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The real test is utility. A theory that enables us to do new things constitutes knowledge.
The connection forged between science and technology is so strong that today people tend to confuse the two. We often think that it is impossible to develop new technologies without scientific research, and that there is little point in research if it does not result in new technologies.
In fact, the relationship between science and technology is a very recent phenomenon. Prior to 1500, science and technology were totally separate fields. When Bacon connected the two in the early seventeenth century, it was a revolutionary idea.
Until the Scientific Revolution most human cultures did not believe in progress. They thought the golden age was in the past, and that the world was stagnant, if not deteriorating.
Science can explain what exists in the world, how things work, and what might be in the future. By definition, it has no pretensions to knowing what should be in the future. Only religions and ideologies seek to answer such questions.
scientific research can flourish only in alliance with some religion or ideology. The ideology justifies the costs of the research. In exchange, the ideology influences the scientific agenda and determines what to do with the discoveries.
European imperialism was entirely unlike all other imperial projects in history. Previous seekers of empire tended to assume that they already understood the world. Conquest merely utilised and spread their view of the world.
European imperialists set out to distant shores in the hope of obtaining new knowledge along with new territories.
The modern ‘explore and conquer’ mentality is nicely illustrated by the development of world maps. Many cultures drew world maps long before the modern age.
But unfamiliar areas were simply left out, or filled with imaginary monsters and wonders. These maps had no empty spaces. They gave the impression of a familiarity with the entire world.
During the fifteenth and sixteenth centuries, Europeans began to draw world maps with lots of empty spaces – one indication of the development of the scientific mindset, as well as of the European imperial drive. The empty maps were a psychological and ideological breakthrough, a clear admission that Europeans were ignorant of large parts of the world.
The discovery of America was the foundational event of the Scientific Revolution. It not only taught Europeans to favour present observations over past traditions, but the desire to conquer America also obliged Europeans to search for new knowledge at breakneck speed.
Henceforth not only European geographers, but European scholars in almost all other fields of knowledge began to draw maps with spaces left to fill in. They began to admit that their theories were not perfect and that there were important things that they did not know.
to understand modern economic history, you really need to understand just a single word. The word is growth.
For most of history the economy stayed much the same size. Yes, global production increased, but this was due mostly to demographic expansion and the settlement of new lands. Per capita production remained static. But all that changed in the modern age.
The fact is, it’s not a deception, but rather a tribute to the amazing abilities of the human imagination. What enables banks – and the entire economy – to survive and flourish is our trust in the future. This trust is the sole backing for most of the money in the world.
before the modern era this ability was limited. In most cases, money could represent and convert only things that actually existed in the present. This imposed a severe limitation on growth, since it made it very hard to finance new enterprises.
Credit enables us to build the present at the expense of the future. It’s founded on the assumption that our future resources are sure to be far more abundant than our present resources. A host of new and wonderful opportunities open up if we can build things in the present using future income.
The problem in previous eras was not that no one had the idea or knew how to use it. It was that people seldom wanted to extend much credit because they didn’t trust that the future would be better than the present. They generally believed that times past had been better than their own times and that the future would be worse, or at best much the same.
Business looked like a zero-sum game.
That’s why many cultures concluded that making bundles of money was sinful.
Credit is the difference between today’s pie and tomorrow’s pie. If the pie stays the same, why extend credit? It would be an unacceptable risk unless you believed that the baker or king asking for your money might be able to steal a slice from a competitor. So it was hard to get a loan in the premodern world, and when you got one it was usually small, short-term, and subject to high interest rates.
The belief in the growing global pie eventually turned revolutionary. In 1776 the Scottish economist Adam Smith published The Wealth of Nations, probably the most important economics manifesto of all time. In the eighth chapter of its first volume, Smith made the following novel argument: when a landlord, a weaver, or a shoemaker has greater profits than he needs to maintain his own family, he uses the surplus to employ more assistants, in order to further increase his profits. The more profits he has, the more assistants he can employ.
Smith’s claim that the selfish human urge to increase private profits is the basis for collective wealth is one of the most revolutionary ideas in human history – revolutionary not just from an economic perspective, but even more so from a moral and political perspective. What Smith says is, in fact, that greed is good, and that by becoming richer I benefit everybody, not just myself. Egoism is altruism.
Smith taught people to think about the economy as a ‘win-win situation’, in which my profits are also your profits. Not only can we both enjoy a bigger slice of pie at the same time, but the increase in your slice depends upon the increase in my slice.
A crucial part of the modern capitalist economy was the emergence of a new ethic, according to which profits ought to be reinvested in production. This brings about more profits, which are again reinvested in production, which brings more profits, et cetera ad infinitum.
