1. The European Miracle

Ralph Raico covers classical liberalism’s growth, development and possible future. Liberalism arose in Europe entwined with Christianity. Why Europe? The East lacked the idea of freedom from the state and never established the legal system that could protect wealth. Europe had multiple, decentralized competing powers, not a universal empire.

Europe came into existence in the Middle Ages. The contractual relationship between princes and subjects was similar to the Magna Carta. The Middle Ages [5th to the 15th century] were not dark ages. The sign of a freeman was that he had the right to keep and bear arms.

The powerful, international Church of Rome was the strong institution that acted as a counterweight to secular power. It was the largest property owner in Europe and concerned about taxation.

Lecture 1 of 10 from Ralph Raico’s History: The Struggle for Liberty.

Transcript

[This transcript is edited for clarity and readability. The Q and A at the end of the lecture has been omitted. Annotations have been added by Ryan McMaken.]

This week, my subject is going to be history as a struggle for liberty. This conception of history, what history is, goes back to Lord Acton, a famous nineteenth-century historian who spent all his life accumulating notes and materials for what would be thought a 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.

What I’m going to be discussing this week is classical liberalism. I might slip and just call it liberalism from time to time, but 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 and its outposts, especially America. Europe has sometimes 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 is the history of modern science Eurocentric.

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. 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 The University of Pennsylvania who has specialized in this. He is a great scholar 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 respects.1 Now, of this view of the Europeans as genocidal murderers and demons and so on, much could be said. I’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 and have a proclivity to the temptation of putting their own perceived self-interests above others to any extent that they feel necessary. Another thing that could be said is that power corrupts, as Acton famously said.

In the modern period, it’s Europeans who had the power. It would be interesting to see what would have happened if it had been the Aztecs— Aztecs famous for their ritual murders and cannibalism—who landed in Spain rather than the other way around, and what scenes we would have witnessed. Finally, I want to say that there were Europeans who opposed those various crimes of the men of power in their own countries and among them—among the most prominent—were the classical liberals that we’ll be talking about this week.

What Made Europe Different

Now, the first thing to say about liberalism is that it arose in Europe, specifically in western Christendom. This is the Europe that grew up in communion with the Bishop of Rome, at 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. This approach to trying to find out why Europe was different, why Europe was distinctive, is sometimes called the institutional approach of economic historians. This phenomenon 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.2  The miracle in question consists in a 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 and this enabled new tens of millions—hundreds of millions really—to survive, and it 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. The 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 the rulers. It never called into question the arbitrariness of the despots. And first of all, it never established the legal framework that would protect the private citizens’ wealth against confiscation on the part of the tyrants.3

Mises was not primarily an historian. In my view, on the basis of what I know, he was the greatest economist of the twentieth 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, 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— it’s an international movement, Americans, British, French or Australians— is Jean Baechler of Paris. Baechler’s pioneering work pointedly expressed this, as he said,

The first condition of 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’être to political anarchy.4

We’ll see what that means. Among others who have developed this is Douglass North, who won a Nobel Prize in Economics for his work in this area, in economic history. 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.5  Now, this institutional approach was adumbrated by John Hicks, the Nobel Laureate in Economics in the late 1960s. But the essentials of the view were sketched by the great economic historian—now Emeritus from Harvard—David Landis, who, by the way, is no particular classical liberal. But he’s a good historian in a book of his called The Unbound Prometheus. 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. … The role of private enterprise in the West is perhaps unique, more than any other factor that made the modern world.6

Still, why was there the scope and leeway for private enterprise? Landis also points to the radical decentralization of Europe, what Baechler had called political anarchy and this is what he writes:

Because of this crucial role in a context of multiple competing polities (the contrast is with empires of the Orient and the Ancient World) private enterprise in the West, possessed a political and social vitality without precedent or counterpart.7

Now, of course, it wasn’t a linear progression to some kind of a libertarian utopia. However, we’re talking relatively and in contrast with other civilizations. Keep that in mind. There’s radical decentralization based on a context of multiple competing polities. Baechler, 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 this was tried from time-to-time. Instead, Europe developed into a mosaic of kingdoms, principalities, city-states, ecclesiastical domains, and other political entities. Within 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. They’re simply very good historians and they talk about the customary behavior of states as based on predatory taxation and continual confiscation. States throughout history have acted like the Mafia does in some neighborhoods: what they would very often do is pick out somebody who rises above the rest, who has higher assets—a successful doctor or small businessman—and then the extortion starts with him. This is what states have typically done through history: confiscations and predatory taxation. States apply taxation to the victim to the degree it’s possible. Sometimes, in the case of the late Roman Empire, taxation went beyond what even was natural, was rational, even for the predatory state. The victim died from excessive taxation or regulation and inflation.

