Jeff’s Blog #23: Making America Safe for Industrialization

Last week I wrote about development in the context of  so-called Third World countries. In many cases, like those I discussed, richer countries play a commanding role in directing the development trajectory of poorer countries. But a different category of development is the one where the developing country remains in control of its own destiny. Sometimes this occurs because the developing country manages to reject offers of outside help, rejects imports, copies technology from richer countries, and forces itself to develop industries capable of exporting to the rest of the world. This is roughly the story of Japan, South Korea, and Taiwan as told in How Asia Works. In that book, the author makes a few offhand comments about how America’s development strategy was actually quite similar to that of the Asian Tigers. The famous example here is Alexander Hamilton’s “Report on Manufactures,” where he laid out a gameplan for stealing as much industrial technology from the British as possible. And then there is the story of Francis Cabot Lowell visiting British textile mills and committing their blueprints to memory so as to replicate them in Lowell, MA.

There is actually a direct lineage between the American and Japanese cases. Friedrich List was a German economist who came to America, studied Hamilton and other protectionist policies, returned to Germany, theorized a blueprint for how a country should develop, and helped implement the Zollverein customs union, arguably the first stage of unifying the German states. Toward the end of the 19th century, Japanese economists discovered List’s writing and planned their own development strategy around it.

But one thing you notice from the East Asian development stories is that while most people end up better off in the long term, it’s a very disruptive and unrewarding process in the short term. People are coerced to move from farms to factories, the new urban working class is mistreated, and inequality skyrockets. For these reasons, it’s conventional to think of development as a bitter pill that an enlightened autocrat forces his country to swallow. This raises an interesting question: how does development ever happen in a democracy?

Chinese workers building the Union Pacific railroad
Courtesy Alfred A. Hart Photograph Collection, Stanford University

Is democracy compatible with development? This is the motivating question for Richard Bensel’s book The Political Economy of American Industrialization, 1877-1900. This is a detailed book about some wonky topics in a forgotten era. And yet it was one of the most satisfying books about American history and politics I’ve ever read. Maybe too satisfying. Bensel’s project is to explain how the first industrial corporations became so rich and powerful without provoking a populist political revolt. The protagonist is the dominant, development-minded Republican Party. The answer to the question is, broadly, sectionalism: while industrial workers in the East and Midwest fought against their corporate bosses bitterly in local politics, they were content to screw over the South and West in national politics.

I’ve seen very few books that do a better job dealing with politics and economics simultaneously than this one. Bensel’s approach is to look at the most important Republican Party policies and discern which were important for jumpstarting corporate expansion, which were important for holding the political coalition together, and which were good for both. He attributes to the Republican Party a brilliant three-pronged strategy entailing the protective tariff, the gold standard, and the creation of a national market.

Let’s start with the tariff because it was the most widely discussed political issue of the time. The basic story is that the U.S. charged high tariffs on foreign goods of all types: sugar, wool, iron, steel, tin, tea, etc. The specific items changed from tariff bill to tariff bill, but it was a lot of stuff and the tariffs were high, often in the 50% range. Historians and economists used to debate the economic effects of protectionism, with the predominant view being that tariffs are bad because they make these products more expensive for everyone even while benefitting some producers. But Bensel’s clever move is to say: it doesn’t matter whether the tariff was efficient. What matters is that it created a huge political coalition. It’s clear why Northerners were part of this coalition; they were the ones making industrial products. But Southern and Western farmers hated the tariff: they had to sell their products on an open world market while paying inflated prices on domestic goods. To win some Western farmers to the cause, Republicans added a single agricultural product to the tariff: wool. So now sheep-raisers and wool producers joined the coalition. To further broaden the coalition, Republicans specified that Civil War pensions would come out of the tariff’s revenue. So now Union veterans, many scattered throughout the West, had a reason to accept the tariff too.

Bensel argues that the political “surplus” earned by the popular tariff worked to “subsidize” the two less popular but more economically crucial policies for propping up the new industrial corporations. One was adherence to the gold standard. This is a major rabbit hole of a topic, but suffice it to say, for now, that there were two important things about the gold standard: (1) it encouraged foreign, and especially British, investment in American companies, and (2) it was deflationary, which was good for investors/creditors in the East and bad for mortgage holders in the South and West who would like their debts inflated away. Opposition to the gold standard was central to the populist third-party challenges of the era. One was the Greenback Party, which I love for their populist, social democratic platform, although they were probably too early on calling for the U.S. to move to fiat currency. And then bimetallist ideology (adding silver to the gold standard, which would have allowed at least a one-time inflation) permeated the Democratic Party, culminating in William Jennings Bryan’s nomination in 1896 (if you’re not familiar with The Wizard of Oz as allegory for bimetallism, go look it up). Understanding the interplay between the tariff and the gold standard has helped unlock the politics of this period for me. For example, it now makes sense why Grover Cleveland was the only Democrat elected between the Civil War and Woodrow Wilson. He was from New York, and New York was the only part of the country that opposed the tariff (as a trading hub) but also supported the gold standard. It, and Cleveland, played a tenuous balancing role between the interests of North and South. Bensel claims “Of all the major commercial cities in the world…New York may have been the most politically and culturally alienated with respect to the remainder of the nation in which it was located.”

