Michael Novak has repeatedly argued (recently, in a lecture here at Elizabethtown College) that our economic system is “permanently attached to a Judeo-Christian culture,” but history suggests otherwise.  Although capitalism developed within a Christian culture, it has also actively undermined that culture’s moral and spiritual foundations, as the use of the market by the entertainment industry shows.  Nihilistic sentimentalists can profit in our society by selling their opinions as movies, as surely as do those who print and distribute the Bible.  But that does not prove that capitalists must aid the forces of social disintegration or that the free market inherently favors those forces.  The “capitalist system” is neither the sworn enemy nor the firm friend of social/cultural traditionalists.  It does not operate in a political vacuum, nor do those who pursue profit necessarily believe in any particular worldview.  

It has long been assumed that political centralization and economic development are necessarily related.  The larger industrialized economies become, the more they require political control to sustain themselves and to develop further.  Such a connection has seemed axiomatic to such diverse analysts as Gary Becker, Karl Marx, and Michael Novak, who have all argued that economic modernization presupposes highly centralized and ideologically homogeneous regimes.  This argument is not confined to the Marxist left but has cropped up at least as often among defenders of capitalism and 19th-century bourgeois nationalists.  While Ben Wattenberg and Charles Krauthammer might disagree with national liberals of the German Second Empire about the kind of regime that should be imposed, all of them would agree that the global expansion of their political systems would be good for economic growth.

This conventional assumption about economic prosperity and political centralization is, at best, an overstatement.  More likely, it is an effort to modify group behavior by associating a desired political outcome with economic benefits.  Those who fancy a particular regime—whether American-style “global democracy” or a quasiconstitutional German empire under the King of Prussia—and desire its expansion have cited material advantages to promote their political project.

By the time I was a graduate student in the 1960’s, multiple dissertations had already been written supposedly demonstrating that German capitalists were pursuing economic advantage by backing German unification.  This thesis is either tautological or false.  Every capitalist hopes to maximize his advantage and, unless behaving quite irrationally, will try to avoid public stances that may harm his material interests.  But capitalists who associated themselves with Bismarck and his allies, as well as German industrialists who went along with Hitler, were not free to pursue optimal material advantages.  They were reacting to the historical situation they found, jumping on board a moving train already full of noncapitalist interests.

Austrian social economist Joseph Schumpeter drew a distinction between the historical circumstances in which the European bourgeoisie operated (which came from a pre-middle-class past) and what that bourgeoisie might have done if it had been able to act more freely.  Seen in this light, the German bourgeoisie were eager to have industrial and financial development but not necessarily the protectionist Bismarckian empire that came along in 1871.  In any case, much of the protectionist baggage assumed by that government was placed there by the aggressive landed interests that accompanied the birth of the Second Empire.

To the extent that German capitalists backed imperial consolidation, many of them did so for patriotic reasons, not because German political unification was necessarily in their economic interest.  In a perceptive study of 19th-century German liberals, Die Partei der Freiheit (Stuttgart: Lucius, 1999), historian Ralph Raico demonstrates this point in painful detail.  Examining the Freihändel-Partei, grouped in Berlin in the 1850’s around the figures of John Prince-Smith and Otto Michelis, Raico shows how an originally anarcho-capitalist faction moved away from libertarian economics toward nationalist and unificationist positions by the mid-1860’s.  This volte face, argues Raico, was not driven by any coherent perception of capitalist interest.  It took place because of despair about reforming the political climate, fear of a socialist revolution promoted by universal male suffrage, and, finally, the widespread patriotic enthusiasm that followed the achievement of German unification.  But none of these motives, according to Raico, was produced by capitalist economic interest or particularly tight economic reasoning.  The Freihändler were reacting to an historical context, and most of them had yielded to it by 1871.

Raico would not argue that the Second Empire was entirely hostile to bourgeois fortunes.  In some ways, it provided an economically freer society than does contemporary public administration, which manages the lives of democratic citizens.  But the Second Empire was not the preferred society of the German bourgeois capitalists of the mid-19th century or of those liberal publicists who embraced their interests and social vision.  Similarly, there is no reason to believe that the economic development of the United States required the vast managerial state that took form in the 20th century.  American administrative consolidation occurred primarily because of the evolving connection between social planning and mass democracy.  This connection was based originally on “protecting” the working class against the dislocations of capitalist cycles, and trade-union organization was fundamental for the public support on which the welfare state was built throughout the industrialized West.  But these political developments were not essential for economic growth.  The welfare state was a mere byproduct of economic modernization, which—for better or worse—restricted the free market.  The same regime has promoted missionary enterprises—e.g., the spreading of “human rights” and the punishing of “undemocratic” governments, activities that commercial and banking interests have not opposed but have usually not taken the lead in advancing.

In A Theory of Socialism and Capitalism (Boston: Kluwer, 1989), Hans-Hermann Hoppe presents the argument that capitalist development could have taken place in a Western world full of small political communities.  Without pushing counterfactual history too far, Hoppe offers the reasonable view that the political and territorial consolidations of the 19th century were not necessary in order for industrial economies to develop, standards of living to rise, and capital formation to proceed.  Such economic changes would have been possible without a German Second Empire, a unified Italy, or the United States being held together in the 1860’s by bloody force.

In books published in the 1950’s and 60’s, Yale political scientist Karl Deutsch insisted that regional and national loyalties were vanishing as technology and progress in communication were helping to bring about a world state.  Deutsch’s prognosis was given a political spin in the context of a cosmic vision of “spiritual pluralism” and an international “open society.”  This vision of a politically unified world shaped by “economic necessity” did not clash with Deutsch’s ideological preferences.  To the contrary: His predilection for Western unilateral disarmament was dressed up in the “scientific” prediction that the Soviet Union was collapsing before the same modernizing forces that were overwhelming the United States.

Industrial and agricultural revolutions were clearly conditions for Western economic development.  Moreover, the rise of the bourgeoisie, as an entrepreneurial and investing class, furthered economic modernization as it occurred in the West.  And the state has functioned, when it does its job, as a protector of life and property and a bearer of the sword against the violent.  Without civil order, the benefits of enterprise would not have been available, nor could a class devoted to it have arisen and prospered.  But neither capitalism nor the appearance of a state under law required a steadily expanding centralized public administration.  That happened for other reasons, and not always in ways that have been socially beneficial.  Soviet historian Robert Conquest provides this useful judgment about the effects of political centralization:

The more bureaucratic and centralized the state becomes, the more inefficient and corrupt it is.  This absolutely hobbled the Soviets.  Similar problems are now arising in Europe, where massive corruption in the European Union bureaucracy has just been exposed.  That’s another accompaniment to modern centralization.

Conquest might just as well have been speaking of the increasingly centralized United States.