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THE MIND AND THE MARKET

Jerry Z. Muller

Subtitle: Capitalism in Western Thought, Random House, NY., 2002, 487 pgs., index, notes, paperback

 
 

Reviewer Comment:
I learned a great amount from reading this book. And it complements Dr. McCloskey's three volumes. Here - Dr. Muller refers to his selected authors as 'intellectuals' and of course they are. But for me they are a particular group, a component of them, not all those who can be classified as 'intellectuals' are of the 'intelligentsia' - Rather they are what many others (including me) call the 'intelligentsia' - or Dr. McCloskey calls the 'clerisy'. That is, smart and well educated people who self-determine that their personal roles are to change society to what they consider 'the better'. Dr. Muller credits these individuals, as do many other commentators as well, as among the elite influencers of 'public opinion'; which was a growing power source in Europe as a larger and larger segment of the population gained political power. The more the masses could vote, the more critical it was (and is) to insure that they vote acccording to the enlightened thought of their intellectual betters. Moreover, when they do not, or ignorant politicians seek votes, the envious intelligentsia must interveen.
As his subtitle indicates, this is not a study of capitalism itself nor of the economic history of Europe during which capitalism became the driving force. Rather, it is a study of the thoughts of a selected group of these intelligentsia about not only or mainly the economics of capitalism but its interrelationship with culture, morality, and ethics. Or as he writes in the introduction: "That is why this is a history not of economic ideas, but of ideas about the capitalist economy." However, he cites his methods as an historian which enable him to place the individuals' thoughts in both the context of their personal biographies and the historical setting in which they lived. And he does have to outline their views on economics in order to place their published pronouncements on the cultural and social results of capitalism in to context. Dr. Muller describes the personal biographical background of each author in sufficient detail to demonstrate the connection between each author's life experience and his thoughts - theories - on capitalism.

The chapter titles indicate the names of these individuals. Most are well known to general students, but several are almost unknown and not usually included in such compendiums as Thomas Neill's Makers of the Modern Mind, or Robert Heilbroner's The Worldly Philosophers. Dr. Muller includes critics of capitalism as well as its supporters, but mostly critics. For my purpose the chapers on the most recent authors such as Schumpeter, Keynes, and Hayek are most important.

As is common about many philosophical issues contention over these same issues remains central to the political agendas of adversaries today. Definitions of 'capitalism' itself are contentious. Even more so are opposing concepts about the definition and nature of 'money' and its role in capitalist and other economies - a topic for another discussion. I include Dr. Muller's book with others in a general survey of current thought about capitalism, markets, money, and 'social justice'. The reader may notice that much of the criticism and opposition to 'capitalism' is based not on economics but on concepts of morality and ethics or about claims that 'capitalism' degrades culture. But this is a response to the promoters of economic theory who early on viewed economics in a purely materialistic way, even positing their subject as the actions of 'economic man' - that is one whose desires and actions are motivated by purely materialistic goals. Thus the two groups are talking past each other still, today.

 
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Bourgeois Role

 
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McCloskey, Deirdre - Volume I - The Bourgeois Virtues

 
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McCloskey, Deirdre - Volume II - Bourgeois Dignity

 
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McCloskey, Deirdre -Volume III - Bourgeois Equality

 
 

Introduction:
The author starts out directly, writing: "We live in a world shaped by capitalism"... and, "It (the book) is based on the assumption that capitalism is too important and complex a subject to be left to economists." Further, "That is why this (book) is a history not of economic ideas, but of ideas about the capitalist economy."

He notes the development about which I have objected for years, namely, the separation of economics as a separate academic and professional discipline and subject matter from its real context as an integral component of 'political/economy'. This, he notes "have come at the expense of marginalizing many of the issues about the market that are likely to concern reflective people." But he also notes that 'the moral, cultural, and political ramifications of capitalism' have recently become the subject of serious concern and attention for commentators. The resulting losses of the 'forces of commerce' have included civic virtue and the "willingness to defer gratification upon which capitalism depends.". "Individualism and selfishness were destroying any sense of collective purpose."
Dr. Muller cites his interest in our contemporary conflicting analysis of the 'virtue' or not, of capitalism and of its manifestation in 'the market' on the grounds of moral, cultural, and political criteria, of which he mentions many. He decided to investigate the historical background of these theories and found that they all have lengthy pedigrees starting from the very origin of intellectual recognition that something causing radical change in human relations was taking place.