The final, and in Bensel’s view most important, leg of the economic policy stool was the creation of a national labor market. This basically means restricting the ability of the states to regulate business and thus allowing large corporations–especially railroad corporations–to grow on the national scale. This is a story that played out in the courts, culminating in Wabash v. Illinois (1886), which overruled Munn v. Illinois (1877) in ruling that the states may not regulate interstate commerce. Bensel agrees with Alfred Chandler’s classic account, The Visible Hand, that the railroads were the key drivers of industrialization in this period. But he doesn’t persuade me that the states were on a path to limiting the viability of national railroads in the absence of these court cases. Nor does Richard White’s book Railroaded, which portrays the Western railroad companies as successfully buying every politician and judge they encountered. This excellent review of Bensel’s book offers some more skepticism that the “national labor market” was so crucial to economic development in the era while suggesting several other factors including cheap land.

But even in remaining undecided on Bensel’s specific claims about interstate commerce, I am very sympathetic to his broader point that the most important pro-development policy is often crafted not in the legislature but in the courts. To return to the original question, this is one way democracy becomes compatible with development: by vesting development responsibility in the least democratic branch of government. The most famous articulation of this argument came in Morton Horwitz’s 1977 book, The Transformation of American Law, 1780-1860. Horwitz shows that in the antebellum period, U.S. state and local governments chose to promote economic growth primarily through the legal rather than tax system. His clever move is to shift attention away from constitutional law, which everyone writes about (including Bensel’s argument about the importance of the courts), and instead focus on private law: property, contract, tort. Constitutional jurisprudence is only “the naysaying function of the law,” but private law governs the everyday business of capitalism.

Before showing the specific changes in 18th century legal doctrine, Horwitz documents a shift in judges’ basic orientation. Early American judges inherited a British common law tradition that found authority in customary ways of doing things. Those customs, in turn, were often rooted in a sense of natural law, or fixed rules of moral behavior with an ultimately divine provenance. For example, the common law approach emphasized a traditional agrarian conception of property as something an owners should be able to enjoy undisturbed by encroaching neighbors. If you asked a common law judge why, the only sensible answer is that’s how  it had been for a long time. But Horwitz identifies the rise of a new attitude he calls “legal instrumentalism,” where judges start thinking about how their decisions will affect commerce in a growing nation. Judges start writing things like “the benefit which always attends competition” or “as Professor Smith says in his Wealth of Nations…” or  “Consider the effect on the whole community.” This is a fundamentally legislative version of jurisprudence.

Horwitz shows that legal instrumentalism was not a neutral system: it consistently sided with capitalists seeking to develop property, displace older landholders and businesses, enforce exploitative contracts, and borrow money, all in ways that would have been offensive to common law principles. In property law, developers won the right to build a mill even if it diverted water from downstream fisherman or flooded the fields of adjacent farmers. Landholders were forced to bear the costs of public works; when road construction damaged the foundation of someone’s house, the judge ruled that “the risk of consequential damage was already discounted in the price originally paid for a piece of land.” Whereas public nuisance doctrine once protected people harmed by construction, the rise of a new “gross negligence” standard made builders liable only for carelessness, not run-of-the-mill damage. The first corporate charters had been public projects, usually canals or bridges or toll roads operating at the pleasure of the state. But judges came to see the value of competition, most famously in the Charles River Bridge case. The city of Boston had granted a charter for a toll bridge to Charlestown. But then they hired a second company to build an additional, non-toll bridge. The first bridge sued, claiming the charter had implied an exclusive right to operate a bridge. Chief Justice Roger Taney eventually ruled against the original bridge on narrow grounds that there is no implied exclusivity in a corporate charter, but his private memos suggest his main motivation was that the second bridge was good for economic development. Which was by then, apparently, a good enough reason. Little did he know that Ben Affleck would use the multi-bridge system to escape after bank heists.

Horwitz summarizes the changes in the antebellum period like this: “Law, once conceived of as protective, regulative, paternalistic and, above all, a paramount expression of the moral sense of the community, had come to be thought of as facilitative of individual desires and as simply reflective of the existing organization of economic and political power.” The irony is the contrast between this utilitarian character of private law and the principled, formalistic cast of public law in the same period, which protected property rights from the state. For example, eminent domain law became more conservative just before the Civil War, after plenty of land had already been seized for canal and railroad companies. The upshot, Horwitz thinks, was the justification of upward redistribution in the private market while protecting against downward redistribution by legislatures. In the second volume of Transformation, Horwitz examines the Progressive Era’s challenge to pro-business antebellum law. I will be interested to see whether some other judicial ideology replaces legal instrumentalism, and why.

