Every civilization is defined by its economic engine—the social system that accumulates wealth, and reinvests in the production of further wealth. The development and decay of its economic engine drives a civilization’s rise and fall.
Transcript
Introduction (00:00)
Ben: Thank you all for coming. I’m Ben Landau-Taylor, here to give the first of our in-person Students lectures. So as many of you know, The Students is a political philosophy group. We’re interested in thinking about how society works, where it’s all going. Many of you have been watching our videos, and we’re planning to start doing more stuff in addition to those, of which this event here is the beginning, and I hope to be seeing a bunch of you again in the future.
Defining economic engines (00:43)
Ben: I’m Ben Landau-Taylor. I’m here with Wolf Tivy, who is the founder of The Students. And I’m here to talk about economic engines of civilizations. So to start with, what do I mean when I’m talking about that? The basic idea is that each civilization, where when I’m talking about a civilization, I’m talking about a big grouping of people who are ways of living that are coming from the same place.
So things like Western civilization or classical Greco-Roman civilization or medieval Chinese civilization, these very big, quite long-lasting groups of people. And when you look at these, you will find that at any given point, each civilization has one main economic engine, which is a social system that is accumulating wealth and deciding how that wealth is allocated, so that you get these concentrations of wealth forming, and then the people, the social class that is getting these concentrations is then reinvesting them into further production. So for example, the main economic engine, if you’re looking in Roman times, is the institution of agricultural slavery, where you get a bunch of slaves, you have them work the land, you appropriate the produce of that land, you use it to become a skilled warrior, and then you and your other guys get together, you go out, you conquer the next guy over, you take more slaves, you put them to work on your land, and this engine keeps going and reinforcing itself. Today, our main economic engine is industrial capitalism. You have a bunch of machines, you operate the machines, and then within a price system, that’s the capitalism part, you sell the stuff you made with the machines, you use that to buy more machines.
It’s a basic process we’re all very familiar with. Now, this is never the only thing that’s going on in a civilization. There’s always other ways of people making money, but one of them, at most one at any given point, is going to be the main load-bearing thing, the main thing that is driving the society, driving where things are going politically, and sort of the main socially load-bearing thing that’s driving the development. I’ll get more into what I mean by that later. So certainly today, there are many people who make money by means other than operating factories.
Theoretical foundations (03:33)
Ben: Nevertheless, it’s fair to say that that is the thing that is the economic engine of our civilization today. So for a little bit of background, these ideas that I’m talking about, most of them come from the work of Carroll Quigley, especially in his book, “The Evolution of Civilizations.” Is wonderful book. People who are familiar with my work have certainly heard me talk about it before. And in his book, he describes what he calls the instrument of expansion of each civilization.
I don’t like the term. I think it’s an unclear term. So I’m just calling it economic engines, but I’m just using his idea, basically. And a lot of the stuff I’m talking about is just very strongly based on what he was doing in that book. And so what he’s doing there is he’s looking at how do civilizations rise, how do they fall, how do they develop in between?
There’s a bunch of theories that people have about how this works. His is the one that I have found most useful and most predictive. And so if we’re talking about these very big things, if we’re talking about entire civilizations, this means talking somewhat in generalizations. This means talking about very long processes and as having one point. And so, I’ll often be talking about, oh, this was happening around the year 1500 when there was a 100-year-long process around them.
Life cycle of an engine (05:12)
Ben: So that’s the nature of talking about big things like this, where you just have to talk about particular points, even when that’s an oversimplification. So enough background. Let me get into how an economic engine works and how it comes to be and why they drive how the civilizations go. So the thing about economic engines is that they start when they’re fairly young. They’re doing the thing that they’re described as doing.
They’re much more like, oh, yes, this is how the system’s supposed to work, and that’s closer to how it’s actually happening. The parts of society that are about making wealth are actually focused pretty well at making wealth in that way. So if you look at the early days of the feudal system in Europe, early on, you’ll see people clearing lots of land, getting rid of the forests and putting farmland there or draining the swamps and putting farmland there as part of this. And then you have the lord or the monastery who’s over that land and collecting the incomes and this. And then the lord is supposed to be a good fighter so he can defend the land.
