As societies evolved and civilization progressed, various economic systems emerged, persisted for some time, and then replaced by a seemingly better system from feudalism through mercantilism and socialism to capitalism. These economic models sought to address specific needs in society at the time, but when new challenges or needs egressed, novel systems were required. Capitalism is one of the economic systems that have persisted for a long, and it is the most preferred form of conducting business in the majority of countries in the modern world. It is believed that capitalism started in Western Europe, specifically in Britain, before spreading to other parts of the globe as the dominant system. However, different scholars seem to disagree on how capitalism started. On the one hand, economists and philosophers, such as Max Weber, Henri Pirenne, Adam Smith, and Fernand Braudel, believe that capitalism emerged naturally as a product of the forces of commerce, trade, and the dynamics of urbanization. This line of argument holds that as city residents accrued enough primitive capital, they started reinvesting in production.
On the other hand, economists, such as Karl Marx, Paul Sweeny, Rodney Hilton, and Karl Polanyi, argue that capitalism has agrarian roots as farmers took advantage of loosening feudalism. As such, as opposed to the earlier claims that capitalism was due to urbanization, this perspective introduces the view that this economic system was an inevitable and natural behavior waiting for the right time to explode. This paper discusses why capitalisstarteded in Europe and became a dominant force in the world. It also compares the agrarian and urbanization theories on how capitalism started. The first section explains why capitalism emerged in Western Europe, specifically in Britain, while the second part compares the said theories. The third section highlights why and how capitalism spread to the world and the last section is a conclusion tying the paper together by underscoring the main points in the paper. Capitalism started in Europe due to the existence of feudalism, which started to decline in medieval times, and the outbreak of the Black Death, and it spread to the world as a dominant force through imperialism.
Why Capitalism Started in Europe
Historians, philosophers, and economists agree that capitalism started in Western Europe and made its breakthrough in Britain (Fulcher, 2004). This economic system is believed to have emerged in 16th-century Europe due to the changing social relationship between feudal lords and peasants in the countryside. According to Fulcher (2004), “Feudal lords had lived off their rights to produce, labor, or money payments from an unfree peasantry that was tied to the land, but in the 15th-century market rel,ationships were beginning to supersede feudal ones” (p. 23). At the time, feudal lords were progressively becoming landowners, and they largely depended on the rent paid by peasant tenants, who had to compete for these tenancies in an open market system. This evolving form of feudalism meant that land could be bought and sold with the increasing use of wage labor to work in plantations. The enclosure movement of the 15th century is the evidence of these changes, and land that had even been owned previously by the public was being converted into private use through fencing, and small land sizes would be put together into manageable units.
Consequently, this movement led to extensive land subdivision with people owning private tracts. In the process, the feudal system changed drastically, and the land became a marketable product. The outcome of these events was the emergence of market-oriented agriculture, which contributed significantly to the rise of capitalism at the time. In a bid to gain a competitive advantage in the market, farmers became innovative; hence, increasing productivity to cater to the food needs of the rising number of non-agricultural populations. In the process, farmers benefiting from high productivity due to innovation, and readily available labor had extra financial resources to buy consumer goods. As Fulcher (2004) notes, “Greater agricultural efficiency released labor for employment in making these goods, which were, indeed, produced increasingly in the rural areas where new centers of production were emerging” (p. 25). Ultimately, the feudalistic economic system was slowly fading and being replaced by the rudimentary concepts of capitalism, where private entities own capital and markets are shaped by the forces of supply and demand. However, the question remains why capitalism started specifically in Europe and not anywhere else in the world.
The question as to why Europe became the epicenter of capitalism can be answered from two perspectives. First, as shown in the preceding sections, feudalism was a central determinant in the evolution of capitalism. It is important to note that feudalism in Europe was quickly evolving during medieval times, and thus being the ingredient of capitalism, this economic system had to arise in this region. Second, the issuthe e of the Black Death contributed significantly to the decline of feudalism. According to Hatcher (1994), this catastrophe reshaped the economic landscape in Europe, and specifically, England. Feudal lords lost the grip that they hitherto had on peasants, and with the declining ability to enforce land rights, feudalism started to wane. The Black Death reduced the working class by almost a third, and the available small workforce was now empowered to resist feudalism. For instance, peasants could easily escape from brutal lords and secure work elsewhere without struggling. Additionally, in England, the monarchical system had created a small space for feudalism to take root, and thus it was easily replaced by capitalism when the right conditions were in place.
However, the available evidence shows that capitalism started specifically in Britain, and it is important to understand the peculiarity of England to make it the source of this economic system. Feudalism in England was weak due to the existence of the monarchical system of governance. According to Wood (2002), England made notable steps toward eliminating the “fragmentation of the stateparceledcelized sovereignty,’ inherited from feudalism…The autonomous powers held by lords, municipal bodies, and other corporate entities in other European states were, in England, increasingly concentrated in the central state” (p. 98). This phenomenon distinguished England from other monarchies, such as Spain and France, where feudalism was widespread with landowners having unchecked power to decide how land would be used. The aristocracy in England did not have autonomous economic powers or own property based on political influence, which was a distinctive departure from such practices elsewhere in Europe. Therefore, the largest parts of the land were occupied by tenants as opposed to the peasant-proprietor model.
