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Discussion point…

Conventional theory has it that capitalism arose in England in the 16th century but I long ago found it thriving in the 13th century. Rowland Parker’s ‘Men of Dunwich’, a treasure of my bookshelves for many decades, uses ancient pipe rolls and mediaeval manuscripts in our historic archives as the author turns detective. Why did Ada Ringulf, with a cottage by St Peter’s, pay only ¼d rent a year when neighbours paid 1½d?* Parker thinks he knows. Anyway, Dunwich merchants, shipowners with vessels we know as ‘cogs’, would speculatively take cargoes of wool, barley, cloth to Europe and the Baltic and return with iron, wine, silk and spices. Profits could be handsome – but the loss of a cog to a hostile port, pirates, minor warlords or official blackmail could ruin a man and his family overnight. So merchants offset their risk by investing in eachother’s cogs and cargoes, risking only a fifth or a sixth on each voyage. Parker has the evidence. That’s capitalism. And it was happening three hundred years earlier than thought. Capitalism means risk, even if it’s managed risk. What the global corporates do is risk free; monopolistic, monopsonistic or oligopolistic, they have a licence to make money with virtually no risk, by virtue of their size and power.

Raedwald

Agree, disagree? Not convinced by the entirety of the thesis at all but there are some interesting points being made. Read the whole thing.

39 comments to Discussion point…

  • Paul Marks

    Trade and private production for profit is thousands of years old.

    As for England in the Middle Ages – see M.M. Poston “Medieval Economy and Society” (business – including landed estates – run for CASH PROFIT and INVESTMENT OVER TIME) and Alan Macfarlane’s “The Origins of English Individualism” – same message but put more clearly and from a more clearly free market point of view.

    However, the term “capitalism” also tends to mean MASS PRODUCTION with the use of factories and large scale machines – whist that certainly existed in Roman times (there are remains of vast Roman factories and multiple water mill power sources only a couple of miles from Arles in France – and that was just one site among many), it is normally associated with Britain in the late 18th century – see T.S. Ashton’s “The Industrial Revolution” – still the best short book on the subject, even though it is 70 years old.

    And now I had better go to bed – I have to do utterly pointless things in the morning.

  • Capitalism does indeed mean risk. Even when risk management is real, and not the government passing a law that claims to make us safer while actually endangering us, it often means simply moving risks out of the manager’s field of view, like so many unexploded bombs being piled into some “won’t happen (unless several unlikely event coincide)” area. An example is the forest that routinely has small fires or is managed to have no fires – until one day there is an immense conflagration. Capitalism purges itself (and learns from) bankruptcy. ‘Too big to fail’ just means that “we’ll all fail together when we fail”.

    As regards the history, Paul Marks is right; a degree of capitalism is very old, since people practise it when they can. England by the 16th century had gradually become an unusual thing: a country where slavery and its lesser cousin serfdom had ceased to be. This unusual degree of freedom naturally caused capitalism to be more widely done, which generated more wealth, which enabled more capitalism, etc. Saying it did or did not start in England under Elizabeth is a matter of degree: how much capitalism, how little feudalism or other less-free/un-free rival, do you need to call it capitalism.

  • bobby b

    When caveman Yog spent days fashioning a spear so that he could hunt animals for food, and then used the result of his labors to stab more animals to death than he could eat by himself and so traded a few dead sabretooth tiger skins to Edith the cavewoman for a few evenings of companionship and a nice mastodon-steak dinner, he invented capitalism.

    Isn’t capitalism at its most basic simply the private ownership of the means of production, and the trading of any produce that is excess of the producer’s needs for the produce of others?

  • Mr Ed

    Dunwich was England’s second city once. A storm all but destroyed it, but it kept its two MPs for centuries. It is now a tiny village, slowing falling into the German Sea (as it had been called in its time), another lost glory of Suffolk. However, you need not look just at Suffolk, but just one example, a 15th Century ‘Wool Church‘ in glorious Stamford, Lincolnshire, to see the works wrought by prosperous merchants, whose risks paid off.

    And of course, they had the Common Law, not wholly sabotaged by the Bastard father of Socialism, Equity.

  • JohnW

    There have been many attempts to escape the Malthusian Trap but only one succeeded – the Industrial Revolution [ property rights, self-interest, division of labour, free thinking, etc..]

  • Roué le Jour

    “The facts of life are conservative.”

    Every creature’s reproductive strategy, the selection of a mate, the number of offspring produced, the investment in each, conforms to capitalist principles.

  • Bruce

    One problem is the utter corruption of the language by the totalitarian swine.

