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Robert L. Heilbroner - The Worldly Philosophers
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The Worldly Philosophers Review

This summary is going to offer a complete view of this masterpiece written by a pen of Robert L. Heilbroner. The first edition in 1953 achieved an enormous success not only among public but also in the circles of academicians. Retrospectively, we are going to examine all the great economic philosophers from the 18th century starting off with Mr. Adam Smith and continuing with many other academic thinkers who enhanced their society with a new perspective of the world they lived in. The end of the summary will also produce a brief vista about the future and present a few of the many theories of present philosophers.

We shall start with probably the most known economist of all times being no one else than Adam Smith. Mr. Smith was probably the first of all philosophers who focused on the subject of economy and the society bound in one entity by the magnificent instruments of economy. No doubt he was the first since all the economic subjects were totally unfamiliar to a man of middle-age living in feudal regime. His only goal was to grow as much crop as possible to satisfy needs of his feudal lord. Only in the 18th century the whole society grew to a level worth describing by the eyes of economists. Not only was the community not divided in feudal lords and poor peasants anymore, but it was now separated in consumers and producers. Therefore, the whole world we had known slowly started to change its shape to finally turn into such an outstanding form. The relationships between consumers and producers were far more difficult than any time before. And this is the main reason why Smith started to explore the principles of them. Let me now introduce the book which offered his own perspective as he saw the society.
The most famous and world-recognized book published by Smith was unmistakably Wealth of Nations. This book represents the origins of economy, the science objecting itself with economics. Smith produces a spectacular view of the English society of the 18th century. He supplies us with all the details of every class in the community. The book is enormously broad, yet it gives all the required explanations. We shall now look at the facts Smith discovered while examining the world of economics. As already mentioned, the world of Adam Smith consisted of consumers and producers. Since all the producers selling goods are in competition, they cannot raise price of a certain product, because it would inevitably lead to his costumers abandoning him and turning to his competitors. In other words, it would result in his bankrupt. The second fact discovered here is that the community itself dictates the producers what and for what price the goods will be produced. Let me provide an example. Imagine that the society needs more shoes and fewer gloves. This will result in a higher demand of shoes and therefore also the price of shoes will rise since the demand for this good is considerably higher than the producers are ready to manufacture. On the other hand, the prices of gloves will tend to fall as there are fewer buyers. And this is the final moment where the market steps in. As the producers of gloves are not able to employ so many workers due to the considerable loss, the labour will slowly start their migration to the shoe industry. This will lead to a balance between the number of shoes made and demanded and consequently, the prices will fall. Furthermore, as fewer gloves are produced and the surplus disappears, the prices will rise back to normal. This will set up the new balance between the market and the demand. In the background of this all, as the wages rise in a particular field, the entrepreneurs will rush in here and will leave the market which is in loss. The surplus tends to fall in the shoe field because of an increased number of capitalists active in the field, and rise in the glove field. This is being performed until the surplus vanishes and new balance is restored by the self-curing instruments of market, the Invisible Hand of Market as Smith used to call it. For all this to be possible, he needed to work with two essential assumptions. The first is that all the people regardless of being buyer or seller are driven by self-interest. And secondly, all the producers must be in competition. Without these assumptions, the whole market described by Smith would never be possible. For the English world of 18th century everything seemed to be ideal. But can we still see the analogy today? The world has undoubtedly changed. And it has changed a lot. But some of the basic principles are still present. Even though the community is much more controlled by oligopolies nowadays and the government restrictions are sometimes more than uncomfortable, the Invisible Hand of Smith’s has probably not vanished totally. Additionally, as the past taught us, a man is not always as rational as Smith wanted him to be and the two assumptions were sometimes more than silly to be applied on Homo Sapiens Sapiens, doubtfully a man only of wisdom.

Let me continue with two other philosophers who had a little bit more depressive view of the society they lived in. The world of Adam Smith was perfect in its sense. It offered Smith all the answers to his questions and that is why he saw no point in seeking a flaw in this ever-lasting system of capitalism. On the other hand, it did not cover all the necessary questions, especially the ones concerning the future.
The two thinkers we will continue our journey with were in fact really good friends, but they were not able to agree on some of their statements. The first one is Parson Malthus, whose main contribution to the world of economy was his doom theory of society. He believed that human beings are inevitably condemned for apocalypse due to a very simple fact discovered by the Reverend. His statement was that since the population grows geometrically and the amount of food only arithmetically, the society is inevitably doomed for famine and decay. To analyse this theorem, Malthus could only see the society he lived and obviously he was not able to predict the unbelievable advancement of science leading to higher food production and also other regulations, e.g. birth regulation. The population does not grow in such a rapid pace as before and the food supply in advanced countries has been enhanced. Nevertheless, we can still observe certain aspects of this theorem in undeveloped and overpopulated countries.
