a long-term vicious downward social and political spiral from which many African nations have never fully recovered.

Diagram of a slave ship presented to the a Select Committee of the House of Commons, 1791. It has been estimated that approximately 15 million Africans were sold into the Atlantic slave trade before it fully ended in 1853. It is thought that around 2.5 million of these died in transit and many more died soon after arrival. As well as the conflict and instability this created in Africa, the slave trade resulted in a massive economic and demographic setback for some regions of Africa.

Of course, the massive European demand for slaves came primarily from Spain’s (and then Portugal’s) conquests in the Americas: Columbus in the Caribbean (1492), Cortes against the Aztecs (1521) and Pizarro against the Incas (1532). The impact upon the indigenous  peooples of these regions, particularly from European diseases, was catastrophic. There is still dispute as to the numbers - many suggest that it was as high as 90% population decline (a literal decimation) - but there is no dispute that from an indigenous perspective it was an event of apocalyptic proportions.

This raises a question: was the Iberian conquest of the America’s a product of capitalism or of feudal imperialism, or were they becoming the same thing? There is a lengthy theoretical dispute over these questions which I won’t bore you with, but it is largely a moot point, because, irrespective of the terminology we use, there is little doubt that the rising affluence of the European capitalist economy was intimately bound up with the conquest of the Americas - the slave trade, the massive injection of liquidity that came from American gold and silver and the booming trade in new commodity crops (sugar, tobacco, cocoa), not to mention the opening up of new vistas for investment. European economic growth cannot be understood separately from the tyrannous rule of Spain and Portugal in the Americas, irrespective of how we label it, and vice versa.

From 1498, when Vasco da Gama rounded Cape Horn, Europe also began trading directly with Asia. Here, European fortunes were more mixed. Some regions (Java, Ceylon, the Philippines) fell quite quickly under European domination, but others (especially China, Japan and the Mhugal Empire) dealt for a long time with the Europeans on a much more even footing. But this began to change from 1757, when the Indian subcontinent fell under the rule of a trading corporation, the British East India Company, and was effectively run as a private-sector state. Over the course of the nineteenth century, India’s thriving and sophisticated industrial, commercial and financial sectors were largely dismantled as Britain’s industrial revolution now only required raw materials, cheap labour and markets. More than once, Britain’s imperial economic policy resulted in unprecedented Indian famines, just as it did in Ireland in the 1840s.

One hundred years after the conquest of India, the Chinese economy was brutally levered open to Europeans through the Opium Wars - wars fought to force the Chinese to buy drugs. For almost two thousand years, China had been the wealthiest civilisation on earth; by the early 1900s it had become an economic basket-case, characterised by widespread poverty and social unrest. These are the circumstances that prepared the ground for the disastrous triumph of Maoism in 1949. European intervention wasn’t by any means the sole cause of this decline, but it was the factor that tipped a difficult situation into a disastrous one. Of course, that insult of history is now being avenged!

There is one final piece of the jigsaw that we must consider that will help us understand the historic rise in Western living standards after 1850. So far we have seen that an integral part of the European economic dynamism was the expansion of exploitative economic relationships with the rest of the world. Yet, even then, this did not necessarily result in uniformly better living conditions amongst the mass of common people in Europe. What happened after 1850 to produce the continuous rise in living standards of which we are the beneficiaries?

There are three factors. The first two are well known and generally presented as the sole explanation of Western affluence: that is, the astonishing improvement in economic efficiency achieved by the combination of the industrial and agrarian revolutions. Under the new conditions, each worker was able to produce vastly more than had ever before been the case. The second was the staggering increase in scientific knowledge (particular advances in understanding disease and hygiene) and technological development beyond the commercial sphere.

But the third factor is much less acknowledged, even though its social and economic consequences continue to underpin the current global distribution of wealth (but for how much longer?). In the nineteenth century, the European economic system ‘acquired’, virtually overnight in historic timescales, effectively two (and a bit) continents worth of food-growing regions. In the opening years of the nineteenth century, European settler societies occupied only a quarter of the North American continent (east of the Appalachian Mountains), the southernmost tip of southern Africa, a small area around Port Jackson in the New South Wales and a brand new settlement on the Derwent River in Van Diemen’s Land. By the end of the century, European settler colonisation had taken possession of the land across the face of North America, Australia and New Zealand and the southern third of Africa, as well as the Argentine Pampas region and the vast spaces of Siberia.

