Global Study 1 Midterm Essay
Moving Beyond Basic Definitions…
Capitalism – an economic system in which private capital / wealth is used in the production / distribution of goods and prices are determined mainly in a free market
The Profit Motive
Giles Gunn (2018) develops this basic definition:
Capitalist societies reflect a mixture of public and private enterprise along with legal rules governing the pursuit of profit, an approved market structure, and limits on the amount of wealth accumulation
The Industrial Revolution (1800s CE) provided the key propellant
The mixed nature of capitalist societies is evidenced by the U.S.A., a country that can be called the “wild west” of capitalist economies, where most forms of economic exploitation are not only tolerated but encouraged by the government
Even in the U.S.A., there are restrictions on certain practices – for example, insider trading
Theories of the “Great Divergence”
Great Divergence – the prosperity gap between rich and poor countries (i.e., between Europe / North America and the rest of the world) that has emerged since 1500 CE
1) The mercantilist era (1500 CE – 1800 CE)
Americas were settled / exported silver, sugar, coffee, etc.
Africans were enslaved and forced to produce these goods
Asia exported spices, textiles, and porcelain to Europe
European countries sought to increase trade by acquiring colonies and using tariffs and war to prevent other countries from trading with them
2) The industrial revolution era (1800s CE)
Creation of a unified national market by eliminating internal tariffs / building transportation infrastructure
Erection of external tariffs to protect industries from competition
Establishment of banks to stabilize the currency and finance industrial investment
Mass education to improve the labor force
Theories of the “Great Divergence”
Concerning mercantilism, there was economic theory backing up the practice
A nation's wealth is increased by a favorable balance of trade, and that a government should encourage such a balance by promoting exports (especially, manufactured goods) and restricting imports
1) As the word suggests, it is an economic theory concerned primarily with commerce
2) It posits that there are winners and losers when it comes to trade
3) What makes a particular state / empire a winner is whether it exports more than it imports
4) When a particular state / empire has a favorable balance of trade that means money is flowing from the outside to the inside
5) That money can be used for various kinds of investment
6) It is the state’s / empire’s responsibility to ensure a favorable balance of trade by taxing imports (if they do not originate in the colonies) and by encouraging exports
Theories of the “Great Divergence”
Mercantilism was challenged by liberal economic theory around 1800 CE
Liberalism encouraged freedom in the marketplace
Individuals should be left to pursue their own self-interest without state intervention
Self-interest would promote competition / keep prices low, while increasing the production of goods and services
If states / empires focused on producing only those things that they were good at producing and traded with other states / empires that were good at producing other things, then everyone would win
Comparative Advantage
Nevertheless, it seems clear that mercantilism (and the empires / protectionist trade policies it was based on) was the primary cause of that second phase of the “Great Divergence” known as the Industrial Revolution
Theories of the “Great Divergence”
We have already discussed how slave labor and the processing of goods produced in the colonies generated surplus value / capital that could then be invested in European manufacturing
But mercantilism laid the foundations for the Industrial Revolution in other ways as well:
1) Growth in urbanization / manufacturing increased the demand for labor and led to higher wages
2) Growing cities and higher wages put demands on agriculture for food and labor. The result was an agricultural revolution – output per farmer increased
3) Growing urban demand also led to an energy revolution. As cities grew, wood prices rose, and substitute fuels were developed – coal!
High cost of labor and low cost of energy created incentive for manufacturers to invest in technologies
There were numerous attempts to mechanize production of cotton textiles – Samuel Crompton’s mule (1770s CE)
People had been experimenting with steam power since the early 1700s CE, but it was only in the early 1800s CE that steam engines had become developed enough to give birth to railways
Theories of the “Great Divergence”
But the story of the “Great Divergence” is not simply about “the West” getting richer, but also about “the rest” getting poorer. The cotton industry is a perfect example:
British East India Company began to ship calicoes and muslins to Europe in the 17th century CE, where they successfully competed against the principal European textiles (linen and wool)
Wages were so high in Great Britain that competition with India / China was only possible if machines were invented to reduce labor costs
Crompton’s mule made England the low-cost producer
The result was to undercut cotton manufacture in India / China, creating a self-sustaining cycle of inequality
High wages led to the invention of labor-saving technology, whose use drove up labor productivity and wages with it
Poor countries have low wages and high capital costs, so they make do with archaic technology and low incomes
Was it coincidence that Europeans became prophets of free trade / economic liberalism when they started to feel confident in their competitive edge?
Critics of Capitalism – Why All the Fuss?
Karl Marx wants to communicate in the excerpt from Das Kapital (1867 CE) that the free economic agent, whose emergence liberal economics celebrates as a liberation, is burdened with modern forms of servitude
“The historical movement which changes the producers into wage-workers, appears, on the one hand, as their emancipation from serfdom…. But, on the other hand, these new freedmen became sellers of themselves only after they had been robbed of all their own means of production, and of all the guarantees of existence afforded by the old feudal” arrangement
1) Wars between nobles and the monarchy
Wars of the Roses (1450s CE – 1480s CE)
2) Increasing prices for wool / development of a woolen textile market
15th Century CE generated economic incentive for driving peasants from common lands / enclosing them for the pasturing of sheep
3) The Protestant Reformation
Lands belonging to the Catholic Church were seized and sold
4) The “Glorious Revolution” of 1688
Caused a further round of seizure and selling, this time of royal lands
Critics of Capitalism – Why All the Fuss?
According to Marx, that is the process whereby proletarians (those who sell their labor to survive) were created
How were capitalists (those who employ labor for profit) created?
Some guild-masters and independent artisans might have been able to turn themselves into capitalist entrepreneurs through low-level exploitation of paid labor
But the principal force behind the emergence of capitalist entrepreneurs is “the new world-market that the great discoveries of the end of the 15th century created”
“The treasures captured outside Europe by undisguised looting, enslavement, and murder, floated back to the mother-country and were there turned into capital”
Capital accumulation was also furthered by the economic exploitation of those most vulnerable in society
Orphaned children were taken from workhouses and forced to labor from an early age, receiving in return shelter and enough food to keep them alive
Critics of Capitalism – Why All the Fuss?
Marx’s argument points to the fact that there were both “pull” and “push” mechanisms at work
Our initial interpretation focused on the “pull” factors – how global trade and the need to process colonial goods, when combined with cheap energy in the form of coal, created economic incentives for people in Europe to leave agriculture for high-wage manufacturing jobs, where productivity was maximized by new technologies
Marx reminds us of the “push” factors. All was not opportunity and choice, since peasants were forced from the land and their social status degraded, as they became proletarians who needed to sell their labor to survive
Violence and dislocation associated with industrialization was not confined to European colonies
Even in Europe, whose peoples benefited from colonial cruelty, there were winners and losers when it came to capitalism
Global-Local Interactions…Avoiding the Either-Or Trap
Our final reading for today [Jeremy Adelman (2015)] is not so much concerned with providing another account of capitalism, but with pointing out what the best accounts all have in common
Refusal to privilege one type of interpretation over another
Refusal to label themselves internalist or externalist / local or global
Instead, they attempt to transcend such labels and such limited interpretive approaches
“It’s the interaction of the local and the global that makes breakouts so difficult – or creates the opportunity to escape…. To find clues to success or failure, then, historians should look not at either the world market or local initiatives but at the forces that combine them”
One of the defining characteristics of globalization is how it links the local, national, and regional to the global
One of the defining characteristics of Global Studies as a discipline is its combination of different levels / scales of analysis