The other of these two is businessman Ricardo who saw the entire population as an elevator where people fight for their position in the upper stages of this staircase. Ricardo’s opinion of the world was dehumanizing human beings who only saw their profit and accordingly behaved that way. Ricardo divides people in three groups consisting of workers, capitalists and landlords. Capitalist’s aim was to accumulate and enlarge his field of work. Although capitalists profited from workers and products made by them, the best position for Ricardo was to be a landlord. Because of the ever-lasting natural need for eating, landlord earned his profit from possessing a fertile soil. Since the population was growing, he advanced to less fertile soil in the surroundings. Due to the less fertile soil, the wages of workers had to be higher for the increasing number of hours spent to produce the same amount of grain as on a fertile soil. Therefore, also the price of bread had to be put higher. So the world of a landlord is getting better and better. On the contrary, the world of capitalist is getting gloomy. Firstly, he is forced to pay higher wages to his labour, since the bread is dearer. And secondly, he is starting to loose the top position in society. He is being replaced by a landlord who profits from the soil he possesses. This theorem of Ricardo’s mind is not entirely wrong but lacks a vital fact being import. Ricardo was aware of the fact, that when the grain is getting more and more expensive, the natural course of economics will lead to the path of importing the grain from abroad which will again set the proper price for grain. That is why he voted against the proposal of government to import grain from France.
We shall not leave these two dear friends to comment just on one interesting topic of theirs. Malthus was opposed to Ricardo in one statement which Ricardo was convinced to be true. Ricardo claimed that saving only resulted in spending and therefore was not dangerous for the world of economics. However, Malthus was not entirely sure. He simply saw a flaw in this optimistic statement of Ricardo’s. Even though he was not able to put his thoughts on paper and materialize his doubts, we should not condemn Malthus’ opinion. We can see the equivalence even in today’s world when the savings of people interrupts the constant flow of money. This very fact was later observed by John Maynard Keynes, but this will the object of our focus some time later.

The third group of the worldly philosophers are so-called Utopian socialists. As the name indicates, these thinkers longed for finding a utopian vista of the world. According to the recent gloomy times of Parson Malthus and Ricardo and their condemned theories of population growth which forecasted burying society under its own weight and dehumanizing human beings, there is no wonder that academicians grasped at their own optimistic glance of future. To be specific, it was not future but rebuilding of the whole society they intended to accomplish. The first representative coming from Utopians is Englishman Robert Owen. Owen was a successful entrepreneur who possessed his own factory in Scotland. Visiting the factory and the surroundings of it being the village, which labour lived their lives in, were like entering a different world, maybe a different dimension. The village was world-known and regularly visited by noble people not only from Great Britain, but from the whole world. We shall mention just one of all the spectators being Russian emperor who travelled the enormous distance just to observe this functional system himself. But let us get back to the revolutionary idea of Robert Owen. He was the first capitalist who did not force the labour to work by brute force but by an opposing attitude. His treatment of his workers was an upheaval. Every worker had to work a specified time a week and not a single minute more. Above every employee hung a flag with a different colour depending on how efficient the worker had been. Therefore everyone tried to do his best not because of a brute force but thanks to a lovely attitude. Furthermore, at the exit of the factory laid a box of comments where any complaints could be thrown in and afterwards analyzed. With this pleasant image in his heart, Owen decided to make a use of it. He therefore tried to raise money for his new project- to build a village following the rules of his factory. He even managed to find a soil for his intention in the USA, but it was not a significant success. Despite of Owen’s failure, the idea of putting people closer together not with a brute force but with an opposing attitude still remains fascinating and helped the communists to form society based on this principle.
Another utopian presented in the book was Saint-Simon, a wealthy Frenchman. The life of this man is full of sacrifice and unsatisfied taste for any world-breaking contribution to the world. He spent all his money on books and the most intelligent scientists to surround him. Sadly, he died as a poor man and with apparently no contribution to the economics. However, the main reason why the world knows the name of Saint-Simon did not happen until his death. Because it was just then that his esprit, enthusiasm and hope in people inspired a group of people, maybe a sect which then spread to a larger circle. The reason for the establishment of this sect, maybe a brotherhood will be more exact to this age, was one of Simon’s thesis. It claimed that if France lost leading scientists, artists, workers and all the people leading the nation, it would result in a catastrophic scenario for every French soul. However, on the other side, if we apply the very same extinction to the social upper crust, the result will be at worst sad. But it would bare no significance to the running of the nation since all ministers and politicians as well as aristocrats can be replaced or are not needed at all. Only now we can see the source of esprit among the members of such brotherhoods consisting mainly of workers.