And they tend to be, in fact, good fighters who spend a lot of time at war. And then later on in the history of feudalism, you’ll find that if you go away for a couple of hundred years and then come back, you’re like, “Wait a minute. Now these guys are jousting, they’re having tournaments.” When they get a lot more land, it’s not because some guy got a big army together and just crushed all of his enemies, it’s because he made a bunch of marriage alliances, and then that’s how he got a lot more land. That’s kind of funny.
Institutional stagnation (07:05)
Ben: That’s not really how the description of it working was supposed to go. And this is a common type of pattern with lots of these economic engines. And how does that work? So in the early days, the reason why it’s able to arise in the first place is because of its actual functioning. And there’s this sort of selection effect where if it’s not working in a way that leads pretty clearly to the production of wealth, the accumulation of wealth, the production of more wealth, it’s just not going to rise to the level of us looking back on it and being like, “Oh, yes, that ended up being the important one.”
So in order to come together in the first place and sort of be the pattern that ends up replicating throughout society, it has to be doing never a perfect job, there’s always going to be some corruption and some kinkiness, but pretty well-focused at actually just generating wealth, accumulating wealth, producing more. But then over time, you will get the social class that is in charge of this, that is doing the accumulation and making the decisions about where to distribute them. They’re going to be looking after their own privileges. They’re going to start being like, “Well, instead of just maximizing production, how do I look out for my own privileges? How do I ensure my own position in society? How do I make sure that even if it comes with the cost of lower average wealth over time, I’m more interested in making sure that my sons inherit instead of some other guy, and if I’m going for stability in that way and that lowers overall growth, I’m fine with that because I want my sons to be the ones?”
Or maybe there’s just a bunch of ways that people start trying to entrench their own particular privileges, directing more of the wealth towards, instead of just back into that productive cycle, into political jockeying with each other. And this starts slow with a bit, but it’s a process that ends up feeding on itself and driving itself more and more because as you get a little bit of this, that will cause the rate of the economic growth, which is the sort of fundamental thing underlying a lot of the other types of growth you’ll see in a civilization of population, of land area, of knowledge, that’s all downstream of the economic growth. But if the economic growth starts to slow up, then a lot of these sort of positive sum interactions that people are used to doing, they’re just not really getting the payoff that they were expecting. And there was this sort of implicit social contract of you do all this stuff, and then you’ll end up with here’s the rewards you get. But it’s like, oh, but we don’t really have enough stuff to go around.
So if you want to make sure that you’re the one who ends up in that social position on top, you have to spend less of your attention on maximizing production and more on that sort of internal politicking and jockeying. And so then more of the surplus gets redirected away from the sort of core economic engine loop and into a bunch of rent-seeking, political, internal struggles. And so you end up with a few guys figure out, oh, we can do this type of marriage alliances as a better way of expanding our land holdings than fighting against the infidels or whatever. And then they end up becoming more dominant, more prominent. And with any other engine, you’ll see a similar sort of cruft accumulate as at some point there will be some bumps in the economic engine, and then it’ll slow down, and you’ll get more and more internal social conflict as people are...
It made a lot of sense to direct all your energy, or most of your energy, into the productive loop when that was yielding the large growth. But as that becomes a worse way of trying to meet those goals, you’ll get more and more... Like in the Roman example, as the conquests started slowing up, you get a lot more internal conflict at home. And it caused all sorts of political problems, which then made it harder for them to keep expanding the borders and taking more slaves and sending them home. And so it gets this sort of more sand in the gears over time.
Decay and hollowing out (11:52)
Ben: And this leads to eventually there will be just a long period of stagnation, which can last for often several hundred years. What you don’t see is a sort of sharp collapse and the whole economic system blows away in the wind. The ways that this eventually, you go forward several hundred years, this will eventually cause things to fall apart, but it’s not because the economic side totally falls apart. The economic side just kind of stagnates and ceases to be a way of driving everything forward. And then this leads to a sort of political disintegration and political hollowing out.
