History of capitalism
is an economic system based on the private ownership of the means of production and their use for obtaining profit. It includes features such as private property, the profit motive, capital accumulation, competitive markets, commodification, wage labor, and an emphasis on innovation and economic growth. Modern capitalism evolved from agrarianism in England and mercantilist practices across Europe between the 16th and 18th centuries. The 18th-century Industrial Revolution cemented capitalism as the primary method of production, characterized by factories and a complex division of labor. Its emergence, evolution, and spread are the subjects of extensive research and debate.
The term "capitalism" in its modern sense emerged in the mid-19th century, with thinkers like Louis Blanc and Pierre-Joseph Proudhon coining the term to describe an economic and social order where capital is owned by some and not others who labor. Karl Marx discussed "capital" and the "capitalist mode of production" extensively in Das Kapital.
Some historians argue that the roots of modern capitalism lie in the "crisis of the Late Middle Ages," a period of conflict between the aristocracy and agricultural workers. This system differs from earlier forms of trade by focusing on surplus value from production rather than simply "buying cheap and selling dear." Conceptions of capitalism have evolved significantly over time, influenced by various political and analytical viewpoints. Debates sometimes focus on how to bring substantive historical data to bear on key questions. Key parameters of debate include: the extent to which capitalism is natural, versus the extent to which it arises from specific historical circumstances; whether its origins lie in towns and trade or in rural property relations; the role of class conflict; the role of the state; the extent to which capitalism is a distinctively European innovation; its relationship with European imperialism; whether technological change is a driver or merely a secondary byproduct of capitalism; and whether or not it is the most beneficial way to organize human societies.
Agrarian capitalism
Crisis of the 14th century
According to some historians, the modern capitalist system originated in the "crisis of the Late Middle Ages", a conflict between the land-owning aristocracy and the agricultural producers, or serfs. Manorial arrangements inhibited the development of capitalism in a number of ways. Serfs had obligations to produce for lords and to sustain their own families. The lords who owned the land relied on force to guarantee that they received sufficient food. Because lords expanded their power and wealth through military means, they spent their wealth on military equipment or on conspicuous consumption that helped foster alliances with other lords.The demographic crisis of the 14th century upset this arrangement. This crisis had several causes: agricultural productivity reached its technological limitations and stopped growing, bad weather led to the Great Famine of 1315–1317, and the Black Death of 1348–1350 led to a population crash. These factors led to a decline in agricultural production. In response, feudal lords sought to expand agricultural production by extending their domains through warfare; therefore they demanded more tribute from their serfs to pay for military expenses. In England, many serfs rebelled. Some moved to towns, some bought land, and some entered into favorable contracts to rent lands from lords who needed to repopulate their estates.
Some Marxists have used the word mercantilism to refer to a stage of development before capitalism. Feudalism lasted from the medieval period through the 16th century. Feudal manors were almost entirely self-sufficient, and therefore limited the role of the market. This stifled any incipient tendency towards capitalism. However, the relatively sudden emergence of new technologies and discoveries, particularly in agriculture and exploration, facilitated the growth of capitalism. The most important development at the end of feudalism was the emergence of what Robert Degan calls "the dichotomy between wage earners and capitalist merchants". The competitive nature meant there are always winners and losers, and this became clear as feudalism evolved into mercantilism, an economic system characterized by the private or corporate ownership of capital goods, investments determined by private decisions, and by prices, production, and the distribution of goods determined mainly by competition in a free market.
Enclosure
England in the 16th century was already a centralized state, in which much of the feudal order of Medieval Europe had been swept away. This centralization was strengthened by a good system of roads and a disproportionately large capital city, London. The capital acted as a central market for the entire country, creating a large internal market for goods, in contrast to the fragmented feudal holdings that prevailed in most parts of the Continent. The economic foundations of the agricultural system were also beginning to diverge substantially; the manorial system had broken down by this time, and land began to be concentrated in the hands of fewer landlords with increasingly large estates. The system put pressure on both the landlords and the tenants to increase agricultural productivity to create profit. The weakened coercive power of the aristocracy to extract peasant surpluses encouraged them to try out better methods. The tenants also had an incentive to improve their methods to succeed in an increasingly competitive labour market. Land rents had moved away from the previous stagnant system of custom and feudal obligation, and were becoming directly subject to economic market forces.An important aspect of this process of change was the enclosure of the common land previously held in the open field system where peasants had traditional rights, such as mowing meadows for hay and grazing livestock. Once enclosed, these uses of the land became restricted to the owner, and it ceased to be land for commons. The process of enclosure began to be a widespread feature of the English agricultural landscape during the 16th century. By the 19th century, unenclosed commons had become largely restricted to rough pasture in mountainous areas and to relatively small parts of the lowlands.
