Episode 24 | What Is Capitalism, Anyway? (Part 1) April 17, 2022


GUEST: Jonathan Levy, Author, Ages of American Capitalism: A History of the United States

How did America become the world’s largest economy? By constantly evolving and responding to economic disruptions, says our guest Jonathan Levy. Across four distinct ages, the United States moved from an agrarian past to a capitalistic future, fueled by an economic system in which investors and consumers bank on future profits, while the government directs and sustains that growth through fiscal and legislative policy. In this episode, Levy talks about that shift, as well as the impact that enslaved labor, particularly in the south, had on U.S. economic growth and accumulation of wealth. Given the breadth and depth of the economic history of America, we’ve divided our interview with Jonathan into two parts. In Part I, Jonathan talks about America’s leap from its colonial past to its emergence as the world’s most productive economy by the early 1900s. In Part 2, he’ll bring us through the New Deal and into our present-day boom-and-bust cycles, as well as theorize where American capitalism is headed next.


Jonathan Levy is the author of Ages of American Capitalism: A History of the United States. In it, he tracks the history of American economics from colonial times to the Great Recession. Throughout, he uses a historian’s eye to look at how modern economic life and American capitalism were shaped through wealth acquisition, as well as social and fiscal policies. Jonathan is a history professor at the University of Chicago, where his research and teaching spans the 19th and 20th centuries – specifically the relationships among business history, political economy, legal history, and the history of ideas and culture. He’s also a member of the  John U. Nef Committee on Social Thought at the university and the faculty director of the Law, Letters, and Society program. In 2012, he published his first book, Freaks of Fortune: The Emerging World of Capitalism and Risk in America. He lives in Chicago.


Ages of American Capitalism: A History of the United States

The American Civil War 

The Great Depression

The New Deal

The gold standard

Full Transcript

BRAD PHILLIPS, HOST, THE SPEAK GOOD PODCAST: I’m based in New York, widely regarded as the financial capital of the world, and as such, it’s little surprise that our firm, Throughline Group, has worked with many financial companies over the years, including banks, and private equity firms, and credit unions, and broker-dealers, and others.

During that time, I’ve learned a fair bit about the financial industry. I’ve learned about the good it can do – on the personal front, such as providing financing for a new home or helping families build a retirement nest egg – and on the corporate side, such as helping firms transact business across multiple jurisdictions or financing massive projects to move energy production from extractive fossil fuels to climate-friendly renewable sources.

I’ve also seen the harm that some in the financial industry can do – irresponsible lending that collapsed the American economy in 2007 and 2008, the packaging of incomprehensible new asset classes, such as those related to residential real estate that were based on a foundation barely stronger than a Ponzi scheme, to the bailouts of the wealthiest companies that continued paying out bonuses even as the rest of us were left holding the bag.

And yet, with as much exposure as I’ve had to the financial industry, I never quite felt that I had a gotten a grasp on the incredibly complex topic of economics. Of what makes markets move, or causes recessions, or leads to an economic boom. Or how precisely different the views of Adam Smith and John Maynard Keynes (pronounced canes) and Milton Freidman and Karl Marx were from one another.

So, I decided to dig in and learn more. And because I love history, I started with a sweeping book called Ages of American Capitalism: A History of the United States. The book is filled with fascinating and sometimes horrifying tidbits. Here are three of many:

Fact One: “The average price of a slave in 1850 was $300.” Now you might have thought that number would soon crash as the Civil War loomed on the horizon. But “In 1860 it was $800.” That means that even as the nation was a year away from the start of the Civil War, the southern states clearly believed that slavery would continue – and were willing to pay close to triple more than a decade earlier for the privilege of owning an enslaved human. In fact, just before the Civil War, “Southern slave property was far more valuable than southern lands – or even northern factories.”

Fact Two: Henry Ford, who perfected the industrial assembly line, claimed that he was able to trim the time to produce a single Model T vehicle from 12½ hours to just 93 minutes. He was also the first large employer to bypass potential labor issues by offering his employees a then-generous $5 workday. But there was a catch. Ford’s “sociology department conducted home inspections” of his employees to make sure that his employees weren’t drinking, living beyond their means, or having any sort of domestic trouble. $5/day…in exchange for mandatory surveillance.

