An Idea of Capitalism

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Capitalism has expanded and changed in a multitude of ways. From the 1500s, when capitalism slowly began to take shape, up until today, we live in a society dominated by capitalism. In “Capitalism: A Short History” by Jurgen Kocka, he argues that capitalism is “mostly used to denote an economic practice or an economic system, frequently with special attention to its social and cultural consequences.” Kocka goes to great lengths to argue that capitalism changed over time because it was contingent on several capitalist principles such as globalization, colonization, state formation, and industrialization working together.

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Throughout this book, the author demonstrates how external dynamics have driven capitalism forward. Kocka starts by exploring the formation of merchant capitalism, even though it was in the minority from the 1000s to the 1500s. He continuously reiterates that “The manifestations of capitalism depicted were minority phenomena, all taking place while the economy and society functioned by and large non-capitalist principles.” Kocka uses the weak European economy and political basis to illustrate that merchant capitalism was very slowly starting to expand. Following the early to mid-1000s, long-distance trade began to emerge as globalization progressed. The focus of long-distance trade was to move goods from a market where they were cheap to a market where they were expensive. Due to the lack of industrialization and commercial finance, merchant capitalism was based heavily on traveling and trading. However, he suggests that the difference between capitalist developments in Europe and other countries such as China and Arabia is due to the slow expansion of merchant capitalism in Europe into production and financing. As globalization continued to be a prevalent force, free trade began to progress. This meant that as goods were being traded, the idea of paying for them emerged. This increased the need for specific goods, leading merchant capitalism to develop finance and banking systems as debt and credit were emerging. This evolution led to financial capitalism. The practice of trading goods for other goods or currency slowly developed capitalism. Feudalism, widespread in Europe during this time, also significantly influenced this evolution. Serfs were obligated to live on the lord’s land, work for him, and give him a share of what they produced. This system reinforced the idea of credit in the framework of capitalism. As globalization continued to progress, colonialism also began to take shape. The growth of towns and cities in Europe broke down feudalism by promoting agriculture and trade.
It was not until after the 1600s, known as the era of discovery, that capitalism truly began to transform. As time passed, financial capitalism became more powerful with the advent of the joint-stock company and stock exchanges. One of the contingent factors that helped shape capitalism was colonialism because it was financed by merchant bankers who were highly praised by the state. Capitalism started to gain momentum because “via the stock market and speculation, entire classes of society got their first introduction to the hopes and disappointments, the gains and losses, that capitalism so abundantly held in store for them.” Following the developments of financial capitalism, agrarian capitalism took root, prompting the growth of a plantation economy. Large-scale agrarian capitalism was striving to obtain wage labor, but they were releasing workers to the growing industry and urban economy. Although merchant capitalism still existed, industrialization began to take shape. The first Industrial Revolution began in the late 18th century, changing the dynamics of capitalism. Proto-industrialization transformed capitalism; it created conditions and established fully industrial societies. People began to realize that household production was no longer efficient. They started to rely on factory production and proto-industrialization catalyzed this transition.

As the second Industrial Revolution spread in the 19th century, capitalism was changing yet again. Kocka illustrates how industrialization changed capitalism. Innovations in technology, along with the emergence of factories and manufacturing plants, were at the center of industrialization. The rise of factories and demand for employees led to the development of wage labor. Kocka then discusses how wage labor became a phenomenon and how the mass quantity of fixed capital boomed. The use of technological and organizational innovations was necessary to keep up with demand. Kocka argues that this process rebuilt the social structure and contributed “to the unpopularity of capitalism.” As factories advanced, capitalism became more closely affiliated with the state. Capitalism grew dominant and started to spread globally due to the impact of industrialization. Elements like joint-stock companies transformed into large-scale business enterprises, separating capitalists from entrepreneurs – a process known as managerial capitalism. Kocka suggests this transition from ownership to managerial capitalism led to the creation of large enterprises and contributed to frequent irresponsible behavior by salaried managers in higher positions within firms. Following this, capitalism began growing and becoming even more complex, therefore, financialization became prominent. Financialization transformed capitalism through the development of insurance companies, mutual funds, and multinational corporations. This brings us to the present day, where companies like Amazon are booming and corporations like Walmart are thriving.
Throughout the book, Kocka reiterates that capitalism emerged as a tool of critique and analysis, and explains why this dual function is important. I agree with Kocka in the sense that external factors have changed capitalism over time, and that capitalism continues to progress. Kocka notes that all the alternatives to capitalism have proven to be inferior. I appreciate the way he mentions the faults and issues with capitalism because I agree that it is not perfect, and that the system faces many issues. As Kocka explains the growing inequalities and disintegration of public welfare that capitalism creates, I feel an uneasiness begin to rise within me. This impacts everyone, and it’s a scary thought. Kocka also notes that he fears the capitalistic need for constant growth and expansion could lead to the exhaustion of natural and cultural resources. He acknowledges that capitalism can be defined, or interpreted, in many different ways and that there are both positives and negatives to capitalism. Overall, Kocka does an excellent job of demonstrating how capitalist principles such as globalization, colonization, state formation, and industrialization, work together to transform capitalism over time.

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An Idea of Capitalism. (2019, Mar 22). Retrieved from