The European Miracle

0:00Thank you. Thank you very much. This week, my subject, as Mark mentioned, is going to be history as a struggle for liberty. This conception of history, of what history is, goes back to Lord Acton, a famous 19th century historian, Acton, a historian, who spent all his life accumulating notes and materials for what would be, he thought, his great history of liberty, the greatest book never written, people say. Nonetheless, Acton wrote many essays on the subject, and he's a historian well worth consulting.

0:47What I'm going to be discussing this week is classical liberalism. I might slip and just call it liberalism from time to time, so you'll understand what I'm saying. We'll be discussing its growth, its development, and finally, I'll say something about the possible future of liberalism. Now, the history of classical liberalism is intertwined in the history of Europe. Europe and its outposts, especially America, the Europe that sometimes has been defined as extending from Warsaw to San Francisco and one might amiably throw in also Vancouver and Melbourne. Some people would consider this a very Eurocentric kind of approach. Well, so here's the history of The Theory of Modern Science, Eurocentric.

1:43But anyway, the story that I'm going to be outlining will serve as an antidote to what some of you, at least, have experienced in your high schools and colleges and that is the demonization of Europe and Europeans as mass genocidal murderers and imperialist exploiters. If you doubt that this is standard in American education today, then you can read the works of Alan Kors, a professor at Penn, who specialized in this, a great scholar of the French, of France and the French Enlightenment otherwise, but has made it a point to detail how this demonization takes place through sensitivity training and many other Now, this view of the Europeans as genocidal murderers and demons and so on, much could be said about this.

2:45I'm not going to go into any great detail. The first thing that comes to mind is that Europeans, like everybody else, are subject to original sin to Original Sin, and have a proclivity to temptation of putting their own self-perceived interests above others to any extent that they feel necessary. Another thing that could be said is that power corrupts, as Acton famously said, and in the modern period it's Europeans It would be interesting to see what would have happened if it had been the Aztecs who landed in Spain rather than the other way around and what scenes we would have witnessed, Aztecs famous for their mass ritual murders and cannibalism and then finally I want to say that there were Europeans who opposed these various crimes of the men of power in their own countries Now, the first thing to say about liberalism is that it arose in Europe, specifically in Western Christendom, the Europe that grew up in communion with the Bishop of Rome, one time or another, so that the history of Europe and the history of liberalism are intimately intertwined.

4:08European Union with the Bishop of Rome, one time or another, so that the history of Europe and the history of liberalism are intimately intertwined. The question of why this should be the case has given rise to an enormous literature. And in this talk, as for all of my talks, if you have any questions about sources, bibliography and so on, This approach to trying to find out why Europe was different, why Europe was distinctive, is sometimes called the institutional approach of economic historians, or what I'll title today's talk, the institutional approach.

4:55was distinctive is sometimes called the institutional approach of economic historians or what I'll title today's talk could be called the European miracle after the title of a book by one of the major authors of this approach, E. L. Jones, the Australian economic historian. The miracle in question consists in the simple but momentous fact. It was in Europe that human beings first achieved per capita economic growth over a long period of time. In this way, European society eluded the Malthusian trap. This enabled new tens of millions, hundreds of millions really, to survive and enabled the population as a whole to escape the hopeless misery that had been the lot of the great bulk of the human race in earlier times.

5:54The question is, why Europe? Why is Europe in this way set apart from other great civilizations, China, India, Islam and so on? Geographic factors played a role, no doubt, but I think that Mises put his finger on the essential point when he wrote the following. The East lacked the primordial thing, the idea of freedom from the state. The East never raised the banner of freedom, it never tried to stress the rights of the individual against the power of rulers. It never called into question the arbitrariness of despots. And first of all, the East never established the legal framework that would protect the private citizens' wealth against confiscation on the part of tyrants.

6:46You know, by the way, this is typical of Mises. Mises was not primarily a historian. In my view, on the basis of what I know, he was the greatest economist of the 20th century. On the other hand, he had this ability to put his finger on the solution to some historical problem in a way that other professional historians weren't able to do. We'll see when we discuss the Industrial Revolution later on, he did the same thing there. Now, the question is, still, why was Europe in this kind of position? Now, one of the authors in this general school of thought that I'm talking about, John Bechler of Paris, by the way, it's an international movement, and Americans, British, French, Australians, I already mentioned.

7:46Jean Béchler, in the pioneering work, pointedly expressed it, as he said, The first condition for the maximization of economic efficiency is the liberation of civil society with respect to the state. The expansion of capitalism owes its origins and raison d'etre to political anarchy. We'll see what that means. Among others who have developed this is Douglas North, who won a Nobel Prize in Economics for his work in this area, in economic history. And North wrote, It was precisely the lack of large-scale political order that created the environment essential to economic growth and ultimately human freedoms in Europe.

8:39Now, this institutional approach was adumbrated by John Hicks, another Nobel Laureate in economics in the late 1960s. But the essentials of the view were sketched by a great economic historian, now emeritus from Harvard, David Landis, who by the way is no particular classical liberal, but he's and a book of his called The Unbound Prometheus and Landis said there were two factors that set Europe apart from the rest of the world the scope and effectiveness of private enterprise and the high value placed on the rational manipulation of the human and material environment and he continued the role of private enterprise in the West is perhaps unique more than any other factor It Made the Modern World Well, still, why was there this scope and leeway for private enterprise?

9:46Landis also points to the radical decentralization of Europe, what Bechler had called its political anarchy, and this is what he writes, Because of this crucial role in a context of multiple competing polities, the contrast is with the empires of the Orient and the ancient world, private enterprise in the West possessed a social and political vitality without precedent or counterpart. Now, of course, it wasn't a linear progression to some kind of libertarian utopia. However, we're talking relatively and in contrast to the other civilizations.

