Capitalism

A Short History

Jürgen Kocka

• Publisher: Princeton University Press
• Year: 2016
• ISBN:
  9781400873418
• Topic: Storia
• Subtopic: Storia mondiale

A comprehensive and concise history of capitalism from its origins to today In this authoritative and accessible book, one of the world's most renowned historians provides a concise and comprehensive history of capitalism within a global perspective from its medieval origins to the 2008 financial crisis and beyond. From early commercial capitalism in the Arab world, China, and Europe, to nineteenth- and twentieth-century industrialization, to today's globalized financial capitalism, Jürgen Kocka offers an unmatched account of capitalism, one that weighs its great achievements against its great costs, crises, and failures. Based on intensive research, the book puts the rise of capitalist economies in social, political, and cultural context, and shows how their current problems and foreseeable future are connected to a long history.Sweeping in scope, the book describes how capitalist expansion was connected to colonialism; how industrialism brought unprecedented innovation, growth, and prosperity but also increasing inequality; and how managerialism, financialization, and globalization later changed the face of capitalism. The book also addresses the idea of capitalism in the work of thinkers such as Marx, Weber, and Schumpeter, and chronicles how criticism of capitalism is as old as capitalism itself, fed by its persistent contradictions and recurrent emergencies.Authoritative and accessible, Capitalism is an enlightening account of a force that has shaped the modern world like few others.

1

What Does Capitalism Mean?

The Emergence of a Controversial Concept

Capitalism is a controversial concept. Many scholars avoid it. To them it seems too polemical, since it emerged as a term of critique and was used that way for decades. The term is defined in different ways, and frequently not defined at all. It encompasses a great deal, and it is hard to delineate. Would it not be better to dispense with the concept and, say, talk about a “market economy”?

On the other hand, there is a long line of serious-minded scholars in the social sciences and cultural studies who have contributed a great deal of substance to the discussion about capitalism. A quarter century after the end of the Cold War, which was also a war of words in which key concepts were weapons, the term has returned to the scholarly discourse with a vengeance. The international financial and debt crisis that started in 2008 has added fuel to the fire of critical interest in capitalism. We are witnessing a new boom in course offerings about the history of capitalism on American college campuses, and the number of books and articles with “capitalism” in the title is on the rise. In Europe, too, the concept is now more newsworthy than it has been in a long while, even if its renewed topicality is more noticeable among journalists, social scientists, and cultural studies scholars than with economists.¹ But if the term is going to be used, one should be familiar with its history and define it sharply.

The term capitalism only gained acceptance in French, German, and English, after some sporadic antecedents, in the second half of the nineteenth century, although capital and capitalist had already become part of the vernacular in those languages. Let us take German as an example: there the concept of “capital” migrated from the language of merchants (where it was frequently used, at the latest, by the early sixteenth century) into the terminology of the social and economic sciences that were emerging in the seventeenth and eighteenth centuries. Initially the concept meant money (either invested or lent), and then later assets consisting of money, monetary values, commercial paper, commodities, and manufacturing plant, though always “in regard to the profit that it should yield” (1776), instead of being consumed or hoarded.

Since the seventeenth century, “capitalist” stood for the “capital-rich man who has cash monies and great wealth and can live from his interest and rents” (1756). More specifically, those designated as “capitalists” include merchants, bankers, pensioners, and other persons who lend money and thus “broker or deal in capital” (1717). In the meantime, “capitalist” also stood for all those engaged in the acquisition of wealth “if they accumulate the surplus of their labor, their earnings, over and above their required consumption, in order to use the surplus anew toward production and labor” (1813). Starting in the late eighteenth century, moreover, capitalists were increasingly viewed in contrast, and soon in outright opposition, to workers, and as the “class of wage masters (merchant-employers, factory entrepreneurs, and merchants)” who did not live off wages or rents but from profits (1808). Imbuing the concept with connotations of a class society, something already in evidence early in the nineteenth century, intensified in the ensuing decades as public poverty grew, revolutionary tensions erupted in 1848–1849, and industrialization with its factory system and wage labor also caught on in continental Europe, while observers, well into the early nineteenth century, drew their illustrative material above all from England, the country that had pioneered capitalist industrialization.²

Apart from a few early instances that did not really shape linguistic usage, the term capitalism initially reflected above all this imbuing of the term with criticism of the class society, a usage that happened just as the term started to catch on in the middle of the nineteenth century, originally in French, then also in German beginning in the 1860s, and somewhat later in England. In 1850 the socialist Louis Blanc criticized capitalism as the “the appropriation of capital by some to the exclusion of others.” In 1851 Pierre Joseph Proudhon condemned land on the Parisian housing market as a “fortress of capitalism” while advocating measures against exorbitant rents and speculation. Then, in 1867, a representative French dictionary cited the term capitalisme as a neologism, used “power of capital or of capitalists” to describe it, and referred to Proudhon. In Germany in 1872, the socialist Wilhelm Liebknecht lashed out against the “moloch of capitalism” plying its dreadful trade on the “battlefields of industry.”³