    “Capitalism” was “invented” as a term of opprobrium by Marx, and that doesn’t mean Groucho or Harpo.

    It has been successfully embedded in our language to the detriment of reality.

    You have a problem when your mortal enemies are redefining and directing your own language.

  • Paul Marks

    By the way what is this “conventional theory that capitalism arose in the 16th century?”

    If capitalism means production and trade for cash profit – then it is thousands of years old. And if capitalism means most production being conducted in large workshops and factories using technological inventions to save labour (rather than individual craftsmen) than it is 18th century.

    The “16th century” has little to do with it either way (although there was a growth of the iron industry in Sussex). Please do not tell me that someone believes there was a “moral economy” with “just prices” and “fair wages” before the Protestant Reformation and the end of the monastic houses. Because if they believe that, they will believe anything.

    It is true that some (some) Catholic theologians taught that the “just price” and the “fair wage” was different from the prices and wages produced by supply and demand (although some Catholic theologians taught that prices and wages determined by supply and demand were the “just” and “fair” ones) – but whenever a government tried to enforce a price or wage different from the market one, shortages and unemployment resulted.

    Economic law is UNIVERSAL (tied to the laws of reason – which are universal, at least if we are talking about beings) it is not tied to some “historical stage”.

    The “Alt Right” going back to Fichte and others, and the left going back to Karl Marx and Rousseau (and both “Alt Right” totalitarians and left totalitarians going all the way back to Plato) are, after all, WRONG.

    As Carl Menger pointed out (in his “War of Method” with the German “Historical School”

  • Paul Marks

    If people are interested in the Industrial Revolution I again urge them to read T.S. Ashton’s short book on it – still the best 70 years after its publication.

    Turning away from the industrial revolution (and the agricultural revolution that came before it in the 18th century – it was the profits of DOMESTIC FARMING not “empire” or “the slave trade” that was the source of most profits that were invested in industry in the 18th century, before industry could reinvest its own profits), to the medieval economy…..

    Again – M.M. Poston “Medieval Economy and Society” and Alan McFarlane’s “The Origins of English Individualism” – even the later work is 40 years old now.

  • NickM

    A massive issue was the Black Death and Britain going from serf strip-farming to sheep. Less labour-intensive. An aha moment.

  • One problem is the utter corruption of the language by the totalitarian swine. “Capitalism” was “invented” as a term of opprobrium by Marx (Bruce, April 21, 2018 at 1:11 am)

    It will usually be sensible for us to talk of ‘free enterprise’ not ‘Capitalism’ in debate. The OP quote’s use of the word ‘Capitalism’ coloured this thread’s debate. Attempts at free enterprise are very old, but the ability to do it without interference from local power brokers is not.

    Is there anything specific in the industrial revolution and/or post-renaissance banking and/or laissez-faire that rationally needs any term more specific than ‘free enterprise’?

  • Alisa

    Thank you, Niall – finally someone gets it. I try to avoid the term ‘capitalism’ like a plague, not just in debates.

  • Kevin B

    Surely capitalism is best defined as a number of people investing their capital in an enterprise in order to reap a share of the profit, (or loss)? What the managers of the enterprise do to ensure a profit and/or avoid a loss for the shareholders is moot.

  • NickM

    “The “Alt Right” going back to Fichte and others, and the left going back to Karl Marx and Rousseau (and both “Alt Right” totalitarians and left totalitarians going all the way back to Plato) are, after all, WRONG.”

    Yes Plato. “The Republic” is a totalitarian blueprint that explicitly promotes the idea of a “noble lie”. Interestingly the somewhat lefty Bertrand Russell critiques it brilliantly in his “History of Western Philosophy”

  • Albion's Blue Front Door

    Generally, I agree as mankind has always sought to gain an advantage. It can be in hunting (as in you come home with the carcass, and not feeding the cubs of the hunted), love (for example you get the pleasures, not some other person) or making ends meet financially. Once you have money or a recognised system of barter and exchange, the instinct in humans is to gain an advantage and, with experience, at less risk to your prospects.

    I also agree with earlier comments: the use of the word ‘capitalism’ is deliberately misleading though as it is misdirection from the useless side of life (aka the left), we are obliged to use it more than common sense suggests.

