WEBVTT 00:14.347 --> 00:17.373 -I believe that open markets and free enterprise are the best 00:17.517 --> 00:22.114 imaginable force for improving human wealth and happiness. 00:22.255 --> 00:23.814 -(Protesters): Who protects the bankers? 00:23.957 --> 00:25.516 Police protect the bankers! 00:31.031 --> 00:34.763 -Did you ever have a moment of doubt about capitalism? 00:34.901 --> 00:37.893 -Is there some society you know that doesn't run on greed? 00:38.038 --> 00:42.407 -How would Smith see the economic world around us? 00:42.542 --> 00:44.408 -I think Keynes would have said the problem is the hole 00:44.544 --> 00:46.069 in the economy. 00:46.212 --> 00:48.044 -Hayek really wrote "The Road to Serfdom" 00:48.181 --> 00:49.580 asawarning. -You always have to be careful 00:49.716 --> 00:51.582 with Marx about the one-liners. 00:51.718 --> 00:55.279 -Polanyi, for me, was an intellectual earthquake. 00:55.422 --> 00:58.255 -I mean, if I had to stereotype Ricardo, I would say he would 00:58.391 --> 00:59.916 look like George Soros. 01:10.170 --> 01:12.867 ~(Narrator): We were told that capitalism is the product 01:13.006 --> 01:18.410 of big thinkers and big ideas, but is it true? How did ideas 01:18.545 --> 01:22.539 shape our lives? What is their relation to reality? 01:22.682 --> 01:25.879 Can they help us understand today's economic crisis, 01:26.019 --> 01:28.886 let alone the future of capitalism? 01:50.376 --> 01:52.572 -Chinese students visit the grave of Adam Smith, 01:52.712 --> 01:57.240 the 18th century Scottish philosopher. 01:57.383 --> 02:03.516 -Adam Smith is very honoured and he wrote a very famous book. 02:03.656 --> 02:06.523 I do not know what it is in English. In China, we call it 02:06.659 --> 02:09.685 "Go Full Loon" and most of us know it. 02:11.698 --> 02:14.861 -I root for the free market team, Adam Smith is 02:15.001 --> 02:18.198 my star player. -Backin 1776, economist 02:18.338 --> 02:21.205 Adam Smith shocked everyone by saying that what governments 02:21.341 --> 02:24.208 should actually do is just leave people alone to buy and sell 02:24.344 --> 02:26.005 freely among themselves. 02:26.146 --> 02:29.912 -It's as persuasive now as it was then. 02:30.049 --> 02:32.211 -Everybody here knows Adam Smith, "the self-interest', 02:32.352 --> 02:35.720 "greed is good', "the invisible hand", "the free market', 02:35.855 --> 02:37.550 "the free enterprise', etc. And all that, he's the father 02:37.690 --> 02:39.556 of capitalism. 02:43.530 --> 02:46.227 -But is he? For many, the philosopher and his book are 02:46.366 --> 02:48.733 linked to the birth of capitalism. 02:52.705 --> 02:55.902 History however suggests that capitalism was born hundreds 02:56.042 --> 02:59.410 of years before him. And so our story begins not with 02:59.546 --> 03:02.015 the man, but with the world that gave birth to him. 03:16.496 --> 03:20.694 -Now Smith himself was brought up in an interesting port 03:20.833 --> 03:22.699 on the east coast of Scotland. 03:30.343 --> 03:32.539 The society he lived in was going through an absolutely 03:32.679 --> 03:35.876 profound revolution inits public life. 03:43.356 --> 03:47.554 The glorious revolution in Britain had brought about 03:47.694 --> 03:50.220 a religious revolution in Scotland and then, a few 03:50.363 --> 03:55.233 years later, Scotland is united to England by the Act of Union 03:55.368 --> 04:00.465 of 1707, which is still in force. And that again brings 04:00.607 --> 04:03.008 about a political revolution. 04:08.815 --> 04:12.012 The point about this revolution in public life in Scotland, 04:12.151 --> 04:16.520 as far as Smith is concerned, is that he puts a great onus 04:16.656 --> 04:21.457 on the Scottish middling ranks. And the duty of this class is 04:21.594 --> 04:26.191 to seek the improvement of public life, the improvement 04:26.332 --> 04:29.358 of Scottish institutions, the improvement of Scottish 04:29.502 --> 04:33.029 religion, the improvement above all of the Scottish economy. 