History of capitalism
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/* See also */ *History of private equity and venture capital
{{Mergefrom|Capitalism in the nineteenth century|date=November 2007}}
{{Mergefrom|Capitalism in the twentieth century|date=November 2007}}
{{Mergefrom|Capitalism in the twenty-first century|date=November 2007}}
The '''history of [[capitalism]]''' dates back to early forms of [[merchant capitalism]] practiced in the [[Middle East]] and [[Western Europe]] during the [[Middle Ages]],<ref name=Banaji/> though many economic historians consider the [[Netherlands]] as the first thoroughly [[capitalism|capitalist]] country. In [[Early modern period|early modern]] [[Europe]] it featured the wealthiest trading city ([[Amsterdam]]) and the first full-time [[Amsterdam Stock Exchange|stock exchange]]. The inventiveness of the traders led to [[insurance]] and retirement funds as well as such less benign phenomena as the boom-bust cycle, the world's first asset-inflation bubble, the [[tulip mania]] of 1636-1637, and according to Murray Sayle, the world's first bear raider - Isaac le Maire, who forced prices down by dumping stock and then buying it back at a discount.<ref>"Japan Goes Dutch", ''London Review of Books'' [April 5, 2001]: 3-7.</ref>
Over the course of the past five hundred years, capital has been accumulated by a variety of different methods, in a variety of scales, and associated with a great deal of variation in the concentration of economic power and wealth.<ref>Scott (2005)</ref> Much of the history of the past five hundred years is concerned with the development of capitalism in its various forms, its condemnation and defense, and its rejection, particularly by [[socialism|socialists]].
==Prehistory of capitalism==
{{Refimprove|section|date=February 2007}}
The notion that [[capitalism]] can be divided into early, middle, and late eras is itself extremely controversial. Scholars have found capitalism, or elements thereof, in very early times. Some philosophers and most neoclassical economists consider capitalism not a time-bound practice or a historical era at all, but the recognition of some timeless elements of human society like private property and market prices.
Nonetheless, the division into eras is often made on the presumption that there was a uniquely notable explosion of capitalistic practice in early modern [[Europe]].
Since pre-Roman times goods have been bought and sold on markets throughout Europe, and local trading networks have enabled goods to make their way onto European markets from places as far away as [[China]] and [[History of India|India]]. Much of the expansion of the [[Roman Empire]] was at least partially driven by the desire to obtain control of the sources of goods being traded with the Romans (such as Tin and cement), and thus obtain these goods more cheaply by cutting out the middle-men.
In the [[Maurya Empire]], there were a number of organizational entities similar to [[corporation]]s. These were mostly privately owned commercial entities concerned with raising capital.<ref>Vikramaditya S. Khanna (2005). [http://papers.ssrn.com/sol3/papers.cfm?abstract_id=796464 ''The Economic History of the Corporate Form in Ancient India.''] [[University of Michigan]].</ref>
Some economists like [[Peter Temin]] consider the Roman Empire as [[market economy]], similar in degree of capitalistic practices to 17th century Netherlands and 18th century England.
The [[Bruges]] Bourse opened in [[1309]] as a place for commodity traders to meet and trade their goods.
In the sixteenth century, merchants of [[Antwerp]] developed the idea of [[shareholder]]ship, to facilitate the building of larger ships, and to make possible more extensive trade. The northern Netherlands became a [[Dutch republic|Republic]] in [[1581]], and when Antwerp fell in [[1585]], many of these merchants went north to [[Amsterdam]]. The new Republic was largely controlled by its merchant class rather than by the nobility, and had an economy based on early capitalist principles rather than feudal ones. Specifically, the Republic was an early proponent of Free Trade ideas (e.g. [[Grotius]]). Its model of colonization was characterized by a strong belief in the bottom line and was entirely based on private enterprise rather than state control.
Many economic historians regard [[the Netherlands]] as the first thoroughly [[capitalism|capitalist]] country in the world. In early modern Europe it featured the wealthiest trading city ([[Amsterdam]]) and the first full-time [[Amsterdam Stock Exchange|stock exchange]]. The inventiveness of the traders led to [[insurance]] and retirement funds as well as such less benign phenomena as the boom-bust cycle, the world's first asset-inflation bubble, the [[tulip mania]] of 1636-1637, and the world's first bear raider - Isaac le Maire, who forced prices down by dumping stock and then buying it back at a discount<ref>[http://prudentbear.com/press_room_short_selling_history.html Chancellor, Edward (October 29, 2001) "A Short History of the Bear" ''David W. Tice & Associates, LLC'']</ref>.
