If markets are to function effectively, prices need to be agreed and respected. However, confidence in the ability of free markets to allocate resources efficiently through the price mechanism is in decline. Minimum wages are accepted despite evidence that they price the unskilled out of work. The manifesto of the newly elected mayor of New York, Zohran Mamdani, includes a $30 minimum wage, rent freezes and city-run grocery shops.
For those from a Common Law background, price is generally, in the absence of fraud, as agreed between buyer and seller. However, not only is there a long tradition of thinking about whether a price is ‘just’, and if not, how to remedy it, those principles survive in contemporary legal systems.
The idea of a just price, while owing something to Aristotle and Roman law, was developed by Scholastic theologians who believed that commutative justice required that the items being exchanged should be of equal value. For Thomas Aquinas, justice required that in an exchange one should be concerned to ensure that the counterparty receives what is due to them. While for Hayek this was a ‘futile medieval search’, the concept allowed, by the application of the Roman law principle of laesio enormis, land transactions at less than half their ‘true’ value to be void so that the seller recovered their property. In common law systems that concept has been dismissed as contrary to the principle of the autonomy of the contracting parties, while elements of this thinking survive, for example in Germany and France.
While Just Price Theory and Just Price in the Markets cover similar ground, with the latter, by Charles R. Geisst, focussed on the history of the idea and Joaquin Reyes using it in the former as the basis for a reassessment, they make a stark contrast. Though Reyes is markedly less accessible, he seeks to explain the ideas behind a ‘just price’ and argues that it deserves renewed attention. By contrast, Geisst writes at greater length, but to less effect. His previous work on usury may not be unconnected to significant material on that subject being included here which is only, at best, tangentially relevant. He includes material on well understood subjects from monetary theory in the seventeenth century, to the development and problems of mercantilism and public markets in the eighteenth and the gold standard and anti-trust legislation in the twentieth, although the connection to the concept of a just price is far from clear. Much of his material is not only largely irrelevant but underlines the lack of originality. Neither Hayek nor Collingwood feature in the bibliography or index. Errors – including on the nature of feudalism – add to the impression of existing material being recycled without anything new to say.
Reyes sets out the various ways that the idea of a just price have been regarded as misleading. In the view of free market critics, it is impossible in a free market to sell an item for more than its worth, as its value is that which someone is willing to pay for it. The idea of a just price undermines the ability of an individual to make a contract. The sovereignty of the individual requires that he is able to exercise autonomy in agreeing a price. It may transpire to have been a mistake to agree that price, but the individual had the freedom to make that decision. For others, the concept of a just price fails to recognise the efficiency with which market prices provide signals to buyers and sellers which ensure demand is met efficiently.
While recognising these counterarguments, Reyes suggests that the concept deserves to be reconsidered on the understanding that the price agreed reflects an imbalance of power between buyer and seller. He explores the tension between the autonomy of the individual and the risk of injustice. His purpose is to demonstrate that market economics are unjust by favouring the rich. While confused by a style which prefers complexity over clarity, at its heart his view is that ‘prices are the product of choice and power’, tending to reinforce inequalities of power. There are arguments to be made for more equal distribution of resources, but Reyes’ attempt to argue that disparities of wealth mean that market pricing is unfair is undermined by a lack of credible analysis. His examples tend to the extreme; the person obliged to sell their organs or markets characterised by extortion.
He quotes R.G. Collingwood who described a just price as a ‘contradiction in terms’. Collingwood also noted that it is reasonable to demand a higher wage if it is lower than it should be due to circumstances which ‘ought not to exist’. Collingwood makes the point that this is not an argument for legislation controlling wages, but for it to prevent exploitation of workers. For Collingwood ‘a wage fixed by any but economic considerations ceases to be a wage’. Reyes misrepresents the argument by suggesting that Collingwood’s characterisation of a just price is contradicted by his support for a freely organised labour market. He claims that Collingwood ‘did not really believe that the idea of the just price was contradictory, although he believed that he did’. Reyes’ argument in support of this contention is obscure and does not deal with Collingwood’s analysis.
While noting that people will not work as hard without wage differentials, he suggests that a virtue based approach ‘allows us to challenge this assumption by noting that this is merely a contingent feature of our current society’. No detail is given of the alternative arrangements, ‘shaped by a more egalitarian ethos’ which would avoid this problem. Animal Farm is not referred to.
While his work is characterised by the repetition of chains of logic, this does not prevent Reyes from making suggestions with no obvious support. Having quoted Adam Smith suggesting that wealth is power, he moves without comment to suggest that that the rich impose prices on the poor. He gives no examples of public markets that function in this way but argues that market economics can only operate efficiently ‘if equality of wealth obtains.’ This leads to the conclusion that ‘in societies in which wealth is unequally distributed, … very few (if any) of the prices that we pay and receive are just’. His purpose is to suggest that, to use a much favoured word, ‘normative’ pricing, dependent on ‘virtue’, should replace prices set by free well-functioning markets. In making this argument he suggests that contract law should recognise ‘distributive justice’ by setting prices which lead to greater equality of wealth. The autonomy of the individual to make a contract is only partially accepted.
A book reviewed by Richard Turnbull illustrates the sustained interest in this area. Richard’s comment that the content was ‘shrouded in a mystical academic language of a rather obscure discipline’ can equally be applied to Reyes. That review provides case studies where attempts to replace market prices were resisted by those with less resources than the counterparty.
One might dismiss this line of thought as ignoring generations of experience. From attempts to limit wages after the Black Death to the wages and prices policies of the 1970s or the experience of eastern Europe after 1945, the attempt to replace a market by prices controlled by executive action has been both damaging and ultimately unsuccessful. However, the interest in the idea of a ‘just price’ demonstrated by these two books underlines the fact that for many this is an attractive idea. If the voters of New York elect a mayor who thinks that state controlled grocery shops will reduce prices, it would be a mistake to dismiss this line of thought as redundant. Many simply do not trust market economics. Academics like Reyes seek to provide credibility for distributive justice as a replacement for the operation of the market and they have a receptive audience. Making the argument for the central importance of market economies in generating the wealth needed to provide prosperity and reduce poverty is a priority for a generation attracted by the idea that ‘justice’ can be achieved by replacing the freedom of individuals with direction by the state.
‘Just Price Theory: A Reassessment’ by Joaquin Reyes was published in 2025 by Bloomsbury (978-1-509-96354-6). 256pp.
‘Just Price in the Markets: A History’ by Charles R. Geisst was published in 2023 by Yale University Press (978-0-300-26833-1). 280pp.
Andrew spent his career with PricewaterhouseCoopers where he was a partner for more than 25 years. He led a variety of the firm’s businesses both in the UK and globally, with a focus on the pharmaceutical industry. He also led the firm’s work on explaining corporate taxation to civil society and the public. Since retiring from PwC he has completed a master’s in history at Oxford and is hoping to undertake further research. He is also a trustee at the London Handel Society and the Open Spaces Society.
This is a spectacular book whose title only hints at its true ambition. Economist Richard Langlois brings depth to both the overarching framework and to finely crafted historical details. The book’s broad scope and rigorous analysis across 816 pages (a mere 550 pages of main text with extensive endnotes) can only be hinted at in a review.
At heart, Langlois offers a retelling of the conventional view of the rise of the managerial corporation that Alfred Chandler wrote on nearly fifty years ago in The Visible Hand. Chandler’s triumphalist account of the large, multidivisional, vertically integrated corporation was published in 1977, ironically just as the shifting economic sands and corporate raiders were already beginning to transform corporate life. Until that decade, the story seemed one of linear progress away from personal, entrepreneurial capitalism and toward managerial experts. This theme of a competent managerial elite replacing the messiness of the invisible hand of the market extended beyond the business world to policy and politics more broadly. This context is not lost in the book, and Langlois evokes the broader zeitgeist, drawing on the words of figures such as Herbert Croly and John Kenneth Galbraith.
Langlois’s core task is to explain the rise of managerial corporations in the late 19th and early 20th centuries in light of the fact that market forces later dismantled these same large corporations in the late 20th and early 21st centuries. He does this with a deceptively simple theoretical argument and detailed economic history to substantiate his claims. I’ll examine these dimensions in turn.
The theoretical argument is straightforward. Building on the foundational work of Ronald Coase, we know that economic activities are organized within firms when the cost of achieving them via market transactions would be higher than organizing within the firm. That is, the visible hand of an integrated firm replaces the invisible hand of market relations when it is profitable for it to do so.
Langlois argues that large corporations proliferated in the late nineteenth and early twentieth centuries not because they were a permanently superior institutional form, but because they filled a temporary institutional gap. Rapid technological change outpaced the development of market-supporting institutions—the legal frameworks, financial markets, and infrastructure that enable decentralized coordination. In this environment, integrated firms could organize complex production more efficiently than fragmented markets could. These corporations weren’t naturally better at resource allocation; they were simply the best available solution given the institutional constraints of their era. By the late twentieth century, as market-supporting institutions matured, the advantage of large integrated firms diminished, and many were dismantled or reorganized.
After an introductory chapter introducing the main concepts and the nuanced argument of the book in précis, the eight additional chapters and the long epilogue are arranged chronologically. The author deftly weaves a narrative that combines corporate, intellectual, and political history all analyzed through the mind of an economist who has read the empirical economic literature on relevant topics. At various stages, Langlois explains the role of these different forces on the organizational form of the corporation. The result is a synthesis—patchwork in parts—of the various threads needed for this multifaceted undertaking. Readers may get mired in the detail at times, but the amazing thing about Langlois’ enterprise is that he pulls it off and the result is a magisterial book that deserves to be read widely.
These varied threads are necessary because Langlois argues for the role of contingent history in the rise of the Chandlerian corporation. The role of government misapprehensions about business practices played a serious part in the tendency towards certain types of structures. Technological change and economies of scale can explain some industries, but the phenomenon was much broader. Furthermore, the continued dominance of the Chandlerian corporations is explained by the absence of sophisticated decentralized markets the development of which was hampered by antitrust efforts and shocks. There was a reason the market forces which rose at the end of the 20th century did not emerge in midcentury: the chaos of economic turbulence, world war and cold war. The space for an efficient make-or-buy decision was necessarily closed down when, as was often the case, the courts decided that contracts necessary for external contracting decisions are anticompetitive, or the empowered regulator like the Interstate Commerce Commission or Federal Communications Commission intervenes.