10:31Keep that in mind, there's radical decentralization based on a context of multiple competing polities. Beschlur, as others might well have written, says that this is the crucial non-event of European history. After the fall of Rome, no empire was able to arise in Europe to establish hegemony over the continent. There was no universal empire, although it was tried from time to time. Instead, Europe developed into a mosaic of kingdoms, principalities, city-states, ecclesiastical domains and other political entities.

11:16Within this system, it was highly imprudent for any prince to attempt to infringe the property rights in the manner that was customary elsewhere in the world. And these authors, again, I want to emphasize, they're not doctrinaire, if you want to call it that, libertarians or free market people for the most part. And they talk about the customary behavior of states as based on predatory taxation and continual confiscations. States throughout history have acted like the mafia does in some neighborhood, if there existed the mafia, which I can tell you that there doesn't. But if the mafia did exist, in particular ethnic neighborhoods, what they would very often do is pick out somebody who rises above the rest, who has higher assets, a successful doctor, a small businessman, and then the extortion starts with him.

12:16And this is what states have typically done through history. and Confiscations and Predatory Taxation. Taxation of the victim to the degree it's possible. Sometimes, in the case of the late Roman Empire, taxation beyond what was natural, what was rational, even for the predatory state, because the victim died from excessive taxation and regulation and inflation and so on. Now, so what does the decentralization of Europe have to do with this? It created the indispensable condition for what we're calling the European miracle and that is the possibility of exit, the term used by these scholars.

13:15To take an example, supposing you're a successful businessman in Antwerp or Amsterdam, and this did not happen historically because the rulers of these areas engaged in what was even from the state's point of view rational behavior, that is relatively light taxation and a relatively Light Hand and Respect for Private Property. But supposing that you were oppressed by the state, that the state was confiscating or heavily taxing your assets, you could exit, okay? You could exit within the whole cultural area of Christian Europe. You didn't have to go to a totally different civilization, okay? You could go across the North Sea to England. You could go down the Rhine River And this held generally, among the Italian city-states it certainly held, since it was very easy to go from one to another depending on how the state was treating you there.

14:28Now, this did not hold in every case, but it was a constant factor. and the possibility of exit created limitations to what the state could do to its productive citizens. Now, this story goes back many centuries, goes back into the Middle Ages, and by the way, this historical interpretation I'm giving you is has also been the basis of the works of other scholars Peter Bauer for instance the great Peter Bauer who died a few months ago in his work on economic development economic development of Europe vis-a-vis economic development of the Third World simply assumes this basic interpretation of why Europe grew Rich or Paul Kennedy of Yale in that book on the rise and decline of the great empires assumes this basis as his basis this interpretation or William McNeill of Chicago and his other synthetic works on European history assumes this as a correct interpretation and Peter Bauer said in one of his essays that this is economic development goes back at least seven, eight centuries, which means into the

15:59heart of the Middle Ages. So we have to examine something about the Middle Ages to explain why Europe was different. And in fact it is in the Middle Ages that what we call Europe, Europe not the geographical continent but Europe the civilization, came into existence. Here, there are a number of important factors, feudalism, that is the European version of feudalism played a role, in Russia for instance, there was a nobility, however it was based on state appointed dukes, archdukes, counts and whatever. In Europe, feudalism was based on a contractual relationship between powerful lords and the and King, contractual, that is, there were obligations and duties on both sides and already some limits were placed on what the prince or the king might do.

17:01Within each of these realms, which were relatively small anyway, there was often a struggle for power and this gave rise to distinctive European institutions, again, distinctive as part of The general distinction of Europe, representative bodies, which didn't exist in other civilizations, representative bodies of the tax-paying public, and we'll get into that in a while. They were parliaments, or in France, the Estates General, or the Provincial Estates, and Castile, the Cortes, but they existed throughout Europe. There was, I think, no area of Europe that didn't have such a parliamentary representative of Body, certainly the different parts of the low countries did, Scandinavia also, Castile, when I mentioned the Cortes, but there was also Cortes in Aragon, there was a parliament in Sicily, in Naples, in the German states, in Hungary, in Poland, throughout Europe.

18:02Princes often found their hands tied by charters of rights, which they were forced to grant The Magna Carta is the best known of these. I'll talk about this in a few minutes. But there were many others. And we'll mention the low countries later. So I should say there's a famous similar document called the Joyous Entry of Brabant, which each ruler of what is today Belgium and the Netherlands and Holland had to agree to on his ascension to power. This stipulated that no new taxes would be imposed without the consent of the various diets of the different parts of what are today Belgium and the Netherlands. No new customs contrary to the traditions of the areas to be introduced, no foreign office holders and so on.

18:56In other words, what we had in that very important area of the Low Countries, similar to the Magna Carta. Now, perhaps more crucial than anything else in the whole distinctive development of Europe, was the existence of a powerful international church whose interests were not synonymous or often really compatible with the interests of the state. Lord Acton, who was a Catholic, emphasized this, but it's not something that you have to be a Catholic in order to agree to, I mean it's a question of what is actually the historical development, and you could be a free thinker, you could be a Protestant, and as a matter of fact, today there are scholars who are not Christians at all, who think that the role of the Catholic Church was crucial.