Jeff’s Blog #22: Development Without History

In recent weeks I’ve written about capitalism and modernity. Separately and together, these are the grand themes of the past 250 years. Neither concept is an absolute; capitalism can be more and less developed in a particular time and place. This is one lesson from an expansive genre of books in history and anthropology that document the arrival and penetration of these themes in society after society. In this context it’s interesting to think about what “development” is. One definition I’m playing around with: development is when people from rich countries try to accelerate the expansion of capitalism and modernity in poorer countries. Note that this is different from most official definitions, e.g. the UN’s development goal to “end poverty, protect the planet and ensure that all people enjoy peace and prosperity.” The actual effects of development might be different from the stated goals. This week I read two books that take a critical approach to development by placing it in historical perspective. The main lesson I took away from both is that as much as Western experts want development to be a technical matter, the fate of poor people in poor countries is foremost a political question. Meaningful “development” might be a more revolutionary matter than governments and aid organizations are prepared for.

Lesotho. Beautiful. Very mountainous. Not great for agriculture.

When you read official development publications, you don’t see much mention of colonialism. I take it that the development industry’s attitude is roughly: “Of course we know about colonialism, and we agree that it structured some of the problems we’re trying to solve, but that’s water under the bridge so we might as well focus on what we can do now.” There are potentially two problems with such a view. First, it might be the case that if the poverty in question is the result of political subjugation, political empowerment might be the only way to reverse it. If the problems can be found in history, the solutions might, too.

Second, an ahistorical approach to development encourages us to view “Third World” poverty as “the traditional poverty of a peasantry that has not yet or has only recently joined “the 20th century” rather than very much a product of the political and economic forces of that century.” This quote is from Timothy Mitchell’s book Rule of Experts: Egypt, Techno-Politics, Modernity. James Ferguson makes a similar point in The Anti-Politics Machine: Development, Depoliticization, and Bureaucratic Power in Lesotho. He argues that development practitioners are committed to seeing any “less-developed country” as having certain common features, even when the facts scream otherwise. A development target must be seen as aboriginal, or not yet incorporated into the modern world, so that roads and infrastructure might make a difference; it must be agricultural, so that farm technology can be offered; it must be construed as a national (rather than regional or local) economy, because development discourse only operates at the national level; and it must be controlled by aneffective, neutral government, because development must work through the state apparatus. Acknowledging history, especially colonial history, would be devastating to the first and last myths of the development target. Namely, what if rural poverty were the result not of isolation from the rest of the world but of engagement and exploitation? And what if the post-colonial government were not neutral but actively engaged in suppressing rural people? Building roads and granaries might then seem incidental to the main determinants of poverty and prosperity.

Rule of Experts is the more complicated book of the two because it has several ambitions. On one level it is a political and economic history of rural Upper Egypt from about 1840 to the present. That broad time span includes several somewhat distinct periods–feudal, colonial, post-colonial–and distinct ways of life–smallholder farming, tenant farming, and tourism services. Mitchell’s main project is to show how the concept of “the economy” was invented.1 There was no such thing as “the economy,” in the way we currently understand it, before about the 1920s. Mitchell argues that colonialism was a necessary context for conceiving of problems at the particular national scale that we now think of as “an economy.” While working in Britain’s India office, Keynes wrote the first book that posed questions at this scale: how to measure and manage the circulation of money within a defined geographical space. This is the invention of macroeconomics.

In Egypt, the most important act of formalizing the national economy was the 1898-1908 creation of the most detailed set of maps anywhere in the world. Based on a landholding survey, these maps displayed property lines, ownership rights, and tax liabilities across the country. And while land registries in the Nile Valley are the oldest in the world, the new maps exerted a standardizing influence by revealing which landowners were paying lower taxes than their neighbors and which plots weren’t owned at all. Mitchell argues that formalizing landholding into a systematic database was notable not for adding accuracy, which it did not, but for moving the site of authority from a field to the government office. In doing so, the government statisticians hid the contested reality of rural property claims beneath a supposedly objective model.

The map was the final blow of a 19th century project of reorganizing villages of smallholders into feudal estates with a single owner. This was achieved by seizing land from people who refused to grow sugar and cotton for the global market (we’ve heard this story before), and by allowing foreign creditors to seize rural land for nonpayment of debt. The British government of Egypt (1882-onward) and French merchants before them saw these land laws as the salutary extension of property rights. Mitchell turns a critical eye to “property rights” and “rule of law,” which he sees as arbitrary lines drawn by the powerful which make possible “the economy.” In this light, I read Rule of Experts as a story about primitive accumulation, Marx’s term for the violent seizure of capital that sets the original distribution before “normal” capitalism can begin. Primitive accumulation is a head start before the official whistle blows. What Mitchell is adding, I think, is not just a story of the primitive accumulation of capital, but also the primitive accumulation of laws and institutions. An economy is said to be a self-regulating system, but Mitchell draws our attention to how much of the necessary infrastructure lies outside the system and is not self-regulating at all. This is most apparent in a “developing” country, where the economic infrastructure gets renovated in rapid strokes rather than gradually over time.