This was the largest and fastest land grab in human history and represented a colossal ecological windfall (in terms of productive soil for growing food) for the European economy. When this combined mid-century with developments in transport (rail and steam ships) and storage (refrigeration), the European economy was suddenly  awash with quantities of grain and meat never seen before. Here we have the key development that has been the basis of widespread affluence in Western industrial economies ever since – cheap food. This provided the circuit breaker to the acute political and social tension that had been building in European industrial cities as a result of the deepening social polarisation of the haves and the have-nots.

But, of course, the cheap food came at a cost. It was cheap because the land was not paid for, it was stolen. In a single stroke (in historical terms), whole nations of peoples – the native American (north and south), Aboriginal Australian, Torres Strait Islander, Maori and southern African nations – were deprived of the basis of their economic livelihood, their political constitution and their culture. The suffering of the indigenous peoples of settler societies has been amongst the most acute in history, even when ‘compensated’ by provision of ‘welfare’, because it involved such a comprehensive loss of the sources of being and identity. And let us not forget the actual violence and appalling death rates that they experienced almost everywhere.

The colonisation of Australia was more violent than is generally recognised today: "In less than twenty years we have nearly swept them off the face of the earth. We have shot them down like dogs. In the guise of friendship we have issued corrosive sublimate in their damper and consigned whole tribes to the agonies of an excruciating death. We have made them drunkards, and infected them with diseases which have rotted the bones of their adults, and made such few children as are born amongst them a sorrow and a torture from the very instant of their birth. We have made them outcasts on their own land, and are rapidly consigning them to entire annihilation." ~ Edward Wilson, The Argus, 17th March 1856.

In Australia, perhaps more than any other country in the world, this foundational act of dispossession continues to be the source and root of our affluence. What is Australia without mining, agriculture, the pastoral industry and tourism (for which the core attraction is the distinctiveness of the Australian landscape)? And this same fact continues to be the foundational source of indigenous disadvantage in our country.

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We have been repeatedly told that capitalism’s undeniable and astonishing capacity for producing wealth is the most powerful means to lift humans out of poverty. In this article we have been interrogating the historical back-story a little more closely and found that the story is not quite that straightforward. The dark side of the story is a good deal darker than we have perhaps allowed for. To be fair, I have not here given space to the innovations, ingenuity, the creativeness, the improvements in efficiency and the developments in technology that have also been central to the story of capitalism. I do not, by any means, want to deny this, but that is a story we hear all the time and we do not need to be told again. We are rarely told the other side of the story.

The dynamism and expansion of the capitalist economy has, from the very beginning, been intimately bound up with exploitative trading relations, colonialism and imperialism. Moreover, the generalised high living standards of Western societies, on which we have largely based this story, are much more recent in the history of capitalism then is generally admitted. Prior to that, the fantastic wealth generation of the capitalist economy was simultaneously accompanied by the economic suffering of very large numbers of the common people of Europe. The seventeenth century and the early nineteenth century were particularly dark times for many. And when generalised high living standards did come to the West, they were only made possible by the great nineteenth century land grab and the cheap food that has ever since been the basis of our affluence.

To put it in plain terms, the growth of the capitalist world-economy has been accompanied by (perhaps it has required) the sacrifice of multiple generations and even whole nations, upon the altar of ever-growing wealth. This is idolatry, pure and simple, and it cannot be reconciled with the one who urged us to ‘seek first the kingdom of God and his justice’ (Matt 6:33).

But that is all in the past. I have not brought the story up to date. What about the twentieth century and the beginning of the twenty-first? Haven’t these in fact been the centuries in which widespread poverty alleviation has been achieved? Didn’t we halve world poverty by 2015 and wasn’t capitalism a crucial part of this success? Unfortunately (you guessed it), once again the story is not quite as straightforward as that. But that story will have to wait until the next edition.