Genesis of Capitalism

Opinion

By Syed Ehtisham

Marxists advocate bourgeois revolution to break the fetters of feudalism. Capitalist markets are only the most advanced form of exchange. Industrialization was the inevitable outcome of human instincts. In the Marxist version, petty commodity production freed of feudalism grows into capitalism. 1

Many people came to believe, especially after the collapse of communism, that capitalism was the natural condition of humanity. Progress from the earliest times to mercantilist and capitalist society has been inevitable. Seeds of capitalism were embedded in the most primitive acts of exchange. Technology has continuously advanced.
But cyclical recessions and meltdowns are also inbred in capitalism. There is a conflict between the needs of people and the requirement of profit. Capitalism recovers from recurrent crises at the cost of suffering of hundreds of millions of people. Capitalism is inherently opportunist. Market connotes an opportunity, a place where opportunities exist to sell and buy-implies a choice.

In pure capitalist ideology, the market implies freedom guaranteed by supply and demand and chosen freely by people. They compel economic actors to act rationally. According to socialists, on the other hand, it involves commodification of labor and class exploitation.

The conviction that there can be no alternative to capitalism and the system is the destination of history, is deeply rooted in the Western mind.

Capitalism means that all goods and services are produced for profit. Competition and profit maximization are fundamental to capitalism. The basic objective of capitalism is production and expansion of capital.

Human labor is a commodity for sale; workers and capitalists are dependent upon the market. Producers, unlike the peasants who have retained non-market possession of land, are dependent upon it for access to the means of production. Bulk of work is done by property-less laborers, who create profit for those who purchase their labor.

Capitalists cannot directly use the power of coercion, military, political and judicial as a feudal lord can, but in effect exercise greater control by financing the election campaigns, obliging the officials to do their bidding, purchasing the media so people hear only what they want them to and thus molding public opinion and directly bribing officials of their own and foreign countries and controlling international financial bodies.

Capitalism did not exist before the early modern period. In proto form it existed in the mercantile period, but came into its own in the 19th century AD. The system is market dependent and dictates of the market, competition, accumulation, profit maximization and increase of labor productivity regulate all aspects of life. Social relations between people are relations between things. “Fetishism of commodities” as Marx put it. It is an imperative rather than a choice or an opportunity.

In actual fact capitalism is not a natural progression but rupture with earlier forms. If it was natural, it could not be overthrown. It is incompatible with democracy, social justice and survival of ecology.

Theories to Explain Emergence of Capitalism:

Classical political economy, enlightenment and Marxism all agree that Capitalism is the natural outcome of human practices and requires only passing of the feudal and mercantile phases for it to mature. Adam Smith “With truck, barter and exchange”, individuals have been engaged in exchange of goods and services since the beginning of history (2). Division of labor led to specialization.

In the Mercantile model of the origin of capitalism, it is the highest stage of progress and emerged when restraints (feudalism) were removed. It does not subscribe to the view that Capitalism arose when market became compulsory. In this model Capitalism is thus not a qualitative break, but a quantitative increase.

These restraints were removed in the West in ancient Mediterranean Society, but with several centuries long feudal hiatus of the Roman Empire. The Belgian historian Henri Pirenne attributed the hiatus to Muslim Empire’s expansion, which closed off the trade routes between the East and the West and the Mercantile Society was replaced by a rentier one (3).

Cities dominated by bourgeoisie emerged and freed themselves once and for all from constraints of feudalism and in due course capitalism arose and matured. In this view mercantile practice of buying cheap and selling dear is the same as Capitalist exchange and accumulation of wealth through appropriation of Surplus Value. Prudence and frugality allows accumulation of sufficient wealth to invest. This is primitive accumulation and once it reaches critical mass brings Capitalism, (which Marx debunked in Vol 1 of Capital). (4). Thus the bourgeoisie are the agents of progress.

Bourgeois are by definition town dwellers, not of the Nobility and work for a living, but use their mind rather than the body. The term can refer to professionals and intellectuals as much as to a merchant. The convergence of the Bourgeois and Capital was implanted in Western culture, and was brought about by British economic development and the French Revolution.