04:40.179 --> 04:44.548 When Smith moved from Kirkcaldy from this house in 1778, 04:44.684 --> 04:49.053 he moved with his mother who was by that stage a very frail 04:49.188 --> 04:51.748 old lady. 04:51.891 --> 04:55.054 When Smith lived in Kirkcaldy, he was used to be able and look 04:55.194 --> 05:00.223 out onto vast expanses of beach, of sea. Here, he's overlooking 05:00.433 --> 05:03.334 gardens, overlooking the Canongate Church, 05:03.469 --> 05:07.167 which is where he and his mother worshiped at. 05:07.307 --> 05:11.175 It's interesting because from one of these windows, 05:11.311 --> 05:16.681 Smith was able to look out over the monument to his old 05:16.816 --> 05:21.686 and very best friend and partner, David Hume. 05:24.657 --> 05:28.525 Hume and Smith's philosophical partnership was one of the great 05:28.661 --> 05:32.894 formative influences on shaping the Scottish enlightenment. 05:33.032 --> 05:38.198 Hume and Smith, two men who were like peas in a pod 05:38.338 --> 05:42.866 intellectually, both had the ambition to try and develop 05:43.009 --> 05:48.880 a philosophy, a science even that would explain 05:49.015 --> 05:50.881 the principles of human behaviour, explain 05:51.017 --> 05:53.714 the principles of social organization and historical 05:53.853 --> 05:57.721 change without any reference whatsoever to religion. 06:02.462 --> 06:05.488 -In the beginning... 06:05.631 --> 06:12.003 there was empty space. And in this empty space, 06:12.138 --> 06:17.167 there emerged a primordial fire ball. Billions of years ago, 06:17.310 --> 06:19.836 this fireball exploded. 06:29.655 --> 06:32.181 -Adam Smith, like other philosophers of his time was 06:32.325 --> 06:35.522 searching for laws that could explain human development, 06:35.661 --> 06:39.359 a science of man. They were looking to nature as a source 06:39.499 --> 06:42.366 of social order. 06:44.871 --> 06:47.863 -Science was a belief system of the time. 06:52.512 --> 06:58.042 As God and theological hierarchies begin to break down, 06:58.184 --> 07:02.143 one of the things that begins to emerge is an idea that if 07:02.288 --> 07:05.815 we can no longer look at the universe as God's creation, 07:05.958 --> 07:09.986 we need to start looking atthe universe as a creation 07:10.129 --> 07:15.499 which has some kind of absolutist logic to it. 07:20.807 --> 07:23.833 Carl Linnaeus, who was a botanist, decides that he's 07:23.976 --> 07:28.846 going to take the entire natural world and define it as a system 07:28.981 --> 07:32.508 that is completely integrated and that is hierarchical. 07:32.652 --> 07:35.349 And so he starts working on this project called the Systema 07:35.488 --> 07:38.685 Naturae, the System of Nature. 07:42.662 --> 07:47.361 That's an attempt to take the natural world and to make 07:47.500 --> 07:53.530 it a logical model. His model is based on the monarchy. 07:53.673 --> 07:57.541 So he creates the animal kingdom, the plant kingdom, 07:57.677 --> 08:00.612 and he originally planned on doing the mineral kingdom. 08:06.118 --> 08:08.815 What he's doing is taking the social structure 08:08.955 --> 08:12.482 of his time and turning it into a natural hierarchy. 08:12.625 --> 08:14.992 In other words, the hierarchy is not something that has been 08:15.127 --> 08:18.825 created by the sword, but rather hierarchy and inequality 08:18.965 --> 08:21.332 is something that has been created by nature. 08:26.305 --> 08:32.301 By the 18th century, which is Adam Smith, 08:32.445 --> 08:39.181 in many ways it is already this idea that reason 08:39.318 --> 08:47.351 and science and structure are things that are the architecture 08:47.493 --> 08:49.018 of truth. 08:53.833 --> 08:57.531 -In 1763, almost 30 years after the publication of "Systema 08:57.670 --> 09:01.971 Naturae', Adam Smith arrives in Paris. He's on a quest 09:02.108 --> 09:05.134 to find the natural order of the economy, the basis for 09:05.278 --> 09:07.474 his "Wealth of Nations". 09:09.782 --> 09:14.481 -In Paris, he moves instantly to the circle of the physiocrats, 09:14.620 --> 09:18.648 the "économistes", and to Frangois Quesnay who 09:18.791 --> 09:20.486 is the leader. 10:29.128 --> 10:31.893 -Classical economics was founded by two doctors. 10:35.368 --> 10:38.394 William Petty, a surgeon in Ireland and Francois Quesnay 10:38.537 --> 10:43.407 in France, founded physiocracy. And their concept of circular 10:43.542 --> 10:46.739 flow between producers and consumers was inspired 10:46.879 --> 10:48.244 by their view of the bloodstream. 10:48.381 --> 10:51.078 They said, just as in the human body, there's a circular flow 10:51.217 --> 10:54.414 of blood to the organs, so the economy is very much 10:54.553 --> 10:57.579 like a human body, and it circulates blood 10:57.723 --> 10:59.919 from the producers to the consumers. 