Nostalgia is a powerful emotion, but it can become a poor economic guide. By romanticizing the past, societies risk resisting the innovation, entrepreneurship, and creative destruction that make future prosperity possible.
If someone asked me what the most dangerous economic ideology is, many would expect an Austrian to give a typical answer: Marxism, socialism, or Modern Monetary Theory. Yet I believe there is another way of thinking that is even more pervasive. It is not a coherent body of ideas like those ideologies. Rather, it is a sentiment so widespread and socially accepted that it threatens not merely economic freedom, but our very understanding of progress itself. I call it “nostalgia economics.”
Recently, the singer Sting suggested that the rise of toxic masculinity is partly the result of the “loss of manual jobs,” claiming that because many men no longer use their hands and physical strength in their daily work, unhealthy masculine traits are on the rise. Like many commentators on the political left, he also blamed Margaret Thatcher for Britain’s economic transformation. “Britain’s wealth was created in the coalfields and the steel towns and the mill towns and the shipyards,” Sting said. “All of those skill sets were thrown on the scrapheap… for Thatcher’s dream of a service economy.”
This is nostalgia economics in action. A global celebrity whose music can be streamed instantly on another continent, who earns income through digital platforms, and whose career depends on modern communications and services, criticizes the very service economy that makes his success possible.
A person in thrall to nostalgia economics will take the blessings of progress for granted while romanticizing a past that never truly existed. Imagine living in the world of Charles Dickens: you would not have had access to a typewriter for much of your life, if at all, since it was only commercialized in the late 19th century. More importantly, you would not have had access to electricity. The conveniences we now consider basic would have been unimaginable luxuries.
The economic historian Norman Stone illustrated the extraordinary pace of modern progress through the experience of the novelist Henry James:
In 1895 the novelist Henry James acquired electric lighting; in 1896 he rode a bicycle; in 1897 he wrote on a typewriter; in 1898 he saw a cinematograph. Within very few years, he could have had a Freudian analysis, travelled in an aircraft, understood the principles of the jet-engine or even of space-travel.
Had Sting been alive in 1890, a world tour would have looked very different. A journey from London to New York would have taken more than a week rather than a few hours. International audiences, instant communication, and global entertainment markets would have been beyond imagination.
The glorification of manual labor is one of the most overrated ideas in modern political discourse. This tendency is not confined to the left. Ambitions to revive manufacturing employment through government policy often draw on the same nostalgic impulse. But what exactly are we trying to return to?
Perhaps literature offers a more honest answer than politics. Oscar Wilde observed that “all unintellectual labour, all monotonous, dull labour” involved unpleasant conditions. He went even further, commenting that “there is nothing necessarily dignified about manual labour at all, and most of it is absolutely degrading.”
The reality of industrial labor was far harsher than many modern observers imagine. In Britain, workplace fatalities have fallen dramatically over the last century: fatal injuries to employees dropped from around 4,400 a year early in the 20th century to around 200 a year by the end of the century. Coal mining, one of the occupations most frequently romanticized today and the first industry Sting evoked, exposed workers to constant danger and disease. Throughout the 1950s and 1960s, coal workers’ pneumoconiosis (“black lung”) claimed well over a thousand lives annually. What would a laborer enduring dangerous conditions, long hours, and chronic health risks have given for an air-conditioned office job?
One reason nostalgia economics is so persuasive is that we view the past through the lens of the present. That’s why all the characters in historical dramas have healthy teeth! As the historian Niall Ferguson recently remarked, one of his pieces of advice to aspiring historians is never to watch historical dramas.
The same mistake occurs in economics. We imagine that the comforts of modern life existed in the past, minus the anxieties of the present. We recall a perceived community of earlier eras while forgetting the poverty, danger, and limitations that accompanied it. Human beings seem naturally inclined to recall the best aspects of the past and focus on the threats of the present. This tendency helps explain much of the hostility toward markets.
Friedrich Hayek argued that Adam Smith’s great insight was that civilization advanced when people moved beyond the face-to-face relationships of small communities. In tribal societies, individuals primarily served those they knew personally. In a market society, however, people respond to price signals that connect them with millions of strangers. As Hayek wrote:
The practices by which the great commercial centres had become rich were shown to enable the individual to do much more good and to serve much greater needs than if he let himself be guided by the observed needs and capacities of his neighbours.
The market order makes what Adam Smith called the “Great Society” possible. Through prices and the division of labor, individuals cooperate with countless others whom they have never met and probably will never meet. Prosperity emerges not because anyone planned it, but because millions of people respond to signals that coordinate their activities.
The tension is that our brains evolved for and within small, face-to-face communities, while modern prosperity depends on participation in a vast and impersonal market order—what Roger Scruton called a “society of strangers.” We are naturally drawn toward the world we can see and understand directly, even when that world was poorer, less healthy, and offered fewer opportunities.
The irony, of course, is that those who actually worked in mines, mills, and factories often welcomed the opportunity to leave them. The movement from rural to urban areas is an example of that. Yet many of the loudest critics of the service economy are people whose prosperity—even their capacity to criticize it in the first place—depends entirely upon it.
Nostalgia economics invites us to look backward. The market economy, by contrast, is the engine that has enabled humanity to move forward. The greatest danger is not that we fail to appreciate the past, but that we romanticize it so much that we forget how much progress has already been achieved.
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Republished from FEE.