Recognizing all this, he undertook to research the history of thought about capitalism as found in the writing of major Western - European - intellectuals back to the early 18th century. He writes: "I found that reflections on the cultural, moral, and political effects of capitalism had been central not only to intellectuals often treated as 'economists' such as Adam Smith and Joseph Shumpeter, but to figures not usually thought of in connection with the market, from Voltaire through Hegel, from Edmund Burke through Matthew Arnold and beyond." The result is this book in which each chapter is focused on one or several writers. In connecting their views he has found several general themes, which he has addressed. Among then: "Among the issues that recur throughout this study is the question of poverty and wealth." "Then there are questions of capitalism and culture." "How the market economy affects the family has been another long-standing focus among the analysts of capitalism." "The relationship between capitalism and equality is another recurrent theme." "A larger theme, uniting several of those mentioned so far, is the effect of the market on pre-market institutions - political, religious, cultural, economic, and familial." "Because the rise of the market to its position of centrality in modern European societies coincided with the rise of intellectuals as a distinct social group, another recurring theme is how the thinkers in question conceived of the role of intellectuals within a capitalist society."

He writes, "The Mind and the Market moves between practical, concrete capitalism, and intellectual reflection on capitalism - between what the Viennese satirist Karl Kraus in his Magical Operetta, called 'tachles' and 'shmonzes'." He continues with a discussion of his methodology for historical research and his selection of the writers and their thoughts that he considers most significant. A feature of his method is to place each author and their thought in the context of their time.

 
 

Chapter 1 - Historical Backdrop: Rights, Righteousness, and Virtue
The content of this chapter is an important confirmation of the very same appraisal Dr. McCloskey presents in her three books on the Bourgeois role in modernization and expansion of market capitalism. Dr. Muller cites the most influential authorities going back to Plato and Aristotle and the Bible. All the intellectual preconditions on which capitalism; modern ideas about money, markets, competition; and roles of individuals in society are based were opposed by both civil and religious opinion and institutions. Some of the same concepts appear, such as honor, dignity, trade, markets and liberty. As he notes, the fundamental debate is "about the moral worth of a society organized around markets" Societies were structured on a hierarchal basis in which everyone had a status and knew what it was. Work, especially artisan and merchant activities were disdained. Making 'money' was denounced. There was great 'hostility toward trade and money- making' in both the religious and civil traditions. He continues: "The most suspect form of commerce was the making of money from money." Lending money which generated interest was by definition 'usury'. Wealth itself was 'disparaged' by moralists. Dr. Muller traces published views on all this from classical and Biblical times through the middle ages. One powerful classical authority he does not mention is Cicero, who dismissed all forms of commerce out of hand and preached that politics was the only really honorable way of life.

He cites the admonitions of St. Bernard of Clairvaux warning about Jewish influence in money making, even though the Cistercians were noted for their development of profitable marketing activities. Moreover, he writes: "Thus began an association of money-making with the Jews, an association that would further taint attitudes toward commerce among Christians, and that, as we shall see, would survive in transmitted forms in the reflections of modern intellectuals."
I see a 'feedback loop' here. Jews were denounced because they were 'money-makers' and 'making money' was denounced because it was considered a Jewish activity.
Luther was "hostile to commerce in general and international trade in particular." not to mention usury. And. "That trade was inimical to communal cohesion was a staple of the civic republican assumptions of early modern political thought." He cites Machiavelli as a proponent of the classical view on 'virtue' and self-sacrifice in favor of the community - the 'public good'. "Republican 'liberty was the freedom to take part in preserving the freedom of the commonwealth from foreign domination." - A classical Greek conception of the meaning of 'liberty'. Dr. Muller then discusses the development of civil law in contrast to Christian and classical traditions.

 
 

Chapter 2 - Voltaire: "A Merchant of a Noble Kind"
In this short chapter we learn a great deal more about Voltaire's personal life and activities than one finds in the usual essay about his political opinions and influence. As is his objective with all these intellectuals, we find that Dr. Muller identifies the way in which Voltaire's personal life agenda and activities corresponded with his public political pronouncements and how his theories subsumed his views on economics (especially capitalism) beneath his theories on culture and social issues. And we learn also about Voltaire's advocacy for an increased role and power for intellectuals (of a certain sort) in creation of public political policy.

