The history of Capitalism

THE common narrative of Capitalism is that it is just part of the natural order of humanity, that hurdles like feudalism needed to swept away for Capitalism to emerge and bring freedom to all. Even Karl Marx thought that Capitalism was a great leap forward and, potentially at least, the release of human potential. If you want a paean to the dynamism of Capitalism you could do worse than read The Communist Manifesto. Of course, he saw it as only a stepping stone to Communism but still it was, he thought, an advance.

Was feudalism just a hurdle for Capitalism to overcome?

But there is another narrative which challenges the notion that Capitalism is in some sense endemic, ahistorical and a kind of force of human nature. This, according to Ellen Meiksins Wood in The Origin of Capitalism is just another narrative, which she calls the Commercialization Model. In this model the ‘highest stage of progress, represents a maturation of age-old commercial practices (together with technical advances) and their liberation from political and cultural constraints’. However, Woods argues, this explanation has in common ‘certain assumptions about the continuity of trade and markets from their earliest manifestations in exchange to their maturity in modern industrial capitalism’. In this model it is ‘feudalism that represents the real historic rupture, interrupting the natural development of commercial society’.

Even during Feudalism, according to the model, the intrinsic logic of the free market simply lay dormant. From the start ‘rationally self-interested individuals maximising their utilities by selling their goods for profit’ was the fundamental driving force of society artificially suppressed by Feudalism.

Wood, however, argues that Capitalism is historically located and represented a completely new relation of production due to a unique set of circumstances. She writes: “A market economy can only exist in a market society, that is a society where instead of an economy embedded in social relations, social relations are embedded in the economy.” Indeed, it could be argued that before Capitalism people simply would not have understood the idea of an ‘economy’ as a separate entity. And she quotes the economic historian and anthropologist Karl Polanyi who argues that, far from being the natural order of things, the system of self-regulating markets was so disruptive ‘not only to social relations but also to the human psyche…’ that ‘its implementation had to be at the same time the history protection from its ravages’. And without ‘protective counter measures, particularly by means of state intervention, human society would have been annihilated’.

Society had to be embedded in the economy for Capitalism to thrive.

Interestingly, Wood challenges a common view that Capitalism represents the pinnacle of human freedom because the ‘dominant characteristic of the capitalist market is not opportunity or choice but, on the contrary, compulsion’. She writes: “Material life and social reproduction in capitalism are universally mediated by the market, so that all individuals must in one way or another enter into market relations in order to gain access to the means of life.”

Wood defines Capitalism as 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 system, she claims, is unique and very different from all previous ways of ‘organizing material life and social reproduction’. And yet explanations 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’ – a logical fallacy known as begging the question.

Wood argues that Capitalism did not, as is often assumed, start in towns and cities but in the countryside. Prior to the rise of Capitalism much of the land in England was owned by peasants, although the concept of ownership was different from our understanding of it. It actually meant more like access to land, which often involved more than one person. And there was always common land. That is not to say that life for the peasant was easy. But rather than economic imperatives impoverishing the peasant, it was the nobility and landlords, often using brute force, that expropriated crippling payment from them. But as the English ruling class was demilitarized before its counterparts on continental Europe, and political power split away from the nobles into the State in the form of the Monarchy, so nobles had to rely more and more on improving production to earn their keep – at the expense of the peasant. Their philosophical justification was provided by John Locke.

Wood writes: “The theme running throughout his (Locke’s) discussion is that the earth is there to be made productive and profitable, and this is why private property, which emanates from labour, trumps common possession.” But crucially Locke argues that there is no direct link between labour and property because ‘one man can appropriate the labour of another’. Wood adds: “It appears that the issue for Locke has less to do with the activity of labour as such than with its profitable use.” And: “The point is…that the landlord who puts his land to productive use, who improves it, even if it is by means of someone else’s labour, is being industrious, no less – and perhaps more than the labouring servant.” It is in this appropriation of property and labour that is distinctively Capitalist.

And it is these purely economic imperatives in agrarian Capitalism that led to the notorious enclosures, industrialization, wage-labour and the rise of the proletariat. Of course, simply identifying Capitalism as a unique phenomenon does not mean that it must be overcome. With all its faults Capitalism has produced unprecedented economic prosperity and, to misquote Churchill, it may the worst way of organizing society apart from all the others. But Wood asserts that Capitalism is incapable of promoting sustainable development precisely because of its unique economic imperatives that privilege exchange value over use value – profit not people. If that is true then the conundrum for humanity is how to create a more sustainable society without going down the path of the kind dictatorships that blighted the 20th century.

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  1. Just read a book on feudalism as part of some research I’m doing and discovered that much of what we assume we know about it is wrong. The word was unknown during the time it was supposed to be in existence ie 12th and 13th centuries. Apparently, our thinking about it is a creation of 19th century historians.
    Anyone interested in capitalism should read ’23 Things They Don’t Tell You About Capitalism’ by Ha-Joon Chang. PC


  2. Yes, this is often the case, the Enlightenment being one of the few exceptions. There was an interesting In Our Time last Thursday about mercantilism, a term which was not known until the economic drivers were critiqued by Adam Smith in The Wealth of Nations. Of course, it does not follow that simply because a certain economic era was not identified at the the time, that later critiques that identify it have no value. There was a logic to mercantilism and to feudalism.


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