In the nineteenth century, commentators increasingly distinguished between closely held businesses and large businesses. Any history stresses the role of the railroad in the rise of professional management, but Langlois brings to life the economics of the business and the politics surrounding it. Through antitrust and regulations like those on the railroads, government changed the optimal institutional structure. Work in economic theory and history has helped explain the practices of businesses that contemporary legislators and regulators dismissed as anti-competitive.
Langlois’s argument is in summary that the business practices which led to government intervention were often efficiency-enhancing and the policy response was often harmful. When this included things like banning contracting practices this led to more business being done within the firm. This rather bold argument is aided by copious references to work in economics on 19th and 20th century business practices and the implications of government policy, making scholarship on this available to the general readers for the first time.
Perhaps most important for understanding the middle of the 20th century is the string of shocks, namely the two wars with unprecedented levels of war planning and the Great Depression that happened in the first half of the century. In general, these contingencies shifted the decision to bring elements within the firm instead of purchasing on the market. The years between 1914 and 1973 can in fact be viewed as the high watermark of state planning. As more time separates this period from the present, a conception of the degree of state planning and the worldview of the managerial elite in politics, economics, and business is lost.
Among the many terrible events, Langlois calls the Great Depression, the signal catastrophe and ‘a worldwide cataclysm that would alter the history of the century in the US more fundamentally and profoundly than even its two brutal wars’ (page 186). He argues, with supporting evidence, that for the United States the century’s worst year was 1933—the second dip in the Great Depression. Between the peak in 1929 and the low point in 1933 the Dow Jones dropped some 86 percent. Over this same time unemployment rose from 4 percent to 25 percent and estimates suggest that real per capita output dropped by 29 percent to a level not seen since 1901.
Drawing on the consensus in the literature, Langlois argues that this catastrophe was not caused by inherent features of capitalism that make it prone to break down or particular features of the 1929 crash itself but was the fallout from bad policy ideas which he dissects in detail. The crucial set of facts is that the Federal Reserve failed to act appropriately when it allowed the money supply to shrink and thereby unleashed the horrors of debt deflation. Beyond this central problem, the government attempted (among other things) to keep wages from falling in a delusional idea that high wages would allow the surplus of goods to clear. Many of the most egregious attempts of the New Deal were stopped by the courts, but there was a more general attempt to control markets.
In a key summarizing passage Langlois says of the Depression and war years:
The Second World War placed resource allocation even more firmly in the hands of the government and ushered in far more comprehensive nonmarket controls. Between fall 1929 and the end of World War II, prices in the United States often transmitted either false information or no information at all about relative scarcities, and many of the institutions upon which market exchange depended were hampered or destroyed. It is against this background, and not against a counterfactual backdrop of thick and well-functioning markets, that we must explain and appraise the rise of the large American corporation in the middle years of the twentieth century.
In a very interesting chapter, Langlois shows how dynamic market forces similar to those of the 1970s and beyond were already emerging in the 1920s but were diminished by the crisis. Across different industries innovative entrepreneurs were able to access capital and generate complex contracting networks solving assorted economic issues. General Motors and other companies (unlike Ford which because of its eccentric founder was steadfast in remaining optimized for the previous environment) would take advantage of responsive, modular supply chains. Even companies like DuPont sourced their patents not in the famous research labs of the midcentury but from acquisition. Much of this energy would become concentrated in the large corporations not because of their superiority as Chandler claimed, but because they were the only ones to survive the Depression. New restrictions on banking and forms of contracting limited new entrants and startups. Furthermore, the capacity of large firms to internally finance led to the growth of R&D departments at DuPont, GM, GE and others.
As Langlois writes:
The Depression and the policy responses to it had decisive consequences for the American corporation…. The dramatic monetary contraction, along with the failure of the Fed to act as an adequate lender of last resort, led to an amplifying cascade of bankruptcies and bank failures… this had the effect of destroying much of the capacity of the banking system, and of the financial system more generally, to supply financial intermediation. Small firms, which needed to rely on external capital markets, felt the effects far more than large firms, which could rely on internal financing and had close ties to large banks. Thus the Depression initiated or accelerated shakeouts in many industries. In some industries the process was Darwinian, with the most productive firms surviving; in others, survival depended simply on access to capital. At the same time, the New Deal instituted an unprecedented regime of price supports and entry restriction in financial, labor, and product markets. (187-88)
Absent these events one wonders how different the corporate world would have looked in the 1950s and 1960s.
Another merit of the book is the way it reflects on the way antitrust regulation, industrial policy and scientific and technological progress interacted and on the ideological and political context for them. Odd Progressive ideas underlay aspects of antitrust legislation and decisions of the FTC; odd monetary ideas underlay the decisions of the Fed. The science of industrial practices, whether in steel production or electronics, developed rapidly. Government and industry were closely intertwined in both world wars, and he discusses industrial policy at length in an even-handed but negative way. Another component of many chapters is Langlois’s focus on the role of finance, whether J.P. Morgan through the House of Morgan in earlier chapters or leveraged buyouts in the later chapters. Langlois also examines the form of pyramidal holding companies which was viewed as suspect by Progressives and partially banned in the New Deal. The demise of that form (unlike in the rest of the world) plays some role in explaining the American integrated firm and later conglomerates.
This level of historical detail and context makes the past come alive. Its coverage of the more recent past stands out as well. While the first 400 pages of the main text take readers from Standard Oil to Mad Men, the last 150 pages cover deregulation, disintermediation, and the rise of VC-backed startups. In the past decades, numerous books have been written about the revival of liberal thinking in the 1970s. Until that decade, for a variety of reasons, the story seemed one of linear progress away from personal, entrepreneurial capitalism and toward managerial experts. Many of these works suffer from depicting the changes as merely the actions of a few choice actors rather than a more widespread and diverse set of changes rooted in a disillusionment with the status quo. One illustrative example that Langlois discusses is the role of Ted Kennedy, no market fundamentalist, in the deregulation of trucking, rail, and air travel.
One of many dimensions to the book is that Langlois is seeking to undermine what he sees as a broader Progressive vision of society (he explains American Progressivism in detail and contrasts different varieties) that runs up to the present. The introduction and epilogue contain some understandably pointed remarks about the contemporary efforts by those on the right and left who have sought a more muscular state to regulate businesses. Many of these figures make explicit historical claims and hearken back to Progressive efforts to restrain the dominance of big business via antitrust and regulations banning practices like self-preferencing by Amazon. Building on the work of others, Langlois shows many ways in which past attempts failed to understand the efficiency of practices they villainized and how state regulation often empowered big business against markets and consumers. In doing so, he illuminates both past failures and the risks of repeating them. General readers may disagree with the broader view and specialists might have issues with one of the many episodes he covers, but The Corporation and the Twentieth Century is a tour de force.
‘The Corporation and the Twentieth Century: The History of American Business Enterprise’ by Richard N. Langlois was published by Princeton University Press in 2023 and came out in paperback in 2025 (978-0-691-24753-3). 816pp.
John Kroencke is a Senior Research Fellow at the Centre for Enterprise, Markets and Ethics. For more information about John please click here.
Economic historians have a growth preoccupation. The Industrial Revolution and its causes play the leading role in most prominent books in the field. And there are many other works that seek to explain the absence of an industrial revolution elsewhere in the world.
It is refreshing therefore to read a book that is not about the causes of industrialization but its consequences. If we reach back to the past, say, 200 or more years ago, two dramatic transformations are visible: one is the abundance of material goods and transformative technologies due to industrialization; the second transformation is the rise of large, modern, welfare states.
Walker Hanlon’s book The Laissez-Faire Experiment addresses this second transformation. He asks two fundamental questions: ‘First, how well did limited government in mid-19th century Britain work? Second, why was limited government abandoned in favor of the more interventionist government found in the U.K., and essentially all other developed countries, today?’
Hanlon’s argument is elegant and simple and it is grounded in standard economic theory.
The main problem facing the British economy in the early 19th century was dismantling the inefficient policies of the pre-Napoleonic war era, i.e., the fiscal-military state of the 18th century which protected large land-owners and relied on local and ad hoc institutions. Hanlon suggests that laissez-faire was an appropriate economic philosophy in this context: ‘across the first half of the nineteenth century, Britain’s laissez-faire system was successful. Economic growth was booming, and the benefits were accruing not only for the rich but also for average workers. Technological progress continued at a rapid pace. As a global power, Britain was unmatched.’
But, as the Industrial Revolution unfolded, the costs associated with this policy of non-interference mounted. For example, rapid urbanization brought new problems of overcrowding, sanitation, disease control, and pollution. There was a large health penalty to urban living in the 19th century.
Hanlon provides a compelling empirical assessment of the economic problems that led British policymakers to adopt a more interventionist series of policies. Increasingly severe market failures in the form of externalities from pollution, or asymmetric information in a range of markets, made government intervention potentially welfare enhancing.
The book is admirably clearly written. First, Hanlon presents the relevant economic analysis, which will be familiar to those who have taken Intermediate Micro or Public Economics, outlining the main explanations for market failure: information problems, monopolies, credit constraints, public goods, and coordination problems. Each chapter then considers different applications of the general principles, and provides a survey of relevant literatures in economic history, for example the literature on child labor regulations or urban public health.
The chapter on unemployment insurance, for example, condenses a tremendous amount of information and evidence into just a few pages. One charge that classical liberals have made against the modern state is that unemployment benefits and insurance crowded out the many forms of charity and private insurance that were commonplace prior to the welfare state.
Indeed, Hanlon discusses the wide array of traditional and occupation-based non-government forms of insurance available prior to 1850. He then, however, explains how the rise of large, geographically concentrated industrial agglomerations based on a single industry, such as cotton textiles in Lancashire, changed the problem of insuring workers. Neither family, locality-based, nor occupation-based forms of unemployment insurance, could deal with a general downturn in cotton textiles.
Overall, the book offers an exemplar of how to write a modern work of economic history. I wouldn’t hesitate in recommending this book. Beyond an economic history audience, it is an important book for anyone interested in understanding the rise of the modern state in the 19th and 20th centuries.
Nonetheless, as I discuss below, I want to push the implications of the book’s arguments a little further and explore some aspects of the debate which Hanlon perhaps neglects.
Having lavishly praised The Laissez-Faire Experiment as a work of economic history, my more critical comments will focus on the implicit political economy of the book and its treatment of economic ideas.
