How did the modern dynamist economy of wealth and opportunity come about? The processes of transformational changes could have started many times in history — but they first became sustained in North‐West Europe about 240 years ago. The question of why this happened in that particular place and time is one that has exercised generations of scholars.
What is modernity? What is a ‘civilization’? What is considered ‘western civilization’? What is the moral economy? How could you make a living before the Enlightenment? Are there different kinds of modernity? What is economic nationalism?
00:07 Trevor Burrus: Welcome to Free Thoughts. I’m Trevor Burrus.
00:09 Aaron Powell: And I’m Aaron Powell.
00:10 Trevor Burrus: Joining us today is Stephen Davies, Head of Education at the Institute for Economic Affairs in London. He’s a former senior lecturer in the Department of History and Economic History at Manchester Metropolitan University. His newest book is “The Wealth Explosion: The Nature and Origins of Modernity.” Welcome to Free Thoughts, Steve.
00:26 Stephen Davies: Glad to be here.
00:27 Trevor Burrus: What is a modernity, at least as far as your book is concerned with the issue?
00:31 Stephen Davies: That’s obviously a very big question, and there are some historians who would deny that there actually is such a thing as modernity in the sense of the state of affairs that is different from the way things have been for most of history. For most people, I think, and this includes a lot of academic disciplines, modernity is the state of affairs that we live in, a world which is extremely rich compared to any previous period in human history, unprecedentedly rich, in fact. A world that is marked by sustained and intensive technological innovation, so that we are constantly discovering new technologies, new applications of existing technologies, and these diffuse very rapidly. A world in which we have record numbers of people on the planet, the majority of whom live in cities. This is completely unprecedented. Before the 19th century, we never had more than about 10% of the population, of even the most developed states, living in towns and cities. A world in which we have, also, a whole number of completely novel social arrangements, such as the dispirit of slavery, the effective emancipation of women, compared to their situation in past periods.
01:34 Stephen Davies: That’s what we mean by modernity. It’s the world we live in, which is sharply and distinctly different from the world of our ancestors. And the interesting thing is that it begins, really quite suddenly, in a specific time and place, which is Northwest Europe in the last third of the 18th century.
01:51 Aaron Powell: Do we see any similar thing elsewhere?
01:54 Stephen Davies: Well, yes, we do. That’s part of the interesting thing that I’m concerned with in the book. If you look at the course of human history, we see episodes, sometimes quite significant episodes, of about 100–150 years in which you see a lot of the things you see in the modern world. The most dramatic example, which I devote a whole chapter to, is Song China and China, and particularly the 12th and 13th centuries. But there’s other ones as well. Parts of the Middle East in the eighth century, the lands around the Mediterranean, the Roman Empire in the second century AD, India in the fourth century AD. But none of them last. The crucial thing is that whenever you have one of these episodes of innovation, sustained growth, lots of radical free thought, they never last for more than about three generations usually, and then they’re effectively suppressed. They peter out. And the crucial thing about our world is that ours kept going. It hasn’t petered out in that way.
02:52 Trevor Burrus: Based on the examples that you just said, it seems like a lot of people would think modernity is the West, that it’s aligned with the West, but that seems to not be true, at least maybe in your view.
03:02 Stephen Davies: Yeah. That’s one of the main arguments I make. I think that is not true at all. And that’s not true in two ways. The first is that, if you look at the course of human history as a whole, there have been many, many examples of efflorescences, as another author calls them. Episodes, as I say, when you get a lot of growth, you get a lot of innovation, you get a lot of urbanization, all the rest of it. And so you can’t say, “Well, this is only once ever happened in Europe,” because it hasn’t. The only real critical difference is that, in the European case, in the case of Europe’s offshoots, like North America, it’s been sustained and has not been checked in some way. So, the real question is not, “Why Europe?” It’s, “Why does Europe manage to keep things going, when in previous places it’s been stopped?” And, of course, that raises the question, “What stops it?”
03:50 Stephen Davies: The other way in which I would say this is not Western, is to say that, “Well, the world we’re living in, it starts appearing in Northwest Europe and that means it grows out of historical Western civilization. However, that doesn’t mean, in my view, that it reflects something really deep‐rooted or long‐lasting in Western civilization. I explicitly reject the kind of argument that something that happens in the Middle Ages, or even further back in Western history, Athens and Jerusalem and so on, which makes Western civilization unusually dynamic compared to other ones. I think that that’s… Europe is pretty much the same as all the other civilizations, until roughly the 18th century. So, I don’t think there’s something structural about Western civilization that means each, rather than say, China or the Middle East, was the place where a sustained breakthrough happened.
04:36 Stephen Davies: And I also think that the changes in the modern world are so dramatic that, in a very real sense, we are no longer living in Western civilization. We’re living in a new civilization, which happened to first appear within the West. You could think it’s a bit like the creature in Alien. It’s grown up within the body of Western civilization, but has now burst out of it, and in the process, I think Western civilization is a bit like classical Greek and Roman civilization. It exists as a memory, an inheritance, but I think it’s no longer a living civilization. I think we’ve moved into a new civilization. And I think the same is true for other parts of the world, by the way. I think we are seeing the emergence of probably not a one world civilization, but of several civilizations which have historic links to older ones, but which are so radically transformed by modernity that they really should be thought of as being novel.