Capitalism distinguishes ‘capital’ from mere ‘wealth’. Capital consists of money, goods and resources that are invested in production. Wealth, on the other hand, is buried in the ground or wasted on unproductive activities.
Capitalism began as a theory about how the economy functions.
It now encompasses an ethic – a set of teachings about how people should behave, educate their children and even think. Its principal tenet is that economic growth is the supreme good, or at least a proxy for the supreme good, because justice, freedom and even happiness all depend on economic growth.
Scientific research is usually funded by either governments or private businesses. When capitalist governments and businesses consider investing in a particular scientific project, the first questions are usually, ‘Will this project enable us to increase production and profits? Will it produce economic growth?’ A project that can’t clear these hurdles has little chance of finding a sponsor.
Over the last few years, banks and governments have been frenziedly printing money. Everybody is terrified that the current economic crisis may stop the growth of the economy. So they are creating trillions of dollars, euros and yen out of thin air, pumping cheap credit into the system, and hoping that the scientists, technicians and engineers will manage to come up with something really big, before the bubble bursts. Everything depends on the people in the labs.
In 1484 Christopher Columbus approached the king of Portugal with the proposal that he finance a fleet that would sail westward to find a new trade route to East Asia. Such explorations were a very risky and costly business.
He pitched his idea to other potential investors in Italy, France, England, and again in Portugal. Each time he was rejected. He then tried his luck with Ferdinand and Isabella, rulers of newly united Spain. He took on some experienced lobbyists, and with their help he managed to convince Queen Isabella to invest.
A hundred years later, princes and bankers were willing to extend far more credit to Columbus’ successors, and they had more capital at their disposal, thanks to the treasures reaped from America.
But these expeditions remained chancy affairs, so credit markets nevertheless remained quite cautious. Many expeditions returned to Europe empty-handed, having discovered nothing of value.
In order to increase the number of potential investors and reduce the risk they incurred, Europeans turned to limited liability joint-stock companies. Instead of a single investor betting all his money on a single rickety ship, the joint-stock company collected money from a large number of investors, each risking only a small portion of his capital. The risks were thereby curtailed, but no cap was placed on the profits. Even a small investment in the right ship could turn you into a millionaire.
This is why today a country’s credit rating is far more important to its economic well-being than are its natural resources. Credit ratings indicate the probability that a country will pay its debts. In addition to purely economic data, they take into account political, social and even cultural factors. An oil-rich country cursed with a despotic government, endemic warfare and a corrupt judicial system will usually receive a low credit rating. As a result, it is likely to remain relatively poor since it will not be able to raise the necessary capital to make the most of its oil bounty. A
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At heart, the Industrial Revolution has been a revolution in energy conversion.
Why are so many people afraid that we are running out of energy? Why do they warn of disaster if we exhaust all available fossil fuels? Clearly the world does not lack energy. All we lack is the knowledge necessary to harness and convert it to our needs.
Only a tiny proportion of the sun’s energy reaches us, yet it amounts to 3,766,800 exajoules of energy each year
All human activities and industries put together consume about 500 exajoules annually, equivalent to the amount of energy earth receives from the sun in just ninety minutes.4 And that’s only solar energy.
The Industrial Revolution yielded an unprecedented combination of cheap and abundant energy and cheap and abundant raw materials. The result was an explosion in human productivity. The explosion was felt first and foremost in agriculture.
Most people throughout history lived under conditions of scarcity. Frugality was thus their watchword. The austere ethics of the Puritans and Spartans are but two famous examples.
Consumerism sees the consumption of ever more products and services as a positive thing. It encourages people to treat themselves, spoil themselves, and even kill themselves slowly by overconsumption. Frugality is a disease to be cured.
The Industrial Revolution brought about dozens of major upheavals in human society. Adapting to industrial time is just one of them. Other notable examples include urbanisation, the disappearance of the peasantry, the rise of the industrial proletariat, the empowerment of the common person, democratisation, youth culture and the disintegration of patriarchy.
Yet all of these upheavals are dwarfed by the most momentous social revolution that ever befell humankind: the collapse of the family and the local community and their replacement by the state and the market. As best we can tell, from the earliest times, more than a million years ago, humans lived in small, intimate communities, most of whose members were kin. The Cognitive Revolution and the Agricultural Revolution did not change that.
The Industrial Revolution, on the other hand, managed within little more than two centuries to break these building blocks into atoms. Most of the traditional functions of families and communities were handed over to states and markets.
Prior to the Industrial Revolution, the daily life of most humans ran its course within three ancient frames: the nuclear family, the extended family and the local intimate community.*
The community offered help on the basis of local traditions and an economy of favours, which often differed greatly from the supply and demand laws of the free market.
Over time, states and markets used their growing power to weaken the traditional bonds of family and community.
