Today, Capitalism is an economic powerhouse. Most major countries practice it and even those that don't are affected by it. So, what is Capitalism and how did it become the way so many countries run their economies?
Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, a price system, private property and the recognition of property rights, voluntary exchange and wage labor. Before we dive into Capitalism it is important to understand what inspired it. Feudalism was the way the elite figured out how to maintain power and live a lavish lifestyle while doing the least amount of work possible. It is important to understand how this system worked because not only is it a precursor to Capitalism but it is also a precursor to Communism and Socialism.
As we can see free trade or lack of free trade is what truly gave the feudal lords their power. This power began breaking down around the 16th century as trade began to grow again. Merchants began to amass great fortunes by purchasing foreign goods cheaply and selling them for huge profits. (sound familiar) This allowed many European countries to grow rich from taxes and their share of trade by establishing colonial empires. Once a country created a colony they would impose a trading monopoly by banning foreign merchants and ships. Countries like Spain would establish colonies in America and only be allowed to export to Spain where they were then traded to European countries at a tremendous mark up. Naturally ownership of the new land was extremely important and that is why England a a latecomer to the international trade race developed a strong military force. As trade grew outside and within Europe money began to change the feudal economy. In Britain, wheat prices, that had been static for centuries, more than tripled between 1500 and 1574. This inflation of money undermined the feudal order. As prices spiraled it made it easier for individuals to make money either by producing and trading agricultural goods directly or by renting the land to a growing class of large-scale farmers. This allowed capitalism to penetrate English agriculture. The changes in the economy led to a dramatic change in social relations. The peasants who were tied to the land and owned by the lords were kicked off the land to make room for sheep to be raised for high quality English wool. The Elite forcibly took as much land as they could. These evictions took place for the next three centuries. Today, Britain still has the smallest rural population in the industrialized world. The majority of people neither own nor work on the land. In France the French revolution prevented this from happening . Upon defeating the aristocracy they handed the land to the peasants and made France a country of small-scale peasant holdings. In towns throughout the 16th Century, the guild system suffered due to increased trade. Merchants no longer forced to only buy locally forced craftsmen to compete across a national market. Unable to maintain monopoly production and keep the market forces at bay they began to take control of trade affecting all aspects of production, consumption and pricing of goods.
Capitalism began to truly emerge during the 17th Century. In the beginning the merchants, or 'buyer uppers', as they became know, were a link between consumer and producer. With time they began to change things through placing orders and paying in advances and supplying the raw materials and paying a wage for the work done in producing finished goods. A waged worker brought a crucial change in the development of capitalism. Its introduction was the final stage in the 'buyer uppers' transition from merchant to capitalist, or making money from trade to deriving wealth from the ownership and control of the means of production. This introduced the world to what we have today a Capitalist or owning class and a waged working class. The hundred-year transition from feudalism to primitive capitalism had strong state support. The feudal economies and the power of the aristocracy found themselves running on the same side of capitalism and the increasingly centralized state. The state gained the wealth it needed to maintain a growing bureaucracy and standing army through taxes, customs, duties and state loans. In return, it conquered colonies, fought to dominate the world's markets, and took measures against foreign competition and the power of the aristocracy. Some of the ways they did this was bans on the import of manufactured goods, restricting the export of raw materials, and tax concessions on the import of raw materials. Restrictions on the exporting of raw materials hit the aristocracy particularly hard, however a section did survive the transition from feudalism by forming an alliance with the new capitalists. The alliance between the state and capitalism occurred across Europe through different forms. In Germany where capitalism was much less developed and weaker, the state was able to exercise much more control. In contrast in Britain, capitalism was much more developed and able to exert more influence which lead to the development of the free market system that gave the state less influence.
Establishing capitalism wasn't easy. It was a time of great upheaval and bitter struggles between the old power houses and the new ones. The mass of the population was dragged unwillingly into an increasingly violent conditioning process. The new capitalists had to be able to exert more pressure on their producers to produce more for less so they could maintain trading prices and increase their profits. For the first time, workers were being forced to sell their labor in an increasingly competitive work environment, an environment that was aggravated by a swollen number of landless and unemployed. Laws were passed setting a rate for the maximum wage payable to peasants. The aim was to turn the disposed into a disciplined obedient class of wage workers who, for a pittance, would offer up their labor to the new capitalist elite. The state also clamped down on beggars and able-bodied vagabonds were lashed or branded with red-hot irons, while persistent vagrants would be executed. It's important to understand how hard it was to create a disciplined and regimented workforce. Looking 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 to be normal. However, this routine was alien to the peasants of the 16th and 17th century. During a pre-capitalist system the workday would of been shaped by hours of light and dark and most work took place outside. The intensity and length of labor was dictated by seasonal considerations, such as planting or harvest periods. Holiday periods, even those marked by the church were 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 165 days a year, excluding Sundays, were given over to celebrations and festivals.
