This diary series is a slightly edited version of Contradictions of Capitalism, a book that I wrote in the early 90's which is still available now on Amazon. I have updated some parts of it to reflect the very important changes in the corporate economy since the mid-1990s with the appearance of a global economy rather than a national, which has important effects which much of the socialist movement has still not fully grasped.
Part One of this series can be found here: http://www.dailykos.com/...
TWO: The Rise of Capitalism
The eventual downfall of the feudalist system can ultimately be traced to the growth of the towns. While the agrarian basis of the feudal economy tied most people to the landed fiefs, there were in many areas small towns and ports which served as trading posts. Through trade with neighboring kingdoms, these commercial centers became small colonies of merchants and artisans, who produced and traded tools, weapons, armor and other implements.
A natural division of labor thus arose, with the urban artisans producing manufactured implements and imported goods, while the rural fiefdoms produced food and agricultural products. At first, trade took place only when both parties possessed a surplus over what they needed for themselves. Eventually, however, urban artisans began more and more to produce implements specifically for trade, and began to obtain their own necessities solely through this trade. These articles, produced for exchange rather than for the immediate use of the person who produced them, mark the beginning of the “commodity” economy.
Since feudal taxes are paid “in kind”, that is, as a direct portion of the serf’s agricultural output, there is little need for a monetary system in the fief. As commodity trade between the fiefs and the urban areas increases, however, the need for money as a medium of exchange becomes apparent. Under the direct barter of commodities, commodity exchangers have to keep looking until they find a partner who is willing to trade the commodity desired. Using money, commodities can be exchanged at any time for a cash equivalent, and this cash can then be used to trade for the desired item.
Thus, each fiefdom took to minting coins for use in exchange. The use of gold and silver as money is not due to any mysterious qualities in the metals themselves —clamshells or cattle would do just as well as a medium of exchange. Coins were made of gold and silver simply because these metals were nonperishable and were simple to carry, mint and divide into subunits.
This monetarization of the feudal economy, however, forced profound changes in the socio-economic structures of feudalism. The feudal lords, who needed the weapons, armor and manufactured goods produced by the urban artisans, also needed the money to exchange for them. As a result, the feudal convention of a “tax in kind” was modified, and feudal lords turned to monetary taxes and monetary fees —“rent” —in addition to the agricultural tax. As the use of money became more and more widespread, the portion of the economy that was engaged in commodity exchange rather than in agrarian production increased.
This growing counter-economy presented a mortal danger to the aristocracy by undermining the very basis of its economic privilege. As a result, the feudal nobility attacked it, and the ideo-religious ethos of the Church was turned to the task of limiting the growing commodity economy. Priests now spoke of the sins of “avarice” and “usury”. The Church declared it a sin to lend money at interest, and exhorted the faithful to abandon the sinful world of monetary and material interests. “Homo mercator vix aut numquam Deo placere potesti,” the Church warned. “A person of commerce can rarely or never be pleasing to God.”
While recognizing the threat that the growing merchant class (or bourgeoisie —“town dwellers” —as they were known) represented, the feudal aristocracy at the same time was forced to concede that they could not live without the merchants. Trade with the artisans provided weapons, armor and such exotic imported goods as Chinese silk and porcelain, Indian tea and spices, and Arab foods and technology. These things were beyond the reach of the feudal nobles, and they were absolutely dependent upon the bourgeoisie to obtain them.
As this system of trade grew, a transition began to take place in the methods of commodity production. Now, instead of merely importing exotic commodities which were then exchanged through the monetary system, merchants with sufficient monetary resources began the direct manufacture of commodities for resale at a profit, thereby increasing the amount of money available to them for new production. Under this system, money no longer served exclusively as a medium of exchange—it could be directly utilized to produce still more money. This process marked the introduction of “capital” by the infant bourgeoisie.
As the merchant class grew in size and influence, so too did the urban areas, known as burghs, where they set up shop. As these commercial centers began to expand their trade ties across Europe, however, they ran head-on into the hodge-podge of fiefs which quilted the countryside, each controlled by a particular feudal lord and each having its own system of laws, tolls, taxes and legal tender. To overcome this stifling maze of regulation and taxation, the bourgeoisie raised the banner of nationalism, and called for the control of each national area by a single feudal ruler, with a unified system of law, taxes and currency.
Since the feudal nobles were always anxious to expand their fiefs at the expense of their neighbors, nationalist ideas found ready allies in both the bourgeoisie and the nobility. In each national area, a single feudal noble gradually expanded his power until he had imposed his rule upon the entire nation. This “monarch” was in turn allied with and supported by the bourgeoisie, upon which he depended for the cash he needed to buy weapons and hire soldiers for his wars of consolidation.
As the need to defend the monarchy from the predations of other feudal rulers grew, so did the king’s need for cash. The merchants, for their part, were in constant need of new sources of exotic commodities for trade. Once again, the monarchies and the merchants found their interests to be mutual. The monarchs of Europe commissioned overseas expeditions of exploration and conquest—Drake, Vespucci, Columbus, Cabot and Magellan. These expeditions resulted in overseas colonies that were kept under the economic and political control of the monarchy. This “mercantilist” system provided the fledgling bourgeoisie with new sources of exotic trade commodities, and the taxes and tribute collected in the colonies increased the coffers of the feudal monarchy.
The need for cash also led the feudal nobles to divert parts of their traditional fiefs from food production to the raising of sheep for wool and other profitable commodities. This in turn forced large numbers of peasant farmers and serfs off of the land and out of the feudal fiefs. Penniless and starving, these paupers crowded into the towns and burghs, where they had nothing left to sell for their living except their own ability to perform labor. They were hired by the artisans and merchants as laborers to produce commodities for trade, and thus formed the beginnings of the proletariat or working class.
By the time of the 18th century, the twin frameworks of feudalist monarchy and bourgeois commodity production existed side by side in most of Europe. These two systems were, however, entirely incompatible. Feudal monarchy required a heavily agricultural economy in which wealth could be directly appropriated from serf labor. It also required a rigid hierarchy of authority, supported by the ideals of unquestioning loyalty and obedience. It required strong economic and legal ties to keep the serfs on the fief where their labor could be exploited, and it also required that the major source of wealth in the economy be the land, over which the aristocracy had complete control.
The rising capitalist system, by contrast, required a commercial and manufacturing economy. The aristocratic privileges of the feudal nobility were in conflict with the merchant class’s need for freedom of economic action. The merchants also required methods of removing the landless serfs from the fiefs and turning them into propertyless industrial laborers.
By the middle of the 18th century, the conflict between the two social systems came to a head. With the capitalist class steadily undermining the basis of the feudal system, it was a battle which the monarchy could not hope to win. In 1775, the explosion began in what was then an obscure and distant British colony in North America. Under the banner of the merchants, the North American colonists attacked the feudal institutions of monarchy and Divine Right, and established the first state dedicated to the bourgeois system. In 1789, the citadel of monarchism, France, fell to a similar Revolution, one that shook Europe to its foundations. Within a hundred years, virtually every monarchy in Europe had been destroyed. They were replaced with an economic and social system which allowed the new ruling class to consolidate its own position of privilege—the mode of production known as capitalism.