Capitalism created, undoubtedly, the most momentous advances in human welfare in the last millennium. In less than three centuries, it has extended and enriched human life to a greater extent than in the former ten millennia. Liberating masses of people from slaving for mere survival, it has provided many with unimagined wealth and with the potential to do both good and evil on an unprecedented scale.

Like all spontaneous human creations, capitalism was a protracted, complex incremental, perhaps unique, process. It was propelled after 1750 by gains in knowledge, especially in technology. Yet, while both were necessary prerequisites, they were not sufficient by themselves. China, Greece and the Islamic world all excelled in them, yet failed to create sustained economic growth.

Similarly, the legal framework required to safeguard economic activity and the development of infrastructure and transportation were necessary but not sufficient. China, Rome and the Islamic world all developed them, yet did not take off economically.

Only under European capitalism did people benefit, initially slowly and gradually, then dramatically, from economic blessings on a massive scale. Capitalism translated potential into achievement because it possessed the drive to accumulate capital and to invest it for profit – the very attributes which its enemies, especially the Marxists, so deplored. Without massive investment technology could not become useful. Capital made all the difference.

The drive to invest was rooted in a worldly faith, in a belief that the future expressed the culmination of linear time, which should be molded by human action. It required a willingness to defer enjoyment. All these were the genius inventions of Judaism, but were inculcated in Europe by Christianity. Far Eastern beliefs in cyclical time, in static transmutations, extolled stability above all. In China and India great, centralized absolute regimes evolved that were run by arbitrary bureaucracies that were indifferent, even hostile, to individual initiative and had little regard for personal rights, especially property rights. Such regimes failed to encourage enterprise, or invest in developing their many spectacular inventions. They were also reluctant to acquire markets abroad as the European did the moment they mastered naval skills.

In Europe, by contrast, the reformation “democratized” and spread wide the originally Jewish notions of man’s individual dignity, his equality before a God that blessed his worldly affairs. In a rudimentary and ambivalent fashion such ideas were also alive since early in the millennium among certain productive monastic orders, but the Reformation gave them strong impetus and wide currency. Still, the early pioneers of world trade, the Cairo Geniza documents indicate, were Jews who created, since early in the millennium, an international trade network based partly on trust. Jews were literate, they strictly observed their law and were future orientated. They perfected financial instruments, bills of lading, the extensive use of credit. They also possessed a lingua franca ( Hebrew) that made them able to communicate from Britain to China. They developed international trade several centuries before Italian city states developed it on a grand and glorious scale.

It took the better part of the millenium to prepare for the final breakthrough of European capitalism because of the slow evolution of appropriate political frameworks and of the rule of law, especially of property rights. Though certain basic property rights were already present early in the millennium in the canon law evolving in large political domains and in “multinational” monastic orders (it included also essential mechanisms of enforcement, not least the crucial internalization of such values as hard work and honesty), it was the political fragmentation and competition that followed the breakup of these domains that accelerated the process. Principalities and cities competed in providing better legal frameworks and environments for capitalist enterprises (some benefited by offering shelter to Jews). They learned that they could earn more from taxing prosperous enterprises than from arbitrary takings or the confiscation of property, as was common practice in absolute regimes. Eventually, property rights, contracts and patents created the pluralism that made possible fair and orderly competition, a major spur to economic growth.

So after a long (and costly) period of trial and error, all the ingredients came into place after 1750, including Adam Smith’s The Wealth of Nations (1776) which provided the road map for the great leap forward, and the launching American capitalism.

A happy millenium then? Not really. Even the stupendous success of Capitalism could not erase human folly or all the problems and misconceptions inherited from a dismal past. Utopian thinkers demanded Paradise Now. When it failed to materialize, they drew plans for forcibly bringing heaven to earth, promptly, and required just a few sacrifices. The rest is history; a most painful conclusion to a millenium that could have delivered on its great promise to better human life.

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