And so when you see eventually, this will lead to a collapse of the system, but not because the economic thing suddenly falls apart, but because the political side, which has been hollowed out in a way downstream of the economic stagnation, that’s the part that will more have a sharp collapse and suddenly it’ll fall apart under its own weight, like the Soviet Union or the Germans will come pouring across the borders and you can’t really stop them anymore. Once the economic system can no longer support the political superstructure, then eventually the political superstructure is the part that’s going to actually fail.
So there’s a couple of things that you can go along with this. When you’re in the relatively earlier unencumbered stage of the economic engine, you’ll find that the social class that is accumulating wealth tends to be personally involved in the production. So to go back to the Roman example, there’s the famous story of early on in the Roman Republic, when they needed to call in the dictator Cincinnatus. They were appointing Cincinnatus the dictator to solve, there was some conspiracy that they needed him to come in and handle. And when they went to go get him, they found that he was working on his farm at his plow.
So here’s this guy, this quite important, successful, I think this was the second time he’d been dictator, and there he is just involved in the actual farming. I assume as an overseer rather than out there with a hoe, but who knows? But he was on site. And then if you go forward a couple hundred years to the late Roman Republic when they’re starting to get a lot more of the internal conflict, the Cincinnatus types are no longer at their farms. They’re all living in Rome.
They have an overseer back at the farm who manages all the farming, manages all the slaves, and sends the income to the guy in the city. But the overseer who’s actually in contact with the production and knows how it works, they’re not the ones who benefit if they manage to actually make things go better. They’re not the ones who directly benefit from increased production. And so in the later stages, you get this more of the principal-agent separation. Or in our own case, in the earliest days of industrial capitalism, it was much more of this entrepreneurial, the guy would own and operate his particular factory, and he would figure out how to operate the factory and make it go well, and then he would just directly own it and get the money if it worked out better and he could increase the production.
And then in the late 1800s largely, early 1900s, we started seeing this gradual transition to more managerial style we have today, where we get these managerial experts who are actually running all of the factories, and then there’s several layers between them and the actual ownership. And so again, you have this sort of principal-agent separation. So this is a common thing you will see a lot of the time over the life cycle of an economic engine. And so, yeah. What happens as they get to these later stages and start getting encumbered?
Circumvention of engines (16:18)
Ben: Most of the time, they just get into this very stagnant period, which then lasts for often centuries before the whole thing hollows out and eventually falls apart. But there is a different thing that can also happen once they get pretty encumbered in late stage, which is about maybe a quarter or a third of the time, you’ll see circumvention. You will see a new economic engine get developed and sort of slowly grow and displace the old one. So if you look at in the Roman case, yes, that one eventually just stagnated for several hundred years and then kind of fell apart. But if you look at medieval Europe, you don’t see a big collapse after that.
What happened was that there was the growth of a new economic engine, commercial capitalism. If you would have these people in the cities, you would have these guys in guilds, who were engaging in commerce, they were making a bunch of stuff, and then there were these very long-distance trade routes across the Mediterranean, across the North Sea, across the mountains in the middle of Europe, where you would buy low, sell high. You’d get your Medicis and your Fuggers and all those guys accumulating giant piles of money, which came to eclipse the wealth of the feudal landlords. And so this new economic engine sort of grew up alongside, and then ended up sort of displacing it. And it’s not like the feudal system sharply went away.
In some places, you’ll still have your barons and your dukes. But it just stopped being the big driving force that was pushing forward where society was going. And then when the commercial capitalism started getting encumbered, when you start seeing a lot of the guild rules and a lot of the sort of mercantilist national policies involved are when they’re much more about limiting production and extracting the wealth from that long-distance trade rather than expanding production and getting more wealth that way. That’s about when you start seeing industrial capitalism start to take shape and eventually ends up circumventing that. So within the history of Western civilization, we are on the third economic engine that we have had without any of them getting to the point of very long-term stagnation. And that is why our civilization has not yet collapsed, which is pretty nice.