  • Alisa

    The literal meaning of the term is inseparable from any human activity, and as such is meaningless when used to describe any such activity in particular: we all accumulate stuff (capital – whether financial, social, emotional, or any other), and then apply it to our benefit (or the benefit of others – which is really a complex way of benefiting ourselves). We can accumulate stuff based on free consent from those around us (hence ‘free enterprise and free market), or we can accumulate it by force, or subject to the application of force by others upon us. So maybe I’m missing something, but I simply cannot see how the latter two are less capitalist than the first. The reason Marx (or whoever preceded him in this) chose to stress the capital component of any human activity by using it as a semantic label, was precisely to vilify the natural human tendency to acquire stuff – and I see no reason whatsoever to go along with it.

  • Snorri Godhi

    I, too, approve of the Confucian rectification of names required for “capitalism”. In as far as i understood+remember the Commie Manifesto, capitalism is defined, primarily, as a system in which the ruling class derives its power from the ownership of capital. Obviously that is no longer the case: part of the ruling class derive their power from having enough money to influence politics with their political contributions, but others derive their power from their ability to get elected, or to rise in the civil “service” bureaucracies, or to get people to hear/read their opinions on TV or newspapers, etc.

    Marx apparently thought that “capitalism”, as defined above, is inevitably linked to the free market, but limited liability has put an end to that: now we can have a free market without concentration of capital in the hands of the ruling class — indeed, it is in Communist countries that capital was (and is) entirely in the hands of the ruling class.

    The above paragraphs are not off-topic: in 13th century England, there were certainly elements of capitalism, however defined, but in the country as a whole, it seems safe to say that power came primarily from land ownership, not from capital ownership. Thus, it could not be properly called a capitalist country. At the time, the term would have been more appropriate for e.g. Venice, Florence, the Hansa, and some other city-states in an arc from Northern Italy to Flanders.

  • Jacob

    The main point of the cited article is NOT “when did capitalism arise in England”.
    The main point is a rant against “Global firms”.

    This is, of course, misguided.
    Global firms develop naturally under a (more or less) free market and are not evil. Even if (as claimed) global firms oppose Brexit.

  • Thanks for actually reading the article, Jacob 😎

  • Marx apparently thought that “capitalism”, as defined above, is inevitably linked to the free market, but limited liability has put an end to that: now we can have a free market without concentration of capital in the hands of the ruling class — indeed, it is in Communist countries that capital was (and is) entirely in the hands of the ruling class.

    And that’s a very interesting point.

  • bobby b

    “The main point of the cited article is NOT “when did capitalism arise in England”.”

    Sure, but the main thesis of the quoted paragraph was “Conventional theory has it that capitalism arose in England in the 16th century but I long ago found it thriving in the 13th century . . . ” followed by Perry’s query “Agree? Disagree?”

    And it is considered polite to address the poster’s commentary. So there were two ways to go here.

  • Global firms develop naturally under a (more or less) free market and are not evil.

    Actually I think global firms are quite capable of being evil, because firms are run by people. Just because I think global firms should exist that does not mean I have to like a given global firm or what they do either.

  • Alisa

    Actually I think global firms are quite capable of being evil, because firms are run by people.

    If by ‘global’ one means ‘huge’, then the same obviously goes for businesses of any size. Problem is, the bigger the company, the easier it is for it to act on the evil impulses of the people running it – as well as to remain big and grow even bigger, at the expense of potential competitors and customers.

  • Jacob

    Big is not proof of evil. (Like many lefties believe).

    Big companies (Google for example) can be evil, when they fire an engineer because he said something unfashionable (though true). Even so they were within their rights to fire him even if we dislike the reason.

    It IS possible that their interest dictates opposition to Brexit, or that their management thinks so. That doesn’t make them evil.

    The quoted article by Raedewald had a leftist leaning – he took it for granted that everyone will agree that huge, multinational companies are evil.

  • fcal

    “The above paragraphs are not off-topic: in 13th century England, there were certainly elements of capitalism, however defined, but in the country as a whole, it seems safe to say that power came primarily from land ownership, not from capital ownership. Thus, it could not be properly called a capitalist country. At the time, the term would have been more appropriate for e.g. Venice, Florence, the Hansa, and some other city-states in an arc from Northern Italy to Flanders.” , wrote Snorri Godhi.

    Indeed, the medieval warm period had a beneficial effect on Europe. It allowed a sizable growth in population and a prosperous economical development. The latter started in Italy and resulted indeed in a arc of ‘capitalistic’ city states from Italy, along the Rhine to the Low Countries. The Hansa was a similar case in point.
    At that time the British Isles were far less populated than the European mainland. It functioned mainly as a provider of raw materials to the more developed part of Europe up until the 16th century. Most rewarding and famous was the wool-trade.
    The late 17th century witnessed the Glorious Revolution and the 18th century allowed first the agricultural and subsequently the industrial revolution.

