Win-Win

Whoever drank coffee this morning took part in a ritual that connected more people than any council in history. The beans grew on a hillside in Ethiopia or Colombia, picked by hands we will never shake; they were roasted, shipped, insured, cleared through customs, and ground by strangers who are as foreign to one another as they are to us. The current that heated the water oscillates in the European grid at 50 hertz: hundreds of power plants, thousands of technicians, and millions of consumers jointly hold this one number stable, every second, without a conductor. How delicate the feat is rarely shows. In 2019 the frequency in the European grid sagged to 49.8 hertz, and the experts held their breath; in America, a tree on a power line and a software bug once sufficed for a blackout costing billions. We notice none of this. Breakfast is on the table, as reliably as the sun rises.

The full shelves are only the tip of prosperity.

Frédéric Bastiat stood in Paris almost two centuries ago, marveling: a city full of people, hardly one of whom can produce what he consumes daily, and yet every one of them has food every day. Nobody commands it, and nobody could even plan it. A large supermarket today carries several tens of thousands of items, and behind every single one stands a chain of intermediate contributions that no human being can survey: seed breeders and freight captains, packaging chemists and actuaries, cooperating across all borders, languages, and enmities. Whoever believes that the full shelves already are the prosperity, needing only to be divided up, overlooks this chain: what is visible is the tip of an iceberg whose mass drifts below the waterline. We usually call a miracle whatever breaks the laws of nature. This one leaves the laws of nature untouched and breaks instead the laws of our perception: too large, too finely branched, too everyday to be seen. It belongs to that curious class of things Adam Ferguson described as results of human action that stem from no human design.

The more capitalist the society, the stranger its own founding principle appears to it.

Herein lies the paradox with which this book begins. We live in the most densely interwoven world of exchange of all time: never have more strangers cooperated over greater distances in a finer division of labor. At the same time we understand this world about as poorly as any generation before us. The more capitalist a society, the fewer people grasp its founding principle, and the more take for granted what never was to be taken for granted. Money comes out of the ATM the way electricity comes out of the socket; crises seem to come from outside, and so do successes. For the individual, the great order remains a black box, and into the interpretive vacuum stream the system concepts: “capitalism” is almost always shorthand for the diffuse feeling that something about the world is amiss.

Whoever curses the market presupposes its order.

The quarrel over this something is old and runs in circles. Albert Hirschman has shown that market society has for centuries been read in three rival interpretations: as a civilizing force that refines manners and tames despots; as a destructive force that dissolves all bonds; and as a feeble force that draws down moral reserves it cannot itself replenish. In the eighteenth century the first reading counted as common knowledge: Montesquieu expected commerce to tame princely caprice, a commercial writer of the era rhapsodized that commerce makes the proud supple and the haughty serviceable, and Rousseau rebelled against the consensus. What is remarkable about this perennial quarrel is less who turns out to be right than what all three readings tacitly presuppose: that an order is at work which nobody founded and which is stronger than any intention. Hermann Lübbe has noted that even our most solemn vocabulary is of economic origin: “value” was a term of household economics long before it entered catechisms and Sunday sermons, and the folklorists count well over a thousand German proverbs about money, four times as many as about life, and after all half as many as about God.

Yet we have always been asking the wrong question. What strikes us as needing explanation is poverty: where does misery come from, who is to blame for it, who profits from it? But poverty has accompanied the species from the beginning; it is the normal condition. Poverty explains itself.

On prosperity people vote with their feet, not with their mouths.

In rough economic-historical orders of magnitude, some 97 percent of humanity's entire material prosperity arose in the last 0.01 percent of its history, in that brief phase of global division of labor we call modernity; even the Sun King's Versailles, by legend with over a thousand rooms, had not a single bathroom in today's sense. On the value of this order people have long since voted, only with their feet rather than their mouths: where prosperity does not come to the people, the people migrate to prosperity. Every rural exodus in history, every trek to the cities and the coasts, is a demonstrated preference, more unambiguous than all the surveys in which the same migrants reject “capitalism.” What turned subsistence and hunger into a world of full shelves within a few generations was invented by nobody and commanded by nobody. It arose while everyone was busy with other things. This book is about how human beings discovered this order: first with their hands, much later with their heads, and again and again, most bitterly, in its loss.