First, and I think intentionally, Hanlon’s treatment of what he calls ‘a laissez-faire philosophy’ is remarkably flat. I say intentionally as Hanlon clearly wants to focus on the economic history. From this perspective, too much engagement with the literature on the history of ideas would be distracting. So, he uses laissez-faire as a short-hand to refer to what is often called classical liberalism, essentially the idea of limited government and a general presumption of liberty.
This is entirely understandable and indeed defensible. Nonetheless, there is a price to taking this approach, which I will attempt to cash out below.
First, there is the use of the term laissez-faire as a shorthand. Classical liberalism has never been identical to laissez-faire because classical liberal thinkers have always recognized areas where government intervention is required.
Hanlon doesn’t really defend his use of laissez-faire as shorthand. But this approach overstates the degree of elite consensus and underestimates the extent to which there were competing intellectual traditions in 19th century Britain.
It is true that many of these positions came together in favoring a limited state in the mid-19th century, but it is precisely by recognizing that they were not a coherent ‘philosophy’ that we can appreciate why some of the leading figures also came to push for more technocratic interventions in society. A case in point would be Edward Chadwick. Chadwick was both a utilitarian follower of John Stuart Mill and a founder of modern public health and policing and he was more than willing to abrogate private property rights to achieve an improved societal outcome.
Hanlon’s narrative is of liberal, laissez-faire inclined policymakers and thinkers confronting the reality of widespread market failure and externalities and gradually adapting their policies and intellectual principles. He writes that ‘government intervention during the nineteenth century was not the work of a group of ideological collectivists. Rather, many interventions were the work of laissez-faire adherents who nevertheless believed that intolerable or inefficient conditions exist and were open to the possibility of experimenting with various forms of government intervention’. My feeling is that a deeper investigation of the ideas and writings of the classical economists and associates like Chadwick will reveal a more forthright commitment to policies of amelioration and improvement, rather than what is conventionally meant by the term laissez-faire.
Moreover, as Colin Holmes documented more than 50 years ago, something recognizable as a doctrine of laissez-faire did exist in the mid-19th century but it was never the animating principle of the British elite or government. Opposition to great government involvement in society could be animated by traditional ‘small c’ conservative principles. We don’t get a sense of this opposition (no John Ruskin or Thomas Carlyle, for example) in The Laissez-Faire Experiment.
Acknowledging this does not weaken Hanlon’s argument, but it would strengthen our understanding of the issues at hand in 19th century Britain.
My second comment concerns the treatment of political economy in the rise and fall of laissez-faire.
In general, Hanlon’s treatment is broadminded. He doesn’t assume that the existence of widespread market failures automatically translated into policies that could by assumption correct for those failures. Aware of the role played by both ideology and interests, he rather argues that the market failures that were exacerbated by industrialization ‘created opportunities for efficiency-enhancing government intervention’. Many factors would be critical in determining the extent to which these opportunities were realized.
Hanlon provides a similarly nuanced discussion of the shift towards more government activism at the end of the 19th century. He draws on recent historical scholarship to discuss the extent to which the example of the German welfare reforms and the pressures of war and imperial competition pushed policymakers away from laissez-faire.
Nonetheless, this part of the argument was less compelling than the first part of the book where Hanlon provides a systematic account how the new industrial economy generated all kinds of new externalities.
There is a reason for this. The type of evidence that Hanlon does a great job of assembling is very convincing in demonstrating the existence of market failures. He combines rigorous evidence with economic theory. But he doesn’t have an equivalently powerful framework for discussing how and why certain policy decisions were made.
In his conclusion, Hanlon tackles some of the big questions raised by his account: ‘is there evidence that the expansion of British government intervention . . . was misguided?’. Hanlon provides evidence that this was not so. He contends that policymakers followed experience and were not led by public opinion.
There is a risk here that the political economy of the 19th century does not get the full attention it deserves. Political economy is about heterogenous preferences and Hanlon’s framing in terms of an unmet nascent demand for education or for regulations abstracts from these conflicting preferences. Hanlon appreciates that government policies do not always achieve their aims. But political economy considerations are only occasionally mentioned, for example in explaining the failure to tackle coal pollution.
In contrast, conflicting political interest groups were prominent in earlier accounts of the rise of the state in late 19th century England. Holmes noted that what was traditionally seen as the high-point of laissez-faire ideology, the mid-19th century, was in fact a period of centralization and increased regulation, a point that Hanlon’s narrative and data in fact substantiate. But the role of conflict between different interest groups is not a major theme in The Laissez-Faire Experiment. And this also limits the ability of Hanlon to speak to developments in the 20th century, when much larger and more interventionist states emerged.
None of these comments take away from the fact that The Laissez-Faire Experiment is a great work of economic history and a major achievement. All subsequent scholarship will have to engage with it and will no doubt build upon its findings.
‘The Laissez-Faire Experiment: Why Britain Embraced and Then Abandoned Small Government, 1800-1914’ by W. Walker Hanlon was published in 2024 by Princeton University Press (978-0-691-21341-5). 504 pp.
Mark Koyama is Professor of Economics at George Mason University. He writes extensively about economic growth and institutions.
Magnuson, a professor of corporate law, has compiled a detailed and entertaining narrative of the key episodes in corporate history that documents how the corporation has been deployed by society’s problem-solvers. The corporation is a distinct form of human organisation that pre-dates many of those we take most for granted, such as the democratic nation state and even the Church. In Magnuson’s prosaic account, rich in surprising details, corporations are not seen as individual agents that pursue goals we can easily evaluate as simply good or evil. Rather, they are an organisational tool that enable human beings to cooperate at scale to do things that human beings might want to do, for better or worse. In their success, they transform the world around them, and often create new problems to solve. They are always impressive, but never morally pure.
The legal privilege that constitutes the corporation is what makes them useful both to society in general and to particular people’s purposes. Corporations survive the death of their members, and therefore, so do their fiduciary obligations. When undertaking large-scale and long-term projects, it makes one more attractive to creditors if the project is known to continue even if its individual members might come and go, have a career change, go bankrupt, or even die. With the reach of human agency transcending the life time and changeable circumstances of any individual, corporations can achieve what would otherwise be impossible.
For most of recorded human history, the main source of organisational capacity in society has been the state. It is the state, therefore that originally created the corporation through granting, at its discretion, this peculiar form of legal privilege. From the first corporations of Rome to the early 19th century in England, those who wanted to avail themselves of incorporation would need to be granted such a privilege by the state. For the state to agree to creating this impersonal legal agent for your purposes, it generally needed to be shown that it was also in the state’s interests to do so, and not just the entrepreneur’s. At its very conception, then, there was the possibility of divergent or even conflicting interests between the agent who controls the corporation and the agent that grants it its status.
A fascinating aspect of this history of the corporation is that they are shown to be in one sense distinctively ‘private’ entities in that they are definitionally not states. But on the other hand, they are explicitly creatures of the state. In earlier epochs the way in which corporations served state interests was much clearer – they collected taxes, lent capital, subdued foreign lands to the glory of their sovereign, etc. A corporation could only be created if it did in fact serve the interests of its state (for better or for worse – the interests of the state have not very neatly converged with the interests of the general public for much of human history). Magnuson makes this tension vivid. However, it does leave us confused as to why he sometimes refers to the corporations of the ancient and pre-modern world as ‘capitalists.’
Over the course of the 18th to early 19th centuries (in Western Europe) incorporation went from being a discretionary legal privilege to being an impersonal, general right. One now has to fill out the forms and pay the taxes, but one does not need to persuade the sovereign of the virtues of one’s intentions. The discipline of the market is what now regulates which corporations get to exist or not, rather than the discretion of the sovereign. What this means, which is well shown in the second half of the book, is that profitability takes the place of perceived service to the realm. Magnuson impresses upon the reader that profitability is a good, but imperfect, measure of a corporations’ contribution to society. What he somewhat elides, however, is that its imperfections are so much less serious than those of premodern corporations. Serving Rome meant imposing arbitrary taxes that often left people literally starving; bringing glory to England often meant war and slaughter. Whilst the difference in the way corporations functioned before and after this revolution in corporate law took place is made vividly clear in the book, Magnuson does not explicitly mention the legal changes themselves. Analysis of this change would, I think, help him to ground the normative conclusions he lays out at the end.
The book is divided into seven periods of corporate history, told through the story of a particular corporation or industry that defined its era. In the beginning was the corpus economicus of the Roman Republic, first created to raise private funds for the overstretched military ambitions of Rome, and then to collect taxes on behalf of the later territorially stretched Republic. Such ‘tax-farming’ was the standard way states raised revenue. It was not until the dawn of early modernity that states had the bureaucratic capacity to do it themselves and thereby cut out the middle man. Such middle men were essentially local gangsters who extorted as much as they could from the population because a fixed sum was owed to Rome, and they got to keep any surplus they could squeeze out (hence the New Testament’s constant equation of tax-collectors and sinners). Rome could never have ascended to the power it did without them. But, inevitably, they became a source of political and economic interests unto themselves, separate from the Republic. Next comes the first bank, started by the Medicis, which made available huge amounts of wealth for European princes and merchants, as well as the Church, and were able to manipulate their debtors in the interests of their own long-term profits. Then we come to the joint-stock companies of England, created for seafaring trade to generate revenue for the Crown and bring glory to the realm. The most famous among them, the East India Company, would become so rich and powerful, with its own armies, currency, and slaves, that it was a de facto state in India. Eventually it became such a rival to England herself that the Crown would, bit-by-bit, take it over. Next, we turn to the American railroad companies that were granted monopolies for the purposes of connecting and thereby modernising a vast and internally conflicted country. The particular way in which they were granted privileges over land and the trade that would take place on their rails presented various opportunities for them to exploit, which would inform a whole era of American anti-trust legislation. The next episode occurs firmly within a legal and economic context in which corporations no longer had any special privileges but rather had to compete with one another on legal terms that tended to favour value-creation and efficiency over government favour. Henry Ford’s ambitious and successful plan to make a high-quality vehicle every working American family could afford required no special monopoly privileges but rather an innovative technology (the petrol-powered engine) and production method (the assembly line). Then the narrative moves onto multinational oil companies, which, on the one hand were able to coordinate oil supply far better than separate nations were, and on the other used their wealth and influence to suppress climate change science. The final two chapters are on private equity, and then Facebook as the archetypal tech start-up. In both cases, head-spinning profitability was reached at lightning speed. While there is no doubt they provide value to society, it is also clear they found ways to make profits without creating value, in the former case through arbitrage of the tax code, and in the latter case by purposefully drawing on compulsive human behaviour.