Ignorance of the history of land ownership in Egypt clouds contemporary development thinking. In recent decades, Egypt has had to import staple foods. The conventional wisdom, as Mitchell reports it, is that Egypt is a country of too many people packed into a narrow sliver of arable land along the Nile. But it was only in the 19th century, as I mentioned, that land was consolidated into large private estates and used for export-oriented production rather than growing food for Egyptians to eat. In the second half of the 20th century, farmers were encouraged to grow animal feed to support the growing meat consumption of the upper classes. Under these circumstances, the need to import staple foods is unsurprising. Mitchell’s view is that a serious conversation about rural development in Egypt should begin with land reform (essentially, limiting plot size and reimbursing large landholders for transferring land to smallholders) following the model of Japan and South Korea.

Ferguson’s The Anti-Politics Machine focuses more directly on the topic of development. His starting point is the observation, generally accepted in Lesotho’s development circles, that development projects in that country never work. They don’t work in terms of alleviating poverty, and they don’t work in terms of extending  the reach of markets–the most common claims of development’s proponents and its critics, respectively. Ferguson is not directly concerned with why development doesn’t work, although his analysis provides plenty of fodder for speculation. Instead he wants to ask: what, then, does development accomplish? Here’s the answer: “‘Development’ is the principal means through which the question of poverty is de-politicized in the world today…A development project can end up performing extremely sensitive political operations involving the entrenchment and expansion of institutional state power almost invisibly, under cover of a neutral, tactical mission to which no one can object.” It’s important to note that Ferguson is not saying that development is adeliberate scheme to extend state power without making anyone’s lives better; that is just what it tends to do.

Ferguson confines his analysis to a single project funded by the World Bank and Canada’s International Development Agency and located in the Thaba-Tseka region of Lesotho, from 1976-1985. The book begins with a truly hilarious close reading of a World Bank research report on Lesotho’s development prospects at the beginning of that period. Ferguson observes that the report established Lesotho as an archetypal “less-developed country” with the four characteristics discussed above. The report was committed to seeing Lesotho as a country with great agricultural potential against all evidence. At the time, the majority of able-bodied adult men were migrant workers working across the border in South African mines. Remittances made up the majority of GDP and agriculture a small fraction. Lesotho, which is mostly mountainous, had once held some better agricultural land, but lost it in wars with Dutch settlers in the middle decades of the 19th century. The report made no reference to role of mining or other wage labor in Lesotho’s prospects because acknowledging such labor as a legitimate development strategy would require the World Bank to have opinions about miners’ pay, or border-crossing rights, or the apartheid regime in South Africa, all of which were outside its professed  interest and expertise. “History as well as politics is swept aside, and the relationship between the two “national economies” of Lesotho and South Africa is seen as one of accidental geographic juxtaposition, not structural integration or political subordination.” Instead, the report focused obsessively on farming. This determination to see agriculture everywhere was expressed most surreally in the following direct quote: “Of the total of 34 farmers surveyed it was found that 29 were farmers.”

In the middle section of the book, Ferguson examines each of the initiatives that the Canadian-led project tried to implement in rural Lesotho. These chapters contain your fair share of resistance to change that should be very familiar to anyone who has ever been or known a consultant, international or domestic. Many failures result from not understanding what Sotho people care about. I found the discussion of would-be “livestock reform” particularly interesting. Development experts were frustrated with how Sotho people tended to treat cattle: they would hold onto too many cows and oxen, refuse to cull their herds, and fail to sell for available profit. Ferguson had some fascinating conversations with cattle owners who said they would prefer to receive cash over an ox, but if given an ox would not sell it for cash. Pause and consider how upset this would make an economist. Conversion between cattle and money only seemed to be acceptable in one direction. Owning a large herd was a particularly social form of wealth: lending an ox to a needy neighbor was an important way to earn respect in the community. Also, cattle were a distinctly male form of wealth: while cash belonged to the household and might be spent on clothing or medicine or food or children, cattle belonged exclusively to the husband. One could dwell interminably on the differences between supposed Western economic rationality and other value systems, but the point here is just that a development strategy based on cattle auctions was unlikely to catch on in Lesotho.