19:48Now, we should not be thinking of, and in this context we're not involving ourselves with, the post-Reformation or especially the post-French Revolution church. There there were problems and you found the church coming closer to the state, coming closer especially to Catholic rulers and each one using the other. The critical point was, again, the Middle Ages, and there you had an adversarial position between the church and the state that was, in fact, crucial. And it goes back even before the Middle Ages to the first centuries of the church. When I was, there may be those of you who are addicted not only to lewrockwell.com, which of course is a mass phenomenon now, but the LRC blog, okay, and as far as I'm concerned they could have LRC blog 2, blog 3 and so on and still wouldn't be enough for me.

20:54You might have noticed that I had an item, I think it was on the blog, about a terrific painting I saw at the National Gallery in London recently that I had never been aware of. It was by Van Dyck, a Flemish painter, and it showed St. Ambrose blocking the entrance to the Cathedral of Milan to the Emperor, Emperor Theodosius. Theodosius, because Theodosius had been involved in the massacre of many innocents in Thessalonica in the eastern Mediterranean, and this was considered a sin by St. Ambrose that the emperor had not repented of.

21:41This was around late fourth century, so it's not the Great War Memorial of Milan that you see now, but it was a forerunner cathedral, and St. Ambrose, of course, was the Archbishop of Milan and the man who converted St. Augustine to Christianity. So the painting demonstrates, it's a small group of people, demonstrates in a very stark kind of way that the Archbishop is standing there in front of the doorway and the Emperor Theodosius had never experienced such a thing. You can see that he's enraged, he's totally frustrated. What is this churchman doing preventing me from entering a building of my empire? But the emperor is not permitted to come into the building.

22:29Now this is another example of the conflict between Ambrose and Theodosius. Theodosius demanded that Ambrose hand over the cathedral to the emperor, and Ambrose responded, It is not lawful for us to deliver it up, nor for your majesty to receive it. By no law can you violate the house of a private man. And do you think that the house of God may be taken away? It is asserted that all things are lawful to the emperor, that all things are his. But do not burden your conscience with the thought that you have any right as emperor over sacred things. It is written, God's to God and Caesar's to Caesar. The palace is the emperor's, the churches are the bishop's.

23:18That statement, by the way, of course, comes from the New Testament. Render unto Caesar what is Caesar's, unto God what is God's. And Lord Acton had early in his career identified that as, in his view, the origin of the idea of liberty. That is, that there is a realm that is not the states. A division now between what belongs to the state and what belongs to God. Whereas ancient polities, the Greeks and the Romans, especially the later Roman Empire, did not make this distinction between what belonged to the state and what belonged to the gods. In the late Roman Empire, the emperors themselves were gods.

24:05Now, as a matter of fact, Ambrose, who was, as I mentioned, responsible for the conversion of St. Augustine, well, now with St. Augustine we have an interesting development in his work on the City of God, what has been called the desacralization of the state, the desacralization of the state. In the Roman Empire, Roma was a god with particular sacrifices and religious obligations due to this god representing the Roman state. Among the sacrifices, the very stark kind of sacrifices were the ones that you would see in the Coliseum, the sacrifices of Rome's enemies.

24:54in ways that are not even shown on Fox TV today, but what Augustine said was that this is Rome, Rome Schmoam, this is the city of man, what is important is the city of God, our eventual and permanent habitation, and the city of God is infinitely more important than the city of man. Desacralizing the State, which had been considered God-like by the Romans. Now, much could be said about this adversarial position and hostile interaction between the State and the Catholic Church in the Middle Ages.

25:50One important thing to keep in mind is that this did not hold for Christianity in general. In Byzantine Christianity, for instance, there prevailed what's called Caesaropapism, and that is the situation where the church was pretty much under the thumb of the emperor. And this was characteristic of Greek Christianity, And this is the kind of Christianity that the Russians inherited, so that under the Russian rulers and the Tsars, as they took that title, they were effectively in charge of the church, different kind of situation from Europe. And again, we come across this idea of decentralization, division of power.

26:41It was important because of the different small decentralized polities and especially this big division between the state and the church. Whereas in other civilizations the ruler himself was God, I mentioned Rome or Pharaoh or the emperor of Japan, the direct descendant of the goddess of the sun or the emperor of China and so on. It was quite different in the West. And we can see this in a number of different ways. And the role of the church, you know, I was talking to Mark before about teaching students, and I don't understand why this happens. It is almost literally impossible for me to convince my students that the Middle Ages were not the Dark Ages.

27:38This was maybe the biggest, or one of the biggest, next to the myth of the Industrial Revolution, one of the biggest historical frauds perpetrated by Renaissance humanists and French philosophs, Middle Ages, the Dark Ages, go and see Chartres Cathedral, read Dante, the Dark Ages, or Thomas It was Aquinas, right, the dark ages, but one thing in particular I tell my students is that in the middle ages, in the high middle ages, after scholastic philosophy had been established, it was universally taught in every university from Oxford to Salamanca to the Jagiellonian University of Krakow that the prince was under the law.

28:29The ruler himself had to obey the law. Then, on an exam, which is becoming increasingly simple, because I don't want to flunk the whole class, right? It doesn't look good. It's a true or false question. In the Middle Ages, it was considered that the ruler, the prince, could do anything he wanted. True or false? Almost everybody writes true. Even when I tell them, as I'm teaching the course, write this down, it doesn't make any difference. And when we talk about the Industrial Revolution, I think we'll see the same thing. It doesn't make any difference. It doesn't make any difference what economic historians say. Still, everybody has in their minds a picture of the Industrial Revolution as causing infinite misery to working people.

