Is Capitalism Working?

A primer for the 21st Century

Jacob Field, Matthew Taylor

• Publisher: Thames and Hudson Ltd
• Year: 2018
• eBook ISBN: 9780500774342
• Topic: History
• Subtopic: World History
• Index: History

Is Capitalism Working? is a highly relevant question today not least to a generation coming of age in a world still experiencing aftershocks from the near-meltdown of the world economy in 2008. Economic theory can be complex, but Jacob Fields wellstructured and thought-provoking text lays out the debate in a clear, accessible and engaging manner. Infographics and timelines ensure that readers grasp the basic tenets, history and context of capitalism, without distracting from the compelling arguments. Jacob Field presents a measured conclusion that reviews the evidence on each side, allowing room for the reader to draw his or her own conclusions.

1. How Capitalism Evolved

A The Great Chain of Being (1617) by Robert Fludd illustrates the idea that everything in the universe – humans, animals, plants and minerals – can be classified and placed in a hierarchical order.

B This illustration from the August calendar page of The Queen Mary Psalter (c. 1310) shows a reeve directing his serfs to harvest the corn. Profits from agriculture remained low or non-existent, as well as subject to the vagaries of the weather, for the next five centuries.

Feudalism was a system common in medieval Europe. It created a tiered society in which everyone theoretically had a level of obligation to their superior. The majority of people, mostly peasants, owed some proportion of their labour or economic output to their local lord, who had a high degree of control over their lives.

Output is the quantity of services or goods produced by a person, thing or region.

For much of human history, economies have been virtually stagnant. The roots of global exchange had emerged by the 2nd century BC in the Silk Road, an extensive network of land and sea routes that linked Asia to Europe and remained important until the 15th century. However, most activity was agricultural, geared to subsistence or fulfilling feudal obligations.

The roots of modern capitalism emerged in Western Europe after 1500, particularly in the Dutch Republic and England. The accumulation of capital and the making of profit grew increasingly important, eventually becoming the main focus of the economy. Accompanying these changes was the growth of international trade, financial institutions, new economic theories and technologies that increased productivity. However, for the next three centuries, economic growth remained slow. Most economies grew at around 2% per decade, if that.

In many respects, a country’s economy develops as a result of changes in three factors: national population, technological knowledge and institutions. During the early modern period, all three were transformed in Britain. As a result, the first Industrial Revolution (which began in the mid-18th century and ran until the c. 1830s) occurred there.

This process can be seen as a shift from an organic economy to an inorganic one. Organic economies are largely based on human and animal muscle, and machines that can be powered by them. These were supplemented by devices that harnessed natural sources of energy such as wind and water (e.g. windmills and waterwheels). The fixed quantity of land and the resources that can be extracted from it limit growth. Theoretically, inorganic economies are capable of much faster growth because they are reliant on mechanical energy from mined mineral sources, such as coal and petroleum. Machines, if well-maintained, have a theoretically constant output.

From the early 17th to the late 18th centuries, the Enlightenment and Scientific Revolution took place in the West. This contributed to a major shift in intellectual and philosophical life, and the fostering of a more rational world view. Systemization made it easier to disseminate knowledge, thus enabling the spread of new ideas, and also their refinement and adaptation.

The most important developments were the invention of the steam engine and the mechanization of textile production, both of which occurred first in Britain. These fields were pursued only because they were potentially profitable. This is because wages in Britain in the 17th century were comparatively higher than in other areas, so labour was expensive for business owners. There was an incentive to invent and to use labour-saving devices that did not exist in areas where labour was cheaper, such as in India or China.

The first steam engines were designed in the late 17th and early 18th centuries to pump water, but their motions were too imprecise to drive machinery. They were also expensive to operate because they were fuel inefficient. It was not until the 1760s and 1770s that a steam engine with a rotary motion smooth enough to run machinery was developed. Over the next century, this design was improved and adapted constantly. In 1760 only 6% of the 85,000 horsepower produced by stationary power sources in Britain came from steam. However, by 1907 stationary power sources in the country were producing 9,842,000 horsepower, and 98% came from steam.

Cheap coal was crucial because it meant that steam power’s initial inefficiency was less costly. Britain was the first country to harness coal’s power for industry, having abundant natural deposits to draw on, and by 1800 it produced 90% of the world’s coal.

A Interior, Woman by a Spinning Wheel (1868) by Knud Larsen Bergslien. Before mechanization, spinning fibres such as wool to make yarn was one of the main female occupations, and most women worked in their own homes.

B An Iron Forge (1772) by Joseph Wright of Derby. During the 18th century, new techniques to produce iron were invented in England, which led to better quality iron at a lower cost.

C During the 19th and early 20th centuries, Wales was one of the leading coal-producing areas in the world. This image depicts the pit head, winding gear and coal trucks at a colliery at Ponsy Pool in Monmouth, Wales, in 1888.

D Some coal mines allowed unemployed people to look through their waste tips to gather free coal. This photograph was taken in 1936 at Cilfynydd near Pontypridd in the South Wales valleys.

Starting with the textile industry, the Industrial Revolution transformed manufacturing. From the mid-18th century, a series of inventions led to the full steam-driven mechanization of textile production in Britain only a century later, and productivity skyrocketed.

In 1750 approximately 100,000 operative hours were required to process 100 pounds of cotton. By the early 19th century, it took only 100 hours. The techniques used in textile production were replicated in other industries, such as metals and pottery, and in other countries (Belgium was the first in mainland Europe to adapt the technology). What started out as an endeavour to produce textiles more cheaply eventually transformed society. Mechanical devices were too large and expensive for domestic use. Consequently, it was more cost-effective to centralize manufacturing into factories, where economies of scale decreased costs. This contributed to urbanization as factories tended to be located in towns, which were close to labour supplies, markets and transport hubs.

Previously, workers operated at their own pace and set their own hours, but in factories, employers regulated hours and conditions. Division of labour meant workers became more specialized in order to maximize their output. During this time, growing agricultural productivity – driven by new techniques and more efficient land use – freed up labour to work in manufacturing.

Improvements in transport were vital to this burgeoning industrialization,...

Table of contents

• Cover
• Title Page
• About the Author and Editor
• Other titles of interest
• Contents
• Milestones
• How to Read
• Introduction
• 1. How Capitalism Evolved
• 2. How Modern Capitalism Works
• 3. Capitalism in Crisis
• 4. Adapting the Capitalist Model
• Conclusion
• Further Reading
• Picture Credits
• Index
• Acknowledgments
• Copyright