Should the government be involved in the economy? If so, to what extent should they get involved? When is it okay for capitalism to bleed into socialism? How far can the boundary between capitalism and socialism be pushed? But the capitalism that rules our society today is very different from its humble origins in the thirteenth century.
For centuries the Catholic Church condemned money lending at interest or usury, believing it to be a mortal sin. This meant that the use of wealth to create more wealth had little chance of developing before major trade centers began to flourish. However, as trade centers began to grow, the seeds of capitalism were laid. Italy was the epicenter of trade during the Middle Ages, placed at a very strategic location between Asia and Europe on the Mediterranean Sea.
City-states, like Florence and Naples, brought in profits that were capitalist in nature because any merchant is, in a sense, a capitalist, and Italy had some of the largest merchant cities in the world. The merchant, and by rights capitalist, risked his profit each time her bought product in one place only to sell it in another. Florence with its large banking families is the best example of early capitalism.
They engaged in transactions across Europe, and even saw a successful strike by underpaid day workers in the textile industry, who all wanted a share in the benefits and profits enjoyed by their employers.
With the Protestant Reformation came the opportunity for capitalism in the northern protestant countries, like the Netherlands and France. Because the Protestant Church removed the stigma associated with usury, people were free to lend money at interest. The religion positively encouraged purposeful investment. A wealthy family was a sign of good predestination, meaning wealth ensured entrance into Heaven, leading people to seek out a means for wealth.
The nature of business during this time meant that there was a chance for profit growth for the individual, rather than a large-scale enterprise. This began to change with the creation of the joint-stock companies and the development of factories at the outset of the Industrial Revolution in the sixteenth and seventeenth centuries. As the Old World started undertaking ocean voyages to expand the world, a mercantile system of trade came into practice. Mercantilism is the belief in the benefits of profitable trading; commercialism.
For instance, in Britain, wheat prices, which had been static for centuries, more than trebled between and Increased use of money and inflation began to undermine the feudal order. The gentry wanted money to buy the new luxury goods that flooded Europe. Meanwhile, spiralling prices meant they could make money either by producing and trading agricultural goods directly, or by renting the land to a growing class of large-scale farmers.
Thus, capitalism was quick to penetrate into English agriculture, where part of the land-owning class formed a bloc with the new capitalist farmer. These changes in the economy led to a dramatic change in social relations.
Evictions gathered pace as trade increased, especially as the growth of the textile industry raised the demand for high quality English wool. The landed gentry enclosed more and more common land, to raise sheep.
Such land was owned collectively by the peasantry and was forcibly taken over - stolen - by the aristocracy. Some measure of the pace of evictions can be gauged from contemporary writers. By , H. Stafford wrote:. On the contrary, they insist that the land belongs to them and throw the poor out of their shelter, like curs. In England at the moment, thousands of people, previously decent householders, now go begging, staggering from door to door.
Evicted from the land and faced with massive price rises for basic foods, the lives of an increasing number of landless peasants became ones of desperation and growing starvation. Evictions were to carry on in Britain for the next three centuries. As a result, today, it still has the smallest rural population in the industrialised world, and even amongst these, the majority neither own nor work on the land. It is interesting to note that the transition from feudalism to capitalism took a different route in France due to the French revolution.
The land, which under feudalism was jointly owned by the lord and the peasant, was taken from the defeated aristocracy and handed to the peasantry, making France a country of small-scale peasant holdingsthe opposite of what occurred in Britain. It was not just in the countryside that the feudal order was breaking down. In the towns throughout the 16th Century, the guild system also suffered due to the increased trade. The new merchant capitalists now bought goods locally for export.
Hence, these were no longer produced for sale locally, but were instead sold to merchants. As merchants could travel the country to buy the cheapest goods, craftsmen soon found themselves competing with each other in a national market. This undermined the guild system, which could only operate through control of regional economies, maintaining monopoly production, and keeping market forces at bay.
However, with the establishment of a national market, the regional monopolies were broken. Henceforth, market forces began to dictate patterns of trade, fundamentally affecting all aspects of production, consumption and pricing of goods.
Capitalism started to emerge during the 17th Century. However, gradually, they began to dominate the latter, first by placing orders and paying in advance, then by supplying the raw materials, and paying a wage for the work done in producing finished goods. The concept of a waged worker signalled a crucial stage in the development of capitalism.
The first stage of capitalism had come into being. This stage saw one new class, the primitive capitalists, exerting power over another new class, the waged workers.
Early capitalism also engendered new methods of production. The cottage industry model became so widespread in the woollen textile industry that it became a method of mass production. Importantly, the hundred-year transition from feudalism to primitive capitalism had strong state support.