So it does seem like when you see these circumventions, they tend to be pretty early on in the stagnation. You don’t see a thing where it’s, oh, it’s been totally stagnant for 150 years, and then it gets circumvented. It tends to be while it’s still ongoing and there’s a bunch of encumbrance, there’s a fair amount of barnacles. It seems like as it goes further, things eventually get too locked down and probably if the economic engine is just in total decay and total failure, it doesn’t seem like at that point it becomes possible, because at that point, the level of internal conflict and repressive forces is so much that it’s just going to shut down any competing system before it can get to the point of successfully circumventing it. So it seems like there’s a window, a fairly long window, of I don’t know, something like a century, 150 years it seems to be of when the economic engine is decayed enough that it makes sense to circumvent it, and that it can be done, but the political superstructure isn’t so locked down that it’s going to prevent that from happening.
And so there’s a fairly long, from the perspective of a human being who lives a human life, period of possibility there.
Four types of engines (20:38)
Ben: So that’s the basic, speaking very broadly, it seems like trying to talk about things you can see in every civilization, every human society with cities and writing and stuff. That seems to be how it works. Now, within this, there seem to be four general types of economic engines, where within each one, there’s going to be a fair amount of variation, but it seems like you can kind of sort them into four general ways that they work. Where to go through those briefly, there’s manorialism, state bureaucracy, commercial capitalism, and industrial capitalism. Where manorialism, it’s basically agricultural land, and then the social class that is accumulating the wealth and reinvesting it is the landlords.
And then there’s a bunch of variations within this. Are the people on the land slaves? Are they serfs who have a bunch of reciprocal obligations? Are they free people? What’s the political organization of the landlords?
There’s a lot of variation here. So, we’ve talked about the Greek and Roman slavery as an example of manorialism, or the Western feudalism is probably the case that a lot of us here are most familiar with. Japanese feudalism. Islamic civilization had a system that was pretty similar to European feudalism, and they were in dialogue with each other for quite a long time. And then medieval China, in the period from around 600 to 1000 AD or so, seems to have worked largely this way as well, where it was a lot of the local landlords driving the expansions of the waterworks projects and the irrigation that seemed to be the main thing driving it forward.
And there’s also state bureaucracy of when you have the main social class that is accumulating the surplus to themselves and then deciding where it goes, is bureaucrats who work for the emperor, who work for the political unit. And so one of the very recurring types of this is the sort of river civilization coordinating the irrigation mega projects, where you’ll see this one in the ancient Egyptian civilizations or in the Mesopotamians, in the Chinese civilization around the time of in the millennia before Christ, basically up through the Han dynasty and a little bit after that.
Then outside of the sort of, I forget who it was who called these the hydraulic despotisms, but the sort of river irrigation bureaucracies. There’s a few other cases. The Soviet Union being a pretty notable one. And maybe the Incans, maybe the Minoan civilizations, but I don’t know enough about those guys to be totally sure.
There’s commercial capitalism, which is accumulating wealth on the basis of long-distance trade, where you buy over here, you go quite a long way, and you sell the thing. So the early modern Western civilization, when you have your various East India companies and your Medicis and that sort of thing as the main drivers of a lot of things is the one that a lot of us are most familiar with. The Phoenicians were another civilization that worked this way.
Medieval China from after about 1000 AD or so basically up through the period when it became more modern.
That’s an interesting one because in a lot of the cases from Europe, we’re used to the trade being on the seas, but in the Chinese case, a lot more of the trade is on the canal network that they had built earlier on, much more for agricultural purposes. But it turns out you can do long-distance trade on that as well. And so you saw a lot of the commerce growing on top of that. And then, of course, there is industrial capitalism.