And, Fact Three: 13 million homes were built in the period after World War II, from 1948- 1958. 11 million of them were in the suburbs. Many of those communities had restricted covenants that banned African American families from moving in. And that restriction was supported by federal policy – as the author notes: “By 1960 less than 2 percent of Federal Housing Authority-sponsored mortgage lending financed home construction for minorities.”

Now, the truth is, I read this read this book to satisfy my personal interests, not because I was thinking about it for this podcast. And the topic doesn’t neatly fit into the theme of The Speak Good Podcast, which is using the power of communication for good. Yet, the topic was so interesting to me, that I decided to bend the rules a bit – not just for this episode, but for the next one, too. Because trying to cram 350 years’ worth of economic history into a single 30-minute conversation just wasn’t enough. So, in this episode, we’ll focus on the period between 1660 and the Great Depression, and in our next one, we’ll pick back up again with FDR and the New Deal and bring our conversation all the way to the present day. And there’s at least some discussion about communications in this episode, as you’ll hear when I ask whether the tendency of some Republicans to label their Democratic political opponents as “socialists” or “communists” has some merit, or whether they’re all capitalists, just of different shades.

Jonathan Levy is the author of Ages of American Capitalism. He’s also a professor in the Department of History at the University of Chicago. And it’s worth noting that his first book, Freaks of Fortune: The Emerging World of Capitalism and Risk in America, won all sorts of recognition, including the Organization of American Historians’ Frederick Jackson Turner Award, Ellis W. Hawley Prize, and Avery O. Craven Award, as well as the American Society for Legal History’s William Nelson Cromwell Book Prize. Here’s our conversation.


Jon Levy, thank you very much for joining me. Your book … I’m holding it up for people who are watching the video version of this Ages of American Capitalism, 740 pages of content, plus the end notes and index. You’re dealing with a 900-page book. It is an enormous accomplishment. And I guess the starting point is what was your initial goal going into this project? Because certainly there or were other books that focused on American capitalism. And, did that goal shift and change as you learned more and started gathering information?


Well, first, thanks for having me on the podcast. It’s a pleasure to join you and thank you. I would say the goal for the book – I mean, I’m an academic, I’m an academic historian. And so, until I wrote this book, I spent my goal doing what academics do. We teach. And we typically write for one another, we write for other academics. This book had a different intention behind it. We often talk about the mythical general reader. The reader who’s interested in the subject, who wants to learn more about it, but who isn’t an academic, who want to learn the history or wants to learn more about the American economy, simply to be a better-informed citizen or simply for the pleasure of the experience of learning. So, for me, you know, this was a different task trying to communicate what I’ve learned as an academic historian, trying to communicate what other academic historians know to a broader public. And it really was a challenge. And so, as you suggested, as I went about the writing, I had to develop a different kind of voice. It still is an academic tome. It has notes. It has a full scholarly apparatus. But I had to really focus on doing what really is at the bottom of all history, which is telling story. So, there’s a lot of detail. There’s a lot of statistics. There’s a lot of facts and there’s some, I hope not too much, technical language. I hope it wouldn’t rise to the level of jargon. But, at the end of the day, I really focused on trying to tell the story because this story of American capitalism is in many respects, remarkable, which I hope is what we can get into during our conversation today.


And obviously this is your profession. You came into this book project knowing a lot about the topic, but as you researched it, did anything surprise you or jump out at you as something you didn’t know a lot about, and that suddenly you went down the rabbit hole of trying to explore?


Yeah. You know, as academics, like other professions, you specialize. So, I was trained as a specialist in 19th-century history. And, in the past, I wrote about the history of finance, but also the history of slavery, and the history of slave emancipation and associated ideas of freedom. So, to write the book, I had to move backwards, before the 19th century. The book starts really in the 1660s. And then, I stopped with the great recession. I really stopped in 2010. History is, of course, the line always shifts. I think nowadays the 1990s has become a topic of fascination among historians, but that’s about as far as we go. So, I had some trepidation going up to 2010, uh, but I actually found the most recent period, really the book dates that most recent period, the age of chaos since 1980, to be the most fascinating to try to figure it out. But, historians are also generalists, so the book does tell the history of the United States from an economic perspective. But, unlike say a political scientist who focuses on politics or an economist who focuses on the economy, historians claim the right to roam. To roam across society, politics, culture, ideas, environment, to try to offer an integrated account of what happened and why. And, of course, when you study the most recent period since 1980, there tend to be specialists who focus on politics, economics, culture. So, I really got lost in trying to make connections across those different registers, again, through an economic perspective. And, the most recent period, again, since 1980, that was a rabbit hole that I fell down and that I might still be in quite frankly.