But many historians assert that Capitalism represents a break between the Feudal, Mercantile and Capitalist mode of production; from production for use to production for exchange to that of accumulation. They believe that Feudalism interrupted the development of Mercantile society into a Capitalist one.

The Commercialization model does not acknowledge Capitalism’s specific imperatives of the market; reinvest surplus, improve labor productivity, competition to enhance profit to maximum possible and lead to capital accumulation. Adherents of this model saw no need for an explanation of social property relations or exploitation.
The paradox is that the market is offered as an arena of choice and freedom, but the end result rules out human freedom.

Max Weber to Ferdinand Brandel-Demographic and other Models:

Weber contends that Capitalism arose only in specific historical conditions, and emphasized the uniqueness of Western cities and religion. He always talked about the factors that impeded Capitalist development in other places; kinship, forms of domination, the religious traditions, and thought that all Europe followed one historical path (5).
The Demographic model attributes European economic development to cycles of population growth and decline; that transition to Capitalism is governed by the law of supply and demand; Malthusian blockages (6). It challenges the primacy of expansion as a determinant of European development.

World systems theory intersects with dependency theory; world economic development by unequal exchange between core and periphery regions and exploitation by imperial power in colonial times and neo-imperial-postcolonial form (7).

Capitalism emerged in the early modern period when vast trading networks covered the globe. Most advanced non-European countries, whose technology (India supplied ships to the British to fight Napoleon) and commerce exceeded that of Europe, were self-sufficient and did not develop the networks. Moreover, the West had small states which encouraged trade based on division of labor and did not impede commerce and accumulation. Eastern Empires did not need to do so. (8).

Another variant is that commercial gravity shifted from Italian city states to Netherlands, Spain and finally to Britain; each stage built on the last and refining it (9).

New social history, though interested in the long term process of social change, yet harbors the tendency to beg the question. Thomas Mann offered “teleological bias” that industrial Capitalism prefigured in medieval European society and the driving force of European development was technological and commercial expansion (10). Absence of constraints and decentralized political order of feudalism, (without a head) gave merchants a substantial degree of autonomy. Protestant work ethic helped too (11). Private property was allowed to develop into Capitalist property because no community or class organization possessed monopoly powers.

Karl Polayni points out that individual profit associated with market exchange has never been a dominant principle in the economy till the modern age. “One must distinguish Society with Market, which have existed through history from Market society”. In all earlier societies economic relations submerged in non-economic relations-kinship, communal, religious, feudal. Motives of economic activities were status, community, solidarity, reciprocity, appropriation and redistribution of surplus by authority in addition to profit. Polayni challenged Adam Smith that propensity to ‘truck, barter and exchange’ did not regulate the economy till a century after Adam Smith assigned the dominant role to it. Markets operated under different logic from that of the modern capitalist one. (12)
Pre-Capitalist economies were complementary rather than competitive, even when distorted by unequal power. External trade was simply carrying trade, traders move goods from market to market and local trade was regulated and exclusive. Competition was discouraged as it disorganized trade.

Polayni points out that only internal national markets, a very late development, resisted by merchants and autonomous towns, were run on a competitive principle. Even internal markets in early modern period were for some time only a collection of separate municipal markets and joined by carrying trade as were overseas markets. Integrated internal markets were the result of state intervention largely based on self-sufficient peasants. State regulation continued to prevail over competition (13). Only a market society has a distinct economic motive. Human labor and land are treated as commodities in a self-regulating system of markets driven by price mechanisms; society itself becomes adjunct of the market. In a market society social relations are embedded in the economy, not the other way round

Polanyi asserts that so disruptive was the system of self-regulating market to social relations and human psyche that without the protective counter move of state intervention, human society would have been annihilated (14). This is a departure from the argument that continuities existed between the feudal/commercial/capitalistic developments. The main theme of Polayni’s historical account is that industrial revolution brought about a market society, invention of complex machines made it necessary to convert “Natural and human substance of society into commodities’ ‘ (15). Since elaborate machines are expensive, they do not pay for themselves, unless huge amounts of goods are produced…all factors involved must be on sale (16). “The industrial revolution was merely the beginning of an extreme and radical revolution that utterly transformed society by commodifying humanity and nature” (17). The transformation was the effect of technological progress; it was the culmination…of earlier improvements in technique…organization and notably the Enclosure movement in England. (18).

