“Sapiens: A Brief History of Humankind” by Yuval Harari

In the book “Sapiens: A Brief History of Humankind” written by Yuval Harari, Harari takes us through the various revolutions that humans have undergone, right from their days as hunters to the present day. Harari also goes deep into the topic of capitalism, an economic-led system based on private ownership of the means of production and their operation for profit”, in one of the chapters. He says that capitalism now has turned into a sort of religion; he defines capitalism as “a system of human norms and values that is founded on belief in a superhuman order”.

In the Chapter “The Capitalist Creed” Harari says that for most of history, the economy has stayed much the same size. But things have changed drastically in the modern age. In 1500, global production of goods and services was equal to about $250 billion but today it is around $60 trillion. In 1500, the annual per capita production averaged $550, but today it is around $8,800 a year. So what has happened that the world witnessed such massive growth?

In the chapter, Harari goes on to provide several reasons (with examples) for this stupendous growth, such as the economics involved in running a bakery business. The main point is that in the modern era, it is common for banks to lend several times the money that they are actually holding in the bank, and this is one of the reasons that economy has grown so huge, compared to how it was several centuries back.

So, why did people back in earlier times did not do this? Harari says that back then, people really didn’t believe that the future would be a lot better than how it was at the present. And so, it was not very easy to get credit. If at all someone made money, the general belief was that it was at the expense of someone else, and that is why, in the past, it was considered bad to make money.

However, things started changing from the scientific revolution onwards, as more people started believing that the future could look better than the past. In the modern era, people completely trust that the future would be better, that the ‘pie’ would be much larger, and almost all the economic activities in the modern era is based on this trust. As a result, it’s easy to get credit in the modern world, and as a result growth is faster. People are made to believe in a ‘win-win situation’ where everybody (who doesn’t hoard onto money and invests the money into something) can profit and enjoy a bigger slice of the pie at the same time. So, today, the it’s important for people to reinvest, and that is what capitalism is all about. Capitalism distinguishes ‘capital’ from ‘wealth’.

Capital consists of money, goods and resources that are invested in production. Wealth, on the other hand, is seen as something that gets wasted on unproductive activities. Harari says that “a pharaoh who pours resources into a non-productive pyramid is not a capitalist. A pirate who loots a Spanish treasure fleet and buries a chest full of glittering coins on the beach of some Caribbean island is not a capitalist. But a hard-working factory hand who reinvests part of his income in the stock market is.”

In his book “Enlightenment Now,” Steven Pinker touches upon several things that have contributed to the progress of humans, with the main themes being reason, science and humanism. Even Pinker points to the rapid economic growth in modern times and attributes the reason for this massive growth to developments in science. Pinker says we have created open economies by having adequate laws, property rights, and enforceable contracts, and giving more importance to merchants and inventors and not just to soldiers, priests, and courtiers. Pinker says that the Western countries were among the first to show rapid growth, beginning in the 18th century (known as the Great Escape). The Great Escape was followed in the 20th century by the Great Convergence, where the rest of the world – the poor countries around the world – is now trying to catch up and close the gap with the west.

So, coming to the question “is greed good?”, I would say that I agree more with what Schumacher says in his book “Small is beautiful”. Schumacher says that the modern world suffers from bigness and excessiveness. There is greed and envy to produce and consume more, and it just doesn’t seem to stop. Schumacher says that this however leads to moral emptiness where we focus upon “things” we have, and not on the “life” we have. The inequality that results in the society because of this approach is not only unfair, it is also not unsustainable. He suggests that a better approach is to have a “smaller” focus in life, where we value human spirit above human possessions, referred to as Buddhist economics. And this can be achieved by focusing more on “Think global; act local.” And on this topic of greed, I totally agree to Schumacher’s viewpoint.

 

“[G]reed is good…Greed works. Greed clarifies, cuts through and captures the essence of the evolutionary spirit.” – Gordon Gecko in Wall Street (1987).

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” – Adam Smith, Wealth of Nations

Key Readings:

Harari, Y. 2014. “Chapter 16: The Capitalist Creed,” in Sapiens: A Brief History of Humankind, 341 – 373.

Pinker, S. 2018. “Chapter 8: Wealth,” in Enlightenment Now: The Case for Reason, Science, Humanism, and Progress, 65 – 76.

Schumacher, E.F. 1973. “Chapter 3: The Role of Economics” and “Chapter 4: Buddhist Economics,” in Small is Beautiful: A Study of Economics as if People Mattered, 26 – 46.