In German, at least, the term rapidly outgrew its original polemical thrust and became more widespread. Although Karl Marx rarely used the noun “capitalism,” in the 1850s and 1860s he wrote profusely and effectively about the “capitalist mode of production.” The conservative economist Johann Karl Rodbertus, who sympathized with state-socialist ideas, asserted in 1869 that “capitalism has become a social system.” In 1870 Albert Schäffle, a liberal-conservative professor of political economy, published his book Capitalism and Socialism with Special Attention to Forms of Business and Property. In this book he delved into the conflict between wage labor and capital. He advocated state-sponsored reforms in order to mitigate those conflicts, and he defined capitalism as a national and international “organism” of production under the leadership of “entrepreneurial” capitalists competing for the highest profits. “The Socialists are correct,” he added, “when they declare that the present economy is characterized by the capitalist mode of production,” that is, by the hegemony of “capitalism.” There is a reference to Schäffle in Meyers Konversations-Lexikon from 1876, when this German household encyclopedia treated “capitalism” for the first time, though in an entry on “capital.” In 1896 this widely used reference work included a separate entry for “capitalism” with a differentiated argument about what the encyclopedia now described as a “designation for the capitalist production method, as opposed to the socialist or collectivist” one.

In 1902 Werner Sombart’s great work Modern Capitalism was published, a book that contributed decisively to making the term part of the vernacular. Subsequent to this, there was a rapid expansion of the social science and historical literature that dealt with the theory, history, and present state of capitalism, to a great extent in debate with Sombart. Although Sombart viewed his book as a continuation and completion of Marx’s work, in fact its emphasis on the role of entrepreneurs and enterprises, his concept of the “capitalist spirit,” and his perspective reaching back into the Italian High Middle Ages went well beyond Marx.⁴

In Great Britain, as early as 1851, the concept was not entirely unknown. But starting in the 1880s, it was reluctantly introduced to a wider public, especially in Fabian circles. John A. Hobson published a book, The Evolution of Modern Capitalism, in which he focused on the rise of the factory system. The Encyclopaedia Britannica first mentioned the concept in its 1910–1911 edition (still only in its entry on “capital”). The encyclopaedia then carried an entire separate entry on the term in 1922, defining capitalism as “a system in which the means of production were owned by private proprietors” who employed managers and workers for production.⁵

The history of the concept in the United States paralleled that of Great Britain, though there is evidence that the term was known to radical working-class circles before journalists and scholars adopted it. Among American writers, Thorstein Veblen was one of the first to use it in his 1914 book The Instinct of Workmanship and the State of Industrial Arts. He followed European authors in stressing that capitalism was much older than industrialization, growing out of the handicraft system, trade, and finance from the fifteenth and sixteenth centuries. But he emphasized that “its highest development comes with the advanced stages of the machine technology and is manifestly conditioned by the latter.”⁶

Individualized property rights; commodification on markets for goods, labor, land and capital; the price mechanism and competition; investment, capital, and profit; the distinction between power-holding proprietors and dependent propertyless wage workers; tensions between capital and labor; rising inequality; the factory system and industrialized production—these were, in varying combinations, major characteristics of the concept of capitalism as it emerged in the period leading up to World War I. The term was mostly used to denote an economic practice or an economic system, frequently with special attention to its social and cultural consequences.

All in all, then, one may summarize that the concept emerged out of a critical spirit and from a comparative perspective. Usually it was used in order to make observations about one’s own era, which was conceived, in marked contrast to earlier conditions, as new and modern. Or it was used to confront what was then the present status quo with socialism, first as an envisaged idea and then as a movement whose first stirrings could be observed. Only in the light of a sometimes transfigured memory of a different past, or of a better future envisioned as a socialist alternative, did the concept of capitalism emerge, mostly in the context of a critical outlook on the present of that time. Yet at the same time the concept was employed in the service of scholarly analysis. This dual function of the term made it suspicious to some, but all the more interesting to others. Both functions could, but did not need to, stand in each other’s way. This is still the case today.

Three Classics: Marx, Weber, and Schumpeter

In the late nineteenth and early twentieth centuries, numerous intellectuals, social scientists, and cultural studies scholars regarded capitalism as the decisive contemporary feature of their era. Numerous historians were then already using the term in order to investigate the history of capitalism in previous centuries when the term did not yet even exist.⁷ Many authors contributed to the broadening of the concept of capitalism from a politically tendentious term into an analytically sophisticated systemic concept. The following pages explore somewhat more comprehensively three thinkers whose now classic statements have shaped the discussion and definition of “capitalism” to this day: Karl Marx, Max Weber, and Joseph A. Schumpeter.

Karl Marx rarely used the term capitalism, and then only marginally. But Marx wrote so extensively and penetratingly about the capitalist mode of production that his understanding of capitalism shaped following generations more strongly than the work of any other single person. The main components of the Marxist concept of capitalism may be summarized in four points.

