Originally published: 1959
284 pages
Chapter 26

THE ROOTS OF CAPITALISM


John Chamberlain
 
As his book attests, John Chamberlain loved America. He devoted much of his professional efforts to an explanation of the philosophy and machinery of modern capitalism, the foundation of America's freedom and security, so his readers could appreciate what we have created-good and bad. He became an expert in dissecting the connection between government and the free market, how we legislate and adjudicate, how we accomplish our duties and expand our opportunities, and most importantly, how the excesses of government we visit upon ourselves affect everyday lives.
     In The Roots of Capitalism, Chamberlain investigates the origins of the entrepreneurial economic model and the free enterprise system. But he considers that paradigm as square two; he starts his discussion at a point before the issues of government or the free market arose. Like so many others, he begins with the premise that a free society must be predicated on a moral framework and an understanding of man's free will. Without a moral foundation and the freedom to choose to make it work, citizens in their ordinary lives cannot trust the system, nor are they likely to trust one another.

               To make any sense of the idea of morality, it must be presumed that
               the human being is responsible for his actions-and responsibility cannot
               be understood apart from the presumption of freedom of choice.

For Chamberlain, like Frank Meyer (In Defense of Freedom [Chapter 10]), 

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if human beings do not have the option to make bad choices they will not understand the content, and necessity, of good choices.
     After setting the stage with these fundamental premises Chamberlain analyzes the market on which a free society must be based. He demonstrates that a free market exists when free choice is exercised in both the application of labor and the disposition or acquisition of property. Without these freedoms we reel toward collectivism-embodied first in control of economic life, then dominion over our personal lives.
     Yet, even before these freedoms can work together there must be a physical foundation, for man is a physical animal. That foundation is private property. Chamberlain engages in a root investigation of property, which he found to be the basis of liberty. (For an expanded account of this essential relationship see Richard Pipes's Property and Freedom [Chapter 11].) It is beneficial, as many of the authors studied in First Principles recognize, to return to the foundations of modern social relationships before examining their more complex interactions. For Chamberlain, economics was the study of the significance of ownership-"the right to dispose of [or acquire] a good or service."
     If there be any question of the human impulse to ownership and the right to the free exchange of property Chamberlain gives stark examples of what people have historically risked for these basic
entitlements. What he offers is a sketch of the conditions that slowly, but inexorably, led to the freedom we experience today-a freedom attained only with blood.
     Chamberlain's model is eighteenth-century France where freedom of action was essentially destroyed by the arrogance of the monarchy and the "intellectuals" of the period, and virtually inflexible economic rules were put in place. The French had implemented over two thousand pages of regulations covering the textile industry, with dire consequences for those who ignored the precepts of the government. Yet people would still risk all for their perceived right to economic freedom. As Chamberlain recounts,

               For breaking [textile] regulations some 16,000 people were either
               executed or killed in armed brushes with government agents. And . . .
               on a single occasion, seventy-seven people were sentenced to be
               hanged for breaking economic regulations, fifty-eight to be broken
               on the wheel, and six hundred thirty-one were sent to the galleys.
               Yet for the sake of "natural liberty" men continued to break the
               rigid mercantilist laws.

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     These brutal statistics found their genesis in the Enlightenment-a label that becomes an oxymoron when some of its effects are considered. The Enlightenment's foundation was rationalism, a process distorted by an excess of logic over experience. Essentially, rationalism contended that if the human mind could define a practical solution to the difficulties of human interaction, implementation was the only impediment to a more perfect world. The problem, of course, is that human beings are not always rational. It is not that we are wholly irrational very often, but our thoughts and hopes frequently do not mesh well with the surrounding real world. While this may be a minor inconvenience, the more important issue is that what is rational to one person can be insanity to another. Thus there was not and cannot be agreement on what might be the best course in any situation. Far more to the point, no one can know which course of action will ultimately prove most advantageous. This simple fact led to freedom of choice being the only reasonable method to arriving at best solutions for whatever problems arose (these best solutions will, as well, change over time as facts, imagination, and outcomes determine additional course changes).
     The masters of France did not see it that way. If the resolution to circumstantial social and economic differences was only a matter of making a choice those in power would make the decision (often in a corrupt fashion-after all, they were only human, and French). This, of course, was nothing more than a dictatorship, or perhaps more accurately, a kleptocracy. However, no matter how directly and surely choices were made there were always those who disagreed and believed in their right to act on their disagreement. Perhaps most importantly, there is a more subtle and far more remarkable point to be found in the murderous statistics cited by Chamberlain. It relates not to the simplicity of the penalties (death in most cases, implemented to encourage adherence to the regulatory decrees) nor to the authoritarian reduction of choices to only what was commanded by those in power; it was found in the massive resistance expressed by the people in spite of the lethal punishments. Freedom of choice and action were more important, more core, to these citizens than their very lives.
     The American experience of this era was the opposite of the European. The Founders of the U.S. constitutional system were wise enough not to fashion a blueprint for all social arrangements. They understood that freedom would open a pathway to choices that would bring us to functional, but varied, conclusions about how to make economic