Yeah. Understandable. In the second part of this episode, we will talk about that age of chaos. And, there’s some really interesting ground to cover there. To the ground the conversation. I’m wondering if you can, just like you did in the book, define what you mean by the word capitalism.


You’re right to start the conversation there because capitalism is a very vexed term. I mean, within the academy, you can find those…  it’s vexed both as an academic term, it’s also a politically and ideologically loaded term. So, you can find those who define capitalism, first and foremost, through markets or ideas about market freedom. You can also find those who define capitalism through, say, labor exploitation, a very different kind of phenomenon than say market freedom. I start with capital. I think if capitalism has a use as a term that the root of the term has to mean something — capital. And I define capital as an object of investment. So, it’s a form of property that one invests in with an eye towards a future profit. I think there the most important aspect of the definition is the future.

For most of history, economic life was oriented around the reproduction of the past. We think of agrarian societies. If we think of pre-capitalist feudal societies, what’s really distinctive about capitalism as an economic system is it’s premised upon generating a future different from the past, that also generates a, a profit, a monetary profit. So that kind of habit, that expectation that capital will yield a future profit in different ways that different kinds of capital, whether it be land or slaves, or factories or financial assets can generate that future yield. That, to me, is the heart of capitalism. And that’s the definition that I use throughout the book. And I’ll just say, you know, two more things quickly. In economic thought, in traditions of economic thought, the two touchstones for me that were most important was an early American, early 20th century American economist named Thorstein Veblen, whose definition of capital is important to me. And then also the British economist, John Maynard Keynes. I mention capital, forward looking, uncertainty, future monetary profit. And those were central themes of Keynes’ economics, which I try to incorporate into the book as well.


When thinking about speaking to you for this episode, the theme of our podcast is using the power of communication for good. And what struck me was, particularly in the United States, the number of conservative politicians and pundits who accuse their democratic opponents of being socialist or communist. In fact, one Washington Post article in 2019 wrote: While formally launching his 2020 reelection campaign on Tuesday, President Trump circled back to a word he has used publicly at least 118 times since becoming president —  socialism. And so, I wanted to clarify with you, obviously you have public figures who have very different views of what capitalism is, but do you see a Democrat like Joe Biden and a Republican like Donald Trump or Mitch McConnell, or an independent like Bernie Sanders all as different flavors of capitalists? Or, as Donald Trump suggested, is there a fundamental difference that makes somehow his opponents anti-capitalist?


Yeah, so, I hope I won’t go on too long. Let me give you a three-part answer. First, it’s important to note that that capitalism is an ideologically termed, charged concept, and socialism has always been its rhetorical twin. So, actually, it was socialists, in the late 19th century who were critical of economic inequality and critical of economic domination, who, for the most part, created the term capitalism as a means of naming the system, kind of naming the enemy. So rhetorically, the history here is very rich and capitalism and socialism can’t really be disentangled as twins. Excuse me, as terms. They’re actually twins. With that said, you mentioned this aspect of American political rhetoric, which I think doesn’t help us very much at all. I think most of the times in which people evoke the term socialism, they’re debating the proper rule of the state and the American economy.

You know, this is a very important debate and there are lots of positions one could have within that debate. But, usually, when the term socialism or radical socialism is wielded, I think it obscures that debate more so than it helps it. The moment you’d really want to focus on as the origin of that story, although it goes back earlier too, is really the Cold War and the context the Cold War created, in which charges of communism or socialism could be used to critique the involvement of the state in American life in any way of any kind. Now, one of the arguments in the book is that the state has always been involved in the economy and to try to debate whether or not it should or shouldn’t be, it’s kind of a waste of time. The question is how should the state be involved in the American economy? And so, I think in terms of our political communication, we often go in the wrong direction there. Just the last part of your question – the term capitalist to me has a very specific meeting in the book, it’s someone who owns capital and invests capital towards the end of profit and makes the economy go round. You know, Trump was a figure like that. I think still is a figure like that. But when I think about politicians like a Biden or a Sanders that’s not really their role because they’re politicians. They’re involved in the administration of the state. With that said, I mean, Biden, I think has been very explicit that he’s quite comfortable embracing a capitalist economy. And I think Sanders, though Sanders identifies, of course, as a democratic socialist, if you look at his policies, I would suggest his policies want to move the American economy in much more of a social democratic direction. I think in more of a socialist direction, but the kind of policies that Sanders advocated – more progressive redistribution in terms of taxation, a larger role for the welfare state – I don’t think those policies, if they were put in practice, would mean that the United States economy shouldn’t no longer be characterized as a capitalist economy. I think it still would be characterized reasonably as a capitalist economy.


