Capitalism: Economic and Social Change in Europe - Case Study Example

Ecological Footprints Capitalism is a system – a distinctive means of organizing human existence. It has history, a future and with a gargantuan capacity to alter human conditions. People especially in democratic countries enjoy institutions such as educational systems, the job market, career opportunities that support individual choices. The appeal of this concept is encouraged by the success of industrialized countries such as the United States and those of Europe. In the advent of globalization, where not only goods are exported, imported – traded – but ideologies and cultures as well, capitalism is spreading like wildfire. China, a communist country for instance, is now increasingly banking on capitalist principles to spur its growth, through its “one China, two systems” policy. The ‘collapse of Communism’ in the late 1980s and 1990s seemed to confirm what many people have long believed: that capitalism is the natural condition of humanity, that it conforms to the laws of nature and basic human inclinations, and that any deviation from those natural laws and inclinations can only come to grief. (Wood 1) This paper will explore the impact of the capitalist system around the world since the fifteenth century and how the variables such as rebellion and protest affected its course. Also, consequences of capitalism will be discussed as well as the ways which we – individuals and states – address them. Background The concept of capitalism is founded on personal liberties where the means of production in a society is not controlled by the state but in the hands of private persons. Capitalist practices started as early as the 1400s and it started to be institutionalized between the 16th and the 19th centuries. It emerged as the dominant economic system in Europe after its predecessor, which was feudalism. Through time, capitalism has evolved from one form to another, and today economists agree that there are several different types of capitalism throughout the world. Usually this depends on elements such geography, politics, culture as well as the concentration of economic might and the methods of capital accumulation. 1 The mechanisms behind the evolution of capitalism are documented by history and we will explore the timeline of the most important upheavals and, eventually, the resulting capitalist culture that we have at present and its impact. Our thesis is that crises such as rebellion and protest challenge capitalism in a way that encourages the foundation of new principles. These principles become powerful due to their economic, hence political significance. What holds the power in the economic system has the more impact in the world –the merchants in pre-industrial Britain, the industrialists, the financiers who monopolized trade, multinational companies, and so on. Rise of the Bourgeois Even though some form of capitalism was already present since the invention of agriculture, capitalism, as mentioned above, emerged in 1400s during the decline of feudalism. The emergence of the commercial society was largely due to political movements in England. The constraints of parasitic powers of lordship in feudal Britain confined the free movements of economic actors and the free expression of economic rationality. Revolutionary violence, hence, brought down the prevailing system and gave rise to capitalism. In feudalism, the key point is the exploitation of the cultivator by means of direct politico-legal compulsion – the enforced performance by the cultivator of obligatory labor services on the lord’s estate. The crucial movement leading to a social crisis happened in the fourteenth century: The feudal system based on the serfdom had led to the expansion of European society, economy, and population. But in time it ran up against limits and the serf-based feudalism could no longer support the large population it had spawned. The result was a crisis of productivity. The outcome of the crisis was that cultivators won their freedom… The essential point was the change in the cultivators’ status from unfree to free. In the debate, this change is called “the demise of feudalism”. (Headlee 11) It was the class struggle of the serfs themselves in reaction to an increase in exploitation that was instrumental for the crisis. The freedom that entailed as a result of the decline of feudalism triggered the rise of trade as well as the trading centers and the emergence of exchange economy. Freedom enabled people to do away with production which was regulated by custom and tradition. This is one of the leading factors that would give birth to the Industrial Revolution in the succeeding centuries. At this point, we highlight the role of Industrial Revolution as a process in the economic transformation associated with the rise of capitalism and levels of wealth and economic output in much of Europe. Mercantilism It was argued by some historians such as Karl Polanyi that capitalism did not emerge until the establishment of free trade in Britain in the 1830s. Prior to that the commercial economy that prevailed that resembles capitalism was the merchant capitalism, a system of trade and profit where commodities are largely produced by non-capitalist production methods. According to Randall Lee Pouwels and Philip J. Adlernder, the chief goal of economic policy under mercantilism was a favorable balance of trade where the value of exports must exceed the cost of its important (312). To achieve this, the state continually intervened in the market in order to secure advantage to itself and the population at large by carefully supervising every aspect of commerce and investment.2 Mercantilism declined in Great Britain in the mid-18th century when fundamental mercantilist doctrines were challenged by a group of economic theorists led by Adam Smith. The point of the protest was 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. As people accumulated a vast amount of capital during the merchant phase and have invested them in the development of machineries, the age of industrial capitalism emerged. At this time, Britain has experienced significant upheavals which resulted to its adhering to the principle of liberalism. The relations between the British landowners and the peasant improved, giving rise to the production of cash crops for the market rather than subsistence for the feudal lord. Liberalism encouraged competition and the development of a market economy. Industrial Revolution and Beyond The industrial movements from the 18th century to the late 19th century saw the replacement of the merchants by the industrialists as the major force in the capitalist system. The development of machines revolutionized the production process and it diminished the role of artisans, guilds and journeymen in the economic system. There are many examples of radical change during the Industrial Revolution. “The best known type of radical change is the introduction of strategic inventions with far-reaching effects on productivity growth, such as Newcomen’s atmospheric steam engine in coal mining, large-scale manufacturing based on an efficient division of labor and the rise of railway transport and steam shipping.” (Prak 100) The capitalist trade within this period saw the acquisition of immense wealth and its impact would be felt by the 19th century. At this time, the control and direction of large areas of industry came into the hands of financiers. Thus the name "finance capitalism," was tagged to this period that is characterized by the subordination of processes of production to the accumulation of money profits in a financial system. The dawn of the 20th century capitalism saw an era of "monopoly capitalism," which is distinguished by the movement from laissez-faire capitalism to the concentration of capital into large monopolistic or oligopolistic holdings by banks and financiers. 