Key Takeaways
Wealth Addiction Fueled the Rise & Fall of the Middle Ages
Lust for Gold Sparked The Industrial Revolution
Classical Economists Proposed Heavy Taxes on Wealth
Wealth Addiction Fueled the Rise & Fall of the Middle Ages
The Greek philosopher Plato presented justice (dikē) and greed (pleonexia) as warring opposites in a debate on the nature of good people and just societies. He identified chronic wealth addiction as the psychological engine that drives cycles of economic decay and collapse.
Plato argued that greed is the most dangerous of all addictions because there is no hangover period. Addicts of food or wine are limited by their stomach capacities. But the pursuit of wealth creates a desire for more wealth without ever satisfying that appetite.
This observation of Plato’s about wealth addiction and collapse seemed downright prophetic during the late Roman Empire, when it was well-understood that the greed of the ruling class was a major factor in Rome’s decline.
As Roman civilization disappeared from Europe, its oligarchy retreated into fortified homes at the centers of their vast estates. Workers who tilled the soil became attached to the land as serfs or peasants.
Meanwhile, the Roman Catholic Church endured as a new political authority amidst the ashes of the Roman Empire. It preserved the rituals, clothing, and language of the old imperial authority that preceded it and carried them forward into the Middle Ages.
And just as Plato’s pleonexia hallmarked the Fall of Rome, it also came to characterize the downfall of the Roman Catholic Church at the end of the Middle Ages
The Church enjoyed a spiritual monopoly over Medieval Europe because people believed that through it, alone, they could commune with God. As the Middle Ages wore on, church officials couldn’t resist monetizing that perceived monopoly by charging money for the invisible product of sin forgiveness.
These so-called “Sales of Indulgences” amassed a conspicuous fortune for the Church. That fortune became a liability after bold individuals defied its authority and translated the Bible into common languages.
Previously, the Church had enforced a ban on non-Latin versions of the text. This ban helped the Church downplay biblical condemnations of wealth, as it lapsed into pleonexia. But the unauthorized translations revealed what historian Will Durant called “the sympathy of Christ for the poor and oppressed” and “the communism of the apostles.”
The fortunes of the Roman Catholic Church collapsed after the invention of the printing press flooded Europe with pamphlets decrying its hypocrisy. Soon thereafter, the Protestant Reformation cleaved the Church in half, and its spiritual monopoly was finally broken.
Lust for Gold Sparked The Industrial Revolution
The Fall of Rome saw pagan temples smashed and pre-Christian literature burned. Plato was lost to Europe for a thousand years—until the political power of the Roman Catholic Church finally began to wane at the end of the Middle Ages. After the Medici of Florence reintroduced Europe to Platonic manuscripts, magic became all-the-rage in the face of declining Church authority.
Magic is rooted in the idea that the observable universe is not bedrock reality, but rather an illusion projected by the mind. In this sense, the magic of the Renaissance was a demonstration of the classic Platonic principle that we inhabit a false reality—like the bullet-dodging character Neo in the 1999 film The Matrix.
Alchemy was the quintessential magical art of the Renaissance. The trick of manufacturing gold became an obsession that consumed the most recognizable figures of the transition period between Medieval feudalism and modern capitalism.
Alchemy was a defining passion of the Medici banking family in Florence. One of history’s most famous alchemists was the polymath John Dee, close confidant and court astrologer to Queen Elizabeth I. Sir Isaac Newton wrote far more on alchemy than he ever did on physics, as he served as Master of the Royal Mint and established the English gold standard.
During Newton’s lifetime, the goldsmiths of central England altered the course of history by using a simple trick to realize the famous alchemical dream of manufacturing gold. People left their gold with a local smith for safekeeping in those days, receiving claim stubs in exchange for their deposits. The public came to recognize these paper stubs as valid forms of payment, such that paper began circulating as a convenient alternative to heavy gold coins.