So, with that grounding, I thought for the rest of our conversation, we would kind of go in the same chronology you laid out in your book. For the benefit of listeners, your book is divided into four parts, the Age of Commerce, which covers the period of 1660 through 1860, around the time of the beginning of the (American) Civil War, the Age of Capital from 1860 to 1932 – so, around the New Deal and the Great Depression. The Age of Control, 1932 to 1980, the end of the (President) Carter era, and the Age of Chaos, which you describe as 1980 to today. So, starting with the Age of Commerce, this obviously is the colonial period up to the first 80 or so years of the United States. How was wealth acquired at that time? You talked a lot about, and this is something that was kind of new to me, the way that you framed it, that you talked about it in terms of land ownership, in contrast to income politics, which will get into. But can you talk a little bit about that 200-year period in terms of wealth accumulation?


Yeah, so typically, this is not always the case, but the single volume history of the United States, or if we think about when did the United States, the history of the United States begin, one typically starts with the American Revolution. There’s a chapter in the book about the American revolution, but, you know, as you said, this age of commerce starts in 1660. So, one of the arguments of the first part of the book was that the United States was capitalist before it was Republican or democratic. Uh, the beginnings of American capitalism, I argue, had to do with the expansion of the British empire across the North American continent, but also through the Caribbean, through the broader Atlantic world. So, it’s an Imperial formation and it has to do with conquest and settlement, which involved wresting, conquering, taking land from native peoples and transforming land into forms of capital. They could be used to produce commodities for sale at first, across the Atlantic, back to Europe, especially Britain, and then within the colonies and ultimately within the United States. So, land was acquired politically. It was often acquired violently, and very important to this process of Imperial and colonial settlement was of course slavery, was Black slavery. There were many regions of the United States, especially as you go further south, that free migrants in the 17th and 18th century did not want to move to. There were bad disease environments. There were bad climates at that time. And so, the most effective way they developed to settle them, to populate them, was to move slaves. And I also argue that slaves, economically speaking, of course, there’s other dimensions in which Black slaves have to be understood and considered as human beings. But slaves became forms of capital within early American political economy. So, wealth was acquired in these ways. And for the most part, wealth was owed by white heads of households. Households were the central economic units of production, the central economic units of distribution, and all also consumption at this time. So, when we think about, say corporations or firms today organizing the economy, back then, in this first part of the book, the household is really central.


Am I correct that the white often landowners who obviously viewed slaves as a form of capital, that at some point the value of enslaved people was the largest single form of capital accumulation in the United States?


In some states? Yes. First we have to be careful, because it’s true that the racial category, white landowner, white male landowners is very important. But also, there were differences and distinctions within that population too, in terms of how much land or even how many slaves, one owned. But, in the south, capital ownership concentrates on slaves, much more so than land. When we think about it through the credit system, if one wanted to leverage property, to raise credit for commercial purposes, the Southern credit system through the Civil War was actually oftentimes more premised upon, using slaves as collateral instead of land. So, you’re quite right to suggest the large degree to which the slave economy dominated the commercial economy of the southern parts, first, of the British empire. Then later the United States in this period.


I’ll just note that in reading your book, one of the things that really surprised me is I understood the slave trade in general terms. I don’t think I recognized just how much human beings were used as forms of capital or, I’m sorry, Aa forms of collateral in order to then be able to access larger forms of credit. That was pretty eye-opening for me. You also talk in the book about this sphering. You use that term sphering a lot. You use it in a few different contexts. One of the ways you use this term sphering was between the public and the private. And I think that touches on what you were talking about a few minutes ago, about how this term socialism and communism are often wielded when really what we’re talking about in many cases is what should be private, what should be in the hands of industry and what roles should be played by the government. How did that kind of sphering come to be? Was it just kind of assumed that that’s what would happen or were there deliberate decisions that made it so that private life and public life were separated?


