·......P ropositions ) : � rosperity, ·l/ - & Liberty BASIC BOOKSInc,.I PL 52061$8.95 THE CAPITALIST REVOLUTION THE CAPITALIST REVOLUTION FIFTY PROPOSITIONS ABOUT PROSPERITY, EQUALITY, AND LIBERTY PETER L. BERGER BA S I C BO O K S ,IN C . , P UB L ISH E R S NEW YORK Llbrary oi Congress Caraloging-in-Public:arion Data Berger. Peter L rne c:apnalisc re..-oluaoo. Includes bibliographical references and index. I. Capnalism. 2. Liberty 3 Economic de-·elopmeoL L Title. HB501 B--.5 I 330.12'] I a:-,.; O-.o>--00 dom) I: B. . 0--!6 >--00 2 paper) Copyrighc :s' 19 D)" Peter L Ber er Primed in che Cnited caces of America Desi ed h)· \'incem :-orre gn 90 91. fPC9 -65 4 31 I CONTENTS Introduction 3 1. Capitalism as a Phenomenon 15 2. Material Life: The Horn of Plenty 32 3. Class: The Ladder of Success 49 4. Capitalism and Political Liberties 72 5. Capitalism and Personal Liberation 90 6.C apitalism and Development 115 7. East Asian Capitalism: A Second Case 140 8.In dustrial Socialism: A Control Case 172 9. Capitalism and the Dynamics of Myth 194 10. The Shape and Uses of a Theory of Capitalism 210 NOTES 225 INDEX 253 V THE CAPITALIST REVOLUTION INTRODUCTION CAPITALISM is widely viewed as a conservative force in the con­ temporary world. Consequently, the phrase "capitalist revolution" in the title of this book may appear odd to some. Like many widely held views, the notion of capitalism as conservative is misleading. On the contrary, from its inception capitalism has been a force of cataclysmic transformation in one country after another. Capitalism has radically changed every material, social, political, and cultural facet of the societies it has touched, and it continues to do so. Understanding this revolutionary impact of capitalism on modem society is a formidable and important intellectual task. The purpose of this book is to draw the outline of a theory concern­ ing the relation between capitalism and society in the modem world. Each chapter (with the exception of the first and the last, which deal, respectively, with matters of definition and with summary reflections) contains various propositions which I put forth on the basis of the empirical evidence cited. These propositions are hypotheses, in the strict sense in which this term has been used within the social sciences. That is, these propositions are not of a philosophical, ethical, or any other a priori sort. As hypotheses within a social-science framework, they are subject to empirical testing and thus to falsification. I expect that they will be challenged, in part or as a whole; I hope that such challenges, like the propositions themselves, will be grounded in em­ pirical evidence. As is spelled out in more detail in the first chapter, an empirically 3 THE CAPITALISTR EVOLUTION oriented theory of capitalism and society does not exist at present, unless one wants to accord this status to Marxism. Clearly, I do not. Marxism, of course, comes in many versions, some of them sharply contradictory of each other. All share that peculiar mixture of science and prophecy that is both the major intellectual flaw of Marxism and the source of its immense mythopoetic appeal. It remains the case, however, that only Marxists have consistently sought to integrate in a single theoretical construction the economic, social, political, and cultural dimensions of the capitalist phenomenon. Thus it will be necessary in various portions of this book to deal with the Marxist interpretations of this or that aspect of the phenomenon, usually in a critical vein. A few observations should be made right in the beginning as to why Marxism in any of its versions will not meet the requirement of a comprehensive theoretical framework for an understanding of the relation between capitalism and society in the modem world. It is further appropriate to indicate why various non-Marxist theorists, such as Max Weber,Joseph Schumpeter and F.A. Hayek, do not meet this requirement either. In other words, it is important to establish that a great lacuna exists on the contemporary intellectual landscape. Not for a moment is it intended to suggest that the present book, by itself, can fill this lacuna. Such a suggestion would not only be an exercise in insufferable hubris (of which, if only because of a pervasive sense of the comic, I find myself incapable), but it would also lift the book out of the context of the social sciences, which can never do more than provide partial, provisional, and in principle refutable interpretations of human reality. In the present state of our knowledge, no individual is in a position to supply the full-blown theory that must be a final if ever-elusive goal. What an individual can do is to produce a blue­ print for the task at hand and to suggest some building blocks. This is what I have tried to do here-no more, but also no less. Karl Marx was one of the intellectual giants of the modem age, and especially social scientists remain indebted to his work at many points. One may only mention here, by way of an important example, the concept of class, which Marx first put squarely into the center of the analysis of modem society. However, from its inception, Marxism has been plagued by its methodological starting point, which supposedly grounded its scientific investigations in philosophy and which did this in a manner that undermined its