MIDTERMM

Chapter 4

The Evolution of Capitalism

In this lecture we’ll focus on the most well-known theories of history and social evolution

that shed light on the process by which capitalism came into being. Such an investigation will

help us discern those features of capitalism that distinguish it from other political economic

systems and provide insights into the processes that have made it grow and become a global

system. The theorists we will be exploring are Adam Smith, Karl Marx, Thorstein Veblen, Karl

Polanyi, and Ellen Wood.

Before addressing these broad theories of history, we’ll first explore, in a very brief

fashion, some of the most salient characteristics of the transition from feudalism to capitalism, as

well as some of the most well-known theories regarding that transition. To begin with, its widely

known and accepted that capitalism emerged in England sometime during the Mercantilist era.

Elements of feudal political economy persisted alongside the new emerging capitalist forms for

several centuries, from roughly the early 16th century to the late 18th century, but it wasn’t until

the industrial revolution of the late 18th century and early 19th century, that capitalism came to

the fore.

The first thing to note about this characterization is the close association that’s frequently

made between the industrial revolution and capitalism. Indeed, it’s common to imagine that

capitalism and industry – specifically the widespread use of machines in the production and

distribution of goods – are two sides of the same coin. And while it is true that the introduction

of mechanized techniques of production emerged alongside the development of capitalism, it’s

also true that capitalism is a form of social organization, a structure of property relations, and not

simply the mechanized production of industrial capitalism. After all, the Soviet Union managed

to introduce mechanized techniques of production, large urban centers, and smog producing

factories, but no one would define that system as capitalist. So, while it’s true that the industrial

revolution seems to have coincided with the full flowering of capitalism, it’s also true that the

formal rules of the game, the property laws which set capitalism apart from previous political

economic systems, had been developing for several centuries before the industrial revolution.

While there’s no way that we can explore all the ways in which notions of property

changed from the medieval ages to the current era of capitalism, we can draw attention to two

2

broad currents that help to explain that transition. The first has to do with the notion of usufruct,

which was widespread during the medieval era, but which is now largely, if not completely,

absent. This idea is best understood when thinking in terms of the manors, which were the

centers of political economic power during the feudal era. These were vast swaths of land which

were under the control of a lord (a duke, baron, prince, or king). The lord and his entourage lived

off the surplus product generated by the serfs that lived and worked on these estates. But the

serfs that worked the land or generated artisanal goods, were not considered employees and the

lord could not simply dismiss them (“fire them” in the language of contemporary capitalism).

The serfs were thought of as being a part of the manor, literally tied to the land, and were

expected to provide allegiance to the lord and a surplus, over what they retained for themselves,

in the form of agricultural or artisanal goods and/or labor. Indeed, the serfs had control over their

small parcel of land and owned enough means of production to provide for themselves. In return

for their allegiance and surplus to the lord, the serfs received military protection, and religious

and civil oversight, from the lord.

For their part, the lords didn’t really own the land in the sense that they could freely sell

it, or demand that all those who live on the land, such as the serfs, leave the manor unless they

could pay a rent of some sort. The lords had a right to the use of the manor, a right to the output

of the land and the laboring services of the serfs, so long as they did not abuse that right and

provided allegiance to their overlord (another, generally more powerful, lord that in turn had

obligations to the lesser lords in return for military and political allegiance). The lords, in short,

didn’t own the land, they instead had a right to its use, so long as they adhered to the medieval

traditions of reciprocal obligation.

Gradually, over the course of several centuries, this way of viewing landed estates

gradually changed, leading eventually to the abolition of the usufruct and the acceptance of

private ownership. By the time we get to the 17th century, these landed estates, formally

medieval manors, had been converted into huge chunks of private property owned by

descendants of landed nobility, but also by wealthy merchants who had acquired enough wealth

to purchase these estates. The rights that came from owning this land now exceeded the rights

that had been associated with usufruct and, what’s more, carried far less obligations than had

been thought customary during the medieval ages. It was understood that the “landlord” could

sell that property and/or demand rent from those who lived or worked on his land. What’s more,

3

it was understood that the landlord no longer had obligations to those that were renting the land.

If the rent could not be paid, the landlord could evict the tenant (an attitude or practice that was

viewed as sinful during the medieval era).

In addition to the emergence of private property over land, displacing the medieval notion

of usufruct, the transition from feudalism to capitalism also saw the growing acceptance of

charging interest on the lending of money. In general, the charging of interest on monetary loans

was viewed as sinful by the Catholic Church during most of the medieval era. The fallback

position was that one should not charge interest on the lending of money to a fellow human, a

fellow Christian. This was particularly true for loans that might be taken out to purchase

necessities. The church viewed the charging of interest on consumer loans as sinful and did its

best to outlaw it (after all, how could a Christian charge interest to a fellow Christian in dire need

of money to buy necessities?). But in practice, the church did make exceptions, particularly in

the case of loans intended for commercial purposes. So, for example, the church did not think it

was wrong to charge interest on the lending of money to a merchant or artisan who intended to

use that money for commercial purposes, so long as the interest rate was not usurious (beyond a

level that could be thought of as reasonable or Christian). What’s more, if that loan was paid

back within a specified time, often 90 days, then the borrower did not have to pay interest on that

loan. It was only after that initial grace period that interest could be charged on the loan. And

even then, the interest rate could not exceed some reasonable limit, it could not be, in short,

usurious.

It should go without saying that such an era is far behind us. Indeed, it was already

receding by the 15th and 16th centuries. By the mid-18th century, it was commonly accepted that

the charging of interest on loans was a normal part of business for a commercial society. Now-a-

days the interest rate is whatever the market will bear and there’s no limit to what it might be,

other than the limit imposed by the pressures of demand and supply. What’s more, interest is

charged on all kinds of loans, consumer or commercial.

Along with the growing acceptance of private property in land there also emerged a

tendency, on the part of the emerging new landlords, to enclose acreage that previously, in the

depths of the medieval ages, had been part of the commons or greens. During the medieval ages,

it was common throughout Europe to find vast expanses of land that were considered the

common property or usufruct of all. These were often forests that weren’t owned by any one

4

person and were viewed as spaces to which people could go forage, hunt, graze their animals,

gather wood or wild fruit, and live, so long as they did not abuse that right and allowed others to

do the same. But as feudalism gave way to capitalism, that tradition came under assault as

landlords began to enclose tracts of land that previously were not part of their estate but which

had been part of a commons. These enclosures often involved the literal fencing off of a landed

estate, expanding the boundaries of the estate beyond its original border to include acreage that

had previously been thought of as common. But, more often than not, the erection of a fence was

less important than the claim, on the part of an aggressive landlord, that x acreage of land, which

previously had been a part of a common, now belonged to him and could thus now extract

payment for its use, that is, charge a rent. The humble peasant could no longer flee to that portion

of the commons to eke out an existence, unless he/she paid the fee or rent demanded by the

landlord.