The project’s main accomplishment, in Ferguson’s eyes, was giving the national government a much larger presence in Thaba-Tseka. The remote region was thought to be a stronghold for the opposition party, so the ruling party was happy to spend Canada’s money installing offices in the main town. If the government were a useful ally of the people, then this would count as a positive accomplishment. If, as in Ferguson’s view, it represents a self-interested elite, this bureaucratic penetration can be neutral at best. And even worse, the political reinforcements are cloaked as technical aid.

Ferguson’s fieldwork in Lesotho took place 30+ years ago, and I get the sense that we have progressed into a less naive, more skeptical era of development projects. I don’t know for sure, but I would not be surprised if most contemporary development organizations are suspicious of relying on heavy-handed, self-interested political elites to implement their projects. If anything, there seem to be more organizations that evade political institutions entirely and organize development “interventions” around access to education and healthcare at the individual, family, and community level. This “human capital” perspective skirts most of the assumptions about the prototypical under-developed country that Ferguson brilliantly outlined. The notion that people need better health and education to prosper rings true in a pleasantly universal way; it narrows the gap between what Americans, Egyptians, and Southern Africans each need. Universal as it may be, I worry that the human capital approach is no less apolitical and ahistorical than the older orthodoxy of development through exporting cash crops. The main problem facing Lesotho, per Ferguson, is that it is essentially a reservation for a persecuted ethnic group who are disallowed from crossing the border to participate in the regional economy. Why shouldn’t that political problem be the priority for those interested in the welfare of the Sotho people? It’s harder, for one. But it offers a symmetry that I find attractive: maybe development should be about undoing historical domination.

1. Here Mitchell is practicing genealogy, a method introduced by Nietzsche and popularized by Foucault for uncovering the historical emergence of a now-commonplace idea or category. You might wonder how genealogy differs from intellectual history. As I understand it, (a) while intellectual history deals with ideas that people (“thinkers”) consciously held (and usually wrote down), genealogy often deals with assumptions, attitudes, and taboos that historical actors might not have noticed; and (b) genealogy is inclined to debunk these attitudes and beliefs as tools of power and oppression (for more on this debunking tendency in philosophy and critical theory, look up the “hermeneutics of suspicion“).

Jeff’s Blog #21: The Most Important Drug in the World

Last week I wrote a bit about cotton, probably the most important commodity in the making of the modern world. But sugar comes in a close second. Sugar was the centerpiece of the Atlantic slave trade at least a century before cotton was. And now that so much of our clothing is made out of synthetic, petroleum-derived materials (there’s another commodity to learn about), sugar is once again more important. One angle for thinking about sugar is its role in nutrition and public health. I’ll share a few things I’ve learned in that regard, but I’ll also go a few centuries back into the history and political economy of the powder. It seems to me that the public health crisis around sugar becomes even more profound when you consider its origins, in some scholars’ views, as the drug that made the industrial revolution possible.

Domino Sugar Factory, Brooklyn (built 1882). © 2011 Alanna Rios

The nutrition journalist Gary Taubes was on EconTalk discussing his new book, The Case Against Sugar. Taubes is known for polemical, opinionated views about food science and this book is no exception. It is framed as a “prosecutor’s brief” alleging that sugar is the primary cause of obesity, heart disease, and all other ills of the Western diet. This one-sided argumentative commitment struck some academics as unscientific from the get-go, but I’m sympathetic to what Taubes is trying to do. He recognizes that, because there are no long-term randomized control trials, it’s impossible to make the airtight version of his argument. But he wants to draw our attention to neglected evidence that sugar should be the leading suspect. This claim is in opposition with the more cautious consensus that obesity has many dietary and non-dietary causes, among which sugar can get in line with fat, processed foods, cholesterol, and lack of exercise. Taubes thinks it’s essential that we narrow down the one true cause. The stakes are high: the CDC says more than one third of U.S. adults have obesity and that the annual costs of obesity-related medical care exceed $200 billion. The director of the World Health Organization recently called obesity and diabetes among the “biggest global health crises of the 21st century” and “a slow-motion disaster.”

Taubes presents evidence that excess sugar is the fundamental cause of a condition called insulin resistance, which itself is the cause of type 2 diabetes, which is highly correlated with obesity. So if you follow that causal chain through insulin resistance, you can get from sugar to obesity in just a few reasonable leaps. The details of that insulin resistance story make up the chemical half of Taubes’s argument against sugar. The other half is a historical examination of how sugar consumption constituted the biggest change in the Western diet in the past 200 years. Per-capita sugar consumption increased 30-fold in that period, peaking in 1999 when Americans were getting 20% of their calories from sugar.

In addition to making the case against sugar, Taubes attacks other nutrition researchers for missing the story. One target is the theory that obesity is simply a matter of over-eating and under-exercising: a “caloric imbalance.” In this view, sugar is not good in that it entails “empty calories,” but is no worse than any other such source. A complementary theory that many of you may have internalized is that dietary fat is the main cause of obesity. Taubes shows a history of shady research funded by the sugar lobby making the case against fat. On the other hand, as this review of the bookpoints out, the opposite is also true as meat and egg industry groups have sponsored plenty of negative research on sugar. It’s probably best to ignore all such industry propaganda.