The regionally based feudal economies and the power of the aristocracy ran counter to the interests of this alliance between capitalism and the increasingly centralised state. The state gained the wealth it desperately needed to maintain its growing bureaucracy and standing army, by tapping into capitalism through taxes, customs, duties and state loans. Such measures included bans on the import of manufactured goods, restrictions on the export of raw materials destined for competitors, and tax concessions on the import of raw materials.
Restrictions on exporting raw materials hit the aristocracy particularly hard as agricultural produce is, by its very nature, raw materials.
Thus, bureaucrats and capitalists defeated the aristocracy - though a section did survive the transition from feudalism by forming an alliance with the new capitalists. It is worth noting here that the alliance between the state and capitalism occurred across Europe, though in different forms. This was an early indication of the development of the social market in Germany under which the state has much more power.
In Britain, capitalism was much more developed and so was able to exert much more influence, leading to the development of the free market system, under which the state has far less influence. The establishment of capitalism was a time of upheaval and bitter struggles between new and old power-brokers.
At the same time, the mass of the population were dragged unwillingly into an increasingly violent conditioning process. The new capitalists needed to be able to exert ever more pressure on their producers to produce more for less, so that the capitalists could maintain trading prices and increase profits.
They looked to the state to ensure pressure was brought to bear on workers who, for the first time, were being forced to sell their labour in an increasingly competitive work environment, which was itself aggravated by the swollen ranks of the new landless and unemployed. Laws were passed setting a rate for the maximum wage payable to peasants. The aim of all this brutal legislation was to turn the dispossessed into a disciplined obedient class of wage workers who, for a pittance, would offer up their labour to the new capitalism.
The state also clamped down on beggars, whose ranks were swollen by dispossessed peasants and ruined craftsmen. Able- bodied vagabonds were lashed or branded with red-hot irons, while persistent vagrants were liable to execution. The problem of creating a disciplined and regimented workforce should not be underestimated. Viewed from our advanced modern industrial perspective, submitting to the routine of going to work daily, for a set number of hours, usually inside a building, appears the norm.
From the perspective of 16th and 17th Century peasants, however, this routine would have been alien. The working day under a pre- capitalist agrarian system would have been shaped by hours of light and hours of darkness, as most work took place out of doors.
The intensity and length of labour was dictated by seasonal considerations, such as planting or harvest periods. Similarly, holiday periods, even those marked by the Church, were seasonally derived and often based on ancient pagan festivals. The number and extent of these holidays helped define and shape the working year; up until the Reformation during the 16th Century, it is estimated that around days a year, excluding Sundays, were given over to celebrations and festivals.
The spread of capitalism meant that the feudal economic system and the power of the aristocracy was in terminal decline by the late 17th Century. The establishment of mass production, based on the cottage industry, meant England was well on the way to becoming a capitalist and industrially-based society.
As the 18th Century progressed, this transition was completed. During the 18th Century, a primitive form of manufacturing developed, which differed from cottage production in that workers did not work from home, but rather from single premises, or factory, owned by the capitalist. However, this early manufacturing differed from its later form in that it still depended on human physical power with little use of machinery.
As such, early 18th Century manufacturing can be seen as a link between domestic production, based on cottage industry, and capitalist production, based on the mechanised factory system. At first, the move towards factory production was driven by cost. Centralised production spared capitalists the cost of distributing raw materials to individual workers.
Further, as the factory system developed, it soon became clear that it gave capitalism much greater control over the workforce, establishing tighter organisation of work and workers and thus higher productivity. Keeping production under one roof also meant the possibility of speeding it up by breaking the process down into planned stages. This entailed workers specialising in one particular component of the production process.
This led to gains by the capitalist because of the greater speed of the production process and the better quality of the goods. Importantly, this division of labour into separate tasks significantly transformed the nature of work. It effectively de-skilled craftsmen and women who had been trained to produce finished goods by participating in the process of production from beginning to end and arguably, removing the sense of meaningfulness inherent in being present in the whole process of production to the point of completion.
These transformations, of the place and nature of work, lead to yet another fundamental change in social relations. Society rapidly evolved into two clearly defined social classes, the industrial capitalist and the waged worker. Capitalists broke their remaining links with their merchant past, giving up their commercial role to concentrate on organising the production process. Their sole source of income was profit, gained from the exploitation of the labour of the emerging working class.
Working class life also changed dramatically under the factory system. Even under the cottage industry system workers had had some independence. Owning their own basic tools and cultivating a plot of land enabled them to subsidise their income. This, and the fact that they worked unsupervised from home, gave them some degree of autonomy and control.
In the factory, any semblance of autonomy was lost completely. Workers had to work a specific number of hours under the direct supervision of the capitalist, who owned the more specialised tools. With no land or tools to earn extra income from, workers became totally dependent on their ability to sell their labour. Thus, a clearly defined working class was emerging, separated totally from even limited control of the means of production.
