By the time Adam Smith laid out the reason for the decline
of the feudal aristocracy in An Inquiry
into the Nature and Causes of the Wealth of Nations, the writing was
already on the wall. Smith was a
philosopher and one of the founders of a sub-field of philosophy called
Political Economy. Unlike modern pure
economics (a fruit of the 19th Century craze for applying
mathematics to every study of human endeavour), political economy relates social,
political, historical, legal and even moral trends (the latter being one of
Smith’s particular interests) to economic activity. Even the word “economy” was then interpreted
in a way much closer to the Greek original, meaning roughly the equilibrium or
mode of life of the national household, and thus encompassed far more than
business. The distribution of wealth
was of particular interest to Smith, as it is to us today.
In Wealth of Nations,
Smith puts forth a compelling theory of the change from feudal to modern
political economy, and it had to do with freeing captive wealth and dissolving
the feudal wealth gap. In the chaos of
the post-Roman world, wealth was the land you could defend and the number of
followers who supported you. In the
pervasive violence between nobles, nothing else really mattered. However, as the skilled artisan class slowly
recovered under the protection of emergent national states, the nobility
suddenly had an abundance of things to buy.
They began to rent out their previously serf-tended land, or even sell
it outright in order to raise capital.
As they sacrificed their former sources of power to support conspicuous
consumption and keep up with ever-changing fashion, the nobility in effect
transferred their wealth in two kinds to two different classes. Their money went to the rising artisan
class. Their land went to a rising class
of free farmers, who for the first time had an incentive to improve their land
and methods of production.
This kind of phenomenon, the disappearance of a wealthy
class, has occurred throughout history, beyond Britain and beyond the
Enlightenment, often with different details.
Louis XIV dislocated his nobility by giving them court positions and
enslaving them to opulent fashions, both of which alienated the rural and urban
lower orders. The Prussian state
centralised by giving its Junkers military and official positions while
inculcating a sense of noblesse oblige, which helped to ensure that Germany
would not experience a French-style revolution.
Farther back, Ivan the Terrible wiped out his entire noble class through a system of and installed
more compliant replacements, incidentally ensuring that the first steps toward
constitutional government would be impossible in Russia. But these are all essentially the strategies
of centralising monarchs.
What should be more interesting to us are the super-rich
classes of history who fell without the aid of a central authority. The vast wealth of the British Empire dried
up in the course of a single generation, owing both to the World Wars and the
hubris of British administration. The
Spanish Empire, the greatest cabal of treasure thieves in history, perished
because it did not plant sustainable economies in its possessions. Without more resources, all the extra silver
was simply inflation. The Russian
Revolution was the end result of a long and futile attempt of an unbearable
landowning aristocracy to hold on to their positions. The more they held on, the worse the fall they
were in for. Such classes may perish
from internal causes, popular dissatisfaction, or a combination of the two.
The problem today is not one of captive capital (if
anything, capital is far too mobile for its own good- marginal lending and
derivatives are both devices which allow banks and investment companies to
create money that simply isn’t there), but of misallocated capital and the social
illegitimacy which follows- and this, I think, is a problem that Smith could
easily understand. The half-life of an
economic class is arguably proportional to the social legitimacy of the
distribution system which creates it.
Capital allocations on the basis of blood and race almost always seem to
fail- that is one explanation for the fall of the Babylonian Empire to the more
meritocratic Persian Empire, and of course for the end of the European global empires. By contrast, the Chinese
Imperial Examination system established a meritocracy that survived the falls
of several dynasties.
The point is that
in today’s system, it is not the entrepreneurs and real economic creators who
are begrudged their share. It is the
financial class who profit by moving other people’s money around and are paid
obscenely large bonuses and benefit packages regardless of their profitability,
and the upper managerial class who likewise recieve compensation disproportionate to their value, and are likely to retire with
millions or billions in their pockets regardless of how badly they fail the
people dependent on them.
We are trained to look down on economic systems based on
patronage. The only thing worse is a
patronage system in which the modern patron completely denies any responsibility for
the people affected by their activities.
By doing so, the current economic order is setting the stage for its own
obsolescence. The only question is whether the change will
open up new possibilities, as the demise of the feudal aristocracy did, or
whether it will drag everyone down.