Magnuson says from time to time that profit-maximisation is what often leads to corporate abuse. However, by his own account Ford was driven by keeping his profits low so as to keep quality and volume as high as possible, and prices as low as possible so that all Americans could afford one of his cars. From time-to-time Magnuson invokes various cliches about corporations being short-termist. But this is in tension with the general idea that what corporations do is enable longer-term planning and risk-bearing investment than individuals are otherwise capable of. Nonetheless, the driving normative lesson from this fantastic account Magnuson has compiled is that corporations are a tool of human ingenuity, and human ingenuity is not always benign. He gives many examples of how well societies tend to respond to the new problems introduced by corporations – typically in the form of adaptive regulation – but this should in no way give corporations or the entrepreneurs that wield them moral permission to disregard their consciences, and tell themselves that whatever is good for them must be good for the public. This is a fascinating book and one of which there is very much more to speak about!
‘For Profit: A History of Corporations’ by William Magnuson was published in 2023 by Basic Books (ISBN: 978-1-541-60157-4). 368pp.
Billy Christmas is Associate Professor at West Virginia University, in the John Chambers College of Business and Economics, affiliated with the Kendrick Center for an Ethical Economy.
Prior to joining WVU he was Senior Lecturer in Political Philosophy at King’s College London, in the Department of Political Economy.
How is it that an eighteenth-century Scottish moral philosopher came to be featured on neck ties worn by Nobel laureate economists and cited by presidents and prime ministers? That, in essence, is the question Glory Liu sets out to answer in Adam Smith’s America: How a Scottish Philosopher Became an Icon of American Capitalism.
The book is not a biography of Adam Smith the man, nor is it an exposition of his ideas. It is a biography, as Jennifer Burns described it in the Wall Street Journal, of Adam Smith the idea. It surveys the variety of causes—mostly in America—that the name Adam Smith has been invoked to support. It elaborates some of the competing ‘Adam Smiths’ that have emerged in the last 250 years and that to some extent remain with us today.
The book is not simply a historiography of Smith scholarship. It is offered as a window into the ‘politics of political economy,’ a phrase used to capture the fact that descriptive efforts in political economy are not easily disentangled from the ethical and political commitments of practitioners. Studying the receptions of Adam Smith foregrounds various rhetorical and normative dimensions of economic science.
After an introduction, Chapter 1 of the book treats the initial reception of The Wealth of Nations by Smith’s contemporaries. Smith’s friends and associates enthusiastically praised the book and perceived its scientific import. Thomas Pownall, a British MP and former governor of Massachusetts Bay, hailed the book as a successful exposition of social Newtonianism. The Wealth of Nations contained ‘the principia of those laws of motion, by which the system of the human community is framed and doth act.’
The founders of the American republic received the book as an authoritative treatment of the subject of political economy and an extension of the British ‘science of man.’ They drew on its arguments as one might draw on an academic anthology. James Madison found in its pages a compelling description of the effects of faction. Alexander Hamilton found competent discussions of wide set of issues pertaining to national wealth and public finance. Rather than The Wealth of Nations, John Adams turned to Smith’s The Theory of Moral Sentiments to reflect on the moral psychology of wealth.
Chapter 2 deals with the emergence in the nineteenth century of the image of Smith as the founder of modern political economy. In America, the primary platform for Smith’s ideas in the early nineteenth century was the college classroom. Although infrequently assigned as a college textbook, arguments from The Wealth of Nations were incorporated into standard textbooks of the day, such Francis Wayland’s Elements of Political Economy. Within the shifting contours of the field over the century, the academic status of Smith’s work was somewhat amorphous, as Liu describes it, but Smith nonetheless became an increasingly important focal point in academic discourse. Political economists of all stripes saw the need to read and take Smith’s arguments seriously, either to debunk his analysis or affirm their own positions. His reputation and authority grew, as one nineteenth century literary critic quoted by Liu put it, by virtue of ‘the care and acumen which succeeding writers have bestowed upon Wealth of Nations.’
Academic engagement with Smith’s ideas coincided with increasingly polemical political engagement on the issue of free trade, which is the subject of Chapter 3. In their vigorous disagreements about tariff policy, northern and southern American politicians alike recruited Smith to their cause. Southern politicians found in Smith a convenient figurehead for the cause of free trade, which they favored due to the large market Britian provided for their cotton exports. Northern proponents of Henry Clay’s ‘American System’ of high manufacturing tariffs and infrastructure spending ceded the point that Smith presumptively favored free trade, but they latched on to the exceptions Smith made to his presumptions, making use of an ‘even-Smith-said-so’ logic.
The growing authority of Adam Smith the idea is apparent in the use of his ideas by the early American institutional and historical economists towards the end of the nineteenth century, such as Richard Ely and Edwin Seligman. Seligman especially drew on German readings of Smith emphasizing Smith’s historical bent (evident especially in Book III of Wealth of Nations), pragmatism, and somewhat elastic vision of the role of government. Liu shows throughout Chapter 4 how Ely and Seligman, just as American politicians and academics before them, made Adam Smith in their own image as a would-be supporter of progressive American politics.
Like the late-nineteenth-century progressives, the twentieth century Chicago economists—especially the ‘new’ Chicago school of Milton Friedman and George Stigler—similarly recreated Adam Smith in their own image. The ‘old’ Chicago school of Jacob Viner and Frank Knight maintained, in Liu’s telling, a mostly balanced view of Smith as a cautious, non-dogmatic advocate of free markets with some ethical scruples about the commercial order. Friedman and Stigler and F.A. Hayek—who, it should be said was a somewhat peripheral figure in Chicago economics and never a part of the core Chicago school of thought—departed from the interpretations of their predecessors. They fashioned Smith not simply into an apostle of free trade, as the nineteenth century Southern congressmen had done, but a broader advocate of sweeping de-governmentalization. The Chicago Smith cast a long shadow. According to Liu, it is the Chicago construction of Smith that is largely responsible for popular conceptions of Smith as an apologist for individualism and market efficiency and an opponent of government intervention and collective action broadly.
The story about the Chicago School, told in Chapters 5 and 6, is the climax of the book. Chapter 7 treats the efforts by Donald Winch, Albert Hirschman, Istvan Hont and Michael Ignatieff, and Knud Haaksonssen after 1976 to recover a broader, contextual understanding of ‘the real’ Adam Smith, especially the political and moral dimensions of his thought. Gertrude Himmelfarb’s and Irving Kristol’s work to articulate a Smithian moral economy, with emphasis on the historical Smith’s care for the poor, also features. The Epilogue surveys the Smith scholarship renaissance of the past decades.
Adam Smith’s America is a remarkable scholarly achievement. It should be read and studied by historians of politics and economics and, of course, by Adam Smith scholars. In addition to its virtues as work of intellectual history, the book ably challenges those of us keen to invoke the venerable name of Adam Smith to pause and consider what we are asking Smith to do for us and why. Liu’s book magnificently frames the question: why do we read Adam Smith?
Liu, it must be said, is not innocent of the tendency she so ably diagnoses in others to eclipse context and shape history according to precommitments. She remarkably omits an able Smith scholar and Nobel laureate from Chicago from her narrative: Ronald Coase (1910-2013). Perhaps this is because Coase somewhat complicates the story about the Chicago Smith caricature, and she wants to foreground the idea that there is something fundamentally un-Smithian about Hayek, Friedman, and especially Stigler. Stigler’s reading of Smith evidently has its issues. But Hayek and Friedman were careful readers and generally sound interpreters of Smith’s corpus. Liu does not marshal any substantive evidence to the contrary, but simply resorts to charging Hayek with deploying his reading of Smith opportunistically and Friedman with exaggerating the importance of the invisible hand metaphor. More generally along these lines, the subtitle of the book suggests that Liu wants to communicate to reader that the ‘real’ Smith would likely have disapproved of the association of his name with modern American capitalism, although why exactly this is the case—or what ‘American capitalism’ actually entails—is never explicitly spelled out.
If political economy has inevitably political dimensions, so too do reception histories of the kind offered in Adam Smith’s America. The book tells us that many of us likely engage with Smith in ways that comport with our broader ethical and political visions. The book shows us, albeit inadvertently, that we might engage similarly even with the history of Smith’s reception. In a way, though, this observation makes Liu’s central thesis all the more persuasive.
‘Adam Smith’s America: How a Scottish Philosopher Became an Icon of American Capitalism’ by Glory Liu was originally published in 2022 by Princeton University Press (ISBN 978-0-691-24086-2). 384pp. A paperback edition was published in 2024.
Erik Matson is Senior Research Fellow at the Mercatus Center, Deputy Director of the Adam Smith Program at George Mason University, and Lecturer in Political Economy at The Catholic University of America
Nearly a century later, the Great Depression still shapes how we think about the government’s role in America’s free enterprise system. That lasting influence is no surprise: the Depression remains the most severe economic contraction in U.S. history. Between 1929 and 1933, per capita GDP fell by roughly 30 percent, industrial production by nearly 50 percent, unemployment soared to almost 25 percent, and close to a third of the nation’s banks failed. Just as important, however, the Depression triggered a fundamental shift in how the government responds to recessions—a transformation that continues to shape policy today.
At the center of that shift was Franklin Delano Roosevelt’s New Deal, a set of policies aimed at promoting recovery, providing relief, and laying the groundwork for long-term reform. Yet despite decades of scholarship, two central questions remain: What ended the Depression—and what role, if any, did the New Deal play? In False Dawn: The New Deal and the Promise of Recovery, George Selgin takes up these questions directly. Drawing on contemporary accounts of the Depression and the New Deal, retrospective assessments from the decades that followed, and modern scholarship, Selgin makes a compelling case that the New Deal not only failed to promote recovery but likely delayed it.
By the numbers, the New Deal’s record on recovery is hard to defend. Although the economy improved markedly during FDR’s first term, by 1939—a year after the New Deal had effectively ended as a legislative program—it remained in poor shape despite the administration’s recovery efforts. Roughly 17 percent of the labor force was still either unemployed or on work relief—which, as Selgin notes, even New Dealers regarded as a poor substitute for real employment. Industrial production had barely edged above its level from a decade earlier, and per capita GDP was still below its 1929 peak.
