Landholder vs stockholder |
Listen to this essay
Describing the political map in terms of Left and Right is an accepted convention all over the world, almost to the point of cliché. Yet it is surprisingly complicated to explain whose interests lie on each side of this spectrum. For example, if the Left supports the interests of workers over the interests of employers, why are Left-leaning regions of the United States and elsewhere in the world among the richest? When Japan and South Korea sought to become economic powerhouses in the later 20th century, they adopted Leftist policies such as strong public education, universal healthcare and increased gender equality – if countries seeking to compete in capitalist arenas adopt broadly Leftist policies, then how do we explain why Leftists are always talking about overthrowing capitalism? And if the Left is somehow both the party of workers’ rights and the party of material wealth, then whose interests are supported by the Right? Given such contradictions, how did these terms become so central to modern politics?
The terms ‘left’ and ‘right’ come from the seating arrangements in the National Assembly during the French Revolution, where the combatants used the medieval estate groupings to define their battle lines. According to their writings, land-owning aristocrats (the Second Estate) were the party of the Right, while the interests of nearly everyone else (the Third Estate) belonged to the Left. This Third Estate included peasants working for the landowners but also every other kind of business owner and worker. Decades later, Karl Marx offered a different analysis of capitalism: he put owners of both land and businesses together on one side (the bourgeoisie), while grouping workers from fields and factories on the other side (the proletariat) in a single, world-wide class struggle. The trouble with both these ways of parsing Left and Right is that voting patterns never seem to line up with class. Both historic analyses leave us with questions about the contemporary world – and not just the paradox of why so many Left-leaning places are so rich. Why, for example, do working-class conservatives appear to vote against their material interests, year in and year out, across generations?
David Hume (1754) by Allan Ramsay. Courtesy the National Galleries of Scotland
The 18th-century philosopher and political theorist David Hume had answers to these questions, though he was writing decades before the French Revolution. While his essay ‘Of Public Credit’ (1752) was a warning about the dangers of Britain’s increasing reliance on debt financing, his apocalyptic vision of the future turned out to describe some features of our current political map surprisingly well. Hume was writing because he believed that debt financing had the power to upend Europe’s traditional power structure and culture by creating a new source of money divorced from tradition or responsibility: stocks and bonds. Unlike land, anyone with some cash could buy war bonds and get an immediate passive income in the form of interest. This was the thin end of the wedge caused by the debt financing that Hume believed was destroying every part of society. The governments of antiquity, Hume argued, saved money to use in battle and then waged wars in self-defence, or else to expand their territory. But the British had invented a new form of warfare that Hume saw no precedent for, even in the merchant states of Nicollò Machiavelli’s Italy: war for trade, funded with money borrowed from private stockholders.
Hume acknowledged the potential for riches in securing trade routes overseas, but the debts worried him. Of the many downsides to the practice of borrowing money in pursuit of empire, possibly the most interesting is that Hume foresaw what the historian Richard Whatmore in The End of Enlightenment (2023) describes as ‘an addiction to the idea of liberty among the populace and politicians’. Once Hume realised the connection between liberty and debt financing, he lost his taste for the philosophical concept entirely.
The connection between liberty and debt financing isn’t obvious at first – it could easily seem like a coincidence that the concept of liberty became so popular among Enlightenment thinkers during the same period that their governments began habitually borrowing money. To see the connection as Hume saw it, we need to understand the contrast between these new economic practices and what had come before.
Through the centuries leading up to Hume’s time, the majority of British people undertook the same kinds of work as their parents, and the primary source of wealth was land. Most landowners had inherited the land from their fathers, passing down responsibility and identity through the generations. Other classes had similarly unchanging patterns of life; peasants and tradespeople lived as their parents had lived, or with slight variations depending on the education or marriages that parents were able to secure for their children. There was little social mobility, and most forms of wealth were concentrated in the oldest generation of each family, giving them power over younger generations. Hume pointed out that the occasional merchant might get rich enough to buy land, but the necessity of caring for the land and its inhabitants would soon transform even a risk-loving merchant into the same boring, responsible personality as his land-holding neighbours. All of British society was structured around landholding, and the shapes of life and character that were most compatible with it.
A View of the Old Bank of England, London (c1800) by Thomas Hosmer Shepherd. Courtesy the Bank of England Museum
Hume viewed the sale of government debt to private citizens in the form of bonds as a profound threat to this social structure, because the passive income it generated them offered a means of opting out of social responsibility. Young aristocrats who didn’t want to wait to inherit, and anyone else who wanted to live differently from their parents – for the first time, these people had access to another source of income, disconnected from tradition, lineage or obligation. For Hume, this threatened to spell the end of ‘all ideas of nobility, gentry, and family’. The change was not just political, it would be felt in personal relationships at every scale: every tie that composed a stable society was at risk.
Hume clearly described certain dynamics that still drive global politics to this day
While Hume was aware of the commercial stock market growing up alongside the government debt market, he was more concerned with government debt because the interest that accrued on government bonds came from taxes. Effectively, taxpayers all over the country were paying the interest going into the pockets of these stockholders, who could then enjoy themselves living in London or any other great city in the world without concern for anyone’s needs but their own. There was nothing to prevent a British stockholder from deciding his money would be better invested in the French government, say, even if the two countries were at war. Everything that tied a landholder to a particular place and a lifelong role in their community was reversed among stockholders, who could increase their profits by buying and selling rapidly and investing internationally.
Hume was not the only person to notice the vertiginous rise in public debt and its potential to disrupt social order – just over 40 years earlier, Jonathan Swift, writing about the new system of public finance in The Examiner, said that ‘power, which … was used to follow land, is now gone over to money’. Yet Hume’s fears for the future of Britain are especially interesting in our current times because of how clearly he described certain dynamics that still drive global politics to this day. Hume identified three threats that seem particularly prescient, and were also tied to the growing mania for liberty. First, there was the disconnection between money and traditional responsibilities, whereby older generations would lose their power over younger ones, and individualism would prosper over generational fealty. Second, while the economy of London might not suffer, rural populations would get no benefit from the taxes they paid into these interest payments. The wealth of landholders had always been tied up with the wellbeing of rural people, but that wasn’t so with stockholders who could spend their money as they pleased. The interest involved was........