3 This period is what history would declare as one that is characterized by the growth of large corporations and a division of labor separating shareholders, owners, and managers. Capitalism and War The period of the Great Global Depression, which was partly responsible for the Second World War was marked by what historians called as the easing of capitalism. The conflicts of 1914-18 disrupted the internationalization of economic activity that had been built up before the war, and the economic depression of the 1930s strengthened specifically national economic institutions and practices. The world economy between 1914 and 1945 was fractured into rival imperial blocs to a far greater extent than in the preceding half century. (Scott 207) In this period business ownership and control became more organized and rationalized in the sense that states asserted control. According to Scott, families and individual entrepreneurs found it more difficult to retain control of their expanding businesses and a larger proportion of capital was drawn from the expanding financial system.(Scott 207) The nation state and industrial capitalism worked together in pursuing human control over the natural world and over other human beings. After the war, much of the world’s industrial economies experienced an upward surge amid the states’ intervention in the capitalistic system. Government expenditures became one of the most important contributors in the economic progress. “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 commentator-politicians to embrace neoliberal policy prescriptions inspired by the laissez-faire capitalism and classical liberalism of the 19th century.” (‘Capitalism’ 2007) Globalization The ultimate horizon of capitalism which is a world market was realized in the emergence of the concept of globalization in the 20th century. Although some economists may argue that a world trade or globalization was already present sometime in the past with the incidence of global trade, there is a difference in the 20th century’s case due to one important factor – it is technology. This increased the mobility of people and capital as well as integration the international free market in a speed never thought possible. Some observers stress that this incident hints a form of multinational capitalism that starts to weaken the concept of nation-states. Indeed, with technology and free trade, national boundaries almost do not matter anymore and states are now bound to abide by international trade terms. The tumultuous history of capitalism is saga of opportunities but also of problems. Capitalism has always pulled out of its recurrent crises, but never without laying a foundation for new and even worse ones. It is now imperative to address, limit or correct the damage of the capitalist economy’s consequences as weaknesses and contradictions in the system are increasingly getting transparent. Conservatives are the first to cite problems because in capitalistic societies, market exchange and production are often seen as threats to cultural and religious traditions as well as the environment. Anti-capitalism sectors have their sentiments most represented in groups such as socialist and labor political parties. The bourgeois’ values of profiteering, greed, selfishness and hoarding are the most common source of complaints in capitalistic societies. Also, in many countries, particularly the underdeveloped, the unfair and inefficient distribution of wealth is thought to be the most significant consequence of the free market. Other problems include a tendency toward oligopoly and government by oligarchy; various forms of economic exploitation or imperialism; and the societal phenomena such as alienation, inequality, unemployment, and economic instability. In addressing the problem, there seems to be a consensus that capitalism should not be abolished entirely since there is no perceived viable and more effective alternative form of economic system since due to its ability to spur economic growth. There is a concept called ‘hybrid capitalism’ or sometimes called ‘mixed capitalism’ where a state may intervene for the greater good or to protect the populace, the environment, among other important societal sectors. This could be achieved through legislations and the strengthening of national institutions. It need not necessarily be protectionist or in conflict with the concept of free market. Karl Polanyi has a very interesting explanation which could very well provide us an insight what was meant above: The evolution of capitalism was driven by two opposing movements: One was the principle of economic liberalism, aiming at the establishment of a self-regulating market, relying on the support of the trading classes, and using largely laissez-faire and free trade as its methods; the other was the principle of social protection aiming at the conservation of man and nature as well as productive organization, relying on the support of those most immediately affected by the deleterious action of the market – primarily, but not exclusively, the working and the landed classes – and using protective legislation, restrictive associations, and other instruments of intervention as its methods. (Gao 23) Mixed or hybrid capitalism is within the parameters of the democratic principle of “a government of the people, for the people and by the people”, implying that the interests of the citizens are paramount. The ability of the government to support, regulate and defend the private sector has constitutional and moral foundations; hence it could be best to use it in addressing the perennial problem brought about by capitalism. Works Cited "Capitalism". Wikipedia. Retrieved 02 Mar. 2007 Gao, Bai. Economic Ideology and Japanese Industrial Policy: Developmentalism from 1931 to 1965. Cambridge University Press, 2002 Headlee, Sue. The political economy of the family farm: The Agrarian Roots of American Capitalism. Praeger/Greenwood, 1991 Prak, Maarten Roy. Early Modern Capitalism: Economic and Social Change in Europe 1400-1800. UK: Routledge, 2001 Pouwels, Randall Lee, and Adler, Philip J. World Civilizations. Thomas Wadsworth, 2005 Wood, Ellen. The Origin of Capitalism: A Longer View. Verso, 2002. Scott, John. Corporate Business and Capitalist Classes. Oxford University Press, 1997 Scott, John. Social Theory: Central Issues in Sociology. Sage Publications Inc, 2006 Scott, John and Marshall, Gordon. “Capitalism”. The Concise Encyclopedia of Economics. Oxford University Press, 2005 Read More