The enclosure movement took place over several centuries, but in the case of England,

one of the most disruptive episodes occurred in the 16th and 17th centuries, though it continued

on into the 18th century. During that era, the enclosure movement had reached such a peak that

large portions of the peasantry, that had traditionally lived in the countryside, were being forced

off the land because they were unable to pay the rent now demanded by landlords. This had the

effect of creating a huge pool of propertyless workers moving into towns and cities in search of

employment. Homelessness and vagabondage became a growing problem in the cities and

villages of the time. And it was from this growing pool of disposed people that a working class

was forged. That is, the enclosure movement led to the development of a class of people who do

not own productive property (in this case land) and, as a result, have no option but to offer their

labor in the hope of garnering a livable wage. That is, the emergence of a working class, as

distinct from a peasant or serf class – which does have access to means of production, however

modest, is intimately tied to the dislocations brought on by the enclosure movement.

At the same time that the enclosure movement was working its way through England, and

more broadly Europe, merchants and medieval guilds were gradually being transformed into

what we would now-a-days call factories. This is a fascinating history and one that,

unfortunately, we do not have time to explore. It’s enough to note that the beginnings of the

factory system occurred in textiles and cloth production. Indeed, the leading industry which

propelled England, and more broadly Great Britain, to imperial status, was the cloth trade. Prior

5

to the enclosure movement, or during its infancy, cloth production was carried out by peasants

living in the countryside. Their access to sheep, and thus wool, along with the modest equipment

they owned to transform wool into cloth, made it easy for them to produce and sell this good, in

addition to whatever other – mostly farming – activities they carried out in the countryside. This

was, overwhelmingly, domestic production, that is cloth production was carried out within the

peasant’s humble home.

The cloth merchants would travel through the countryside purchasing the finished cloth

from the peasants and then take it to other sectors of England and/or other countries, to sell it at a

price that, hopefully, covered their cost plus a tidy profit. The profit that could be made from this

trade would obviously depend on the difference between the price at which the cloth was sold

and the price at which it was purchased. So long as the sell price exceeded the buy price by a

reasonable margin, then a profit could be made. But competition among merchants had the effect

of narrowing the gap between these two prices, and in an effort to bypass this problem the idea

gradually emerged of controlling the price of the input, the cloth, by controlling the cost, and

specifically, the labor, involved in its production.

At first, the merchants introduced what came to be called the putting-out system. The

idea here was that the merchant would first purchase the wool, instead of the finished cloth, and

then take the cloth to a peasant to have him/her transform it from wool into the finished cloth.

This would give the merchant a bit more power over the cost of the primary input, wool, while

also making it easier for him/her to haggle with the peasant over the cost of transforming the

wool into cloth. But the problem with this technique is that the merchant could never be sure that

the amount of time (labor) which the peasant claimed was necessary to create the cloth, was

indeed correct. The peasant had every incentive to claim that it took much longer to produce the

cloth, while the merchant had every incentive to claim it took much less. In short, the merchant

could never be sure that the effort (labor) which the peasant claimed was necessary to the

produce the good was indeed the amount needed. And the only way to know for sure would be to

oversee the laboring activity of the peasant.

So, little by little, merchants began to bypass the putting-out system by building

warehouse-type structures that housed the wool they had purchased as an input plus various

machines, spindles and whatever other contraptions peasants used to produce cloth. The

merchant could then announce that he/she would hire people to work at the factory. The

6

merchant would only pay for the laboring activity of the hired people and could now directly

observe whether or not the workers were operating at a tempo that could generate the product,

and thus profits, expected by the merchant (who had now been gradually transformed into a

capitalist).

Notice, however, that this new system can only work if the laborers do not have

reasonable alternative to employment in the factory. If the factory had existed prior to the

enclosure movement, the typical worker could easily leave the factory and its employment, if

working conditions were seen as too onerous and/or the wages were thought of as inappropriate.

The laborer could simply walk out and go back to his/her plot of land and continue eking out an

existence as a peasant. The fact that peasants could sustain themselves from their own labor

would have made it difficult to sustain this kind of business. Such factories would not be

profitable, since labor could not be controlled, and would cease to exist.

But the enclosure movement had the effect of creating a huge pool of people who no

longer owned land, or the simple implements of production, and were now far less willing to

quite working for an onerous or stingy employer. And this in turn made it far easier for the

employer, the merchant/capitalist, to control the labor of his/her employees and demand a high

level of productivity. The power which the merchant/capitalist had over the employee came from

the fact that he/she could always threaten the worker with unemployment, being fired – leaving

the worker to figure out how to survive in the absence of a job. In short, the enclosure movement

created the conditions for the emergence of a working class that would now be obliged to work

in these new factories, even if working conditions and wages were onerous, simply because they

had no other option.

Beyond the above transformations, it’s also the case that the transition from feudalism to

capitalism involved improvements in technology that led to the creation of greater surpluses. We

know that, during the course of the medieval era, gradual improvements in transportation and

agricultural production, led to the development of agricultural surpluses which could then be

exchanged for the manufactured (artisanal) goods being generated by the guilds within the cities

and towns. This led to a gradual increase in the size of the cities and a growing volume of

manufactured (artisanal) goods.

At the same time, we also know that trading activity increased, not only trade between

the countryside and the cities, but increasingly long-distance trade. Indeed, many have argued

7

that it’s not a coincidence that the era of imperial conquest (starting from the conquest of the

Americas in the early 15th century and continuing on into the 20th century) coincides with the

development and eventual maturation of capitalism.

The above outline has been far too terse, but it should provide you with enough material

to place the following theories in their proper context.

Adam Smith’s Theory of History

While Adam Smith wasn’t the first to develop a theory of society that highlighted

economic activity, he quickly became the founding father of a way of thinking about society that

focused on the manner in which humans go about producing and reproducing their material

conditions of life. Smith argued that laboring activity is the original source of all wealth, and that

nations that wish to become wealthy should encourage the division of labor by setting up a

system of natural liberty, what contemporary American audiences would call economic freedom.

He imagined that societies organized along the lines of natural liberty would eventually

become the norm and believed that commercial society (what we would now call capitalism) was

the highest stage of human civilization, the pinnacle of human progress. In arriving at this

conclusion, he developed a theory of history which laid out the various stages through which

human society had evolved. It was a linear theory of history in the sense that he imagined that all

societies would move, in varying degrees, through a series of successive stages or eras that

started from the most primitive and would culminate in the most advanced, commercial, stage.