1. Marx saw the market, which presumed a division of labor and money economy, as a central component of capitalism. He emphasized how a merciless, cross-border competition spurred technological and organizational progress while simultaneously positioning market players against each other. He brought out the compulsive character of the “law” of the market, a law capitalists and workers, producers and consumers, sellers and buyers had to obey on penalty of failure, no matter what their individual motives might be.

2. Marx discussed at length capitalism’s essentially unlimited accumulation as one of its distinguishing features, that is, the formation and continuous increase of capital more or less as an end in itself, initially as “original accumulation” owing to transfers from other sectors (not without expropriation and not without force), then later as the reinvestment of profits, but ultimately derived from the value that labor created: capital as congealed labor.

3. Marx saw the core of the capitalist mode of production in the tension between capitalists as owners of the means of production, along with the entrepreneurs and managers dependent on these owners, on the one hand, and workers, contractually bound but otherwise freely employed in return for wages and salaries without ownership of the means of production, on the other. Both sides were bound to each other, by an exchange relationship (labor power or service against wages or salary, labor or labor power as commodity) and by a relationship of dominance and dependency that enabled the “exploitation” of workers by capitalists: exploitation in the sense that a portion of value earned by workers, so-called surplus value, was not made available or paid out to them. This portion passed into the possession of the capitalist/entrepreneur, who used it partly to advance accumulation, partly to provide for what he consumed. The capital–wage labor relationship understood this way not only advanced the dynamism of the system. It simultaneously provoked class struggles that led over the long run to a confrontation between the bourgeoisie and proletariat facing each other as irreconcilable adversaries. This was, according to Marx, the precondition for revolution that, carried by the proletariat, will abolish the system of capitalism in favor of another, specifically socialist or communist, alternative, though Marx did not enter into any more detailed discussion of this alternative system. With this prediction, which could simultaneously be read as a call for the proletariat to attend to its historical mission, Marx transformed his theoretical conception into a practical political guideline, which is how many also understood it, starting in the late nineteenth century.

4. Marx described the enormous dynamism of the capitalist system that, sustained by the bourgeoisie, was dissolving everything traditional, was on its way to spreading out all over the world, and had not only the drive but also the capacity to extend its logic into noneconomic areas of life. Marx was convinced that the capitalist mode of production had a tendency to shape society, culture, and politics decisively. What the economist Adam Smith had described as commercial society and the philosopher Georg Wilhelm Friedrich Hegel had called bourgeois society, Marx portrayed as a social formation heavily influenced by the capitalist economy.

This picture of capitalism was critically influenced by the dynamic conditions that Marx and Friedrich Engels were able to observe in the second third of the twentieth century in Germany and especially in western Europe. Marx and Engels perceived the industrial revolution as an epochal upheaval. They recognized the social dynamite inherent in the burgeoning labor question. They conceptualized capitalism in a way that made it appear fully formed only as industrial capitalism, with the factory and wage labor at its core. Marx did not deny the existence of older varieties of capitalism prior to industrialization, yet they were not the subject of his investigations. He was interested in capitalism in its modern, industrial form and in its emergence—in England starting with the sixteenth century.

Critiques of the Marxist conception are legion. With good reason, he has been accused of having underestimated the civilizing impact of markets while overestimating labor as the only source of newly created value. Marx has also come in for criticism for his lack of attention to the importance of knowledge and organization as sources of productivity, his mistaken predictions about the social repercussions of industrial capitalism, and his almost quaintly old-fashioned European mistrust of the market, exchange, and self-interest. Nevertheless, Marxist analysis remains an original, fascinating, and fundamental framework, a point of reference to this day for most subsequent interpreters of capitalism, no matter how much they may criticize Marx.⁸

Max Weber treated the subject of capitalism as part of a comprehensive history of occidental modernization. Against this background he removed the concept from its fixation on the industrial age. Unlike Marx, he did not expect capitalism to be destroyed by its own crises; rather, he feared the danger of petrification owing to an excess of organization and bureaucratization. He did not believe in the superiority of a future socialist system. His analysis was more wide ranging and reached further back into history than was the case with Marx.

For Weber, capitalist economic action was characterized by competition and exchange, orientation to market prices, the deployment of capital, and the search for profit. In his definition, capitalist economic action had to include a modicum of calculation, that is, weighing of expected risk, loss, and profit, as well as control over the profitability of the capital deployed. Weber was familiar with different forms of capitalism, such as the politically oriented capitalism and rentier capitalism of ancient Europe, or the “robber capitalism” that was associated since ancient times with wars and pillaging but has also not been absent from the speculation and exploitative businesses of modern finance capitalism. Above all, Weber was interested in modern capitalism, which was characterized by “formal, calculative rationality.” He saw these features guaranteed above all by the structure of the capitalist enterprise. He emphasized how that enterprise was separated from the private household of economic agents, and he underlined the purposive rationality systematically built...