Psychological Roots of Capitalism

At the height of the U.S. political season, concerns over the economy are never far from mind, and all the more so in the midst of a weak recovery that for many looks more like a continuation of recession. Of course, the outlook varies from one individual to another. Most in the top few percent of the wealth distribution have largely recuperated their losses, whereas many in the lower 90-some% or so are still struggling to put bounds on long term declines in their living standards. Whether to vote for a return to policies that may have helped cause the crisis, or for continuation of ones that have failed to reverse its effects decisively enough, is how the conundrum looks to many.

Some psychologists argue that whether such matters are viewed through a more conservative or a more liberal lens is influenced not only by immediate interests but also by aspects of personality that affect how we frame the issues morally. As with individuals, so with our society or culture as a whole. There’s a tension in the Western mindset between ideals of brotherhood and mutual responsibility, on the one hand, and the virtues rewarded by a competitive economy, on the other. While the view that wealth is a well-earned return to hard work may be much trumpeted, those envisioning ideal societies from the days of the Essenes and early Christians of two millennia ago to Thomas More in the 16^th century to utopian visionaries like St. Simon and Owen in the 19th, opposed the very idea of private property. Similar opposition to private property by Karl Marx would give the idea an anti-religious cast in the 20^th century.

Responses to discomfort over private wealth include arguments that property is necessary on practical grounds, first and foremost as a motivator of effort. Discomfort over the seeking of wealth is also countered by the argument that the best way to help others is to build up a capacity for philanthropy. Most arguments give an important place to psychology and human nature. The Hebrew Bible and other ancient texts take the existence of private property as self-evident, although the Torah commands the farmer to leave the stalks at the edges of the field to be gleaned by the poor. Debts are to be forgiven in the Jubilee year, and slaves to be offered their freedom. Why the ambivalence?

At some level, the impulse to appropriate is intrinsic to our biological nature. We’re put together by strings of DNA that encode the goal of taking energy and matter from the stuff that surrounds them and building from them our very bodies. It’s not our species that invented the instinct of defending the nest, the stash of buried nuts, the prize morsel of food tight in the grip. They’re propensities that we inherited from eons of mammalian and even pre-mammalian ancestors.

But early in our human history—and building on the social instincts of primate and earlier mammalian precursors—our grasping impulses were softened by the need for solidarity within the small bands with which we foraged and defended ourselves from predators. We were almost as cooperative, dependent on one another, and reciprocating towards each other as are the ants, wasps and bees that are communal by virtue of near genetic identity. Being constantly on the move, we had few possessions. Many of the hunter-gatherer groups that survived long enough to be studied by anthropologists in the 20^th century enforced remarkably egalitarian norms, such as prohibitions on a successful hunter getting the best cuts of meat.

Things changed with the advent of settled agrarian societies. Settled life made possible the building of relatively permanent houses and the possession of more pottery, tools, and other goods than could be carried on one’s back during the trek to the next campsite. Unlike hunting for large game, which called for group effort, farming could be effectively done by the nuclear family. In settlements, specialized occupations arose, as did invention of specialized tools for pursuing them. Societies came to accept far greater inequalities, but there are abundant signs that this was not due so much to a change in underlying psychology as to the growth of capacities to defend their advantages by the wealthy and powerful. Surviving echoes of pre-agrarian egalitarianism seemed to remain part of the human psyche throughout the era of agrarian civilizations and survive into the industrial age, helping account for the ambivalence noted earlier.

Is the formal institution of private property really necessary? In modern societies in which people are mobile, play multiple roles, and interact with numerous others on both large and small scales, it certainly appears to be, since attempts at its abolition other than among a few voluntary groups have fared disastrously (my book The Good, The Bad and The Economy contains an account of one of the most famous American experiments, the early 19^th century New Harmony community in Indiana). Treating private wealth accumulation as a sign of political treachery helped keep the lid on entrepreneurial spirits in China for the 28 years of Mao Zedong’s rule. Secure rights to land and farm animals can encourage farmers to make long-term investments in land quality and animal health, while also aiding with access to credit by serving as collateral. Assigning private rights is sometimes helpful in addressing environmental issues, because some people feel no hesitation about ‘trashing’ what belongs to no one in particular.

But it’s also natural for people to be uncomfortable with unlimited differences in wealth and to seek to moderate them through devices like progressive taxation and inheritance taxes. And there’s no evidence that such practices seriously harm economic efficiency. On the contrary, they allow for the education and thus the enhancement of the social contribution of a broader segment of a country’s population, and they increase general acceptance of existing economic and political arrangements, making them more self-sustaining with less need of coercion. With unlimited inequality the exception rather than the rule for most of human existence, this is not terribly surprising. With your right to your property implying my exclusion from it, maintaining the arrangement through mutual consent is more efficient for all concerned than is the alternative of force and coercion.