One aspect of Taubes’s dismissal of other theories of obesity that I found curious was his repeated invocation of Occam’s Razor to justify his insistence that we must find the single prime mover of obesity. He is frustrated with those who say obesity is a “complex physiological response” and therefore no single cause can be identified. Lung cancer is also a complex response, but smoking has been identified as the main cause (associated with over 80% of cases, per CDC). I agree with this point that the complexity of the human body is no guarantee against monocausal explanations, but I’m not sure it follows that there must be a single cause. Occam’s Razor provides no insight on what level of abstraction should be used for judging the relative simplicity of arguments. Taubes seems to be working at the level of macronutrients, so a theory that involves just one macronutrient (carbohydrates) is “simpler” than one that involves two or three. But at a higher level of abstraction, you could treat “Western diet” as a single cause and still have a maximally simple theory without distinguishing between sugar and fat. So I really don’t think Occam’s Razor gets him very far here.

Unsurprisingly, Taubes has earned plenty of pushback for his arguments. Here is one forceful rebuttal from a nutrition researcher (although, the kind of person who appends “PhD” to their title…). One interesting argument in that piece is a response to Taubes’s claim that while other civilizations have consumed processed grains, no civilization ate very much sugar prior to the modern West. Guyenet points out that some hunter-gatherer groups have subsisted on a seasonal majority-honey diet without evidence of insulin resistance or obesity, which he takes as evidence that the total calorie load is the important thing. On the other hand, some honeys consist of more glucose than fructose, which is the really bad sugar. In this Cato forum, Taubes fights back against this critic and others. One point several critics had made is that U.S. sugar consumption has declined slightly since 2000 while obesity and diabetes have continued to increase. Damning evidence? Taubes shows that lung cancer didn’t begin to decline until 30 years after smoking did. “It would indeed be nice if our bodies, both on a population-wide and individual basis, responded immediately to the removal of a toxic substance from the environment. But there are many reasons why they wouldn’t, among them being threshold effects, intergenerational effects… and an incubation period for development of the disease.” The threshold effect seems like the most important one: sugar consumption is still an order of magnitude greater now than during the industrial revolution.

So let’s go back to when sugar was a luxury for special occasions. The story of how sugar became so important to the Western diet is told in Sidney Mintz’s book Sweetness and Power. The first hints of sugar’s unique role came as early as the 12th century, when Thomas Aquinas settled an important theological question by judging sugar to be a medicine, not a food, and thus exempt from the fast. The idea that sugar doubles as a drug–good for easing digestion, or for stimulating a worker’s energy–recurs throughout Mintz’s narrative. In Aquinas’s day, sugar was an utter luxury cultivated in the Middle East. By the 1400s, it was a key vehicle for conspicuous consumption; sugar-based sculptures were popular centerpieces at banquet tables, and having a flock of birds (or other animals) burst out of a pie was the height of entertainment. But sugar didn’t become a mass commodity until it was produced cheaply, and it wasn’t produced cheaply until the British opened slave plantations in the West Indies. J.S. Mill offered a remarkably blunt analysis of what the island colonies were: “These are hardly to be looked upon as countries…but more properly as outlying agricultural or manufacturing estates” belonging to the mainland.

Like Empire of Cotton, which I discussed last week, Mintz is telling the story of how the Industrial Revolution was built on the back of slave labor. Unlike Empire of Cotton, he is also showing how the invention of an industrial working class required the simultaneous invention of mass consumption. To see this, consider an important shift in how the British state thought about its sugar industry. In the 18th century, the sugar trade was thought to mainly benefit the sugar planters. Most of them lived in England, sat in the House of Commons, and pushed a protectionist agenda to exclude non-British sugar. But as sugar grew cheaper and more integral to the working class diet, state policy shifted from this production logic to a consumption logic. With the 1846 Sugar Act, Britain opened up sugar imports to Brazilian, Cuban, and other producers: “By removing barriers to “free trade”…the leading sectors of British capitalism sold out their planter-capitalist fellows.”

So the next question is: why was sugar so important to the working class? I can’t delay Mintz’s explosive punchline: “The hypothesis offered here is that sugar and other drug foods, by provisioning, sating–and, indeed, drugging–farm and factory workers, sharply reduced the overall cost of creating and reproducing the metropolitan proletariat.” That claim is so provocative it deserves a much longer book in its own right, but Mintz sketches what he means. He argues that sugar consumption must be understood in the context of an inadequate diet, lack of hot food especially for midday meals, and new schedules of work and rest as the society adapted to a more urban, time-conscious character. Sugar entered Britain around the same time as three other stimulants grown in colonies: coffee, tea, and chocolate. All three are bitter on their own and seem to improve with sugar. Tea, especially, emerged as an essential tool for making a cold meal seem like a hot one (it was common to dip bread in tea to make it more lively). The time-crunched nature of the urban workday plays an important role in Mintz’s argument. He presents evidence that when mothers started working in textile factories, children’s meals grew less nutritious and more dependent on molasses and jam for quick calories. This analysis reminds me of the argument thatChris Arnade makes in defense of McDonald’s: that it’s an extremely sensible choice for people short on both money and time (conventional discussion of poor people’s food choices seems to underplay the time element).

