“Irritated, one shoos it out the door, and almost immediately it climbs in through the window.” Without the concept of capitalism, the late French historian Fernand Braudel once wrote, it was impossible to study economic history. But the reverse is equally true: We can’t understand capitalism without economic history.
Once a mainstay of history departments, economic history was, with historians’ complicity, seized in the mid-20th century by economists who sucked the culture and chronology out of it and turned it into an obscure province of mathematical formulas. There it languished. The field became increasingly uncool. By the 1990s, to be a materialist in the age of Michel Foucault and Pierre Bourdieu was to be “deterministic”—in other words, a dinosaur. So economic history further retreated to economics departments, where many self-described economic historians had already been gathering under the banner of the “new economic history.”
The past decade has exposed some fundamental problems with that division of disciplinary labor. The now-old “new” economic history either fizzled or has become so technical, so unrecognizable to anyone who cannot wield its finely tuned analytics, that few historians can engage with it. Meanwhile, fewer and fewer economics departments now consider history—including the history of economics itself—a relevant domain of disciplinary inquiry, with many of the top departments having eliminated economic history from their programs altogether.
Lately historians have started to take it back, spurred by a demand to better understand the roller coaster of capitalist life, particularly how inequality and globalization factored into the recession. The economic crisis pushed courses on the “history of capitalism” to the top of the charts in history departments around the country, even making front-page news in The New York Times. With conferences, courses, and book series, the history of capitalism, one of the few areas of inquiry where job postings are growing, is on the verge of becoming an established subfield. The runaway success of Thomas Piketty’s Capital in the Twenty-First Century (Harvard University Press) raised even higher the political and intellectual profile of capitalism and its history.
In this way, a prodigal-son subfield has returned. Historians do not leave political history to political scientists, or social history to sociologists. Why should economic history be left to economists, especially when they ignore it? Besides, the humanities might well benefit from the revival of a field that once served as a bridge to the social sciences.
The history of capitalism performs heroic service, but bereft of a broader grasp of the history of economic life, it can’t provide deep insights into the makings of systems of production, circulation, and distribution. Capitalism is a latecomer in that story, and, like all latecomers, more reliant on its precursors and alternatives than its apostles and critics like to admit. There can be no history of capitalism without an economic history near its explanatory core.
Like democracy or modernity, capitalism is a historical problem, specific to time and place. If only because it eludes easy definition, it must be studied from different perspectives, with different historical methodologies. There are social histories of democracy, intellectual histories of democracy, and, of course, political histories of democracy. The economy could be the subject of similar multiple approaches. But it is not. It has been treated as a realm apart.
This is a surprising state of affairs. Looking back to 1960 or even 1980, one would not have predicted the eclipse of economic history. From the Progressive Age (1900 to 1930) onward, it was almost de rigueur to proclaim the material roots of everything and to tie one’s research to the broad spirit of reform. Capitalism’s postwar “golden age” was good for economic history, as it was for the world economy. The pairing of “social and economic history” was the fallback working methodology of many professional historians. The works of Eric Hobsbawm, Thomas C. Cochran, and Braudel himself were touchstones. Even books by the first generation of new economic historians, such as Robert Fogel and Stanley Engerman’s Time on the Cross: The Economics of American Slavery (Little, Brown and Company, 1974), were read and reckoned with by noneconomic historians. Surely globalization, the ascendance of China, and the rise of Apple should have continued to fuel the field.
A confluence of several forces broke things up. By the 1960s, economic history was increasingly associated with development economics, at a time when that field was seen as running out of steam. It often took the likes of Alexander Gerschenkron and R.H. Tawney as departure points and was preoccupied with identifying (or debunking) catalytic factors in the “takeoff,” as W.W. Rostow put it in The Stages of Economic Growth, to modern economic growth. Here the importance of the economy—while often disaggregated into various sectors, industry almost always the leading one—was taken as a given. Further, many economic historians concerned themselves with the economic growth of nation-states—bounded entities in space, which grew (or not) across a nation’s chronology. Postwar economic history became a modern enterprise aimed at explaining how to expand the pie.
Behind the scenes, though, the consensus was coming apart. Some say a change took place in 1960, when the editing of The Journal of Economic History passed to William Parker and Douglass North, two economists with deep interests in historical processes but also commitments to sophisticated statistical methods. The English Economic History Review, the French Annales d’histoire économique et sociale, and even Past & Present stayed true to their narrative roots but eventually suffered from dwindling readership, or chose to diversify or rebaptize themselves.