One major reason, Selgin maintains, is that the New Deal’s signature legislative achievements—such as the Agricultural Adjustment Act (AAA) and the National Industrial Recovery Act (NIRA)—facilitated the cartelization of agriculture, industry, and labor—hardly a recipe for recovery. The AAA sought to raise farm prices by restricting output; the NIRA aimed to achieve the same for industrial prices, while also raising wages through higher minimums and enhanced union power. In both cases, the New Dealers mistook a symptom of the Depression—falling prices and wages—for its cause. The result was sadly predictable: prices and wages rose, but output and employment fell.
As misguided as the AAA and NIRA were, Selgin argues, the deeper problem lay not in any single intervention, but in the uncertainty created by the administration’s constant policy experimentation—and Roosevelt’s unwillingness to change course once it became clear those policies weren’t working. This regime uncertainty depressed business confidence and stalled the rebound in private investment that was crucial for recovery—a point emphasized by none other than John Maynard Keynes in his correspondence with the president. Yet Roosevelt ignored Keynes’s advice. As a result, private investment remained depressed throughout his presidency.
Making matters worse, Selgin stresses, was FDR’s skepticism toward the two tools most economists today consider essential for boosting aggregate demand: deficit spending and monetary expansion. As Selgin demonstrates, Roosevelt remained firmly committed to balancing the federal budget—a pledge he had made during his 1932 campaign. As a result, much of the spending that occurred during FDR’s first term was offset by new taxes, reflecting Roosevelt’s fiscal conservatism. Indeed, throughout the New Deal era, the federal deficit remained below the peak reached under the Hoover administration and did not surpass it until the onset of World War II.
To be sure, not everything Roosevelt did hampered recovery. As Selgin acknowledges, several of FDR’s early decisions involving the banking system and the gold standard helped end the Great Contraction that had begun in 1929 and gave a much-needed boost to demand. Chief among them was the declaration of a national bank holiday shortly after his inauguration—a move Selgin regards as perhaps the single greatest achievement of Roosevelt’s first term. While FDR deserves credit for declaring the bank holiday, much of the groundwork had already been laid by the Hoover administration, making it less a New Deal innovation than a continuation of earlier efforts.
The bank holiday by itself, however, was not enough to restore public confidence in the banking system. That required convincing depositors their funds were safe. This was accomplished, in part, through the creation of federal deposit insurance. Interestingly, as Selgin explains, Roosevelt opposed deposit insurance on the grounds that it would encourage banks to behave imprudently—a concern many economists share today. In fact, FDR threatened to veto the Banking Act of 1933 specifically because of its inclusion of deposit insurance. He signed it only when it became clear that Congress would override his veto. Although Roosevelt would later claim credit for creating deposit insurance, associating it with the New Deal would be misleading.
Also crucial to the recovery was Roosevelt’s decision to devalue the dollar. During the Great Contraction, gold had flowed out of the U.S., shrinking the monetary base. Devaluation reversed this dynamic by encouraging gold inflows, which expanded the money supply and supported recovery. Yet because FDR remained wary of monetary expansion, the Federal Reserve sterilized many of these inflows, limiting their stimulative effect. Even setting aside the Fed’s response, however, devaluation could provide only a one-time boost: once international monetary equilibrium was restored, the gold inflows would stop. If monetary expansion were to continue, it would have to be fueled by a different source.
That source, as it turned out, was an unlikely one. Fearing war in Europe after Adolf Hitler’s rise to power, many Europeans transferred their gold to the United States, expanding the U.S. monetary base. At the same time, rising gold prices prompted Joseph Stalin to ramp up Soviet gold production—much of it produced by forced labor in gulag-run mines. Together, these inflows significantly increased the U.S. money supply. Combined with renewed confidence in the banking system, they helped fuel a 60 percent rise in nominal spending between 1933 and 1937—an increase that, Selgin contends, accounts for most of the economic improvements during FDR’s first term. Yet here too, Roosevelt’s persistent skepticism toward monetary expansion and fear of inflation led the Federal Reserve to partially sterilize the inflows, muting their full potential effect.
The massive increase in government spending during World War II certainly contributed to the recovery. But as Selgin observes, if wartime spending were solely responsible, the economy should have collapsed when the war ended. Indeed, many prominent economists at the time predicted as much. Yet when government spending fell sharply after the war, the expected downturn never materialized. Instead, the economy boomed. These forecasts, Selgin argues, proved wrong because support for the kinds of New Deal interventions FDR had pursued before the war had waned. As a result, the regime uncertainty that had depressed business confidence receded, private investment returned, and the recovery finally took hold.
One of the book’s many strengths is Selgin’s evenhanded approach. This is no polemic. He readily credits the Roosevelt administration’s successes—recognizing the policies that aided recovery—and engages seriously with scholarship that challenges his account. Rather than dismiss opposing views, he addresses them directly and thoughtfully, making his case all the more persuasive for its fairness. False Dawn is a remarkable contribution that will undoubtedly stand as the authoritative account of the New Deal for years to come.
‘False Dawn: The New Deal and the Promise of Recovery’ by George Selgin was published in 2025 by The University of Chicago Press (ISBN: 978-0-22-683293-7) 370pp.
It has long been a fundamental maxim in business that trust and integrity are integral to the extension of credit between businesses, partners, and clients. It is a central theme of Josh Lauer’s book that, despite the revolutionary effects of technological capability, the central elements of trust and integrity remain in place. Lauer contrasts this continuity of principles with transformative changes in the fin-tech sectors, resulting in financialization of the modern American economy, the construction of individual financial identity, and customized financial products.
Lauer’s book, part of the ‘Columbia Studies in the History of U.S. Capitalism’ series, consists of nine chapters, recounting the historical evolution of systematic credit surveillance amid cumulative changes in the credit sub-sector of financial services. It is highly informative, immaculately researched, and written in crisp, precise prose. The earlier chapters are particularly insightful in explaining the transition from localized face-to-face economies to more impersonal modern financial institutions. The broader historical perspective on surveillance is identified and conceptualized, with historical parallels drawn from factory and prison surveillance, noted by Marx, Taylor, and Foucault (pages 10-11).
In earlier centuries, creditworthiness was assessed locally but as the American economy expanded, surveillance emerged as a surrogacy for personal knowledge and observation. Mercantile agencies, forerunners of credit bureaus, used advanced methodologies of reporting, surveillance, and intelligence-gathering. Creditworthiness was not primarily about wealth per se but honesty and integrity, that is, not whether you could pay but whether you would pay (pages 19-20). Evaluating and quantifying risk was always somewhat subjective, when assessing the alliterative core signifiers, or the ‘three Cs’, of character, capital, and capacity’ (page 20). Technology played a role in offsetting subjectivity, through quantitative data of balance sheets, statements, and alphanumerical coding, signifying recorded financial experience and activity (page 69).
Credit reports increased exponentially in the second half of the nineteenth century, and significantly, at the fin de siècle, two of the three leading contemporary credit bureaus were founded. ‘Credit Men’ within companies, acting as professional custodians and interpreters of creditworthiness, were organized into the National Association of Credit Men (NACM) in 1896 (page 83). While indicative of the (gendered) professionalization of credit management, after 1914, more women entered the sector and the nomenclature of the professional association was revised accordingly.
The post-1945 democratization of credit, underpinned by Mass Production, increasing availability of household goods, and installment deals, expanded the consumer base. It was accompanied by a relentless drive to educate consumers and to induce ‘Credit Consciousness’ (pages 135-136). Credit reporting networks extended across the national business landscape, strategically positioned to serve multiple sectors (page 84). Equally, a national credit infrastructure was closely aligned with the rise of department stores, with credit checks often made at point of purchase (page 87). Codes signified credit status, and authorization or refusal was conveyed within stores by pneumatic tubes. Technology again, in the form of the Dewey card-file system, vertical filing, and telephone usage, allowed for greater functionality and efficiency, not least through facilitating tighter control on credit limits.
Database marketing in the 1970s and 1980s made consumer segmentation possible, especially important given social fragmentation and rapid demographic change. Moreover, the sales potential of credit rating data had been quickly recognized, with customized information in promotional literature and correspondence. Identifying and locating income brackets and market segments became a powerful marketing tool, understood statistically through the Pareto Principle of the ‘vital few and trivial many’ (page 153). Typically, with 20% of customers providing 80% of sales, clearer financial visibility and micro-targeting of high-value and high-volume customers was possible (pages 153-154).
Computerization was transformative, not least by hastening standardization. It was a great leap forward in terms of efficiency, and decision-making was far more rapid than could be achieved by personal interviews and pneumatic tubes. Statistical scoring and ranking did have their limits, and even well into the 1960s, traditional methodologies were not fully obsolete. How character could be quantified and scored was resolved by a multi-variable approach, whereby possession of assets and commodities, such as a mortgage, a home phone, and a savings or checking account, provided a profile of creditworthiness based on personal stability and institutional validation (page 206). Affirmative and negative reporting of lifestyle, employment, income, and health, were bell-weathers of creditworthiness. Adjustable and variable interest rates followed the risk-based pricing model of the insurance sector but as the sub-prime crisis in the Federal home-loan markets of Fannie Mae and Freddie Mac indicated, the temptation for lenders was to relax credit limits. (page 209-210).
Throughout the 1990s and 2000s, credit data played a vital role in the interstices of the State apparatus and criminal justice system. Yet, issues surrounding data-sharing and confidentiality became more contentious, and fittingly, privacy, data collection, and regulation dominate the second half of the book. Historically, the credit sector developed without close legislative scrutiny, but self-regulation was increasingly untenable. A raft of legislation, such as the Fair Credit Reporting Act (FCRA) of 1970, following the 1968 Consumer Credit Protection Act, including Truth in Lending clauses, provided powers of oversight, transparency, and accountability (page 226). There were societal welfare gains from a more efficient credit system but the trade-off was greater surveillance and data mining to inform credit decisions and to act as a marketing tool (page 234).
While credit bureaus sought to act as neutral information-gatherers, credit availability could not escape the broader socio-economic framework of modern America, with race, gender, class, occupational status, and residence all profiling factors (page 143). There were winners and losers. Single women and minorities were often excluded from mainstream credit and exposed to predatory lending. This ‘credit discrimination’ was tackled by Equal Credit Opportunity Acts (ECOA) in the 1970s, prohibiting credit refusal on the basis of gender or race, and promoting ‘blind’ scoring to eliminate discrimination (pages 235-236). Yet, financial identity based on economic stability and institutional status often still reflected entrenched racial and gender disadvantages. Statistical credit scoring can’t eliminate proxy discrimination since it deals with the effects rather than causes of disadvantage and discrimination (pages 237-238).