But now we will move to a more gifted philosopher in terms of imagination. His name is Charles Fourier, also coming from France. The idea which brought fame to this thinker was the division of society into separate phalanstères. This is a French word which Fourier used to name his romantic thought to form various phalanstères as separate villages which will function on their own. All the people living in such a village will work except for certain exceptions. Every man would do what he likes and would not be forced to work. Even the dirty work would be done by the ones who would like to do it. Furthermore, Fourier also presented various ideas to bring society together, for example there would be several contests and competitions among people to motivate them. Although, such an idea of Fourier’s sounds very pleasing since everyone would be equal, we should not forget the nature of a man who most probably would not be able of living in such a noble world. People are not equal and everyone who thinks they are is a mad man.
All of these utopians were fascinated characters. But somehow most remarking of all of them was John Stuart Mill. This man was briskly genial since he was a child. He had a daily routine filled with philosophy, mathematics and history. At the age of three he began to learn Greek. At the age of seven he had read most of the dialogues of Plato and between the age of 9 to 12 he had already mastered differential calculus and written ancient history. Simplified, Mill was a genius. No wonder that he was not only philosopher but also historian and pamphleteer. But the most remarkable contribution to the world of economics had his statement on society. Mill was convinced that mankind can do with itself what it wants. In other words, even what a person has produced he cannot keep, unless by the permission of society. The distribution of wealth depends on customs and laws of society. These laws are put in use by the ruling part of the community and are different in every age. By this statement the society itself was responsible for the money allocation. Furthermore, there was no “correct” distribution of wealth and might. There was only the decision of community which they saw fit at the time being. Only society is responsible for the course of community and can change this course whenever they change their minds. This theorem has put all the blame on the shoulders of society, which can also be represented by Smith’s fact that the upper-hand in consumer-producer relationship is held by the consumers and consequently they wield the metaphoric compass which guides the ship of community.

A single chapter is reserved for such a great man as was Karl Marx. Marx was a prototype of German efficiency and their affection in perfection. He did not only forecast the inevitable end of capitalism, but also summarized and described everything to the detail in a fabulous book Das Kapital. Although he was not entirely alone in the vision of capitalism destructing itself, the contribution to the world bares mainly his name. The less-known fellowship of Marx’s was Friedrich Engels, who was Marx’s life-long friend and supported him even in the times of cruel poverty.
The aim of Das Kapital was to highlight crucial defects of capitalism. German’s aim was to present the doom of capitalism by describing a perfect capitalism which would lead to an end. Thus, when the flawless capitalistic system results in a destruction of itself, why should our own system full of mistakes and human imperfections endure? This is totally rational thought which brings us even more to the question: How did Marx imagine perfect capitalism? The answer is relatively easy. He adopted the definitions of labour and values from his previous colleagues being Smith and Ricardo. To explain the definition of labour and values, we have to look at the functioning of the whole society. It is separated in two opposing stations: capitalists and workers. Worker is evaluated by the value he needs to survive. For example, if a labourer needs 6 pounds per day to survive, this is his exact value. But every worker has to work for a capitalist. Let us say that the worker receives his 6 pounds-wage during a 6-hour shift. However, a labourer will not contract himself to a 6-hour shift since the capitalist offers no less than 12 hours a day. Therefore, these extra 6 hours of work belong to the capitalist as a profit. Marx called this profit “surplus value”. Now we know where the profit comes from. According to Smith, capitalist’s main aim is to accumulate and expand. Yet, the expansion means more labourers to work and more competition to face. Since all capitalists are in competition they have to steal the labour from each other and that leads in a rise of the wages. One would think that this is the final argument as the surplus value will somehow disappear on behalf of rising wages. Yet, it is not. Marx found a way out which provides an implementation of labour-saving machinery. And this is the final mistake of the capitalists. They establish factories with still less and less labour and replace them with machinery. Their profits tend to rise some time but then it suddenly stops as they realize and remind themselves of the real source of profit-surplus value. Thus, they once again start employing labour instead of machinery and the wages rise and then again steps in the machinery and circle continues. And one day the drama ends. The capitalist world is no longer able to endure all these cycles and simply collapses. At the ash of the system the society produces a new one where the labour force, also called proletariat by Marx, will have the leading word. As you can see, it reminds one of socialism or communism. Therefore, it is no wonder that the Manifesto was a basis for socialists alongside Lenin. Marx’s work was not to be taken as an ideology as he himself proclaimed. Nevertheless, the Manifesto and the vista of capitalist doom as well created a basis for various cults and sects. While living, Marx longed to observe such an opportunity for his idea to come to life which he did not manage to experience. He died with his wife in excruciating poverty. He would have never imagined proletariat force would come to life in such an undeveloped country as Russia.