As such, “the relatively weak extra-economic powers of landlords meant that they depended less on their ability to squeeze more rents out of their tenants by direct, coercive means than on their tenants’ success in competitive production” (Wood, 2002, p.100). Consequently, it was beneficial for landowners to encourage tenants to increase productivity because such a scenario would benefit both sides. Additionally, tenants were subjected to market imperatives and forces of supply and demand, and thus they had to be competitive in their ventures (Lachmann, 1989). Tenancy in England was a factor of economic rent, which means that tenants would compete to access land. Therefore, tenants who could produce effectively and competitively were allowed to own more land as compared to their unproductive counterparts. This system underscores the essence of capitalism, where capital is controlled and owned by private entities. The market-mediated relationship between landowners and in tenants England created an enabling environment for the emergence of capitalism.
How Capitalism Started
While scholars and historians agree that capitalism emerged in Europe, they differ on how it started. The classical theory on this subject is that capitalism emerged due to the dynamics involved in commerce and de, and in some cases, urbanization. This view was common among theorists, philosophers, and economists, such as Max Weber and Adam Smith (Birnbaum, 1953). However, in 1976, Robert Brenner published the article “Agrarian Class Structure and Economic Development in Pre-Industrial Europe,” challenging the classical view about capitalism and argued that, as opposed to the popular beliefs on this subject, capitalism had agrarian backgrounds. This section discusses these two views concerning the origin of capitalism using the available literature.
Capitalism as a Product of Commerce, Trade, and Urbanization
The straightforward way of explaining the origins of capitalism is to assume that it developed naturally in response to human practices. According to Wood (2002), “With or without a natural inclination to ‘truck, barter, and exchange’ (in Adam Smith’s famous formulation), rationally self-interested individuals have been engaging in acts of exchange since the dawn of history” (p.11). The exchange of goods and services evolved and became specialized due to various aspects, including innovation and division of labor. These practices led to increased productivity, which necessitated the need for more innovation and specialization. This scenario describes the concept of a “commercial society,” which is the other name for capitalism. Therefore, it suffices to argue that capitalism was the culmination and maturation of historical practices supported by innovation. According to this line of thought, this economic system was bound to emerge with the removal of barriers, such as lack of work specialization and advanced equipment for increased productivity. As such, the removal of these constraints as civilization progressed, and societies became more organized, the enabling environment for the existence of capitalism was created.
Additionally, this commercialization model of capitalism assumes that trade started to expand coinciding with job specialization and innovation, thus promoting the establishment of capitalism. However, some questions arise from this argument – for instance, what was peculiar with Europe for capitalism to start that was lacking in other areas, such as the Mediterranean, which had a well-established commercial society and markets. The proponents of theory argue that the evolution of commercial societies in the Mediterranean towards becoming fully-pledged capitalistic was “interrupted by an unnatural break – the hiatus of feudalism, and several dark centuries during which economic life was again fettered by irrationalism and the political parasitism olandlordly power” (Wood, 2002, p.12). Based on this argument, the strong grip of feudalism in the East, as opposed to its quickly evolving nature in the West, was the main reason why capitalism stalled in the Mediterranean and progressed unprecedentedly in Europe. Additionally, occupation by the Roman Empire and the Muslim invasion repressed the old commercial system, especially through the closure of trade routes between West and East. Instead of evolving to capitalism, commercialized societies turned to mercantilism in the Mediterranean.
However, this theory is based on the assumption that cities were inherently capitalistic, waiting for the right environment and conditions for this economic system to take root. As such, cities were mainly focused on trade supported by the middle class, which sought to break cultural barriers and political parasitism to liberate the urban economy. Therefore, the buying of goods at a lower price and selling them at a higher price to create a profit margin, which characterized trade at the time, is the very basic definition of capitalism. However, this argument is problematic because capitalism involves more than that, especially in the accruement of wealth through the annexation of susurplus-valueAs such, it is assumed that commercialization would create enough wealth for the involved parties to excesses that could permit investment. However, these explanations do not underscore a major social transformation to place the emergence of capitalism at the center of commercialization; hence, the need for a different explanation.
The Agrarian Background of Capitalism
Given the glaring inconsistencies and assumptions in the commercialization model of the origin of capitalism, scholars continued to look for answers, and the publication of Brenner’s article provided constructive insights into the topic. According to Brenner (1995), it is the “structure of class relations, of class power, which will determine the manner and degree to which particular demographic and commercial changes will affect long-term trends in the distribution of income and economic growth – and not vice versa” (p.11). The class structures being referred to, in this case, are the relationships between feudal lords and peasants under feudalism. In this form of arrangement, the feudal lords owned the land and the tools that were used in production. On the other hand, the peasants provided cheap labor working on these lands to produce agricultural products. In other words, peasants would pay rent to continue producing on lands owned by feudal lords. However, there lacked a standard way of determining the amount of rent that peasants were required to pay to landowners. As such, peasants were prone to abuse and exploitation, and in return, they would resist such unfairness.