  • Thailover

    Capitalism is an economic and social system. Capitalism is recognized rights in a just law-abiding land, in an environment where free enterprise can function. “Free” from what? From government choosing winners and losers. Risk management, IMO, is simply wise, not an economic or social system.

  • Thailover

    Bobby B, what you’re describing is division of labor. When caveman Og trades his high quality spears for Gerbs high quality baskets, both are better off than spending that same time making their own inferior versions of these products.

  • Johnathan Pearce

    I was born 10 miles from Dunwich and raised in that part of East Anglia. So it’s all making sense now!

  • Snorri Godhi

    WRT early forms of insurance, i seemed to remember reading something about it in Terence Kealey’s Economic Laws of Scientific Research. Here it is (from chapter 4: The Commercial Revolution)

    A primitive form of marine insurance had been developed by the Greeks; (…). But by the twelfth century the Italians had invented premium insurance, the modern variety, under which a ship is insured for a fixed price. By 1400, two-thirds of Venetian maritime trade was underwritten in Florence.

  • Snorri Godhi

    In my 1st comment above, i remarked on continental city-republics being the best representatives of capitalism in the late Middle Ages.
    I should add that, paradoxically, England might well have been more of a free market at the time.

    From another book that i like, David Landes’ Wealth and Poverty of Nations, close to the end of chapter 3:

    The one country where putting out had a free field was England, where local political autonomies made it hard for the monarchy to sustain corporate (guild) claims to monopoly (…) This recourse to cheap labor lowered costs over competitors abroad, so that by the sixteenth century a country that had once been largely an exporter of primary products, including raw wool, was well on its way to becoming the premier manufacturing nation of Europe.

    The clause about “local political autonomies” is not entirely clear to me, but the message seems to be that the guilds did not have the sort of monopoly power that they had on the continent.

  • Fraser Orr

    Perry de Havilland (London)
    Actually I think global firms are quite capable of being evil, because firms are run by people. Just because I think global firms should exist that does not mean I have to like a given global firm or what they do either.

    Evil is a strong word, and it assumes a lot about shared moral codes. However, nearly all firms, global or not, do act in their own self interest, and there is nothing wrong with that. However, no doubt some firms do exceed the bounds of decency and law, much as some humans do, and we have the law to prosecute them if they do, and the force of public opinion to counteract them for those acts that are wrong but not illegal (or, unfortunately as has become more common here in the USA, to punish firms for being not PC.)

    But I did want to comment that I think the nature of firms is mostly to be small. Firms grow large largely because of government interference. We often here about the economies of scale and this is a very real phenomenon. What we often don’t here about is the diseconomies of scale. What these largely amount to the the exponential growth of transaction costs within a firm as it grows. This is seen most commonly in the form of decision making — the quadratic growth in communication costs with the number of people involved and equally damaging the distancing of individual incentives from firm incentives leading to empire building, power play and politics. These things stymie the ability of large firms to move and adapt. It is why large companies are not often good at innovating, and why they tend to buy their innovation.

    However, government counteracts this by growing the cost of running a firm through regulation. Here are a few examples. After 2000 public IPOs ground to a halt, the primary reason being that the new SOX laws (here I am talking in the US economy) made compliance so expensive for publicly traded companies that it crushed their values and discouraged people from transforming themselves from entrepreneurs into government compliance officers. Those of you who are old enough will remember that prior to 2000 the goal of an entrepreneur was to take his company IPO, and after 2000 their goal was to “get bought by google”.

    A second example (again apologies but from the US) would be the Dodd-Frank banking legislation after the 2008 crash (“never let a crisis got to waste”). This made banking so complicated that, from what I understand, the number of local banks in the USA has shrunk by 75% since the passage of that act, and effectively no new local banks have been opened.

    A third example, it used to be the case here in the US that when doctors graduated medical school they’d get together with a group of their friends and start a small medical practice, or they might inherit one from their father. Small doctors practices where the norm here for a very long time (and I might add this is still the same with dental practices, which aren’t subject to the forces I am discussing.) However, with the growing complexity of government regulation, and especially with Obamacare regulation these small practices cannot cope with the overwhelming paperwork and bureaucracy and are being vacuumed up into huge medical conglomerates. These doctors are no longer partners but simply employees in these big mega firms, not by choice, but rather by the overwhelm of government interference in their business.

    There are some types of companies that need to be big because they need huge amounts of risk capital (such as oil companies), but the natural state of the firm is to be small to manage the transaction costs mentioned above, that firm focuses on its core competencies and contracts out everything else, but they are forced to be big (which is to say acquired into larger firms) to comply with government regulations.