Another chapter of this brilliant book is dedicated to the ages of Victorian World and the Underworld of Economics. The Victorian Ages offered the Great Britain and the rest of the world another market to sell their products within. This was a very crucial fact due to the still rising number of products manufactured in leading countries of Europe, e.g UK, Germany, Holland and France. Several new academicians were raised in this part of our history, yet they were not vitally important. They were just following the natural course of economy and consequently brought no real contribution to it. What we will focus our sight on is somehow different side of the economic world.
Let me launch this chapter with more a mathematician than philosopher, Francis Ysidro Edgewtorth. As we already mentioned, he was a mathematician, and a brilliant one. And this passion reflected in his understanding of economics as well. And why not? The quantities and prices in economy can be best interpreted by the tools of mathematics. Therefore, Edgeworth found an interest of his in interpreting economics in differential calculus. He even solved the apparent problem of the unpredictability of a man. He simply degraded him to a machine and set equations for economic rules. Edgeworth’s theory of simplifying complex world of economics by the means of mathematics was at one point of view naïve. But on the other side, it brought us closer to the world of John Maynard Keynes and the modern world which uses this very procedure mainly in microeconomics.
Another representative of the underworld of economics was Frederic Bastiat. This man, famous for his ability of highlighting absurdity, was primarily a journalist. One particular article is worth mentioning. There was an event of French government legislating higher duties on all foreign goods in order to support French domestic industry. As a response, he wrote on behalf of manufacturers of candles and kindly asked the government to motivate them by helping them with their ever-lasting and intolerable competition of the world’s largest producer of light being no one else than Sun. He even demanded a legislation ordering all the people shutting down all the windows. To support his statement he put in use an argument that if a greater need for artificial light is established, who will profit from it the most? Undoubtedly the domestic industry because of the greater demand for wax, oil and consequently bee-keeping and olive trees cultivation.
In spite of this great talent of Bastiat’s he was never a great economist unlike our last philosopher, Henry George. In his work of art Progress and Poverty he claimed to have found the true reason of poverty which was to his mind the matter of rent. To be specific, he explained it this way. If you say to a capitalist that on a certain piece of soil there will be a prosperous town with complete infrastructure and ideal conditions for market to thrive and ask him if the interest is going to be any higher, his answer will be negative. The same answer will be given to the question of whether the wages will rise. Therefore, the only profit coming from all of this will be the rent, the value of the soil. And for George, this undeserved gain of money was the exact reason of poverty. No wonder he then dedicated his life to persuading the US government in putting massive tax on land to absorb all the rent. The matter of rent was certainly a tricky one. On one side, the lack of doing anything prosperous for the economics was certainly not entirely just. But on the other hand, the soil is constantly passed from hand to hand and you can find no confidence in holding the soil just because you know there will be a skyscraper being erupt there in a century or so.
The last hero of this chapter is going to be John A. Hobson. In comparison to Marx, Hobson presented even more disturbing thoughts expressed in book Imperialism. He was not only of that belief that capitalism inevitably destroys itself but also the whole world with itself. Hobson saw the main problem of evolving capitalism in never-ending manufacturing of products and also saving. As the technique aided the capitalists to broaden their field of interests, so was getting bigger the number of produced goods. With richer getting still richer and the poor ones constantly hovering above the line of starvation, the market seemed to be saturated with goods. And while the poverty class could only afford to spend their wages on basic needs, it was on the shoulders of the capitalists to consume. But with the capitalists accumulating they simply could not broaden their factories any more end also were not able to consume all goods produced by themselves and were forced to save. The only solution was the politics of imperialism. Therefore, the countries saturated with their own production needed to expand. For now, the appetite of advanced countries was satisfied by annexing the rest of the undeveloped world where they were able to find new outlets for their goods. But what will happen later? Will they be able to find and conquer other countries? Probably not. Therefore, it all leads in a certain end. And this is something the society could not accept as a resort and could not swallow such a bitter pill.
