Early Modern Capitalism

Economic and Social Change in Europe 1400-1800

Maarten Prak, MAARTEN PRAK

• Publisher: Routledge
• Year: 2005
• Topic: Business
• eBook ISBN:
  9781134604418
• Subtopic: Business General
• Index: Business

This volume takes stock of recent research on economic growth, as well as the development of capital and labour markets, during the centuries that preceded the Industrial Revolution. The book underlines the diversity in the economic experiences of early modern Europeans and suggests how this variety might be the foundation of a new conception of economic and social change.

1 Early modern capitalism: An introduction

Maarten Prak

Eric Hobsbawm once stated the issue in the clearest of terms. ‘Nobody’, Hobsbawm declared in Marxism Today in 1962, ‘has seriously maintained that capitalism prevailed before the 16th century or that feudalism prevailed after the 18th’ (Sweezy et al. 1978: 162). This statement maintains in effect that, during the early modern period, Europe was transformed from one type of society into another. The nature of this transition, as well as its precise outlines, have continued to fascinate historians and social scientists alike: this book seeks to add some new elements to our understanding of this crucial issue in the history of Europe, and indeed the world.¹

Like all conceptual tools, the word ‘capitalism’ works on two levels simultaneously. It obviously refers to certain aspects of the realm of human experience, more specifically of the economic and social order of modern society. At the same time, ‘capitalism’ is self-referential, to the extent that the word can hardly be used innocently, in a purely descriptive sense. Whoever speaks or writes about ‘capitalism’ must immediately confront issues of definition and interpretation (Sombart 1930; Dobb 1946: chapter 1; Braudel 1982–84 Volume 2:232–49; Hilger 1982). This book consequently includes both empirical and reflective contributions.

The use of the word ‘capitalism’ is not necessarily the prerogative of radical historians. It is a fact, nonetheless, that the history of the debate about the rise of capitalism in Europe reflects the ups and downs of the left-wing intellectual heritage in the West since World War II. Immediately after that war, communism as a political system, and therefore Marxism as an intellectual framework, struck many as offering a significant alternative to the prevailing doctrines of the time. However, the disclosures in 1956 by the Soviet authorities of Stalinist brutalities, as well as the subsequent economic prosperity and international successes of the Western countries during the later 1950s and the 1960s, did little to help the cause of Marxist historiography (Kaye 1984). It was only with the disenchantment of the Vietnam War and the subsequent economic recession that Marxism again became a force to reckon with, in the universities as well as on the streets. In the mid-1970s, in the span of only a few years, a number of seminal works on the rise of capitalism appeared, almost all of which contained extensive references to the work of Karl Marx. In 1974 Immanuel Wallerstein published the first volume of his Modern World-System; in 1976 Robert Brenner published his first essay in Past and Present about the agrarian roots of European capitalism; and in 1977 Peter Kriedte, Hans Medick, and Jürgen Schlumbohm proposed a fully developed theory of proto-industrialization. In the meantime the main contributions to the Dobb-Sweezy controversy were published in a single volume (1976), and shortly afterward (1979) Fernand Braudel produced his three-volume Civilization and Capitalism 15th–18th Century. Although Braudel was not obviously a Marxist, he had come under its influence and accepted several of its leading ideas; he was happy to quote Marx at key points in his work (Aguirre Rojas 1992).

Even if they drew inspiration from similar intellectual sources, these authors were not necessarily trying to explain the same things. At least three different sub-plots to the bigger story of capitalism during the early modern era can be distinguished, each with its own time-frame and explanatory models. The first sub-plot is concerned with the circumstances that helped to launch capitalism upon the world. These are most often located in the fourteenth and fifteenth centuries, in the so-called ‘feudal crisis’. According to the proponents of this argument, the outbreak of plague in the middle of the fourteenth century that was to kill off a quarter or more of Europe’s population was the most vivid expression of a fundamental crisis of the feudal economy and the social relations underpinning it. This issue is further discussed in S.R.Epstein’s contribution to this volume.

The second sub-plot concerns the rise of capitalism proper. This story basically covers the early modern period. The debate here is about the nature of the new socio-economic system, and the extent to which the traditional elements in society had given way to the newly established capitalist relationships. Most of the essays in this book address this issue. As will be elaborated later in this Introduction, the debate in the 1970s alternated between the three main sectors of the economy: trade, agriculture and industry. Depending on their points of view, authors have dubbed the three centuries between the Great Discoveries in the New World and the Far East and the Industrial Revolution as a period in which capitalism became firmly established, as a time of transition, or as one characterized by a special type of capitalism, dominated by the merchants.