    BTW, let me add myself to the list of people above who HATE the word capitalism. To use it is to capitulate to our enemies.

  • BTW, let me add myself to the list of people above who HATE the word capitalism. To use it is to capitulate to our enemies.

    I agree.

    However…

    The term is also in common use by people who use it to mean something good & have no intention of eschewing articles that choose to use the term on grounds of ideological purity.

  • Alisa

    What Fraser said above about large corporations. I’d add agriculture to his examples.

  • Jacob

    Some companies grow big using Government favors (concessions) or regulations. But other companies grow big naturally and legitimately (Google, Microsoft, Facebook, etc.).

    It is wrong to assume that a big corporation (or global corporation) is evil because it necessarily grew with Government help. Some did, some didn’t.

  • Snorri Godhi

    It is wrong to assume that a big corporation (or global corporation) is evil because it necessarily grew with Government help. Some did, some didn’t.

    Very true, but, in my mind, that is not the issue: the issue is whether it is possible for a corporation to remain independent of government help AFTER it has grown big.

    Theoretically, it is possible, but the problem is: it is much easier for a big corporation to get gov. help than for a small corporation; and that means: if you are a big corporation and you don’t get gov.help, and your competitor(s) do, then you are not going to be a big corporation for long.

    That is the Machiavellian/Darwinist in me speaking.

  • Julie near Chicago

    This raises an interesting question, to wit: Does BB&T (the bank) maintain the same standards of ethics as it did under John Allison? If so, does it continue to thrive and expand?

    I’ve heard Mr. Allison on UT say something to the effect that there were times when he would pass up a “growth” (my word) opportunity based on Govt. largesse — or co-operation.

  • Rob Thorpe

    The ever-useful Deirdre McCloskey:

    ‘Like economists and others before and after, Marx claimed that the accumulation of capital was the watchspring of wealthy modernity. The Marxian sociologist Immanuel Wallerstein, for example, wrote in 1983 that “the word capitalism is derived from capital. It would be legitimate therefore to presume that capital is a key element in capitalism.”

    Actually, it wouldn’t. That we insist on ruminating on something called “capital” does not prove that its accumulation was in fact unique to modernity. And it is not. Romans and Chinese and human beings back to the caves have always accumulated capital, abstaining from consumption to get it. What made us rich were new ideas for investing it, not the investments themselves, necessary though they were.

    I frequently find myself defending my peculiar form of anti-capitalism to my libertarian friends. Mark Skousen, who hosts the FreedomFest conference every year in Las Vegas, voices typical objections: “You must have capital to advance the economy,” he wrote to me in an email recently. “Entrepreneurs have plenty of great ideas and budding technology to change the world, but unless they get financing, they will remain unfulfilled.”

    That’s right, but as Skousen admitted, the financing is merely a necessary condition, not a sufficient one. The explosion of human ingenuity after the turn of the 19th century, by contrast, was sufficient. The ideas were so good that financing was seldom a problem. Necessary conditions are endless, and mostly not pertinent—”having liquid water at the usual temperatures” and “the absence of an active civil war” are necessary too, but nobody wants to call it waterism or peaceism.’

  • Romans and Chinese and human beings back to the caves have always accumulated capital, abstaining from consumption to get it. What made us rich were new ideas for investing it, not the investments themselves. (Rob Thorpe, April 23, 2018 at 10:29 am)

    Very true. I once read right through a thesis written in 1842 (by a German but in English or someone translated it – I forget) about how much gold was actually held in the ancient world – just how rich were Croesus and his like – as part of comparing ancient and 1842 price levels. He demonstrated that the ancients did at times have a lot of disposable liquid wealth.

    Adam Smith notes the same thing and explicitly contrasts the ancients’ use of their wealth to fund client bases, retainers, etc., with the modern (in 1776) use of it to invest. Smith is very clear that the difference between the modern economics he is describing and the past is not having wealth but the ways you can use it.

  • JohnW

    Gold and silver isn’t wealth, neither are big armies and political influence. Spain had mountains of the former and France had lots of the latter but neither had anything like the wealth of cash-poor army-free England, as James Mill pointed out in ‘Commerce Defended.’
    The fact is that for 10,000 years humanity laboured to achieve a per capita GDP scarcely above $100.
    Then in England something odd happened from 1600-1800 AD : per capita GDP doubled, mortality rates plummeting as the population increased.
    No genetic or geographical phenomena can explain such an extraordinary change of affairs.

    Ideas count.

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