How vested interests can ruin a society | Summary of The Evolution of Civilisations by Carroll Quigley
Why do societies eventually decline? According to historian Carroll Quigley, the culprit is neither natural disasters nor violent invasions but rather something gradual and ubiquitous: the tendency of successful institutions to become more focused on preserving their power than serving their purpose: what Quigley calls institutionalisation. From ancient Mesopotamian priesthoods to modern financial capitalism, this pattern has repeated throughout history—and understanding it might be the key to breaking the cycle.
But is there any reform that could remedy this organisational flaw, or is the cycle to be our destiny? To answer this, let’s first explain Quigley’s theory in detail. Then, we will apply it to modern society. Finally, we will discuss what it might take to create some kind of immune system against institutionalisation, and the role Metasophism might play in this.
Quigley’s theory of institutionalisation
In his book The Evolution of Civilisations, Quigley argued that a society’s life cycle consists of seven stages: mixture, gestation, expansion, age of conflict, universal empire, decay, and invasion. He designated the “institutionalization of instruments” as the key factor causing a civilization to stagnate, enter an age of conflict, and eventually fail.
Quigley’s “instrument” could be an organisation such as a priesthood, a practice such as slavery, a governing system such as feudalism, or an economic system such as capitalism and its variants. Each instrument is created to fulfil some purpose that initially helps the society become wealthier. But eventually, the instrument seeks to ensure its own survival, wealth and power: the process Quigley called institutionalisation. At this stage, it is no longer an instrument, but an institution in Quigley’s terminology.
The institution now values its own interests above those of the broader society, thereby damaging the prosperity of the whole. Once this happens, the society (or specific actors within it) can either circumvent or reform the institution. In practice, Quigley offers many more examples of circumvention—we’ll explore these later. But a society could also suffer reaction: where the vested interests succeed in entrenching their power, condemning the society to decline.
Instruments of expansion in history
Of the various stages proposed by Quigley, the most relevant is the stage of expansion. This is marked by growth in wealth, knowledge, population, and production. But what is it that kicks off this process? For Quigley, three conditions need to be present for an instrument to effect an expansion of civilisation:
Accumulation of surplus
An incentive to invent
The surplus is used to pay for or use new inventions
The incentive to invent he sees as being something of a cultural trait, not something that arises due to a challenge as Arnold Toynbee argued.
The question then is how does an instrument start to accumulate a surplus, and who is responsible for investing it. Some examples are helpful here.
Mesopotamia
Let’s take Quigley’s speculative discussion of the very first civilisation: Mesopotamia. The surplus-generating organisation was the Sumerian priesthood. How did this priesthood arise? According to Quigley, someone investigated astronomical and weather cycles, and eventually learned how to foretell the flood. They exchanged this valuable information for tribute, which resulted in a surplus.
This surplus was later invested in other activities such as irrigation, in turn providing evidence that it was worthwhile to belong to the new society. Other Mesopotamian inventions such as the plow, the wheeled cart, the brick, the arch, city life, pottery manufacture and metal smelting had a similar effect.
Unfortunately, Quigley does not provide many citations making it hard to evaluate where this information comes from.
Canaanite Civilisation
Another example supplied by Quigley is the Canaanite civilisation, which was based in areas along the Eastern and Southern Mediterranean. This expanded through commercial capitalism, which he defined as the system within which profits are pursued through the geographic exchange of goods. But this instrument became an institution when the pursuit of profit led to monopolisation and the rise of a commercial oligarchy. As expansion through economic means became strangled, the society began to expand through political means such as conflict.
Classical Civilisation
He next addresses the Greco-Roman civilisation. Here he claims that Classical society expanded through the use of slavery. Furthermore, he claims this eventually hindered productivity growth once the owners turned absentee, as slaves had little incentive to improve the productivity of the estates. To support this, he cites Pliny noting that agricultural output per area was greater on family farms.