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. For example, suppose you’re a successful businessman in Antwerp or Amsterdam, and suppose that you were pressed by the state and the state was confiscating or heavily taxing your assets. In western Europe, you could “exit.” You could exit without leaving the whole cultural area of Christian Europe. You didn’t have to go to a totally different civilization. You could go across the North Sea to England, you could go down the Rhine River to the Archbishopric of Cologne. This possibility of exit held generally among the Italian city-states. It was very easy to go from one to another, depending on how the state was treating you there. 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. It goes back into the Middle Ages and, by the way, this historical interpretation I’m giving you has also been the basis of the works of other scholars. The great Peter Bauer, for instance, in his work on economic development in Europe, vis-à-vis economic development of the third world, simply assumes this basic interpretation of why Europe grew rich.8  Paul Kennedy of Yale, in that book on The Rise and Decline of the Great Empires, assumes as his basis, this interpretation.9  Or William McNeill of Chicago and his other synthetic works on European history, assumes this as a correct interpretation.10  And Peter Bauer said in one of his essays that this economic development goes back at least 7-8 centuries, which means the heart of the Middle Ages.11  So we have to examine something about the Middle Ages to explain why Europe was different. In fact, it is in the Middle Ages that what we call 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, etc. In Europe, Feudalism was based on a contractual relationship between powerful Lords and the King—contractual, that is, there were obligations and duties on both sides. Already, by this time, some limits were placed on what the prince or the king might do. Within each of these realms, which were relatively small anyway, there was often a struggle between powers and this gave rise to distinctive European institutions. Again, this was part of what made Europe different.

There were representative bodies, representing the taxpayers, which didn’t exist in other civilizations. There were parliaments. In France, the Estates General or the provincial estates. In Castile, there was the Cortes. These bodies existed throughout Europe. There was, I think, no area of Europe that didn’t have such a parliamentary representative body. Certainly, the different parts of the Low Countries did; Scandinavia also. Castile had a Cortes, as I mentioned, but there was also a Cortes in Aragon, there was a Parliament in Sicily, in Naples, and the German states, and in Hungary, and in Poland.

Princes often found their hands tied by charters of rights, which they were forced to grant their subjects. The Magna Carta is the best known of these, but 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 were to 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 were to be introduced; there were to be no foreign office holders, and so on. In other words, we had in that very important area of the Low Countries, something 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. It’s a question of what is actually the historical development. You could be a freethinker, 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. Things are different when we’re talking about the post-Reformation, or especially the post-French-Revolution Church. At that later point, you found a state of the Church coming closer to the state; coming closer especially to Catholic rulers and Church and state, each using the other.

The Medieval Origins of the European Miracle

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. It goes back even before the Middle Ages, to the first centuries of the Church.

This is represented, for example, in a painting by Flemish painter Van Dyke which shows St. Ambrose blocking the entrance to the Cathedral of Milan to the Emperor Theodosius. Ambrose did this because Theodosius had been involved in the massacre of many innocents in Thessalonica in the eastern Mediterranean and St. Ambrose considered this to be a sin that the Emperor had not repented of. This was around the late fourth century. The scene of the painting is not the great Duomo of Milan that you see now. It was a forerunner cathedral and St. Ambrose, of course, was the Archbishop of Milan and the man who converted St. Augustine to Christianity. The painting 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 Church doing preventing me from entering a building of my empire?” But, the Emperor is not permitted to come into the building. Now 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 a thought that you have any right as Emperor over sacred things. It is written: God’s to God, Caesar’s to Caesar. The palace is the Emperor’s. The churches are the Bishop’s.12

That statement, by the way, comes from the New Testament: “Render unto Caesar what is Caesar’s and unto God what is God.” Lord Acton, earlier in his career, had identified that, in his view, as the origin of the idea of liberty. That is, there’s a realm that is not the state’s. Division now exists 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.