To link up with Malthus’ thesis of saving which he was just not able to materialize in words, Hobson did the job. As we can see, the problem of saving was recounted as a doom image of our capitalist system. Nevertheless, Mr Hobson was not far from the truth. The matter of saving will be later explained in a different light by Keynes and is still an apparent menace in the modern world.

As stated at the beginning of the next chapter in the book, one hundred and twenty five years have passed since Adam Smith published first economic ever, Wealth of Nations. And taken all these years in summary, the world has significantly changed. In the origins of our expedition we explored the world of Adam Smith as a briskly and brilliantly working society of consumers and producers. Everything was set in its place and there was no need for pointing out any flaws of capitalism. But throughout the century, the capitalism evolved in even more dangerous form of its own, imperialism. This not only brought new outlets for developed countries but also generated an inexpensive labour and new products such as tea, coffee and other exotic groceries. The darker side of the imperialism laid in its needful expansion which sometimes inevitably led to wars.
The world described is the one that Thornstein Veblen lived his life in. As the name can indicate, he was not a native American but a Norwegian immigrant. Most of his childhood and years of unemployment as well he spent buried under books and was known as “The last man who knew everything”. It is said that anything you asked him resulted in a professional explanation and argumentation of Veblen’s. But let us now move to the crucial point of his contribution to the economics. This contribution consisted in a new pair of eyes he looked at the society. To quote Heilbroner, all the great philosophers were somehow mad in their entity but they were at least from this world. However, Veblen was a totally different case since he was not even considered to be from this world and this gave Veblen the vital advantage to see the naked truth of society without being too optimistic or too pessimistic, without any prejudices or connections and relationships with the real world. There was simply nothing he could not describe in its bare core.
This was reflected in his first world-known book The Theory of The Leisure Class. The motive of writing the book rested in Veblen’s fascination of society holding together in spite of separations into certain classes. As the name indicates, according to Veblen it all laid in the entity of the leisure class. To define this term, it is the part of community which earns profit from the working class and doing particularly “nothing”. To support this thesis he had been observing certain primitive tribes across the world where he noticed the separation of the community. It was divided in a working group of people responsible for hunting and the functioning of the whole society and the leisure class. He also noticed the fact that such a society was bound in one with a specific relationship between the classes. It was not a brute force or determent but admiration. The working part literally admired the leisure class and saw them as the ruling group of the community. To see the analogy in the 20th century, the society in capitalism was divided in labourers and capitalists, in other words working and leisure class. And for Veblen the admiration as a significant characteristic of the relationship between these two was also the main argument why the society held together. It was simply this fact which protected entrepreneurs from being torn apart by the majority of working class. Stated in a plain language, the workers wanted to become their managers and act like them. To analyze this statement, it gives us a fully satisfying answer for the question why the proletariat force of Marx’s still did not start any riots. These riots were as well fully avoided in advanced countries, however, not in such an undeveloped country as Russia, which was later a starting point for the violent spread of socialism all across the Eastern Europe. But in the fully advanced countries Veblen’s statement was entirely true.
Let us continue with another creation of his spectacular mind. The second world-famous title was The Theory of Business Enterprise which brought a stunning view of the world observed by Veblen’s unique eyes. Economic meant production and production was maintained by the labour. Therefore, we can imagine world as a gigantic clock working at a steady pace. On the other side of the community, we have capitalists. And this is where the twist begins. The aim of the capitalist is to accumulate and earn profit from the work of labour. But the working force, represented here by engineers, taking care of the steady pace of the clock knew no end except making goods. And where would a businessman oriented on earning profit take place? The answer is nowhere, at least according to Veblen. Consequently, he had to interrupt the ticking of the clock to generate yield. And therefore the capitalists as a united class formed another massive construction whose aim was to gain profit by disturbing the rhythm of labour’s clock. In fact a very interesting theorem. But we shall not entirely condemn this statement of Veblen’s. On one side, such an absurd thought could only be created in such a mind as his, but on the other side, let us have a look at the world Veblen lived in.
It was not a pleasant world at all. If we take USA in consideration, his view of reality was not as sick as it can seem. US entrepreneurs were full of self-interest and inconsiderateness. If we look at the railroad construction, it was filled with robber barons. Their interest was not to satisfy need of their workers or to complete the railroad as soon as possible, but to generate gain at any cost. Another argument for Veblen’s statement was the fact that US Steel and even other monster companies were overvalued by selling common stock to the public. Due to this fact US Steel company was twice as big on the paper (stocks) as the real evaluation of the corporation (assets). After all these facts taken into consideration, Veblen was not so far from the truth. But just like Marx, he badly evaluated the society’s own ability to correct its mistakes. Because of this, and also other crucial matters the capitalism did not end so far. One of the other matters, as stated, is undoubtedly the implementation of government in the financial markets. But as everything, the governments planning and regulations should be kept under control so that we will not find ourselves in a serfdom as it was described by Mr. Hayek, but we shall come to that in the later section.