The idea of a specific ‘merchant capitalism’, or commercial capitalism, goes back to Marx, who may have taken his cue in turn from Adam Smith. In Book III of The Wealth of Nations (1776), Smith ascribed to towns, and merchants in particular, a crucial role in the transformation of the European economy. Marx, of course, was fully aware of the implications of the Industrial Revolution, and he was convinced that a fundamental distinction should be made between industrial capital, entrenched in the production process, and commercial or circulating capital. Significantly, Marx remarked that ‘[i]n the first phase of capitalist society trade overruled industry; in modern society it is the other way around’ (Marx 1971, vol. 3:335–49, quote on 342). But Marx never developed a theory of merchant capitalism, and the concept has remained open to the criticism that it was not a proper ‘mode of production’ precisely because merchant capitalism was characterized by a separation of commercial capital and presumably non-capitalist production.²

The third sub-plot in the debate over the origins of capitalism concerns the transition from pre-industrial to industrial society. As will be argued below, some authors see this as a development within the broader framework of capitalism. Others maintain that the Industrial Revolution was a fundamental discontinuity and inaugurated a truly new era in the history of Western society. If this is so, and one accepts that industrial society is capitalist (or socialist, in one of its later incarnations), by implication pre-industrial society must have been something other than capitalist. The debates about the Industrial Revolution that focus of course on the decades around 1800 thus have indirect but nonetheless significant consequences for the analysis of the preceding centuries. This topic is further discussed in Edwin Horlings’ contribution to this volume.

The end of feudalism and the origins of capitalism

Maurice Dobb’s Studies in the Development of Capitalism, published in 1946, was the first major post-war statement on the origins of capitalism (see also Kaye 1984: chapter 2). In many ways his proposals have defined the debate ever since, including some of the confusion that it has engendered. Dobb made a distinction between the demise of feudalism and the rise of capitalism. He claimed that trade, ‘an alien body within the pores of feudal society’, may have been an important contributing factor to the creation of capitalism, but that it was in itself not a ‘sufficient’ pre-condition for the establishment of a capitalist economy (Dobb 1963: 37–9). To understand why feudalism declined it was, Dobb claimed, of paramount importance to investigate the ‘forces internal to [the] feudal economy’ (ibid.: 42). Although relatively little was known about this, Dobb speculated that the feudal crisis was a combination of two factors. On the one hand, the manorial economy was incapable of long-term improvement. On the other, the pressures on the peasants to increase their output were rising because the number of lords was increasing, and their armed conflicts (e.g. the Crusades) were requiring ever greater sums of money. Although this pressure was initially absorbed by a rising population and the exploitation of newly cultivated lands, at the same time peasants were escaping from the countryside and seeking their fortunes in the towns. Rising levels of mortality around 1300, i.e. well before the great outbreak of plague in the middle of the fourteenth century, suggest that a breaking point had already been reached (ibid.: 42–50).

The crisis of feudalism did not directly lead to capitalism, however. According to Dobb bourgeois capital was accumulated in international trade, thanks to the political privileges and monopoly strategies of the early merchants, for whom the playing field had been levelled by the unravelling of feudalism. In the sixteenth century, merchant capital in England started to penetrate the sphere of petty production, in the seventeenth century the first industrial capitalists were rising from the ranks of petty producers. Capitalism had arrived (ibid.: 18, 70, 88, 109, 126, 134).

This interpretation was challenged by Paul Sweezy, like Dobb a Marxist economist, and not trained as an historian.³ Sweezy maintained that Dobb’s analysis of the feudal crisis was seriously flawed. Logically, it was unclear how a mode of production that had existed for ages, could transform itself without substantial inputs from outside. Sweezy also accused Dobb of misinterpreting Marx’s own words. This, it seems, was a somewhat ambiguous argument, because in different places in Marx’s writings one finds him emphasizing different elements in the process. In the third volume of Capital, for example, Marx stated unequivocally that ’[i]n the early stages of capitalism commerce dominates industry’ (Marx 1971 Volume 3:342). He then went on to explain how the Great Discoveries and the development of commercial capital were (ibid.: 345)

key moments…in the transition from a feudal system of production to a capitalist. The sudden expansion of the world market, the multiplication of goods in circulation, the competition among European nations to acquire the Asian products and American treasures for themselves, the colonial system, all made crucial contributions to cracking the feudal limitations on production.