Now, as a matter of fact, Ambrose, was, as I mentioned, responsible for the conversion of St. Augustine. With St. Augustine we have an interesting development in his work on the City of God. This has been called the desacralization of the state. In the Roman Empire, Roma was a god with the particular sacrifices and religious obligations due to this god, representing the Roman state. Among the sacrifices—very stark kinds of sacrifices—were the ones that you would see in the Colosseum, sacrifices of Rome’s enemies in ways that are not even shown on Fox TV today. But, what Augustine said was that this is Rome—“Rome Schmome,”—and that this is the city of man. In contrast to the city of man, what is important is the city of God. As our eventual and permanent habitation, the city of God is infinitely more important than the city of man, thus desacralizing the state, which had been considered godlike by the Romans.

The Conflict Between Church and State

Now, much could be said about this adversarial position and hostile interaction between the state and the Catholic Church in the Middle Ages. One important thing to keep in mind is that this did not hold for Christianity in general. In Byzantine Christianity, for instance, the state prevailed with what was called caesaropapism. That is the situation where the Church was pretty much under the thumb of the emperor.

This was characteristic of Greek Christianity and this is the kind of Christianity that the Russians inherited. So, under the Russian rulers and “tsars”—they took that title—they were effectively in charge of the Church. It was a different kind of situation from Europe, and again we come across this idea of decentralization and division of power that was important because of the different small decentralized polities.

Also important was the big division between the state and the Church whereas in other civilizations, the ruler himself was a god. We might point to the Roman Emperor, or Pharoah, or the Emperor of Japan—who was a direct descendant of the goddess of the sun—or the Emperor of China. It was quite different in the West. And we can see this in a number of different ways and the role of the Church.

These medieval limitations on the state are generally ignored today, and it is almost literally impossible for me to convince my students that the Middle Ages were not “the Dark Ages.” This Dark Ages myth is maybe the biggest—or one of the biggest, next to the myth of the Industrial Revolution—historical frauds perpetrated by Renaissance humanists and French philosophes.

One thing in particular I tell my students is that in the High Middle Ages, as 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. The ruler himself had to obey the law. Jacob Viner, the great economic historian and scholar at the University of Chicago, 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 which is as likely as not to be morally illicit.13  Viner points to a medieval papal bull, republished every year into the late eighteenth century, which threatened to excommunicate any ruler “who levied new taxes or increased old ones except for cases supported by law or in express permission from the Pope.”14  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 countervailing power for the state in the West that did not exist in other civilizations. Nonetheless, we find Thomas Aquinas himself talking about taxation as probably illicit.15  Similarly, this papal bull is saying that taxes would be illicit and not permitted except with papal control.

Magna Carta and Democracy of the Taxpayers

There is 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. I 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:16

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 their power of the purse, [the Parliaments] often influenced the ruler’s policy, policies especially restraining them from military adventures.17

Now all of that is important. 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. That’s very different from the modern situation where you have mass electoral democracy. Now, the income tax is being given back to people paying low taxes, so it’s a smaller and smaller part of the population that pays 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. But, 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 the Italian city-states, this is 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 the rulers’ power. Most famous is the Magna Carta in English history. The barons of England, the lords, spiritual and temporal, forced bad King John to sign 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. Nonetheless, what’s being established comes through.

Here’s one chapter: “No scutage nor aid,” —basically, taxes—“shall be imposed on our kingdom unless by common counsel of our kingdom…” Already now we have the beginning of the right of representative assembly to okaying taxes, “except for ransoming our person, for 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 that has to be common counsel involved. Another: “No constable or other bailiff of ours shall take corn…”— corn in the British sense, that is, your grain—“or other provisions from anyone without immediately tendering money therefore, unless he can have postponement thereof by permission of the seller.” Hence if we send the soldiers out among the peasants and take their harvest away, we can’t act like the Bolsheviks in the Ukraine.18  

Here’s another one: “No sheriff or bailiff of ours or other person shall take the horses or carts of any freeman for transport duty against the will of the said freeman.” Horses or carts are essential in an agricultural society, but the king’s men can’t just go and take them because the king needs them. The rulers 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 or send upon him except by the lawful judgment of his peers and the law of the land.” That is, the rule of law and trial by jury. Another item: “All the merchants shall have safe and secure exit from England and 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, the commercial freedom, even for enemy and aliens. Finally, 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 of 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 a meadow which is called Runnymede, between (the rivers) Windsor and Staines on the fifteenth day of June, in the seventeenth year of our reign,” the year of our Lord 1215. 