Therefore, the unbridled power by seigneurs to decide the amount to charge peasants in rent for land created open rebellion from the exploited party leading to conflict of classes as described in the Marxist theory (Hilton, 1995). However, in Europe, and specifically Britain, feudalism was multifaceted. For instance, free peasants were not tied to a certain feudal lord, and thus they were free to look for lands that were leased at favorable terms. Only indentured peasants were bound by law to exploitation because they could not leave their seigneurs. Apart from that, the very status of the free tenants in the “thirteenth century (which incidentally included a significant section of the population) generally carried with it precisely the freedom from heavy (or increasing) labor service on the lord’s demesne, and freedom from tallages, entry fines and other similar payments” (Brenner, 1995, p.22). As such, once free peasants had paid the initial fixed customary rent, they could not be subjected to other unwarranted levies. This environment created a sort of a competitive market where peasants could maximize production to meet their needs.
As such, peasants could set prices for their products based on market forces. Wood (2002) argues that it was “unfixed, variable rents responsive to market imperatives that in England stimulated the development of commodity production, the improvement of productivity, and self-sustaining economic development” (p.102). In other words, with the increasing ability of peasants to have security on the lands where they worked, feudalism was slowly dying. As such, with the forces of supply and demand dictating the markets, peasants who could not produce competitively lost their properties to those that could work efficiently. Landowners would also discourage unproductive farmers by opting to lease their lands to innovative and highly productive peasants. Therefore, with increased productivity, farmers were in a position to feed a large population of people without lands. At the same time, populations were increasing drastically, thus creating a ready market for agricultural products and enough labor force to work in the farms, which formed the basis of English industrial capitalism. This explanation underscores why and how capitalism started in Europe, specifically in Britain.
World Domination by Capitalism
Having established that capitalism started and gained momentum in Britain, the next question that arises is why and how it became the dominant economic system in the world. The answer to this question lies in European imperialism, starting with the extensive British occupation in various places around the world. British imperialism in the New World, Africa, and Asia exported capitalism in these regions by introducing the concept of primitive accumulation of wealth. European capitalists would seek to advance their agenda in the countries where they occupied. According to Wood (2002), some versions of historical accounts indicate that when Columbus sailed to the New World, he amassed wealth by furthering the capitalistic agenda (p.148). Similarly, the slave trade promoted this economic system by deriving value from slaves who worked in plantations in Europe. In India, European occupation initiated and expedited the industrialization process leading to the promotion of capitalism.
By the time decolonization took place in various parts of the world, capitalism had become the preferred economic system because imperialism had established it as the default way of doing business. Capitalism was so ingrained in societies that countries were willing to engage in war to defend it. The Cold War was an ideological conflict between the US and the Soviet Union, with one side advocating for capitalism and the other, communism. European imperialism left an indelible mark on the global economic structures by exporting capitalism to its colonies. This argument underscores why and how capitalism became the dominant economic system in the world.
The origin of capitalism can be traced to Europe, where it emerged starting from the 14th century. Britain was particularly central in the evolution and spread of capitalism. The dynamic feudal system in Europe, especially in England, facilitated the establishment of competitive markets agricultural products. With peasants gaining the security of land tenure, they were in a position to increase productivity through the primitive accumulation of wealth to have excess for investment, hence capitalism. However, the classical theory supported by Max Weber and Adam Smith holds that capitalism emerged through a commercialization model, and thus societies were inherently capitalistic but constrained by a lack of labor specialization and innovation. As such, once these barriers were removed, capitalism emerged naturally. However, this theory has many gaps and assumptions. Regardless of how capitalism started, Europe exported it to the rest of the world through imperialism, making it the dominant economic system contemporarily.
- Birnbaum, N. (1953). Conflicting interpretations of the rise of capitalism: Marx and Weber. The British Journal of Sociology, 4(2), 125-141.
- Brenner, R. (1995). Agrarian class structure and economic development in pre-industrial Europe. In T. Ashton & C. H. Philpin (Eds.), The BrenneDebatete: Agrarian class structure and economic development in pre-industrial Europe (pp.10-63). Cambridge University Press.
- Fulcher, J. (2004). Capitalism: A very short introduction. Oxford University Press.
- Hatcher, J. (1994). England in the aftermath of the Black Death. Past & Present, 144, 3-35.
- Hilton, H. (1995). Introduction. In T. Ashton & C. H. Philpin (Eds.), The Brenner Debate: Agrarian class structure and economic development in pre-industrial Europe (pp.1-9). Cambridge University Press.
- Lachmann, R. (1989). Origins of capitalism in Western Europe: Economic and political aspects. Annual Review of Sociology, 15(1), 47-72.
- Wood, M. E. (2002). The origin of capitalism: A longer view. Verso.