It’s similar to commercial capitalism in that the thing that is accumulating wealth and directing where the wealth goes is the pursuit of profit within a price system. But rather than it being based on this sort of long-distance trade and arbitrage, very often in luxury goods, it’s based on the operation of machines. Now, of course, this is a much newer economic engine, which depends on more advanced technology that has only relatively recently, in the historical sense, come into being. So no one had good enough machines to be doing industrial capitalism in 500 BC or whatever. But of course, it is the one that we are most familiar with today.
And with all of these, there’s some variation in the way that the Europeans were doing commercial capitalism in 1700 was quite different from the ways that the Phoenicians were doing it. Today, we see some different models of industrial capitalism, of how involved the state’s going to be, and is that going to be done with direction from above or more in a bottom-up way, and how all the pieces are going to relate to each other. So within each of these, there’s a lot of variation. So that’s the basic picture that I see looking out over recorded history, basically. And so with that as context, where are we now?
Modern status and outlook (26:33)
Ben: The reason I was trying to understand this stuff, the reason Quigley was trying to understand this stuff, is to understand what’s going on with our civilization and where it’s going to go and what we can do about that. So yeah, we’re currently in this Western civilization that has industrial capitalism. It’s not the only industrial capitalism in the world, but I’m talking here right now about as it exists in the West, basically. And so, this industrial capitalism, it’s not a new system. It started becoming the really dominant one around the period that historians mostly call the Second Industrial Revolution, which is the second half of the 19th century.
So by historical standards, it’s not a super old one either. And we can see looking around that it’s kind of working, but it has a fair amount of these political encumbrances on it. It has a fair amount of pressures on it to do things other than maximize production. And so we’re starting to see it’s definitely still growing, it’s definitely still driving the expansion of our civilization in a lot of ways. The population’s increasing, our knowledge is increasing, but notably less rapidly than it was in the period when it was sort of youngest and newest and healthiest.
When you would be born on some subsistence farm, walking behind the horse as it’s plowed, and then as a kid you read in the papers of the first airplanes, and then before you die, you watch a man land on the moon on the TV. We’re not growing at that rate anymore. And as we look around, we see that there are a fair amount of these encumbrances. We’re seeing more of the political pressures on the industrialists to act in particular ways. They have to put more of their energy into defending their position and making sure that they’re not being expropriated or thrown out of their positions, and a lot of that more just defending themselves against the political infighting or engaging aggressively in the political infighting, depending on who it is and what they feel like doing.
We see there’s a lot of mandates. If you look at within the United States, the Federal Reserve has an explicit mandate to be preserving stability and employment and doing a bunch of things for these sorts of political stability, which I guess it’s a longer argument than I have time to get into here why I think that cuts against growth. So I’ll just briefly note that the periods where we saw a lot more of those wild depressions with high unemployment was also the period of the most rapid technological and industrial growth, I think in part because that makes it easier for society to switch from obsoleted methods into new ones. But for the sake of time, I’m not going to go too deeply into that. And so I was talking before about, oh, there’s this fairly long window where the system is moderately decayed, but it’s not so locked down that any competing economic engine is just going to get squashed.
I basically think that’s where we are. And there still is pretty substantial dynamism in industrial capitalism. We still do see it doing a lot of new things and growing in a lot of important ways. And we see a fair amount of the wealth getting siphoned off to things other than reinvestment in the engine itself, and that’s slowing it down somewhat, but it’s still working kind of okay. And it doesn’t look like it’s about to suddenly fall apart.
It doesn’t look like it’s causing the absolutely crazy levels of repression and infighting that you see in the very late stages. So the big question, in my mind, for the last few years has been: Is there a circumvention coming? And I’ve been looking around for one. I have not found one that looks to me like it’s promising. There’s a few candidates that people have speculated about.
I’m sure many of you are having ideas. None of them look to me like they’re really firing on all cylinders yet. So hopefully, something does that. I think we’ve got maybe 100 years, 150 years left before... By historical analogy, that seems to be about how long something can go in this state of gradual, ongoing decay before the stagnation gets terminal, and you can’t really bust out of it from within.