A committee is set up of the barons to enforce this to make sure that bad King John does what he promises to do and 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—take Peter Bauer, for instance, who is a Budapest Jew—adhere to.19

Contrasting East and West

Now, 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 thirteenth century, the German Emperor Frederick II, Hohenstaufen, who has been called by some the first totalitarian ruler, tried as much as he could to establish totalitarian control. He was a holy Roman Emperor and ruler of Germany, but he made his court in the south of Europe. He prohibited the inhabitants of Sicily or Naples from going to other places to study at the university. To keep control, he established the 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,” he meant anywhere in the East, where, he says, “rulers need not fear the weapons of their subjects and the machinations of priests.”20  

He’s putting together two very interesting elements: the right to keep and bear arms, which the Europeans had, but which the elite Romans had abandoned. The Germanic people made the right to bear arms into a sign of a free man from the early years, in fact, while they were still barbarians on the other side of the Rhine. At the time, they would get together in council, and if something was being suggested by the chieftain, the freemen would signal their agreement by clashing their arms together, their weapons together. That became, among the Anglo-Saxons, a settled individual right, as I’ll probably mention in some other lecture. So, what Frederick II hated was the fact that his subjects seemed to have weapons all around the place, and also Frederick II was worried about the machinations of priests, trying to subvert the ruler at all times.

Now, we can go on to the seventeenth century. There was a famous Frenchman named Francois Bernier, who visited many different places. He was trained as a physician at the famous medical school in Montpellier, in the South of France. So, as a physician, he went to many different places and he was even down in Ethiopia, Persia, but especially in India, and wrote about his experiences there. As he returned 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 Bernier says: 

[because of the] cupidity of a [neighboring] 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.21

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? The Dutch did not hide their wealth, as we’ll see. They put their wealth into their herring boats that traveled throughout the North Sea and into the Baltic Sea. This was 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 the reason, confirmed by historians, because there was no rule of law protecting private property. With property accumulated to a certain degree, the tyrant, the soldiers who has the guns or swords, simply went and confiscated it. This is Bernier:

[The nations of Asia] have no idea of the principle of meum et tuum [mine and thine], relatively 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 … have to suffer tyranny, ruin and misery.”22

There is much more along the same lines in 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, Jean-Baptiste Colbert. In the history of European economic development, Colbert is known as kind of the ideal type of the mercantilist minister. You follow what I’m saying? My point is that even in regard to a minister who’s not a 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 is really a government interventionist and a prime mercantilist, but nonetheless, even under mercantilism, the Europeans had this regard for private property, the sanctity of contracts and so on, that allowed them to develop in contrast to the East.

Baechler says when you want to talk about China, “[e]ach time China was politically divided, capitalism flourished.”23  Now in regard to Japan, there’s a very interesting situation. The stereotype has it that the Japanese were hopelessly backwards and 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, two centuries or so, called the Tokugawa period, Japan flourished economically and this has been investigated by economic historians who have come to the conclusion that the Japanese situation in some ways resembled Europe 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 the defined rights including rights to water. You had defined rights of individuals in their own labor. So, in other words, you had kind of an institutional infrastructure in Japan in a way similar to the one that existed in Europe.

Now, when we talk about Russia, you have a different situation, unfortunately. This is not to say anything against the great Russian people. Everybody, in a way, is a victim of the history of the society he’s 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 the eighteenth century with Catherine the Great who was converted to free trade for a while.

