The Origin of Capitalism

# history

How did capitalism emerge in Europe after centuries of feudalism? Many historians treat capitalism as preordained. They believe that a community of humans will self-organize as capitalists if given the freedom to do so. In this worldview, capitalism emerged in the last five-hundred years or so because the obstacles to capitalism — like primitive technology and tyrannical landlords — finally subsided, allowing our true nature to flourish.

In this worldview (which underpins the dominant paradigm of the West), capitalism is pseudo-religious. It is not just a technology; it is our nature as humans.

In The Origin of Capitalism, Ellen Meiksins Wood challenges this narrative. Like so much of historian, capitalism is an accident — not fate. Meiksins Wood says capitalism emerged in the early modern period in England as the relationship changed between landowners, farmers, peasants, and the state.

Meiksins Wood starts the book with an excellent definition of capitalism:

Capitalism is a system in which goods and services, down to the most basic necessities of life, are produced for profitable exchange, where even human labour-power is a commodity for sale in the market, and where all economic actors are dependent on the market. This is true not only of workers, who must sell their labour-power for a wage, but also of capitalists, who depend on the market to buy their inputs, including labour-power, and to sell their output for profit. Capitalism differs from other social forms because producers depend on the market for access to the means of production (unlike, for instance, peasants, who remain in direct, non-market possession of land); while appropriators cannot rely on ‘extra-economic’ powers of appropriation by means of direct coercion – such as the military, political, and judicial powers that enable feudal lords to extract surplus labour from peasants – but must depend on the purely ‘economic’ mechanisms of the market. This distinct system of market dependence means that the requirements of competition and profit-maximization are the fundamental rules of life. Because of those rules, capitalism is a system uniquely driven to improve the productivity of labour by technical by technical means. Above all, it is a system in which the bulk of society’s work is done by propertyless labourers who are obliged to sell their labour-power in exchange for a wage in order to gain access to the means of life and of labour itself. In the process of supplying the needs and wants of society, workers are at the same time and inseparably creating profits for those who buy their labour-power. In fact, the production of goods and services is subordinate to the production of capital and capitalist profit. The basic objective of the capitalist system, in other words, is the production and self-expansion of capital.

This distinctive way of supplying the material needs of human beings, so very different from all preceding ways of organizing material life and social reproduction, has existed for a very short time, barely a fraction of humanity’s existence on earth. Even those who most emphatically insist on the system’s roots in human nature and its natural continuity with age-old human practices would not claim that it really existed before the early modern period, and then only in Western Europe. They may see bits of it in earlier periods, or detect its beginnings in the Middle Ages as a looming threat to a declining feudalism but still constrained by feudal restrictions, or they may say that it began with the expansion of trade or with voyages of discovery – with, say, Columbus’s explorations at the end of the fifteenth century. Some might call these early forms ‘proto-capitalism’, but few would say that the capitalist system existed in earnest before the sixteenth or seventeenth century, and some would place it as late as the eighteenth, or perhaps even the nineteenth, when it matured into its industrial form.

Yet, paradoxically, historical accounts of how this system came into being have typically treated it as the natural realization of ever-present tendencies. Since historians first began explaining the emergence of capitalism, there has scarcely existed an explanation that did not begin by assuming the very thing that needed to be explained. Almost without exception, accounts of the origin of capitalism have been fundamentally circular: they have assumed the prior existence of capitalism in order to explain its coming into being. In order to explain capitalism’s distinctive drive to maximize profit, they have presupposed the existence of a universal profit-maximizing rationality. In order to explain capitalism’s drive to improve labour-productivity by technical means, they have also presupposed a continuous, almost natural, progress of technological improvement in the productivity of labour.

In most accounts of capitalism and its origin, there really is no origin. Capitalism seems always to be there, somewhere; and it only needs to be released from its chains – for instance, from the fetters of feudalism – to be allowed to grow and mature.

The first part of the book summarizes the history of capitalism. Historians agree that capitalism has an origin, somewhere between the creation of the city-state and the Industrial Revolution:

Economic historian and anthropologist Karl Polanyi maintained that the motive of individual profit associated with market exchange was never till the modern age the dominant principle of economic life. Even where markets were well-developed, a sharp distinction must be made, he said, between societies with markets, such as have existed throughout recorded history, and a ‘market society.’ In all earlier societies, ‘economic’ relations and practices were ‘embedded’ or submerged in non-economic — kinship, communal, religion, and political — relationships. There have been other motives driving economic activity than the purely ‘economic’ motives of profit and material gain, such as the achievement of status and prestige, or the maintenance of communal solidarity. There have been other ways of organizing economic life than through the mechanisms of market exchange.