As we leave the years of publishing of Thornstein Veblen, we are finally encountering one of the greatest economic thinkers of all times being John Maynard Keynes. This Englishman lived his most active life in extremely disorganised times because of the first world crisis and two world wars which nearly tore the Europe apart. Before we step into the life Keynes, let me put things in order by describing the times when the ground of capitalism was being shaken.
The standard of living in the United States was by the end of the year 1920 pretty solid. Not only the labour was not starving and living in inhuman conditions, but they were now able to live a solid life. The whole society was thriving and with it also the wages were on rise. Despite of the rise of salaries of American working class, this was not the only fact helping labour to live a rather comfort life. The other reason was the new trend of living established mainly in the USA in the very late end of 19th century. Banks were now wealthy and mighty corporations and were on a spectacular thrift. As a result of their gluttony, they started to issue loans to simple working people at an unseen rate. On one hand, the whole country was on a rise and no one dared to point out any mistakes of this profitable-for-everyone trend. On the other hand, it had tremendous consequences in the form of Great Depression. The main reason for all of this to be happening was that the whole market was built on a system of loans which were inevitable to collapse some day as it happened on the 29th of October 1929 also known as Black Tuesday. This remarkable day was a starting point for the decades of the deepest depression ever encountered. The national income of the US fell from $87 billions in 1929 to $39 billions in 1933. Half of the prosperity of the nation literally vanished in the air within four years. By the end of the year 1930, every fourth workman was fired and the number of unemployed people rose to 14 million. This was just the darkest part of the Great Depression. It seemed to have no end and the government was facing menacing riots of the unemployed mass which called for the end of capitalism. And to this world, John Maynard Keynes brought so essential exit point and aided the world to recover.
Keynes was undoubtedly an interesting man. First thing to mention would be his aberration in investigating people’s hands. He was able to memorize every hand he had ever seen to compare them with each other. But this was just one of the side brilliances he teemed with. The main geniality lies in his contribution to the economics. Keynes came out to be one of the forming personalities of the economy of the 20th century. And what was the contribution? We shall examine it now.
The first book to shine a ray of light on Keynes was The Economic Consequences of the Peace. It was just after the end of the World War I and Keynes was utterly miserable to persuade his colleagues being Clemenceau, Wilson and Lloyd George of the crushing consequences of the decision for Austria and mainly Germany to pay reparations so high that it would inevitably lead to economic disaster. Not only would Germany be forced to earn profit somewhere else than in domestic economics but it could lead to another militarization of army as a sign of aversion. As prophesized, the thesis was put into reality by no one else than Adolf Hitler, who took over Germany by means of fascism because people were so frustrated with donating such high sums of money for reparations.
Another fascinating piece of art written by the Englishman was Treatise on Money. And this is the right time to finally answer all the questions which bothered firstly Parson Malthus and then later Hobson, the matter of saving. This dark unexplored passage of economic world was finally uncovered by Keynes. It was stated first by Smith and Ricardo that accumulation is the main point of the thrift of capitalism. Because it brought more people the opportunity to work and also raised the wages because of the incomes of the company, this statement had been undoubtedly true in those times. But the times changed. Now it was not only the capitalists who were able to save and accumulate to spend it later for expansion, but it was also ordinary people who had this opportunity as well. Since the economics is based on a constant flow of money from hand to hand, saving is something like an interruption in this uninterrupted flow. Therefore, with still more and more people saving, the society started to lose. Even though most of the people tend to accumulate their money in a bank which does not interrupt the flow, the thrift of a society depends on the ability of investors to expand. Hence, when the investors are in no position to expand either because of a lack of funds or because of bad odds of possible future incomes in case of expansion, the society will not move forward, it will stagnate. Bear in mind that the saturated market of goods is not always in position to be capable of accepting more goods of the same kind or something utterly new. The investors have to take some courage to offer something new to the society and it is always a risk of losing an enormous amount of capital. But on the other side, as the whole world was trapped in Great Depression, the interest should be moving downwards, thus, there should be also higher effort to invest according to Keynes. And this is where the trouble begins. The Great Depression lasted so many years without a slightest change in investing which was in contrast with Keynes’ theory. But the brilliant mind set everything aright with the final masterpiece of his.
