Capitalism is a term which is frequently used to describe a lot of occurrences, circumstances, eventualities, and the core structure of modern society today. The term “capitalist”, which means an owner of capital, appears earlier than the term “capitalism” dating to the mid-17th century while “capitalism” is derived from “capital” - which evolved from “capitale”, a late Latin word based on caput, meaning “head”—which is also considered to be the origin of “chattel” and “cattle” in the sense of movable property [1].
By tracing the origin of the word, we can infer that if you own your head like a movable property or your head is a cow, you are a capitalist! It is now a safe assumption that tracing the etymology will lead us nowhere. Hence, this article aims to walk you through the history, the core principles and the current applications of this concept so you can interpret it according to your thought process.
An Efficient History
Capitalism is considered an economic system, but it is also a cultural system. There have been many versions of this concept throughout history. But, this article will focus on the three most paradigm-defining iterations; mercantilism, agrarianism and industrialism.
Mercantilism
Perhaps the oldest and most simple form of capitalism is mercantilism. The fundamental concept of mercantilism is the idea of borrowing money to buy goods, selling them at a profit, and paying back the borrowed sum with interest. While the consensus is that mercantilism originated in the 16th-18th century, this concept was alive as early as 300 BC!
The whole concept of mercantilism can be seen all over the globe in ancient international trade, driving the Indian Ocean trade route and the caravans crossing the Sahara. [2] The complete form of mercantilism was constructed in the 17th century by the merchant’s guilds of the Netherlands and England by expanding upon the previous concept. They formed “joint stock companies” that fund trade at an international scale.
However, this also increases the risk of international trade. There was an extremely large risk of losing ships to sea or pirates for the mercantile capitalist. However those who invested at a much smaller scale in diversified portfolios of trade suffered loss at a smaller scale. This concept forms the fundamental basis of the modern-age capitalist institution of the stock-driven economy.
Despite being simple, Mercantilism was not scalable to a large extent and only affected a sliver of the population. It was not a form of capitalism that could be considered a cultural system.
Agrarianism
To form a culture of capitalism two requirements were needed; simple practice and easy scalability. In the 17th century, food was the most scalable property while agriculture was the most widespread practice.
At this time, the British Empire was in a unique position where it held the potential to adopt a model capitalistic culture, thanks to its trade with its colonies and powerful foothold over the seas. This potential was catalyzed into realizing agrarianism by the British Civil War. Due to the war amidst population growth, food prices started to rise, which incentivized both small and big farmers to invest in agricultural innovation to improve crop yield.
Now innovations such as multi-crop farming by the Dutch increased the productivity of agriculture which brought down the prices of crops encouraging further innovation to increase yield to make up for the low prices. The cultural and structural change that this brought was the concept of “enclosure”.
Enclosure privatized agriculture to a system of landlords and tenants, as opposed to many tenants holding common land. This led to many tenant farmers losing their livelihood. [3] However, this also had two upsides for capitalism. Firstly, wages and profits were now dictated by the economy instead of feudal obligation. Secondly, it ingrained the idea of cultural capitalism in society. The need of turning a profit, leading to an appreciation of risk and innovation was established, which is a core principle of capitalism.
Now that food prices were lower and wages remained the same, people had more disposable income. This opened up a market for consumer goods to be purchased by the public and marked the beginning of the final evolution of capitalism.
Industrialism
Due to the increase in innovation in agriculture, there was a lesser requirement for a workforce in agriculture. All this manpower transitioned to the industrial revolution. There were a lot of vices such as unemployment, child labour, extended work hours, and drop in quality of life during this transition. However, this was the basis of another one of capitalism’s fundamentals which is that “trade and ingenuity are spurred by the exorbitant appetite of man to consume, which they will take pain to gratify.” [4]
As the industrial revolution stabilized, the poor conditions got better and eventually formed definite markets in different areas of consumption.
Modern Times
Another principle of capitalism states that “markets form economies and it is our nature as individuals to be actors to these markets”. This can be seen in the current economic system which is an extension of industrial capitalism, as markets became connected throughout the world thanks to globalization.
Marxist Socialism to Join the Pieces
Socialism is considered the most apt critique of capitalism. It was popularised by Karl Marx, a German historian and philosopher. It was this ideology which formed the primary basis of the Soviet Communist regime, until it was later bastardized into imperial communism.
The popular opposition to the vices and virtues of capitalist philosophy forms an intriguing perspective when explored from a capitalist point of view.
Socialism and Marxism
Socialism is said to have solidified in France after the French Revolution. There were two initial schools of thought, utopian and revolutionary. The utopian approach describes the fundamental theme of socialism. It says that human desires go beyond basic self-interest, and we are not always rational economic actors. This theme has proven to be right in the following history. However, the utopian school of thought could not successfully explain the means to get to a society in which this theme prevailed.
As a result of this came the revolutionaries. Inspired by the French Revolution, the revolutionaries believed the only way to realize the theme of socialism is to overthrow the current capitalist regime. The term communism comes from this school of thought. However, the flaw in this thought was the elitist mindset of its leaders. They believed that the working class couldn’t cast aside their differences without a figure to rally behind. This resulted in the previously mentioned bastardization of socialism into imperial communism. [5]
Marxist Critique of Human Nature
Marx was the co-author of ‘The Communist Manifesto’, and hence, supported the revolution for the labour class. Where the Marxist approach differed from the rest is the concept of class struggle. Marx believed that it is not the classes that struggle, but it is the struggle that defines those classes. Through conflict, classes developed a sense of their identity and without conflict, there was no class consciousness. As such he defined two broad classes: the labourers and the capitalists.
Regarding labourers, the concept of class struggle had two key ideas. Firstly, he believed that productivity, or the ability to work, gave life material meaning. Secondly, he affirmed that humans are social; They collaborate, work together, and pool resources. Capitalism strongly contradicts this idea, replacing it with conflict. [6]
Capitalist Critique of Human Nature
The capitalistic approach to the same situation is rooted in itself. It leans toward the fact that the commodities of labourers and capitalists are different. The labourer desires the maximum value extracted from their endeavours, while the capitalist desires the most economical option as their human nature.
However, another principle of capitalism, which dictates that every individual plays the role of controlling the market can easily remedy this situation, while maintaining its take on human nature.
Conclusion
Capitalism is a school of thought that promotes innovation, collaboration, risk-taking, and enthusiasm to participate in the market.
In today’s world, capitalism has prevailed as the primary form of the global economic system, at least for now. The ever-increasing disparity between the rich and the poor, Marx’s primary concern with capitalism, is still the biggest hurdle for the modern world.
As capitalism is a culture where theoretically every individual is an actor in the economy, it is logically considered that its benefits can be best reaped in a democratic government. However, state-controlled capitalism in countries like China prove to be optimal for the concept of a national economy, sacrificing the individual’s well-being.
How we use socialism to regulate free markets is a very open discussion. Our policy-makers must attempt to find a balance between the two approaches to ensure the collective and individual success of the members of the free world.
Article by:
Darsh Agarwal,
Co-editor, For the Record,
PES MUN Society, RR Campus
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