Thomas Hobbes captured the double nature of man in a single antithesis: “Man to Man is a kind of God; and Man to Man is an arrant Wolfe. The first is true, if we compare Citizens amongst themselves; and the second, if we compare Cities.” Within one's own walls a god, beyond them a wolf: this boundary is older than all states. For the greater part of human history, the stranger was in doubt an enemy; whoever stood before the camp without kin, without shared gods, without guarantors was a walking threat. As long as there have been humans there has been peaceful exchange and murderous conflict, and for most of that time the two remained interwoven; the clean separation of trade and violence that shapes our present picture is younger and more brittle than it appears. Alongside the hand that holds out an offer belongs, therefore, from the very beginning, the fist that threatens and takes, and it is no less ancient. The fist too follows a logic of its own, which later chapters will unfold: a cycle of power that resembles that of money to an astonishing degree. Whoever wants to sing the miracle must sing its dark side with it: it was never accomplished on innocent ground.

Alive, the stranger is worth more than dead.

And yet at the edges of the camps something happened that changed world history more than all the battles: people laid down goods, stepped back, and waited. Exchange became the first technique for letting a stranger live, because alive he was more useful than dead. Trade belongs among the most powerful peace technologies man has ever found, akin to marriage: both transform the stranger into a relation, the one through shared business, the other through the shared clan. The merchant treats every customer alike, whatever his origin and persuasion; this indifference outraged the Romantics of every era, and it is at the same time the quiet achievement of tolerance that exchange performs. Money too, which we shall encounter at length, belongs in this line: it founds relationships where otherwise there would be none, relationships between strangers. A brother need not produce a coin; it is only ever the stranger who needs money. Georg Simmel therefore praised it as a medium of liberation: it overcomes barriers of rank effortlessly, with a lightness that has always been uncanny to the guardians of the old orders.

The warm neighborhood bestows happiness; prosperity is bestowed by strangers.

Catallaxy is the order of exchange among strangers: the capacity to play games with unknown people in which both sides win. Its core is as inconspicuous as everything great: the offer that can be refused. Where people make one another offers instead of threats, the circle of those who are no longer wolves to one another widens, from clan to tribe, from tribe to city, from city to that world-spanning nexus that prepares our coffee in the morning. The Romantics of all camps object that what really matters is the warm relationships of the small community, the neighborhood, the shared bread. They are quite right as far as happiness is concerned; as far as prosperity is concerned, they err by orders of magnitude: the relationships of custom and trust in our immediate circle account for an estimated one to five percent of our material livelihood, and the great remainder comes from the division of labor in cooperation with strangers we will never meet. This widening is the real story of civilization, and it ran neither straight nor peacefully nor irreversibly.

Where nobody steers, the eye invents a steersman.

But why must an order on which our breakfast literally depends be discovered at all? Nobody has to discover the sun. The answer begins with our senses. We recognize patterns spontaneously when they are programmed into us: a face in the crowd, a track in the snow, a threatening tone of voice leap out at us without our having to search. This pattern recognition was calibrated in small societies, in bands of a few dozen people in which everyone knew everyone and every effect had an author. Economic patterns are built differently: too many links, chains too long, no intention behind the result. The belief that a pattern reveals itself if only one looks long enough is an error; some orders remain closed to the naked eye forever. Our instincts are programmed for an environment in which we no longer live. That is why we see faces in clouds and overlook the order in the supermarket; that is why we suspect a culprit behind every crisis and an arbitrary will behind every price. The conspiracy theory is the honest report of a perceptual apparatus that imputes organization where there is none. What the naked eye cannot grasp requires instruments: the order of exchange became visible only where people ground concepts like lenses.

Whoever paints a face on the miracle has already missed it.