The General Theory of Employment, Interest and Money brought so wishful answer why was the world still trapped in the net of the Great Depression even in spite of the lower interest. On one side, the book was an endless field of differential calculus and algebra. But on the other side, it was revolutionary. It stated that the economic world is like an elevator. It can go up, down or it can stand perfectly still. And the third case was the major problem now. As mentioned before, the income of the US fell by $48 billion within four years. The saving was simply a luxury that could not be afforded in times of depression. And when there is no intention in investing by private corporations, the time for government has come. When the community could no longer suffer under crucial loss of incomes and savings and the capitalists see no point in expanding because of the extremely low demand, the government is there to throw a rope in the darkness. The New Deal offered millions of Americans the opportunity to work on several government projects including building of infrastructure, power plants etc. The US slowly started to recover from the unconsciousness and the whole world with them.
The rehabilitation of the world public finances took several years, but it was worth doing. The world finally recovered from Great Depression and the course of the ship of capitalism was set aright. However, the cure in form of New Deal did not work so well. At first, the programme was not brought to the full scale of government investments needed to bring nation to full employment, and secondly, more importantly, the business world started to treat the government planning not as a cure but a disease. The government was told to be overstepping its traditional bounds. The brilliance of the market mechanism was in its self-cure as explained by Smith. Even though the economics was brought to knees in the times of Great Depression and the government help was more than welcome, it also raised many questions. Was the help of government needed in such a great scale? Did it not lead to an overplanning of government and to destruction of the capitalist system based on freedom of individuals? This very questions were lately worked out by Friedrich Hayek in the book Road to Serfdom, which we will examine later.
The General Theory somehow came up also with another interesting message. The business cycles of thrift and decline seem to repeat themselves. As the community needs still more and more goods, the economics is on the rise. The investors expand and pull the nation with themselves. But when the nation is satisfied for the time being, the problem of saving shows up again. And the past repeats itself. We have to realize that the investments have a certain pattern: at first it is eagerness to seize the opportunity and in the final it is inactivity because of the satisfied market. Thus, the major problem of our economics not only then but also today is the innovation. The innovation is the most expensive but simultaneously also the most vital programme of all corporations. It gives them the advantage to constantly hold the market not fully satisfied. And this is the key to survive in the modern world of economics.

As we leave the unstable waters of the first half of the 20th century, we are being situated in relatively peaceful times of the 60’s years, when The Worldly Philosophers were published. Now Heilbroner has depleted all the most important minds of the economic history. Hence, it is the right time to make a vista of the future life. The statistics of the US in the year 1960 were rather pleasant. Three quarters of the nation lived a comfort life and were able to afford everything necessary. However, there was still the remaining one quarter of the people that was not able to succeed in living a decent life. Nevertheless, the capitalistic system managed to bring so many people a chance to experience a decent life. Yet, one can argue that the socialistic regime in Russia and the Eastern Europe offered full employment and free medical care. But to compare these two regimes is very difficult. The capitalism was based on freedom of individuals and self-interest. On the other side, in socialism everything was owned by the government and consequently it administrated all the nation incomes. People suffered under tyranny of disinformation and were constantly threatened by the reigning force. To return to the capitalism in the United States, it was likely to draft people closer to a higher standard of living. And to compare the prognosis from 50 years ago with the presence, it was undoubtedly right. Capitalism has certainly produced an environment to live a qualitative life in. The average wages have been raised since then and the standard of living has improved. Everything looked just fine.
But according to Berle and Means the traditional capitalism was about to be abolished. In their publication The Modern Corporation and Private Property they presented a rather discomforting vision. The statistics about wealthy corporations showed that in the year of 1932, one half of all corporate wealth was in hands of two hundred companies. In 1950, the fraction to be controlled was three quarters. Therefore, it was logical that in the year of 1970, the whole corporate world would be ruled by the leading two hundred corporations. The traditional competition would somehow disappear and, furthermore, the companies would no longer be in private hands but they would be owned by several investors possessing stocks. The crucial word in operating the company would be held by managers who were no longer bound by self-interest as it was before. This prophecy, unfortunately, has come true. The world is under reign of oligopolies which has somehow partly erased the competition. In addition, the matter of self-interest has also been deleted due to possession of the companies by its stock holders. The traditional capitalism as described by Smith is somehow gone. Yet, the spirit of it still lives among us. It has only evolved into a different form. The market is no longer a self-curing mechanism and from to time it needs help from the government. But is the planning and investments of government really necessary?