12:14.166 --> 12:16.692 -According to Smith, faith in the natural order of the free 12:16.836 --> 12:19.533 market could be observed here, in one of the more remote 12:19.672 --> 12:21.697 regions on earth. 12:26.345 --> 12:31.715 “What we can see in Smith's work is an exercise in putting 12:31.851 --> 12:37.881 together an absolutely enormous science of man. 12:44.697 --> 12:46.893 -He claimed that the origin of the economy is rooted 12:47.032 --> 12:50.229 in the natural human capacity for trading and bartering. 12:57.042 --> 12:58.737 In evidence, he offered the "savage tribes', 12:58.878 --> 13:01.848 as he called them of the Americas. 13:11.690 --> 13:15.524 -Adam Smith was the first person to really lay it out 13:15.661 --> 13:17.186 elaborately and explicitly. 13:21.500 --> 13:24.526 Once upon a time, when there was no money, people would have 13:24.670 --> 13:28.197 to swap things directly. I would say: "Tell you what, I'l give 13:28.340 --> 13:31.867 you 20 chickens for that cow... alright, maybe 25 chickens!' 13:38.017 --> 13:40.714 §§ When we lived in caves, there were no shopping malls § 13:40.853 --> 13:43.379 § people's manners were Neanderthal. I'll give you § 13:43.522 --> 13:47.720 § this for that, that for this, we'll make a trade called § 13:47.860 --> 13:51.888 § barter. Il give you this for that, that for this, § 13:52.031 --> 13:54.898 § we'll have it made with barter! §§ 13:55.034 --> 13:57.901 -People would negotiate and come to a deal. That's how 13:58.037 --> 14:01.735 the economy worked. Gradually that becomes inconvenient, 14:01.874 --> 14:03.342 maybe you don't want my chickens and I don't have anything else 14:03.475 --> 14:05.170 you want. So we settle on one thing that everybody's going 14:05.311 --> 14:08.178 to want, that becomes money. 14:11.817 --> 14:16.015 -It was a radical idea. For the first time, economic 14:16.155 --> 14:19.181 activity was stripped of its complex social context, 14:19.325 --> 14:22.522 psychology, cultural norms, religion and community, 14:22.661 --> 14:27.758 and studied in isolation as if in a laboratory. 14:27.900 --> 14:30.699 -It makes perfect intuitive sense, the problem is that 14:30.836 --> 14:32.361 itisn't true. 14:34.840 --> 14:37.207 No one's ever been able to find any place where that's the way 14:37.343 --> 14:39.869 ordinary transactions take place. And if you think about 14:40.012 --> 14:43.505 it, it's kind of obvious why they wouldn't, because 14:43.649 --> 14:46.209 it assumes that even in a Neolithic village, 14:46.352 --> 14:48.548 everybody is going to be dealing with each other on what 14:48.687 --> 14:50.212 economists call the "spot trade". 14:50.356 --> 14:53.053 I give you something, you give me something, we walk away. 15:07.640 --> 15:10.337 -Adam Smith's idea of bartering trade could have easily been 15:10.476 --> 15:13.343 demonstrated by the way these hunters in this isolated 15:13.479 --> 15:15.846 community barter and trade their hunt. 15:21.987 --> 15:24.183 The problem however is that they don't 15:24.323 --> 15:26.189 and they never have. 15:58.357 --> 16:01.725 Anthropologists call this system of communal sharing reciprocity. 16:01.860 --> 16:06.491 For the Maijunas, as for most indigenous tribes, it is 16:06.632 --> 16:10.660 a thing of the past. Today, no one in the village will eat 16:10.803 --> 16:14.171 these majas, they will be taken to market a few hours boat ride 16:14.306 --> 16:17.332 away and sold. 17:13.599 --> 17:16.500 -Adam Smith, you can't really blame him, he did not really 17:16.635 --> 17:20.503 have the evidence. But since then, economists have been told 17:20.639 --> 17:22.334 over and over again by anthropologists that no, 17:22.474 --> 17:24.499 people don't actually do this. 17:27.146 --> 17:29.012 We have been looking for a society like that 17:29.148 --> 17:31.845 for 200 years and they don't exist. Yet they still feel 17:31.984 --> 17:34.510 obliged to tell the same story. So clearly this story is 17:34.653 --> 17:38.521 doing something for them which has nothing to do with history 17:38.657 --> 17:40.182 or empirical reality. 