Another was Peter the Great, for instance, around the year 1700, who wanted to modernize Russia. (Every once in a while, a ruler comes along and says, “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 took a famous trip to Europe. It’s a very interesting story if you look it up sometime about Peter the Great, and sometimes he’s disguised as an ordinary seaman, but he was stunned by what he found in Europe. (The present Russian flag, by the way, has the same colors as the Dutch flag, introduced by Peter the Great.) He saw that Europe had entrepreneurs and capitalists and development of modern industry, and had a high standard of living compared to the Russian masses. So, he decided to do the same thing in Russia and he began with a draft—conscription of entrepreneurs to put them in charge of new factories, of mines. What he didn’t begin with was a definition of property rights, which by that time had been well established in Europe. This is a problem through Russian history.

What’s going to happen to the Russians is impossible to say. Russia is a case history of a society that deviated from Europe that we can talk about. Spain would be another example.

The Dutch Model of Secession, Commercial Freedom, and Religious Tolerance

We can take a positive example and positive model of European development, and that is the Dutch experiment. The Low Countries—that is, today, the Netherlands and Belgium—had long benefitted from the legal system inherited from the Dukes of Burgundy who had ruled the area. These were rulers who governed in collaboration with the States General. The States General is a meeting of representatives of all of the estates, or in other words, legal categories of noble, commoner, and sometimes clergy. The Dukes of Burgundy and the acts of the States General promoted open commercial and industrial system based on the protection of property rights. Naturally enough, the States General was 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. By the time the Reformation came along in the sixteenth century, they were about as developed as the city-states of northern Italy, which were the most developed parts of Europe.

And 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 in salt, packed them in boxes, ready for delivery as soon as they got back home to Antwerp or Amsterdam. That is, at the end of the Middle Ages, an enormous capital investment. Now, what happened at a certain point is that the Hapsburgs, when the Reformation came along, decided to deal with their recalcitrant subjects, mainly in what is today the Netherlands, who had the nerve to become Calvinists. Maybe even worse was that they had the nerve not to pay the new taxes that the Spanish monarchy required because of its imperialist plans and ambitions.24  The Spanish Netherlands 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.

This led to the revolt of the Dutch, the first war of national liberation in modern history. The Revolt of the Dutch was a crucial, pivotal event in European 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. And after a very long struggle of decades, the Dutch finally did. What they set up became a model for Europe for decades, and was the first European economic miracle or “Wirstschaftswunder.”25

There was no king, there was no court. There was a united diet for all of the provinces, but 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. In other words, it was all highly decentralized. And it was basically ruled by mercantile elite, the burghers of Amsterdam, and so on, and the other towns. 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 country is sometimes called that. On the other hand, the poor were much better off than the poor virtually anywhere else in Europe.

Now, 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, particularly 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 and that was the reason, eventually, why Philip II sent the Armada against the English. Not only were they Protestant, but they had given aid to the Dutch rebels. And now the new Dutch Republic is 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.

The Dutch printers were willing to print virtually anything, including what was in those days 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. They didn’t care what language. They’ll publish it in French and then it could be smuggled into France. So Holland became a model that was recognized by everyone. Here is an American historian 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, politics. In the eyes of contemporaries, it was this combination of freedom and economic predominance that constituted the true miracle of the Dutch Republic.26

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. They welcomed the Iberian Jews, the Portuguese and Spanish Jews who had been thrown out and therefore set up important Jewish communities in Antwerp, or most famously Amsterdam. And this is what one Amsterdam Jew named [Baruch] Spinoza wrote:

The city of Amsterdam reaps the fruit of this freedom and its own great prosperity and the admiration of all other people. For 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.27

In other words, this is a case of commerce producing tolerance, producing harmony, producing a willingness to interact, of course, for the 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.28  I 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. It lasted to around the time of Anne Frank when it was put a violent end to.

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 had to leave England because of possible political persecution, and spent time among the Dutch, and learned a good deal from them.

• 1

  Paula Reid “History prof Alan Charles Kors critiques universities’ political correctness,” The Daily Pennsylvanian, March 24, 2009, https://www.thedp.com/article/2009/03/history_prof_alan_charles_kors_critiques_universities_political_correctness. 

• 2

  See E.L. Jones, The European Miracle:Environments, Economies and Geopolitics in the History of Europe and Asia (Cambridge: Cambridge University Press, 2003), p. 118.

• 3

  Ludwig von Mises, Money, Method, and the Market Process (Norwell, MA: Luwer Academic Publishers, 1990), p. 311.

