The Origin of Capitalism

There is a story told about capitalism—mostly by its proponents: classical liberals, American conservatives, libertarians, and the like; but also sometimes inadvertently by its Marxist critics—that sees this system as synonymous with human nature in all times and all places, as the innate propensity of the human species to “truck, barter, and exchange,” in the words of one of its most famous theorists, Adam Smith.

In this view, capitalism is as natural as the sun rising, and any society that was not already capitalist from the start was able to become so by the removal of given obstacles, whether through political, technological, mercantile, or revolutionary means. History is one long, continuous awakening of human civilization to the beneficial opportunities of the free market (even if, in a Marxist narrative, it is not the final goal), such that we can draw a direct line from “the earliest Babylonian merchant through the medieval burgher to the early modern bourgeois and finally to the industrial capitalist” (p. 5).

Apart from an explanation which it already presupposes, what is missing from this widespread view, dubbed the “commercialization model” by Ellen Meiksins Wood, is any understanding of (1) the specificity of capitalism, in both its historical development and actually existing structure of social arrangements, and (2) the distinctive character of the market not as opportunity but as imperative.

For as a critical examination of the logic of capitalism reveals, this system is marked not by freedom or opportunity but by the inescapable compulsions of “competition, accumulation, profit-maximization, and increasing labour-productivity,” (p. 7) which ensnare not only producers but capitalists themselves. In a capitalist system, everyone must participate competitively in the market just to survive.

In The Origin of Capitalism, Wood dismantles the myths of the commercialization model in an effort to locate the true birth of this system, an endeavor which “may seem arcane, but (which) goes to the heart of assumptions deeply rooted in our culture” about the nature of capitalism, and which seeks to uncover the historical specificity, and ultimately the impermanence, of capitalism. For if capitalism is not the natural state of humanity, but is rather a product of a particular moment in history, then it will be revealed as something which can be brought to an end.

If capitalism is not simply commerce or profit-taking, then where and how did it arise? Following Marx, Wood identifies the birth of capitalism in a distinct time and place, among distinct social property relations—specifically, in the 16th–17th century English countryside, among the “famous triad of landlord, capitalist tenant, and wage labourer” (p. 103).

An essential component of Wood’s argument (following fellow Marxist scholar Robert Brenner) is that Europe’s transition out of feudalism was not, as the commercialization model holds, an uneven but irresistible transformation from a monolithic feudalism into the natural end of capitalism, but was rather a series of transitions that produced several outcomes, only one of which (England) was capitalism.

In France, for example, feudalism matured into an absolutist state, in which economic and political power were united in the apparatus of a centralized government but in which there existed a multitude of local, fragmented markets. French absolutism reproduced a feudal, pre-capitalist logic of appropriation, one that was “extra-economic”—in this specific case, appropriation by brute, state-backed force in the form of government-levied taxes on peasant surpluses. In this system, neither peasant, who held direct ties to the land, nor state official was bound by the exclusively economic logic of competition and labor productivity which characterizes capitalist relations.

In fact, France was still guided by this non-capitalist logic at the time of the French Revolution; questioning the popular conflation of bourgeois with capitalist, Wood shows how that event can be understood as bourgeois (the Third Estate demanding equality from church and aristocracy), but not as capitalist (the revolution did little to nothing by way of transforming property relations between the peasantry and the Estates).

It was precisely England’s different post-feudal arrangement of social property relations which produced capitalism in a way France could not. In England, an aristocracy weakened in extra-economic power but rich in unusually large land holdings meant that most of the agricultural production was accomplished by tenant farmers, not by peasant-proprietors as elsewhere in Europe. Because landlords lacked the “extra-economic” force of traditional appropriators, 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” (p. 100).

Thus were tenants compelled to increase labor productivity and profit maximization just to “stay in the game” and continue to have access to land, as poor performance could mean dispossession or transference of land to a more productive tenant. For the first time, a competitive market in economic rents—in which both landlord and producer were market dependent—was established, and capitalism’s logic of purely “economic appropriation,” separate from but reliant on the power of the state, was born.

This leaves the third character of the English agrarian capitalist triad, the wage laborer, whose number was continually swelled by those dispossessed peasant farmers who could no longer compete in the market. These landless workers were compelled to sell their labor for access to the very necessities of life, thereby creating a new class—the proletariat.

By 1700, London was the largest city in Europe, due in large part to the growth of this class. (France, by contrast, remained at this time a mostly rural society.) The existence of a market-dependent urban population was a twofold boon to the emerging capitalist system: not only as a source for industrialized labor, but also as a ready-made, domestic consumer market for the manifold commodities capitalism was beginning to produce.

Thus Wood flips traditional understandings of capitalism’s development: it arose in the countryside, not the city; it centered around the tenant farmer, not the bourgeois merchant; it created a market dependence which was a cause, not a result, of mass proletarianization; it formed a market society based on competition and labor productivity before it saw those values best advanced by industrial techniques.

The competitive pressures engendered by capitalism in England grew ever wider in orbit and began to draw other nations into its fold as capitalism transformed into a global system. Economic-productive appropriation was justified by numerous thinkers, explicitly or implicitly—including John Locke, who developed the important idea of improvement of capitalist property.

Locke’s argument is that unimproved land—land not rendered profitable—is waste, and so the person who appropriates common land as private property and puts it to productive, that is capitalist and profitable, ends is doing something beneficial for humanity. Hundreds of years of custom and communal use of land was erased by the practice of “enclosure.” Needless to say, this ideology proved especially useful in the imperialist dispossession of Indigenous peoples of nearly all of their “unused” land.

The Origin of Capitalism is convincing in its endeavor to show how capitalism is not an inherent or inevitable outcome of human nature, but is the result of specific conditions arising out of (and sustained by) specific social property relations. The book also succeeds in laying bare the distinct “logic” of capitalism, which determines its true nature. That nature, far from being rational and free, is instead compulsive, contradictory, unstable, destructive of the environment, and insatiable in its drive to squeeze more productivity and profit out of labor.