17:42.661 --> 17:44.857 The Maijunas did not evolve from bartering and trading 17:44.997 --> 17:49.025 into a market economy, no matter what 18th century theory would 17:49.168 --> 17:52.695 have us believe. Rather, colonization and the market 17:52.838 --> 17:55.864 system trapped them down inthe 19th century once 17:56.008 --> 17:57.874 rubber was found in the Amazon. 18:10.489 --> 18:13.322 Many Maijunas and other tribes people were enslaved and 18:13.459 --> 18:16.258 murdered during the rubber boom that followed. 18:16.395 --> 18:21.492 Only a few fading photographs remain and the collective tribal 18:21.633 --> 18:24.159 memory of their transformation into day labourers. 18:50.662 --> 18:53.529 So, if Adam Smith's science of man cannot explain 18:53.665 --> 18:55.190 the building blocks of a market economy, 18:55.334 --> 18:58.702 how did the market evolve historically? 19:25.964 --> 19:28.990 So capitalism was not the product of ideas, but 19:29.134 --> 19:31.865 of historical processes that transformed the Maijunas, 19:32.004 --> 19:34.496 and indeed all of us into Homo Economicus. 19:39.144 --> 19:43.342 These sweeping historical changes were unleashed 19:43.482 --> 19:45.007 by a single, key event. 21:17.676 --> 21:20.043 -So the discovery of the Americas was a formative event 21:20.178 --> 21:24.206 for the scientific revolution, but what was its connection 21:24.349 --> 21:26.875 to the evolution of capitalism? 21:29.354 --> 21:32.221 The interesting thing is that our entire arguments about 21:32.357 --> 21:35.224 world history, I think, are on a false basis. We argue 21:35.360 --> 21:37.226 why is it that Europe was in a position to conquer the world 21:37.362 --> 21:39.057 and not anybody else? 21:40.866 --> 21:42.561 Well maybe that is not the right question. I mean, it's very 21:42.701 --> 21:45.068 clear that in many periods of time, China for example, could 21:45.203 --> 21:48.070 have easily done what the Conquistadors did. 23:05.650 --> 23:07.846 -But it just never occurred to them to depopulate entire 23:07.986 --> 23:10.853 continents to be able to accumulate masses 23:10.989 --> 23:13.356 of gold and silver. It would have seemed completely psychotic 23:13.492 --> 23:15.859 to most people on earth. So it's not that everybody wants to rule 23:15.994 --> 23:19.020 the world, the question is why did Europe actually end up 23:19.164 --> 23:20.689 doing it? 23:24.336 --> 23:27.533 I think the answer lies in this peculiar relationship 23:27.672 --> 23:30.698 between lenders and entrepreneurs as they call them. 23:30.842 --> 23:33.539 If you think of the Conquistadors as the archetypal 23:33.678 --> 23:35.874 entrepreneur who would risk more and more, who is always 23:36.014 --> 23:40.212 creating something out of nothing in order to make more 23:40.352 --> 23:41.877 and more money. 23:45.023 --> 23:47.720 -So, while Chinese voyages of discovery were decreed 23:47.859 --> 23:51.227 by an emperor, Western discoveries began as private 23:51.363 --> 23:55.561 initiatives, unleashing a completely different process. 25:10.876 --> 25:14.335 The conquest of Mexico in 1519 by Cortes is an example 25:14.479 --> 25:18.347 of this new link, created between geographic discoveries, 25:18.483 --> 25:20.850 colonization and money. 25:31.496 --> 25:32.930 The fascinating thing I discovered when I started 25:33.064 --> 25:36.193 looking at the actual histories of the Conquistadors is that 25:36.334 --> 25:39.201 every single one of them was in debt. Cortes basically 25:39.337 --> 25:41.704 got himself deeper and deeper into debt. He's a gambler, 25:41.840 --> 25:43.535 he said to hell with it, I'm never going to get out 25:43.675 --> 25:45.541 of debt, I'm going to borrow even more money and just gamble 25:45.677 --> 25:47.543 everything on this crazy expedition. 27:07.626 --> 27:10.652 “When asked by the envoy of Montezuma, the Maxica King, 27:10.795 --> 27:15.164 about his obsession with gold, Cortes replied: "My companions 27:15.300 --> 27:17.826 and I are suffering from adisease of the heart 27:17.969 --> 27:21.166 for which there is no cure, but gold." 27:31.983 --> 27:34.350 -As soon as he actually conquered Tenochtitlan, 27:34.486 --> 27:37.683 which took a very long time, when he divided up the spoils, 27:37.822 --> 27:40.848 he'd arrange things in such a way that none of his soldiers 27:40.992 --> 27:43.359 actually got any of the money. They ended up in debt because 27:43.495 --> 27:45.520 he charged them for the cost of medical care. He charged them 27:45.664 --> 27:47.359 the replacement of weapons. He charged them for everything. 