• 4

  Jean Baechler, The Origins of Capitalism (Oxford: Basil Blackwell, 1975), pp. 77, 113.

• 5

  Douglass C. North, “The Rise of the Western World,” in Political Competition, Innovation and Growth: A Historical Analysis (Heidelberg: Springer-Verlag Berlin, 1998), p. 22.

• 6

  David Landes, The Unbound Prometheus: Technological Change and Industrial Development in Western Europe from 1750 to the Present (Cambridge: Cambridge University Press, 1969), p. 15.

• 7

  Ibid.

• 8

  Peter T. Bauer, From Subsistence to Exchange and Other Essays (Princeton, NJ: Princeton University Press, 2000).

• 9

  Paul Kennedy, The Rise and Fall of the Great Powers: Economic Change and Military Conflict from 1500 to 2000 (New York: Vintage, 1987). 

• 10

  William H. McNeill, The Pursuit of Power: Technology, Armed Forces and Society Since A.D. 1000 (Chicago: University of Chicago Press, 1982).

• 11

  Peter T. Bauer, Dissent on Development (Cambridge, MA: Harvard University Press, 1976), pp. 277, 299-302. Bauer in several examples notes that disparities in economic development between western Europe and other regions begin in the Middle Ages. This acceleration of economic development in medieval Europe that provides insight into modern economies and Bauer concludes “a working knowledge of European and Mediterranean economic history since the Middle Ages is helpful to the understanding of social and economic transformation in many parts of the contemporary world.” (p. 277).

• 12

  Ambrose of Milan, Letter XX AD 385, section 19. The original text reads in English: “At length came the command, ‘Deliver up the Basilica;’ I reply, ‘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. Exalt not yourself, but if you would reign the longer, be subject to God. It is written, ‘God’s to God and Caesar’s to Caesar.’ The palace is the Emperor’s, the Churches are the Bishop’s. To you is committed jurisdiction over public not over sacred buildings.’ Again the Emperor is said to have issued his command, ‘ I also ought to have one Basilica;’ I answered ‘It is not lawful for thee to have her. What hast thou to do with an adulteress who is not bound with Christ in lawful wedlock?’”  Retrieved December 12, 2022 https://www.tertullian.org/fathers/ambrose_letters_02_letters11_20.htm#113.

• 13

  Jacob Viner, Religious Thought and Economic Society, eds. Jacque Melitz and Donald Winch (Durham, NC: Duke University Press, 1978), p. 105. 

• 14In Coena Domini, Article 5: “All who shall establish in their lands new taxes, or shall take it upon them to increase those already exiting, except in cases provided for by the last in the event of obtaining the express permission of the Holy See.” A recurrent papal bull between 1363 and 1770, first written by Urban V and modified by later popes until Pope Urban VIII. 
• 15

  In a manner similar to Viner, theologian Ronald H. Preston concludes “Aquinas treats taxation as an extraordinary act of a ruler and quite likely to be morally illicit; the presumption is that taxation is not a routine measure, and one legitimate only as a last resort…” Ronald H. Preston, Religion and the Ambiguities of Capitalism (Cleveland, OH: Pilgrim Press, 1993), p. 147.

• 16

  See H.G. Koenigsberger, “Parliaments and Estates” in The Origins of Modern Freedom in the West, ed. R.W. Davis (Stanford, CA: Stanford University Press, 1995), pp. 135-177.

• 17

  A.R. Myers, “The Parliaments of Europe and the Age of the Estates,” History 60, No. 198 (1975), p. 18.  Raico here incorrectly attributes this to Koenigsberger. 

• 18

  Raico notes in a Q&A period of the lecture that peasant uprisings did occur in Russia, but these revolts were not founded in appeals to political rights and privileges as occurred in the West: “There were peasant uprisings in every society, in Russia famously a number of times in the seventeenth- and eighteenth-century; in China, a mass peasant uprising in the nineteenth century. [These are] peasants who are at the mercy of rulers and soldiers from the metropolis and are forced to give up their surplus product to keep the cities in existence. … [W]hat the peasants objected to was specific taxes or confiscation or an unusual amount of financial oppression. [T]hey never, as far as I know, until the rise of liberalism, began to generalize this as a social doctrine. … Wat Tyler’s rebellion in England was an exception, but generally, what they objected to was specific oppressions” rather than a “general ideology” protecting property rights. 