05:25 Aaron Powell: What specifically about this radical transformation makes it not Western civilization anymore? Because the Western civilization goes back quite a long ways. And in that time, there have been very different… Eighth century Europe looked very different than 16th century Europe, looked very different from 19th century Europe, but they were all Western civilization. So, what’s so special about now?
05:48 Stephen Davies: Very good question. You started in the eighth century. I think it’s quite true. If you look at the civilization of, say, eighth century gold, it is, although very different in many ways, still the same civilization as the one you get in, say, 18th century France. Why do I say that? Well, it’s because, for me, what a civilization is is a body of commonly understood symbols, ideas and beliefs, symbols being perhaps the most important part of that. To give you an example of what I mean by this, if you show any person, pretty much, a portrayal of a dark, smoky landscape with lots of flames and lots of people in agony, and lots of black creatures with horns and tails, you will know this is hell, and that these are demons tormenting the damned in hell. On the other hand, if you see a rather similar picture from the Indian civilization with Carly or Emma, the king of the underworld, you might think, “Well, that’s hell.” No, it’s not, because in this case, it’s a purificatory kind of post‐state of life, and the apparently malevolent and grotesque creatures are actually benign spirits that are purging the souls of the dead from sin.
06:54 Stephen Davies: The point is that you, as somebody coming from a Western inheritance, will not understand the meaning of the symbols, the symbolic language. Similarly, a Hindu person from the Hindu civilization, or somebody from the Sinic civilization, does not automatically understand all the symbolism of classical Christian or Western civilization. Now, the thing is, if you go back to the eighth century, an educated layman, a landowner in Carolingian Gaul, he would obviously know about the Roman Empire. He could probably read a bit of Latin, but something had changed so profoundly between his time and the time of even the late Christian Roman Empire in terms of the language that was used, the way the world was understood, the kind of mental world that people inhabited, that you could say there’d been a disjuncture. He was living in a different kind of civilization, to one that his late Roman counterpart lived in. And so, I think, something similar has happened… I would date it probably to the period between roughly the 1880s and the 1940s, or something like that. And during that period, I think, the shift away from those commonly understood languages, tropes and memes, became so dramatic, and I think we are gradually moving away into a different world where the historic symbol, symbolic language of the past, no longer means a lot to people, unless you’re a trained historian.
08:15 Stephen Davies: I’ll give you one more quick example before I move on. If you look at the English language, there’s an amazing number of expressions, figures of speech which are biblical allusions. If you talk about “the writing on the wall,” you should realize that that’s a reference to the Book of Daniel and Belshazzar’s feast. Most people now have absolutely no idea about that. Maybe more people in the United States actually than elsewhere, because certainly in Europe, we now live in such a radically secularized society that that whole inheritance of biblical symbolism, biblical meaning, has pretty much become defunct. People have no idea what it means.
08:56 Trevor Burrus: You bring up Christianity, you go through a lot of the different explanations that people are wrestling with, because this, of course, is not… You’re not the first person to wonder why this happened there and then. And, of course, there’s a bunch of different ones, and it seems like that goes back and forth between contingency and inevitability, sometimes, whether or not this was inevitably gonna happen. But one of the explanations is sort of cultural, and you do hear people talk about Christianity, having specific values, or at least maybe ending up maybe Post‐Reformation Christianity, ending up with the value set of where the enlightenment was more possible, and individualism mattered more, as opposed to collective salvation, individual salvation. Do you buy those explanations of Christianity?
09:35 Stephen Davies: No, not at all. The kind of argument that you get from people like Rodney Stark, that there’s something about Christianity almost from the start, certainly from the medieval period, that makes Western civilization more dynamic, more individualistic really, because of the focus on individual souls and salvation, I just don’t buy that. The big problem with explanations like that is, if this is the case, why does it take 700 or 800 years to have an effect? Because if there’s something inherent in the nature of the faith and the way it makes people think, then you would have expected it to have a marked effect in terms of behavior, economic activity, innovation, the like, long before it actually did. So, you then got to try and explain why something else was stopping it doing that. And I don’t think that’s very easy. That’s one big problem.
10:20 Stephen Davies: The other big problem is simply that it’s pretty clear that certainly until, I would say, the 18th century, most Orthodox Christian thoughts, as with most Orthodox thought in most of the world civilizations, is hostile to innovation, which is the key to modernity really. And you mentioned the Enlightenment. Now, this is very controversial. Some historians argue that the Enlightenment grows out of and is in some ways a development of a certain kind of tradition within Christian thoughts. I actually tend more towards the alternative view, the view of people like Peter Gay and others, which is that the Enlightenment is actually, to a very great extent, a attack or critique of traditional Christian civilization. Not true for all of its leading exponents, of course, but for many of them, it is.