Marxist and neo-Marxist historians argue that rich landowners used their control of state processes to appropriate public land for their private benefit. This created a landless working class that provided the labour required in the new industries developing in the north of England. For example: "In agriculture the years between 1760 and 1820 are the years of wholesale enclosure in which, in village after village, common rights are lost". "Enclosure was a plain enough case of class robbery". Anthropologist Jason Hickel notes that this process of enclosure led to myriad peasant revolts, among them Kett's Rebellion and the Midland Revolt, which culminated in violent repression and executions.
Other scholars argue that the better-off members of the European peasantry encouraged and participated actively in enclosure, seeking to end the perpetual poverty of subsistence farming. "We should be careful not to ascribe to developments that were the consequence of a much broader and more complex process of historical change." "he impact of eighteenth and nineteenth century enclosure has been grossly exaggerated...."
Merchant capitalism and mercantilism
Precedents
While trade has existed since early in human history, it was not capitalism. The earliest recorded activity of long-distance profit-seeking merchants can be traced to the old Assyrian merchants active in Mesopotamia the 2nd millennium BCE. The Roman Empire developed more advanced forms of commerce, and similarly widespread networks existed in Islamic nations. However, capitalism took shape in Europe in the late Middle Ages and Renaissance.An early emergence of commerce occurred on monastic estates in Italy and France, but in particular in the independent Italian city-states during the late Middle Ages, such as Florence, Genoa and Venice. Those states pioneered innovative financial instruments such as bills of exchange and banking practices that facilitated long-distance trade. The competitive nature of these city-states fostered a spirit of innovation and risk-taking, laying the groundwork for capitalism's core principles of private ownership, market competition, and profit-seeking behavior. The economic prowess of the Italian city-states during this time not only fueled its own prosperity but also contributed significantly to the spread of capitalist ideas and practices throughout Europe and beyond.
Emergence
Modern capitalism resembles some elements of mercantilism in the early modern period between the 16th and 18th centuries. Early evidence for mercantilist practices appears in early modern Venice, Genoa, and Pisa over the Mediterranean trade in bullion. The region of mercantilism's real birth, however, was the Atlantic Ocean.File:Sir Josiah Child, Bt by John Riley.jpg|thumb|left|upright|Sir Josiah Child, an influential proponent of mercantilism. Painting attributed to John Riley.
England began a large-scale and integrative approach to mercantilism during the Elizabethan Era. An early statement on national balance of trade appeared in Discourse of the Common Weal of this Realm of England, 1549: "We must always take heed that we buy no more from strangers than we sell them, for so should we impoverish ourselves and enrich them." The period featured various but often disjointed efforts by the court of Queen Elizabeth to develop a naval and merchant fleet capable of challenging the Spanish stranglehold on trade and of expanding the growth of bullion at home. Elizabeth promoted the Trade and Navigation Acts in Parliament and issued orders to her navy for the protection and promotion of English shipping.
These efforts organized national resources sufficiently in the defense of England against the far larger and more powerful Spanish Empire, and in turn paved the foundation for establishing a global empire in the 19th century. The authors noted most for establishing the English mercantilist system include Gerard de Malynes and Thomas Mun, who first articulated the Elizabethan System. The latter's England's Treasure by Forraign Trade, or the Balance of our Forraign Trade is The Rule of Our Treasure gave a systematic and coherent explanation of the concept of balance of trade. It was written in the 1620s and published in 1664. Mercantile doctrines were further developed by Josiah Child. Numerous French authors helped to cement French policy around mercantilism in the 17th century. French mercantilism was best articulated by Jean-Baptiste Colbert, although his policies were greatly liberalised under Napoleon.