Yeah, you’re right. Maybe one way to answer this question is just to begin by saying, we’ve talked already a little bit about the economy, economics, but these are really 20th-century terms. When you go back to the 17th 18th, really through the 19th century, the term that people used was political economy, because it was understood that economic life was shaped by politics, interacted with politics, and was fundamentally determined by politics. It’s really, again, in the 19th century that you start to see this I idea that comes with the development of commerce and capitalism, that there could be such a thing as a private economy that’s distinct from the state and distinct from public life. I argue this happens not even during the American Revolution, there I see continuity with respect to these issues,  but during the presidency of Andrew Jackson.

So, it’s actually associated with the rise of democracy, at least the idea of one man, one vote, which typically took the form of one white man, one vote as it played out in practice in the 1830s and 1840s. So, in some respects it’s a democratic idea. So that the idea was that, you know, if the state is inter-penetrating with the economy, that the state is corrupting the economy. Elites, aristocrats, even oligarchs are using the state to manipulate the private economy and it’s best to keep them separate so that all men can have equal commercial opportunity. So, another idea that comes out of this same mix was anti-monopoly. Corporations should be opened up to all and that no corporation should completely dominate any industry or sector. So, there is a kind of small “p” populist idea to this sphering between public and private, as it took shape in the 1830s.

The problem with it, I think, was precisely what you just touched upon that ideologically it can create a debate in politics about either or public or private, when really the question is how should these two different realms interact and interrelate. So, I see it as a kind of mixed outcome, this process of sphering between state and market, as it developed in the 1830s. I just say, finally, I see, in the book I argue this process took place in other settings as well. So, gender and family life is another one. And I mentioned the household was the essential unit of production, distribution, and consumption in the 19th century with the Industrial Revolution. We see the idea of the family and work being separated that outside the family, in the workplace is where the economy happens. Whereas the family is a kind of a haven from the workplace. It’s private in a way that is fundamentally separate from the world of the market.


You said something there that I don’t think I caught the first time, I may not have caught it when I read your book initially that the sphering, I would’ve thought was entrepreneurs, innovators, oligarchs, wanting to sphere the, the economy into private and public because they wanted the private for themselves. What you just said was actually, it was a defense against that. That it was a populist request among the citizenry to keep them separate so that the oligarchs and other very wealthy people couldn’t have everything to themselves. Did I get that?


I think you stated better than I did. I think it was a populist idea, a small “D” democratic idea. But I think the way it played out in practice; it was a populous idea that had oligarchic consequences. That it created a kind of political economic language that really post-Civil War, railroad entrepreneurs, I’m thinking of the Jay Goulds, here, even the Vanderbilts, someone like Cornelius Vanderbilt, who was a Jacksonian Democrat realized, wait a minute, we can use this rhetoric, this language, to try to aggregate private economic power for ourselves .And much later, in the progressive period, do you see, Hey, this was maybe a bad idea. And we need to think of ways in which we can reconnect public and private. And that runs through the progressive area. It runs through the New Deal. And it takes us right back to, you know, that Cold War debate where the debate takes the form of communism, socialism, you know, versus capitalism.


Yes. Now the second part of your book moves on to the age of capital. This is that period from, roughly speaking, the beginning of the Civil War to the Great Depression. Can you maybe begin toward the beginning of that period? And I was struck particularly by what you wrote regarding the Reconstruction and how this policy of resumption really ended just dead its tracks, any chance reconstruction had of taking hold for the long term.