So I’m hoping that we’re going to see that, but historically speaking, it really could go either way. Neither the stagnation nor the reform seems like it’s locked in, and it just really depends on are there individual people who understand what they’re doing well enough and are skilled enough at operating that they can make a new economic engine and get it off the ground. So that’s the thing that I’ve been looking out for and am hoping we’re going to see. We’ll find out. Thank you.
Q&A session (32:42)
Ben: All right. We’ve got time for a few questions. Yes.
Audience: Any prospects that you’ve seen that we should know about?
Ben: Yeah. Are there any prospects? None that I feel really excited about. So, a lot of people have their eyes on the artificial intelligence.
For the technology as it currently exists, it seems like it’s basically been operating within the paradigm of industrial capitalism. It doesn’t seem like it’s doing anything really outside of that yet. Where’s the technology going to be in another 10 years? I don’t know. So what I’m looking for there that would get me excited is are there new social structures causing the production of physical wealth?
Not like is someone making a big pile of dollars in a bank account, but is there objects being produced in a... We’ve seen the use of computers in producing objects a bunch, with computer numerical control, CNC machine tools, stuff like that. So are we going to see new social structures rather than just incremental advances in the existing production technology? That’s something I have my eye on. I haven’t seen any of those yet.
We’ll see. Yes.
Audience: So forgive me, my perspective is tainted by the pure truth and beauty of quantitative finance. And one of the early things you mentioned is the flywheel that we saw these many empires do is go expand. Specifically the Roman one is expand land, use it effectively to put slaves or whatever to plant crops, take the excess, use it to fund the next expedition, grow and grow and grow. And so, historically, you see this premium put on literal physical expansion of an empire. It’s like, what is the size?
Because there’s this high correlation between wealth and literally how much rent can you extract from these areas of lands. But as we’ve seen in modern society, and as you mentioned, land is not necessarily the economic engine. That is not the core flywheel of which value is being produced. And obviously, at a civilization level, there’s different ways, but you could even look at it like Starbucks, for example, right? They don’t need all that land.
They just need the most valuable land of every corner of every major city in the world, and they can build quite a bit of an empire. And so I guess my question to you would be is, looking at these sort of modern economic engines, if land is not the proxy of something when you mentioned physical goods. Now, I’d kind of be curious, data centers are obviously hot right now. But if you’re looking for some sort of proxy of, oh, here’s a new empire, here’s a regime shift, here’s this upheaval happening. What sort of things would you be looking for?
Ben: Yeah. So when it comes to physical metrics, I don’t think there’s a single one that’s going to be like, “Here’s the one to look at.” And when I’ve tried to look at things through the perspective of what physical things are being made, I think it makes more sense to look at a basket of, okay, here’s how many cars they’re making, here’s how much energy they’re producing, here’s how much steel they’re making, here’s how many chips they’re making, and try to get a sense from a couple dozen important ones than any single one. If you had to go with a single one, I think energy is the least bad, but like...
Audience: Would you denominate it in some sort of currency or some sort of—
Ben: I would just look at it in like—
Audience: Watts?
Ben: Yes, like literal units of power. But that’s going to do worse than looking at like just a basket of a bunch of different physical things because any one of them is going to have the idiosyncrasies. But in terms of looking for a new economic engine and distinguishing that from growth within an existing one, because if you’re looking and you’re like, “Oh, wow. I’m looking at the basket of all of the goods and I’m seeing it go up,” that doesn’t tell you, is this industrial capitalism working well, or is this a new economic engine? The thing there I would look at is a socially distinct elite class.
So when you have any of the several cases of commercial capitalism circumventing manorialism, you get this distinct merchant class that has fairly strong social separation from the previous landed nobility or gentry or whatever it was. And in general, when you get these circumventions, you will see they’re part of the same society. Some of them will know each other. But when it comes to the general elite formation and class interests, you’ll be able to note pretty big gaps. So that is a thing I think to keep an eye out for.