29:22It's impossible to eradicate. Well, I don't know if you know the name Jacob Viner, who's a great economic historian and scholar at the University of Chicago. And he mentions, for instance, a reference to taxation by St. Thomas Aquinas, where Viner says Aquinas treats taxation as more or less an extraordinary act of a ruler, Ruler, which is as likely as not to be morally illicit, republished every year into the late 18th century, which threatened to excommunicate any ruler, quote, who levied new taxes or increased old ones, except for cases supported by law, by an express permission from the Pope.

30:17Well, the last part, the Catholic, the Popes were not into this adversarial situation for their health. It was a question of one power against another power. It was good for us that there was a countervailing power to the state in the West that did not exist in other civilizations. But nonetheless, here Thomas Aquinas himself, talking about taxation as probably illicit, New Taxes is illicit and this papal bull is saying that they were not permitted except with papal control. By the way, there's a series of books published by Stanford under the general inspiration of John Hexter And one of them, for instance, is called the Origins of Modern Freedom in the West.

31:16I have almost all of them, and they're mostly very, very useful. Here's a quotation by one of the contributors to this volume, The Origins of Modern Freedom in the West, Professor Koenigsberger, Almost everywhere in Latin Christendom the principle was, at one time or another, accepted by the rulers that apart from the normal revenues of the prince, no taxes could be imposed without the consent of parliament. By using the power of the purse, the parliaments often influenced the ruler's policy, policies especially restraining them from military adventures. All of that is important.

32:04In the parliaments, in England for instance, the House of Commons as well as the House of Lords, in the Italian city-states, in the low countries, the representative assemblies were elected generally by taxpayers, very different from the modern situation where you have mass electoral democracy and now the income tax has been given back to people paying low taxes, so it's a smaller and smaller part of the population that pays the income tax in the United States, whereas the rest of the people have an interest in increasing taxes, since they feel they can get benefits from it.

32:50But in the Middle Ages, into the modern period, it was taxpayers who were represented in these different assemblies. So when people talk about, let's say, the democratic factor in the Dutch cities or in the Italian city-states, it's not to be understood in the sense of present-day democracy. It's not mass democracy by any means, it's democracy of the taxpayers. And that was what was involved in these assemblies. Now, I mentioned representative assemblies, there was also the general scholastic philosophy of natural law, and I mentioned the different charters granted by rulers and acting as sets of limitations on their power.

33:49Most famous is the Magna Carta in English history, not famous to my students, who I think, you know, they're not that bad, they're just kind of average, but they've all heard of a lady called Harriet Tubman, I don't know, maybe somebody can tell me afterwards, many Many, many fewer of them, virtually none of them, know who Martin Luther King was named after. And as for things like the Magna Carta, well, it's pretty much a mystery. The barons of England, the lords, spiritual and temporal, forced Bad King John to sign In this great charter, the Magna Carta, you can look it up, it's not very long, and naturally, considering the age it comes from, there's a good deal of the medieval to it, explicitly and also in the general tenor, and nonetheless, what's been established comes through.

35:06Here's one chapter, no scutage nor aid, basically taxes, shall be imposed on our kingdom unless by common council of our kingdom, already now we have the beginning of the right of a representative assembly to okay new taxes, except for ransoming our person or making our eldest son a knight, and for once marrying our eldest daughter, So, in other words, you have the medieval element there, but nonetheless a limitation on arbitrary taxation. There has to be a common council involved. Another item. No constable or other bailiff of hours shall take corn, that is, in the British sense that is grain, or other provisions from anyone without immediately tendering money, Therefore, unless he can have postponement thereof by permission of the seller, he can't simply send the soldiers out among the peasants and take their harvest away.

36:13He can't act like the Bolsheviks in the Ukraine. Here's another one. No sheriff or bailiff of ours or other person shall take the horses or carts of any freemen for transport duty against the will of the said freemen. Horses or carts, obviously basically agricultural society, but the king's men can't just go and take it because they need it. They have to pay for it. No freeman shall be taken and imprisoned or exiled or in any way destroyed, Nor will we go upon him, nor send upon him, except by the lawful judgment of his peers and the law of the land. The rule of law and trial by jury.

37:04Another item, all merchants shall have safe and secure exit from England, an entry to England with the right to tarry there and to move about as well by land as by water, Except in time of war, such merchants being from the land at war with us, and if such are found in our land at the beginning of the war, they shall be detained without injury to their bodies or goods. Again, respect for private property, for commercial freedom, even for enemy aliens. Many other items that are irrelevant now, and then, this is longer than it seems because it's both in Latin and in English.

37:53Finally, whereof, and this is what the king was forced to sign, whereof it is our will and we firmly enjoin that the English church be free, that the men of our Kingdom have and hold all the aforesaid liberties, rights and concessions fully and wholly for themselves and their heirs by us and our heirs. Pledging the future rulers of England to these rights. Given under our hand in the meadow which is called Runnymede Between the Rivers Windsor and Staines on the 15th of June, the 17th year of our reign, the year of our Lord, 1415. Now a committee is set up of the Barons to enforce this, to make sure that Bad King John does what he promises to do.

38:45And the first name on the committee is Stephen Langton, the Archbishop of Canterbury. Catholic Archbishop, of course, in those days. So what you have here is, in this case, the Catholic Church throwing its weight into the balance against the power of the secular ruler. I want to emphasize that this is not something that you have to be a Catholic to believe by any means. It's a certain interpretation of medieval history and the rise of the West, which many people who are not Catholic, I'll take P.T. Power for instance, who is a Budapest Jew, also adhere to.

39:33Now, we can make clearer what's involved here if we contrast Europe with other civilizations. With the East or with another Christian civilization that is Russia, already the contrast of the East was an established view in the Middle Ages themselves. In the 13th century, The German Emperor, Friedrich II Hohenstaufen, who has been called by some the first totalitarian ruler, that is, he tried as much as he could to establish totalitarian control.