11:11 Trevor Burrus: David Hume, that would be definitely true.
11:12 Stephen Davies: Yes, David Hume, Diderot, d’Holbach, you can run through a whole list of people. And that is why you have, in the 18th century, during the Enlightenment, this great big battle between the Moderns and the Ancients, and the idea of that argument is whether or not the inheritance of medieval civilization, a term they actually invented that time, is actually valuable, or whether it’s not. And the general view of most of the Enlightenment thinkers is that actually previous historic civilization is backward, and the thing to do is to move onwards and beyond that. And so I actually am pretty critical of the idea that there’s some kind of connection in the sense of a causal or direct connection between the Enlightenment and Christianity.
11:57 Aaron Powell: So, if it wasn’t, if it wasn’t the birth Christianity leading to the Enlightenment, leading to modernity, what was the cause, the catalyst of this turn towards modernity? And not just in the brief way that you said we see in other places around the world, but what was the thing that made us get into a sustaining version of it?
12:17 Stephen Davies: Yes. That’s the key thing. The key thing is, why does it not stop? There are a whole number of people who’ve talked about this. Deirdre McCloskey, for example, thinks that the reason why this time it was different is because, in about the 17th century, starting with the Dutch, but increasingly other people as well, we began to think that the activity of business, of trade and commerce, was actually morally esteemable and dignified, and that this led to a shift in culture attitudes and behaviors. I certainly think that happened at that time, but I disagree with her that that’s the main explanation.
12:52 Stephen Davies: My own view is that there are two reasons why, in all those previous episodes, the innovation, the dynamism did not persist. The first is that our ancestors are living in a Malthusian world, a world in which most human beings are living at the edge of subsistence all of the time. They’re living one bad harvest away from severe hunger or even starvation.
13:14 Trevor Burrus: And there were a lot of bad harvests.
13:15 Stephen Davies: A lot of bad harvests. The harvest fails one year in five, on average. And every 20–25 years, you get three or four harvest failures in a row, in which case you will starve, just no way out of it. Now, in response to that, our ancestors developed a whole range of social institutions, what James Scott calls the moral economy. And these are everything from institutions, rules, norms, practices institutions like guilds and peasant associations and the like, which have the effect of protecting people against contingency, providing a kind of safety net. But they also, quite deliberately, have the effect of stopping innovation. And that’s my design partly, because most innovations do not work. And if you’re living at the edge of subsistence, you don’t really want to be doing stuff which is risky and gonna use up scarce resources. Paradoxically it’s probably the only way of getting out of that situation.
14:09 Stephen Davies: So, you have actual structural social features of the society, some formal, some not, which stopped change. The other thing is the role of elites. Now, in every human society, I argue, and this is not a novel argument for me, there are basically two kinds of ways you can make a living. You can make a living through productive activity, productive work, trade, exchange, commerce, or you can make a living by basically using force and fraud to take other people’s stuff as rent. And so in every human society, there are broadly two kinds of social groupings. There are the productive classes, the industrious classes, as they used to call them, and there are the idle classes, or the exploitative classes, the ruling classes. They’re the people who control not the means of production but the means of predation. They often do well in the means of production, but that’s because they use their control of violence to acquire them.
15:02 Stephen Davies: Now, if you’re one of these elite groups, you have a rather mixed view about innovation and economic growth. On the one hand, you like it because it means you can take more stuff from the peasants to build big palaces and the like. But on the other hand, you don’t want too much of it because, if you do have too much of it, from your point of view, the peasants become independent, they start to acquire autonomy, and before you know where you are, your middle class starts to bend, undermines your position. The other reason, apart from the sheer inertia of all the social institutions, is that elites actively and deliberately take steps to stop ages of free inquiry and intellectual development and periods of economic growth. The most classic example of this is China, where after the Song dynasty is overthrown by the Mongols, the new Chinese dynasty, which comes to power, just under 100 years later, the Ming, quite deliberately and systematically set about undermining the free dynamic society and economy of Song China. And they do this because they thought it’s brought along disaster, the conquest by the Mongols, and because they think it’s just not a good thing to have a society that is so unstable.
16:12 Stephen Davies: And so those are the things which, I think, stop these episodes lasting and becoming self‐sustaining in previous civilization. Obviously the big question is, why does that not happen in Europe? What is it that’s changed in Europe? And my answer is that it’s nothing structural, it’s actually something contingent. To cut a long story short, back in the 16th and 17th centuries, all over the world we have what is called the military revolution, which is a transformation of warfare brought about by the advent of gunpowder. And in most of the world, what this leads to is the emergence of large empires which dominate most of the great civilizations. All of the Middle East is controlled by the Ottoman Empire, the Mughal Empire comes to control all of India. You’ve already got the Chinese Empire. Russia goes from being a collection of about 30 to 40 states, to being just one big empire and has been ever since.