27:47.499 --> 27:50.196 They were all in debt, they were up in arms and were going 27:50.335 --> 27:51.860 to kill him. 27:53.672 --> 27:55.697 He finally said, look ok, I tell you what, I'm not going to let 27:55.840 --> 27:57.706 you off the hook, I'll give you a ten-year moratorium. Go off 27:57.842 --> 28:00.971 to the provinces and govern those. So they became these 28:01.112 --> 28:04.480 incredibly rapacious governors who just extracted as much 28:04.616 --> 28:06.141 money as possible. 28:14.325 --> 28:17.659 Ithink that sense of outrage, of shame, humiliation, 28:17.796 --> 28:21.323 indignation, like we just fought for an entire year and somehow 28:21.466 --> 28:23.833 survived one of the greatest battles in world history, 28:23.968 --> 28:26.665 and they're still not paying me anything? They say I owe them? 28:26.805 --> 28:32.175 This is crazy. And that sense of outrage and unlimited power 28:32.310 --> 28:35.336 combined, turns them into monsters. 28:39.984 --> 28:41.679 William Shakespeare in "The Merchant of Venice", 28:41.820 --> 28:45.017 tried to humanize such lenders and the passions inflamed 28:45.156 --> 28:46.851 by money. 28:48.660 --> 28:55.191 -He has disgraced me and hindered me half a million, 28:55.333 --> 29:03.639 laughed at my losses, mocked at my gains, scorned my nation. 29:03.775 --> 29:06.801 -You never actually see the guys that Cortes or people like that 29:06.945 --> 29:09.243 owe money to, you do not really know who they were, 29:09.380 --> 29:11.815 but that relationship between the financiers who are expecting 29:11.950 --> 29:15.818 their 5% or whatever itis, 7% a year interest, 29:15.954 --> 29:22.826 and the entrepreneur as it were, the warrior who goes out there 29:22.961 --> 29:26.659 and conquers worlds, that relationship becomes 29:26.798 --> 29:31.827 the very basis of our modern economic monetary system 29:31.970 --> 29:33.836 even though we no longer think of it that way. 30:23.555 --> 30:25.819 The Spanish Conquistadors, with their voracious appetite 30:25.957 --> 30:30.895 for precious metals, found here a mountain of silver. 30:38.369 --> 30:42.567 They called it Cerro Rico, the Rich Mountain. 30:46.878 --> 30:48.744 Over the three centuries that followed, more than 30:48.880 --> 30:52.407 62 metric tons of silver was extracted from Cerro Rico, 30:52.550 --> 30:55.576 at great human cost. 30:58.056 --> 31:01.185 Thats nota good quality of silver, not like in the colonial 31:01.326 --> 31:03.351 times. 31:03.494 --> 31:05.519 -It was this silver that triggered an explosion 31:05.663 --> 31:07.529 in international trade. 31:15.340 --> 31:18.366 In China, the Latin American silver fuelled a dramatic 31:18.509 --> 31:20.534 expansion of the commercial market. 31:37.862 --> 31:41.560 -Many people now still think that China was isolated from 31:41.699 --> 31:46.227 the world before the 19th century, it's a world on its 31:46.371 --> 31:48.396 own, it's not interacting and trading. 31:51.342 --> 31:56.746 In fact now, it is quite clear that the European "great 31:56.881 --> 32:00.249 discoveries" of the Americas and things like that actually 32:00.385 --> 32:03.013 had a really very important impact on China. 32:08.826 --> 32:11.523 Before the 16th century, the Chinese economy was based 32:11.663 --> 32:14.189 on paper currency, that is the government prints some 32:14.332 --> 32:17.859 paper for people to use in transactions. Itis very 32:18.002 --> 32:21.529 unstable because the value of the currency is not based 32:21.673 --> 32:25.041 on any precious metal. So the commercial economy was 32:25.176 --> 32:28.202 not very advanced until China, the Chinese government, 32:28.346 --> 32:33.546 as an attempt to fight inflation and these economic disabilities, 32:33.685 --> 32:36.211 shifts to a silver-based economy. 32:43.695 --> 32:47.063 China at that time found a very reliable, stable and large 32:47.198 --> 32:50.224 source of silver. So the whole economy was silverized, 32:50.368 --> 32:53.736 meaning that silver became the standard currency for 32:53.871 --> 32:56.067 commercial transactions. So it laid the foundation 32:56.207 --> 32:59.905 fora rapid commercial expansion. 