Each stage was defined by a set of conditions that distinguished it from the previous, while - at

the same time, setting the preconditions for the next, higher, stage of social development.

All of human history, he argued, could be broken down into the following successive

eras: hunting, pasturage, agricultural, and commercial. The hunting era of human society was the

most primitive, followed by the pasturage era, then the agricultural era, and finally the

commercial era.

The first, and most primitive, era of human society was the hunting phase. Technology

was very primitive, consisting of little more than bows and arrows and the various flint

instruments used to capture and butcher animals, and use their hides and bones to fashion

clothing, tools, and shelter. Private property did not exist and there was very little surplus

production. Laboring activity, in the form of hunting – and the production and distribution of the

8

goods made possible by the hunt, was used almost exclusively to provide for the sustenance of

the group. As a result, the material conditions of life were poor and precarious. Social

organization was communal and egalitarian, and there were no institutionalized hierarchies or

government. Smith saw the Native Americans of the 18th century as a prime example of this level

of social evolution.

The next stage in the development of human society was the pasturage era. By now,

technology had advanced to the point where humans had domesticated animals and were herding

cattle or sheep (we can include all other forms of domesticated animals, such as chickens, pigs,

and ducks, as well) as a way of providing the community with all the byproducts (food, clothing,

shelter, implements, etc.) that come from that activity. The herds or flocks were the first form of

property and were the foundation upon which the first hierarchies of wealth and power were

established. Men with larger herds were wealthier and more powerful than those with smaller, or

no, herds. It was also during this era that the notion of inheritance begins to take shape, with the

owner of a herd invariably bequeathing his “property” to his son or sons in varying proportions.

And yes, the focus was on patriarchal control or possession of property (i.e. herds or flocks). The

existence of property and the obvious imbalance between the haves and have-nots leads to the

development of government. Smith sees the origins of government as emerging at this stage and

explicitly defines government as an institution that emerges for the purpose of defending the rich

(those who own property) against the poor (those who do not own property). The examples he

uses to describe this stage of human civilization are the Tartars and Arabs of his time period.

The next era in the development of human society is the agricultural stage. Technology

has now advanced to the point where, in addition to the domestication of animals, plants have

also been domesticated to the point where agricultural production is now a feature of the system.

This has the effect of creating settled communities and the emergence of landed estates (manors).

As a result, he sees Medieval Europe as the prototypical example of this era of human

civilization. Property is now held in the form of land and landed estates are passed on through

inheritance. There are institutionalized hierarchies of wealth and power but little commercial

activity among the various estates (manors). As a result, the surpluses that are generated in this

era are used overwhelmingly, if not exclusively, for the maintenance of a large group of retainers

and dependents, ostentatious displays of wealth, and waring capabilities.

9

The last stage in the evolution of human society was the commercial era. Smith saw this

era as emerging from the medieval towns and, in particular, the actions of the burghers that

dominated those towns. Trade and, more broadly market activity, was the vehicle through which

the medieval towns expanded and became a central part of the growing division of labor between

the city and countryside; with the cities specializing in the production of artisanal, manufactured,

goods, and the countryside specializing in the production of agricultural goods. The growth of

the cities also coincided with the growth in rights to property and freedom of economic

movement.

By the time of Smith, this commercial stage had evolved into what we would now call a

capitalist society – though it wasn’t called that by Smith (the term capitalist, or capitalism, didn’t

come to be used until the 19th century). In this stage of development, property relations are

broken up into the following categories: landlords (owners of land), capitalists (owners of

capital), and workers (who do not own property, just their ability to labor). By the time of Smith,

and even though the system could still be defined as Mercantilist, commercial society could be

characterized by the fact that labor was set into motion by the investment activity of capitalists

(features that are central to capitalism). The capitalist invests in the machinery, raw materials,

buildings, etc. necessary for the production of a good, rents land from the landlord, and hires the

worker to labor with the tools and raw materials owned by the capitalist. The resulting product is

then sold on the open market to generate an income that in turn is partitioned into the wages of

labor, the rents of the landlord, and the profits of the capitalist.

Adam Smith believed that the gradual transformation of human society from the hunting

stage up to the present commercial stage, was the result of the human propensity to truck, barter,

and exchange. This tendency sets into motion the specialization of labor and thus, the division of

labor into ever more specialized activities. As the level of wealth increases, the opportunity for

exchange also increases and so too does specialization and the division of labor. As a result, one

can interpret Smith’s theory of history as a prolonged (millennia long) process of having the

social division of labor become increasingly more intricate as a result of the increasingly greater

opportunities for exchange that are presented as the level of wealth increases over time. The

removal of artificial barriers to exchange, which was ubiquitous in the Mercantilist period of his

time, would set into motion greater opportunities to truck and barter. And this, in turn, would

encourage a greater division of labor and thus wealth.

10

Karl Marx’s Theory of History

Karl Marx had a much more elaborate theory of history than did Adam Smith. But, they

held in common the idea that history, or the social evolution of the human species, should be

seen as the on-going outcome of the laboring activity of humans; that the way in which humans

go about producing and reproducing the stuff of life (the food, clothing, housing, entertainment,

etc., they need to get buy or flourish) is the fundamental reality of life which, in turn, molds the

way in which humans go about organizing their ideas about politics, government, religion, and

so on. Marx referred to his theory, or method of analyzing history, as Historical Materialism

and saw it as an antidote to the ideological interpretations of history that were prevalent in his

time, and still are. (An ideological interpretation of history would be one that privileges ideas,

and specifically ideals, as the motive or engine of history, that human societies evolve as a result

of an on-going elaboration and redefinition of what it means to live the good life or what it

means to be good or pure.)

The basic idea undergirding the theory of historical materialism, was that human society

can be thought of as composed of two very broad components: on the one hand the economic

base of society, consisting of the forces and relations of production; and on the other hand, the

superstructure of ideas making up the dominant beliefs (the ideology, religion, political and

scientific ideas) that are widely accepted as “truths” by the people of a society. Marx referred to

this constellation of relationships (the economic base and the superstructure) as a mode of

production.

The forces of production represented the foundation of any one mode of production

(society) and consisted of the technology that exists to transform nature into the array of goods

needed or desired by a society. This technology is, by its very nature, inherent in the memory of

the people (passed on from generation to generation through oral tradition and/or more formally

in the form of written records and formal instruction) and, as such, must be seen as a feature of

the people themselves, rather than a thing that exists outside of human nature. The social

relations of production, the other component of the economic base of a mode of production,

consist of the ways in which humans typically organize themselves to produce and distribute

goods. It represents the pattern of work and control, the class structure of society helping to

explain who works, who doesn’t, who organizes work, and who benefits from the work of others.