By framing sugar as a palliative used for easing the transition to industrial capitalism, Mintz places it alongside other coping drugs like tobacco, alcohol, and, yes, opioids. In this light, perhaps a Bloomberg-style war on sugar looks like normal drug policy. In truth, I don’t know much about the public health strategies people are proposing to deal with our likely dangerous level of sugar consumption. I’d like to learn more. In doing so, it seems important to remember that the class disparity in sugar consumption is baked into the food’s earliest appearances in the Western diet as the very first mass commodity.

Blog #20: What is Capitalism?

What is capitalism? Questions of definitions are always somewhat pedantic, especially so when we already have a strong intuition of what a word means. But with capitalism, I’m not sure we do. We use the word everywhere, more often than not pejoratively (the worst economic system, except for all the others). I think it’s important to identify the most salient features of capitalism if we are interested in reforming its excesses. I will focus my discussion on what strike me as two major contradictions or disputes in various definitions of capitalism: stability vs flux, and free exchange vs exploitation.

In common usage, people seem to use “capitalism” to refer to the profit motive. And in fact this is pretty close to where Marx started. Marx’s definition of capitalism revolves around what he labeled the circuit M-C-M’. You come to the market with your money, M. You buy a commodity, C. And then you sell it for more money than you paid: M’. The important thing about this exchange is that you don’t really care about C in and of itself–its “use value.” C could just as easily be a bulldozer or a rubber duck or an hour of mowing the lawn. You only care about C for its “exchange value,” what you can sell it for. If you actually cared about C, the exchange could end after M-C, and indeed this is how most of our exchanges end as consumers. You buy what you want, and then you use it. M-C-M’, on the other hand, is part of a never-ending chain. The accumulation of profit, which is in turn invested to accumulate more profit, is the fundamental element of Marx’s capitalism.

From Marx, we take the image of the unstoppable capital owner, who gets richer and richer over time. In other portraits of capitalism, like Joseph Schumpeter’s, capital is always in flux. The capitalist can no sooner count his profit than be displaced by the next capitalist in line. The point of Thomas Piketty’s book, Capital in the Twenty-First Century, is to adjudicate between Marx and Schumpeter. He does this very elegantly by pointing out a simple race at the heart of capitalism: r vsg, where r is the rate of return on capital and g is the growth rate of the economy, including both population growth and productivity growth. Capitalism is a race, Piketty says, where old money is pitted against new money. If the economy is not growing, old money will pull further and further ahead. When the economy grows rapidly, on the other hand, more and more new money emerges and diminishes the importance of the old.

Piketty investigates the history of r vs g using unprecedentedly rich data on income, inheritance, and capital stock in most of the rich countries over the past 200+ years. In almost every setting, he finds the same trend: both wealth and income inequality reached historic peaks around 1910, then declined dramatically until 1945, and then remained stable until about 1980 before rising, and now once again nearing 1910 levels. The history of industrial society seems to be ever-increasing capital concentration, as Marx predicted, except when broken up by financial crisis and world wars. The wars represent a special one-time destruction of the capital stock; r gets sent back to square one.

In the post-war decades, inequality rose for two reasons, both of which are important in their own right but neither of which seems to fit neatly with Piketty’s overall story about r vs g. First, income inequality skyrocketed, driven almost entirely by growth in the top 1% of the income distribution. This stemmed not from productivity increases but from changes in social norms about appropriate executive salaries. Troubling as this trend is, it doesn’t have much to do with capital accumulation. Second, inequality in capital ownership increased, but this time it was the 15% pulling away, not the 1%. The second half of the 20th century witnessed the creation of a “patrimonial middle class,” a somewhat broad band of people who pass on considerable wealth to their children. In France, for example, 15% of people inherit larger sums than the bottom 50% will earn in a lifetime. This statistic brought inequality closer to home; I expect many of you are also in the 15%.

Piketty argues that the patrimonial middle class has benefited from r, the rate of return on capital. But in an influential critique, Matt Rognlie points out that almost of all the growth in capital’s share of income in Piketty’s data is attributable to growth in housing assets. He cheekily suggests that the book should have been called “Housing in the 21st Century.” If this empirical claim is true, which no one seems to dispute, the question is: is housing subject to the same force, r, that Piketty applies to capital generically? Or do house prices go up for their own particular reasons, like scarcity of urban land and NIMBY-ism in San Francisco? I can’t go all the way into these questions here, but see Ryan Avent for a very thoughtful take. In any case, these questions should go a long way to determining our mental model of capitalism. I would guess that most people don’t envision the most important capitalists as homeowners.