In the Grundrisse there is a similar emphasis on the role of money and merchant capital, but at the same time an insistence that this in itself was not enough. For if mere wealth could create capitalism, then Ancient Greece and Rome should have travelled this road earlier (Marx 1964:109). What was needed to transform monetary wealth into capital was its application to the exploitation of free labour. Hence, capitalism could only develop where a pool of free labour was available. Such a labour market was first created, Marx claimed, in the English countryside ‘when the great English landowners dismissed their retainers, who had consumed a share of the surplus produce of their land; when their farmers drove out the small cottagers, etc.’ (ibid.: 110–11).

If Marx proved to be an unreliable ally, Sweezy had another arrow to his bow. Historically, Sweezy said, it could easily be demonstrated that towns and their trade, in other words a cause ‘external to the system’, were crucial in the dissolution of the feudal economy. It was the towns that whetted the appetite for new luxuries among the propertied classes, which in turn forced them to increase the extraction of ever greater revenues from the peasants. At the same time, the towns were setting new standards of productivity and providing an alternative source of income for the oppressed peasants. This exposed the frailty of the feudal economy and created the crisis. Sweezy also pointed out another puzzling aspect of Dobb’s interpretation, which had left a yawning historical gap between the dissolution of the feudal economy in the fourteenth century and the establishment of capitalism around 1600. Somehow it seemed unlikely that the feudal economy, having succumbed to its own internal contradictions, was succeeded by… nothing. Sweezy’s own focus on towns and trade could resolve this problem too.

The Dobb—Sweezy controversy went through a second round of exchanges and was joined by other contributors, before petering out in the mid-1950s. Apart from the unfavourable general political climate, it also suffered from a lack of fresh input of historical data; quotations from Marx will only take one so far (cf. Hilton in Sweezy et al. 1978:11, 153–8). The issues it raised, however, did not go away. In the 1970s the two sides re-emerged, albeit in slightly different forms.

Trade and the emergence of a world-economy

Superficially, the first volume of Immanuel Wallerstein’s Modern World-System looked like a confirmation of the Sweezy position. Critics have been quick to point out the common features between Sweezy and Wallerstein.⁴ The similarities are, nonetheless, limited. For one, Wallerstein, although politically an avowed socialist, was far less intellectually dependent on Marx than Sweezy was.⁵ Moreover, Wallerstein’s vision was truly global, where Sweezy remained transfixed by the European experience (Ragin and Chirot 1984). As a sociologist specializing in the plight of the young African nations, Wallerstein was less interested in explaining the rise of capitalism as a European phenomenon than in demonstrating the connection between the West’s dominance and the poverty of the Third World.

Wallerstein’s starting point is a simple statement: ‘In the late fifteenth and early sixteenth century, there came into existence what we may call a European world-economy’ (Wallerstein 1974:15). This world-economy differed from earlier phases of economic expansion, because the space of the world-economy did not coincide with any single political unit. Whereas former world-economies had been transformed into empires, this new world-economy was held together by economic ties. The older world-economies had suffered from the tributary demands imposed by the political superstructure. Not so under the new system: ‘What capitalism does is offer an alternative and more lucrative source of surplus appropriation’ (ibid.: 16). By implication, the ‘modern world-system’ equalled capitalism (also Wallerstein 1979: chapter 1).

Given these definitions, several questions impose themselves. What preceded this new order? What circumstances caused the transition to capitalism? What was the shape of the new world-economy? Wallerstein describes the feudal economy as a series of ‘relatively small, relatively self-sufficient economic nodules’, strung together by a long-distance trade in luxury commodities. During the fourteenth century, however, the feudal economy was thrown into turmoil as a consequence of conjunctural factors (the available technology had exhausted its potential), of diminishing returns to feudal exploitation, and finally, a climatological turn for the worse, which caused agricultural productivity to decline (Wallerstein 1974:18, 20, 36–7; quote on 36). To overcome the crisis, the propertied classes started to look for ways to make up for the loss in income. They found it in the ‘capitalist world-economy’ (ibid., 37).

The establishment of this new order entailed three crucial developments. First and foremost, it required the expansion of what was originally a European world-economy into something truly global. Although this expansion did not necessarily imply that all of the globe was from the very start included into the new capitalist system, significant areas outside Europe in fact were. Second, it led to a divison of this world-economy into different zones, or regions, according to a specific hierarchy of exploitation. The core, semi-periphery and periphery, roughly coinciding with north-western Europe, southern Europe and the non-European worlds respectively, were also characterized by different systems of labour control (Wallerstein 1979: chapter 2; also 1974:86–118). A third characteristic of the world-economy was the development of strong state-structures in the core area. As distinct from the economically crippling empires of yore, however, these new states acted to support the new capitalist dynamic.

