Capitalism and Its Critics: A Long-Term View
Business, Violence and Enlightenment: Capitalist Expansion in the Early Modern Period
The
European expansion into the rest of the world since the fifteenth
century had many motives and driving forces, but the resources,
ambitions, greed, and enterprising spirit of West European commercial
and finance capitalists were, no doubt, among them. From the sixteenth
to the eighteenth century, capitalism developed a new pattern: In
overseas trade, in the colonies, and connected with this, in the
economic life of Europe. A new symbiosis between business and violence
characterized capitalism during those centuries, particularly outside
Europe - but under the influence of Europeans - as became evident in the
many wars and raids, but also in the plantation system on the basis of
unfree labor. Certainly, slavery was not a capitalist invention, but the
capitalist plantation economy in Brazil, the Caribbean, and the
southern regions of North America triggered a huge expansion of the
slave trade and slavery. According to Marx, modern capitalism came into
the world soaked in blood and filth, as a result of violence and
suppression. This is only a half-truth historically, but none the less a
correct observation when one considers the connection between the rise
of capitalism and colonization. This connection is currently intensively
researched.6
Within Europe, capitalism continued its expansion
into the world of production, which was accordingly reshaped. Think of
the different types of agrarian capitalism in Western and Eastern
Europe, think of mining and metal-producing industries, and think of the
proto-industrial reorganization of cottage industry in most industrial
regions of Europe. Productivity growth was one major consequence that
decisively improved the life chances - and frequently the survival
chances - of a rapidly growing population. However, new forms of
inequality, dependence, and exploitation also followed, which could not
be realized without some violence and many social conflicts.
The
combination of merchant and finance capitalism with colonialism
triggered innovations. The enterprise, a core element of capitalism in
its process of consolidation, became more clearly profiled by gaining
elements of a legal and institutional identity beyond the people who
founded and managed it. The Dutch Vereenigde Oostindische Compagnie (the
VOC, founded in 1602) was just one, but a famous example among several
firms founded for the purpose of colonial trade in a number of
countries, especially in the Netherlands, England, and France. An
impressive capital fund (6.5 million guilders) on the basis of shares,
more than 200 shareholders with limited liability, power with a board of
directors, sophisticated organization with a transnational and
transregional reach, a central office in Amsterdam soon with about 350
employees, a diversified portfolio of trading activities including some
production units, for example a spinning mill in India: A very modern
corporation, indeed. However, it rested on the foundations of political
privilege and was a monopoly with extensive quasi-governmental powers.
The Dutch government had conferred on the VOC the right to operate all
Dutch trading business east of the Cape of Good Hope, along with the
authorization to wage war, conclude treaties, take possession of land,
and build fortresses. The VOC executed these rights, often in armed
struggle with competitors from other countries. The distinction between
conducting capitalist business and waging war was fluid. There were
years in which the company apparently drew the major share of its income
from the seizure of competing or enemy ships.
The VOC held
together until 1799, while its shareholders continuously changed. They
could easily enter and leave the corporation because they could sell and
buy their shares on newly emerging stock markets; in Antwerp from 1460,
in Amsterdam from 1612, and in London from 1698, with a precursor from
1571. The shares of the monopoly companies engaged in colonial business
represented a considerable proportion of the commercial papers traded on
the stock exchanges. Capital increasingly became a commodity, and the
speculative elements associated with it grew by leaps and bounds. Not
only did the prospect of spectacular profits increase as a result, but
also the danger of great losses. Both the opportunities and the perils
soon affected not just a small number of active, professional trade
capitalists, but also an increasing number of small and large investors
from wide sections of the population in western European metropolises.
In the course of the seventeenth century they learned how to try their
luck on the stock exchange, to bet, to invest, and to speculate, with
prospects and dangers. The downfall of the English South Sea Company in
1720 was preceded by fully-fledged speculation mania. The British
government had granted the company a monopoly on trade with South
America, even including all the rights to regions not yet discovered!
The public expected huge gains. A run on shares set in, and the share
price rose from 100 to 905 pounds within just one month. Broad segments
of the population entrusted their money to the company and lost it when
the bubble burst in the summer of 1720, and the share price went into
free fall. Sir Isaac Newton was among the victims. He is supposed to
have said: "I can calculate the motions of erratic stars, but not the
madness of the multitude". The macro-economic and social consequences of
such crises still remained quite limited. Yet, via stock market and
speculation, larger segments of society got their first introduction to
the hopes and disappointments, the gains and the losses that capitalism
so abundantly held in store for them.
The rise of finance
capitalism not only followed from the growing credit needs of trade and
production through expansion. Rather, the services provided by banks
were also requested by those in power; by city governments and ruling
aristocrats, and later on above all, by the governments of the powerful
territorial states just establishing themselves by competing and
sometimes by fighting with one another. Step by step, the center of
transnational finance capitalism moved to Western Europe, first to
Antwerp and Amsterdam, then later to London.7
In the Netherlands
and in England particularly, capitalist principles affected social life
beyond the economy, sociability, consumption, leisure activities,
betting and sports, the relation between the sexes, and the distribution
of political power. In the seventeenth and eighteenth centuries, the
Netherlands and England were the most capitalist countries in Europe
and, for that matter, the world. It is worthwhile to note that they were
also the most prosperous countries and certainly also the freest in
Europe, on the way to constitutional government and a dynamic civil
society.
I have discussed the skepticism about trade and
capitalism, and the anti-capitalist sentiments dominant in medieval
Europe, under the influence of Christian moral doctrine and other
factors. Certainly, Reformation and Counter-Reformation brought about a
"modern religiosity" that stressed the "worldliness of faith"8 and
contributed to an upgraded appreciation of work and profession. Max
Weber has emphasized this, not without some justification.
Nevertheless,
it was not so much the Reformation, but instead the Enlightenment that
brought about a re-assessment in contemporary thinking about capitalism
and its reputation, at least among intellectuals and probably beyond.
Under the impact of their era's destructive wars, authors such as
Grotius, Hobbes, Locke, and Spinoza worked at redefining the virtues of
civil society with a secularizing thrust and informed by a concern about
human rights, freedom, peace, and prosperity. In 1748, in a clear
withdrawal from the old European mainstream, Montesquieu praised trade
as a civilizing force that contributed to overcoming barbarism, calming
aggression, and refining manners. Other authors chimed in to the same
tune, among them Bernard de Mandeville and David Hume, Condorcet, and of
course Adam Smith; all of them West European thinkers. The common good,
went the thrust of these arguments, is actually promoted by the
reasonable pursuit of self-interest; the advantage of the one need not
be to the disadvantage of the other. Commerce and morality were not
locked into inevitable opposition. The market helped replace the war of
passions with the advocacy of interests. Commerce was said to promote
such virtues as diligence and persistence, uprightness, and discipline.
Overall,
a fundamental affirmation of society's new capitalist tendencies was
starting to emerge. It was expected not only that these tendencies would
increase prosperity, but also that they would contribute to creating a
new social order that was better for human cooperation, one without
arbitrary state intervention, with respect for liberty and individual
responsibility, and with the capacity for resolving conflicts through
compromise instead of war. Certainly, these authors did not use the
concept "capitalism". Adam Smith wrote about "commercial society".
However, basically this was a legitimizing vision of capitalism as a
civilizing promise in the spirit of Enlightenment.
With regard to
appreciation by intellectuals and to public opinion, capitalism had its
best time in the second half of the eighteenth century. However, again
there was a wide gap between reality and discourse; now between the deep
contradictions of capitalist reality and its utopian idealization in
terms of "doux commerce" and "commercial society".9