Karl Marx, for all his faults, deserves credit for authoring economic determinism—the view that economic relationships are the foundation on which fluffy things like politics, ideology and culture rest. Marx was obsessed by the means of production—in other words, by technology—and indeed we see that technology for centuries has shaped social organization and world history.
The American Civil War was, at its core, a clash of new industrial technology, and the kind of society it was creating in the North, with pre-modern, low-tech agricultural production in the South. New technology won—as it usually does, despite resistance—and the United States emerged as an urbanized society dominated by manufacturing enterprises.
Similar “revolutions,” both violent and not, took place in a number of European countries. Within a decade of the U.S. Civil War, Italy and Germany were unified, Russian serfs were freed and Austria created a Dual Monarchy, putting those countries on the path of accelerated industrial development.
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Successful economies in the industrial age relied on a strong, centralized government that functioned in partnership with big business. The state created and defended markets, ensured supplies of raw materials, provided primary education required for the industrial workforce, regulated competition and acted as an intermediary between labor and management. The U.S. government pushed the boundaries of the nation and ensured the flow of immigrants to man America’s factories. In Europe, the governments acquired overseas colonies.
Industrial societies were characterized by representative democracy and a strong middle class. Authoritarian Asian Tigers and Latin American nations such as Mexico and Brazil have seen rising industrialization go hand in hand with the spread of democracy and emergence of democratic institutions.
The U.S., meanwhile, has moved into a post-industrial stage. Our factories moved to lower-cost regions or disappeared altogether, their workers replaced by technology. We have gone through the IT revolution and have developed an innovation economy, which has already brought to life a new set of economic relationships and is in the process of creating new forms of social organization. What kind of society will emerge from all this is probably too early to tell, but we are now seeing a breakdown of age-old certainties in economics and politics.
In politics, the most important feature of the transition to a post-industrial economy has been the decline of the government. The state remains an important actor, and it retains many of its powers, but its functions are changing. The anti-government, anti-tax revolt began in 1978 with California’s Proposition 13, the same year, incidentally, that the Apple II became the world’s first-ever mass-produced personal computer. Throughout the past three and a half decades a call for a smaller government has been consistently popular with Americans—even as the size of the government actually increased.
The level of dissatisfaction with the government is extremely high and none of its institutions, with the exception of the military, enjoys much trust or respect of its citizens. Young people, who were actively politically involved a generation ago, don’t seem to bother to vote for politicians whose policies and decisions will presumably shape their lives.
But perhaps this apathy is due to the fact that the government no longer actually shapes our lives. Certainly its impact on financial markets has eroded. When Congress first decided to shut down the government, Wall Street panicked. Subsequent attempts have produced a yawn.