According to Friedrich Hayek, it is not. In his book Road to Serfdom this man born in Austria criticised the overplanning of government. It was not all planning he did not approve. To restore a balance or to offset a bad depression, was in good order. He was mainly afraid that the effusive effort of government to directly control public finances could lead to an end of capitalism and personal liberty as well. Everything was brilliantly explained on one example. The planning is like trying to get from one place to another through a crowd of people. The task is to walk a straight line if the plan works perfectly. However, in most cases you have to change your direction to avoid all the people, thus, you have to come up with another plan of yours to achieve your goal. Since all plans work perfectly only on paper until put in reality, the risk of overplanning hangs over the society like the Sword of Damocles. Hayek’s interesting thesis did not escape the eyes of Keynes who fully supported the aid of government. Nonetheless, he was of such mind to both agree and disagree with it.
The last economist we shall encounter in this section was Alvin Hansen also called as “The American Keynes”. Professor Hansen returned to Malthus’ theory of population growth. Yet, he was not afraid of it. He was aware of the necessity of it. The population growing still larger could offer more employers to the side of producers and higher demand to the side of consumers. Therefore, the expansion of corporations was fully possible. Also the technology advancement brought the world bigger production and effectiveness in producing goods. With continuing population growth and technology advancement the society could thrive. But according to later statistics, the population was stagnating in the 60’s years. With such a bad vision to the future, Hansen saw no other result than relying still more and more on a new ally, government. Only the permanent stream of government spending could keep the economics moving steadily ahead which would start off a new era of capitalism. No wonder he was called “The American Keynes”. Nonetheless, in my opinion Hansen failed to see the population boom in Asian countries that now rule the world and also the advancement in technology rising exponentially.
In summary, all the theories stay half-resolved. Although the world is now ruled by oligopolies, there is still plenty of small entrepreneurs and will always be. However, the rising power of big corporations should not come unnoticed. According to Hayek’s theory, the government planning has become a daily routine in the economic world. Whether it is really a road to serfdom and loss of personal liberty is hard to say. And finally, the Hansen’s thesis did not count with population boom after World War II and also the rise of China and India. Even the technology advancement is nearly unstoppable. But the matter of government expenditure bounds us with Dr. Hayek. The face of capitalism has undoubtedly changed and the role of government is far more significant than any time before. Whether it will lead to serfdom remains unanswered.

Most of the matters contemplated here were economic ones. But as we move forward with the world in change, the moral questions appear more often. As we already issued moral dilemma of Dr. Hayek of personal liberty and theories presented by Berle and Means and finally Hansen, we could find ourselves in a mixture of economical and moral problems.
As we already mentioned, the world has changed. Our new “ally” government is playing a vital part for today’s economics and feeds the market with all regulations, anti-monopoly strategies and new laws. The market is now ruled by oligopolies and the market somehow lacks the two original signs of capitalism being competition and self-interest. The leading role in corporations are deputized now by managers who do not face such a fierce competition as before and also do not own the company, it is now owned by its bond holders. The managers are more interested in earning their fortune from salaries than advancing the company forward. According to Joseph Schumpeter, this is the starting point of the doom of capitalism. In the past, capitalists were people of courage trying to expand as far as they were able to. There was always a “knight” to step out of the crowd and make a step into darkness. He was not always successful, though. But to compare it with the present times, such character of knight is something we lack. Since the corporations are lead by managers, they do not tend to take such a high risk of failure. The capitalism as we know it today is rather “comfortable”.
Nonetheless, it has succeeded in generating one billion of people an opportunity to live a solid life. But the rest of the world has never even encountered capitalism. The whole Africa suffers under tyranny of monarchs and its inhabitants are constantly menaced by devastating civil wars. South America and Asia are ruled by means of socialism. The fact is that capitalism as a regime could not even be established in some of these countries since they are comparable to England in the 17th century. Such a path would not only be long end exhausting but would not meet people’s expectations. The main advantage of socialism is their control over everything. Its mass mobilization when and at place it is needed is extraordinary. On the contrary, the nations are threatened by a brute force of government and lack of personal freedom. Even though someone would say that socialism is inevitable to fall apart as it was shown by Russia and the Eastern Europe which now experience a thriving force of capitalism, if we are to observe such countries as China and India which are now leading nations in production and GDP, one would claim that they fully enjoy the mass mobilization of socialism. By its means it is possible to build a relatively cheap working force whenever needed. But to explicit in whether the world will live in harmony of capitalism or be rather lead by rising force of socialism, we are not to say yet. As we leave the waters of the past and all the encountered philosophers forming the society, we have to say that all these thinkers managed to achieve a real contribution to the world of economics and all their thesis can still be observed in our modern world.
 
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