17:09 Stephen Davies: In Europe, it doesn’t work out that way. In Europe, for, I think, purely contingent reasons, you end up with no hegemonic power. Instead, you have about 14 pretty large and relatively powerful monarchies. And they’re constantly in competition with each other. And that competition is much more intense than it has been in the past, because they have to mobilize much larger resources for warfare basically. And what this means is they now have a very strong incentive to encourage free inquiry, innovation, scientific discovery, and the rest of it is because they soon get to learn that this makes your sinews of war, as somebody once called them, the resources you need for warfare much larger. And if you do not innovate, you’re going to end up like Poland, you’re going to be gobbled up by your neighbors.
18:01 Trevor Burrus: Do you think that… So, is this a product of this warfare in this… It sounds like there’s some parity there. It’s kind of like in a football league or a soccer league, either way, it’s like, “Well, there’s a lot of competition and there’s not just two blue bloods, there’s a lot of competition, which means… So, everyone has to innovate to stay competitive.” But are they doing this because of the wars of religion? Is that even a pre‐cause?
18:25 Stephen Davies: Well, originally… That’s where it starts, but what happens with the wars or religion in Europe in the roughly 1550, 1648 period, at the end of it, it ends with the Treaty of Westphalia in 1648…
18:37 Trevor Burrus: Sovereignty.
18:38 Stephen Davies: And that sets up the modern sovereign territorial state, and a state system which we still have. The Westphalian principles are still the ones that govern international relations to this very day. And in the case of Europe, where it just obviously first started, what you’ve therefore got is a set of sovereign states, ranging from some very small ones to several very large relatively large ones, which aren’t governed in their interactions by a setter of particular rules. But the whole system is intensely competitive, because it’s no longer a super national authority, like the medieval papacy or the emperor to actually arbitrate or control the whole game of nations, as you might call it. So, it’s intensely competitive.
19:19 Stephen Davies: And it becomes pretty obvious to most rulers, by the middle of the 17th century, that there’s a big payoff, for example, from scientific innovation. Learning about things like gravity and physics and mechanics isn’t just a matter for the professors, because it gives you huge advantages in things like ballistics and working out how to make your artillery more effective. There’s all sorts of navigation, again, obviously very important for trade and commerce, but also makes the Navy a damn slight more effective. You’re very interested in promoting astronomy, more accurate accounts of the natural world. So, I think the incentives facing European elites are quite different after about the middle of the 17th century from what they had been for their counterparts elsewhere in the world or for their own ancestors in previous centuries.
20:10 Aaron Powell: Is there a role for ideology in this? If I remember correctly, one of the reasons in the closing of China, that you mentioned earlier, that that was about the same time as the rise of neo‐Confucianism, which was, in large part, a set of ideas about Chinese culture and the closeness, and that there’s something different about us than everyone else, and the way you… Is to lock down any ancestral worship and all of that. Does the ideology just kind of follow on, that it was contingent, and we’re closing China anyway and now we have a reason to justify it? And in other places, or does the ideology then impact which way these contingencies go to?
20:47 Stephen Davies: It sounds as though I’m sitting on the fence here, but I think the answer is both. [chuckle] Let me explain what I think about that. I broadly take the first view, the kind of materialist view, in which ideologies are essentially rationalizations or justifications for things that people want to do anyway. And also, a bit more than that, a way of working out intellectually that if you want to do X, why should you do it and what would be the best way of doing it? They’re not just purely instrumental reasoning, I don’t think. But I do tend towards the view that ultimately material interests and conflicts of interests are then expressed in the form of ideological conflicts, which are following on to that, a product of it. However, the ideologies do, in fact, play a role because there’s a kind of feedback loop in which the ideological superstructure, to use the Marxist term for it, then affects the way people actually behave, and that can tend to affect the material side of society.
21:43 Stephen Davies: Now, I think, in the case you mentioned, the Chinese case, there’s nothing inherent in Confucius that means it had to be the kind of ideology you’ve described. But under the Ming emperors, the version of Confucianism you’re talking about, conservative neo‐Confucianism, there are radical versions as well, is the one that comes out on top. And it’s, on the one hand, partly because the Ming emperors, for highly pragmatic reasons, promote it because it justifies what they’re doing, but also, as time goes on, people genuinely, sincerely believe this, and this then in turn leads them to do things they might not otherwise have done. So, although I would ultimately give primacy exponentially weight to the material circumstances, I don’t think that ideas are purely an epic phenomenon or determined by the base. I think that they are… Or they also act upon the way people behave.
22:31 Stephen Davies: Now, in the Western case, enormously important, because what happens there is that, at the end of the 18th century, there is a global population crisis basically. World population has more than doubled between roughly 1690 and 1790. China has more than doubled. The only part of the world that has not seen a huge growth in population at that time is Africa, for reasons that we don’t really understand. Everywhere else, things like the potato, have meant that a lot more people are surviving and a lot more people are living. By the time you get to the 1780s, 1790s, it’s pretty clear in most parts of the world that the population is pushing up against structural limits, resource limits. You’re starting to get severe land hunger, famine is starting to become more acute, you’re starting to also get severe political unrest. And this manifests itself, in the late 18th century, in huge political uprisings all over the world, all around the Atlantic, the French Revolution, American Revolution, all the revolutions in the Spanish Empire but also elsewhere.