The features of what was dubbed “the new economic history” are well known. Chiefly there were three—an evidentiary style that preferred numbers to narratives, an effort to disaggregate variables to test causal claims about growth, and a reliance on the methodological individualism of neoclassical economics to make inferences about behavior, even of groups. William H. Sewell Jr. has charted the rise of quantitative styles and the demise of narratives in economic-history journals. In 1965-66, only 8 percent of Journal of Economic History articles boasted mathematical equations. By 2008 the count was 62 percent, by which time 90 percent of the articles contained statistical tables.
The preference for numbers was less troublesome than the assumptions hitched to them. The neoclassical economics behind the new approach claimed to hold the keys to both current and future equilibrium states. But it did not have a theory about time, about how to move from one state to the next. That posed problems because grappling with time is what historians do. While the “cliometricians,” as they dubbed themselves without irony, offered findings that fit an all-purpose economic theory, they collapsed history into a static formula, a global equilibrium for a world of possessive individualists. Coincidentally, if less consciously, the prospect of intervening for the purposes of reform faded away.
Economic history seceded from the study of history generally. After all, the point of going cliometric was to subject the study of the past to the more-rigorous scientific norms of economics and formal models. True, the occasional historian has dared venture into the domain of economic theory. But if Niall Ferguson’s recent pitfall into Keynesian economic theory is any indication, it’s not a game for the faint of heart. Or the humble.
A second consequence was less perceptible and took more time to play out. The rise of cultural history in particular, and the engagement with more-interpretive social sciences in general, turned more and more historians away from structures and statistics and toward meanings and mentalities. Among the meanings to be dissected using that interpretive approach were categories that economists used with happy abandon, like “labor,” “credit,” and “industry.” Institutions and innovations, rather than the results of individual and group responses to incentives, were studied as social and cultural constructs. For some, especially those influenced by Foucault, the drive to modernity was less about a grand narrative of making plenty and more about micronarratives of power and alienation.
So, one side went causal while the other went cultural. After Fogel and North won the 1993 Nobel Memorial Prize in Economic Sciences, the economic historian Claudia Goldin remarked on the extinction of economic history from history departments, worrying that the prize served as a kind of elegant epitaph for an alliance that once crossed disciplinary boundaries. “The new economic historians,” she noted, “extinguished the other side"—a side that had moved on of its own accord. By the turn of the millennium, what we got was a de facto agreement for each side to bask in the glow of its unexamined assumptions about the other.
There is always, of course, more to the rise and fall of academic fields than their internal history. So much of what economic history had become was, in fact, attached to the capitalism question. Capitalism, in postwar economic history, was the present industrial stage in nations’ grand and irreversible march through time. It was also communism’s evil twin; the term “capitalism,” after all, was coined by late-19th-century socialists to name the enemy. In a sense, economic history thrived as long as there were rivals to capitalism.
The question of the “origins of capitalism” was so hotly debated in part because so many historians—and not just the Marxists among them—were concerned with the threats it faced. Rostow’s Stages of Economic Growth, an unapologetic defense of capitalism, laid its cards on the table with its subtitle, A Non-Communist Manifesto. It was a manifesto precisely because it claimed to distill what we knew about how capitalism could (as befitted the jet age) “take off” and bring abundance to all. This was especially relevant in 1960, when much of the third world was up for ideological grabs and listening to the siren calls of socialism and revolution. Rostow himself would soon leave the halls of MIT for the White House, carrying his lessons from economic history to the defense of the free world.
As the romance with revolution wore off, so did the urgency to understand the mystique of capitalism. By the time Francis Fukuyama’s The End of History and the Last Man (Free Press, 1992) declared the triumph of liberal-capitalist democracy over all possible alternatives, many people had lost interest in capitalism’s origins and consequences. Questions gravitated to what kind of capitalism rather than how or why. Big books in post-Cold War economic history, like David Landes’s The Wealth and Poverty of Nations (W.W. Norton, 1999), read like the rise of the capitalist West and the travails of the catching-up rest. The story line had a moral: Nations that do not conform, whether to the narratives of economic historians or to the dictates of the 1990s Washington consensus, were doomed to misery.
It did not help that economics, the discipline tasked with giving us the clues to understand the economy, was moving further and further from reach, not just from historians but also from the rest of the social sciences, let alone the broader public. Many veteran economists today complain that they can’t fathom the math of their younger colleagues. Increasingly, technical economic history follows the cues (not to say the incentives) of its master discipline to simulate natural experiments, relying upon the narrowest of behavioral assumptions about homo economicus, mining data excavated and stylized from the past.