status as an empirical discipline. To this day Marxists criticize "bourgeois" (chat is, non-Marxist) social 4 Introduction scientists for their putatively illusionary ideals of objectivity and value­ neutrality; by contrast, Marxists claim to base their own science on a correct understanding of underlying historical forces. Unfortunately, these superior insights into the historical process are not susceptible to empirical testing; rather, they are a priori assumptions, which are nonfalsifiable, but which determine both the approach and the results of particular historical or social-scientific investigations. Not to put too fine a point to it, Marxist social scientists typically ask questions about matters on which they already believe to have the answers, at least in broad outline. This is a very useful methodology for prophets; it decisively Raws the work of social scientists. Those who·are not convinced by the philosophical outlook founda­ tional to Marxism have no alternative to bracketing this outlook (a difficult feat, in view of the way in which philosophy and science are intertwined in Marxist works) and then to exploring those Marxist propositions that are, one by one, susceptible to being tested empiri­ cally. {Marxists, of course, repudiate such treatment as illegitimate, indeed as a trick of "bourgeois ideology," but non-Marxist social scientists have learned to live with this.) Thus, for instance, Marx's own labor theory of value {the notion that the true value of a commodity is the labor expended in producing it) is based on an a priori notion that cannot be empirically tested or falsified; but Marx's prediction of falling wage rates can be empirically tested outside the context of his philosophy of labor; and, indeed, this prediction has been consistently falsified in the economic history of the advanced capitalist societies. The list of other falsified Marxian propositions is long and embarrass­ ing-to mention but a few of the more important ones, the deepening "immiseration" (Verelend11ng) of the working class and the consequent ever-sh er polarization of society, the inability of "bourgeois" de­ arp mocracy to cope with modern class conflicts and the consequent as­ cendancy of dictatorial regimes in the heartlands of capitalism, or the progressive exclusion of the working class from the culture of the capitalist classes. Post-Marxian Marxism, in all its various forms, has not done much better in withstanding empirical testing. The inability of Marxist theory to explain the realities of socialist regimes in the contemporary world is a particularly serious weakness, as is the failure of the Marxist prediction that only socialism can generate successful development in the Third World. It is of the nature of prophecy that it manages to survive despite 5 THE CAPITALIST REVOLUTION repeated empirical falsifications (a psychologist of religion may even argue that such falsifications actually strengthen the devotion of true believers). Thus Marxism continues to have strong appeal in various places and, because of this, it must be taken seriously by the social scientist (later on in this book, there will be some discussion of the nature of this appeal). But the social scientist who, for whatever reasons, cannot be counted among the believers, must look elsewhere for a satisfactory theoretical framework. There is, alas, no embarrass­ ment of riches. If one is to look for such a non-Marxist framework, the three authors mentioned above-Weber, Schumpeter, and Hayek-are probably those who would suggest themselves first. It is by no means a derogatory statement about them if one says that none of them supplies this framework. Each of the three made enormously important contributions to our understanding of the modern world, and some of these contributions will have to be taken up in the pages to follow. But it must be stressed that none of the three set out to construct the kind of theory that is being called for here. Weber's intellectual enterprise was essentially one of comparative history, designed to uncover the roots of the unique Western development of what he called "modern rationality." Capitalism was one important phenome­ non explored by Weber in this connection, but he never intended to come up with a comprehensive theory of capitalism as such. Schum­ peter remained essentially an economist and his most durable contribu­ tions have remained in economics (for example, his theory of the economic role of entrepreneurship). His profoundly astute analysis of the relations between capitalism, socialism, and democracy constituted a sort of intellectual excursion, never intended to result in something to be called a theory of capitalism in sociopolitical or sociocultural terms. Hayek, finally, also made some highly astute observations about the relation of capitalism to various other phenomena in modern society, such as democracy and the rule of law, but, once again, he never set out to construct a comprehensive theory embracing all these relationships. Indeed, his later works are primarily concerned with what he considered to be the preconditions of a "free society," among which capitalism is but one of several. There are many aspects of capitalism-social, political, and cultural-that interested none of these authors. Finally, it should be emphasized that Weber and Schum- 6