Meiksins Wood outlines the mainstream history of the origin of capitalism (the commercialization model), debates within Marxism (the transition debate), and countervailing views in Marxism (the Brenner debate). Meiksins Wood argues that most historians — including most Marxists — treat capitalism as an inherent property of human collectives, which requires no explanation. But capitalism was a system that needed inventing:

What fails to emerge from all of this is an appreciation of the ways in which a radical transformation of social relations preceded industrialization. The revolutionizing of productive forces presupposed a transformation of property relations and a change in the form of exploitation that created a historically unique need to improve the productivity of labour. It presupposed the emergence of capitalist imperatives: competition, accumulation, and profit-maximization… The specific imperatives of the capitalism market — the pressures of accumulation and increasing labour–productivity — are treated not as the product of specific social relations but as a result of technological improvements that seem more or less inevitable.

Many historians see capitalism as having emerged from European feudalism. Meiksins Wood uses Perry Anderson’s definition of feudalism:

A mode of production defined by an ‘organic unity of economy and polity’, which took the form of a ‘chain of parcellized sovereignties’, together with a hierarchical chain of conditional property. State power was fragmented among feudal lords, and lordship represented a unity of political and economic power. The fragment of the state that feudal lords possessed — their political, juridical, and military powers — at one and the same time constituted their economic power to appropriate surplus labour from dependent peasants. Lordship was accompanied by ‘a mechanism of surplus extraction’, serfdom, in which ‘economic exploitation and politico-legal coercion were fused.’

Feudalism is a system where coercive politics and economics are joined in the hands of lords, but power is fragmented.

Historians imagine that capitalism somehow triumphed over feudalism, breaking the chains of history. Meiksins Wood outlines a different narrative, where capitalism didn’t need to compete with feudalism, since both were driven by class struggle between lords and peasants. Capitalism wasn’t an inevitable “next step” from feudalism, otherwise capitalism would have emerged in other feudal states. In France, feudalism turned into absolutism rather than capitalism. But other than its formation in early modern England, capitalism has never independently emerged anywhere else in the world. Capitalism has only spread through (usually violent) contact with capitalist states.

Why did commerce become more exploitative under early capitalism?

Not the emergence of steam or the factory system, but rather the need inherent in capitalist property relations to increase productivity and profit. Those capitalist imperatives were imposed on traditional forms of work no less than on new forms of labour, on artisans still engaged in pre-industrial production no less than on factory hands.

The emergence of capitalism shifted peasants’ understanding of the world. Previously, if a peasant couldn’t find food in a marketplace, there would have been a transparent reason. Capitalism put the market beyond the control of the people, passing control to “self-regulating” price mechanisms. Peasants were forced to accept that sometimes food was unavailable for abstract reasons of supply and profit. As this new worldview took hold, with new conceptions of property and profit, it took precedence in law. The state enforced the ethic of profit with force, placing capitalists’ right to profit over the customary rights of subsistence and communal or customary lands. “Coercion by the state was required to impose the coercion of the market.”

On the origin of agrarian capitalism, Wood explains that England was an unusual European state in the 1500s. At the time, England was especially centralized. One government had extended sovereignty over the entire island, with relatively little remaining feudal conflict or insurgency. At the same time, the island of Great Britain is large and naturally well defended by the surrounding seas, with easy shipping access to the continent. As a result, England had little need for a built-up military, and instead exercised political–economic coercion on the citizenry through taxation.

In this environment that was relatively consolidated and free from conflict, landlords viewed the land that they claimed as property rather than domain. Up to this point, mercantilism had encouraged the idea of trading goods, but the critical mass for markets to arise. In 16th-century England, lords saw their land as a good to trade, and the first mass market emerged. Lords competed to get the highest rent from their tenants.

Up to this point, the tenants had enjoyed customary rights to the land at relatively fixed prices. Now, tenants had to buy their right to the land at extractive market rates. The rising rents forced tenants to compete to increase income from their farms by producing more or lowering prices.

Once some members of a community begin acting competitively, all members of the community are forced into competition. If other tenants tried to ignore the market, they would be driven out of their land by increasing rents. So market forces quickly took hold and spread.

At the end of the book, Meiksins Wood concludes:

Capitalism is not a natural and inevitable consequence of human nature, or of the age-old social tendency to ‘truck, barter, and exchange’. It is a late and localized product of very specific historical conditions. The expansionary drive of capitalism, reaching a point of virtual universality today, is not the consequence of its conformity to human nature or to some transhistorical law, or of some racial or cultural superiority of ‘the West’, but the product of its own historically specific internal laws of motion, its unique capacity as well as its unique need for constant self-expansion. Those laws of motion required vast social transformations and upheavals to set them in train. They required a transformation in the human metabolism with nature, in the provision of life’s basic necessities.

There is, in general, a great disparity between the productive capacities of capitalism and the quality of life it delivers.