11

This aspect of the economic base is often, particularly since the beginning of class divided

societies - several thousand years ago, formalized in rules or laws regarding the nature of

property and work and the legally or morally accepted ways of organizing labor and distributing

the proceeds of that work.

The forces of production are always advancing, sometimes slowly, sometimes quickly,

but advancing nevertheless. They advance because humans are creative creatures always trying

to figure out a different or better way of producing or doing something. But as the forces of

production advance, inevitably a new set of social relationships, a new social class, emerges

seeking to organize society along different lines. This new social class will have ideas that come

into conflict with the ideas of the existing ruling class steeped in the traditions and beliefs of the

previous social order. For a period of time society will be in a state of revolution during which

the new social class, and its accompanying ideas, will be in conflict with the ideas of the old

ruling class and its ways of organizing society. Eventually, the new social class emerges

triumphant and a whole new era of human history emerges, one with a different economic base

and a whole new set of beliefs, the superstructure that represents the politics, religion, sexuality,

etc., of the new era.

This is the framework that Marx used to argue that history had evolved from primitive

communism, to slavery, to feudalism and now capitalism. While each of the preceding eras

lasted for thousands of years, capitalism, he believed, was destined to be short lived. This was

due to the fact that under capitalism, the social relations of production are structured in such a

fashion that capitalists, the ruling class under capitalism, are in perpetual competition with one

another for market shares. This economic competition forces capitalists to be attentive to new

technologies and methods of production that can provide them with a market advantage. Each

capitalist is forever seeking ways to increase his/her market share at the expense of other

capitalists. But the search for new technologies and methods of production means that a portion

of the profits appropriated by capitalists (the surplus produced by workers) is always being

invested in new technologies. In other words, under capitalism, the social relations of production

are structured in such a fashion that the forces of production (technology) grow by leaps and

bounds due to the investment activity of capitalists. This explains why the volume and variety of

output is so much greater under capitalism than under any previous mode of production.

12

In previous eras, the social structure of production was such that the upper classes tended

to consume most of the surplus on warfare, interesting costumes, temples, etc., instead of

investing it in new productive capacity. Of course, the upper classes under capitalism also

engage in consumption such as warfare, temple building and lavish parties, but the proportion of

the surplus allocated to the creation of new productive capacity is far greater than anything that

went before. As a result, technology grows at exponential rates under capitalism speeding up the

day when the human species will be able to conquer nature and the economy without being

subjected to the imperative of private profitability.

Marxists tend to see the emergence of capitalism as emanating out of the agricultural

surpluses that were made possible by the new technologies that had been gradually introduced

during the feudal era. They see it as emerging from within the feudal order and not the result of

some outside factor – such as international trade, which is often mentioned by mainstream

authors as a reason for the emergence of capitalism. But, once agricultural surpluses could be

generated, the thirst for more wealth led to the enclosure movement and the development of a

working class. The emerging capitalist class could now extract greater levels of productivity

from this working class, setting into motion the political and economic dynamics characteristic

of capitalism.

Thorstein Veblen’s Theory of Social Evolution

Veblen argued that institutions, i.e. habits of thought, structure the way we interpret

reality and organize our lives. That is, we are thoroughly social creatures, not just in the sense

that we live in groups and experience empathy toward others, but - more importantly, in the

sense that our behavior and ideas are heavily influenced and informed by the broader social

context of which we are a part. The actions we carry out, and the justifications used to explain

them, are heavily influenced by our culture, education, socialization, and need to belong. This

does not mean we are automatons reproducing whatever beliefs and actions are common to the

social milieu of which we’re a part; individual actions and beliefs can differ from the group. Yet,

it’s the actions and beliefs of the group and society, the institutions of society, that structure

social life and the patterns of thought and behavior common to the individuals of a society. The

norms we have internalized about the way society views a wide variety of individual behavior is

experienced by us, as individuals, through the sense of shame or guilt we often feel for behaving

13

in ways we know are frowned upon by society at large, likewise with the sense of pride and

satisfaction we experience when behaving in ways we know are socially approved. In both cases,

our behavior is guided by the belief systems of society which we, in turn, have internalized and

made a part of our world view.

Veblen believed that two broad types of institutions govern social behavior: those that

deal with the problem-solving aspect of life, the technologies developed by humans to

domesticate plants and animals, build tools, furniture, dwellings, invent things, etc.; and those

that seek to explain or justify the way power is organized to distribute work and the output of

that work. The first set of institutions were progressive in the sense that they sought to improve

on the current way of doing things, facilitating and improving the process of social provisioning.

The second set of institutions were conservative in the sense that their primary aim was to

reinforce belief systems and ways of doing things.

Both sets of institutions were seen as evolving out of fundamental, biologically given,

characteristics of humans. He tended to refer to these fundamental characteristics as instincts, but

a more appropriate term would be proclivities or propensities; that is, behavioral characteristic

that are common to humans regardless of their cultural or social context. Thus, the sex drive is

innate to humans, but the form it takes and the way it’s expressed varies across cultures and

social settings.

Veblen identified several propensities or instincts. There was the instinct of

workmanship, the parental bent, and idle curiosity, as well as the predatory instinct and a related

set of ceremonial and ritualistic behaviors. The instinct of workmanship dealt with the human

need to work and create things, while the parental bent referred to the inclination to care and

provide for one’s children (future generations) and provide them with the requisite set of social

skills (socialize them into the various institutions needed to thrive in society). The propensity to

engage in idle curiosity referred to the tendency humans have to imagine how things work, to

seek answers to the question why, or to explore how sounds, colors or ideas interact. The

predatory inclination referred to not simply the human capacity to inflict harm on other humans,

animals, and the environment, but the capacity to belittle, denigrate, ostracize, shame, and

condemn, others. One of the characteristic features of the predatory propensity is that it is

associated with feelings of envy and tendency to covet the behavior and beliefs of those we think

14

of as our betters. It is also expressed in the tendency to glorify and lionize those whom we see as

our betters.

It’s important to note that the above extremely short outline of Veblen’s view of human

behavior underscores the extent to which he did not accept the utilitarian view of humans. He did

not believe that humans were passive hedonists motivated only by the pursuit of pleasure and the

avoidance of pain, doing nothing unless the marginal benefit of an action outweighs the marginal

cost of exertion. Like Marx, but also to some extent Smith, Veblen saw humans as purposeful

creatures forever molding their physical and social environment. What’s more, they derive

pleasure and meaning from work. The instinct of workmanship involved more than simply doing

things, it also carried with it the sense of pride and accomplishment that comes from a job well

done, a well-executed dance routine, song, painting, sculpture, or an interesting and impressive

feat of engineering, scientific discovery, etc. We are, in short, doers and derive pleasure from a

job well done.