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and political decisions. Chamberlain voices concern regarding how this approach had been insidiously undermined in modern times. For example, he believes that the federal government's regulation of the private sector under the auspices of the commerce clause in the U.S. Constitution has resulted in far more negative than positive consequences. This has been especially noticeable in the twentieth century, where such intervention is often effected through the courts as well as Congress. This continuing battle between government and the free market has changed both American society and the business climate to such an extent that the whole struggles to be recognizable as a market capitalism model anymore.
     Chamberlain's commentary in The Roots of Capitalism contends that a sense of equalitarianism and political correctness (long before that term came to the fore) underlies melioristic government intrusion into the marketplace. It is enforced by means of the legal system-a system that operates in an economic vacuum and is often arbitrary and rarely evidences an understanding of the existence of vast vertical and horizontal market forces. Unless this process is reversed, eventually the market will become so skewed we will experience nothing but increased government intervention as each special interest or constituency makes its case-to the point of substantial economic contraction or even social instability.
     Milton Friedman's comprehension of the effect of these government actions, delineated in Capitalism and Freedom (Chapter 25) and written contemporaneously with The Roots of Capitalism, is equally stark and apprehensive. He observes that government's eventual authoritarian form results in continued attempts to rectify by further legislation and judicial and bureaucratic intrusion that which had already been warped by previous attempts to control market sectors. These results were the inevitable consequence of what the courts and Congress had incrementally (and in theory, innocently) constructed. Chamberlain, like Friedman, holds that followed to its logical conclusion, such programmatic excesses as he witnessed in the 1950s would simply result in the disappearance of the free market as any sort of effective independent mechanism. That this has not happened to the extent Chamberlain feared is more a testament to American economic ingenuity and the massive size of our economy than any reluctance on the part of bureaucrats or politicians to intervene in our economic relationships.
     As a business realist Chamberlain helps define how human beings express their motivations in the marketplace. He focuses on the con-

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tinued striving of individuals to upend any equilibrium in the world of commerce (to their advantage, of course, but then obliquely to the advantage of the whole system) as they try to better their products, their prices, their sales, and themselves. In order for this atmosphere to allow each person to act as he deems fit, even to chase his dream, freedom and a free market must exist-with a minimum of government's direct interference and indirect meddling via regulations and bureaucratic overseers.
     Chamberlain saw politics as it is-a game of power.

               In point of fact, political power is correctly to be defined as interference
               with social power.

It may be even more useful to reframe his proposition at its basic level and change Chamberlain's observation slightly to say, "political power is correctly to be defined as interference with social rights." Stated this way, the juxtaposition is more palpable, and perhaps more accurate. It isn't just that free citizens have social power; it is their rights to freedom of action and freedom of choice that
are more sacrosanct-no matter how much actual power they possess. For a quite profitable and detailed investigation of Power-a topic that must be understood in all political and economic contexts-Bertrand de Jouvenel's On Power (Chapter 15) covers this subject from serf to king, citizen to president.
     Chamberlain reserves some of his harshest criticism for government regulators who do not understand competition (which is both vertical and horizontal) and how it functions in conjunction with the imperative of freedom of action. Writing in the 1950s, he cites the competitive challenges to then-corporate behemoth United States Steel as an example. Chamberlain notes that U.S. Steel did, at one point, control some two-thirds of the domestic steel market. Federal regulators took note and salivated at the opportunity to dismember the company because of its dominant position. They could not, however, alter U.S. Steel's corporate structure or operations at the time because of various political, economic, legal, and social realities. It was fortunate that the regulators (who as do-gooders did not look so much forward as downward from their exalted perch as public servants) found themselves thwarted. What they might have done, to the detriment of the system-through the precedent that could have been set-was instead accomplished as it should have been, based on the facts as they evolved in a free-flowing and open market.