40:24He was a holy Roman Emperor and ruler of Germany, but he made his court in the south of Europe. of Europe, he prohibited the inhabitants of Sicily or Naples from going to other places to study at the university, wanted to keep control, he established what would be a prototype of the secret police and he was involved famously in a conflict with the papacy and defeated ultimately. In one of his writings, Frederick praised happy Asia, Felix Asia, by Asia meant anywhere in the East, as he says, where rulers need not fear the weapons of their subjects and the machinations of priests, putting together two very interesting elements, that is the right to keep and bear arms, which the Europeans had, which the late Romans had abandoned, of which the Germanic people made into a sign of a free man from the early years.

41:31In fact, while there were still barbarians on the other side of the Rhine, when they would get together and counsel, something was being suggested by the chieftain, the free men would signal their agreement by clashing their arms together, their weapons together. And that became, among the Anglo-Saxons, a settled individual right, I'll probably mention in some of the lecture. So what Frederic II hated was the fact that his subjects seemed to have weapons all around the place. The Iraqi people, as you know, being helped towards ultimate freedom and self-determination by taking their guns away.

42:18And also, Frederic II was worried about the machinations of priests, trying to subvert the ruler at all times. Now we can go on to the 17th century. There was a famous Frenchman named Francois Bernier who visited really many different places. He was trained as a physician at the famous medical school at Montpellier in the south of France. So, as a physician, he went to many different places, even down in Ethiopia, Persia, but especially in India, and wrote about his experiences there.

43:05And his return to France, he published Travels in the Mogul Empire, that is the empire over India, which incidentally later became the basis of Karl Marx's concept of the Asiatic mode of production. This is what Menger says, Because of the capidity of the tyrant, when wealth is acquired, the possessor studies the means by which he may appear indigent. In the meantime, his gold and silver remain buried at a great depth in the ground. Remember the Arabian Nights stories about the treasure, maybe sometimes guarded by cobras or something, gold and silver and diamonds and so on? Why do people have treasure in that form? Why are they hiding their wealth?

43:56The Dutch did not hide their wealth, as we'll see, they put their wealth into the herring boats that traveled throughout the North Sea and into the Baltic Sea, enormously productive, even for the late Middle Ages. Why in the East was this custom established of hiding wealth on the part of productive citizens? Bernier gives a reason, and confirmed by historians, because there was no rule of law protecting private property, and when property accumulated to a certain degree, the tyrant who has the soldiers, who has the guns or swords, simply went and confiscated it. Bernier, The Nations of Asia have no idea of the principle of maim and taim, of mine and thine, relative to land or other real possessions, and having lost that respect for the right of property, which is the basis of all that is good and useful in the world, necessarily resemble each other in the essential points, they fall into the same pernicious errors and have to suffer tyranny, ruin and misery.

45:09more along the same lines with Bernier on the basis of his personal experience. Now one interesting thing about this is that many of these observations were written to the minister of Louis XIV, Colbert. Now in the history of European economic development, Colbert is known as kind of the ideal type of the mercantilist minister. Now, my point is that even in regard to a minister who is not the total believer in free trade, Bernier is saying the East doesn't even have what we have in France, basic protection of private property. In other words, Colbert would go down as somebody who's really a government interventionist and really a prime mercantilist, But nonetheless, even under mercantilism, the Europeans had this regard for private property, sanctity of contracts and so on that allowed them to develop in contrast to the East.

46:13Now, I could send you some information, incidentally, in regard to Japan. Baschler says when you want to talk about China, each time China was politically divided, capitalism flourished. Now in regard to Japan, there's a very interesting situation. The stereotype has it that the Japanese were, what, hopelessly backwards, Third World and so on, until Commodore Perry came and introduced them to the modern world. The fact of the matter is that in the previous centuries, about two centuries or so, called the Tokugawa period, Japan flourished economically.

47:00And this has been investigated by economic historians who come to the conclusion that the Japanese situation in some ways resembled Europe also. Also, that is, you had a feudal class, you had a merchant class with guaranteed property rights in the towns, you had a stock exchange in Japan, you had defined rights, including rights to water, you had defined rights of individuals in their own labor, and if you like, I can send you references in this connection. So in other words, you had the kind of institutional infrastructure in Japan in a way similar to the one that existed in Europe.

47:45Now, when we talk about Russia, we have a different situation, unfortunately. And this is not to say anything against the great Russian people. I mean, everybody, in a way, is a victim of the history of the society they're born into. and the Russian people are one of the great peoples of Europe. Nonetheless, they are burdened by history that deviates from the mainstream history of Europe. It was very, very late that any limitations were put on the power of the ruler at all, maybe in the 18th century with Catherine the Great who was converted to free trade for a while. for a while. But if you take Peter the Great, for instance, around the year 1700, who wanted to modernize Russia, every once in a while some ruler comes along and says, Lord, heavens, we're so far behind Europe, we have to do something about it, let's modernize. So he built his new capital in St. Petersburg with serf labor, of course. And then he'd taken

48:55Peter the Great was on a famous trip to Europe. It's a very interesting story, look it up sometimes, about Peter the Great. Sometimes he was disguised as an ordinary seaman, but he was stunned by what he found in Europe. And the present Russian flag, by the way, has the same colors as the Dutch flag, introduced by Peter the Great. But he saw that Europe had entrepreneurs, had capitalists, had development of modern industry, had a high standard of living compared to the Russian masses. So he decided to do the same thing in Russia, and he began by a draft, conscription of entrepreneurs to put them in charge of new factories, of mines.