 
 

Chapter 3 - Adam Smith: Moral Philosophy and Political Economy
Dr. Muller devotes much more space here for a fuller description and analysis of Smith's thought (and real meaning) especially in his two main books. The Wealth of Nations, and The Theory of Moral Sentiments, but also other publications, letters, and lectures. Smith's full range of opinions is revealed to be much deeper and richer than one finds in the typical quotation about 'the hidden hand'. In fact much of the standard concepts today about Smith's theories about economics are shown to be misleading at best. He was a moral philosopher before he was an economist.

 
 

Chapter 4 - Justus Moser: The Market as Destroyer of Culture
This German gentleman was a contemporary of Smith's who vehemently opposed capitalism mostly on cultural and social grounds. But this was in support of his own class position in medieval society, in other words special interest. Moser's attack on 'capitalism', 'the market economy', and industrialization was based largely on his view that these were disrupting established society, which of course they were. He favored the 'status quo' of feudalism, manorialism, guild control, hierarchy and 'honor' based on status. In other words, he was a staunch defender of the conceptions about the superiority of medieval life and society. But he, himself, was a member of the intelligentsia determined to advance this category into running the state.

 
 

Chapter 5 - Edmund Burke: Commerce, Conservatism, and the Intellectuals
Burke was a British politician whose influence waxed and waned on Parliament. He is best known to students today for his Reflections on the Revolution in France, but his speech Thoughts on the Cause of the Present Discontents brought him to public attention. And his speech Vindication of Natural Society and lengthy attack on the misconduct of the British East India Company for its greedy exploitation of India generated much contention in Parliament and Royal politics.

 
 

Chapter 6 - Hegel: A Life Worth Choosing
We learn quite a bit about Hegel in this chapter. Again, it is clear that his philosophical theories were the outgrowth of his personal experience. He was another member of the intelligentsia, but a supporter of Hardenberg in the reform campaign to concentrate power in the bureaucratic state. He stressed study of history to find the true nature of 'liberty' as opposed to the excesses of the French revolutionaries. Dr. Muller writes: "Hegel sought to explain that, rightly understood, the institutions of the modern world were worth affirming, for modern institutions have their own ethical dimension." And further: "For Hegel, the fundamental fact about man is that he is capable of being free." Dr. Muller continues with much more on Hegel's views of civil society and such important features as private property. And Hegel believed in the positive role of the entrepreneur in the expansion of consumers. Dr. Muller writes: "The market, that is to say, did not just satisfy wants, it created them." And: "The market was a want-creating machine." And all this was good as it promoted the sense of individuality as long as the consumer has the self discipline to control his desires. There is much more valuable expansion of Hegel's philosophy in this chapter. Dr. Muller concludes with this: "Hegel's influence upon later intellectuals was formidable, and reached well beyond German-speaking Europe."

 
 

Chapter 7 - Karl Marx: From Jewish Usury to Universal Vampirism
As usual the author provides a brief but excellent biography of Mars and Engles that links their thought to their life experiences. This is a lengthy chapter with a rich content that defies a brief summary. The title indicates Dr. Muller's exposition of Marx's core belief in the antisocial essence of the Jew. From an elaborate critique of all the evils that Jews were supposed to embody, Marx expanded to claim that the central social problem was the extension of 'Jewishness' to all of modern 'capitalist' market economy.

 
 

Chapter 8 - Matthew Arnold: Weaning the Philistines from the Drug of Business
This author was another of those who denounced capitalism on cultural, moral, ethical grounds but from a practically opposite position to that of Marx. He favored 'high culture' considered that of the aristocratic class and bemoaned its being downgraded by the pretensions of the middle class of business and industrial society. He was an example of the intelligentsia cited by Dr. McCloskey.

 
 

Chapter 9 - Weber, Simmel, and Sombart: Community , Individuality, and Rationality
Dr. Muller considers all three of these sociologists together because they were of one generation and addressed the same issues related to 'capitalism' but from different points of view.

"Setting the terms"

In this introduction he writes, "What is capitalism" as the important philosophical and academic subject of the age. And further, "Perhaps never has capitalism received the level of intellectual attention and illumination as it did in Germany during the reign of Kaiser Wilhelm, in the two decades before the Great War" "At the center of those debates were three academics: Max Weber, Georg Simmuel and Werner Sombart". "It was an era when German universities, research institutions, and museums - paid for by the state and by state-solicited donations from newly wealthy capitalists - were widely regarded as the best in the world, and when the prestige of professors within Germany was at its peak".