Audience: So forgive me for a brief follow-up, but I guess finance, at least in the United States, was the hot thing, in the ‘90s, 2000s, right? That was the elite sector to be in. And then you have 2008, and then everything moved to tech. Would you qualify that as a new elite happening, and now you can see maybe a new AI elite happening, or is this still—
Ben: On a much smaller scale.
You can definitely notice the social divisions between the different waves of financiers, but they are much smaller than the merchant class and the feudal class when you were seeing commercial capitalism or the guilds versus the new factory owners when industrial capitalism was just starting to come up. So difference of degree there. Yes.
Audience: Do you have a favorite circumvention, like looking back through all of history?
Ben: Ooh, that’s a fun one. The initial industrial revolution in 1700s Britain is just always been the one that I’ve been most drawn to romantically. Yeah.
Audience: You mentioned seeing no prospects for circumvention or the next engine in this society, ours. Are there any contemporary societies, maybe with a phase offset in this succession in the social engines that we can look to as a guide and start to see what might be on the horizon?
Ben: The obvious answer to that, I think, is if you look at Chinese civilization, which looks to me like the medieval Chinese civilization was basically disintegrated around 1900. And then as is pretty normal for after a civilization disintegrates, there’s a period of chaos and gestation, and then we’re seeing the emergence of a new Chinese civilization as of the late 20th century with a lot of continuity with the old in a similar way that we saw in European history when the classical civilization disintegrated, and then there was the period of chaos and gestation, and then we had feudalism arise. But the new Chinese civilization seems to be basically they have successfully imported industrial capitalism. They’re doing it a bit differently in some ways, but the basic thing is operating a factory system of machines making goods within a price system. And it’s much younger because they started using and really relying on this economic engine in, you could draw the line in the late ‘80s or the early 2000s, somewhere around there, but much more recently.
So that seems to be industrial capitalism in a much younger form. And just as we had many different civilizations over thousands of years using manorialism, using commercial capitalism, it could well be that many different civilizations over the next quite long period will be using their own industrial capitalist systems, and it’ll break down in one place and then be used somewhere else. Yes.
Audience: You mentioned a system of oppression which often stops the creation of the next economic engine. Is it possible for this system to itself produce the next economic engine? Many of the oligarchs who later dominated industrial capitalism in post-Soviet Russia were members of the KGB, and the Jesuits themselves were part of the reason that the exploration of the New World was so successful. So is it possible that members of such a system are the ones who help create the next economic engine?
Ben: I imagine this could be possible in the cases like you mentioned with the Soviet Union or the early modern Europe where it’s not super advanced. If you’ve had the several hundred years of stagnation, if you’re looking around Rome in 300 AD, or if you’re looking around China in 100 AD. At that period of very advanced stagnation, I don’t know of any cases, but when you’re within that window of moderate stagnation, it seems to me like it would be possible, yes. Yes.
Audience: So it’s interesting that Quigley sees the economic metric as physical industrial production in modern Western society. And I was wondering if you’d go in a bit because this seems to be by far the modern minority view. As most economists and most political economists tend to denominate things in terms of GDP. But America, it’s mostly a service economy. So I’m wondering, is this because Quigley is biased by writing in the height of material production in the 20th century?
Or is he onto something more essential—about a real industrial economy that is what matters—in contradistinction to an economy of services and finance that’s maybe more illusory or less significant?
Ben: Yeah. So two things I’ll say to that. First, I think that the division is actually not as sharp as it might appear. There’s this common idea of, oh, now that we are in this sort of digital post-industrial world, you can skip through the industrial stuff and just go through and just have a service economy. This has never worked, not once.
There’s a bunch of countries that have tried this, and it just hasn’t succeeded. Every country that has gotten rich has done it industrially, and then once you have a lot of industry, then you can afford to use that on having all of these really great services that everyone really enjoys. But that looks to me like a thing you are buying with a healthy industrial engine.