23:32 Aaron Powell: And what happens is that European elites, some of them, in parts of Germany, Britain, Sweden, France, they deliberately act in response to this to sweep away a lot of the old institutions that previously checked innovation. They’ve been doing this for quite a while anyway, but they really doubled down on it. Now, that’s where the ideology comes in, because what this also does is to lead to the emergence of quite a lot of powerful social grouping that actually benefits from the change and wants more of it. These are the kind of protoliberals, if you will, the classical liberals of the early 19th century, late 1830, 19th century. And they’re opposed by a rival coalition, if you will. And so you’ll get a huge ideological‐political conflict in the first half of the 19th century, which the forces of change and dynamism win.
24:26 Stephen Davies: Now, that’s where the ideology matters, because to the extent that they had it worked out ideology, they were able to realize what it was they needed to do to have more of what they wanted. And also this provoked a counter‐ideology, traditional conservatism, which wants to basically do what the Ming emperors had done in China. And that’s a rival social coalition made up basically of some aristocrats, most of the peasantry and most artisans. And they fortunately lost the argument. But again, their ideology tells them what it is they need to do in order to stop the changes they don’t like. So, I wouldn’t say that ideology is a pure epic phenomenon. It is very important, and I think historically, in the case of Western civilization, enormously important in that period.
25:09 Trevor Burrus: One word that hasn’t been mentioned here, which I think maybe our listeners were expecting to hear, is capitalism.
25:14 Stephen Davies: Right, yeah.
25:15 Trevor Burrus: Why hasn’t that figured into this account yet?
25:16 Stephen Davies: Well, I do mention it in the book.
25:19 Trevor Burrus: Yes, but not yet here.
25:20 Stephen Davies: Not yet, no.
25:21 Trevor Burrus: But you also downplay it a bit.
25:21 Stephen Davies: Yes. I tend to agree with Deirdre McCloskey, who I mentioned earlier, that the key thing really is innovation. But what innovation, sustained innovation, both necessitates and leads to is what we call capitalism, an economic system which is market, trade…
25:35 Trevor Burrus: Trade tested betterment is what Deirdre was talking about.
25:38 Stephen Davies: Yes. Exactly, yes. Now, the thing is though that people tend to think that capitalism just means market economies, private ownership of the means of production, trade and exchange. That doesn’t work unless you are prepared to say that capitalism has always been around, because you have those kinds of things in ancient Rome, you have them in Syria. Some of the world’s first multinational trading companies are in Syria, in the ancient, near East. So, if capitalism is the real thing that drives the modern world, and it means just market economies and trade in private property, then why did it take so long to have an effect? The view I take is that capitalism is actually a distinctive kind of market economy. So, you have the wider category of market economies, and then you have the peculiar subset of capitalist market economies. And my view is you don’t really see capitalism in that sense fully developed until the early 19th century.
26:31 Stephen Davies: And so what makes it different? Well, it’s things like the existence of large complex firms as a matter of course rather than as an exceptional thing for just long distance trade. It’s marketing capital itself, marketing investment, quite an elaborate and developed one. The Romans have one, but it’s nothing like as developed as the one that you see by the early 19th century in both sides of the Atlantic. And a true credit system with quite sophisticated and elaborate means of raising money on the promise of future production, which reduces the cost of investment dramatically, because otherwise you have to basically save up all the golden stuff before you actually make the investment. Whereas with credit, it’s like a time machine. It brings future income into the here and now to create the physical assets that you need to reduce the future income. So, it’s kinda by your bootstraps thing.
27:21 Stephen Davies: Those are all features of capitalism. Now, that means that capitalism is a central feature of modernity, and I think the evidence of the last 100 years is that you can’t have a non‐capitalist form of modernity. We’ve had several gos at doing that, and none of them have worked. The evidence means to me that capitalism or the capitalist way of organizing a market economy is, so far, at any rate, an essential feature of the modern world, and it’s the form that the dynamism and innovation it takes in the economic sphere.
27:52 Trevor Burrus: So, when is this stuff all in place? We’re taking out about 1750, later half of the 18th century, and then we have what we call “the long 19th century,” often termed from 1790 to the beginning of the First World War. Is it sustaining? At some point, it seemed to me that the introduction of real growth, especially the level of growth, would have people increasingly choosing growth‐minded policies over alternatives, such as very cloistered conservatism or something like that. And so what would you put the 19th century story in here? Because if someone says, “Hey, look, I can make much more money, and I prefer that to religious fundamentalism that can make me really poor.”