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     Lacking business acumen, or patience, the regulators neither understood nor sought to comprehend that U.S. Steel faced competitive pressures from four sources. Each of these sources was individually more threatening than all the government interventionists combined. Big Steel, as the company was known, battled the other one-third of the industry; it fought foreign competitors; it had to innovate as fast as specialty producers, who were improving products as quickly as finished sheets rolled off U.S. Steel's lines; and most importantly, it faced vertical competition from wood, plastics, other metals, and the new composites that researchers were developing. Within twenty years of the peak of its power U.S. Steel was on the ropes as a major producer of anything; within forty years the company had disappeared from the corporate landscape and the New York Stock Exchange, all without government tampering. Whatever the company's complacent and even presumptuous executives didn't inflict on U.S. Steel by failing to manage its workforce or modernize its facilities, the free market did. Big Steel was held up to the light by its competitors and found wanting and the free market "dismantled" U.S. Steel more thoroughly and decisively than the government ever could have hoped to.
     The governing impulse, somewhat curbed in an earlier time, today enjoys much freer rein. What is frightening to American business is the government's markedly increased regulatory and administrative power to meddle. And, perhaps more harmful, is the changing of tax policy or the regulating premises mid-stream, so that the business owner, the consumer, and the taxpayer are prevented from planning with any certainty. This causes economic caution and reduces the impetus of those on all sides of the economic equation to assume risks (the consumer doesn't purchase, the producer doesn't manufacture, the entrepreneur doesn't invest or invent, the innovator doesn't experiment, etc.). The stifling effect on the economy is palpable and, over the long term, dangerous. Finally, it should be ironically apparent that there is only a random and small chance that ignorant and inexperienced legislators or government regulators, or even judges will impose workable, much less salutary, restrictions on the market.
     Considering these circumstances, the suggestion arises that before we ask the government to manage anything else, let us first look at the results of what it has wrought in the past: public
housing, public education, public health, and public transportation to mention a few. Chamberlain notes that government has historically been quick to step in, but slow to understand the market and even slower to step back

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once engaged. After all, government regulators have jobs to do and if they don't regulate something they cannot justify their existence. So they act. How Chamberlain would have cringed had he seen the government's case against Microsoft in 1999 and again in 2003.
     In his book, Chamberlain does not shrink from attacking the sweeping notions of the collectivist society. As noted earlier, he observes that one regulated sector of an economy inevitably begets another; the conceit of government becomes operative through incremental, ostensibly innocent or even theoretically beneficial regulatory steps, until liberty is lost. In an avalanche each snowflake claims innocence.
     Chamberlain's commentary foretells of government potentially in extremis when it takes its "omnipotence" seriously-an act which is itself the highest form of intellectual corruption. In The Roots of Capitalism one can foresee the progressive destruction of a society by reason of government incompetence, then corruption-as it tries to cover its tracks and defend its failures-resulting in increasing paternalism and equally intense resistance thereto. Eventually, government becomes paralyzed because of misguided policies that largely work against one another. The effects of unchecked intellectual corruption-an administration's increasing insistence that it is right as the evidence is ever stronger that it is wrong-lead to government that cannot do good or prevent bad. It is reduced to picking up the pieces of its last fiasco or putting out the fires created by its never-ending remedial efforts to fix what it has already broken-while blaming the market, the business person, or the public for its failures.
     The downward spiral begins-always-in intellectual hubris, based first in ignorance, then arrogance, then power, and finally presumed omnipotence. Lest anyone believe that omnipotence is not claimed in American government-simply review the tax code, our educational mandates, our commercial or environmental regulations, or any of the other 10 million pages of federal edicts.
     Although the modern regulatory state is portrayed as harmless as it insists on helping those whom the bureaucracy says cannot help themselves, or stops those whom it contends are harming the public, the effects of its programs are larger than their material or even philosophical content. They concern how we govern ourselves and what we think of ourselves and our lives. Those who don't understand the potential for violence or catastrophe when a populace is denied its liberty and property-through the incremental destruction of freedom portended in the ever-increasing nanny-state-will pay a price that is 

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not yet imagined in America. Corruption can take many forms: the intellectual corruption of statist or "therapeutic" liberal endeavors intends benevolence, but in terms of human behavior, achieves an end far different from its goal. Left unchecked, such intrusions can grow in devastation equal to that experienced in the revolutionary histories so well documented by the authors reviewed in First Principles. The future that is seen by these authors-particularly that of John Chamberlain-is not a predictive insistence, but it is a caution founded in history and facts.

About the Author
Born in 1903, John Chamberlain attended Yale University where he acquired a taste for literature and literary pursuits and thereafter spent his life writing about things important to him. In 1932 he
published his first book, Farewell to Reform, the story of American enterprise from 1880 to 1920. During the bulk of the Depression, in order to make a living, Chamberlain wrote a daily book review for the New York Times. But his true love was investigating the permutations of modern free-market capitalism and its partnership with individual liberty.
     Chamberlain came to classical liberalism through a personal process, which he revealed in his autobiography A Life With the Printed Word (1982). Like many intellectuals of the 1930s he briefly flirted with socialism, but he was brought back to his devotion to classical liberalism when he read Albert Jay Nock's Our Enemy The State published in 1937. From the mid-1930s through the end of his career, the book reviews he wrote-probably the part of his career for which he was best known-along with articles for Fortune, Life, and numerous other publications, were combined with the publication of several more books. He served on the editorial staff of both Fortune and Life between 1936 and 1950. The Roots of Capitalism, perhaps his finest effort, was published in 1959. He was a longtime member of the American Conservative Union's board of directors. Chamberlain died in 1995.

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