Without historians in their midst, the new new economic historians were unaccountable to those who shared different understandings of what a preference is. Political or personal choices were siphoned as the outcomes of a timeless economic calculus. Some have taken matters a step further to make the case for the application of game theory, as if traditional narratives were simply “facts arranged chronologically.” Since this type of social scientist doesn’t write for historians, even if they wring them for data, historians’ basic assumptions about the contested nature of narratives, and the craft that must go into constructing them, do not get through. No wonder, then, that many historians take one look at what passes for cutting-edge economic history, shrug, and move on.
Then came 2008. With the crisis, pessimism about capitalism’s present and future came storming back, and the topic returned center stage to American history departments.
As the pie shrank, the publishing world was flooded with big, noise-making books. Histories of financial crises, like Carmen M. Reinhart and Kenneth Rogoff’s This Time Is Different (Princeton University Press, 2009), became best sellers. As the fate of the American middle class became more uncertain, as Europe entered fiscal crisis, as China took over the solar-panel business, and as some parts of the world seemed to fall into a tailspin, liberal capitalism seemed less assured and its history more confusing—or, as historians like to say, more “contingent.”
Grand narratives of the rise of the West have continued to appear, Daron Acemoglu and James Robinson’s Why Nations Fail (Crown Publishers, 2012) chief among them. But the tone is altogether different. Divides, disparities, and divergences have elbowed aside miracles, takeoffs, and growth. Acemoglu and Robinson’s choice to swap out the 20th-century obsession with growth for the 21st’s fixation on failure is a giveaway.
As a couple of historians interested in the economy, we’re happy to see American history departments welcome the topic of capitalism back into the fold. (Outside the United States, subfields didn’t fork in such opposite directions, so the rift has been less of a problem.)
Our joy might seem out of place amid so much economic gloom, but the trend was evident even before the recession. Globalization and competition were already bringing to the fore economic factors in daily life. Consider Kenneth Pomeranz’s The Great Divergence: China, Europe, and the Making of the Modern World Economy (Princeton University Press, 2000). Pomeranz asked an old question—why did the Industrial Revolution happen first in Europe and not Asia? To answer it, he appealed to multiple spatial scales, above and below nation-states, from regions to empires. He employed numbers, but for the purpose of old-fashioned counting, not modeling, and he made those figures part of the story. Furthermore, by pointing to the ecological windfall of New World frontiers, Pomeranz enlisted a sibling field, environmental history. Finally, while his account was primarily about causality, he nodded to an array of historical processes and showed sensitivity to the perspectives of the diverse participants in his tale. As Westerners grew nervous about the rise of China, and the hegemony of the West seemed less given, the global dimension of The Great Divergence struck a nerve.
While economic history’s stock rose with globalization, the new economic history’s stock fell because of doubts about its behavioral assumptions. Even before the recession, the heroic figure of the utility-maximizing homo economicus appeared less infallible. Rational actors? Not even the Federal Reserve’s chairman at the time, Alan Greenspan, could find them. Irrationality, passion, and greed stormed the stage. Subprime mortgage loans, hedge-fund quants’ calculations, moral hazards, tech start-up and IPO crazes made for much better drama.
To their credit, some economists and other social scientists had already recognized the problem, as evidenced in Amartya Sen’s 1977 paper “Rational Fools: A Critique of the Behavioral Foundations of Economic Theory” and Albert O. Hirschman’s “pendular” man, swinging between self-interest and concern for others.
But those were the exceptions. Daniel Kahneman, the behavioral psychologist known for his studies of decision making, was shocked to discover that “the agent of economic theory is rational, selfish, and his tastes do not change.” He added: “My economic colleagues worked in the building next door, but I had not appreciated the profound difference between our intellectual worlds. To a psychologist, it is self-evident that people are neither fully rational nor completely selfish, and that their tastes are anything but stable.”
Historians were no less shocked. Cultural historians for decades had been writing about “market cultures” and what they called “subjectivity.” But because they no longer imagined themselves in conversation with economists in the building next door, they had no chance to be heard. Lately, though, historians have explored the cultures around money, statistics, and finance, to take just a few examples.
The production, distribution, and consumption of value are common descriptors of what constitutes the economy, with economists normally treating value as synonymous with prices. But market prices can’t be the only gauge of value, as demonstrated by a recent spate of philosophical books, among them Debra Satz’s Why Some Things Should Not Be for Sale (Oxford University Press, 2010) and Michael Sandel’s What Money Can’t Buy (Farrar, Straus and Giroux, 2012). Historians have a lot to contribute to such discussions—now that they realize they’re a part of them.