28:34 Stephen Davies: Well, I think that the 19th century is the transitional era really. As I say, the first half of the 19th century, up to roughly the 1860s, there’s this enormous ideological conflict, which is won by the forces of progress, if you want to call it that. Then, as you say, in the latter part of the 19th century, it becomes obvious that the project of restoring or maintaining the Ancien Regime is pretty much over and done with, even in places like Russia or Austria or Hungary. And you get what they call the Belle Epoque, the period from roughly 1870 to 1914, a period of dramatic globalization, incredible technological innovation, much more than we have now actually. Most of the technologies that we think of in the modern world are invented in that period, the Belle Epoque, and it appears that that’s the point at which I think it has become, as you put it, set in place. And most people now want to see more of the good stuff. They’re not interested in going back to the way things were, throne and altar.
29:30 Stephen Davies: However, big however, things also take a bad turn at the same time. And the key thing here is the rise of economic nationalism and the rise of what nowadays, I suppose, you would call the developmental state, which you see first in Imperial Germany but also, to some degree, even in the United States. And it’s the idea of a… That you can have all this kind of modernity but have it controlled by the collective political process. And so the project of Bismarck in Germany is to transform the rural backward parts of Germany into a modern industrial society, but the state plays a central role in this. And you see similar phenomena in Italy at that time, and through things like railroad subsidies and the extensive use of tarrifs even in the United States, although that’s slightly a different case. And unfortunately this has pretty disastrous geo‐political results, I would argue, because it leads to conflicts of imperialism basically. And in particular, it ultimately leads to a conflict of imperialism between Germany and Russia over the Balkans, which culminates, of course, as we all know, in the Great War of 1914–18, and we then have the total disaster of the central decades of the 20th century, which we don’t need to go into. We all know what happened then.
30:44 Stephen Davies: But the point of about that is, I think, that you’re no longer dealing with people who are opposed to modernity. Fascists and Communists both are pro‐modernity, is just that they want a particular kind of modernity, one that has a very central active role for the state, plus a bunch of other stuff. It turns out that neither of those roots is compatible really with the way the modern world is, particularly not the Communist one, because of the way it denies certain fundamental economic realities that you just have to have if you’re going to have a successful economy of any kind, modern or otherwise. But that’s what I think is going on now. Whereas up to about 1860, maybe 1870, the real argument is between people who want to restore the Ancien Regime and people who want modernity to continue and intensify after 1870, the argument has come to be between people who want different versions of the modern world.
31:38 Trevor Burrus: So, it seems like now you might have some of the people on the democratic socialist front, kind of seem like having this Bismarckian debate again, where they’re gonna say, “We need to, not industrialize, maybe “greenify” the rural areas via watered system for state and the urban areas, a large system of state capitalism and all this control, so we’ve kind of gone back around.” Do you see this going in a good direction? Are we on the modern path in such a way that we can say, “Well, even if we tinker with carbon taxes and subsidies for various things, and controls on energy and all this stuff, we’ll still be continuing on the modern path”?
32:17 Stephen Davies: Well, I wish I could be confident about that actually. One of the things I do argue in the book, is that just as modernity was not inevitable to start with, it’s not inevitable it would go on forever. There are people like Matt Ridley, for example, who are very optimistic and think that the kind of inertia or the momentum of where we are is gonna just keep us going. I’m not quite so sure myself. It’s true that you have exactly as you describe, people not just on the left but also on the right, the national collectivist right that is emerging in most of Europe now, who want to have their cake and eat it. They want to have a modernity, but they want to also reverse some of the things that modernity has brought such as large scale urbanization or very rapid population movements and increased social and cultural diversity. In most countries, they’re against that. They want to assert a thick version of identity. On the other hand, you have people on the left who say, “Yes, we want modernity but we want to make it more green, we want to do this and that.”
33:12 Stephen Davies: But you are also, I think, particularly along some more radical elements of the green side getting a revival of a kind of explicitly anti‐modernist ideology. Now, not that they want to go back to the Ancien Regime, but they think that the modern world is heuristic and pious, going to destroy the environment, and that we should really radically simplify society and abandon modernity. At the moment, that is a fringe view. The problem is that what we might well do, unintentionally perhaps, is make that vision come true by messing up the framework we have for the modern world, and I think there are a number of ways in which we could do this. One is that if we do get it on the root of having a central role for the political process in allocating resources for whatever reasons, environmentally greening the economies, sort of that, we could end up with such a misallocation of resources, a misallocation such a scale that the entire process of growth is at least stalled, maybe even stopped.
34:12 Stephen Davies: Another problem though is that we might well accidentally choke off innovation, because what we have got now is an increasingly transnational regulatory regime. Most trade these days and trade talks are all about regulatory harmonization. They’re all about aligning different regimes of regulation of economic activity. And so increasingly the entire world is covered by a great network or web of increasingly detailed and specific regulations, and that increasingly makes innovation, economic and other kinds of innovation, very difficult. Now, it’s done for various often good reasons, but I am a bit concerned that, if we aren’t very careful, we will recreate at the global level the kind of incentives that faced powerful groups historically, which is to actually not allow change in one way or another.
35:06 Aaron Powell: Given that though, the kind of globalization of regulation has been happening for some time, have we seen effects? Is innovation… I’m thinking like Tyler Cowen’s “Great Stagnation” thesis, do you buy into that?