49:47What he didn't begin with was the definition of property rights, which by that time had been well-established in Europe. And so this is a problem through Russian history, what's going to happen to the Russians, impossible to say. But there is a case history of a society that deviated from Europe, but we can talk about and Spain would be another example. Now the book that you've all been reading assiduously, I don't see that everyone has a copy. Marco, where's your copy? Upstairs. Okay. How the West Grew Rich has a few pages on Spain that are worth looking at.

50:37And of course there's a whole other literature that is in support. But we can take a positive example and positive model from the European development and that is the Dutch experiment. The Low Countries, that is what is today basically the Netherlands and Belgium, had long benefited Inherited from the legal system, inherited from the dukes of Burgundy who rule the area. These rulers govern in collaboration with the Estates General. The Estates General means a meeting of representatives of all of the estates, or in other words legal categories of noble, commoner, sometimes clergy, and that's called the Estates General.

51:39The Dukes of Burgundy and the Act of Estates General promoted an open commercial and industrial system based on the protection of property rights, natural enough, since the Estates General were constituted of representatives of the property-owning classes. In the rise of the Northern Netherlands, or the United Provinces, or Holland as we say, we have a near perfect example of the European miracle of decentralization in operation. First, the area had been a major participant in European economic, political and cultural developments for centuries, and by the time the Reformation came along in the 16th century, They were about as developed as the city-states of Northern Italy, which were the most developed parts of Europe.

52:35And as I mentioned, the herring fleet was famous and proverbial in Europe. They had herring boats that not only caught the herring but dressed them, packed them The Hobbsburgs, for whom I have great respect, the later Hobbsburgs, the Hobbsburgs of Austria,

53:19When the Reformation came along, decided to deal with their recalcitrant subjects, mainly in what's today the Netherlands, who had the nerve to become Calvinist, and also maybe and maybe even worse, the nerve not to pay the new taxes that the Spanish monarchy required because of its imperialist plans and ambitions. They were the most productive parts of the Spanish possessions. So new taxes were introduced without the consent of the particular diets of the different provinces And also the Spanish Inquisition was introduced to extirpate Protestantism.

54:18This led to the revolt of the Dutch, the first war of national liberation in modern history. And if students don't know who Martin Luther King was named after, they certainly don't know anything about the revolt of the Dutch, which was a crucial, pivotal event in European in History. What happened was that the Dutch, after a long, bitter, bloody struggle, succeeded in separating. By the way, it was another secession, just as with the American Confederate states. The Dutch didn't want to take over the Spanish Empire. They just wanted to withdraw from the Spanish Empire, as the American colonists wanted to withdraw from the British Empire.

55:07And after a very long struggle, over decades, the Dutch finally did. And what they set up became a model for Europe for decades. It was the first European economic miracle, Wirtschaftswunder. There was no king, there was no court, there was a united diet for all of the provinces, Each of the individual provinces, like Holland or Groningen or the other of the eight provinces, sent their representatives to this united diet, who could not pass on anything until their principals at home had agreed to it.

55:56In other words, highly decentralized, and it was basically ruled by a mercantile elite, the burghers of Amsterdam and so on, and the other towns, and in a short while it became even more prosperous than it had been before. There were poor, of course, in what I'll call Holland, it was a major province, so the whole The poor were much better off than the poor virtually anywhere else in Europe. I say this is a perfect example of the European decentralized model in operation for a number of reasons. For one thing, one reason they had been able to defeat the Spaniards is that they had the support of other European countries, Elizabeth. Elizabeth I in England. In other words, if Europe had already been one huge empire, they could have easily crushed the Dutch. But since it was divided, they could call on other independent areas to support them.

57:03And that was the reason, eventually, why Philip II sent the armada against the English. Well, besides the fact that they were Protestant, because they had given aid to the Dutch rebels. So, and now, now it's set up, it's increasingly prosperous, it's tolerant relative to the rest of Europe because two-thirds of the people are Protestants, Calvinists, and about a third is still Catholic. And the society is controlled by businessmen who generally don't like to kill their customers for religious or other reasons. So, there was a general toleration, de facto more than by law.

57:55The Dutch printers were willing to print virtually anything. Now, I don't want to talk to the internet generation about virtually anything because your own standards are probably quite different. What in those days were considered extreme, especially heretical works, considered heretical by one church or another. The Dutch printers just cared for one thing, whether you settled your bill or not. And they didn't care what language. They'll publish it in French and then it could be smuggled into France. And so Holland became a model that was recognized by everyone. Here's an American historian to say, who wrote, Both foreigners and Dutchmen were apt to believe that the Dutch Republic was unique in permitting an unprecedented degree of freedom in the fields of religion, trade and politics.

58:52In the eyes of contemporaries, it was this combination of freedom and economic predominance that constituted the true miracle of the Dutch Republic. One characteristic of the Dutch Republic was that they welcomed religious dissidents, philosophical dissidents also like John Locke or Descartes who lived there for a while, but they welcomed The Iberian Jews, the Portuguese and Spanish Jews have been thrown out and therefore set up important Jewish communities in Antwerp or most famously Amsterdam. And this is what one Amsterdam Jew named Spinoza wrote, the city of Amsterdam reaps the fruit of this freedom in its own great prosperity and the admiration of other people.

59:51For in this most flourishing state and most splendid city, men of every nation and religion live together in the greatest harmony and ask no questions before trusting their goods to a fellow citizen, save whether he be rich or poor and whether he generally acts honestly or the reverse. In other words, this is a case of commerce, producing tolerance, producing harmony, producing a willingness to interact, of course for mutual benefit, we're not talking about a nation of altruists here, but what they discovered was the rule of peaceful interaction for the benefit of all based on respect for private property.