Audience: But wouldn’t the Middle East be an example of the Emiratis being an example of a place that got rich without going through the industrialization phase?
Ben: By selling a lot of... Yeah. By—
Audience: But I guess my point is that it’s like—
Ben: They brought in a bunch of Westerners to build these big machines which produce this product that they sell within a price system. And then they buy a bunch of really nice stuff with that.
Audience: I guess then maybe I’m confused. What you’re saying is, are you saying that you need to build your own internal factories, and that’s the requirement? Or—
Ben: You need to build something physical. And if you happen to be sitting on top of the largest fields in the world, the physical thing that you’re producing can be oil for a while. And they’ve been trying to diversify into a bunch of other stuff. But the idea that you’re just going to have services without there being a physical thing that is underlying that, has just not been done. And—
Audience: How does Singapore fall into this, then?
Ben: Singapore is a pretty small city-state. I would imagine that... So first of all, they are just not a civilization. They are much, much, much, much smaller than that. And—
Audience: They did tech it up with physical products.
Ben: Yes. Yes. They do have—
Audience: Trade. Yeah
Ben: pretty good industry per capita, which is small in absolute terms. And yes, it’s much more... If you were going to try to shoehorn it into this, you would look at them more as commercial capitalists because it’s much more a trade thing. But basically, they are just a much smaller unit than this type of analysis is trying to look for. You could just as well look at America in 1840 and be like, well, you’ve got these guys who are doing manorial agriculture within it, and you have pockets doing a whole bunch of different things within anything as big as a civilization.
And so generally, if you look at GDP and services and you look at production of steel or cars or chips or whatever, you will find they correlate very, very strongly. One more. Yeah.
Audience: Could you explain why you think the American political ruling elite, in particular, are weak enough to allow a certain circumvention now or in the near future? I compare this to the American industrial elite or the Western Europe or the European political elite. But America still seems pretty competent.
Ben: Yeah. So I think in that case, it’s less that they are too... I think it’s not that American political elites are too incompetent to shut down alternatives. I think it’s that they don’t want to that badly. They don’t feel super threatened.
They’re not going to be like, “Oh, man, somebody’s doing something new. We have to immediately throw them in jail or kill them.” They’re like, “Yeah, of course, people are going to do new things.” And the knife fighting isn’t so intense that they will see that and immediately freak out and have to shut it down. I think America is actually the place in the world that’s the best at that.
Elon Musk is doing all these new industrial things. He’s getting a fair amount of blowback for that, obviously. But it’s notable that a few years ago, he got into trouble with the SEC because he was basically lying about his plans with the stock price in order to try to mess with short sellers, and that’s extremely illegal. And when that was happening, I was like, “Oh, wow.” It’s notable because European regulators, if something like that happened, would take that as an excuse to just totally destroy a person.
And then they ended up fining him $20 million or something, which was enough to be like...
For Elon Musk, that is like a slap on the wrist that he will definitely notice, but they had an opportunity to just totally destroy him, and they’re like, “No, actually, we don’t want him doing that. But we do think that having some of these insane people running around doing totally new things within our society is just like... That’s how it should be. We shouldn’t destroy the people doing new things.” Obviously, that’s a much smaller change that’s within industrial capitalism.
If anything, it’s a throwback back to the more owner/operator type of industrial capitalism. But it shows that there is much more tolerance for new things than if you go back to the case of medieval China when they were entering their second period of stagnation when their commercial capitalism was starting to get locked down. And they were sending these big voyages throughout the Indian Ocean, doing all this exploration and trade and demanding tribute. And it was Zheng He did, I think it was seven voyages before the people at the Imperial Palace ordered the fleet to be dismantled. And we’re just not seeing anything like that.
The sort of internal knife fighting isn’t that vicious. So they could shut it down if they wanted to, but they don’t want to because it is not decayed enough that they are that threatened by it. All right. Thank you.
Audience: Thank you.