The Origins Of Capitalism

Photo by Allef Vinicius on Unsplash

From the moment foreign trade began, in the 16 century, there was an ongoing movement for merchants to find new markets to sell their products. During the agricultural revolution, the feudal system had restricted most of the economical trades between regions. People would organize their lives around lands that were controlled by noblemen and the feudal lord, that were mostly self-sustained and independent. Imports were highly restricted and emphasis would be given to produce only the amount of goods needed to sustain the aforementioned territory.

There was a certain reason that feudalism forbade any sort of trade between two separate regions. And there is a reason that they restricted all produced amounts from the land to just the minimum required. Each region was an independent entity where the land was split up into pieces and rented to lower levels of the hierarchical structure. The actual laborers that were doing all the work, were obliged to give most of the produced outcome to their lords and work under strict conditions. Any surplus of goods would give the ability for market competition to rise, where laborers would gain power and the ability to negotiate their position across regions and lords.

The natural effect of competition is centralization, pushing the majority of the population under a central power, on the region that is most profitable. It’s the reason why the capital of a country, contains most of its resources aggregated, as people move from urban areas to the center. As feudalism was a decentralized system where all power was distributed to the various lords to organize and manage as they liked, it would be totally detrimental to allow any kind of produced surplus or trading to take place, as it would work against the fundamentals of the system per se.

With time and the improved ability of transportation, this philosophy changed and people saw the opportunity to sell their goods across regions making bigger profits. They strived to find new resources, at the cheapest levels, and capitalize on them by exporting them to foreign countries. Whoever controlled the lands that provided these sources had the opportunity to bring wealth and prosperity.

With the expansion of the British empire, many trade routes were enforced and established as monopolies. Policies like the ‘sugar act’, were an example of the battles that played out, to take control of these first seen, markets. Countries embarked on a nationalistic philosophy where they tried to minimize their imports and maximize their exports, in order to generate wealth. This movement is known as mercantilism and lasted for many years from the 16th to the 18th century before capitalism makes its appearance.

“Their interest is, in this respect, directly opposite to that of the great body of the people. It is the interest of the merchants and manufacturers of every country to secure to themselves the monopoly of the home market. And hence [you observe] the high duties and prohibitions upon all those foreign manufactures which can come into competition with our own. And the extraordinary restraints upon the importation of almost all sorts of goods from those countries with which the balance of trade is supposed to be disadvantageous” — Adam Smith.

Trade was a new weapon for countries to create wealth and became one of the main causes of colonization. England had a major movement in occupying areas from which they could establish monopolies and distribute goods. After establishing their right to be the sole commander of their resources they would buy them cheaply and distribute them around the European market for profit. That was one of the main reasons for the colonization of America as well.

“When the Europeans conquered America, they opened gold and silver mines and established sugar, tobacco, and cotton plantations. These mines and plantations became the mainstay of American production and export. The sugar plantations were particularly important. In the Middle Ages, sugar was a rare luxury in Europe.” — Noah Harari

From the moment trade across countries was adopted, it became an indispensable tool to bring wealth to the states.

Any source that is valuable and limited at the same time, will inevitably lead to a zero-sum game where various parties are struggling to get their hand on. It’s a perspective that pours out of scarcity and hoarding, where its main idea is that in order to win something, someone else has to lose it.

With time it became apparent that things were much different than this simple notion. A win for one member propagates to the rest, as it happens with the economy within a society, where money circulates more abundant, every time there is a successful entrepreneur. If one country advances its economy, it can buy more of what another part of the world can provide thus establishing an upwards spiral on the global level. This insight gave way to a new structure to emerge that promoted that every country should focus on trading its local products and allow a more balanced level of imports and exports, instead of a scarce one.

“By means of glasses, hotbeds, and hotwalls, very good grapes can be raised in Scotland, and very good wine too can be made of them at about thirty times the expense for which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of claret and burgundy in Scotland?” — Adam Smith

This new mentality allowed for open borders where trades were promoted and wealth was accumulated to those that had the bigger reach. By reimbursing the profits back to the same machine that generated wealth, capacity maintained in fewer and fewer hands through the natural rise of capitalism. The transition from mercantilism to capitalism was manifested through the change in the way profit generation evolved. Instead of trading in the form of buying and selling at the biggest possible margin, capital allowed the ownership of production means that could allow for manufacturing at low enough cost to make a profit.

Liberals protested for states to minimize their involvement allowing the free market to find its way to balance everything. A free market equals a decentralized state where its various components can act independently.