The invisibility has a further psychological consequence, to which Heinz Dieter Kittsteiner has drawn attention. Toward a visible enemy one feels fear, and fear can act: fight or flee. The faceless order, by contrast, generates anxiety, that unease without an object which can be worked off nowhere and therefore gnaws at the self. So one gives the invisible a face as soon as it hurts: anonymous capital flows become “locusts,” the impersonal order becomes a perpetrator one can fight. The personification is a genuine relief, for now one can fear again instead of feeling anxious, accuse instead of understand. Its price is high: whoever paints a face on the miracle has already missed it.

The order is understood only once it is threatened.

Humanity has discovered the catallaxy three times, and each discovery has its own history. The first was practical: since earliest prehistory the species has lived by exchange with strangers, by gift exchange, by silent trade at the edges of territories, by long-distance trade over distances no single merchant ever traveled, long before anyone knew what was happening. The second was theoretical, and it came late, seldom, and only in particular places: where leisure met entrepreneurship, where people had at once distance from the bustle and close contact with it. In the confessionals of Salamanca, where confessors had to pass judgment on the contracts of merchants and in doing so came to understand price and interest; in the Scotland of the Enlightenment; most deeply and most consequentially in the Vienna of the nineteenth century, whose trail this book follows with particular attention. The third discovery is existential, and it repeats itself: in the crises in which it becomes visible what everything depended on, when the shelves empty, money melts away, and the strangers become enemies again. The sequence is telling. Practice came millennia before theory, and theory almost always came too late: the order was usually understood only where it was already under threat. In bureaucratic Vienna skepticism of the state flourished, and while the monetary system was collapsing, monetary theory made great strides.

Prosperity is least understood by those who enjoy it.

And humanity forgets each of these discoveries with the same reliability, for the forgetting is built into the order's success. The higher the capital stock, the more people live as employees without capital of their own, estranged from the economic reality of their existence; the intellectuals, whom only prosperity can afford, understand its foundations least of all. The load-bearing rules, above all respect for property, owe themselves to no justification: they were imitated because those who followed them visibly flourished, and a society that must first prove its property by reason is already in the process of losing it. The theories, finally, survive according to their usefulness to power: what is in demand is what justifies interventions, and so the insights into the unplanned order regularly vanish into obscurity while the doctrines of planning receive professorships. Hirschman himself in the end defused the apparent contradiction of his three readings: the moral basis of market society is simultaneously depleted and replenished, no more a contradiction than a firm having income and expenses at the same time. However, the bookkeeping of understanding runs chronically in deficit. And Lübbe's warning stands beside it: the old contempt for trade was premodern, and where it modernized itself, it turned totalitarian.

The brain usually understands the fist better than the hand.

Thus arises the cycle that runs through world history: discovered, understood, forgotten, rediscovered. This book tells it from the hearths of prehistory to the data centers of the present. Three threads run through the narrative: the exchanging hand, which makes offers; the threatening fist, which takes and demands obedience; the interpreting brain, which wavers between the two and usually understands the fist better than the hand. It is the story of the slow, repeatedly interrupted widening of that radius within which strangers are trading partners to one another and not prey; it leads by way of temples and counting houses, confessionals and stock exchanges, by way of coin debasements and hyperinflations, to the rare places where people also understood the order they were living. That the insight survived its long dry spells it owes, always, to individuals who passed the thread onward across wars, fashions, and waves of forgetting; of this relay too there will be much to tell. The present is the latest trial of this history: it will become clear that Bitcoin, the pull of the free cities, and the force of artificial intelligence cannot be understood without the long arc — and the long arc cannot be understood without them.

Among the Bushmen of the Kalahari there was a rule that sooner or later caught up with every great hunter. If a man brought much meat into camp, the animal large, the kill rich, he was not celebrated. He was mocked: the game was lean, his effort hardly worth mentioning. The field researcher Richard Lee recorded the words with which the band cooled the hunter's heart. Whoever kills much soon takes himself for a chief and the others for his servants, and from such pride murder one day grows. The hunter joined in. He made himself small, credited the kill to luck, left the distribution to someone else. Thus the circle remained what it was: a community in which no one rose above the others.