The goldsmiths soon realized that they could effectively multiply the volume of gold they held in their vaults by issuing extra claim stubs in excess of their actual holdings. So long as too many depositors didn’t try to withdraw their gold at once, the smiths could get away with creating gold. That’s how fractional reserve lending was born from the feverish alchemical dream.
Within a century, fractional reserve lending touched off the Industrial Revolution. Entrepreneurs took out huge loans to finance the construction of massive textile mills in central England. The credit they needed was provided by banking houses who conjured it into existence through the magic of fractional reserve lending.
Classical Economists Proposed Heavy Taxes on Wealth
The Industrial Revolution began in central England during the 1700s—and spread all over the world in the centuries since. The capitalist production roles of employer and employee replaced the old Medieval roles of lord and peasant. But early capitalist thinkers like Adam Smith, David Ricardo, and John Stuart Mill noticed a problem.
Although the Middle Ages were long over, the descendants of feudal lords still owned the majority of the land, and these landlords helped themselves to the profits of entrepreneurs by jacking up rents. Homeless employees make for unreliable workers, so employers were forced to raise wages whenever landlords raised rents.
The old noble families were in a position to extract the profits of capitalist entrepreneurs who built the factories of the Industrial Revolution. But classical economists like Smith, Ricardo, and Mill noticed that these landlords had done nothing to earn the inflated rents they opportunistically collected. This observation led them to draw a sharp distinction between earned and unearned income.
Those early capitalist thinkers saw jacked-up rent prices as overhead costs that diminished the profitability of capitalist enterprises. Aiming to prevent the vibrant capitalist system from being suffocated by hereditary concentrations of wealth, they proposed confiscatory taxes on unearned income to discourage rent-gouging.
The logic of those classical economists was sound, but the actual implementation of taxes on unearned income was tempered by human nature. In the end, American and French Revolutions had to be fought against hereditary monarchies leftover from the Middle Ages. The Revolutions of 1848 were comparable struggles against the legacy of feudalism.
Conclusion
A corollary to the old adage that history is written by the victors is that economic textbooks are written by wealthy interests. To the foundation thinkers of capitalism, a “free market” was a market free from suffocation by economic rents. But today, we conceive of free markets as free from any authority with the power to enforce Plato’s old idea of economic justice, or dikē. That Greek philosopher named wealth addiction, or pleonexia, as the polar opposite of economic justice and the principle driver of human history. Both the decline of the feudal economic system of the Middle Ages and its replacement with our modern capitalist economic system were molded and shaped at every turn by the very same human tendency toward wealth addiction that Plato first identified in the 4th century BC.
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Further Materials
As soon as the land of any country has all become private property, the landlords, like all other men, love to reap where they never sowed, and demand a rent even for its natural produce. The wood of the forest, the grass of the field, and all the natural fruits of the earth, which, when land was in common, cost the labourer only the trouble of gathering them, come, even to him, to have an additional price fixed upon them. He must then pay for the licence to gather them, and must give up to the landlord a portion of what his labour either collects or produces. This portion, or, what comes to the same thing, the price of this portion, constitutes the rent of land, and in the price of the greater part of commodities, makes a third.
Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, 1776, Book I, Chapter 6
Landlords grow rich in their sleep without working, risking or economizing. The increase in the value of land, arising as it does from the efforts of an entire community, should belong to the community and not to the individual who might hold title.
John Stuart Mill, Political Economy, 1848, Book V, Chapter 2
It is seldom acknowledged by the West, but Karl Mark was a Classical Economist and was familiar with and influenced by the lot of them, especially Adam Smith. I like to think of a long line of philosophers teaching each other through the ages, as Sir Isaac Newton said, "We stand on the shoulders of giants."
I read Plato as a naive teenager and thus have no recollection of his influence. But when I read your expositions, Nathan, I become aware how much Plato’s thinking is the bedrock of mine. Of course, I also read Smith, Marx, and Veblen. Odd that über-bourgeois Stanford would teach us youngsters such revolutionary ideas!