• 19

  See P.T. Bauer, “Economic History as Theory.” Economica, new series 38, no. 150 (May 1971): 163–79.

• 20

  See Jean-Louis-Alphonse Huillard, Diplomatica Friderici Secundi, Volume VI (Paris: Henricus Plon, 1861), p. 686. The original passage reads: “O felix Asia, o felices orientalium potestates que subditorum arma non metuunt et adinventiones pontificum non verentur!” [”O happy Asia, O happy eastern powers that do not fear the arms of their subjects and do not fear the scheming of the pontiffs!”]

• 21

  Quoted in George Howells, The Soul of India: An Introduction to the Study of Hinduism, in Its Historical Setting and Development, and in Its Internal and Historical Relations to Christianity. (London: James Clarke & Co., 1913), pp. 215-216. Taking a more full selection of the passage:  “This debasing state of slavery obstructs the progress of trade, and influences the manner and mode of life of every individual. There can be little encouragement to engage in commercial pursuits when the success with which they may be attended, instead of adding to the enjoyment of life, provokes the cupidity of a neighboring tyrant, possessing both power and inclination to deprive a man of the fruits of his industry. When wealth is acquired, as must sometimes be the case, the possessor, so far from living with increased comfort and assuming an air of independence, studies the means by which he may appear indigent; his dress, lodging, and furniture continue to be mean, and his is careful above all things never to indulge in the pleasures of the table. In the meantime, his gold and silver remain buried at a great depth in the ground. A few individuals alone, who derive their money form the kind, or from the omrahs, or who are protected by a powerful patron, are at no pains to counterfeit poverty, but partake of the comforts and luxuries of life … The peasant cannot avoid asking himself the question, ‘Why should I toil for a tyrant who may come tomorrow and lay his rapacious hands upon all I possess and value without leaving me, if such should be his humour, the means to drag on my miserable existence?’ Nothing but sheer necessity of the blows from a cudgel keeps the artisan employed.”

• 22

  Francois Bernier, Travels in the Mogul Empire, A.D. 1656-1668 (London: Oxford University Press, 1916), p. 232.

• 23

  Jean Baechler, The Origins of Capitalism, trans. Barry Cooper (Oxford: Basil Blackwell, 1975), pp. 82-86. Baechler specifically writes: “Each time China was politically divided, capitalism flourished. The fact is very clear for … the end of the T’ang and especially the Song period … The same evolution may be found in the more distant past: the so-called period of the Warring Kingdoms (453-221 B.C.), probably the richest and most brilliant of all Chinese history, the period of the Three Kingdoms (A.D. 220-280) and finally the period of the Six Dynasties (A.D. 316-580.” (p. 82).

• 24Raico explains in an aside he makes a distinction between the Spanish Habsburgs and the Austrian Habsburgs, noting he has “great respect” for “the later Habsburgs of Austria-Hungary,” while the Spanish Habsburgs were significantly less praiseworthy.
• 25

  Raico is here comparing the Dutch economic comeback to the more famous German Wirtschaftswunder in the wake of the Second World War. 

• 26

  Koenraad Wolter Stewart, “The Miracle of the Dutch Republic in the Seventeenth Century,” inaugural lecture, November 6, 1967, transcript, University College London, 1969. Retrieved online, June 1, 2023: http://www.dianamuirappelbaum.com/?p=583#.ZEb-DHbMJD9.

• 27

  Quoted in Lewis Samuel Feuer, Imperialism and the Anti-Imperialist Mind (New Brunswick, NJ, Transaction Publishers, 1989), p. 65.

• 28

  In a sarcastic aside, Raico adds: “Incidentally, just a sideline, as you know, capitalism destroys culture. 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.” He continues unironically: “The artists used to create their paintings and have them sold in the grocery store next to the barrel of salted herring. It was a very bourgeois society. Jean Jacques Rousseau ... hated the Dutch. He said if you go to Amsterdam and ask somebody the time, they try to charge you for it, which I don’t see anything wrong with, frankly.”