Instead, the typical image of a capitalist is an industrial titan. Rather than sitting idly on land and inheritance, as Piketty’s capitalists do, the industrialist vacuums up land, labor, and money to forge commodities and sell them for profit. This image brings us to the second major dividing line in definitions of capitalism: does capitalism run on free exchange or on exploitation?  Marx said that capitalism required wage labor. Piketty doesn’t need to invoke violence and power to explain whyr tends to outrun g. But historians have a different view.

In U.S. historiography at the present moment, one of the hottest areas is “the history of capitalism.” It combines business history, labor history, and political history, adds a global scope, and tends to put colonialism and the slave trade front and center. Sven Beckert may be the don of this academic movement, and his book Empire of Cotton is the leading tome. Empire of Cotton is an exhaustive history of the global cotton trade, but you can skip the details about spindles and thread counts. Cotton is Beckert’s vehicle for showing how industrialization relied on an exploitative relationship between Britain and the Global South. His main theoretical move is to articulate a distinction between “war capitalism” and “industrial capitalism,” or, from a different angle, to reclaim what many historians would call “mercantilism” as “war capitalism.” Industrial capitalism is what you typically picture in 19th century Britain or 21st century China: a new working class migrates from countryside to city, works in sweltering factories, and exports consumer goods to the world. But what about the raw materials? Here Beckert employs “war capitalism” to show how industrial capitalism could never have gotten off the ground without violently coercing African slaves and Indian peasants to grow nothing but cotton and sell it to no one but the British.

Both forms of capitalism require a strong state. War capitalism requires military force to coerce the cotton growers and keep rival European powers out of a particular colony. Industrial capitalism requires protectionism against other cotton-exporting nations. India found itself on the wrong end of both these spears: most obviously as a reluctant workforce (Indian farmers had always grown cotton, but would rather plant it as just one crop among many other edible ones), but also later when some Indian entrepreneurs tried to start their own textile factories and were shut down by the British who demanded they buy only British products. Beckert uses the cases of India and Egypt to argue for a new interpretation of the Great Divergence, or the origins of the present divide between rich and poor countries. Egypt and India tried to industrialize in the late 19th century but were violently kept from doing so.

An important question is whether slavery is essential to Beckert’s argument. He says it is. Indeed, up until 1860, slaves picked most Europe-bound cotton, first in the West Indies and later, after the Haitian revolution, in the United States. But this is evidence that slavery was sufficient to fuel industrialization, not necessary. One of the most interesting chapters in the book takes place during the Civil War, as cotton merchants in Liverpool and Manchester scrambled to figure out where their cotton would come from in a future without slavery. And after a brief disruption, they figured it out! By ramping up the level of violence and coercing peasants into debt bondage, it proved workable to have enough cotton grown in India, Egypt, Kenya, and other colonies. One notable exception was Australia, where farmers successfully refused the imposition.

One of Beckert’s great accomplishments is showing the similarities, from the capitalist’s perspective, in amassing a labor force through slavery or through other methods. John Clegg makes some incisivecomments on this point around the similarity between slavery and wage labor in capitalism. Unlike in serfdom, to which slavery is sometimes compared, the key point is that both slave and wage labor are commodities bought with money. “Indeed, there is something pristinely capitalist about the total commodification of labor under slavery. Slaves are doubly alienated, for they lack property in both the means of production and in themselves,” Clegg writes. Note of course that this is not an argument for any moral parity or similarity of experience between slavery and wage labor, but simply an argument that both are equally compatible with capitalism.

This discussion of slavery is helpful for narrowing down what is distinctive about capitalism. Clegg says it is the state of being dependent on a market for access to inputs (land, labor, and money): “In capitalism, not only do producers have the opportunity to sell their product: they are compelled to do so in order to maintain access to the means of production.” Slaveowners were capitalists, in this sense, because they usually owned slaves on credit. Clegg shares the shocking (to me) fact that in 1840s South Carolina, more than 50% of slaves sold were sold by courts on behalf of creditors–the antebellum equivalent of foreclosure.

Obviously it is immoral to commodify human beings in a market. But the most trenchant critiques of capitalism, like Karl Polanyi’s The Great Transformation, take this same argument one step further and say it is immoral (or at least socially destructive) to commodify the energies of free laborers as well. The market is mostly absent from Piketty’s account, but it seems to me this is where the action is. The important thing to study about capitalism is not capital in isolation but its interaction with resources– both human and environmental–at the nexus of exchange, M-C and C-M’.