By the time the late 17th century came along, capitalism had successfully brought the feudal economic system to its knees. England had established mass production and was on its way to becoming a capitalist and industrially-based society. As the 18th Century progressed the transition was complete and during this time a primitive form of manufacturing had begun to develop. The new system required people to work from a single location or factory owned by the capitalist. Contrary to the highly mechanized factories we have today, early manufacturing relied heavily on human physical power with little use of machinery. The move to factory production was originally inspired by cost. By utilizing a centralized production the capitalist could spare themselves the cost of distributing raw materials to individual workers. The factory system gave capitalism more control over the workforce. It established tighter organization of work and workers and increased productivity. Keeping production under one roof enabled them to speed things up by breaking the process down into planned stages. Although this allowed workers to specialize in one particular component of the production process, it also reduced the worker's role to repeating the same monotonous task. It effectively de-skilled craftsmen and women who had been trained to produce finished goods from beginning to end. However, it led to massive gains for the capitalist due to greater speed of the production process and better quality of the goods. This transformation led to another fundamental change in social relations. Society evolved into two social classes, the industrial capitalist and the waged worker. Capitalists were able to break their links to their merchant past and gave up on their commercial role to concentrate on organizing the production process. Their sole source of income was profit, which they gained by exploiting the labor of the new working class. Working class life changed dramatically under the factory system. Previously workers had some independence by owning their own basic tools and cultivating a plot of land. They also worked unsupervised from home which gave them some autonomy and control. The factory removed all autonomy and workers had to work a specific number of hours under direct supervision of the capitalist who owned the tools required to do the work. Without land or tools to earn money with, workers became completely dependent on their ability to sell their labor, and the wage slave was born. This also brought new social relations within the factory. The division of labor made it necessary to have someone coordinate the actions of many workers. Thus the job of overseeing was created and the more production became simplified the more the term unskilled worker came up. As factory production developed the needs of capitalism changed. The state was enlisted to help continue expansion. Apprenticeship laws were used to ensure the right to engage independently in industry was only granted to men who had served a seven-year apprenticeship and were members of a guild. Naturally this limited the number of workers that could be hired and slowed the spread of factory production. In the beginning, manufacturers were able to by pass these guild regulations by setting up in rural areas and new towns that the guild didn't operate and investing in new industries not covered by guilds. As capitalism grew, so did the request for an unregulated free labor market. The state removed all remaining restrictive guild regulations and undermining the practice of local Justices of the Peace setting minimum wage levels. The free market form of British capitalism demanded and received a completely deregulated and unprotected workforce that enabled them to exploit to the max. Capitalism developed quicker in Britain and was more 'productive' than anywhere else. This make British capitalists call for international free trade and to end protectionism. The laws that were brought in by the state to protect the interests of capitalism against foreign competition were now a barrier that prevented the more dynamic sectors of British industry from exploiting overseas markets. Today, all capitalist countries push this free trade idea on all underdeveloped nations in an attempt to get them to open their borders.
The early 1770s found the economic and social conditions prime for an industrial revolution. With new inventions the primitive factory system was transformed, and machine power drove productivity to unprecedented levels. Between the 1770s and 1830s a factory boom saw all manners of buildings being converted into factories and the majority of waged labor happening inside these buildings. The industrial revolution was a huge step forward for capitalist. Its important to understand how social relations played a key part in this possibility. Under feudalism new inventions and machines were heavily opposed and often seen the inventor put to death. The guilds demise led to all manner of labor-saving inventions such as the water wheel, the blast furnace, pumping machines for mines, improved transmission of power through cog-wheels and fly-wheels. The cotton industry was really the first stop for the industrial revolution. Cotton production only appeared in Britain in the late 17th Century and was free of any guild restrictions and had to compete with a well-established woolen industry. The invention of the steam engine is what truly set the industrial revolution off. Steam power replaced human power, first in the cotton and metal industries, then throughout all other industries. The explosion in productive power transformed Britain's economy. With increased productivity prices of manufactured goods plummeted which stimulated demand for British goods across the world. As a result, the value of British exports rose from £15million in 1760 to £59million in 1805. Unfortunately, the new wealth did not go to the workers that made it possible. Ownership of the 'means of production in this stage of development of industrial capitalism didn't just mean ownership of factories, machinery and the power to invest or withhold capital, but also the means of the production of knowledge. By owning newspapers, capitalists could exert great political influence to protect their own interests. By owning newspapers capitalists could extend and protect their interests by spreading their ideology with blatant propaganda. The conditions of the industrial revolution was horrible for workers. Up to eighteen hours a day in factories and horrific living conditions in the 'booming' manufacturing towns and the brutality of this new capitalist system is best summed up by its treatment of children. Women workers from the beginning were used as cheap labor while they maintained the responsibility of raising children. Women didn't have anywhere to leave their children so they had to bring them to work and it was not long as the capitalist to take advantage of this new cheaper source of labor. By the early 1800s, children as young as five could be found working up to twenty hours a day down mines in crappy conditions. Orphanages helped supply a steady stream of children to factory owners. To add to these terrible working and living conditions waged fell due to rocketing corn prices caused by the Napoleonic wars. Responding to the rise in corn prices, large farmers and the aristocracy rushed to grow wheat on every available patch of land. This caused the enclosure of more 'common' land and drove peasant farmers to the misery of the industrial cities. Ironically the very thing that made England an international powerhouse ultimately gave them their biggest loss and gave the USA its biggest boost. It's no secret that without WWI and WWII the United States would not of gotten such a boost to the top. Being the only major country not directly affected by the war gave the USA the perfect opportunity to capitalize on the misfortune of the rest of the world.
Looking at the history of the economic and social conditions that pre-dated the industrial revolution shows that capitalism didn't come from the efforts of a few inventors or that British capitalists had some special 'enterprising spirit'. It arose from the systematic breakdown of feudalism as a social and economic system along with the imposition of a wage labor system in its place. Unfortunately capitalists and state bureaucrats were able to copy the 'success' of industrialization across the western world. This capitalist system was heavily reliant on the exploitation of the working class. Today, capitalism alongside its essential partner institutions of sexism, racism and homophobia dominate the global economy informing and maintaining the social relations within it. The economic success is measured by which country or capitalist can extract the most profit from the workers under their control and has its roots in Britain's transition from a feudal society. Capitalism has brought untold misery to ordinary people. Today, many workers have used organizing through unions and pressuring governments to make life easier for workers. However, as suffering continues and the gap between those at the top and the average workers grows, it's apparent there is a long way to go.
