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The extent to which capitalism has increased or decreased inequality has generated significant debate from the 18th century onwards. The capitalist system allows people to derive income and wealth from assets that they own. The most valuable assets are those that are scarce. For 18th- and early 19th-century classical economists such as Smith and Mill good quality agricultural land was the scarce asset and therefore the most important source of income and wealth (Smith, 1791; Mill, 1848). However, from the mid-19th century onwards, in the light of the Industrial Revolution, Marx and neoclassical economists emphasized the importance of capital with which to purchase machinery and factory buildings, and finance inventory (Marx, 1961). Gradually skills possessed by the individual moved to the fore. The second Industrial Revolution in the US emphasized the desirability of skill in organizing large businesses and trusts and in foretelling the future through speculation (Hayek, 1949; Kirzner, 1973). Scarcity factors have become more intangible over time. From the 1930s onwards ‘knowledge’ as possessed by professional managers and scientist became a value asset (Harper, 1995). Finally, from the 1970s onwards, entrepreneurship began to be recognized as a scarce factor. The change in emphasis on scarce assets had the potential to remove the inequality that had existed whereby income and wealth were concentrated in the hands of large landowners.
Private ownership of the means of production is essential in Marx’s definition of capitalism. Norway is an outlier in the Western world with its extensive state ownership, particularly in listed companies. The state is a direct owner of about 25 per cent of the values listed on the Oslo Stock Exchange, and controls companies that account for almost half of the market value. The ownership is mainly in large companies, and can thus be seen as a solution to the challenges regarding ownership and control in large companies (Berle and Means, 1932) Different countries chose different paths to accommodate these challenges. In the US, and later in Great Britain, ownership in large companies was diffused. This diluted the owners’ control and paved the way for managerial capitalism. On the European continent, ownership was more concentrated, with individuals, families and/or business groups staying in control over the large and capital-intensive companies, often by using cross-holdings, pyramid ownership and/or dual-class shares. Hence they controlled companies, without providing the corresponding capital. The Norwegian state ownership does not fit easily into either of the two models. On the one hand, it is a kind of concentrated ownership. On the other hand, the state ownership shares features with the Anglo-Saxon model, for instance with a challenging agency problem. Norway has also settled for a market-conforming state ownership model, respecting minority shareholders and ensuring that shareholder value is at the top of the agenda (Christensen, 2018; Ministry of Trade, 2020b).
The capitalist industry that began with the Industrial Revolution resulted in enormous productivity increases, wealth creation and sustenance as Earth’s population soared. Yet the business system as it emerged described the varied impacts on the natural environment as ‘externalities’, and took little responsibility for them. The result was growing ecological damage, which persisted despite warnings by philosophers and scientists. The results were cumulative, and were magnified from the 1980s as some non-Western countries, including China, experienced fast economic growth. Most studies of this phenomenon have focused on policy and regulation, and have looked at this issue from a system-wide perspective on the negative consequences of capitalism. This chapter offers an alternative business history perspective with a more nuanced analysis of the role of business enterprises. This chapter proceeds chronologically and thematically. The first section reviews the ecological damage between the Industrial Revolution and the 1970s, and the limited attempts by either government or social activists to contain it. The second section reviews the endeavours of small groups of entrepreneurs to create alternative capitalisms before the 1970s that helped rather than damaged the environment. The third section examines the period of corporate environmentalism since the 1980s. These decades saw, for the first time, large corporations that were addressing environmental challenges claiming to become more sustainable.
If imperialism is the highest stage of capitalism, marked by the growth of monopoly and finance capital, and the mechanism by which capitalism was diffused (Lenin, 2010), it is legitimate to enquire what type of capitalism was transmitted across the world, and when. It is also relevant to speculate about forms of capitalism that may have been ‘globalized’ by earlier expressions of colonialism. In the age of precocious commercial capitalism – the so-called Age of (European) Discoveries and Exploration beginning in the early 14th century, what was the impact of Portuguese encounters with African and Asian societies, and what form of capitalism was carried to the Americas by Iberian adventurers around 1500? Indeed, how capitalist were the seaborne empires of the Iberian kingdoms of the period, and how did the impact of these encounters differ from such later examples as the scramble for Africa and deepening penetration of Asia by Europeans at high points of the ‘old’ and ‘new’ imperialisms of the 18th and 19th centuries, successively characterized by mercantile, industrial and financial capitalism? How did these expressions of capitalism and imperialism meld and interact? Speculating about expressions of capitalism that emerged in Western Europe, this chapter will explore the nature of overseas expansion from the North Atlantic world. It offers a stylized assessment of interactions with other regions of the global economy from the old and new imperialisms to the post-colonial (or neo-colonial) era, considering the extent to which specific manifestations of capitalism shaped the political economy of successive state–market formations.
Bitu, also known as Bighu or Begho, was a market town that lay in the Banda region of West Africa just south of the River Volta in what is present-day Ghana. It was identified as something akin to Eldorado within the Arab world – something immensely wealthy and just beyond reach – a perception adopted by European actors as they became familiar with the region. In the 17th-century history of the Songhai Empire, the Ta’rīkh al-Fattāsh, the historiographer Ibn al-Mukhtar recorded that during the rise of the Malian empire ‘the gold mines’ of the western Niger ‘have no parallel in all the Takrūr, except in the land of the Bergo’ at Bitu. Even though merchants (known as Wangara) from Timbuktu and other cities within the Malian and Songhai empires had regularly participated in the trading caravans southward, al-Mukhtar could only identify the trading centre at Bitu as a source of gold and had no knowledge of the actual Akan mining centres further south (Wise, 2011: 74–5; Nobili and Shahid Mathee, 2015: 37–73). The Moroccan physician and author Wazir al-Ghassani similarly wrote about ‘a place called Bitu where there are mines of gold and of gold dust’. He understood that the town was where ‘those who have the salt of Taghaza origin and those who have the gold of Bitu origin meet each other’ but remained unable to describe the origins of the gold, only that it was a source ‘without equal in the universe’ and that ‘everyone finds great profit in going there to trade, and thus fortunes are made of which God alone knows the size’.