I think the most important single event in the history of American capital is the Civil War because it meant the abolition of slavery. Historians debate intensely, as they should, to what degree slave emancipation and reconstruction amount to a story of continuity or discontinuity. And, of course, I try to play both sides of it in the book. I don’t know how well I do that. On the one hand., I think emancipation is a radical change. You’re talking about the abolition of private property. You’re talking about changing the status of a very large population of Americans from slave to free, so I think there is a discontinuity there that we have to recognize there. That after emancipation, everything was different in American history. With that said, to actually make black freedom meaningful during the reconstruction period, it wasn’t enough just to abolish slavery. The economic conditions  to make freedom meaningful, that had to happen too. The central question there had to do with land redistribution. And we talked about the land being a really important capital asset, especially in the U.S. south. Was there going to be a redistribution of land from former white Confederates who had left the union, from them to slaves. In the end that didn’t happen. There are lots of reasons why, but I center in the book on this policy of resumption. During the Civil War to fight the war, the union went off the gold standard, it printed paper money. It relied upon issuing credit, going into debt to pay for the war. After the war, many important Northern capitalists and also politicians wanted to go back onto the gold standard. That’s the policy of resumption. To do that, it required fiscal austerity, to deflate the value of the dollar back to its gold pay. I think we’re going to talk more about the gold standard. And so, I’ll just kind of note that for the time being. And so, what it meant was that the fiscal resources necessary to make for a meaningful slate of emancipation never were brought to bear by the north. Now, again, there was the vociferous and vigorous opposition in the south by former slaveholders to creating anything like a meaningful freedom for former Black slaves. But I point looking at the north, I also  place responsibility upon Northern financers, Northern industrials, capitalists too who had an interest in carrying out a policy of resumption, you know, at the expense of a meaningful reconstruction.


Yeah, let’s get into the gold standard. One of the things that, again, surprised me about your book was just how much it was a recurring theme and how long the peg to gold lasted. I think it was in the early 1970s that finally the peg was done away with. And, I’ll be honest with you. I had obviously heard of the gold standard, but didn’t know much about it. Probably the most I knew about it was Ron Paul, the Texas Republican, who ran for president a couple of times, I think in 2008 and 2012, centered his campaign on a return to the gold standard, which I think a lot of modern economists looked at as a form of quackery. But that certainly made the topic return to the mainstream for a period of time there. So, what was the gold standard? What was the, I guess, let’s just leave the question open. What was the gold standard? What were its benefits and what were its drawbacks?


First the gold standard was British monetary institution. And so, one thing that must be emphasized in discussing the gold standard was just how long I think most people don’t appreciate this, the United States, even after the American revolution, even after the War of 1812, maintained this connection to the British empire. What the gold standard did was it pegged the value of currencies at a set rate to a weight of gold. So, it’s an invariable monetary standard. We can’t inflate the currency; you can’t deflate it. It’s consistent, it’s unvarying, and it does not change. The benefits to the gold standard such as that they existed was that it created certainty and stability about the value of money relative to other goods. That arguably, I think, in many instances, instances did create confidence among  investor class. It made them confident that if they invested their money somewhere, or if they gave loans to someone or someone else that the value of their loans wouldn’t be ultimately inflated away because the monetary standard changed. The gold standard also created the first, I think, genuine era of financial globalization, because the gold standard was an international institution. So, it allowed capital and credit to move more freely across national economies. And, I mentioned the policy of resumption earlier. One of the reasons why Northern American capitalists wanted to go on the policy of resumption was that you had to be on the gold standard if you wanted access to British capital. So, it did these things. The drawbacks to the gold standard were twofold. First, in creating an invariable monetary standard, it didn’t give government the capacity to use monetary policy to determine the path of the economy. So, if you needed to inflate the currency, if you needed to deflate, perhaps, although the gold standard had a deflationary bias, you weren’t able to do that. So, it kind of limited government policy, especially it limited fiscal policy, because if you want to expand the fiscal capacity of the state, oftentimes that involves changing the value of the currency by deflating it. The second thing it did was in creating international connection in terms of capital movements, it relayed financial panics. So, if there ever was financial panics or financial crises in the air of the gold standard, it relayed those panics across the Atlantic. That happened in the panic of 1873. It happened in the panic of 1893, both of which led to crippling recessions, which the American government couldn’t do anything about because it couldn’t expand its fiscal resources because it was committed to the gold standard.

And then of course, most famously or infamously, it happened during the Great Depression. So, I identify like many scholars, the roots of the Great Depression of the 1930s and the functioning of the gold standard. You know, the postwar period coming out of a World War II is a little bit different. The gold standard suspended during the war, World War II, much like it had been in the Civil War to expand the fiscal resources of states to fight the war. Coming out of World War II, it’s really a dollar gold standard. So, the rest of the world pegs itself to the dollar, then the dollar in turn is pegged to gold. I should have mentioned this earlier. Sorry. So, it’s kind of backing up, but another aspect of the gold state is that technically, you know, you could exchange your currency for gold. If you wanted to its free exchange ability. The post-World War II system didn’t quite work that way. You could expand your currency for dollars if you had pounds or francs or Lira, but not for gold. Maybe we’ll come back to that when we get to later parts of the book, but that’s the broad outlines of the gold standard.


