Capitalism: A Creation Story

Capitalism is the first expansionist economic system in history. Contrary to its own myth, it did not emerge naturally and is far from being the expression of human freedom.

The usual story about capitalism is that since it gives everyone a fighting chance, it is the most natural way to go. This story notably assumes that capitalism ended feudality and shaped the way toward a free society. This chapter of Less is More shows that, on the contrary, “There was no smooth, natural ‘transition’ to capitalism, and it has nothing to do with human nature.” (Jason Hickel)

A forgotten revolution

“By the middle of the 1400s, wars were erupting between peasants and lords across Western Europe, and as the rebels’ movement grew their demands broadened. They weren’t interested in tweaking the system a bit around the edges – they wanted nothing short of revolution. According to the historian Silvia Federici, an expert in the political economy of the Middle Ages, ‘the rebels did not content themselves with demanding some restrictions to feudal rule, nor did they only bargain for better living conditions. Their aim was to put an end to the power of the lords.’”¹

While, in most cases, individual rebellions were put down, the movement nevertheless succeeded in destroying serfdom. As feudalism fell apart, free peasants began to build a cooperative society based on the principles of self-sufficiency. This greatly improved their living conditions. Some have described the period from 1350 to 1500 as “the golden age of the European proletariat.”² It is worth noting that “Once they won direct control of the land, free peasants were able to maintain a more reciprocal relationship with nature: they managed pastures and commons collectively, through democratic assemblies, with careful rules that regulated tillage, grazing and forest use.”³ That sharply contrasts with the time when lords put peasants under heavy pressure to extract from the land and forests as much as possible, driving a crisis of deforestation, overgrazing, and a gradual decline in soil fertility.

Backlash

Europe’s elites, obviously, “were irritated that commoners would only hire themselves out for short periods or limited tasks, leaving as soon as they had enough income to satisfy their needs. ‘Servants are now masters and masters servants,’ complained John Gower in Miroir de l’Omme (1380). As one writer put it in the early 1500s: ‘The peasants are too rich … and do not know what obedience means; they don’t take law into any account, they wish there were no nobles … and they would like to decide what rent we should get for our lands.’⁴ And according to another: ‘The peasant pretends to imitate the ways of the freeman, and gives himself the appearance of him in his clothes.’⁵”

As they managed the commons to their own benefit, peasants could afford to negotiate with landlords about how long they would work as well for the latter. These arrangements made it difficult for landlords to accumulate the excess wealth necessary to invest in large projects. Contrary to the usual narrative that capitalism emerged naturally from the collapse of feudalism, it was, at least in the first instance, threatened by the end of serfdom.

Landowners—nobles, the church, and the merchant bourgeoisie—fought back by fencing off collectively managed pastures, forests, and rivers sustaining rural communities. This process, known as “enclosure,” only grew in time.⁶ “Over the course of three centuries, huge swathes of Britain and the rest of Europe were enclosed and millions of people removed from the land, triggering an internal refugee crisis,” says Jason Hickel. Mass poverty appeared for the first time in human history. This is how the initial accumulation of wealth necessary for capitalism to take off happened, not—as Adam Smith would have it—because a few people worked really hard and saved their earnings.

Consequently, “With subsistence economies destroyed and commons fenced off, people had no choice but to sell their labour for wages – not to earn a bit of extra income, as under the previous regime, nor to satisfy the demands of a lord, as under serfdom, but simply in order to survive.” As the rise of capitalism also required the specific resource of labor for as much and as cheap as possible, early capitalists took the principles of serfdom to new extremes. Since profit-making became the exclusive equation of the new economic system, it logically grew on organized violence, mass impoverishment, and the systematic destruction of self-sufficient subsistence economies.

Growth as colonization

Starting at the end of the 15th century, the extension of a capitalist economy in Europe was accompanied and backed up by colonization. The latter “played a key role in the rise of European capitalism. It provided some of the surplus that ended up invested in the Industrial Revolution; it enabled the purchase of land-based goods from the East, which allowed Europe to shift its population from agriculture to industrial production; and it funded the military expansion that powered further rounds of colonial conquest.”⁷

Under the logic of growth for the sake of growth, seeking new frontiers from which to extract uncompensated value makes sense. By the end of the 19th century, “more than half of Britain’s domestic budget was funded by money appropriated from India and other colonies.”⁸ Enclosure had been a process of internal colonization, and colonization was a process of enclosure—the only difference being that Indigenous people had no rights or even a formally recognized humanity.

As capitalism had created a mass production system in Europe, the solution to sell and thus perpetuate itself was two-fold. By destroying self-sufficient economies, the enclosures created not only a mass of workers but a mass of consumers as well. By implementing asymmetric trade rules, local industries in the colonies were wiped out, and another market was created for Europe’s mass-produced goods.⁹

1. Silvia Federici, Caliban and the Witch, p. 46.
2. See Fernand Braudel, Capitalism and Material Life<, 1400-1800 (New York: Harper and Row, 1967), pp. 128ff; Karl Marx, Capital Vol. 1.
3. See Carolyn Merchant, The Death of Nature: Women, Ecology, and the Scientific Revolution (1981).
4. In Christopher Dyer, A redistribution of income in 15th century England, Past and Present No. 39, 1968, p. 33.
5. In John Hatcher, England in the aftermath of the Black Death, Past and Present No. 144, 1994, p. 17.
6. See Guy Standing, Plunder of the Commons (Penguin, 2019), and Thompson, E.P. (1964) The Making of the English Working Class. New York: Random House.
7. Timothy Walton, The Spanish Treasure Fleets (Florida: Pineapple Press, 1994); Kenneth Pomeranz, The Great Divergence: China, Europe, and the Making of the Modern World Economy (Princeton University Press, 2009). For more on this history, and relevant sources, see The Divide, by Jason Hickel.
8. Utsa Patnaik, Agrarian and Other Histories (Tulik Books, 2018); Jason Hickel, How Britain stole $45 trillion from India, Al Jazeera, 2018; Gurminder Bhambra, “Our Island Story”: The Dangerous Politics of Belonging in Austere Times, in Austere Histories in European Societies (Routledge, 2017).
9. See, for instance, B.R. Tomlinson, Economics: The Periphery, In The Oxford History of the British Empire (1990).