Slavery is also portrayed by him as something which was essential to the formation of classical civilisation, as the culture of classical civilization was built by people with leisure, and this leisure was the result of slavery. These people were also city dwellers at a time when the city had little economic function.
According to Quigley, while struggles over this issue eventually destroyed Classical society, any solution in the form of another instrument of expansion would probably have meant the end of that society anyway.
The West: circumvention and reform
Origins of feudalism
Finally, he turns to the West. Western civilisation partly emerged from the mixture of new technology such as cavalry and horseshoe. This resulted in a new social organisation in the form of knights and castles, which was then paired with Christianity. The knight provided protection and the serf provided the food. But the knight had more power which resulted in him extracting more than was necessary from the serf. This resulted in a surplus under the control of the knight.
How was the surplus invested? Agricultural expansion was initiated by draining or clearing wastelands and forests. Such work was also done by monastic groups. The surplus also kicked off demand for luxury goods and therefore long distance trade (p.345). Such goods included “furs, honey, wax, and later hemp, tar, and even lumber.” This in turn created the town-living middle class as commerce required literacy, in turn laying the ground for new types of culture.
Feudalism was circumvented
While in early feudalism the fact that the knight could not beat the castle meant that central power was difficult to enforce, eventually the growing effectiveness of siege warfare reduced the effectiveness of the castle and made the average political unit larger. Guns and artillery later favoured even more centralisation.
Therefore feudalism became obsolete as a system, being replaced militarily by mercenary men-at-arms, and politically by the bourgeoisie and the clergy. Three centuries of expansion ended in around 1274.
But even after its obsolescence, the fundamental structure of feudalism was left in place. This instance of circumvention is best illustrated by looking at the example of England.
The king was left covered with honors, but the task of governing England was taken over by Parliament and ultimately by a committee of Parliament. The Lord Warden of the Cinq Ports has a brilliant uniform and a drafty castle, but the task of guarding the seas of England was given to the Royal Navy in the sixteenth century. The Earl Marshal of England is left with titles and social prestige and still manages the coronation, but the job of leading the army was given to a commander in chief.
Capitalism as an instrument of expansion
After feudalism in the West, the history of instruments is largely a story of different versions of capitalism.
Feudalism was replaced by commercial capitalism. This eventually became institutionalised into municipal mercantilism which lasted from about 1270 to 1440. He defines this as a system where the interests of the consumer are prioritised. For example, it put restrictions on exports but not imports, and regulated crafts to ensure high quality.
Municipal mercantilism would eventually fall due to a new period of circumvention arising from enlarged markets coming about via improvements in communications and transport. This also involved a shift from Mediterranean commerce to the Atlantic. This new geographical scope opened up the way for dynastic monarchies to intervene and regulate economic affairs:
“As a consequence of the inability of municipal authorities to regulate the newer, larger markets created by improved transportation and communications, this task was taken over by the emerging dynastic monarchies…This newer economic regulation by dynastic monarchies is known as state mercantilism. It aimed to protect traders rather than consumers or producers. Much of the expansion of the second period of expansion arose from its efforts… By the eighteenth century, state mercantilism had become in its turn a structure of vested interests serving to hamper economic life rather than to help it.”
State mercantilism would eventually be reformed and superseded by industrial capitalism, which is different from commercial capitalism as it is marked more by the production of goods to generate profit rather than simply the exchange of goods. Quigley is not exactly clear on how this reform process took place. It could have been an intellectual victory through the work of Adam Smith and others. Alternatively, it may have been due to power moving from the British Crown to Parliament.
Industrial capitalism he portrays as slowly falling prey to financial capitalism. But finance he portrays as self-defeating, eventually leading to the rise of monopoly capitalism at around 1930.
“To ensure continued banking control of these firms, bankers used such mechanisms as interlocking directorships, holding companies, consolidations, and controlled banking services. But these methods of banking control, by reducing competition between firms, made it possible to seek profits by raising prices rather than by decreasing costs and thus made it possible for such firms to become self-financing of their own capital needs and, accordingly, to be freed from banking control.”
