Sapiens and Homo Deus: The E-Book Collection by Yuval Noah Harari
In this view, the wisest economic policy is to keep politics out of the economy, reduce taxation and government regulation to a minimum, and allow market forces free rein to take their course. Private investors, unencumbered by political considerations, will invest their money where they can get the most profit, so the way to ensure the most economic growth – which will benefit everyone, industrialists and workers – is for the government to do as little as possible. This free-market doctrine is today the most common and influential variant of the capitalist creed. The most enthusiastic advocates of the free market criticise military adventures abroad with as much zeal as welfare programmes at home. They offer governments the same advice that Zen masters offer initiates: just do nothing.
But in its extreme form, belief in the free market is as naïve as belief in Santa Claus. There simply is no such thing as a market free of all political bias. The most important economic resource is trust in the future, and this resource is constantly threatened by thieves and charlatans. Markets by themselves offer no protection against fraud, theft and violence. It is the job of political systems to ensure trust by legislating sanctions against cheats and to establish and support police forces, courts and jails which will enforce the law. When kings fail to do their jobs and regulate the markets properly, it leads to loss of trust, dwindling credit and economic depression. That was the lesson taught by the Mississippi Bubble of 1719, and anyone who forgot it was reminded by the US housing bubble of 2007, and the ensuing credit crunch and recession.
The Capitalist Hell
There is an even more fundamental reason why it’s dangerous to give markets a completely free rein. Adam Smith taught that the shoemaker would use his surplus to employ more assistants. This implies that egoistic greed is beneficial for all, since profits are utilised to expand production and hire more employees.
Yet what happens if the greedy shoemaker increases his profits by paying employees less and increasing their work hours? The standard answer is that the free market would protect the employees. If our shoemaker pays too little and demands too much, the best employees would naturally abandon him and go to work for his competitors. The tyrant shoemaker would find himself left with the worst labourers, or with no labourers at all. He would have to mend his ways or go out of business. His own greed would compel him to treat his employees well.
This sounds bulletproof in theory, but in practice the bullets get through all too easily. In a completely free market, unsupervised by kings and priests, avaricious capitalists can establish monopolies or collude against their workforces. If there is a single corporation controlling all shoe factories in a country, or if all factory owners conspire to reduce wages simultaneously, then the labourers are no longer able to protect themselves by switching jobs.
Even worse, greedy bosses might curtail the workers’ freedom of movement through debt peonage or slavery. At the end of the Middle Ages, slavery was almost unknown in Christian Europe. During the early modern period, the rise of European capitalism went hand in hand with the rise of the Atlantic slave trade. Unrestrained market forces, rather than tyrannical kings or racist ideologues, were responsible for this calamity.
When the Europeans conquered America, they opened gold and silver mines and established sugar, tobacco and cotton plantations. These mines and plantations became the mainstay of American production and export. The sugar plantations were particularly important. In the Middle Ages, sugar was a rare luxury in Europe. It was imported from the Middle East at prohibitive prices and used sparingly as a secret ingredient in delicacies and snake-oil medicines. After large sugar plantations were established in America, ever-increasing amounts of sugar began to reach Europe. The price of sugar dropped and Europe developed an insatiable sweet tooth. Entrepreneurs met this need by producing huge quantities of sweets: cakes, cookies, chocolate, candy, and sweetened beverages such as cocoa, coffee and tea. The annual sugar intake of the average Englishman rose from near zero in the early seventeenth century to around eighteen pounds in the early nineteenth century.
However, growing cane and extracting its sugar was a labour-intensive business. Few people wanted to work long hours in malaria-infested sugar fields under a tropical sun. Contract labourers would have produced a commodity too expensive for mass consumption. Sensitive to market forces, and greedy for profits and economic growth, European plantation owners switched to slaves.
From the sixteenth to the nineteenth centuries, about 10 million African slaves were imported to America. About 70 per cent of them worked on the sugar plantations. Labour conditions were abominable. Most slaves lived a short and miserable life, and millions more died during wars waged to capture slaves or during the long voyage from inner Africa to the shores of America. All this so that Europeans could enjoy their sweet tea and candy – and sugar barons could enjoy huge profits.
The slave trade was not controlled by any state or government. It was a purely economic enterprise, organised and financed by the free market according to the laws of supply and demand. Private slave-trading companies sold shares on the Amsterdam, London and Paris stock exchanges. Middle-class Europeans looking for a good investment bought these shares. Relying on this money, the companies bought ships, hired sailors and soldiers, purchased slaves in Africa, and transported them to America. There they sold the slaves to the plantation owners, using the proceeds to purchase plantation products such as sugar, cocoa, coffee, tobacco, cotton and rum. They returned to Europe, sold the sugar and cotton for a good price, and then sailed to Africa to begin another round. The shareholders were very pleased with this arrangement. Throughout the eighteenth century the yield on slave-trade investments was about 6 per cent a year – they were extremely profitable, as any modern consultant would be quick to admit.