These two sets of institutions, those associated with technology and those associated with

ceremonialism, are forever interacting with each other to bring about the kind of social system

that’s characteristic of any given society. The institutions associated with technology are

progressive in the sense that they propel society forward, developing better ways of producing

and distributing goods, or more humane and more efficient means of sustaining life, or creating a

more peaceful life sustaining environment. In the meantime, institutions associated with

predation and ceremonial behavior are conservative and reactionary in the sense that their

primary objective is to insist on the sanctity of things as they currently are and, as a result,

making it difficult, if not impossible, to employ new ideas or technologies to extricate humans

from whatever current dilemma may be confronting a society.

Societies generally evolve as a result of the on-going reliance of technology (and the set

of institutions associated with it) to resolve existing social problems, but they can also stagnate

and slip back into obscurity, the dark ages, as a result of a stubborn insistence on implementing

idiotic ceremonial beliefs. This framework is very similar to that of Marx’s theory of historical

materialism. Veblen’s progressive institutions (those associated with technology, workmanship,

and idle curiosity) can easily be interpreted as Marx’s forces of production. In both cases, the

behavioral patterns associated with this aspect of social life are the ones that are moving society

forward, making the future better than the past. Likewise, Veblen’s ceremonial institutions (those

15

associate with predation and ritual) can be easily interpreted as Marx’s social relations of

production. In both cases, the behavioral patterns associated with this aspect of social life, are the

ones holding back progress and insisting on doing things the way existing ideas and sacred

beliefs demand they be done. But where they differ is how they view progress and evolution.

With Marx we get a much greater sense of progress and the belief that, despite the conservative

nature of social relations, the old ways will inevitably be broken asunder and a new social era

will eventually emerge. But with Veblen, there is no such optimism. While he clearly preferred a

future that’s very similar to that envisioned by Marx, he doesn’t believe that progressive

institutions will inevitably win out. Humans are quite capable, he argued, of dooming themselves

by stubbornly believing in stupid ideas they see as sacred and beyond debate.

Veblen used this framework to explain the political economic behavior of advanced

capitalist societies, specifically the USA in the late 19th and early 20th century. In his Theory of

the Leisure Class he explains the emergence of the upper class, what he calls the leisure class, in

evolutionary terms. Prior to the emergence of human civilizations, sometime around 13 to 15

thousand years ago, humans lived in extremely precarious situations as a result of their crude

understanding of things, technology had yet to advance toward a stage where surpluses could be

generated from work. This is the era referred to as primitive communism by Karl Marx or the

hunting stage by Adam Smith. During that era, Veblen imagined that the distribution of peaceful

proclivities (i.e. parental bent, workmanship, idle curiosity, etc.) predominated over predatory

proclivities. As a result, in that era, there was a greater emphasis on cooperation and sharing,

social solidarity, than on exploitation, subjugation, and oppression. But once humans developed

technology to the point where surpluses could be generated (through the domestication of plants

and animals and the creation of tools and dwellings) then the predatory inclination began to

dominate society. With the emergence of surpluses there now was something worth fighting for

and, in consequence, the emergence of class divided societies begins, replete with temple

building cultures, elaborate religious and political rituals, as well as slavery and warfare.

The emergence of surpluses provided an opportunity for predatory proclivities to gain

dominance in the organization and culture of human societies. A warrior class emerges seeking

to gain control of the surpluses by regulating the working activity of those who labor in its

production. The warrior class appropriates the surplus through brute force, warfare. But, over

time, they develop justifications for their privileged status by claiming to be descendants of gods,

16

or to be gods themselves. Religious temples are created to praise and eulogize the order and

civilization brought about by the warrior class; and a priestly class emerges to sanctify the

actions of the warriors with rituals and ceremonies. Distinctions begin to emerge between those

who labor in the production of the surplus and those who live off the surplus: the warriors and

their growing entourage of sycophants, priests, priestesses, and all of those who attend to the

whims of the powerful. The upper class distinguishes itself from the masses by the fact that they

do not work; they instead engage in war, sports, religious ceremonies and temple building (more

accurately enlisting the energies of architects and workers to build the temples). In contrast, the

toiling masses work and gradually come to see the upper class as worthy recipients of the

surpluses. Working activity comes to be seen as less glorious and edifying than the exploitative

activities of the warrior classes; and evidence of work in the form of calloused hands and work-

soiled clothes come to be seen as unflattering. In the meantime, exploit and warfare, athletic

prowess and ceremonial (religious) leadership, come to be seen as praiseworthy; while un-

calloused hands, manicured fingernails and toenails, and clothing unsuitable for work, come to

be seen as signs of merit and refined social standing. The entire culture takes on a predatory tone

and competition and envy, instead of cooperation and solidarity, come to dominate society.

Veblen views the class divisions in the USA in the late 19th and early 20th centuries as the

evolutionary outcome of the patterns that emerged early on in human history. The leisure class

distinguishes itself from the common person by engaging in predatory behavior and conspicuous

consumption. They achieve their fortunes through sabotage, chicanery, exploit and theft, but

justify their actions by appealing to stories of merit, industry, religious piety, or free enterprise.

One way they display their power is through conspicuous consumption, that is, purposefully

making a show of what they can afford by consuming goods and services that will never be

within the reach of the common person. Indeed, the more expensive and less useful the item, the

better. It underscores the power of the wealthy, their capacity to use resources on meaningless

trinkets that serve no useful social purpose, other than to underscore their capacity to be

indifferent or wasteful in the use of resources that could serve a better purpose in provisioning

society at large. It also underscores their capacity to move resources away from the production

and distribution of goods that enhance the quality of social life and employ them instead in the

production of luxury goods that only serve to highlight the power of a tiny minority.

17

In the meantime, the common person comes to see the conspicuous consumption of the

leisure class as evidence of their superiority and good social standing. They then go about doing

their best to emulate their behavior by going out of their way to purchase items that mimic the

conspicuous consumption of the wealthy. Just as the wealthy are intent on displaying their social

status through conspicuous consumption, the common person displays his/her social repute by

imitating the consumption patterns of the wealthy. But the problem is that, unlike the leisure

class, which abstains from work – indeed non-work is a sign of their superiority, the common

person must work for a living and can seldom afford to purchase the luxurious trinkets so

beloved by the wealthy. So, they purchase cheaper versions of the same and/or go into debt so as

to obtain the symbols of status they so desperately need for social esteem. The net result is that

the working class ends up on a treadmill, forever working harder and harder, to purchase items

that serve little utilitarian purpose but provide them with a fleeting sense of social repute.