But by the time of the ascendency of monopoly capitalism, the society was already in an age of conflict.
An age of conflict arises when a society that is used to growth no longer has it. He broadly sees there as being three ages of conflict in the history of the West, starting at 1300, 1650 and 1900 respectively (see p. 165). One could quite easily contest these dates; he muddies the waters slightly by saying that often one part of a civilization could be one stage behind another. Even still, I find it difficult to accept the 1650 date, as at this point the English Civil War, the Anglo Spanish War, and the religious wars in France and Germany virtually just came to an end. Rather, it would be easier to point to it as an end point, epitomised by the 1648 Treaty of Westphalia. But that there was an age of conflict ending at that point cannot really be denied.
How does he characterise an age of conflict, apart from the obvious interstate conflict dimension?
“All the characteristics of an age of irrationality began to appear on all sides—increased gambling, increased smoking, the growing use of alcohol and narcotics, a growing obsession with sex and with perversions of sex, an increasing mania for speed, for nervous tension, and for noise; above all, perhaps, a growing tendency to regard violence as a solution for all problems, be they domestic, social, economic, ideological, or international. All these characteristics of any Age of Conflict are too obvious to require further comment. They arose, as is usual in an Age of Conflict, because the organizational patterns of our culture ceased to function as instruments but had become institutionalized. ”
By the 60s, he also saw monopoly capitalism as having transitioned to a pluralist system composed of different blocs:
“These blocs came to include: (1) finance, (2) heavy industry, (3) light industry, (4) commercial and service groups (such as real estate), (5) civil servants, (6) the armed services, (7) labor, (8) farmers, (9) transportation, and others. If any one or several of these blocs become too obviously exploitative of the others, the others form an alignment to pressurize the government in another direction. The chief consequence of such alignments and pressures has been to increase government spending and thus to increase inflation.”
Even though the book was written many decades ago, Quigley's model provides us with a potentially powerful lens for interrogating our present situation. Let's examine the current landscape through this theoretical framework.
Where are we today?
Among the countries of the West, only the United States and some Eastern European countries are enjoying high growth rates. In most of Europe, growth is quite low or non-existent. We just saw above the point Quigley made about government spending increases: have government bureaucracies themselves become an institution?
Government bureaucracies have interests that are distinct from the people they claim to serve. It’s unlikely that all government departments fulfil their function well, given what we know about human competence and fallibility.
This is even more true given that there are few precedents for the government bureaucracy being so large—the former Communist states are one exception probably, another is the Minoan society of which we know relatively little. A great deal of activity is bound up with increasing tax revenues, which can then be mobilised to provide additional bribes to different groups of voters. It recalls how the later Roman Emperors had to successively bribe the soldiers in order to obtain power.
Even if the size of the state is part of the problem, simply cutting it will not likely be a solution given the tendency of capitalism to institutionalise. The money would likely end up in the financial system—and financial capitalism has clearly emerged from the grave, given that it now has power at a level far greater than it had in the post war period especially in the UK and the US. But is it an institution or an instrument?
Is finance capitalism institutionalised?
First, it is fairly uncontested that the financial sector has taken on a level of importance that it has perhaps never had. This is clearly shown in the graph below. Private equity now controls so many companies that around 12 percent of US workers work for a private equity company. Index funds can throw out board members of companies like Exxon.
The question then is whether it is negatively affecting growth. At this stage, it is useful to recall our three criteria for an instrument of expansion: that there should be a surplus, an incentive to invent, and that the surplus is used to pay for new inventions. One could argue that the modern financial industry acts on all three in a negative way.
Does finance reduce productivity?
Empirical data seems to indicate that, past a certain point, growth in finance lowers productivity. According to researchers at the Bank of International Settlements, looking at data from over twenty countries over a period of 30 years “there is a robust, economically meaningful, negative correlation between productivity and financial sector growth. We also find that causality likely runs from financial sector growth to real economic growth.”