More positively, greater efficiency was driven by risk modelling and database marketing, with powerful information systems generating predictive data for different types of lenders (page 249). Crucially, electronic data is not containable in the same way as paper, thus privacy concerns are again viably raised. The practice of financial institutions, outside the purview of the FCRA, continuing to share financial information with affiliates and third parties in joint marketing activities, is a particularly egregious example (pages 263-264). The oligopolistic triumvirate of Equifax, TRW, and TransUnion may be able to use their market power to regulate the spread of information, but the credit landscape will not regress to an earlier iteration. From a process of localized character assessment to national FICO scores, creditworthiness remains central to an economy largely built on corporate, household, and individual debt. Identifying potential defaulters and extracting more profitability from ‘good’ borrowers remains central to creditors.
Indeed, that dichotomy portrayed by Lauer between the efficiency and functionality of the credit sector, and an increasingly intrusive surveillance apparatus, is convincingly validated by an impressive body of research. In many ways, the book is another thoughtful testimony to the disruptive effects of modern technology, and how there are positive and negative effects of innovation and expansion. Credit bureau databases were predictably an early target for hackers, but ironically a large volume of data is now provided by consumers themselves on social media, through declared data. Surprisingly, until fairly recently, there appeared to be little opposition to credit surveillance, but now, the mantra ‘All data is credit data’ resonates widely (page 267).
It may have been useful to have drawn an international comparison to test American exceptionalism, by assessing the creation of national markets through mass production, product uniformity, and standardization in less commercial societies. As Adam Smith famously wrote: ‘The division of labour is limited by the extent of the market’. Certainly, the expansion of the credit sector is part of that larger narrative of national markets and institutions eclipsing local economies, institutions, and relationships. In that sense, the development of the sector is indicative of a thriving capitalist economy.
Lauer arrives at a somewhat ominous conclusion as to technology, in stating: ‘No digital presence goes untracked; no digital profile goes unmined. This is by design’ (page 274). While algorithms facilitate high-level micro-targeting, and thus further erode human interaction, AI threatens to go further, most notably through automated screening in multiple contexts. The positive features of financialization and financial identity have clearly come at a cost to individual privacy. Avoiding further quasi-Orwellian intrusion may now depend, somewhat ironically, on robust government regulation and oversight.
‘Creditworthy: A History of Consumer Surveillance and Financial Identity in America’ by Josh Lauer was published in 2024 by Columbia University Press (ISBN: 978-0-23-121663-0). 352pp.)
Gordon Bannerman is a professor teaching Business History at Wilfrid Laurier University and the University of Guelph-Humber, Ontario. His primary research interests focus on modern British political and economic history.
In a world where academic publications often descend into the microscopic world of nuance, there is a detectable trend towards volumes with the laudable objective of providing the aspiring amateur with an introductory overview of a subject. The author of Profit has undoubtedly taken this path and pitched for the macro-view: we find ultimately that that the intention of the book is to trace ‘the environmental aspects of capitalism’s germination and growth through human history’ (page 253).
We’re inducted into the argument via the ubiquitous ‘palm-sized technological marvel’ which is simultaneously the ‘environmental crime that is the Smartphone’ (page 2). At the outset, Stoll proposes to resolve this paradox by allowing the reader to judge where responsibility lies between humanity or that subset of guilty humans comprising the ‘capitalists and corporations’ who define the ‘Capitalocene’ (page 3). The verdict turns upon what the author calls ‘profit’. However, while from the outset it is clear that ‘profit’ is not to be equated with a synonym for capitalism, no more precise explanation is forthcoming and in that void, greater experience with the text encourages the reader towards a tentative definition of ‘cui bono?’.
Arranged in chronological order from the dawn of humanity, each chapter seeks to illustrate (if not fully illuminate) typical characteristics of the relationship between human activity driven by ‘profit’ and the natural resources involved. The deliberate choice to define ‘profit’ ambiguously ensures that any – indeed all – human activity becomes material for this study. While this may in itself appear ambitious, the decision to cover the entirety of human existence, from the first dawn of the Hominim, cannot help but have an echo of Shakespeare’s ‘vaulting ambition, which o’erleaps itself’. To navigate this scope would seem to necessitate a rigorous approach with a solid ‘backbone’ argument across the work upon which can hang the various elements of the narrative. Instead, the author has chosen to use a join-the-dots approach supported by potted biographies of a handful of individuals or publications which are used across the ages in a manner similar to posts carrying a string of lamps.
The opening chapter covers the first few hundred thousand years of Hominim activity and is naturally lacking in data points. Stoll runs this period of study up to the fifteenth century AD/CE; when the second chapter switches the focus to ‘Trade and Empire’. This division is a missed opportunity to explore the substantial trading empires of Greece and Rome; instead, with Columbus as the locus for the second period of study this enables the introduction of ‘America’, but brings in its wake an atypical focus on the development of the Genoese Republic, which is subsequently proposed as an exemplar. Chapter Three concerns ‘Coal and Machines’ – although first through the experience of the fifteenth century Dutch, introducing the first of many (ultimately disconcerting) chronological hops back and forth, and odd since the author suggests a reliance of the Dutch empire on wind-power, before moving onto the English, ‘Plantation Capitalism’, sugar and (unusually, perhaps) the contributions of the Scottish Presbyterians who, we are informed, ‘disproportionally administered the British Empire … and dominated shipping and trade’ (page 71). Chapter Four is formed around ‘Steam and Steel’, which acts as the bridge to introduce Andrew Carnegie, whose early life coincided with the Bessemer Process, but more fortuitously was of Scottish decent, which facilitated his career in an age of imperialism and industrial capitalism, soon to become a global phenomenon.
Chapter Five adds environmentalism to the narrative – in the last half of the nineteenth century and exactly halfway through the work. The topic is introduced through two works which Stoll considers pivotal: George Marsh’s Man and Nature and William Jevons’ The Coal Question. Stoll makes the claim that these are ‘books that shook the confidence of a complacent public’ (page116), which appears bold given their subsequent descent into obscurity – almost immediately, in Jevons’ case. While Marsh did later privately republish his text under a fresh title, neither of these prolific authors considered their topic of sufficient importance to engage with it again, and indeed the Stanford Encyclopedia of Philosophy manages to devote over six thousand words to Jevons without a mention of his pamphlet.
The focus moves through the twentieth century on the back of what Stoll terms ‘consumer capitalism’ – the origins of which are ascribed to (consecutively) the availability of mass finance, petroleum, electricity, plastic, disposable products and finally, advertising. Although this caused an increase in ‘waste’ and had a brief pause in the United States (the Wall Street crash, here described as a product of capitalism rather than speculation), this continues through the twentieth century (global conflicts are not discussed) until the rise of the bright and buoyant era known to historians as the Cold War, in which the motor car and electronics drove postwar prosperity hand in hand with central ‘government activism’, until this was attacked by ‘alarmed … wealthy corporate leaders’ who created ‘a propaganda network to promote weak government and low taxes’ (page 176).
Post-1970, the narrative in the chapter ‘Selling Everything’ leaps to hyper-market operations – exampled by Walmart and the web giant Amazon – both of which enjoyed unique success and so would be candidates for the atypical rather than the representative. Their success is set against the stagnation and decline in the US economy, a claim illuminated by the notion that more people entered the service sector in the eight years from 1973 to 1981 than the auto and steel industries combined. However, the author had already flagged the death of nineteenth century ‘industrial capitalism’ before the Second World War, so the shift towards ‘consumer capitalism’ would seem to be entirely in line with expectations, given the central notion of this volume that all and any economic activity is ‘capitalism’. Once again, a handful examples from across the globe are collated to suggest negative consequences from various categories of causes – coal and petroleum are singled out, which seems odd since coal would have presumably featured in the ‘industrial capitalist’ period (however ill-defined) – rather than that of the consumer or late consumer capitalist periods.
It is only at the end of Chapter Eight that we finally begin to see an attempt to discuss ‘Pollution, Air and Climate’; CFCs, Ozone depletion, permafrost methane, and oceanic acidification are introduced and concluded in rather less than one page (pages 223-224).
The last chapter is devoted to the formation of the Global Environmental movement, again through exploring the impact of two publications. The first, Silent Spring by Rachel Carson, is widely acknowledged as perhaps the most important environmental book of the twentieth century. The second, Only One Earth, is Barbara Ward’s influential contribution to sustainable development; both Carson’s lapsed Reformed Protestant heritage and Ward’s hybrid Quaker-Catholicism are given an airing: notwithstanding these volumes remain edifying to all readers. A summary of American developments post-World War II is joined to the rise of the West German Green Party in the 197Os, and the impact of the Seveso, Bhopal and Chernobyl accidents in contributing to a wider spread of environmental concern and the European rise of support for anti-nuclear groups. Half of the very short summary of the ‘Rise of the Greens’ is once again devoted to the influence of a (northern, Reformed) Protestant heritage, while in Catholic countries environmentalism becomes a ‘non-religious, non-moralistic environmental movement’ (page 239): some examples would help forward this claim, not least as it is contradicted by Stoll’s conclusion that in 2015 (and more than forty years after publication) Ward’s work influenced the pronouncements of Pope Francis (page 241).
Stoll’s concluding chapter states that the key question is: ‘does it profit us when someone else makes a profit?’ (page 251). He suggests – perhaps unsurprisingly – that the answer is unclear. However, what is missing here – as in the entire work – is a decomposition of what is meant by the question. Instead, what is presented – as in the entire work – merely adds fog to the lens. Stoll makes the claim that ‘in the pre-Modern Christian West profit entailed a moral calculus’ (page 251). This is both bold and belated: if the purpose of Profit was intended to be an exploration of this theme, it would have gained some coherence – but would have lost any right to be considered ‘An Environmental History’.
Stoll’s summary conclusion is disappointingly (but perhaps not surprisingly) a mirror of the introduction: capitalism (whatever the form in which it is labelled) is rooted in human nature, and the outcomes – including ‘profit’ – have always (historically) been realised ‘at nature’s expense’ (page 252). After 250 pages, the author’s final warning is both stark and something of a surprise: ‘we stop the machinery of consumer capitalism at our peril’ (page 254). Hope is at hand, however, evidenced by an increasing appetite for ‘experiences’ rather than ‘stuff’, with the implication that cruises, travel to foreign countries, climbing mountains, and diving coral reefs will prove less of an environmental issue. There is even a thumbs up for games on Smartphones. It is unfortunate that at the last, the focus falls entirely upon the consumption habits not of the globe, but on one segment of the American population.