1:00:39I suppose you know that this Jewish community of Amsterdam lasted for quite a while and contributed a great deal to the prosperity and fame of the Dutch until around the time of Anne Frank when it was put a violent end to. Incidentally, just a sidelight, as you know, capitalism destroys culture and the free market is the enemy of any culture. That is why the Dutch, for instance, have never produced anything in the way of painting. The artists used to create their paintings and have them sold in the grocery store next to the barrel of salted herring.

1:01:26It was a very bourgeois society. Jean-Jacques Rousseau, whom I'll be talking about a little later on, later in the week, hated the Dutch. He said, if you go to Amsterdam and ask somebody the time, they'll try to charge you for it. Which I don't see anything wrong with, frankly. Well, okay. I'm going to be talking next hour about how the Dutch model was observed and taken up by other Europeans. As I mentioned a few minutes ago, John Locke, when he had to leave England or a possible political persecution, spent time among the Dutch and learned a good deal from them.

1:02:15But let's stop at this point. A lot of material has been gone over and I'm asking for any comments you might have or questions, anything that you'd like to say. Yes. What was it specifically about the medieval church that helped them achieve the growth of the Catholic hierarchy that they had in the Middle East, in comparison to the Middle East, there's a lot more in the Quran about property rights in the Middle East than in the Bible.

1:02:57This is just sort of religious restrictions on what leaders or chiefs can do, there wasn't a whole lot, but there was certainly more than we get in the United States. But I also know that in Islam there's no ordinance for it at all. There's individual leaders who have whatever authority they have.

1:03:56I think it was the fact of the powerful institutional church, an international church also, so that if you had one particular ruler persecuting the church, well, he knew that he could call on this great international power behind him, and it was the bishops of Rome who built this In the 11th century, you had Gregory VII, who was a particularly powerful pope, and Harold Berman is a professor emeritus from Harvard Law, and has written on the history of law, and points to the changes brought about in the 19th century.

1:04:47Mises is brought about by Gregory VII, Hildebrand and his immediate successors that created a, deliberately, explicitly, a church that was independent of secular rule or influence as much as possible and could act as a counterweight. Famously, he brought the Emperor of the Holy Roman Empire and the King of the Germans down I went to Canosa in the Italian Alps to ask for forgiveness and to ask that the excommunication be lifted from him, powerful enough to do something like that. So it was the institution of this church, today the oldest institution in the world, and I don't suppose all the people who seem to be out to destroy the Catholic Church are going to succeed.

1:05:44I'm not Catholic myself, by the way, but I'm just an observer and sympathetic in many ways to the Church. So the hierarchy, of course, was part of the creation of the institution necessary to that. It was the largest property, largest single property owner in Europe. in Europe, so, among other things, concerned about heavy taxation, something they wanted to avoid, but here you have this split that you don't have in other civilizations that was critical. One factor in the Arab era, even though there was private property, and even ownership of land, the difference was that you couldn't inherit money, passed on to your successors, and so that meant there was no improvement of the land, and I guess the individual increase said that Francis got the land back, so you couldn't assume it as well.

1:06:56I think Bernier noticed in India, the Mughal control, by the way, was a Muslim control and the Muslims temporarily controlled India, but you're saying that there was a case also in Arab Muslim countries that, really? Yes. The first thing is that for Islam, of course, Mohammed's first movement and the reason he stuck with the family was not only religious but a national, a mercantile movement, sort of their right to unite the pair of trading blocs. So when they would go conquer another bloc, if you joined us you don't play tag, you're within the trading blocs, you're not without the regime. But also, in Islamic law, I think the key thing to understand is the idea that Ambrose and I got to talk about there was always this important point made that the state is not safe from separation.

1:07:52Whereas in the Islamic law of Sharia, the way of the law, which is codified by Islamic legal scholars, never made a distinction between the path of the main god's law and the enforcement of the state path. and so there was even with private property nominal defectors, all belong, were all in under the jurisdiction of civil power, and this really showed itself later here in the Ottoman period, where people in Bosnia, which was under the control of Ottoman merchants there, would always send their capital to the Habsburg domain. As soon as they made money, they would immediately funnel it into the Austrian government, because that's the only place they could save their money, otherwise it would be subject to confiscation, or like you said, it would be kept under the air. That's very interesting. Other comments or questions or anything you want to say?

1:08:42Joe? __________________________ Yes. And along those lines, I mentioned that Benyais' travels in India influenced Karl Marx and his view of the Asiatic mode of production.

1:09:28Now, in the Marxist view of the different epochs of history, there was the Asiatic mode of, there was first of all primitive communism, The Asiatic mode of production, then slavery in the ancient world, then feudalism and serfdom, and now capitalist exploitation. And people have noted that Marx and Marxist authors in general never paid much attention to that Asiatic mode of production, which is supposed to have been a stage of economic development. And some people have suggested that, especially with modern and contemporary Soviet authors, for instance, it came a little too close to home, because what you had was society under the economic despotism of the state and its bureaucracy.

1:10:25And some critics, for instance anarchist, left anarchist critics of Marxism said that's what Marxist societies eventuated in. So that they didn't feel, Soviet historians wrote endlessly about Marxism and these different stages of history did not feel very comfortable talking about the Asiatic mode of production. The different parts of the people, the different parts of the earth, they have different ideas of what the top or level of adaptation wants to do?