I could do an entire podcast with you about the gold standard because I am fascinated by how it worked, and in many cases didn’t work. But, in the interest of time, we’ll move it ahead to this great period of industrialization, which I want to read a brief excerpt of your book here. You wrote that: “In all economic history, there have been, but two great ruptures. The first was the neolithic revolution, roughly 10 to 12,000 years ago, when many populations shifted into settled agriculture on a permanent basis, leaving hunting and gathering behind for good. The second was the Industrial Revolution, which began in 18th century Great Britain and the United States joined at second wave.” So, in what ways did that period of industrialization represent a second great rupture?


Well, to stick with the core theme of the book, which is capital, before the Industrial Revolution, as we’ve talked about, the central form of wealth, property, and capital was land and societies, therefore, were agricultural agrarian societies that were geared to the rhythms of the reproduction of capital through the land. So, one rupture is that we shift to factories. That industrial forms of capital are now far more important in some respects, not all, than land. People always have to eat. So, the land doesn’t go away, never. So that that’s one great rupture, but it goes broader and deeper than that. The factory system, people coming to work every day at a factory, masses of people. This is a new social institution. Most people for the first time now live in cities. That’s a very new experience for a very large segment of the population to live in an urban in setting, as opposed to living in an agricultural setting. One index that I used to show just how much of a rupture industrialization was, was to talk about culture, In the 19th century, all of a sudden, the most important color in dress men’s clothing becomes black. People wear these black stovepipe hats. And so, the colors of black and gray, kind of evoke the smokestacks, evoke the kind of colors one sees coming out of the factory system. So, it’s really a revolution in the true sense of the word, in that it cuts deep, from economy, certainly, but also society and culture. Of course, politics too, because the great question of the industrial era becomes how to make an industrial economy habitable, how to change its patterns of distribution, how to control its direction. Politics figure in this definition, too.


Am I correct? Obviously, today we understand that tens of billions of people go to work and draw a paycheck and it seems completely normal, but the industrial era was the first time that suddenly you have a mass of people earning a paycheck for work, earning their money from what you described as income or the politics of income that derived from it versus earning wealth from ownership. Do I have that right? And if so, can you just talk about what that shift to a society of people earning income represents?


You have it right, but you have it right in two very different senses, both of which I’m happy you brought out. First is that I make this argument that actually in thinking about Industrial Revolution as a rupture, maybe the place to really dig down is, is time. You know, agricultural societies have a cyclical rhythm, right? Because the natural rhythms of the season, including planting and harvest, really shape the economy. Industry is different. Time becomes more linear. It becomes more abstract. In part, because people now work for the wage, right? You subsist not off of drawing from your property, drawing from land, if you’re a farmer, but from your wage or your salary at work. And you’re paid by the hour. And industrial corporations, I use the example of Carnegie Steel Company in the book, are measuring their costs by the hour, including their wage bills, and are measuring out their profits by these kind of abstract homogenous units. Months, quarters, years. So that is another way in which industrialization represented a huge rupture in human consciousness with respect to the economy. The second issue you brought out is really an argument that’s at the heart of the second half of the book, which we’re getting into, is this idea of income politics. And as we talked about, the United States was born with a politics of property, right? The idea being in a Republic, later in a democracy, it was very important for citizens to own property. Again, we’re back to the land and also slaves. It’s another iteration of this politics and property at the beginning of American history. With industrialization, politics shifts in their register of distribution from focusing on property at the beginning of the economic process – who owns the capital that’s going to trigger the core economic process. It shifts from that to focusing on the end point of the economy, which is the generation of income, profits, but also wages, salaries that we yield from capital. And politics shifts there. So, let me give just one example. Taxation. So, taxation in the early 19th century most of the time, not always, was a property or a wealth tax. Of course, we know in the progressive era, it took a constitutional amendment, but 1913 World War I legitimatizes it. You get an income tax. So, we’re going to tax incomes instead of taxing property. So, that’s one example, but it’s a shift that I see playing out across the political economy in many different places.

In Part 2 of this two-part episode, Brad and Jonathan cover the final two ages of American Capitalism, The Age of Control (1932 to 1980) and the Age of Chaos (1980 to 2008), as well as where we may be headed next.

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