Although there were some further developments, the basic structure of the capitalist world-economy was in place by the mid-seventeenth century. Thereafter, the system became enmeshed in a series of leadership contests. Initially the Dutch Republic captured the coveted role. It was a sweet, but brief interlude (Wallerstein 1980: chapter 2; also Aymard 1982), before France and Britain entered a long and exhausting struggle for economic and hence political hegemony. Britain, helped by its Industrial Revolution, eventually won out, as confirmed by the French Revolution and its military aftermath (Wallerstein 1989).

For Wallerstein (1979:15; also 1974:92), the early modern period is definitely not a specific era in the history of capitalism. He has rejected the idea that the centuries between 1500 and 1800 were a transitional stage, principally because declaring any period in time ‘transitional’ is an expression of muddled thinking. He also rejects the idea of ‘merchant capitalism’, because it suggests an opposition between merchant and industrial entrepreneur, whereas he (Wallerstein 1991:204) maintains that it is precisely characteristic of the capitalist that he is both. Although in passing he refers to an ‘era of agricultural capitalism’ (Wallerstein 1979:17), this looks more like a slip of the pen than a serious proposal. Capitalism, Wallerstein (1979:6) maintains, is a market economy and the division of labour within the world-economy implies exchange throughout the system. Note, however, that capitalism is not necessarily a system of free labour. On the contrary, in the periphery a whole range of non-economic pressures is applied to a labour force, at times reduced not merely to poverty but rather to outright slavery. By implication, the capitalist system is not simply a market economy, where the ‘invisible hand’ does its beneficial work unopposed. In all parts of the system institutions have a role to play, either to maintain the leadership of the core states, or to organize the transfer of surplus from the direct producers to their lords and from the periphery to the core.

Wallerstein’s claims have not gone unchallenged. The idea that the non-European world contributed decisively to Europe’s economic development has been seriously criticized, and is no longer accepted by economic historians, if it ever was.⁶ Nonetheless, perhaps more than any other sociological concept, the ‘world-economy’ has entered the mainstream of academic discourse. Its success rests no doubt on the coherence of Wallerstein’s analysis. But it has been helped by the creation of several strategic institutional positions, notably the Fernand Braudel Center at the State University of New York at Binghamton, the publication of the scholarly journal Review. ‘For the Study of Economies, Historical Systems, and Civilizations’ (Arrighi 1998:114), and perhaps most important, the alliance with the French historical school of Annales (‘Économies, Sociétés, Civilizations’) at the time of Fernand Braudel’s leadership. For Wallerstein, the French provided access to much-needed data, as well as the blessing of the most renowned historical school for his specific brand of historical sociology. For Annales, and Braudel personally, Wallerstein opened the door to American social science and the English-speaking world more generally (Ragin and Chirot 1984:287).⁷ Nonetheless, there are substantial differences between the two authors, even though their analyses of capitalism share certain traits as well.

Like Wallerstein, Braudel saw capitalism as in many ways the opposite of what the classical economists wanted us to believe it was (cf. Wallerstein 1991:207–17). Their capitalism was Braudel’s market economy.⁸ In Braudel’s analysis of the economy, the market occupies some sort of middle ground.⁹ He describes the market as a fairly open, routinized set of exchanges, where the laws of supply and demand introduce adjustments but basically everyone involved understands the name of the game and surprises are therefore unlikely. It is the natural habitat of trade over middle distances, of production for export markets where, once the connection has been made, a regular flow of commodities will be sold against more or less fixed prices. However, beyond the market there are two further realms of exchange, that Braudel labels ‘daily life’ or ‘material civilization’, and ‘capitalism’ respectively. At the lowest level of the early modern European economies, the market had not fully evolved. Even if villagers did more than simply barter their goods, the fortunes of the local bakers, blacksmiths and cobblers could hardly be said to be propelled by Adam Smith’s invisible hand (Persson 1988:50–4). On the contrary, exchanges were determined by tradition, moral standards about a ‘just price’, and similar non-economic considerations, as much as by market forces (Thompson 1991: chs. 4 and 5).

While on the ground-floor level of the economy (a metaphor Braudel reverts to on several occasions) it may have been too overcrowded for the market to impose itself, at the top of the building the air became too thin to support the regular flows of supply and demand necessary to trigger the price mechanism. Instead, this was the natural habitat of the really big wholesale merchants. They were few in numbers bu...

Table of contents

• Cover Page
• Routledge Explorations in Economic History
• Title Page
• Copyright Page
• Figures
• Tables
• Contributors
• Acknowledgements
• 1 Early modern capitalism: An introduction
• Part I Economic growth
• Part II Capital and labour
• Part III Conclusion
• Bibliography