Britain and France, which each applied a [[Mercantilism|mercantilist]] approach to economic policy, were unable{{Fact|date=December 2007}} to outcompete the Dutch Republic, because in their model, long term politically motivated investments by the state were possible. One consequence of this failure was a crash in the speculative trade in [[tulip]]s (the 'windhandel') in 1637. See [[tulip mania]].
==Merchant capitalism and mercantilism==
{{Main article|Merchant capitalism|Mercantilism}}
[[Image:Lorrain.seaport.jpg|right|thumb|200px|A painting of a French seaport from 1638, at the height of mercantilism.]]
The earliest stages of [[merchant capitalism]] can be traced back to the [[Islamic Golden Age|medieval Islamic world]] during the 9th-12th centuries, where a vigorous [[monetary economy|monetary]] [[market economy]] was created on the basis of the expanding levels of circulation of a stable high-value [[currency]] (the [[dinar]]) and the integration of [[monetary]] areas that were previously independent. Innovative new [[business]] techniques and forms of [[business organisation]] were introduced by [[economist]]s, [[merchant]]s and [[trader]]s during this time. Such innovations included [[trading company|trading companies]], [[bills of exchange]], [[contract]]s, long-distance [[trade]], [[big business]]es, the first forms of [[partnership]] (''mufawada'' in [[Arabic language|Arabic]]) such as [[limited partnership]]s (''mudaraba''), and the concepts of [[Credit (finance)|credit]], [[profit]], [[Capital (economics)|capital]] (''al-mal'') and [[capital accumulation]] (''nama al-mal''). Many of these early capitalist ideas were further advanced in [[Middle Ages|medieval Europe]] from the 13th century onwards.<ref name=Banaji>Jairus Banaji (2007), "Islam, the Mediterranean and the rise of capitalism", ''Journal Historical Materialism'' '''15''' (1), p. 47-74, [[Brill Publishers]].</ref><ref>Maya Shatzmiller (1994), ''Labour in the Medieval Islamic World'', p. 402-403, [[Brill Publishers]], ISBN 9004098968.</ref><ref>Subhi Y. Labib (1969), "Capitalism in Medieval Islam", ''The Journal of Economic History'' '''29''' (1), p. 79-96.</ref>
Modern capitalism didn't arise until the [[early modern period]], between the 16th and 18th centuries, when [[merchant capitalism]] and [[mercantilism]] were established.<ref>Burnham (2003)</ref><ref>''Encyclopædia Britannica'' (2006) </ref> This period was associated with geographic discoveries by merchant overseas traders, especially from England, Portugal, Spain and the Low Countries; the [[European colonization of the Americas]]; and the rapid growth in overseas trade. Referring to this period in the ''Communist Manifesto'', Marx wrote:
<blockquote>The discovery of America, the rounding of the Cape, opened up fresh ground for the rising bourgeoisie. The East-Indian and Chinese markets, the colonisation of America, trade with the colonies, the increase in the means of exchange and in commodities generally, gave to commerce, to navigation, to industry, an impulse never before known, and thereby, to the revolutionary element in the tottering feudal society, a rapid development." [http://www.marxists.org/archive/marx/works/1848/communist-manifesto/ch01.htm]</blockquote>
Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist production methods.<ref>Scott (2005)</ref> Noting the various pre-capitalist features of mercantilism, [[Karl Polanyi]] argued that capitalism did not emerge until the establishment of [[free trade]] in Britain in the 1830s.
Under mercantilism, European [[merchant]]s, backed by state controls, [[subsidy|subsidies]], and [[monopoly|monopolies]], made most of their profits from the buying and selling of goods. In the words of [[Francis Bacon]], the purpose of mercantilism was "the opening and well-balanacing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation of prices..." <ref>Quoted in Sir George Clark, ''The Seventeenth Century'' (New York: Oxford University Pres, 1961), p. 24.</ref> Similar practices of economic regimentatation had begun earlier in the medieval towns. However, under mercantilism, given the contemporaneous rise of the [[absolutism]], the state superseded the local [[guild]]s as the regulator of the economy.
Among the major tenets of mercantilist theory was [[bullionism]], a doctrine stressing the importance of accumulating [[precious metals]]. Mercantilists argued that a state should export more goods than it imported so that foreigners would have to pay the difference in precious metals. Mercantilists asserted that only raw materials that could not be extracted at home should be imported; and promoted government subsides, such as the granting of monopolies and protective [[tariff]]s, were necessary to encourage home production of manufactured goods.
Proponents of mercantilism emphasized state power and overseas conquest as the principal aim of economic policy. If a state could not supply its own raw materials, according to the mercantilists, it should acquire colonies from which they could be extracted. Colonies constituted not only sources of supply for raw materials but also markets for finished products. Because it was not in the interests of the state to allow competition, held the mercantilists, colonies should be prevented from engaging in manufacturing and trading with foreign powers.