33:50.528 --> 33:52.895 “The market that evolved, made of small producers 33:53.031 --> 33:55.728 who interacted freely, without the need of an entrepreneur 33:55.867 --> 33:58.393 or capitalist attracted the attention of European 33:58.536 --> 34:00.732 travelers and missionaries. 34:09.814 --> 34:13.182 Their stories impressed French philosophers and physiocrats 34:13.317 --> 34:15.843 and Adam Smith. 34:25.997 --> 34:28.193 But in Britain, the global market fuelled by silver 34:28.332 --> 34:32.701 from the Americas had a completely different impact. 34:32.837 --> 34:36.535 While in China it encouraged small producers, here, 34:36.674 --> 34:39.041 it destroyed them. 34:49.687 --> 34:53.055 Simon Fairlie is an advocate for independent small farmers, 34:53.191 --> 34:57.219 which have become a rather rare breed since the 16th century. 35:00.031 --> 35:02.898 -If you're really good, you can make a minimum wage out 35:03.034 --> 35:07.665 of four cows, four dairy cows, not intensively fed, 35:07.805 --> 35:11.503 and that would require about 10 acres, something like that. 35:11.642 --> 35:14.339 I've got two cows and in order to do it full time, 35:14.479 --> 35:19.178 you'd need four, and you'd have to be good. 35:22.820 --> 35:25.016 -How independent farmers have been squeezed like that? 35:25.156 --> 35:26.851 This is like a 400 year process. 35:26.991 --> 35:34.523 “Yes, it's about that! Well, it dates back from 35:34.665 --> 35:38.533 the 16th century onwards when small farmers were pushed off 35:38.669 --> 35:42.697 land so that the larger land owners could monopolize 35:42.840 --> 35:46.208 their land and improve it to make it more productive, 35:46.344 --> 35:50.542 which they did. But they threw the bulk of people off the land 35:50.681 --> 35:53.548 in the process. It didn't have to happen that way. 35:57.188 --> 35:59.555 The silver that flooded countries like Spain created 35:59.690 --> 36:02.853 a growing demand for English wool, which made raising sheep 36:02.994 --> 36:06.658 more profitable. Peasants were displaced to make room 36:06.797 --> 36:10.825 for more sheep. The process was called "enclosure". 36:51.008 --> 36:53.705 -It was coercive. I would not say it was massively violent. 36:53.844 --> 36:56.211 There was just a lot of rioting and a lot of resistance. 36:56.347 --> 37:00.545 And a lot of poverty and people shoved into urban 37:00.685 --> 37:05.486 situations, which had a very high death rate. So in a sense, 37:05.623 --> 37:08.490 it was violent in so far as the death rate in the emerging 37:08.626 --> 37:13.496 new industrial towns was higher that it was in the countryside. 37:23.474 --> 37:27.172 "They throw down houses", wrote Thomas More. "They pluck down 37:27.311 --> 37:30.337 towns and leave nothing standing, but only churches 37:30.481 --> 37:33.007 to be made into sheep houses." 38:05.616 --> 38:08.813 “This army of dispossessed, homeless and jobless peasants 38:08.953 --> 38:12.321 have become a potential labour force helping to create 38:12.456 --> 38:16.393 a labour market. 38:16.527 --> 38:19.326 -How do you create a market? That's very interesting. 38:22.233 --> 38:25.669 How you create a market that's disembodied from society? 38:30.308 --> 38:33.005 You can pass all kinds of laws, which happened in England 38:33.144 --> 38:39.174 between 1650 and about the early 19th century that criminalized 38:39.317 --> 38:40.842 poverty. 38:43.487 --> 38:45.854 You can make it a capital offence for the stealing 38:45.990 --> 38:48.015 of a handkerchief. 38:51.495 --> 38:55.022 Children can be executed. 38:55.166 --> 38:58.534 You can imprison people because they can no longer pay 38:58.669 --> 39:01.798 their debts. 39:01.939 --> 39:05.637 So, the amount of terroristic type of laws that are being 39:05.776 --> 39:11.306 passed to criminalize poverty, to increase debt, to create 39:11.449 --> 39:17.479 human beings that can be bought and sold, that helps bring 39:17.621 --> 39:21.148 about a particular kind of market. 39:23.794 --> 39:26.491 -Come on, off you go! Come on. 39:26.630 --> 39:30.828 Come on. Come on. 39:34.305 --> 39:37.331 The people who were thrown off the land lost their connection 39:37.475 --> 39:40.501 with the land. If you have access to land, you have a 39:40.644 --> 39:44.842 certain measure of independence. You are your own boss and you're 39:44.982 --> 39:50.011 not really beholden to anybody. Whereas once you are alienated 39:50.154 --> 39:55.024 from the land, you are in amuch more insecure situation. 