The Origin of Capitalism

The Origin of Capitalism
Ellen Meiksins Wood


Collapse of communism made many people believe that capitalism was the natural condition of humanity. , negated cyclical recessions and meltdowns.
There is a conflict between the needs of people and requirement of profit.
Capitalism recovers from recurrent crisis at the cost of suffering of hundreds of millions pf people. The conviction that there can be no alternative to capitalism is deeply rooted in the western mind. The belief is that history from the very beginning has been driven by capitalist laws, and the system is the destination of history.
Capitalism-all goods and services are produced for profit, human labor is a commodity for sale, workers and capitalists are dependent upon the market. Producer are dependent upon it for access to the means of production, unlike the peasants who have retained non-market possession of land. They can not directly use the power of coercion-military, political and judicial as feudal lord can.
Competition and profit maximization are fundamental to capitalism. Bulk of work is done by property less laborers who create profit for those who purchase their labor. The basic objective pf capitalism is production and expansion of capital.
It did not exist before the early modern period and then too in Western Europe. In proto form it existed in the mercantile period, but came into its own in the 19th CAD.
It has been regarded as the natural realization of an ever present tendency. They have presumed the existence of profit maximizing rationality and to improve labor productivity a continuous progress of tech improvement inherent in nature..
These explanations beg the question that emergence and growth of capitalism is manifestation of human rationality and techno advancement began with the use of tools by homo-sapiens and human socialization. Progress from the earliest times to mercantilist and capitalist society has been inevitable. It only had to be released from the chains of feudalism and mercantilism. Seeds of capitalism were embedded in the most primitive acts of exchange. Techno has continuously advanced. Marxists add bourgeois revolution to break the fetters of feudalism. Capitalist market is 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)
Central to the argument is that humans will always want to maximize profits and make innovation to increase the productivity of labor.
Capitalism is an opportunity to be taken. Market connotes an opportunity, a place where opportunities exist to sell and buy-implies a choice.
In capitalist ideology market implies freedom guaranteed by supply and demand, chosen freely by people. They compel economic actors to act rationally.
According to socialists it involves commodification of labor and class exploitation.
But 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” according to Marx.
It is an imperative rather than a choice or an opportunity.
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.
Chap 1 Commercialization model:
Capitalism is the natural outcome of human practices and required only removal of obstacles for it to mature..
This appears in classical political economy, enlightenment and in Marxism.
Adam Smith “with truck, barter and exchange”, individuals have been engaged in exchange of goods and services since the beginning of history. Division of labor led to specialization. In time technique of production improved which may have been the reason for division of labor. Capitalism in this view is the highest stage of progress and capitalism emerged when restraints (feudalism) removed, does not prescribe to the view that capitalism arose when market became compulsory.. Capitalism is thus not a qualitative break, but a quantitative increase.
These restraints were removed only in the West since 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 mercantile society replaced by a rentier one. (1).
Commerce revived with growth of cities, the assumption being the association of cities with capitalism. 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 Vol 1 of Capital), thus the bourgeoisie are the agents of progress. Bourgeois are by definition town dwellers, not noble, worked for a living, but used his mind rather than his body and can refer to professional, intellectual as much as to a merchant. The convergence of bourgeois and capital was implanted in western culture was brought about by British economic development with the French revolution. But many historians who subscribe to the view do acknowledge 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 was the real rupture which interrupted the development of mercantile society.
Commercialization model does not acknowledge capitalism’s specific imperatives that compel people to enter the market, reinvest surplus, improve labor productivity, compete, profit enhancement to maximum possible and capital accumulation, adherents of this model saw no need to explanation of social property relations or exploitation.
The paradox is that market is supposed to be an arena of choice and commercial society another name for freedom, but the
concept rules out human freedom.