Why is this the case? According to the authors, “finance tends to favour relatively low productivity industries as such industries usually own assets that are relatively easy to pledge as collateral. So as finance grows, the sectoral composition of the economy changes in a way that drives aggregate total factor productivity down”. In Quigley’s terms, that means the surplus given to finance to allocate is not being used to pay for new inventions in that way it could be.
The incentive to invent may also be weakened. Finance attracts talent from other sectors. Some numbers indicate that “almost 1/3 of the 33,000 employers working full-time at Goldman Sachs are engineers and programmers, and roughly one fifth of new physics graduates accept a job in the financial sector, which is more than those who go to work in high-tech industries”.
It’s far easier to make a great fortune by going into finance than by doing something new, if one has good educational credentials. Why figure out a new way of generating wealth when you can manage and/or skim off the wealth that has already been generated?
How finance drives short-termism
But even leaving aside the possibility that finance damages productivity by misallocating capital and labour, more pernicious may be the rise of management by metric, and short-termism. Publicly listed firms set their strategies and timelines so that they are appealing to the markets, which mostly means a short-term horizon.
In the words of Peter Drucker, “everyone who has worked with American management can testify that the need to satisfy the pension fund manager’s quest for higher earnings next quarter, together with the panicky fear of the raider, constantly pushes top managements toward decisions they know to be costly, if not suicidal, mistakes.”
This view is corroborated by a study of 400 CFOs of large U.S. public companies in which almost 80 percent of them said that they would “sacrifice economic value for the firm in order to meet that quarter’s earnings expectations”.
Therefore, it seems that a good case can be made that finance negatively affects all three of the societal surplus, the incentive to invent, and that the surplus is used to pay for new inventions.
Of course, finance has a positive role in allocation savings to investments. But the larger it becomes, the greater its ability to profit by altering the environment to its favour instead of simply providing services to others. In that sense, there is something inevitable about finance capitalism: as a society succeeds, savings build up and this eventually finds its way into banks or financial intermediaries. Eventually, the power of the sector is too great for it to remain a simple modest instrument. And they act to ensure their own interest, even at the expense of society.
What this means is that to resolve the problem of civilizational cycles we will need to envisage some way of managing the surplus that does not recreate the problems of financial capitalism.
Institutionalisation is a general problem and needs a general solution
At this point, one may be tempted to propose some kind of new financial firm, resistant to institutionalization. This would be a mistake because institutionalization is a general problem with organisations and firms, and therefore the solution should be somewhat general: what we need is a new type of firm, which the financial institution would be but once instantiation of.
The general nature of this problem is well illustrated by how the most damaging vested interests vary by country. In Italy, lawyers and the judicial system generally are a vested interest, benefiting from long legal procedures which hold back business. Notaries in Germany get fees which are excessive compared to other countries, for functions that are not even necessary. The US healthcare sector is the standout vested interest in the US, spending more than any other sector on lobbying in 2023.
At this stage, it is interesting to ask what are the factors that allow an instrument to become an institution.
Firms and entire sectors find it easy to lobby governments: essentially, wealth is used to buy power, for example through campaign funding or offering politicians and civil servants employment—the so-called revolving door.
Second, firms and sectors manipulate the public through public relations and lobbying. This is often not so difficult, because the public have only a cursory understanding of most issues, and some sectors such as finance are fiendishly complex. In such areas, it is very hard for detractors to identify abuses because the mechanisms involved can be arcane, such as in the area of financial regulation.
What we have here is a lack of the classical virtues. There is a lack of sophrosyne, which relates to self-control and abstention. There is a manifest lack of honesty.
The reason for this is that people see no reason to display such virtues. The societal definition of success is in most cases related to individual wealth and power. Their objective, or telos in virtue ethics terms, is normally not any concept of the societal good.