39:55.159 --> 40:01.861 And you're less able to contest the forces of the economy. 40:04.835 --> 40:08.863 -4,3,2,1 (screams) 40:11.342 --> 40:13.709 “What you've got now is a situation where, in order 40:13.844 --> 40:16.711 to keep the wheels of capitalism turning, you have to persuade 40:16.847 --> 40:19.214 people to consume, which was kind of one of the problems 40:19.350 --> 40:22.376 with people living on their own land or on common land 40:22.520 --> 40:27.219 or whatever it was, so they were not that wild about going out 40:27.358 --> 40:30.225 and consuming. You don't need to buy very much if you actually 40:30.361 --> 40:33.387 live in a place like this. There's just loads to do 40:33.531 --> 40:38.401 and keep yourself amused and eat and so forth at your disposal. 40:43.374 --> 40:43.407 -So the trail of silver and gold that began in the New World, 40:43.407 --> 40:46.570 -So the trail of silver and gold that began in the New World, 40:46.710 --> 40:49.736 helped to stimulate a global market that eventually 40:49.880 --> 40:53.578 transformed British society. 40:53.717 --> 40:56.277 Around the world, private entrepreneurs were using 40:56.420 --> 40:59.253 the newly founds riches to build empires. 41:03.661 --> 41:07.188 -Smith is fascinated, as he has to be, by the mushroom spread 41:07.331 --> 41:09.857 of Empire. 41:10.000 --> 41:14.198 After all, every country in Europe is founding colonies 41:14.338 --> 41:15.863 in the underdeveloped world. 41:22.680 --> 41:24.876 And how those colonies being developed? They are being 41:25.015 --> 41:28.883 developed actually as we would say by the private sector. 41:32.690 --> 41:34.886 Great trading companies, what are they doing? 41:35.025 --> 41:37.892 They are moving with permission of government into different 41:38.028 --> 41:41.896 parts of the world and these trading companies are becoming 41:42.032 --> 41:43.557 governments. 41:51.709 --> 41:55.202 We are standing on the banks of the river Clyde and in front 41:55.346 --> 41:59.579 of you, at the moment, you can see a tall tower with a blue 41:59.717 --> 42:02.743 clockonit. 42:02.887 --> 42:06.687 Wealthy merchants way back in the 18th century stood 42:06.824 --> 42:12.024 on that tower looking down the river to see their ships 42:12.162 --> 42:16.156 coming in. And these wealthy merchants had a sort 42:16.300 --> 42:21.864 of triangular trading route. They took goods from here 42:22.006 --> 42:27.706 in Scotland to the Gold Coast in Africa. The goods they took 42:27.845 --> 42:32.715 from Africa to the West Indies were people. 42:41.191 --> 42:44.718 -Ships from Europe brought goods to Africa then took slaves 42:44.862 --> 42:48.560 to the New World and brought raw materials back to Europe. 42:51.201 --> 42:54.068 It was called a triangular trade and was mainly a private 42:54.204 --> 42:58.573 enterprise, which contributed to the emergence of market economy. 43:00.544 --> 43:04.344 ~The workings of commerce and Empire in the 18th century, 43:04.481 --> 43:09.180 right the way through Europe is increasingly dependent 43:09.320 --> 43:12.017 on Black slavery. 43:12.156 --> 43:15.524 Smith knows this very well. He, after all, was a close 43:15.659 --> 43:17.855 student of the workings of the Scottish economy 43:17.995 --> 43:24.025 of his own day. But he chose to turn a blind eye on slavery. 44:02.139 --> 44:06.838 -By the 1500's the transatlantic slave trade was well under way, 44:06.977 --> 44:09.844 spearheaded by the Portuguese. And when they came, they put 44:09.980 --> 44:13.848 up these castles along the coast and I want to remind 44:13.984 --> 44:17.181 you that these were not referred to as castles, they called them 44:17.321 --> 44:20.689 "barracoons” or factories. Factories that were meant 44:20.824 --> 44:23.191 to produce slaves for the plantations. 44:27.831 --> 44:32.200 You see this? That's the national emblem of Ghana. 44:32.336 --> 44:36.204 It's taken from the crusaders. At the top right corner of it, 44:36.340 --> 44:39.867 there is an edifice of a castle to show the roles these castles 44:40.010 --> 44:42.377 have played in the social, economical, political 44:42.513 --> 44:44.379 development of Ghana. 44:55.359 --> 44:58.056 This was the male dungeon. There were no lights, 44:58.195 --> 45:01.495 so the hole up there provided them with light and ventilation. 