Almost inevitably the overall tone of the work feels rushed – indeed superficial. Arguments do not have the space to be outlined, let alone developed, and thus the whistle-stop tour becomes a giddy and frustrating experience. Indeed, the major weakness arises from the absence of any sustained, central argument. Instead, often poorly constructed polemic is substituted. Possibly the strangest statement occurs in the conclusion, where the reader is invited to contemplate how very different ‘Modern consumer capitalism’ might have been ‘had the Genoese prevailed at the War of Chioggia’ (page 252): it is not easy to imagine a reversal of historic events which would have made less of a ripple beyond the late fourteenth century Adriatic. In the haste to apply the broad brush, some odd images appear: the period noted by historians for its tranquillity and known as the Belle Epoque is described as ‘the tumultuous era between the 1880s and the mid-1910s’ (page 137).
The stated focus on Western Europe and the United States of America is inconsistent. Many examples are typical of the USA but not Europe, while China and Lake Nasser are the examples chosen to illustrate the possible negative effects of a building dams – irrespective of the atypical nature of both Chinese construction techniques, the Sahara sun and the relationship between Egypt and the Nile (page191).
Another oddity is the frequent intrusion of a religious (specifically Christian Presbyterian) theme. Many of the individuals featured are sprinkled with a reference to a ‘Puritan heritage which shaped their analysis and solutions’, even if the author immediately acknowledges that (as in the case of Jevons) he ‘neither embraced nor disavowed the religion of his forefathers’ or the ‘quite religious’ Marsh ‘who rarely attended’ (page 121). As Dr Stoll has previous published a book entitled Protestantism, Capitalism and Nature in America this may perhaps be inevitable, but it is ultimately regrettable since a more general discussion of the nature of profit fragmented through the lens of world religions – or even that of Christianity through the ages – is entirely missing.
Perhaps more importantly for ‘An Environmental History’, there is also very little history of the environment – rather, a small list of negative consequences of human existence are regularly recycled (forests denuded, rivers silted, air polluted) as the consequences of a wide range of activities. While the telegraph, mining, smelting, manufacturing, shipbuilding and consumerism are singled out for particular approbation at various points, the conclusions are largely homogenous: mining makes as mess; processing (from refining sugar to forging metal) burns wood; some people in various places used slave or indentured labour, while others traded or purchased the outputs, and both sea and air quality have got worse as both populations and the reach of advertising have grown.
However unremarkable these conclusions, it may be that there exists an audience for whom it needs re-stating. Given the almost hubristic scope and ambition, to note a lack of supporting data might appear to miss the point. But while the book scatters dates in profusion, there are no data points at all, nor graphs nor tables to illustrate any point. The illustrations are therefore all not only biographical but somewhat anecdotal, while the photograph illustrating Brazilians waving placards including ‘Pray for Amazon’ (page 241) sits somewhat uncomfortably with the earlier profile of Jeff Bezos.
Curiously, the author always falls short of a polemic against capitalism – and in the absence of supporting data it is hard to come to any other conclusion. The central, if missing, element in this work was fully identified in Ward’s work – engagement with the question: what is the mechanism by which we balance the (inner) individual’s right to an adequate standard of living with the (outer) limit of what the Earth can sustain?
An experienced academic editor was wont to point out to aspiring authors that it is ‘always easier to write a book than a paper’. The message was that, while structure – founded on a clear purpose and supported by evidenced argument – remains essential to both, the longer format can withstand a greater burden. Dr Stoll would appear not to have received this advice, and while possibly a good man with good intentions, unfortunately ‘An Environmental History’ was never a very good idea, and it has not resulted in a good book.
‘Profit: An Environmental History’ by Mark Stoll was published in 2024 by Polity (ISBN 978-1-50-953324-4). 280pp.
Dr Andrew Fincham is an early-modern socio-economic historian affiliated to Woodbrooke College, University of Birmingham, UK. His research is concerned with understanding the links between religious values, ethical business, and commercial success; and the implications for responsible corporate governance. His current areas of interest include a revision of Quaker historiography and an exploration of the underlying issues in Max Weber’s ‘Protestant Ethic’. He is a Fellow of the Royal Historical Society.
It takes a brave person to challenge one of the consensus beliefs of a society, but that is precisely what Erik Baker does in, Make Your Own Job: How the Entrepreneurial Work Ethic Exhausted America. His book puts firmly in its sights ‘the idea that everyone should strive to be entrepreneurial’ which he promotes to the status of a ‘work ethic’ that ‘promises material rewards and intangible benefits’ but drives a ‘spike in burnout and despair’ and an ‘epidemic of exhaustion’ (page 3). The book gives a grand historic sweep of corporate America from Henry Ford’s adoption of the ‘New Thought’ Movement in the 1920s to the ‘Great Resignation’ of the 2020s.
At each stage on this industrial timeline the thought-provoking question is how entrepreneurial strategies and activities bred an entrepreneurial work ethic which became so embedded that it was adopted as assumed wisdom for all, rather than the choice of a few. His issue isn’t with entrepreneurs but with ‘our collective commitment to entrepreneurialism’ which he suggests isn’t helping because ‘it enjoins us to work more intensely than we need to and leaves us feeling devoid of purpose when we don’t have work, or the right kind of work, to do’ (page 3). But I couldn’t help replying, ‘Really?’ Is the core proposition proven that entrepreneurial work and making your own job leads to an innate drivenness and risks profound emptiness not experienced by those who work in corporate structures? This doesn’t take away from the fascinating content but does add a warning label that the historical overview needs processing and applying.
One strength in the book is the rich historical detail that deconstructs the beliefs of industrialists, politicians and thought leaders and shows how strong an influence they have had on our attitude to doing work we love – a phrase that is common on co-working walls but is attributed to Elizabeth Jones Towne in the 1900s with phrases such as ‘A man’s success is measured…by the amount of LOVE he feeds his work with’ (page 33). What the book left me wondering however was what other work ethics were at play and how they also impacted our view of entrepreneurial endeavour. Puritan New England is mentioned as an ethic that denied ‘desire and selfhood’ (page 33) but is quickly dismissed as a ‘baleful, anachronistic influence’ in contrast to the success-orientated New Thought luminaries, such as Towne (page 33). If religion is referenced at all it is in a thread throughout the book which separates the new mechanical ideas of business efficiency from the ‘extra endowment’ of ‘foresight – the philosophic power of understanding the complex flux of the varieties of human societies’ (page 56). The idea of a ‘divine energy’ which ‘releases in man a power and a force beyond human capacity to generate’ (page 87) was made popular by Norman Vincent Peale, author of The Power of Positive Thinking in 1952. The glaring gap is the teaching from religion about the purpose of work as a gift from God and part of his eternal purposes. If work is about channelling our own energies, then it is not surprising that we will get exhausted. But when we work with all God’s energy working powerfully in and through us (Philippians 2:13), then we will be restored and enjoy meaningful work and Sabbath rest!
The book is a detailed survey from an almost exclusively USA perspective. This shouldn’t be surprising as the title gives due warning of which side of the pond it’s placed, but it did mean that some transatlantic translation is necessary. The experience of the Blitz and ‘labour’s not working’ election posters are just two amongst many British cultural moments that shape our attitude to work and entrepreneurship. The description of Sun Belt entrepreneurs as a ‘Promethean master race’ full of ‘good-looking, healthy, superior Americans’ (page 114) is slightly at odds with the picture of people in 1960s Britain – the creative energy was there but it looked very different and shaped an entrepreneurial work ethic very differently. By its nature, the book focuses on some aspects of corporate America which help tell the story of an entrepreneurial work ethic, but I’m sure many other threads to that story could be added. One striking insight is how much influence Harvard Business School had in shaping the corporate mindset and several professors are frequently quoted. Since the author is a lecturer at Harvard it is less unexpected but still noteworthy, especially as the influence from and on academic institutions is in a liminal phase right now.
The later chapters describe the entrepreneurial philosophy of Steve Jobs and the rise of ‘philosopher-kings’ (page 163) who thought very differently from the academics in the elite east coast business schools. In contrast to the accepted wisdom, Steve Jobs focused on the intersection of the arts and the sciences, and the conservative executives of middle America emphasised ‘the analogy between the entrepreneurial firm and the patriarchal family; the entrepreneurial leader as a paternal authority; the entrepreneurial work ethic as an expression of faith in God and country’ (page 164). The contrast in the ways the power of entrepreneurialism is applied in the lecture halls of Harvard, the Silicon Valley offices of Apple and the training institutions set up by business leaders in St Louis, is a helpful reminder of how people shape very similar ideas with very different worldviews.
As our narrative timeline propels towards the present there is a fascinating focus on social entrepreneurship – a current phenomenon well worth studying in its historical context. If the outworking of the entrepreneurial spirit’s drive is exhaustion and the enforcing of ‘unforced enthusiasm’ amongst those who ‘survived the cut’, are in ‘the winners circle’ and working ‘extreme jobs’ (page 189), there is a useful exploration of how gain of other types of value legitimises entrepreneurial purpose. One conclusion, which I’m a big proponent of and is the focus of my research, is to reevaluate what we mean by value and what we are therefore applying our entrepreneurial energies to generating. But the conclusion that seems more favoured here is that it is inevitable to create ‘duds of the new economy’ as ‘a significant fraction of the population was condemned to be economically valueless’ (page 231) while the elite are just plain exhausted.
The ongoing tension is in the starting hypothesis. If the entrepreneurial work ethic is causing exhaustion because it ‘leaves us feeling devoid of purpose when we don’t have work, or the right kind of work, to do’ (page 3) what alternative would give meaning and renewing energy? The answer, which many theologians not mentioned in this book have suggested over the centuries, is to find purpose in serving an entrepreneurial God who is creative, redemptive and holistically entrepreneurial.
Would I recommend this book? Yes, to a specific audience who have interest in the story of entrepreneurship or to an engaged audience who are willing to apply the history from a land far away, and in some parts a time long ago, to the present challenges of work. Don’t expect ready answers to exhaustion, but do explore the many reasons in the history of corporate America why doing what we love has become the new religion at work.
‘Make Your Own Job: How the Entrepreneurial Work Ethic Exhausted America’ by Erik Baker was published in 2025 by Harvard University Press (ISBN: 978-0-67-429360-1). 337pp.