Refinements:
Max Weber to Ferdinand Brandel (2)
Weber capitalism arose only in specific historical conditions, and emphasized the uniqueness of Western cities and religion, but he always talked about the factors that impeded capitalist development in other places, kinship, forms of domination, their religious traditions, and thought that all Europe followed one historical path.
Demographic model attributes European economic development to cycles of population growth and decline, that transition to capitalism governed by the law of supply and demand (3)-Malthusian blockages. It however challenges the primacy of expanding as 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-post colonial form (4). Capitalism emerged in early modern period when vast trading networks covered the globe. Most advanced non-European countries whose tech and commerce exceeded that of Europe were thwarted by the unbalance (India supplied ships to the British to fight Napoleon). West further had small states which encouraged trade based division of labor and did not impeded commerce and accumulation. Eastern Empires drained wealth away and hampered investment. It shares with commercialization model in extent of trade index of capitalist development, simply inverts commercialization model in that advanced society fails to grow into capitalism due to impediments. 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. In accountancy, techno in the English industrial revolution. (5).
Neo-classical economics has not added to it as it is not interested in history.
New social history is interested in long term process of social change. But here too tendency to beg the question. Thomas Mann “teleological bias” industrial capitalism prefigured in medieval European society (7) driving force of European development due to techno and commercial expansion (8) and absence of constraints, decentralized political order of feudalism( with out head) left merchants with a substantial degree of autonomy the help of rationalism and normative order provided by Christianity. Private property was allowed to develop into capitalist property because no community or class organization possessed monopoly powers.
Karl Polayni, “The Great Transformation-1944” individual profit associated with market exchange, never a dominant principle economy till the modern age (9). 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 other than just profit. Status, community, solidarity, reciprocity, appropriation, redistribution of surplus by authority. He challenged Adam Smith that propensity to truck, barter and exchange did not regulate the economy till a century after Adam smith assigned dominant role to it. Markets operated under different logic from that of the modern capitalist one.
Pre-capitalist economies were not competitive, they were complementary, even when distorted by unequal power. External trade was simply carrying trade, trader moved goods from market to market and local trade was regulated and exclusive. Competition discouraged as it disorganized trade. Polayni points out that that only internal national market, a very late development was resisted by merchants and autonomous towns , were run on 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 market were the result of state intervention largely based on self sufficient peasants. State regulation continued to prevail over competition.
Only a market society has distinct economic motive. Human labor and land are treated as commodities in 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, than the other way round
Polayni; so disruptive was the system of self regulating market to social relations and human psyche that with out protective counter move of state intervention, human society would have been annihilated. 910). This is a departure from the argument that continuities existed between the feudal/commercial/capitalistic development.
The main problem with Polayni’s argument is have to do with explanation of the conditions and historical process under which market society emerged.
The main theme of Polayni’s historical account is that industrial revolution brought about a market society, invention of complex machines made necessary to convert “natural and human substance of society into commodities” (11).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 (12). “the industrial revolution was merely the beginning of an extreme and radical revolution that utterly…transformed society by commodifying humanity and nature” (13). The transformation was the effect of technological progress (14), it was the culmination…of earlier improvements in technique…organization and notably the enclosure movement in England.
Polayni…inevitability…of Western European trend of economic progress (15). According to him the state retarded change. (Tudor Stuarts retarded the enclosures) with out which…progress might have been ruinous…industrial revolution itself required state intervention to preserve social fabric (16). The process from commercialization to industrialization to market society may have been a natural development. West European feudalism, in contrast to 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 (17) which helped to destroy feudal institutions.
That does not explain that radical transformation of social relations preceded industrialization. It presupposed the emergence of imperatives of capitalism. Competition, accumulation and profit maximization. Accumulation and enhanced productivity are treated not a product of specific social relations, but a result of techno progress.
Why did capitalism not emerge in other countries? Was it failed transition?
Anti-Euro-centrism:
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.(18). The rank includes racists, ecological determinists, non-racist who underestimate the influence of European imperialism (Empires rise like tidal waves and fall like them, Mesopotamia, Africa, Egypt, Greek, Roman, Persian, Asia, Europe, run out of steam, not hungry any more) and Marxists who believe certain historical conditions, not European superiority produced specific consequences like capitalism.
In some euro-centric accounts capitalism has no beginning and involves no transition from one mode of production to another, assumes its latent existence from the dawn of history, only how obstacles were removed explain its development. Europeans displaced parasitic form of feudalism and monarchy with constitutional monarchy and liberal democracy, superstition with rationalism, enlightenment and technology progress and liberated the bourgeoisie. Ant-Europeans deny Europe’s superiority and emphasize more advanced non-European societies through history and the importance of European imperialism in development of capitalism and especially of the British on profit in sugar plantations and slave trade and 1492 a major milestone.. Non-West would have evolved into capitalism, if the western imperialists had not robbed them (why were they able to do so)
Ant-Europeans start from the same premise as Euro-centric do.
Europe diverged from the rest of the world with bourgeoisie revolution and advent of industrial capitalism. Imperialism gave it the critical accumulation of wealth. Non-Europeans were a case of arrested development, did not throw of shackles from over the bourgeoisie.
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.
Critics of Euro-centric history have no concept of capitalism as a specific form, which compels agents of economy to behave in a specific way. Bourgeois revolution dressed up as Marxism is not very different, from Euro-centric bourgeois accounts which treat bourgeoisie as agents of progress.
Western path of natural development deflates Europe