(The HISTORY of CAPITALISM – continued)

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Appleby writes of investors and owners of businesses needing organization and protections. Pooling money created more financial power. Shareholders were separate from managers. And "nothing revolutionaized industrial finance more than the legal form of incorporation that gave limited liability to the owners of enterprise." Incorporation gave capitalists organization with which to confront government and each other. Liberal bankruptcy laws favored borrowers over lenders – money making over merely lending money. In Britain and the U.S., Appleby writes, law "usually came down firmly on the side of enterprise."

To compete with their fellow capitalists and maximize their profits, capitalists paid their employees as little as the market for their workers allowed. "Most industrialists had worked hard to keep wages low," she writes, "inadvertently impoverishing potential buyers of their goods." This was before the age of affluence and massive consumerism. There was a belief among captains of industry that poverty was good for people and leisure for the masses was less desirous than people escaping sin through long hours of work.

In the 1800s (as in the 20th century and later) a lack of coordination existed between production and masses of people able or willing to buy those products. And imperfect money lending got into the act, which produced economic crises. Between the years 1873 and 1879 there was a severe economic downturn in the United States and Europe and economic stagnation that continued into the 1890s.

Another economic crisis developed in the 1930s called the Great Depression. Appleby devotes 20 pages to the Great Depression. The crisis was made worse, she writes, "by the optimism that is integral to free enterprise." "One way to keep hope alive," she adds, "is to ignore distant clouds and focus on the sun that is still shining." (p. 273)

She writes:

The big question about the Great Depression is not why it occurred – such downward slides in economic activity had become regular features of the market economy – but rather why the normal rebound didn't take place. (p. 273)

She continues:

Today, almost eighty years after the Great Depression, there is still no consensus among experts about its causes. Most people agree on the relevant factors: gluts of farm commodities and raw materials, insufficient purchasing power for the amount of factory goods being produced, an unstable financial system, high tariffs, the one, two punch of a speculative stock mania followed by near-zero investments, and, of course, the powerful aftershocks from the First World War. (p. 274)

As to what adjustments to make in response to the downturn, Appleby is describing events, not proposing remedies. And she does describe the Keynsian response.

She writes of alternatives to capitalism. "Industrialization," she writes, "reshaped the working class." A labor movement emerged (in which Marx placed hope), and labor unrest in Europe and invented worker-collectivist theories – socialism – that disturbed liberals and conservatives. Germany's aristocratic government, under Bismarck, responded to the threat from socialism by siding somewhat with working people for the sake of the strength of the state. Bismarck's government "spent generously on primary and secondary education,"social insurance and working conditions, to steer workers away from socialism. (As far as I know, no one responded to his welfare measures with the accusation that he was himself a socialist. That would be the kind of association made in the United States by those opposed to the Obama administration.)

Appleby does not see welfare programs, some government regulation, or government working with capitalists as negating the broader capitalist culture. Instead, these are developments within the broader system of capitalism.

Socialism acquired power led by a Marxist named Lenin, followed by Stalin. Appleby describes the Soviet Union's command economy as suited for wartime. The U.S. during World War II had what was largely a command economy. Into the 1970s the Soviet economy faltered. Innovation was important, and the Soviet economy was not good at innovation. And, unlike Stalin predicted, the capitalist powers kept chugging away.

About some of capitalism's critics Appleby writes:

Critics look for structural changes that will undermine capitalism as a system. They often underestimate the two enduring strengths of capitalism, encouragement of innovation and a capacity to create new wealth along with the real satisfactions that wealth brings to a growing population of recipients. (p. 393)

About reforms applied within capitalist societies, she writes of a disapproving comment by the novelist Tom Wolfe, who said that we were witnessing 'the end of capitalism as we know it.' That, she writes, is "a statement that could have been made many times in the past two centuries, for capitalism is a system constantly reinventing itself ... a work in progress." (p. 334)

She writes that, "There is no monolithic international corporate power, but many diverse players in the world market with, yes, a wide disparity in the influence that each wields." She offers her own criticism of capitalism. She writes of the exploitation of legal loopholes, buyer's ignorance and speculation bubbles. "When government works hand in glove with the nation's businessmen," she says, "you can be sure that the market's own corrective mechanism will be disabled. Competition will then be muted, cronyism rampant, and inefficiency protected." (p. 433)

Appleby offers her own "little list" of criticisms, "and it includes such charges as responding to short-term opportunities to the neglect of long-term effects, dispensing power without responsibility, promoting material values over spiritual ones, commoditizing human relations, monetizing social values, corrupting democracy, unsettling old communities, institutions, and arrangements, and rewarding aggressiveness and – yes – greed." She describes the various kinds of critics of capitalism, putting them into three groups. But sticks with changes. "People do learn from their mistakes," she concludes. "There is no reason to think that societies won't continue to modify and monitor their economies in pursuit of shared goals. A relentless revolution, yes, but not a mindless one." (p. 436)

The book summarized by Appleby herself, available at