In 1992, political scientist Francis Fukuyama wrote a book called The End of History and the Last Man. In it, he said that society had reached: “the end of history as such: That is, the end-point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government.”
Liberal democracy and capitalism was, in his view, the last possible move that society could make.
Fukuyama argued that history is a progression, that one step leads to the next, which leads to the next. Feudalism leads to mercantilism which leads to capitalism. I mentioned this last issue.
But over the last decade or so, Fukuyama has backed down from his original statement.
Unfortunately, according to Fukuyama, the trouble is the world appears to be heading the wrong way. We are seeing a rise in authoritarian states around the world, as leaders reject the idea of democratic capitalism in favour of autocratic dictatorships or systems that offer the veneer of democracy, but are not. (I’m looking at you, Russia.)
Democratic capitalism ultimately has been tried and found wanting.
Since capitalism’s rise to prominence after mercantilism in the mid-1700s, finding its form with the works of Adam Smith and his book An Inquiry into the Nature and Causes of the Wealth of Nations (or just The Wealth of Nations), it has given rise to a number of variations.
Mercantilism’s key form was “trade”, the quotes there because it gave rise to colonialism and all manner of exploitation of indigenous populations around the world.
Its successor, industrial capitalism, wasn’t much better. Instead of relying on trade, industrial capitalism was based on the production of goods. Suddenly Europe was awash with factories—the “dark satanic mills” of Blake’s Jerusalem—which took the raw materials still being pillaged from around the world, and manufactured them into stuff and things on the backs of child labourers who were paid a pittance and frequently worked to death and produced effluence and pollution that made the population nearby sick.
This is what economics call “classic liberalism.” It has nothing to do with politics; instead, the idea is that capitalists are at liberty to do whatever they want to. Government plays little to no role in the economy.
And, when given free reign, capitalism’s first (last and only) instinct was to produce as much capital as possible by whatever means necessary. There was no attention paid to public safety, the health of workers or any impact anywhere whatsoever. As long as it made money, it was fair game.
Children were often employed in coal mines, too. You may be proud of your high paying coal mine job, but remember: if left to their own devices, capitalists would still be employing children for pennies a day.
During this time, money was still tied to the gold standard. Gold had been used as currency for thousands of years, but somewhere along the line, it had become the official currency. In Britain, for instance, Gold became the measure by which all finance was made in 1717. Before then, silver was the standard, but in 1717, Sir Isaac Newton set the exchange rate of silver to gold too low, and suddenly everyone wanted gold.
It was only a few decades earlier that the Bank of England had begun issuing paper banknotes, which was tied to the amount of bullion the bank had on hand (first silver, then gold).
During this time, you could not have more money than you could have precious metals, typically gold. This meant that the value of money was fairly stable. Prices in England varied little between 1880 and 1914. (To put that in context, over the last 34 years, gas prices have more than doubled. Eggs were $1.37/dozen. Now they’re $4.45.)
It was a very stable system. Too stable for many. And, when war broke out in 1914, it also broke the gold standard. People began hording gold. Banks—which were obligated to have as much gold on hand as they had issued bank notes—faced the very real possibility of having to close.
In Canada, a meeting was held in August of that year, making bank notes legal tender. That meant the value of a dollar bill was not tied to the amount of gold they had on hand. Problem solved.
Of course, this created a whole bunch of new problems. A bank could, in theory, print as much money as they wanted, but that would cause the value of that money to be deflated. So banks went back to a gold standard until the second world war, when the same thing happened. By this time, the government had new rules in place to make fiat currency (money established by legal decree and backed by the institution of the government, not tied to anything else.
This change came shortly after the great depression, and the world entered a period of time dominated by what is called Keynesian Economics. Because money was backed by government, it was up to government to exert control over the economy.
This meant that the free market capitalism of previous generations was reigned in. Generating wealth for the company was not the most important thing. Creating a healthy, happy society was. Yes, capitalism was still at its core, but government had it’s finger on the scale to help moderate out capitalism’s excesses.
But capitalism couldn’t be held down, and in the 1970s, as many economies started to experience high inflation and low growth—something dubbed stagflation—and the world moved to a system called neoliberalism. Which is where we are now.
Sort of. It’s complicated. We’ll talk more about the present at a future date.
Trent is the publisher of Tumbler RidgeLines.
