Illuminati

A couple of years ago, I read a two-volume work by Peter Gay on the Enlightenment, which is itself a model of undogmatic humanist scholarship and prose. But it got me thinking about a few other Big Topics that seem to be relevant to the political questions of the day, and since then I've been thinking of composing a series of What Is...? studies--such as What is the Enlightenment? What is fascism? What socialism? Capitalism? What is imperialism?

Well, given the scarcity of time, you've got to start somewhere. Therefore, as a kind of a memo to myself and a spur, I've typed up a page from my notes on the chapter on the Enlightenment, the period and the broad philosophical-social movement, in Norman's Davies's workmanlike Europe: A History.

Enlightenment and absolutism: 1650-1789

• The age of absolutism is characterised by a much wider variety of political systems than just absolutism.


• The colonies and colonialism form a backdrop to the period.


• The Enlightenment outlook is distinguished by its emphasis on rational thinking, and an appeal to evidence. It aims to be undogmatic and tolerant. “The light of reason” shines particularly strongly in the fields of science, epistemology and moral philosophy. Rules and patterns in the arts: classicism. The mania for encyclopedias. In religious thought, it is epitomised by deism. In economics, mercantilism and the physiocrats. In political theory, Locke and Montesquieu. The question of historiography: How should history be written? Key figures include Voltaire and the transitional figure of Rousseau.


• Reacting against Enlightenment rigidity and reductionism, Romanticism emphasises the spiritual, the supernatural, the spontaneous; imagination and emotion. Vico, Kant, Haman , Herder.


• This is the period of French supremacy, primarily under the reign of Louis XIV, the sun king (r 1643-1715) in the seventeenth century, whose religious policy turned against the Huguenots and the Jansenists, and who conducted four major wars (the war of devolution; the Franco-Dutch war; nine-years’ war; the war of Spanish succession). In the eighteenth century: stagnation and hunting under Louis the XV; Louis the XVI: before the deluge.


• In the British Isles, it is the time of the Restoration, the Glorious Revolution, the Act of Union with Scotland (1707)—the basis of modern British identity. The Glorious Revolution enshrines parliamentary sovereignty, as against monarchical or popular sovereignty. Charles II lives it up. James II is seen as too soft on the Catholics. William and Mary are invited in. The reign of the Hanoverians: George I, II, III, IV (1714-1830). The American Revolution (1776-83).


• In rest of western Europe in the eighteenth century: the Bourbon kings in Spain and the auto-de-fe; in Portugal, John the priest king and the Lisbon earthquake; in Italy, rivalry between the House of Savoy in Turin, the Habsburgs in Milan and the Duchy of Tuscany: enlightened despotism.


• In central and eastern Europe: the last surge of the Ottomans and the siege of Vienna, along with a revival of Hapsburg fortunes: Maria Theresa and Joseph II, the “crowned revolutionary”; “Josephism” and education of the state elite; the incorporation of Hungary (1687) and the Rakoczy rebellion (1704-11); the rise of Prussia under the Frederiks, especially Frederick the Great (r 1740-86), said to be—nor least by himself—one of the wonders of the age. The expansion and consolidation of Russia (eg down to the Black Sea), especially under Peter I (r 1682-1725), who killed his son and initiated thoroughgoing Westernisation, and Catherine II (1762-96), who was German and killed her husband; succession by palace revolution; the war with Sweden; the construction of St Petersburg; the subjugation of Ukraine and the Hetman State. The decline of Poland-Lithuania.


• The deleterious role of Orthodoxy in the Balkans, as conservative, anti-Western: “none of the great civilising movements that shook the Western world…could effectively penetrate…Political traditions owed little to rationalism, absolutism or constitutionalism; kinship politics dominated at all levels; nepotism lubricated by bribery was a way of life.”


• Mozart.

Mr Ricardo's political arithmetic

The question of why economies grow has been central to economics since its emergence from the Enlightenment as a discipline in its own right. On this, I shall take an approach that will allow me to look at the question from different angles, bit by bit. The best place to start, it seems to me, is with a little foray into the history of economic thought.

All the classical economic theories were theories of growth—that is, they were designed to show that freedom for economic actors and free trade were essential for improving the prospects for the growth of national wealth. Later, with the "marginalist revolution" of the 1870s, mainstream economists shifted their focus to the analysis of the static problem of resource allocation. In the 1950s they began to apply marginalist tools to the problem of the growth of whole economies over the long term. More recently, this approach to growth theory has itself come under fire.

Of the classical growth theories, that of David Ricardo is perhaps the easiest to expound in a small space. As is usual in classical economics, Ricardo looks at the growth process through supply-side glasses to explain the development of productive capacity; this he assumes will be the same as actual output because market mechanisms assure full utilisation.

Ricardo's model is of a mainly agricultural economy in which production is the outcome of the combination of three factors: land, labour and capital. At any point in time, land is fixed in quantity but variable in quality; the labour supply is fixed; and the stock of circulating capital, or wage fund, is also fixed (it is envisioned as a stock of corn).

In any one period of production, the owners of capital hire the owners of labour to work on the land. Capitalists deploy labour in such a way as to equalise the marginal product of labour. The wage rate of workers is determined by the size of the wage fund, divided by the number of workers (the labour force); capitalists will hire workers as long as the marginal rate of labour is higher than the wage rate, the difference between the two accruing to the capitalist as profit; the income of landowners, in the form of rent, is determined by the difference between the average and the marginal products of labour multiplied by the number of workers on a farm.

This is the static part of the model. The model is set in motion by the behaviour of the economic groups with regard to their income. Workers consume all their wages to reproduce themselves, so that they are fit for labour in the next production period. Capitalists tend to save their profits, adding it to the volume of circulating capital, the wage fund—which is the source of economic growth. Landlords spend all of their income on "unproductive consumption".

However, in Ricardo's model—and in contrast with the model of Adam Smith—growth is not without inherent limits. This depends crucially on the role played by the expansion of the population, which is stimulated as a growing wage fund boosts the wage rate, raising it above subsistence level. As production on existing farms intensifies and also moves outwards to less fertile land, rents increase, which is useless from the perspective of economic growth; worse, the marginal product of labour falls and, with it, profitability, eventually bringing the growth of the wage fund—and thus the growth of national income—to a halt. This is known as the stationary state.

Although Ricardo’s model retains a certain self-contained elegance, it cannot be reconciled to the growth process as it has subsequently happened. This is for three main reasons.

• Population growth has often been "exogenously" determined, and the envisaged close relationship between the income and population growth has not obtained.
• There has been steady progress in the development of agricultural technology, some of it induced by the pressures of population growth.
• The emphasis on the role in growth played by circulating capital ignores the contribution to growth from the employment of fixed capital—particularly in industry, but even in agriculture—through improvements in productivity.