These structures resemble the feudal system in the way that economical power exists in the hands of few people that distribute the workload appropriately to layers below them. They are similar to the feudal lords, where instead of the geographical strict borders there are conceptual markets that traverse anywhere in the world. Hierarchies within every market continue to exist, the same as before, and every level continues to over-capitalize on the layer below. Companies maintain vast internal structures that propagate to the lower levels who many times do, the hardest work for the smallest earnings. And there is a hierarchy across companies as well as most of the power accumulates to very few of them in each sector leaving only the small parts and micro-services for the rest to take.

Capitalism is a system that takes the land — which in the modern case is the production capacity of what we consume and distributes it in further owners to handle it on their own as they pass their biggest part of the merit to the layer above. Even though the lines are not visible as it was with feudalism, the same rules still apply in most of the cases with any apparent freedom to be only a fantasy that propagates in our minds.

To really understand capitalism you need to compare it to a system that opposes its foundations at the core level. Unfortunately, any system like this, that has existed in the past has been an utter failure with communism leaving detriments behind every place it has passed from. Still, it is important to examine closely what an alternate system could look like if we are to understand the current one better.

What Communism Would Look Like In Argiculture

The alternate scenario of the ‘capitalistic’ feudalism would be for the whole land to be maintained under the centralized power, which at these days used to be Kings, but instead of delivering it to lords in exchange for military power and support, it would be equally distributed across all the members of that particular land, independently of hereditary power or wealth.

Of course, although this arrangement seems fair in the first sample, it has some inherent problems in it. There has to be a way for the centralized power to sustain control of this endeavor itself instead of relying on its members to take care of everything on their own. As it is obvious through history, this is a burden that unorganized states were incapable of taking, until a much later point in time.

The second main issue that is slightly less obvious, is that this ‘equalizer’ policy, doesn’t reward or punish anyone according to their strengths and productive abilities for the particular state. Instead, it distributes land equally to anyone independently of how they use it or what they decide to do with it. History is unwavering in its decision to what comes after this kind of arrangement. All motivation of people is plummeting to the ground where everyone is trying to do the minimal amount of work and get the most of what he possibly can. Productivity is falling, as it is obviously not recognized and people feel restricted on their potential and what they can achieve. The perfect system to restrain the drive of people for a better quality of life.

“There are three major components to motivation: activation, persistence, and intensity. Activation involves the decision to initiate a behavior. Persistence is the continued effort toward a goal even though obstacles may exist. Finally, intensity can be seen in the concentration and vigor that goes into pursuing a goal.” — Carol Price

So even if the arrangement may seem more fair and just, which in some way it might hold true, there lies the underlying fundamental that through some form of inequality exists the component that can offer this ‘activation’ part, that is necessary to push people to strive for more.

Yet even in that case scenario, capitalism eventually still falls under the same problem. By offering more land and money to those who are more productive, even if they deserve it at that particular moment in time, you immediately create a set of classes where the accumulated wealth gathers up more and more the higher you get, and this allows the exploitation of those that exist in the below layers. Within time even if some people initially deserved some sort of reward, hereditary power surpasses any kind of meritocracy, as those with the most land will always have the ability to ‘rent’ it over to people with less money as they judge fit. Furthermore, this kind of property ownership doesn’t give any incentive to them to work the job that they are actually good at propagating this vicious cycle of unfairness even further.

If you were to judge this society by its ability to promote productivity you would realize that this system would lie tremendously low, as rising across the chain would get harder and harder with time passing. This phenomenon becomes apparent today as well with the existence of huge corporations that have the ability to put anyone out of business if they decide to. Accumulated power run its cross from the moment it occurred no matter how just it was initially.

The Issue Of The Single Currency

So it becomes apparent that if we were to pick a system that promotes productivity in a meritocratic way that pushes society and human potential forward it would become immediately apparent that none of the above systems works. As a matter of fact, if capitalism allows any money at all in the middle-class today is only for the purpose of taking it back through the consumer philosophy that so much sustains the whole infrastructure. The ‘product mania’ of useless products and fast-food prescriptions is not a random occurrence in a system that allows voices to be heard. It is a mandatory prerequisite that lies at the heart of a system that can only live through endless mass consumption. It’s one of the fundamental pillars that has been presented as a ‘human nature’ factor when in reality is only there to serve a particular cause.

What we need to have is a system of more than one currency. We need to be able to reward productivity without allowing money to accumulate into the hands of the few — even if they are the best because that will be the detriment of them and the society in general in a matter of time. We need to figure out a way to reward without cutting a piece of the feudal land that can be used and exploited pushing lower layers to work on it. Until such a system comes forth we’ll always fall short of our true potential.

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Philip Baker

Philip Baker

Exploring People, thoughts and feelings. Join me at philipbaker.net

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