35:19 Stephen Davies: Not as much… I’m not fully on board with Tyler, but I think there is something in what he says. I think there is quite strong evidence that we are not innovating at quite the rate that we were 100 years ago. A lot of the technologies that we see now are nice and they make our lives comfortable, but they don’t bring the significant productivity changes and increases that things like electricity or the internal combustion engine did when they were first introduced. Now, I actually think that what is happening at the moment is that certain other technologies are, in fact, coming through, which are going to have an equally transformative effect, things such as vertical farming, cultured meats, a lot of bio‐technology, which are going to have as big a transformative effect as those ones I just mentioned. But undoubtedly, in the last 30 years, I think, there has been a kind of stalling of innovation. Now, it could be caused by other things, but you can’t help thinking that the costs of innovation are gradually being ratcheted up.
36:15 Stephen Davies: It may also be the case that institutions that at one time perhaps encourage innovation are now hostile to it. I’m thinking particularly of intellectual property, which I think increasingly, at least in the way in which it’s enforced here in the United States, are running counter to innovation and protecting existing patent holders basically, who are just drawing rents rather than actually doing anything very productive. So, it could well be also that we’ve got certain institutions that have outlived their usefulness and if we’re not careful they will stop the innovation.
36:46 Stephen Davies: The other big challenge is that we do face increasingly tight energy constraints, and what that requires is a major breakthrough in energy technology. Specifically, we need to find a way of storing and compressing and transporting energy, a super battery, if you will. Now, I’m confident in the fact that we will do this, but that is a key technology. If we don’t do that hypothetically, then things really get quite tricky by the middle of this century, because at that point we will have a global population pushing right up against a pretty hard energy supply limit. Fortunately, I think we are going to find a way around that, but that’s another big challenge.
37:24 Trevor Burrus: Well, does that include nuclear or you’re just assuming that we’re not gonna move toward nuclear?
37:28 Stephen Davies: We could use nuclear power, but the problem is that different kinds of energy source have very different uses. You can’t use nuclear power really for things like, above all, transportation. We are actually a quite lot of ways of generating electricity. The problem is there are certain things you can do with fossil fuels, particularly petroleum, that it is almost impossible or horrendously expensive to do with other sources of energy, transport being the main one. And what you need is a way of compressing and transporting the energy that you get from, say, solar power or wind power, so that it can do those functions at the moment only oil can do.
38:05 Aaron Powell: I’m curious how communications fits into all of this. We go back to either early modernity or these pockets of modernity‐like things. One of the features back then was things could stay in pockets because what was happening in a part of China, no one knew about in Europe, and if they did, it was like a handful of elites hearing from people, but certainly the common people had no idea about any of this. But now we’ve got instantaneous global communication between basically everyone on the planet, and I can see that playing out. On the one hand that gives states and regulators more pathways for control and more information about what they want to control. But on the other hand, it feels like it might cut against some of these turning away from modernity, because if your country starts doing this stuff, you can see, “Well, these guys over there seem to be a lot better off because they’re not doing it.” And your point about bigger populations enable more specialization, we’re now operating at a global… We specialize on the global scale in a way we never could before.
39:10 Trevor Burrus: Or your Etsy store can keep you alive or keep you… Can give you a business, but only ’cause you sell to the whole world, yeah.
39:15 Aaron Powell: Yeah. Or your company can have developers in India working with engineers in America, and so on. Does this have a sustaining effect, or do you see it as potentially a dangerous effect? How does that change the calculus for all of this?
39:30 Stephen Davies: It’s definitely a sustaining effect, in two ways. One is it is almost impossible to contain the movement of ideas now, as governments all over the world are finding, not least in China, where, as we know, the party is very keen to keep a lid on all kinds of things but maybe just can’t do it. The Chinese are the world’s greatest experts at getting around bureaucratic rules because they have two and a half thousand years of experience, basically. So, yes, that’s absolutely true. The information now flows much more rapidly, people can move around at much lower cost and much more easily. Some people don’t like this, but I think it’s a great thing. And the result is that, therefore, it’s very, very hard to contain the spread of ideas. And as you rightly say, what people will observe is that if you check innovation in your own country, you fall behind others very rapidly. Parts of the world have banned apps like Uber and Lyft, pretty soon anyone from those countries who goes to a part of the world like United States where there’s free access to them will realize that this is a serious loss they’re imposing on themselves. And this makes it much more difficult to cut yourself off from the rest of the planet and go your own way in that sense. That’s why, I think, the real risk is the growth of supernational regulatory regimes, because those are global in their effects.
40:39 Stephen Davies: So, I think that generally though this is a very positive development. And to give you a very quick little story about how that goes, these days, once a technology has been discovered, it’s almost impossible to contain it. On the other hand, the Chinese learned how to make porcelain probably in the third century AD. It takes the Europeans until the late 18th century to work out how to make porcelain, partly because the Chinese take great pains to keep it a secret. But the point is that, in those days, copying and imitating technologies, which is often as good as inventing them, better actually, was used to be very, very difficult because the cost of communication meant that it was hard for the ideas to move around, plus people didn’t have adequate scientific methodology in place for many cases. That has changed now.