Indeed, and the results has been a political, social, academic disaster. This is the era in which the 'treason' of the intelligentsia as Dr. McCloskey terms it spread from Germany throughout western Europe and America. This is the time in which American academics flocked to Germany for graduate study and returned to the U.S. with 'enlightened' visions of total change of society via educating the youth to German ideas. That these ideas were promoted by the Prussian 'State' to further its conquest of the rest of Germany did not matter, if it was even noticed. Thus in economics we have the conflict between the German Historical School and the Austrian economists - Georg Knapp versus Carl Menger and Ludwig von Mises. And this Georg Simmel is the intellectual beacon whom Herbert Frankel singles out in his devastating critique in - Two Philosophies of Money. of the 'Chartalist' theory of the nature of money. Thus this chapter is a very significant reference source for understanding the academic situation today.

For the sociologists, Dr. Muller notes: "The debate focused on the question 'which human type is promoted by modern capitalism'" He addresses the influence of Ferninad Tonnies. "There were two fundamental forms of social life, (Tonnies) asserted. In community, individuals shared a basic solidarity. They were united by an 'organic will,' by cultural assumptions so deeply shared that they became virtually second nature, leaving little room for conscious choice". "He, (Tonnies), saw community in its broadest form in the way of life of the guilds and villiages championed a century earlier by Justis Moser". (see above).

And this also is the theme of Polyani. The other 'human type' was that occupying a 'market economy society'. And Tonnies was very pessimistic about the future of society created in this fashion.

Muller writes that Tonnies' book "presented a fundamentally pessimistic vision of historical development, depicting modern man as moving from the solidarity of shared aims and beliefs into a calculating society without shared ideals". "Tonnies' description of modern society and of its central institution, the market, was heavily influenced by Marx, and though he regarded himself as a man of the left, his portrait was steeped in the prejudices of the new integral German nationalism of Paul de Lagarde". "Tonnies repackaged romantic anticapitalism at a time when Germany was once again being transformed by the market".

"Commercial Transformation"

Dr. Muller describes the transformation of German industrial and economic power prior to WWI.
"Germany was also at the forefront of the development of the most characteristic feature of the twentieth century capitalist economy: the bureaucratic corporation".

In his excellent book, Capitalism, Goeffrey Ingham goes into more detail, showing the significant differences between 'capitalism' as it developed in Germany and its development in Great Britain and Anglo-Saxon countries. But Muller does note one of the significant differences, that German industrial production remained largely in ownership by families, but with professional management, with financing by banks rather than by widespread ownership of stocks.

He continues: "The division of labor, once evident primarily in production, now became characteristic of management as well". He cites other results as well.

"Weber: Efficiency and Disenchantment"

Dr. Muller writes his characteristic brief but incisive biographical background of Weber and notes that "Weber's analysis and policy prescriptions flowed from his political commitments". Muller notes that Weber was a 'liberal nationalist'. Weber "was a nationalist because he thought that in the modern world the nation-state was the broadest framework that could exert real power, but also because he felt that ultimately Germans ought to put the fate of their own society and culture above those of other peoples".

Do you see the image of Hitler appearing in the mists? Dr. Muller continues for many pages with his insightful appraisal of Weber's thought and publications.

"Simmel: Money and Individuality"

Dr. Muller writes: "The theme of capitalism as the triumph of means over ends was elaborated by Weber's contemporary, Georg Simmel, who in 1900 published one of the most fertile works of reflection on capitalism and its cultural ramifications, The Philosophy of Money. In this and other works, Simmel explained how the development of the market economy made for new possibilities of individuality". Muller again gives us Simmel's biography and how that influenced his thought.
"Life in a modern money economy, Simmel stressed, is characterized by even greater distances between means and ends. Determining how to attain our ends is a matter of intellect, of calculation, weighting, comparing the various possible means to reach our goals most efficiently".

Dr. Muller describes Simmel's ideas that with the money - market economy involving more and more complex means that require decisions the ends sought become more and more displaced. The exposition of this concept with many explicit examples of practice requires many pages.

"The Dialectics of Means and Ends"

"To Simmel, money was an example, perhaps the quintessential example, of a larger pattern in the relationship between men and the objects they created". This concept, too, requires pages of exposition. But the topic and its analysis by Simmel is still very important today. As we see in Frankel's references to Simmel.

