The Rational Optimist: How Prosperity Evolves. Matt Ridley

Thorstein Veblen longed to replace the profit motive with a combination of public-spiritedness and centralised government decision-taking. In the 1880s Arnold Toynbee, lecturing working men on the English industrial revolution which had so enriched them, castigated free enterprise capitalism as a ‘world of gold-seeking animals, stripped of every human affection’ and ‘less real than the island of Lilliput’. In 2009 Adam Phillips and Barbara Taylor argued that ‘capitalism is no system for the kind-hearted. Even its devotees acknowledge this while insisting that, however tawdry capitalist motives may be, the results are socially beneficial.’ As the British politician Lord Taverne puts it, speaking of himself: ‘a classical education teaches you to despise the wealth it prevents you from earning.’

      But both the premise and the conclusion are wrong. The notion that the market is a necessary evil, which allows people to be wealthy enough to offset its corrosive drawbacks, is wide of the mark. In market societies, if you get a reputation for unfairness, people will not deal with you. In places where traditional, honour-based feudal societies gave way to commercial, prudence-based economies – say, Italy in 1400, Scotland in 1700, Japan in 1945 – the effect is civilising, not coarsening. When John Padgett at the University of Chicago compiled data on the commercial revolution in fourteenth-century Florence, he found that far from self-interest increasing, it withered, as a system of ‘reciprocal credit’ emerged in which business partners gradually extended more and more trust and support to each other. There was a ‘trust explosion’. ‘Wherever the ways of man are gentle, there is commerce, and wherever there is commerce, the ways of men are gentle,’ observed Charles, Baron de Montesquieu. Voltaire pointed out that people who would otherwise have tried to kill each other for worshipping the wrong god were civil when they met on the floor of the Exchange in London. David Hume thought commerce ‘rather favourable to liberty, and has a natural tendency to preserve, if not produce a free government’ and that ‘nothing is more favourable to the rise of politeness and learning, than a number of neighbouring and independent states, connected together by commerce and policy’. It dawned on Victorians such as John Stuart Mill that a rule of Rothschilds and Barings was proving rather more pleasant than one of Bonapartes and Habsburgs, that prudence might be a less bloody virtue than courage or honour or faith. (Courage, honour and faith will always make better fiction.) True, there was always a Rousseau or a Marx to carp, and a Ruskin or a Goethe to scoff, but it was possible to wonder, with Voltaire and Hume, if commercial behaviour might make people more moral.

      Coercion is the opposite of freedom

      Perhaps Adam Smith was right, that in turning strangers into honorary friends, exchange can transmute base self-interest into general benevolence. The rapid commercialisation of lives since 1800 has coincided with an extraordinary improvement in human sensibility compared with previous centuries, and the process began in the most commercial nations, Holland and England. Unimaginable cruelty was commonplace in the precommercial world: execution was a spectator sport, mutilation a routine punishment, human sacrifice a futile tragedy and animal torture a popular entertainment. The nineteenth century, when industrial capitalism drew so many people into dependence on the market, was a time when slavery, child labour and pastimes like fox tossing and cock fighting became unacceptable. The late twentieth century, when life became still more commercialised, was a time when racism, sexism and child molesting became unacceptable. In between, when capitalism gave way to various forms of state-directed totalitarianism and their pale imitators, such virtues were noticeable by their retreat – while faith and courage revived. The twenty-first century, when commercialisation has so far continued to spread, is already a time when battery farming and unilaterally declaring war have just about become unacceptable. Random violence makes the news precisely because it is so rare; routine kindness does not make the news precisely because it is so commonplace. Charitable giving has been growing faster than the economy as a whole in recent decades. The internet reverberates with people sharing tips for free.

      Of course, these trends could be nothing more than coincidence: we happen to be becoming nicer as we become more irretrievably dependent on markets and free enterprise. But I do not think so. It was the ‘nation of shopkeepers’ that first worried about abolishing slave trading, emancipating Catholics and feeding the poor. Just as it was the nouveau riche merchants, with names like Wedgwood and Wilberforce, who financed and led the anti-slavery movement before and after 1800, while the old county money looked on with indifference, so today it is the new money of entrepreneurs and actors that funds compassion for people, pets and planets. There is a direct link between commerce and virtue. ‘Far from being a vice,’ says Eamonn Butler, ‘the market system makes self interest into something thoroughly virtuous.’ This is the extraordinary feature of markets: just as they can turn many individually irrational individuals into a collectively rational outcome, so they can turn many individually selfish motives into a collectively kind result.

      For instance, as evolutionary psychologists confirm, sometimes the motivation behind conspicuous displays of virtue by the very rich are far from pure. When shown a photograph of an attractive man and asked to write a story about an ideal date with him, a woman will say she is prepared to spend time on conspicuous pro-social volunteering. By contrast, a woman shown a photograph of a street scene and asked to write about ideal weather for being there, shows no such sudden urge to philanthropy. (A man in the same ‘mating-primed’ condition will want to spend more on conspicuous luxuries, or on heroic acts.) That Charles Darwin’s wealthy spinster aunt Sarah Wedgwood’s funding of the anti-slavery movement (she was the movement’s biggest donor) may have a hint of unconscious sexual motives, is a charming surprise. But it does not detract from the good she did, or from the fact that commerce paid for that good.

      This applies among the poor as well as the rich. The working poor give a much higher proportion of their income to good causes than the rich do, and crucially they give three times as much as people on welfare do. As Michael Shermer comments, ‘Poverty is not a barrier to charity, but welfare is.’ Those of libertarian bent often prove more generous than those of a socialist persuasion: where the socialist feels that it is government’s job to look after the poor using taxes, libertarians think it is their duty. I am not saying that the market is the only source of charity. Clearly not: religion and community provide much motivation to philanthropy too. But the idea that the market destroys charity by teaching selfishness is plainly wide of the mark. When the market economy booms so does philanthropy. Ask Warren Buffett and Bill Gates.

      It is not just cruelty and indifference to the disadvantaged that have retreated with the spread of the collective brain. So has illiteracy and ill health. So has crime: your chances of being murdered have fallen steadily since the seventeenth century in every European country, but once again beginning with the trade-mad Holland and England. Murder was ten times as common before the industrial revolution in Europe, per head of population, as it is today. The fall in crime rates turned into a plummet at the turn of the twenty-first century – and use of illegal drugs fell too. So has pollution, which was far worse under communist regimes than in the free-market, democratic West. There is now a pretty well established rule of thumb (known as the environmental Kuznets curve) that when per capita income reaches about $4,000, people demand a clean-up of their local streams and air. Universal access to education came about during a time when Western societies were unusually devoted to free enterprise. Flexible working hours, occupational pensions, safety at work – all of these improved in the postwar West because people were enriching themselves and demanding higher standards, as much as because higher standards were imposed on recalcitrant firms by saintly politicians; the decline in