Capitalism coming full circle?

Some thoughts on Volume 2, The Wheels of Commerce from Braudel’s Civilization and Capitalism series (post on Volume 1) about the emergence of capitalism from the 15^th to 18^th centuries.

An interesting tidbit was that the early uses of the word capitalist were pejorative. Capitalists were denounced right from the beginning….for “being interested in wealth for its own sake.” Are we coming full circle?

The term capitalism was first used in 1753, but doesn’t really catch on until the early 1900s. Think about this for a second. In a lot of my discussions with the defenders of capitalism, it is spoken of as a sacred and inalienable system that has been entrenched, proven, and is the natural order of things. But, we didn’t even start talking about it till just over a hundred years ago. Granted, the book observes that the shoots of capitalism were emerging well before that.

Braudel uses the metaphor of a house to explain the three volumes. He covered the ground floor of “material life” in the first volume on material life, explores the market or economic life in this second volume, and gets to the top floor of capitalism in the third (I’m looking forward to that!).

What is striking from this second volume is how the emergence of trade across borders and oceans creates the conditions in which capitalism can and does emerge. It may be too strong to say capitalism was necessary, but it certainly fit with the emerging economic conditions of the 15^th to 18^th century — in particular, in how it helped deal with the risks inherent in expanding global trade.

In social change terms, Braudel is presenting the story as a developmental one (consistent direction of change over time towards greater complexity). It is trade that moved economic life up the ladder of complexity. As trade became more complex, it in turn created a requirement for a system capable of handling that complexity. Markets certainly existed at the local level, and Braudel chronicles the various forms, such as my favorite the “fairs”, which were part market and part festival. Indeed the expansion of local market from informal to formal was a key stimulus for global trade.

Right from the get-go, we have “equal and unequal exchange, balance and imbalance of trade, and domination and subjection.” We have the emergence of the modern state and colonial/mercantilist approaches to reinforce that state, and the capitalists providing the financing of the state as they usurp and move into the nobility/upper classes. The capitalist, in Braudel’s term was neither firmly rooted in the land-owning past nor the emerging factories or means of transport, but rather “a man of the market, the stock exchange….in distribution, marketing,” i.e., his “top floor” of the house operating above the market.

Another interesting tidbit was his description of capitalism’s need to get past the idea of usury, which was especially tricky in that basic interest was often viewed as usury. He describes a series of work-arounds, but fair to say capitalism needed that obstacle removed.

Braudel reaches a fascinating conclusions that capitalism “could only emerge from a certain kind of society, one which….having hierarchies of one kind of another, it encouraged the survival of dynasties and the continuous process of wealth accumulation. Inheritances passed on, profitable marriages arranged, division of society into groups with some limited social mobility.” A blunter way of saying that is that needs winners and losers, the perfect system to fit modern values, but not-so-perfect with emerging postmodern and integral values. – Andy Hines