The working class, Veblen’s common man, is thus burdened with not only the disrepute

associated with having to work for a living (as opposed to the exalted status experienced by non-

working elites) but induced by envy to buy, buy, and buy, items that serve little utilitarian

purpose other than to signal to society that he/she has, in some small measure, arrived and is

socially meritorious.

Veblen views all of this as contributing to the dissatisfaction endemic to the working

classes and to the waste that’s central to predatory societies and, in particular, capitalism.

Industry, in such a system, will end up producing all the items of conspicuous and emulative

consumption demanded by the capitalist and working classes. But, even if industry delivers those

items at rates that meet the needs of the consumers, and even if the items are sold at prices that

match their minimum average cost, the system would still be wasteful because resources would

be allocated to the production of things that serve little, if any, utilitarian purpose and seldom

enhance the quality of social life. So, resources are spent on the production of conspicuous and

emulative consumer goods instead of on the production of things that enhance the provisioning

of the community.

Note that Veblen doesn’t directly address the question of how capitalism evolved.

Instead, he sees capitalism as being nothing more than the most recent example of a broader

genus of societies that he would call predatory. That is, the predation, invidious distinctions,

conspicuous and emulative consumption, he sees in capitalism, is not unique to capitalism, it’s

18

instead a feature of all predatory societies. The major difference is that, unlike previous

predatory societies, such as medieval Europe, technological advances under capitalism has

allowed the system to produce a much larger volume of waste – generating ungodly amounts of

things that do not necessarily enhance social provisioning but rather destroy the ecological

environment in an endless pursuit of status through the accumulation of trinkets, temples and

costumes that do little to improve the life of the common man, indeed leaves him in a perpetual

state of anxiety.

Karl Polanyi theory of Capitalist Development

Karl Polanyi’s theory of capitalism, specifically his theory regarding the origins and

nature of capitalism, was laid out in his famous book “The Great Transformation,” published in

1944. In this work, Polanyi explores how capitalism came to be thought of as a system of self-

regulating markets and, in the process, lays out three interesting hypothesis: the first one is that

capitalism (a system of self-regulating markets) represents the first time in human history where

the economy, instead of being embedded within social relations, stands above society –

structuring the nature of social relations; the second hypothesis is that capitalism did not evolve

spontaneously out of the evolution of market activity, but rather was constructed by the early

mercantilist governments, the early nation states, seeking to expand their power; and the third

hypothesis is that capitalist societies have two contradictory impulses, what he calls the double

movement, which are at odds with each other and generate eras of social disruption and

increased inequality when the laissez fair impulse is dominant, and eras of improved social

relations and less inequality when the market regulation impulse is dominant.

Polanyi argues that, prior to the emergence of capitalism, the economic relations of a

people, of a society, were submerged within the social fabric of life. The act of producing and

distributing goods was carried out in the context of an intricate network of social relations and

meaning that focused more on human interaction, such as reciprocity, than on the pursuit of

material gain. Economic activity, and specifically gain-seeking market exchange, was submerged

within a network of social, cultural, and political relationships. Clearly, economic activity was

taking place, but it was not perceived as standing apart from, or prior to, the network of social

relationships that made up the fabric of life. Social relationships, and cultural and political

activity, was the context through which economic behavior was carried out. Work, production,

19

and distribution was performed within a cultural, social, and political context that gave that work

meaning. But, with the emergence of capitalism, this order is inverted, and it is now society and

social relations that fall by the wayside as economic activity, and specifically the pursuit of

material gain, comes to dominate social relations. The social fabric of life is now submerged

under the growing dominance of gain-seeking market exchange. Paraphrasing Marx, the market-

nexus expands to such an extent under capitalism that all social relationship eventually come to

be perceived in terms of cost and benefits, exchange, and “what’s in it for me.”

But it’s not just that, under capitalism, the economy now stands above society (instead of

being subsumed under society, as in previous eras) it’s that the economy, and more specifically

market exchange, now comes to take on a life of its own. In all previous systems, the market was

a subset of the formal and informal rules and traditions that had emerged over time. But with the

advent of capitalism, the idea emerged of the self-regulating market; that somehow, and in the

absence of conscious coordination, the market coordinates production and distribution without

conscious oversight. So, it’s not just that the economy stands above society, but more

importunately, that the economy somehow regulates itself and, as a result, stands above the

social, cultural, and political fabric of life. The market system, in short, is self-regulating

(whether this self-regulation is consistent with the common good is another matter).

Polanyi provides numerous examples of how economic activity, in pre-capitalist

societies, was subsumed within the social fabric of life. While we will not be going over these

examples with the detail that he does, it’s enough – for our purposes – to note that the social

patterns of reciprocity, redistribution, and householding, were the context through which

production and distribution took place in pre-capitalist societies. These principles, he argues are

sufficiently broad that they can be found in all societies, though his focus is on pre-capitalist

societies. But the form these principles can take, that is, the institutional forms that emerges out

of these principles, will vary from one society to another. Thus, with reference to the social

principle of reciprocity, individuals or groups develop symmetrical patterns of exchange; while

with the social principle of redistribution, societies develop centralizing institutions (he calls this

centricity); and lastly, with reference to the social principle of householding, individuals, groups,

and society develop autarchic institutions. He uses the behavior of the Trobriand Islanders of

Western Melanesia as examples of economic activity which is carried out under the social

principles of reciprocity and redistribution. And he points to the Kingdom of Hammurabi in

20

Babylonia, as well as the New Kingdom of Egypt, as examples of social arrangements that

reflect redistribution and centricity. The Greco-Roman era, as well as European feudalism of the

deep middle ages serve as examples of householding and autarchy.

So, for thousands of years, humanity carried out economic activity within a network of

social relationships that set the context within which economic behavior was carried out. This

pattern was inverted with the arrival of capitalism and the emergence of the self-regulating

market system. But the self-regulating market-system didn’t come onto its own until the early

19th century. What’s more, it required a prolonged period of transition, which occurred in Europe

from the end of the feudal era until the late 18th and early 19th century; a transitional period

referred to as Mercantilism by economic historians. Moreover, the eventual emergence of the

self-regulating market system did not come about as a result of the unfolding of some presumed

innate human tendency to truck, barter, and exchange, as Smith believed. Instead, the self-

regulating market emerged as a result of a prolonged period of regulation which was consciously

instituted by the state. What happened, specifically, was that the nation state was consolidating

its power into a set of laws and regulations that applied to the entire nation, eliminating local

differences and establishing a wide arena for competitive markets. This stood in contrast to the

provincialism and scattered centers of power (such as the manors and towns) that characterized

the medieval period. This, in turn, had the effect of creating a market system throughout the

nation which introduced competition among numerous venders selling similar goods. While

there clearly had been trade and exchange which took place during the medieval period, it was

largely a form of carrying trade which involved little competition among the producers who, in

any event, were inevitable scattered over large geographic distances and not directly in

competition with one another. This was true with respect to long-distance trade as well as local

trade (as in the medieval towns). Within the towns of the middle ages, trade was highly regulated

so as to ensure a flow of income that allowed the guilds and burgers to sustain their station in

life.