It should not be surprising that the telos of firms and individuals is not related to the telos for society, for there is no societal telos. In fact, liberalism prides itself on there not being one, believing that it is up to the individual to figure that out. But even if this is a necessary compromise, it gives a moral license to institutionalisation at a firm level. While democratic mechanisms should provide a way to circumvent that in theory, in practise, there is public relations, lobbying and the revolving door as described above.
Can we conceive of any way forward to even partly immunise a firm against institutionalisation?
An immune system against institutionalisation
To reiterate, institutionalisation is when an organisation becomes focussed on money or power, to the neglect of the social role it originally satisfied. Here we have a close mapping with the problem which virtue ethics addresses: namely keeping people from being overly preoccupied with the external goods of money power and fame, and instead helping them cultivate the virtues that allows them to perform their given role well.
In a previous essay on “The Truth-Seeking Economy” I discussed how virtue ethics and Metasophism could reform capitalism by introducing the truth-seeking firm, part of a co-operative including consumers and other firms. The telos this firm would be committed to would be the Metasophist Imperative, defined as the pursuit of knowledge in the hope that one day we may discover the meaning of life. Interestingly, this aligns very well with Quigley’s statement that the essence of Western civilisation was the belief that "truth unfolds in time through a communal process".
How did that system help bind the firm to truth-seeking? The following were the three key aspects which the co-operative would apply to the firms in its ambit:
Mission-oriented rather than profit-oriented: Firms and the individuals in control of them should be focused on attaining the mission of the firm rather than boosting the profitability or stock price of the company.
External evaluation of products: This then allows us to see if the firm is actually fulfilling the purpose it claims to be following, allowing us to cut through the fog of advertising. How long does a piece of equipment or clothing last? Does a given supplement actually improve your sleep quality? This involves an element of cooperation between producers and consumers, one which would be facilitated by the community organisations.
Internal reforms to prevent promotion of vice: Before a firm can corrupt society, it must first corrupt those within it. This invariably happens because people become overly motivated by money, or the organisation initiates their moral corruption by incentivizing them to lie. We could counter this by ensuring that there exists no incentive to lie for career reasons.
But are we missing something?
There is no explicit solution to the problem of financial capitalism and short-termism mentioned earlier. For that, we would need to remove pressure for the firm to pursue short-term strategies from the outside. That means some kind of insulation from the financial markets. That could be achieved if the firm would be controlled by the co-operative (even if not owning more than 50 percent of the entity).
Another theme I did not deal with in the earlier essay was the issue of lobbying. The community could initiate a reform of lobbying as firms should not be allowed to lobby themselves. Rather, the Community itself would undertake this role. There would be a body of people working for the community, and funded by the Community, who would be charged with evaluating whether a firm is working towards the overall mission or not (and therefore possibly also of evaluating the effect of legislation). All firms would pay a certain amount to benefit from this facility.
Conclusion
A producer-consumer cooperative, operating on the principles of virtue ethics, could help avoid societal decline by making it harder for the firms within its orbit from becoming institutionalised. How? By providing an external check on such firms to ensure that they are pursuing their mission, by reforming the firm to reduce the incentives towards dishonesty, and finally by ensuring that they provide value rather than simply manipulating their environment through lobbying.
In other words, we prevent institutionalisation by binding such firms to truth-seeking. Does this help us avoid the problems affecting modern capitalism? It would certainly reduce the incentives for firms to embrace short-termism, because this would be flagged in the deterioration of their product or service. The information from external testing would also provide an alternative to advertising—making it less effective in the process.
Furthermore, it would help us recast lobbying in a more socially-beneficial mold. Over time, if the number of firms in the cooperative becomes significant, we would have an economic base that would allow us to even provide a new model of financial institution, challenging the heart of financial capitalism itself.
The real promise of this system extends beyond merely reforming individual firms or sectors. By entrenching a culture of truth-seeking in the habits and expectations of individuals, it offers a chance to finally break the cycle of civilizational decline that Quigley documented throughout history.