"Sombart: Blaming It on the Jews"

"If Weber and Simmel were ambivalent but predominately positive about the prospects presented by capitalism, Werner Sombart viewed it with despair". Dr. Muller's biographical sketch indicates that Sombart was a very influential intellectual figure who published many widely read and influential books.
He "combined economic history with romantic anticapitalism" "He portrayed the precapitalist economy of the artisan and peasant as 'natural' and the modern capitalist economy as 'artificial'. "Sombart shared the romantic prejudice that identified the archaic with the authentic".

Again, see Polyani for a 20th century version of this romantic idealism.

"Sombart began to draw attention to what was to become a leitmotif of his writing and lecturing for the next decade; the link between capitalism and the Jews".

"The World War as Turning Point"

Dr. Muller notes that all three authors supported the war and its German aims but also had different views about it and their expectations of its results for societies. He writes that Sombart's "'greater bombast and national chauvinism... argued that the war had given back meaning and collective purpose to society".

 
 

Chapter 10 - Lukas and Freyer: From the Quest for Community to the Temptations of Totality

Dr. Muller follows the standard academic classifications in considering Lukas as a 'left wing' communist and Freyer as a 'right wing' National Socialist (Nazi). But the Nazi's were every but as much revolutionaries (and leftists) as were the Communists. And, as Dr. Muller shows, both are representative of the anti-Capitalist thought and critique. He gives us excellent, brief, biographical backgrounds that show clearly the origins of their ideas. They were influenced by Weber and Simmel (not Sombart) - showing how the theories progressed through the generations.
He writes, "Lukas and Freyer provide examples of intellectuals whose analysis of the cultural effects of the market led them to reject liberalism altogether and, like so many European intellectuals, embrace totalitarian solutions to the cultural dilemmas created by capitalism." They were among the intelligentsia 'traitors' whom Dr. McCloskey describes. Lukas was a Jew, although not practicing. But he was one of those who was a convenient target for popular attack.
Dr. Muller writes, "The identification of Jewry with capitalism, which in much of Europe was a metaphor and elsewhere polemical hyperbole, was close to exactitude in Hungary. Lukas became a leading Communist theoretician, thus was an example of both opposite sources of public hatred".

"Capitalism was Jewish, Communism was Jewish" - both were sources of all social problems. Dr. Muller devotes considerable attention to the growing animosity against the Jews in Central Europe prior to World War One. With Communism Lukas was expecting and advocating the eventual elimination of the 'state'. Fryer had a similar view of the cultural and social disaster caused by capitalism but took an opposite position and developed theories that made the 'state' the ultimate and central power.

Thus they are Muller's excellent examples of the opposite solutions in totalitarianism. Along with the 'state' Freyer extolled the role of war, "War for Freyer was the essence of politics." The 'state' was created to wage war. The 'state' could not exist without 'war'.
There is much more fascinating detail in this chapter discussed with the following section topics But these German authors have less authority now than those in the following chapters.

"From Intellectuals to Revolutionaries"

"Capitalism as a System of Illusion"

"Education of the Revolution"

"The Party as Community"

"Freyer: Alienation and the Quest for Community"

"The Particularist Critique of the Market"

"War, the State, and the Preservation of Cultural Particularity"

"Revolution from the Right"

 
 

Chapter 11 - Schumpeter: Innovation and Resentment
Schumpeter remains a very influential source of economic theory today.. Dr. Muller begins by citing his most important book -Capitalism, Socialism and Democracy published in 1942 by which time Schumpeter was a professor at Harvard. Shumpeter disagreed with the growing number of socialists who were using the Depression as ammunition for Marxism.
As Muller writes: "Schumpeter made some startling claims. He argued that capitalism had been a great source of economic betterment for the mass of the population, and that despite the current depression there were excellent reasons to believe that it was capable of alleviating material want. Yet his paradoxical conclusion was that 'capitalism is being killed by its achievements'". It was that, "The forces that have made capitalism the most creative and dynamic economic system in history are creating a social and psychological backlash that will bring it down".

Again, Muller relates Schumpeter's thinking to his personal biography.

The section topic headings are these.

"Creativity and Resentment in Schumpeter's Early Writings"

In this section Muller describes Schumpeter's early life in Vienna during which he studied under Eugen von Bohm-Bawerk the original founder of 'Austrian Sch