This is the fly in the ointment of free-market capitalism. It cannot ensure that profits are gained in a fair way, or distributed in a fair manner. On the contrary, the craving to increase profits and production blinds people to anything that might stand in the way. When growth becomes a supreme good, unrestricted by any other ethical considerations, it can easily lead to catastrophe. Some religions, such as Christianity and Nazism, have killed millions out of burning hatred. Capitalism has killed millions out of cold indifference coupled with greed. The Atlantic slave trade did not stem from racist hatred towards Africans. The individuals who bought the shares, the brokers who sold them, and the managers of the slave-trade companies rarely thought about the Africans. Nor did the owners of the sugar plantations. Many owners lived far from their plantations, and the only information they demanded were neat ledgers of profits and losses.
It is important to remember that the Atlantic slave trade was not a single aberration in an otherwise spotless record. The Great Bengal Famine, discussed in the previous chapter, was caused by a similar dynamic – the British East India Company cared more about its profits than about the lives of 10 million Bengalis. VOC’s military campaigns in Indonesia were financed by upstanding Dutch burghers who loved their children, gave to charity, and enjoyed good music and fine art, but had no regard for the suffering of the inhabitants of Java, Sumatra and Malacca. Countless other crimes and misdemeanours accompanied the growth of the modern economy in other parts of the planet.
The nineteenth century brought no improvement in the ethics of capitalism. The Industrial Revolution that swept through Europe enriched the bankers and capital-owners, but condemned millions of workers to a life of abject poverty. In the European colonies things were even worse. In 1876, King Leopold II of Belgium set up a non-governmental humanitarian organisation with the declared aim of exploring Central Africa and fighting the slave trade along the Congo River. It was also charged with improving conditions for the inhabitants of the region by building roads, schools and hospitals. In 1885 the European powers agreed to give this organisation control of 1.4 million square miles in the Congo basin. This territory, seventy-five times the size of Belgium, was henceforth known as the Congo Free State. No
Within a short time the humanitarian organisation became a business enterprise whose real aim was growth and profit. The schools and hospitals were forgotten, and the Congo basin was instead filled with mines and plantations, run by mostly Belgian officials who ruthlessly exploited the local population. The rubber industry was particularly notorious. Rubber was fast becoming an industrial staple, and rubber export was the Congo’s most important source of income. The African villagers who collected the rubber were required to provide higher and higher quotas. Those who failed to deliver their quota were punished brutally for their ‘laziness’. Their arms were chopped off and occasionally entire villages were massacred. According to the most moderate estimates, between 1885 and 1908 the pursuit of growth and profits cost the lives of 6 million individuals (at least 20 per cent of the Congo’s population). Some estimates reach up to 10 million deaths.4
After 1908, and especially after 1945, capitalist greed was somewhat reined in, not least due to the fear of Communism. Yet inequities are still rampant. The economic pie of 2014 is far larger than the pie of 1500, but it is distributed so unevenly that many African peasants and Indonesian labourers return home after a hard day’s work with less food than did their ancestors 500 years ago. Much like the Agricultural Revolution, so too the growth of the modern economy might turn out to be a colossal fraud. The human species and the global economy may well keep growing, but many more individuals may live in hunger and want.
Capitalism has two answers to this criticism. First, capitalism has created a world that nobody but a capitalist is capable of running. The only serious attempt to manage the world differently – Communism – was so much worse in almost every conceivable way that nobody has the stomach to try again. In 8500 BC one could cry bitter tears over the Agricultural Revolution, but it was too late to give up agriculture. Similarly, we may not like capitalism, but we cannot live without it.
The second answer is that we just need more patience – paradise, the capitalists promise, is right around the corner. True, mistakes have been made, such as the Atlantic slave trade and the exploitation of the European working class. But we have learned our lesson, and if we just wait a little longer and allow the pie to grow a little bigger, everybody will receive a fatter slice. The division of spoils will never be equitable, but there will be enough to satisfy every man, woman and child – even in the Congo.
There are, indeed, some positive signs. At least when we use purely material criteria – such as life expectancy, child mortality and calorie intake – the standard of living of the average human in 2014 is significantly higher than it was in 1914, despite the exponential growth in the number of humans.
Yet can the economic pie grow indefinitely? Every pie requires raw materials and energy. Prophets of doom warn that sooner or later Homo sapiens will exhaust the raw materials and energy of planet Earth. And what will happen then?
17
The Wheels of Industry
THE MODERN ECONOMY GROWS THANKS to our trust in the future and to the willingness of capitalists to reinvest their profits in production. Yet that does not suffice. Economic growth also requires energy and raw materials, and these are finite. When and if they run out, the entire system will collapse.
But the evidence provided by the past is that they are finite only in theory. Counter-intuitively, while humankind’s use of energy and raw materials has mushroomed in the last few centuries, the amounts available for our exploitation have actually increased. Whenever a shortage of either has threatened to slow economic growth, investments have flowed into scientific and technological research. These have invariably produced not only more efficient ways of exploiting existing resources, but also completely new types of energy and materials.