Polayni noted “the …inevitability…of Western European trends of economic progress” (19). According to him the state retarded change (Tudor Stuarts retarded the Enclosures) without which…progress might have been ruinous…industrial revolution itself required state intervention to preserve the social fabric (20). The process from commercialization to industrialization to market society may have been a natural development. West European feudalism, in contrast to the more advanced East, did not have strong bonds of kinship, clan and tribe, “…when feudal ties weakened…nothing stood in the way of domination of market forces which helped to destroy feudal institutions”. (21).

That does not explain the radical transformation of social relations that preceded industrialization. It presupposes the emergence of imperatives of Capitalism; competition, accumulation and profit maximization. Accumulation and enhanced productivity are treated not as a product of specific social relations, but a result of technological progress.
The Commercialization model is based on the premise that Europe deserves the credit for lifting barriers to development of Capitalism. Not all Euro-centric writers share the contempt of non-Europeans (22). Marxists believe that certain historical conditions, not European superiority produced specific consequences like capitalism.
Some Euro-centric accounts assume the latent existence of capitalism from the dawn of history; only how obstacles were removed explains its development. Europeans displaced a parasitic form of feudalism and monarchy with constitutional monarchy and liberal democracy. They replaced superstition with rationalism, enlightenment and technology progress and liberated the bourgeoisie.

Anti-Europeans deny the view and point to more advanced non-European societies through history. They also denigrate the importance of European imperialism in development of Capitalism, especially of the British, who made immense profit in sugar plantations and slave trade. 1492 was a major milestone. Non-Western countries would have evolved into Capitalism, if the western imperialists had not robbed them.

That evades the issue of transition to capitalism. Marx offered “Primitive Accumulation” and Capital not simply as wealth, but social relations and transformation of social property relations as the “real” primitive accumulation. Bourgeois revolution dressed up as Marxism is not very different from Euro-centric bourgeois accounts which treat bourgeoisie as agents of progress.

Bibliography/References:

1. Wood, Meiksins Ellen, “The Pristine Culture of Capitalism: A Historical Essay on Regimes and Modern States,” (London: Verso, 1991);
2. Smith, Adam, “The Wealth of Nations, 1776,” (Blacksburg, VA: Thrifty Books, 2009).
3. Pirenne, Henry, “Mohammed and Charlemagne,” (London: Allen and Unwin, 1956);
4. Marx, Karl, “The Capital,” Vol 1, (New York: Penguin Books, 1992);
5. Hilton, R.H., (ed.), “The Transition from Feudalism to Capitalism,” (London: Verso, 1976);
6. Dobbs, Maurice, Ibid., p 59;
7. Ibid 5, p 27;
8. Sebastian, Thomas, “Globalization and Uneven Development: Neocolonialism, Multinational Corporations, Space and Society,” (Jaipur, India: Rawat Publications, 2007);
9. ibid 1
10. ibid 5. pp 106-7;
11. Anderson, Perry, “Lineages of the Absolutist State,” (London: Verso. 1974), p 19;
12. Polanyi, Karl, “The Great transformation: The Political and Economic Origins of Our Times,” (Boston: Beacon Press, 1957);
13. Brenner, “The Origin of Capitalist Development: A Critique of Neo-Smithian Marxism,” The New Left Review, July-August 1977.
14. Hilton, “Capitalism-What is in the Name,” in ibid 5., pp 157-59;
15. ibid 11.
16. Ibid., p 21;
17. Ibid., 23;
18. Ibid., p 19; Anderson, Perry, “Maurice Thomson’s War,” (London Review of Books, 4 November 1993, p 17;
20. ibid 4 pp 699-701, (Moscow, nd);
21. ibid 13 pp 6-7;
22. Wood, “Eurocentric Anti-Eurocentrism,” Against the Current (May-June, 2001) pp 29-35

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