Andrew Baughen is a management consultant specialising in mapping the whole value of organisations. He researches business worldviews and teaches ethics at Bayes Business School and is also an associate minister at St Margaret’s Lothbury.
Paul Sagar’s Adam Smith Reconsidered: History, Liberty, and the Foundations of Modern Politics offers an ambitious reinterpretation of Adam Smith’s intellectual legacy. The book challenges prevailing accounts of Smith’s political and economic philosophy, particularly the assumption that Smith harbored fundamental anxieties about market-driven societies. Instead, Sagar argues that Smith’s concerns lay less in moral corruption and more in the political dangers posed by commercial societies. The book is an essential contribution to modern debates on Smith, offering a historically grounded yet philosophically nuanced perspective.
Sagar organizes his study into five chapters, each tackling a specific dimension of Smith’s political thought.
Sagar begins by dissecting what he terms the ‘standard model’ of Smith scholarship. He critiques the widespread belief that Smith’s four stages theory constitutes a form of conjectural history. Instead, he argues that Smith used it as an economic model rather than a predictive framework for historical development (page 20). Sagar contends that many commentators have wrongly assumed that Smith believed in a linear progression of societies towards commercialism.
The second chapter examines Smith’s conception of liberty, moving beyond the standard republican interpretation. Sagar argues that Smith’s understanding of liberty aligns more closely with the notion of nondomination, derived from historical conditions rather than abstract philosophical principles (page 72). He differentiates Smith’s stance from contemporary republican theorists such as Quentin Skinner and Philip Pettit, suggesting that Smith saw the rule of law—not civic virtue—as the key mechanism for securing liberty (page 85).
One of the book’s most provocative arguments emerges in its analysis of Smith’s engagement with Jean-Jacques Rousseau. Many scholars have framed Smith as a measured respondent to Rousseau’s critique of commercial society. Sagar refutes this reading, arguing that Smith did not take Rousseau seriously as a thinker (page 120). Instead, Smith viewed Rousseau’s critique as intellectually weak, failing to engage with the empirical realities of history (page 138). This (third) chapter challenges long-standing interpretations that place Smith and Rousseau in dialectical opposition.
A key theme in Smithian scholarship is the question of moral corruption in commercial societies. In the fourth chapter, Sagar maintains that modern interpreters have overstated Smith’s concerns in this area. Rather than viewing commerce as inherently corrupting, Smith saw political mismanagement—particularly the alignment of economic power with political authority—as the real danger (page 165). Sagar carefully distinguishes between Smith’s concerns about elite behavior and a broader critique of commerce itself.
The final chapter turns to Smith’s famous critique of mercantilism and the influence of economic elites on government. Sagar frames Smith as a realist who understood the dangers of concentrated economic power but did not believe in an idealized republican counterforce (page 195). He argues that Smith’s Wealth of Nations should be read not as an economic libertarian manifesto, but as a work deeply preoccupied with the balance of power in political institutions.
Sagar’s reinterpretation of Smith is both refreshing and polemical. His main achievement is dismantling the Adam Smith Problem, the idea that Smith’s moral philosophy (in The Theory of Moral Sentiments) is fundamentally at odds with his economic thought (The Wealth of Nations). Sagar demonstrates that this supposed contradiction rests on a misunderstanding of Smith’s intellectual project. Smith was not torn between benevolence and self-interest; rather, he was developing a holistic view of social order where markets played an integral but politically contingent role (page 210).
One of the book’s strengths is its methodological rigor. Sagar carefully contextualizes Smith’s thought within the Scottish Enlightenment, drawing on sources that extend beyond standard economic interpretations. His engagement with historiography is particularly commendable—by distinguishing between historical reality and theoretical models, he clarifies many misconceptions about Smith’s views on commercial society.
However, the book is not without its weaknesses. Sagar occasionally overstates his case, particularly in downplaying Smith’s engagement with Rousseau. While it is true that Smith critiqued Rousseau’s speculative method, dismissing the Discourse on Inequality as intellectually weak (page 138), Sagar overlooks Rousseau’s influence on debates surrounding virtue, luxury, and civic participation. A more balanced account might acknowledge that, even if Smith rejected Rousseau’s conclusions, he still saw them as worth engaging with.
Additionally, while Sagar’s challenge to the standard model is compelling, he does not always fully explore its implications. If Smith was not concerned with moral corruption per se, but rather with political distortions of economic power, what does this mean for contemporary readings of his work? Does it suggest that Smith should be seen as a forerunner of institutional economics rather than classical liberalism? Sagar hints at these questions but does not fully develop them.
Despite these minor critiques, Adam Smith Reconsidered is an important work that forces scholars to rethink long-standing assumptions about Smith’s political philosophy. It challenges received wisdom with meticulous scholarship and clear argumentation. While some of its claims will spark debate—particularly regarding Smith’s engagement with Rousseau and his views on commercial morality—the book succeeds in shifting the terms of discussion.
For those interested in political economy, intellectual history, or the philosophical foundations of modern capitalism, Adam Smith Reconsidered is an essential read. It reaffirms Smith’s place not as a narrow economist, but as a sophisticated political thinker whose insights remain relevant for today.
‘Adam Smith Reconsidered: History, Liberty, and the Foundations of Modern Politics’ by Paul Sagar was published in 2024 by Princeton University Press (ISBN 978-0-69-123494-6). 248pp.
Jan C. Bentz is a lecturer and tutor at Blackfriars in Oxford, with interests in how medieval metaphysics shaped modern thought. He also works as a freelance journalist.
We have witnessed thirty years of neo-liberal triumphalism. Essential services have been privatised, and utilities have been sold off, while the state has seldom been so weak, and, as a result, work has become more precarious, inequality has widened to unacceptable levels, and a super-elite of mega-rich plutocrats has been allowed to grow wealthier and wealthier at everyone else’s expense. The liberal-left has so successfully established this prevailing narrative about what is wrong with modern capitalism, and how only a stronger state can fix it, that even many of its natural opponents buy into much of its analysis. Ruchir Sharma’s analysis, however, is here to make a simple point. They are completely wrong. Modern capitalism is indeed in bad shape, he argues. But not because the state is too small, but because it is too big.
What Went Wrong With Capitalism tells a powerful story about how the system of making and selling stuff has changed dramatically over the last fifty years. In Sharma’s view, the conventional wisdom is that the state grew slightly in the immediate post-war period, but its size was dramatically rolled back during the Reagan and Thatcher era, and ever since then has shrunk in size and influence. ‘Millennials, the next ruling generation, have embraced a narrative that is clear on the problems of capitalism and way too certain of the causes,’ he writes. ‘Like the media establishment, many Americans seem to assume that the story of shrinking government is true [and] if these distortions arose in a period of shrinking government, they figure, then bigger government must be the answer. But if the era of shrinking government never happened, that is exactly the wrong answer.’
Sharma brilliantly sets out the stark facts and figures on the ever expanding role of government in the modern economy. While Reagan and Thatcher were preaching the virtues of liberal, small government, low-taxes and free markets, central bankers were moving steadily in the other direction. The rot started with the former Federal Reserve chairman Alan Greenspan, ironically a devotee of the extreme liberal Ayn Rand, who started propping up the financial markets with cheaper money every time they fell a little. Ever since then, central bankers saw it as their job to tame and manage the business cycle. First interest rates were cut too close to zero, and then they started printing money on an extravagant scale, and that allowed governments to borrow to finance deficits on a scale that used to be impossible. As Sharma points out, in America potential Presidents used to pay at least lip service to balancing the books, and Bill Clinton actually managed it in one year, the last occupant of the White House to do so. Now they no longer even bother to mention it, so that by 2024, with a deficit of 6pc of GDP in a strong economy, until recently an unthinkable sum outside of wartime, the candidates compete with one another on how much more they can borrow and spend.
But it is not just debt of course. The state has been intervening more and more directly in the economy as well. In the US, Sharma points out the Code of Federal Regulations was first updated annually in the early 1960s, and has grown more than eight-fold since then, and now runs to 180,000 pages covering 240 volumes. America turned into ‘a nation of lawyers’ he argues, not because its people are naturally litigious, as is sometimes lazily assumed, but because it was the only way to cope with the often bewildering accumulation of extra rules that businesses have to follow. In Europe, it is even worse. Sharma brilliantly nails the myth of a ‘neo-liberal’ European Union, pointing out that all it has done is replace cumbersome national regulations with even more cumbersome versions designed in Brussels. ‘In part because the European Union lacks the power to tax and spend directly, its energies have been directed instead into what scholar Giandomenico Majone called “an almost pure regulatory state”, which by the late nineties was issuing regulations at an almost exponential pace.’ On both sides of the Atlantic, the story is the same, with governments attempting to micro-manage almost every aspect of commercial life. Both the Covid pandemic and now the drive to hit Net Zero targets have massively accelerated that.
The strength of the book is in its forensic use of facts to puncture left-liberal myths, and to chart the increasing role of government in our lives. For example, the number of lawyers in the US was growing by only 30,000 per decade prior to 1970, but increased to 100,000 every ten years after the tide of federal regulation grew and grew. Likewise, the number of lobbyists in Washington has overtaken the number of federal employees, with companies spending vast sums trying to manipulate the law in their favour. Almost every page contains a fresh nugget of data, each one illustrating how much more powerful the state has become. Add it all up, and Sharma paints a devastatingly accurate portrait of how massively the state has grown in size and power over the last thirty years, and more importantly, how that has slowed down the innovation and growth that were vital to a stable, free and prosperous society.
If it has a flaw, it is that the book is weaker on remedies. Sharma identifies Switzerland, Taiwan and, perhaps controversially, Vietnam as the three examples of states that have managed to get it right. They are good choices. The trouble is, voters in all the major democracies keep voting for leaders who promise to intervene more, spend more, and regulate more: Argentina is the only country in recent times to vote for less government. The hard part is to convince the voters that the state should get out of their lives, and while Sharma will convince his readers of the case, he has little to say about how to turn that into a message with mass appeal. Even so, it is an excellent book, timely and well-argued, and essential reading for anyone who wants a refreshing corrective to the prevailing wisdom.
‘What Went Wrong With Capitalism’ by Ruchir Sharma was published in 2024 by Penguin (ISBN: 978-0-24-159576-3). 384pp.
Matthew Lynn is an author, journalist and entrepreneur. He writes for The Daily Telegraph, The Spectator and Money Week, is the author of the Death Force thrillers, and is the founder of Lume Books.