Consider the vehicle industry. Over the last 300 years, humankind has manufactured billions of vehicles – from carts and wheelbarrows, to trains, cars, supersonic jets and space shuttles. One might have expected that such a prodigious effort would have exhausted the energy sources and raw materials available for vehicle production, and that today we would be scraping the bottom of the barrel. Yet the opposite is the case. Whereas in 1700 the global vehicle industry relied overwhelmingly on wood and iron, today it has at its disposal a cornucopia of new-found materials such as plastic, rubber, aluminium and titanium, none of which our ancestors even knew about. Whereas in 1700 carts were built mainly by the muscle power of carpenters and smiths, today the machines in Toyota and Boeing factories are powered by petroleum combustion engines and nuclear power stations. A similar revolution has swept almost all other fields of industry. We call it the Industrial Revolution.
For millennia prior to the Industrial Revolution, humans already knew how to make use of a large variety of energy sources. They burned wood in order to smelt iron, heat houses and bake cakes. Sailing ships harnessed wind power to move around, and watermills captured the flow of rivers to grind grain. Yet all these had clear limits and problems. Trees were not available everywhere, the wind didn’t always blow when you needed it, and water power was only useful if you lived near a river.
An even bigger problem was that people didn’t know how to convert one type of energy into another. They could harness the movement of wind and water to sail ships and push millstones, but not to heat water or smelt iron. Conversely, they could not use the heat energy produced by burning wood to make a millstone move. Humans had only one machine capable of performing such energy conversion tricks: the body. In the natural process of metabolism, the bodies of humans and other animals burn organic fuels known as food and convert the released energy into the movement of muscles. Men, women and beasts could consume grain and meat, burn up their carbohydrates and fats, and use the energy to haul a rickshaw or pull a plough.
Since human and animal bodies were the only energy conversion device available, muscle power was the key to almost all human activities. Human muscles built carts and houses, ox muscles ploughed fields, and horse muscles transported goods. The energy that fuelled these organic muscle-machines came ultimately from a single source – plants. Plants in their turn obtained their energy from the sun. By the process of photosynthesis, they captured solar energy and packed it into organic compounds. Almost everything people did throughout history was fuelled by solar energy that was captured by plants and converted into muscle power.
Human history was consequently dominated by two main cycles: the growth cycles of plants and the changing cycles of solar energy (day and night, summer and winter). When sunlight was scarce and when wheat fields were still green, humans had little energy. Granaries were empty, tax collectors were idle, soldiers found it difficult to move and fight, and kings tended to keep the peace. When the sun shone brightly and the wheat ripened, peasants harvested the crops and filled the granaries. Tax collectors hurried to take their share. Soldiers flexed their muscles and sharpened their swords. Kings convened councils and planned their next campaigns. Everyone was fuelled by solar energy – captured and packaged in wheat, rice and potatoes.
The Secret in the Kitchen
Throughout these long millennia, day in and day out, people stood face to face with the most important invention in the history of energy production – and failed to notice it. It stared them in the eye every time a housewife or servant put up a kettle to boil water for tea or put a pot full of potatoes on the stove. The minute the water boiled, the lid of the kettle or the pot jumped. Heat was being converted to movement. But jumping pot lids were an annoyance, especially if you forgot the pot on the stove and the water boiled over. Nobody saw their real potential.
A partial breakthrough in converting heat into movement followed the invention of gunpowder in ninth-century China. At first, the idea of using gunpowder to propel projectiles was so counter-intuitive that for centuries gunpowder was used primarily to produce fire bombs. But eventually – perhaps after some bomb expert ground gunpowder in a mortar only to have the pes
Even then, the idea of converting heat into motion remained so counter-intuitive that another three centuries went by before people invented the next machine that used heat to move things around. The new technology was born in British coal mines. As the British population swelled, forests were cut down to fuel the growing economy and make way for houses and fields. Britain suffered from an increasing shortage of firewood. It began burning coal as a substitute. Many coal seams were located in waterlogged areas, and flooding prevented miners from accessing the lower strata of the mines. It was a problem looking for a solution. Around 1700, a strange noise began reverberating around British mineshafts. That noise – harbinger of the Industrial Revolution – was subtle at first, but it grew louder and louder with each passing decade until it enveloped the entire world in a deafening cacophony. It emanated from a steam engine.
There are many types of steam engines, but they all share one common principle. You burn some kind of fuel, such as coal, and use the resulting heat to boil water, producing steam. As the steam expands it pushes a piston. The piston moves, and anything that is connected to the piston moves with it. You have converted heat into movement! In eighteenth-century British coal mines, the piston was connected to a pump that extracted water from the bottom of the mineshafts. The earliest engines were incredibly inefficient. You needed to burn a huge load of coal in order to pump out even a tiny amount of water. But in the mines coal was plentiful and close at hand, so nobody cared.
In the decades that followed, British entrepreneurs improved the efficiency of the steam engine, brought it out of the mineshafts, and connected it to looms and gins. This revolutionised textile production, making it possible to produce ever-larger quantities of cheap textiles. In the blink of an eye, Britain became the workshop of the world. But even more importantly, getting the steam engine out of the mines broke an important psychological barrier. If you could burn coal in order to move textile looms, why not use the same method to move other things, such as vehicles?