==Industrial capitalism and laissez-faire==
[[Image:Dore London.jpg|thumb|200px|left|[[Gustave Doré]]'s 19th century engraving depicted the dirty, overcrowded slums where the industrial workers of London lived.]]
Mercantilism declined in Great Britain in the mid-18th century, when a new group of economic theorists, led by [[Adam Smith]], challenged fundamental mercantilist doctrines as the belief that the amount of the world's wealth remained constant and that a state could only increase its wealth at the expense of another state. However, in more undeveloped economies, such as [[Prussia]] and [[Imperial Russia|Russia]], with their much younger manufacturing bases, mercantilism continued to find favor after other states had turned to newer doctrines.
The mid-18th century gave rise to '''industrial capitalism''', made possible by the accumulation of vast amounts of capital under the merchant phase of capitalism and its investment in machinery. Industrial capitalism, which Marx dated from the last third of the 18th century, marked the development of the [[factory]] system of manufacturing, characterized by a complex [[division of labor]] between and within work process and the routinization of work tasks; and finally established the global domination of the capitalist mode of production.<ref>Burnham (2003)</ref>
During the resulting [[Industrial Revolution]], the industrialist replaced the merchant as a dominant actor in the capitalist system and effected the decline of the traditional handicraft skills of [[artisan]]s, [[guild]]s, and [[journeyman|journeymen]]. Also during this period, capitalism marked the transformation of relations between the British landowning gentry and peasants, giving rise to the production of [[cash crop]]s for the market rather than for subsistence on a [[feudal]] [[Manorialism|manor]]. The surplus generated by the rise of commercial agriculture encouraged increased mechanization of agriculture.
The rise of industrial capitalism was also associated with the decline of mercantilism. Mid- to late-nineteenth-century Britain is widely regarded as the classic case of [[laissez-faire]] capitalism.<ref>Burnham (2003) </ref> Laissez-faire gained favor over mercantilism in Britain in the 1840s with the repeal of the [[Corn Laws]] and the [[Navigation Acts]]. In line with the teachings of the classical political economists, led by [[Adam Smith]] and [[David Ricardo]], Britain embraced [[classical liberalism|liberalism]], encouraging competition and the development of a [[market economy]].
==Finance capitalism and monopoly capitalism==
In the late 19th century, the control and direction of large areas of industry came into the hands of financiers. This period has been defined as "'''[[finance capitalism]]'''", characterized by the subordination of the processes of production to the accumulation of [[money]] profits in a [[financial system]]. <ref>Scott (2005)</ref> Major features of capitalism in this period included the establishment of huge industrial cartels or [[monopoly|monopolies]]; the ownership and management of industry by financiers divorced from the production process; and the development of a complex system of [[banking]], an [[equity market]], and corporate holdings of capital through [[stock]] ownership. Increasingly, large industries and land became the subject of profit and loss by financial [[speculator]]s.
Late 19th and early 20th century capitalism has also been described as an era of "[[monopoly capitalism]]," marked by government's movement from [[laissez-faire]] capitalism and [[perfect competition|competitive markets]] to the concentration of capital into large monopolistic or [[oligopoly|oligopolistic]] holdings by banks and financiers, and characterized by the growth of large [[corporation]]s and a division of labor separating [[shareholder]]s, owners, and managers.<ref>Scott (2005)</ref>
By the last quarter of the 19th century, the emergence of large industrial trusts had provoked legislation in the U.S. to reduce the monopolistic tendencies of the period. Gradually, the U.S. federal government played a larger and larger role in passing [[antitrust]] laws and regulation of industrial standards for key industries of special public concern.
By the end of the 19th century, [[economic depression]]s and [[boom and bust]] [[business cycle]]s had become a recurring problem. In particular, the [[Long Depression]] of the 1870s and 1880s and the [[Great Depression]] of the 1930s affected almost the entire capitalist world, and generated discussion about capitalism's long-term survival prospects. During the Great Depression of the 1930s, Marxist commentators often posited the possibility of capitalism's decline or demise, often in contrast to the ability of the [[Soviet Union]] to avoid suffering the effects of the global depression.<ref>Stanley L. Engerman "Capitalism" ''The Oxford Companion to United States History''. Paul S. Boyer, ed. Oxford University Press 2001. Oxford Reference Online. Oxford University Press.</ref>
==Capitalism following the Great Depression==
The economic recovery of the world's leading capitalist economies in the period following the end of the Great Depression and the [[Second World War]] —- a period of unusually rapid growth by historical standards —- eased discussion of capitalism's eventual decline or demise.<ref>Engerman (2001)</ref>
In the period following the global depression of the 1930s, the state played an increasingly prominent role in the capitalistic system throughout much of the world. In 1929, for example, total U.S. government expenditures (federal, state, and local) amounted to less than one-tenth of [[GNP]]; from the 1970s they amounted to around one-third.<ref>''Encyclopædia Britannica'' (2006)</ref> Similar increases were seen in all industrialized capitalist economies, some of which, such as France, have reached even higher ratios of government expenditures to GNP than the United States. These economies have since been widely described as "[[mixed economy|mixed economies]]."