Mercantilism had the effect of extending the regulatory impulse that existed in the towns

and manors of the medieval era to the entire nation. And while this did not bring about the kind

of competitive, self-regulating, market which is celebrated in contemporary capitalist culture, it

did provide the infrastructure, the groundwork, needed for its emergence. That is, the self-

regulated market system did not emerge out of some innate tendency on the part of humans to

21

trade, barter, and exchange, it instead emerged as a result of a conscious effort on the part of the

state (the monarchs of the mercantilist era) to impose all manner of regulations on the economic

behavior of the subjects of the crown.

The manner in which these regulations were introduced, and the concern displayed by the

emerging states over the impact economic activity could have on humans (labor) and the natural

environment (land), highlights an interesting feature that has been part and parcel of capitalist

societies since their emergence at the end of the mercantilist era; namely what he calls the double

movement. That is, capitalist societies are forever torn between two contending impulses: on the

one hand, the inclination to free the system of regulations so as to provide as wide an arena of

action to business owners, what can be called the free market impulse; and, on the other hand,

the inclination to regulate the system so as to protect the social fabric, not just those who are

most directly impacted (such as propertyless workers or the environment), but social mores that

begin to fray as a result of the extension of the market-nexus into social relationships.

While Polanyi saw these two impulses as always present in the era of, he does draw

attention to the fact that during some eras the free-market impulse holds sway, while under other

eras the regulatory impulse holds the upper hand. This is very similar to a proposition that was

introduced by Kevin Philips in his 1990 book “The Politics of Rich and Poor.” In that book,

Philips argues that political economic history of the United States can be characterized as going

through successive waves of free-market and regulation. When Republicans gain political

control, they inevitably introduce efforts to free the market system of regulations and generally

usher in a period of unbridled expansion accompanied by growing inequality. But as speculative

fever, inequality, and poverty, begin to take their toll on the population, the citizenry reacts by

bringing into power Democrats who now introduce legislation intended to protect society against

the vicissitudes of the free market. This then ushers in another era of economic expansion, but

now accompanied by stable patterns of distribution and far less speculation and poverty. This

eventually comes to be seen as stifling to economic growth by the business class and, over time,

a new era of Republican rule is introduced, bringing about, once again, speculative manias,

inequality and poverty. Philips argued, in the early 1990s, that the era of Republican rule (which

had just started about a decade before the publication of his book) would inevitably give way to

Democratic rule as the population would react against the speculation and poverty brought about

by free market economics.

22

Note that Polanyi sees capitalism as emerging out of a conscious effort on the part of the

newly emerging nation states, at the end of the feudal era, to consolidate their power by creating

a nationwide system of common laws and regulations. In short, it was government that created

the pre-conditions for what eventually came to be called capitalism.

Ellen Wood on the Coercive Market

One of the most perceptive arguments advanced to explain the evolution of capitalism

has been provided by Ellen Wood in her 1999 book The Origin of Capitalism. Her work is

important, in no small measure, because of the corrective she offers to the common mainstream

belief that capitalism emerged over an extremely long process wherein traditions, regulations,

and ineffectual laws, were gradually removed allowing the underlying, natural, elements of

capitalism to blossom and mature. The idea underlying this perspective is the notion that

capitalism rests on the principle of self-interested exchange; that – at its core – capitalism is

compatible with human nature, specifically the self-interested pursuit of material gain. In this

sense, the basic elements of capitalism have always been around and found in the various market

and commercial societies that have populated history since the beginning of human civilization.

Unfortunately, this perspective continues, previous societies sought to regulate and channel the

self-interested aspect of human behavior and, in the process, restrained economic growth. It was

only when these burdensome traditions, regulations, and laws, were removed, when the principle

of laissez faire was introduced, that the market was able to flourish and bring about the bounty

which capitalism promises.

This idea appears in various guises. Among contemporary pundits this often shows up in

the shallow claim that China, a socialist society, is moving toward capitalism because it has been

introducing market reforms since the late 1970s. It also shows up in the work of some historians

who argue that the commercial success of medieval Venice represented an early version of

capitalism which, unfortunately, was sidetracked by inappropriate rules and laws. Adam Smith’s

theory of history represents one of the earliest versions of this thesis. He saw the development of

capitalism, which he calls a commercial society, as emanating from the medieval cities and,

more specifically, the widening of the division of labor between the countryside and the urban

centers, as a result of the trading activity of merchants and artisans.

23

Central to all the versions of this perspective is the notion that the basic elements of

capitalism have always been around, just waiting to be unleashed. And that its emergence came

about as a result of the, sometimes conscious and at other times unwitting, removal of

unnecessary rules, regulations, and laws. Capitalism, in other words, is always waiting to be

unleashed, and its only when the fetters restraining self-interested exchange, however well-

intentioned those fetters might be, that capitalism blossoms.

Wood disagrees with this perspective and argues instead that capitalism is a specific

historical formation and not some underlying principle of self-interested exchange just waiting to

be unleashed. Market using, commercial, societies, have been a feature of humanity since the

beginning of civilization. But the widespread use of markets, as in ancient Mesopotamia, Persia,

Greece, or Rome, does not mean that those societies were capitalist, any more than the existence

of a robust commercial society, as in medieval Venice, means that it was capitalist.

The widespread reliance on markets and commerce, does not, in and of itself, make such

a society capitalist. It’s true that such societies rely on the pursuit of material gain, to make a

profit (surplus) from exchanging goods. The merchant is central to such societies and she/he

makes her/his fortune by trading in goods that have already been produced. The object of the

game is to buy cheap and sell dear. But the goods themselves need not be produced along

capitalist principles. Indeed, throughout the course of much of human history, production was

carried out by slave labor. The slave produces a volume of goods which exceeds the subsistence

requirements of the slave, allowing the owner of the slave to appropriate the difference in the

form of a profit (surplus) upon selling the finished good to a merchant. The merchant than sells

that good in another region of the economy and charges a price that exceeds the original price by

an amount that covers the cost of transportation, storage, other sundry expenses, and a mark-up

for profit.