The wage slave had been born. New social relations within the factory also developed. With the division of labour it was necessary for someone to co-ordinate the actions of many workers. It had become normal for men to conceive of themselves as producers and sellers for impersonal ends.
About a third of the total labor force worked for wages or salary and thus were sellers of their labor power. In agriculture, world markets claimed major portions of the cotton and other crude materials output of the country. Factory production in the textile industry and transportation advances were hurtling America toward economic predominance.
By mid-century, American per capita output lagged behind that of England, but exceeded that of France. No institution was more significant in that growth than the business corporation. The modern business corporation was the country's second great contribution to the world economy. How to fight a war with paper money was the first. The expansion of corporations forced the courts to review older doctrines and face up to altogether new problems as well.
Supreme Court declared the corporation a citizen. The federal courts, it was revealed, had never been satisfied with the old Devaux ruling. John Marshall, who had written the Court's opinion, had himself become disenchanted with the ruling. Economic power is the central component of the capitalist system. During America's history before the arrival of Europeans, economic power did not exist since life at that time was characterized by an equality of condition.
Even Native American chiefs who presided over crop surpluses were obliged by custom to share with those in need. Economic power implies a choice not to share; the fact of inequality of possession is secondary. Since the economically powerful in a society are almost by definition a minority, self-concern requires that their advantages be made secure from attack.
Power and political rule are thus joined. As Lawrence Friedman writes: "A plan of government is a plan for distribution of the power and wealth of a society. Rather, that is the time for consolidating and structuring advantage. Rule on behalf of the economically powerful proceeds most readily when the ruled accept the legitimacy of that rule.
The ruled may come to regard their deprivation as a mere coercion of circumstance. Economic power always establishes itself in practice and only later in law. That is why it is so readily presented as "practical. Power creates practicality. Economic power dominates. It precludes anything resembling an equality of bargaining. Its possessors dominate in order to create dependence. Except for a broader ownership of land than in most of Europe, the findings of American authors do not sustain at all the traditional portrait of substantial equality.
American society after the Native American period was always characterized by sizable differentials in wealth and power. Only by ignoring masses of recent research can the contrary be claimed. During more than years before the American Revolution, an economic and political elite held sway in just about all the colonies.
Bureaucratic capital accumulated as offices in government became a main avenue for acquisition of land. Prodigious land grants were assigned by top officeholders to themselves or handed over to family, friends, and business associates.
The elites treasured such golden connections and closely superintended access to official positions in county- and province-wide government. Almost invariably, large-scale merchants, landowners and slaveholders, and occasionally professionals occupied the top rungs of colonial society. Even where politics was more democratic, as in colonial Boston, concentration of economic power did not fade away. Wealth and power were further consolidated during the Revolution and the drafting of the Constitution and After three decades of independence, conservative concern that popularly elected law-making bodies might confiscate accumulated wealth was found groundless.
In , Thomas Jefferson wrote John Adams that "from 15 to 20 legislatures of our own, in action for 30 years past, have proved that no fears of an equalization of property are to be apprehended from them.
Capitalism after a time absorbed older forms of enterprise and simultaneously raised the stakes of business to unexpected heights.
One difficulty for Americans in understanding the rise of capitalism in the United States is the very fact that capitalism is a system. Adam Smith once explained that "a system is an imaginary machine invented to connect together in the fancy those different movements and effects which are already in reality performed. Instead, they are combinations of real actions and mental interconnections. Since the whole machine "works," one would consider its existence to be beyond dispute. The opposite is true.
History is all but absent from the pages of the Left and the Right in the United States. Left journals rarely deal with the history of American capitalism. Nor do references to the subject appear in articles devoted to analysis of the contemporary scene. In other words, economic history seems to be irrelevant. Capitalism in Left discussion becomes only contemporary American capitalism. And it is an unchanging capitalism.
How it originated is a mystery. More is written about the history of English capitalism, although the particularities of English and American history are extremely different. On the Right, capitalism is conceived as eternal and unchanging, as part of human nature. Clearly, then, capitalism has no history. In this view, capitalism did not develop, it was created whole.
Since it is eternal, it neither ages nor decays. Criticism of capitalism is blasphemy, and heretics are banished. Gifted devotees are venerated and awarded great wealth. The business press of the United States is largely devoted to celebrations of capitalism, certainly not to a critical history of its origin and development.
When a specific criticism of capitalism is occasionally voiced in public, it is countered with a charge of faultfinding or, curiously, is characterized as "past history. NOTES 1. Mohr, , p. Unaccountably, the English translation omits reference to "Canaan". Translated by Patricia M.
Hocking and C. Husbands M. Sharpe, , p.
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