Even the very idea of “the economy” is the source of revitalized attention. Instead of isolating variables, we can tell the histories of variables and categories of economic life. We can give homo economicus a real, historically conditioned life. It’s the equivalent of turning a computer-modeled Pinocchio into a real boy. This does not mean being antiquantitative, or anticausal, but it does mean understanding that the numbers and agents live in time, and, by implication, that socioeconomic trends are open to intervention and change.
What’s the evidence behind our optimism? The first is the rekindled interest in the history of economic ideas. No longer a subset of intellectual history engrossed in controversies over, say, whether Adam Smith had a concept of marginal utility, the history of economics has found kinship with the history of science and politics. Albert Hirschman and Emma Rothschild have worked to place political economy back into the tapestry of discussions of human nature and the pursuits of power and wealth. More recently, historians like Mary Morgan have charted how political economy evolved from a verbal science, steeped in rhetorical traditions as a branch of literature, to a model science, grounded in reasoning tools that render the subject into a manipulable object that can be simulated, graphed, and spliced into separable equations. From a subject that could be understood through a few general, usually hidden laws, the economy, she argues, became an amalgamation of discrete, increasingly ornate, miniaturized models.
The work of Timothy Mitchell and others has already demonstrated that the economy is not a thing waiting out there to be measured by economists (or economic historians), but the result of a long historical struggle over warfare, empire, and welfare. Indeed, the idea of the calculable economy, like the offshoot capitalism, is a Johnny-come-lately, forged by national and international statecraft and polished only in the 20th century. Its origins extend at least as far back as William Petty’s attempt in 1665 to enumerate the incomes and expenditures of England and Wales, in preparation for war against the Netherlands. Petty anticipated the 20th-century quest for national accounting systems, which culminated in the invention of the statistical aggregate of gross domestic product in 1941, in the midst of another war.
The postwar world demonstrated that this intellectual history was inseparable from the manufacture of economic structures themselves. So much of the development-economics enterprise after 1945 was about creating an economy out of what was seen as a tapestry of loosely strung-together pre-market patches. This attitude saturated the World Bank’s catalog of “missions” (the evangelical tone is hard to miss) to the newly branded third world to forge a modern economy out of the fragments of “backwardness” and “inertia.” Behind Rostow’s manifesto was a mental concept.
Now it is the economy that needs explaining. Economic concepts and tools appear less as a framework for analyzing history than the other way around. We might call this inverted relationship between the economy and history not economic history, but the history of economic life.
Rather than an economic history that takes for its object a timeless given, divorced from other domains of life, a history of economic life historicizes the economy itself, in part by attending to the fuzzy and shifting boundaries between the economic and noneconomic. Rather than confining our studies to market prices and production determined by assumptions about rationality, we can treat these activities across a variety of scales, from the intimate to the global, and through a variety of structures, from the contingent to the durable, and within a broader context of subjectivities and values.
The global dimension is crucial. The trajectories of the production of wealth and of social disparities were global long before capitalism; some might say they laid the groundwork for capitalism. The most recent and intense global turn has disrupted the history of capitalism in at least two ways. First, narratives about the triumph of the West now seem relics of a more confident era. That’s one reason Niall Ferguson’s recent Civilization: The West and the Rest (Penguin, 2011) struck many critics as, well, quaint. Seen over the long run, systems come and go; so do their geographic bearings.
Moreover, seen globally, the economy is the product of more than just the attributes of one particular place (the West) or time (the modern age). Recent and pipeline works will push historians of American capitalism to think in more global, transnational, and comparative terms, and to be mindful that what appear today to have been outdated, precapitalist formations—slavery, household economies, ennobled magnates—had essential places in the story and have not faded away so easily or tidily. In some cases, as anyone attentive to current social inequality can attest, they acquired a new lease on life.
The study of capitalism requires scope and imagination. It needs an economic history reconnected to the broad trunk of history and the humanities. Then, who knows—rather than historians imitating economists, perhaps we’ll see the reverse.
Jeremy Adelman is a professor of history and director of the Global History Lab at Princeton. His forthcoming book, Latin America: A Global History, will be published by Princeton University Press. Jonathan Levy is an associate professor of history at Princeton University and the author of the forthcoming book Ages of American Capitalism, to be published by Random House.