This volume has proposed that the evolution of capitalism was connected to the emergence of five distinct economic functions: entrepreneurship, finance, management, workers and political leaders. Some functions emerged as more dominant in particular locations and periods, and other functions in different locations and periods. Thus capitalism can be seen as a series of evolutions rather than a single one. This chapter will review the evidence in the book that informs on selected aspects of these functions. It will then highlight two key takeaways from the volume: geographical dimensions and values and beliefs. Finally, directions for future research will be proposed. The book has reinforced the importance of situating capitalism in a wider historical context. Chapter 2 proposed that the modern market economy developed in 13th-century European towns and was stimulated by local and national regulation. Building on that analysis, Chapter 3 argued that during the 16th and 17th centuries elements of a shared philosophy pertaining to markets and their place in society can be identified in Continental Europe. Key themes were monetary regulation, customs and trade policies aimed at nurturing certain industries or branches of economy that were considered vital for the common good, and market regulation, in particular of urban product markets. These strategies and philosophies of market were invented, applied and modified centuries before modern capitalism, but were an importance influence on it.
This ambitious collection follows the evolution of capitalism from its origins in 13th-century European towns to its 16th-century expansion into Asia, Africa and South America and on to the global capitalism of modern day.
Written by distinguished historians and social scientists, the chapters examine capitalism and its critics and the level of variation and convergence in its operation across locations. The authors illuminate the aspects of capitalism that have encouraged, but also limited, social responsibility and environmental sustainability.
Covering times, places and topics that have often been overlooked in the existing literature, this important contribution to the field of economic history charts the most comprehensive chronology of capitalism to date.
Capitalism is a topic with many thematic strands and both geographical and chronological dimensions. As a result, its definition and interpretation have generated a significant amount of discussion. Regarding thematic strands, some scholars have focused on the political dimension, for example, and others the financial (including Hall and Soskice, 2001; Murphy, 2009; Neal and Williamson, 2014; Piketty, 2014; Kocka, 2016; Banaji, 2020; Lipartito and Jacobson, 2020). Assessments of capitalism’s impact are also diverse. While aiding economic growth for some sectors and individuals, significant questions remain regarding the extent to which capitalism has had a positive or negative impact on society as a whole (Piketty, 2014; Beckert, 2015; Lipartito and Jacobson, 2020; Yazdani and Menon, 2020). It is generally accepted that to understand capitalism fully we should situate it in a wider historical context (Cain and Hopkins, 1986). Marx’s analysis of capitalism went back to the Middle Ages, although his primary focus was on the 19th century. Sombart (1927) proposed that a capitalist spirit originated in medieval rulers, administrators, noble estate owners and military leaders, and was disseminated from them to the wider population. Braudel and Britnell saw the Middle Ages as an important step in the transition from a market economy to a later capitalist one. Examining 1000–1500, Britnell (1993) used the concept of commercialization to describe economic transformation that led to urbanization, entrepreneurship and the provision of a strong institutional framework.
Markets occupy a central role in economic theory. It is assumed that we understand them – but do we really? This chapter suggests that we do not. We know a lot, but not so much as we should. Markets remain a subject of controversy in popular debates over economic policy and historical debates over commercialization and capitalism. That is why we need to learn more. Markets facilitate trade. Trade, it is often assumed, developed from small beginnings in chance encounters; for example, two people meet on a country path and one swaps their coat for the other’s piece of jewellery. But there is little evidence for this ‘chance encounter’ theory. The key question is ‘Can you really trust a stranger?’ Why does the stronger person not just rob the weaker one? So why would the weaker person go out alone? Trade, it would seem, needs a secure environment. Security needs to be provided by someone who can observe a situation and has the power to detain and punish a wrongdoer. Hopefully, the threat of being captured and punished will deter the wrongdoer. Trade therefore requires a strong individual who can provide that security, such as a tribal leader. Archaeological evidence from the Stone Age suggests that neighbouring tribes would meet at ceremonial centres to marry off their children, worship their gods and trade some goods as well. Provided the tribal leaders were at peace with one another, the ceremony would provide a safe environment where trade could take place. By the Bronze Age, long-distance trade was common in many parts of the world, supported by a network of small cities.
Since the last millennium modern capitalism in the West has evolved around two seemingly diametrically opposed notions – one being the assumption of the market as a manifestation of providential or God-given natural order, the other being about order as a result of deliberate, possibly even planned, human action and sometimes proactive interventions of the state. The earlier notion found its way into neoliberalism and other models of free-marketeerism from the Physiocrats (Kaplan and Reinert, 2019) to Friedman. The other has informed coordinated capitalism from post-1600 cameralism to post-1945 ordoliberalism. This tension has shaped evolutions of political economy of markets and regulation in the West. In this chapter the tension is resolved by demonstrating that it was only fairly recently (post-1900) that political economy has come to misunderstand what initially was a result of a symbiotic and logical relationship – order and freedom – as opposites. Certainly the Second World War (1939–45) and post-war ideological manifestos such as Hayek’s Road to Serfdom or Friedman’s Capitalism and Freedom have wrought considerable damage in the collective economic mind by positing that human economy was, above all, about choice; and that human agency could only be guaranteed by a lean state (Friedman, and his other popular works co-authored with his wife); that capitalism was above all a question of freedom (not true) and that government needs, in the political and economic process, to be principally understood as a potential enemy, not friend, of the people (or individual).