1:11:21And just as you had Bernier talking about India as a contrast to Europe, you had other authors, famously, John Fortescue, talking about England as a country which really respected property, in regard to lower taxation also, in contrast to France. a country which really respected property in regard to lower taxation, also in contrast to France, which he said was a country where the ruler, the king, often acted tyrannically and took too much of the property of his subjects. So you did have different situations in different parts of Europe.

1:12:10An English-British, well I don't know if he's a historian, I think he's more of a sociologist, named Alan McFarlane, has written about the peculiarities of English development. McFarlane says that really very early on, people were generally aware of the contrast between England and the continent, that in England, for instance, there was a much more and more active market in land, whereas in Europe land tended to be passed on from one generation to another without much change.

1:12:58He says that in England the nuclear family, as against the extended family, took root very early on. In Europe, especially in Central Europe and in Eastern Europe, you had an extended family situation. and other differences. So, yes, there were many differences and in particular one might point to differences between England and the rest of Europe.

1:13:45Well, I'm not sure. We are fortunate at the Mises Institute in having an expert in all things Dutch, not to mention South African, and that is Joseph Stromberg, who might know something about this. All I know is that this was a recognized situation at the end of the Middle Ages and why in particular I don't know. The problem that occurred was that the countries ruled by the Dukes of Burgundy then passed an inheritance to the kings of Spain. You talked about the difference between the earlier Spanish Habsburgs and the later Austrian Habsburgs. What brought about this?

1:14:58ruling Spanish dynasty in the Kingdom of Spain today as a bourbon. After Charles V, Habsburg domains were divided between the Spanish domains which his son Philip II inherited and the Central European domains including the emperorship of the Holy Roman Empire which passed to another son of his. And then you have, so you have two different developments. All I had in mind really was the Austria-Hungary of the late 19th century and of the 20th century until it was dissolved by the First World War and the great intellectual flourishing of Austria-Hungary and generally partisan of lost causes.

1:15:48Somebody might snide the remark, maybe that's why I'm a libertarian. The late Austro-Hungarian Empire is an example of that, and down here in Alabama, maybe you can even think of another example of a lost cause that one might be still a partisan of. Oh, by the way, now why the Spanish Habsburgs are different, but let me just say this. This is what many people say when they talk about national character. Keep in mind that the Spaniards went through an experience of seven centuries of what they call the Reconquista, of reconquering Iberia from the Moors.

1:16:35They went on from the high tide of the Moorish domination in the 8th century until the Moors were finally kicked out in 1492. So that there was constant warfare against the infidel and what defined Spaniard was not certainly not language because there were many different important dialects. What defined a Spaniard was his Catholicism, which one might think easily led to a kind of inflamed religious intolerance even worse than experienced in other parts of Europe. I enjoyed your comments about trying to teach the Magna Carta because one time I tried to introduce that subject.

1:17:21I think it's very pivotal to the development of the West. And as part of that I would read parts of the Magna Carta and then ask the students to comment on that. And generally the only comment I got back was, why did they put all that stupid stuff in there? That's not a good question, Mark. We're talking about the early 13th century, the scootage and so on, ransoming the king's person and so on had to do with the customs of the High Middle Ages. That's what you mean by stupid stuff. Knowing your own past habits and preferences, I suppose you'd prefer if the Magna Carta was sort of recited in a rap kind of way, right?

1:18:17I know I've seen some of the tapes in your car.

1:18:26Anybody want to raise any other points? Yeah, in the back please. There is a kind of Christianity and different individualism. Now wait a minute, hold on a second. First of all, I have a sort of hearing handicap, and secondly, you don't talk like a New Yorker. They understand that Christianity is the view of man in the West, in the sense that Christ was the first level. He was an individualist in nature, or in the Jewish community. He was trying to create a kind of sort of individual personality, and the way you read the scripture is basically saying, Well, the beginning of the West was created by the Christianity.

1:19:44Europe is a cultural phenomenon, came into existence through a melding over centuries of three inheritances, Christianity being one of them, being importantly one of them, also the classical tradition from Greece and Rome, no doubt about that, that was kept alive to a degree anyway, but then also the special customs that were brought in by the barbarians, so-called, especially the different German tribes. The Germans, so then when these three came together, let's say around 800, 900 AD, that created modern Europe. But by the Germans we mean of course not just what we call Germans today, but the different Teutonic tribes.

1:20:29The Franks who gave their name to France, the Angles and Saxons who gave their name to England, the Lombards who gave their name to Lombardy, the Burgundians who gave their name to Burgundy. All these different German peoples, who had very different customs from the subjugated inhabitants of the late Roman Empire, the defenseless subjects of Roman bureaucratic regulation and taxation and persecution, added their element to it. And a different sort of personality came out, let's say national character, but here on a larger scale, and then of course there were sub-varieties of that.

1:21:34The peasant uprisings in every society, in Russia famously a number of times in the 17th and 18th century, in China, mass peasant uprisings in the 19th century, Peasants, who are at the mercy of the rulers and soldiers from the metropolis, and forced to give up their surplus product to keep the cities in existence, are in a constant state of, in many societies, in a constant state of latent, at least latent revolt.

1:22:26So I don't think that it would be correct to say that what the peasants objected to were specific taxes or confiscation or some unusual amount of financial oppression. But they never, as far as I know, until the rise of liberalism, began to generalize this as a social doctrine. Maybe Watt-Tyler's rebellion in England was an exception, but generally what they objected to were the specific oppressions being imposed on them.

1:23:13There was no general ideology that, we're human beings like everybody else, we have rights, we have a right to, so, and Paul, you know, Paul Johnson writes too much. He writes very well, but he, so there'd be, I'd take some of the things he says with a grain of salt, certainly.

1:23:43Thank you for watching.