A similar set of relationships can be found in the feudal societies of medieval Europe,

where the bulk of the gross product was generated by serfs who were obligated to provide their

overlords with the surplus generated from their labor. The merchants would then purchase the

output generated by the serfs and, as in the case of slave-based societies, sell the resulting output

elsewhere at a profit.

In both slave and feudal societies, the surplus that’s generated by the primary producer,

i.e., those laboring to produce the good, is appropriated by their owner or lord through extra-

24

economic means, such as through violence, tradition, and/or law. This is most readily apparent in

the case of slavery where it takes little imagination to understand that the owner forces the slave,

on pain of physical punishment, to generate a surplus beyond his/her own subsistence. But what

makes capitalism different from previous market-based, commercial, societies, is that the

appropriation of the surplus from the direct producers, i.e., free laborers, occurs through

economic means (instead of extra-economic means that occurs under slavery or serfdom). In

other words, under capitalism the worker is not owned by the capitalist nor does he/she have

feudal obligations to an overlord, he/she is free. Yet, economic necessity, compels him/her to sell

his/her ability to work to the capitalist and, in the process, generate a surplus (profit) which

exceeds the wages he/she retains for himself/herself. This is what Wood, and Marxists, mean by

economic coercion.

But it must be noted that this issue of economic coercion is not confined to the behavior

of the worker, who must always offer labor so as to purchase the necessities of life, it’s also a

feature of capitalist behavior. The capitalist is also operating under the compulsion of the market

to generate the profits he/she is forever pursuing. He/she is in constant competition with other

capitalists, limiting the profits that might be captured from selling the finished good. So, while

surpluses are indeed generated by the direct producers (workers) under capitalism, this is carried

out not through extra-economic means (such as corporal punishment, violence, as in the case of

slavery) but through economic means where exchanges are voluntarily entered into. Yet, despite

this freedom, both workers and capitalists feel driven by the imperatives of the market.

This characterization of capitalism, as a system of economic compulsion, is a common

feature in Marxian interpretations. Indeed, it’s the way in which Marxists generally explain

capitalism. It’s viewed as a system in which both the worker and the capitalist are free to buy and

sell whatever they wish, but the capitalist owns the means of production while the worker does

not. This imbalance allows the capitalist to hire workers to generate a value that exceeds the

competitively determined wage rate. The difference between the value of the produced good and

the wages of the worker is retained by the capitalist in the form of profits. But all of this occurs

in a context of free-wheeling market exchange. The worker is not forced to work for the

capitalist and the capitalist is not forced to hire any one worker. Yet, the ever present need to

sustain one’s self compels the worker to generate a surplus to the capitalist, even though both the

worker and the capitalist view this exchange as voluntary and non-coercive; after all, the worker

25

can always quit, if he/she finds the terms of employment onerous; and the capitalist doesn’t have

to hire a specific worker and can easily terminate the relationship, if his/her productivity is too

low.

This characterization is generally presented in the context of an industrial economy, with

firms operating in an urban setting, producing and selling commodities through mechanized

techniques of production. As a result, Marxian interpretations of capitalism frequently focus on

the industrial context of that relationship. There’s a pool of propertyless workers forever seeking

employment, and competition among these workers has the effect of keeping the wages of labor

close to subsistence (the cost of reproducing labor). The capitalist then hires workers at the going

wage and has them interact with the machines and raw materials owned by the firm to generate a

product which is then sold at a price that exceeds the cost of labor and materials. That excess is

retained by the capitalist in the form of profits. Economic compulsion ensures that capitalists will

generally be able to extract a surplus from the workers, but not because the workers are slaves or

serfs, but because the need to subsist will ensure that workers generate a value that exceeds their

wages.

While Wood has no quarrel with the above characterization, what makes her argument

interesting is that she places the origins of capitalism not with the industrial revolution, which

began toward the end of the 18th century, but with the enclosure movements and the

centralization of land that occurred in England beginning in the late 15th and early 16th century.

In other words, capitalism had its origins in agriculture, the countryside, and not in industry and

urban centers. Indeed, in her telling of the story, the industrial revolution occurred in large

measure because capitalism had already emerged in the countryside.

The centralization of land, that is the growing concentration of land ownership in the

hands of a relatively small proportion of the population - the nobility and aristocrats of that era,

along with the enclosing of formally common lands, had the effect of wiping out a significant

proportion of the peasant farmers that had formally made a living through subsistence farming.

This, in turn, had the effect of creating a much larger class of tenant farmers. People, oftentimes

former peasants, who would now rent land from the landowner in an effort to generate a

marketable agricultural good which could, hopefully, be sold at a price that covered the cost of

the material inputs, their own subsistence needs, and the rent due to the landlord. A market for

leases began to emerge where potential tenant farmers would compete against each other to rent

26

land from the landowners in the hope of producing an agricultural good that would pay for the

rent, material inputs, and their consumption needs. The tenants were motivated to be as

productive as possible, to ensure they could keep for themselves any revenue that exceeded the

cost of materials and rent. At the same time, the landlords now had an incentive to rent out the

land to those tenant farmers they viewed as most productive. In other words, economic coercion

was motivating the tenant farmers to be as productive as possible, allowing the surplus, in the

form of rent, to be appropriated by the landowners, but not through non-economic means of

coercion, as in the case of slavery and serfdom, but through the economic coercion exerted by

market relations.

Note that this economic coercion is being felt by the tenant farmers, not because they are

propertyless workers but because if they do not manage to rent land, they’ll be incapable of

generating an agricultural product which will allow them to survive and hopefully prosper. In

other words, economic coercion was already becoming a feature of the system, but it was being

felt by the tenant farmers and not by a class or propertyless workers. And both the tenant farmer

and the landlord were now feeling the pressure of having to depend on the market to obtain their

income. If the tenant farmer’s productivity was inadequate, he/she could easily lose the right to

rent the land, and thus the flow of income that could be generated from that activity. The

pressure. was on to be as productive as possible. Economic coercion, in other words, was already

in play. And it’s this aspect of capitalism, namely economic coercion, which Wood sees as one

of the defining features of capitalism.

This new set of property relations had the effect of increasing output from the

countryside. Agricultural productivity set the context for the industrial revolution which would

occur a little over two centuries later. The surpluses being generated from agriculture facilitated

the development of industry which would occur later on. In the meantime, of course, the

enclosure movement also had the effect of creating a class of propertyless workers who would

also feel the economic coercion being experienced by tenant farmers. But by the time of the

industrial revolution, an economic system organized on the basis of market driven economic

coercion was already in place. In other words, capitalism had already emerged, at least two

centuries. earlier, by the time of the industrial revolution.