Origins Of Capitalism

CAPITALISM AND CHANGES

I) Definition and causes of the emergence of capitalism

Max Weber defined capitalism as follows:

“We refer to the capitalist economic action as the one built upon the hope of a profit by the exploitation of exchanges, i. e. on (formally) peaceful opportunities of profit.” (Protestant Ethic and the Spirit of Capitalism)

This definition resembles Marx’s. Marx focused on profit. Profit would form the basis of the capitalist accumulation.

But this definition is a little biased: the French Academy provides a more objective definition. For the French Academy, capitalism is entirely determined by private ownership of the means of production.

For Weber, the contemporary capitalism is making a lot of money building on work of free people. Their freedom does not prevent a subordination link between the employer and the employee.

For Max Weber, the conditions of the emergence of contemporary capitalism (namely that which emerged in the Renaissance) are related to the Protestant work ethic.

Max Weber would note that, in Germany, the protestants are significantly richer than Catholics. This is seen in the specializations they study. This is not insignificant: for Luther, the vocational activity is a task that God granted to men. Profession becomes a divine vocation. Works become a value.

For Catholics, the gain accrual would be harmful. Catholics would mistrust wealth.

Thus, for Weber, the development of capitalism has mainly been due to ethical and psychological reasons and not to technical and economic reasons.

This argument is not isolated: William Petty, Montesquieu, Henry Thomas Buckle and John Keates also noted this connection between capitalism and Protestantism.

More modern thinkers, such as Immanuel Wallerstein, also draw inspiration from Weber.

Weber’s thesis has been criticised by Werner Sombart who also highlights the influence of religion. But, for him, the role of the Jews was major. Sombart’s words were sometimes debatable because they criticised the lack of scruples of the Jews, attracted by profit. The principles of free trade and fair competition were prevalent in the Jewish community. Catholicism and Protestantism had a limited role in the development of capitalism.

Less experienced thinkers, such as Jacques Attali, also found Jewry has given rise to capitalism. The prohibition on asking interest on loans did not apply to Jews. For Attali, this is a positive aspect of Judaism. That’s which would have permitted capitalism to develop. Jews have been innovative. This is also why Jews are disregarded by the Bolsheviks.

Indeed, the Bible recalls that wealth is a means to serve God. Property must come through work.

Nevertheless, Attali is very critical of Sombart: indeed, for Sombart, capitalism only developed in 16th century. Attali shows that its roots are older.

The most interesting critics emerge from Robertson: Robertson recalls that capitalism began to blossom before the emergence of Protestantism, in the fourteenth century. Fernand Braudel agrees with that and thinks the origin of capitalism goes back to the Middle Ages. Indeed, there was some evidence of capitalism in the Middle Ages, mainly in Italy and in the Netherlands (Amsterdam, Bruges, Liège, Gent, Brussels, Douai, Ypres). In Florence, for example, there were bankers. The Hanseatic League has developed trade around the Baltic and North Seas.

Criticism is shared by the thinker, Amintore Fanfani.

Weber’s thesis is frequently seen as too simplistic.

In Belgium, the Bruges Stock Exchange was established in 1409. That marked a new step in the development of financial activities in Europe.

Similarly, credit investment, such as the bill of exchange, began in the Middle Ages.

In France too, commerce thrives in the 15th century. The same goes in England and in Spain.

Weber’s thesis is highly questionable. Furthermore, in 16th century, in Europe, economic thinking was dominated by lay scholars, concerned primarily with the absolute power of the State. Absolutism is incompatible with the development of capitalism.

Thereby, mercantilism, a forerunner to nationalism, was flying high during the Renaissance. Monopolies were set up by State.

The State benefited from the relatively weak Church to extend its power. The Church was a counter-force.

Another author goes so far as to question any connection between Protestantism and Capitalism: Murray Rothbard. For Rothbard, the absolute allegiance to a monarch is the fruit of Protestantism. On the contrary, for Catholics, natural law is a bulwark against absolutism.

We could bring this section to a close in suggesting that the true origins of capitalism date back to the Roman Empire.

Traces of capitalism can be found in Islam.

There is a talk of “Islamic capitalism”. Thus, capitalism would have started many years ago.

Rose Wilder Lane, co-founder of the American Libertarian movement, noted that, originally, Islamic scholars delivered the message of a stateless society.

II) Development of capitalism after the Renaissance

Nevertheless, capitalism continued to expand thereafter. The 18th-century was considered to be the Great liberal century, at least in ideas. This is exemplified in the famous phrase: “Leave that to us”.

And, in practice, it’s the capitalist agricultural systems which have saved the west from famine.

During the French Revolution, private property is acknowledged.

In Britain, laws also protect private property rights.

In the United States, this has always been the case. Private ownership of property was universal. The poorest could access it.

Resistance to tax has been increasing in the United States, despite all that: the ideological spearhead was Henry David Thoreau.

Capitalism triumphs in the West; cities sprout.

In the twentieth century, a Libertarian Party was created in the United States. Every four years, it has been presenting a candidate for the Presidential election

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