41:22 Aaron Powell: It seems like one of the lessons of your book is, don’t take wealth for granted, but also maybe in what we’ve been talking about in the last 10 minutes or so, that we do take wealth for granted, when we come to wanting to regulate everything and just move some levers around. Do you think that’s a general overall problem that we have?
41:39 Stephen Davies: Yes, I do. The thing is that, as you say, we take all the benefits we have in this modern world for granted. We assume it is just natural that we should live in a world where to lose a child or to lose a parent or a sibling before you reach 21 is something shocking and exceptional, when in fact that’s the normal historical experience until well into the 19th century, and until recently for most of the world. And because we take it for granted, we tend to think that the wealth we have and the effects it has are just like the rain, we can just do things with it, and that’s a very dangerous attitude. Because if you’re not very, very careful, you can find that you’ve killed the goose that’s laid the golden eggs basically, and you’ve fallen off the elevator of modernity and you’re back into the world of our ancestors. And that’s why… As you say, one of my central messages is do not take this for granted, realize how incredibly fortunate you are to be alive now and not living the life that most of your ancestors did, and understand why you’re so fortunate because that will give you an idea of what you shouldn’t do.
42:45 Aaron Powell: How do we then deal with… One of the problems with modernity is that it’s not… The positive effects of it are not uniform. Some of us have benefited quite a lot from it, and the changes that it’s constantly bringing, that this system of dynamism is constantly bringing, benefit some and harm others or benefit them much slower. And so a lot of what we’re seeing with the rise of populism in Europe, the rise of Trump‐ism in America, seems to be a reaction against that. We can criticize these ideologies and there’s a lot to dislike about them, but this aspect of it, these people saying, “Look, my way of life is being destroyed by this dynamism. I can’t get a leg up anymore,” is a genuine thing. They’re actually hurting. How does this message and how does this story of modernity play into that, and how do we convince them of the values of this and not killing the goose that lays the golden eggs?
43:42 Stephen Davies: I think there are two separate problems that you’ve put together there. One of them is the fact that the results, the benefits and gains from intensive growth, the modern world, are not equally shared. Now, what you can show pretty easily is that actually the bulk of… Even if some people do much better than the others, everyone is better off. The specific problem we have at the moment is that the two groups who have gained enormously in the last 30 years are poor people in poor countries, particularly very poor people in poor countries, and rich and well‐off people in rich countries. And the people whose living conditions have not actually gone down but have stagnated perhaps, nominal income terms anyway, are the average income people in rich countries, and they’re the people who are making the protests you’re talking about.
44:32 Stephen Davies: Now, I tend to think that actually that will be self‐correcting. There are reasons why that will not continue the way it has done. The problem is that that could take quite a while, and I’m afraid if somebody is annoyed because he hasn’t had a pay rise for 10 years, effectively, saying, “Well, okay, things will work out in about 20 years” is not going to console him or reassure him. That’s, however, ultimately a political challenge. And I think the answer is to find ways to crack the problem of raising the incomes of the average person. And you can argue about what you need to do that. I happened to think myself that actually artificial intelligence and automation is going to have a big impact in that regard, and that 10 years from now, we will wonder why we were so worried about it.
45:20 Stephen Davies: The other more difficult problem is the one you alluded to at the end there, which is that of people who just find change a loss. They experience change and transformation not as a benefit but as a loss because they lose what is familiar, they lose what is… What is it that they’ve grown up with, what they are comfortable with, what they feel they know. And that’s very difficult and that, I think, is what drives a lot of this so‐called populist politics in Europe and here in North America and indeed elsewhere. I think that the answer to that is symbolic politics. Simple acts of public ritual and explicit memorization of the past, if you will, tend to actually alleviate a lot of that kind of anxiety, because the feeling will be, “Well, then maybe things have changed quite a lot, but there are still things that are the same.”
46:13 Stephen Davies: And so I think that that kind of, I can say, public symbolic politics is the way to go. The Victorians are the example we should look to. If you look at Victorian Britain, this is a society utterly, totally transformed by the Industrial Revolution, radically changed, as they were all aware. But at the same time, what the Victorians do is they… That when they rebuild parliament, they rebuild it as a modern Gothic building. That’s actually a deeply symbolic act. What you do is you say, “Well, this is a medieval institution, it’s part of our history for several hundred years, so we’re going to house it in a faux medieval building.” And you may laugh at that and mock it, but actually I think in terms of the cultural politics I’m talking about, that is very, very powerful and important because it reconciles people who are otherwise discomforted by the process of rapid change to the changes going on around them. And, of course, after a while they come to realize they don’t really want to go back because they don’t want to give up the comforts that they’ve acquired.
47:33 Trevor Burrus: Thanks for listening. Free Thoughts is produced by Tess Terrible. If you enjoy Free Thoughts, please subscribe to us on iTunes, or wherever you get your podcasts. If you’d like to learn more about libertarianism, visit us on the web at www.libertarianism.org.