During the postwar boom, a broad array of new analytical tools in the social sciences were developed to explain the social and economic trends of the period, including the concepts of [[post-industrial society]] and [[welfare state|welfare statism]]. <ref>Burnham (2003)</ref> The phase of capitalism from the beginning of the postwar period through the 1970s has also been variously described as "[[state capitalism]]" by Marxist and non-Marxist commentators alike.
The long postwar boom ended in the 1970s, amid the economic crises experienced following the [[1973 oil crisis]]. The "[[stagflation]]" of the 1970s led many economic commentators and politicians to embrace [[neoliberalism|neoliberal]] policy prescriptions inspired by the laissez-faire capitalism and [[classical liberalism]] of the 19th century, particularly under the influence of [[Friedrich Hayek]] and [[Milton Friedman]]. In particular, [[monetarism]], a theoretical alternative to [[Keynesianism]] that is more compatible with laissez-faire, gained increasing support in the capitalist world, especially under leadership of [[Ronald Reagan]] in the U.S. and [[Margaret Thatcher]] in the UK in the 1980s.
==Globalization==
[[Image:NYSESecurity.JPG|thumb|left|180px|The [[New York Stock Exchange]]]]
Although overseas trade has been associated with the development of capitalism for over five hundred years, some thinkers argue that a number of trends associated with [[globalization]] have acted to increase the mobility of people and capital since the last quarter of the 20th century, combining to circumscribe the room to maneuver of states in choosing non-capitalist models of development. Today, these trends have bolstered the argument that capitalism should now be viewed as a truly [[world system]] (Burnham). However, other thinkers argue that globalization, even in its quantitative degree, is no greater now than during earlier periods of capitalist trade.<ref>[[Doug Henwood]] is an economists who has argued that the heyday of globalization was during the mid-19th century. For example, he writes in ''What Is Globalization Anyway?'':
<blockquote>Not only is the novelty of "globalization" exaggerated, so is its extent. Capital flows were freer, and foreign holdings by British investors far larger, 100 years ago than anything we see today. Images of multinational corporations shuttling raw materials and parts around the world, as if the whole globe were an assembly line, are grossly overblown, accounting for only about a tenth of U.S. trade.[http://www.zmag.org/sustainers/content/1999-11/26henwood.htm]</blockquote>
(See also {{cite book | title=After the New Economy | last=Henwood | first=Doug | publisher=New Press | date=October 1, 2003 | id=ISBN 1-56584-770-9}})</ref>
After the abandonment of the [[Bretton Woods system]] and the strict state control of foregin exchange rates, the total value of transactions in foreign exchange was estimated to be at least twenty times greater than that of all foreign movements of goods and services (EB). The internationalization of finance, which some see as beyond the reach of state control, combined with the growing ease with which large corporations have been able to relocate their operations to low-wage states, has posed the question of the 'eclipse' of state sovereignty, arising from the growing 'globalization' of capital.<ref>For an assessment of this question, see Peter Evans, "The Eclipse of the State? Reflections on Stateness in an Era of Globalization," ''World Politics'', 50, 1 (October 1997): 62-87.</ref>
Economic growth in the last half-century has been relatively strong. [[Life expectancy]] has almost doubled in the developing world since the postwar years,{{Dubious|date=March 2008}} and is starting to close the gap on the developed world where the improvement has been smaller. [[Infant mortality]] has decreased in every developing region of the world.<ref>[http://www.theglobalist.com/DBWeb/StoryId.aspx?StoryId=2429 Guy Pfefferman, ''“The Eight Losers of Globalization”'']</ref> Many other variables such as per capita food supplies, literacy, child labor, and access to clean water have also improved.{{Specify|date=December 2006}}
==See also==
* [[Capitalist mode of production]]
* [[Primitive accumulation of capital]]
* [[Simple commodity production]]
* [[Fernand Braudel]]
* [[Capitalism in the nineteenth century]]
* [[Capitalism in the twentieth century]]
* [[Capitalism in the twenty-first century]]
* [[History of private equity and venture capital]]
==Notes==
{{reflist}}
==References==
* "Capitalism" by John Scott and Gordon Marshall in ''A Dictionary of Sociology,'' Third Edition, Oxford University Press (2005). Oxford Reference Online. Oxford University Press. ISBN 0198609876
[[Category:Economic history]]
[[Category:History of Capitalism]]
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