45:01.632 --> 45:05.159 They stayed here for about 3 months on average. 45:05.302 --> 45:07.669 While they were here, they urinated, they defecated, 45:07.805 --> 45:10.536 they vomited, they ate and they slept here. 45:10.674 --> 45:15.840 This was the drainage for the feces and the urine. 45:15.979 --> 45:19.847 When it rained, water came in to wash the floor. 45:19.983 --> 45:23.180 But the whole place got covered with filth and many of them got 45:23.320 --> 45:24.845 sick and died here. 46:07.965 --> 46:12.994 -Liverpool became the leading slave-trading port in Britain. 46:13.137 --> 46:16.835 London and Bristol kind of dallied with slavery beforehand, 46:16.974 --> 46:19.341 but you get to the 1750's and Liverpool really took it 46:19.476 --> 46:21.342 to another level. 46:27.151 --> 46:29.677 You are not talking about a 50 or 75 year period. 46:29.820 --> 46:33.848 These were generations of individuals, of families 46:33.991 --> 46:38.861 that made their entire kind of fortunes on the enslavement 46:38.996 --> 46:40.521 of individuals. 46:47.671 --> 46:49.537 Thomas Golighty was one of the mayors of Liverpool. 46:49.673 --> 46:53.200 He was also one of the traders in Liverpool who traded 46:53.343 --> 46:57.041 in Africa. Now, he was avery important man, he was 46:57.181 --> 46:59.548 the treasurer for a number of societies. And what it shows 46:59.683 --> 47:02.653 is how influential individuals in this city were. 47:02.786 --> 47:04.481 Who were involved in the transatlantic 47:04.621 --> 47:06.146 slave trade. 47:58.508 --> 48:03.537 -400 years of slavery. Capitalism, deadly. 48:03.680 --> 48:05.648 Everybody wants their share. 48:11.288 --> 48:18.160 -Itis often said that Smith was insensitive to social movements 48:18.295 --> 48:20.992 and social change of his time. 48:23.967 --> 48:27.335 Perhaps the elephant in "The Wealth of Nations" 48:27.471 --> 48:29.667 room is slavery. 48:35.479 --> 48:37.846 -Certain economists and historians would have us believe 48:37.981 --> 48:41.178 that what we call free market capitalism was envisioned 48:41.318 --> 48:44.515 by Adam Smith and his book "The Wealth of Nations", 48:44.655 --> 48:47.852 and came to life with the Industrial Revolution. 48:52.663 --> 48:55.530 But the origins of our present day economic system can be found 48:55.666 --> 49:00.194 more than 7000 kilometers across the Atlantic and 200 years 49:00.337 --> 49:03.034 before the publication of Smith's book. 49:23.460 --> 49:27.658 ~The plantations of the New World were the first 49:27.798 --> 49:33.828 productive activity, which Europe located 49:33.971 --> 49:35.496 in these non-European regions. 49:38.208 --> 49:42.167 Prior to that, they either looted or they traded 49:42.312 --> 49:46.340 and they looted and they traded, and they occupied 49:46.483 --> 49:48.008 and they settled. 49:52.322 --> 49:56.350 Some of these plantations were very large, far exceeding 49:56.493 --> 50:00.521 any factory atthe time in Europe. 50:04.835 --> 50:11.036 It had all the characteristics, I would maintain, of capitalism, 50:11.174 --> 50:15.543 with the sole exception that the labour was not wage labour 50:15.679 --> 50:22.710 but unfree slave labour. But in any other way it was capitalist 50:22.853 --> 50:26.551 to the exclusion of any other consideration. It was only 50:26.690 --> 50:28.215 about profit. 50:35.032 --> 50:38.058 -For Smithians in general, they have a hard time relating 50:38.201 --> 50:42.729 extra economic coercion like slavery with sort of normal 50:42.873 --> 50:46.571 economic transactions. And therefore things like 50:46.710 --> 50:50.578 slavery they associate it with some kind of barbaric, primitive 50:50.714 --> 50:54.912 pre-developed, under-developed society, which cannot possibly 50:55.052 --> 51:01.014 be related to a modern developed economy. 51:06.329 --> 51:08.696 But a strong case can be made that capitalism actually 51:08.832 --> 51:12.700 started in the 16th century with the colonization 51:12.836 --> 51:15.032 of the Caribbean and Latin America. 51:58.048 --> 52:01.177 -But if indeed the birth of capitalism has nothing to do 52:01.318 --> 52:04.686 with Adam Smith, why has his book "The Wealth of Nations" 52:04.821 --> 52:08.689 become such an influential work? And why is his view 52:08.825 --> 52:12.523 of the economy as science so widely held?