A historical system characterized by the private ownership of the means of production, the comodification of labor, the production for the world market, the long-distance trade between private firms, and the ceaseless accumulation of capital.
Owing to the pervasive influence of the Annales School, dependency theory, world-systems analysis, development studies, international political economy, and more recently, ecofeminism and postcolonial studies, many historians and sociologists have come to challenge traditional explanations of three interrelated historical processes: the emergence of capitalism (or the decline of feudalism), the advent of “modernity” (or the end of the Middle Ages), and the “Rise of the West” (or the “Fall of the East”). Though diverse in intellectual heritage and political orientation, these academic “schools” favor a holistic approach to the study of the unevenness of capitalist development. As a consequence, they are well equipped to account for the persistence of economic and political inequality on a global scale (e.g., by pointing to the unequal relationship between the core and the periphery, by investigating the connection between the development of the “North” and the underdevelopment of the “South,” by elucidating the legacy of colonialism and Eurocentrism, and by excavating the historical construction of race, class, and gender across national boundaries).
The aforementioned intellectual currents have contributed significantly to our understanding of the current phase of capitalist history (often termed “globalization” in the mass media). This period has witnessed the decline of the Keynesian welfare state in the West, the collapse of the socialist state in the East, and the disintegration of the developmental state in the South. These events have transformed the landscape of the capitalist system. On the plane of the world economy, globalization has involved the implementation of neoliberal policies (under the leadership of the United States and through the mediation of the International Monetary Fund [IMF], the World Bank, and the World Trade Organization [WTO]). On the plane of the interstate system, globalization has involved a transition from U.S.-Soviet bipolarity (with its corollary, U.S.-sponsored anticommunism) to U.S. mono-polarity (with its corollary, U.S.-sponsored anti-terrorism). These transitions point to the need not only to revisit the major debates on the unfolding of capitalism, but also to reflect on the history of political economy (i.e., the discipline that invented “capitalism” as an object of study).
Since the 1904 publication of Max Weber’s The Protestant Ethic and the Spirit of Capitalism, a work designed to challenge the Marxist conception of history by tracing the genesis of capitalism to the Protestant Reformation in the sixteenth century, historians and sociologists have debated the origins, structure, and evolution of the capitalist system. However, with the rapid industrialization of the Soviet Union (under the policy of socialism in one country) and the entry of Marxism into the universities of the West, these debates acquired greater intensity.
The questions posed in the debates between Maurice Dobb and Paul Sweezy (late 1940s–early 1950s) and Ernesto Laclau and André Gunder Frank (1960s) fell into two categories. First, there were questions about the genesis and diffusion of capitalism: Did capitalism originate in England or elsewhere? (Alternatively, why did capitalism not flourish in the Middle East or China?) Under what conditions did capitalism “spread” from Europe to the rest of the globe? Second, there were questions about the definition of capitalism: What are the distinguishing characteristics of capitalism (e.g., private ownership of the means of production, the generalization of wage labor, the production for the world market, and the ceaseless accumulation of capital)? What differentiates it from feudalism (and other pre-capitalist social formations)? Inevitably, these debates blurred the distinction between the problem of capitalism’s history and the problem of its definition. More to the point, they hinged on a false choice between the primacy of wage labor and the primacy of the world market in the transition from feudalism to capitalism. Whereas the “productionists” (Dobb and Laclau) asserted the priority of wage labor, the “circulationists” (Sweezy and Frank) asserted the priority of the world market. However, as Dale Tomich argues, “both approaches fail[ed] to develop an adequate methodology for reconstituting capitalist development and class formation in their historical complexity as world processes.” Thus, with a view to isolating the historical character of capitalism, we would do well to trace the history of political economy as a discipline.
The evolution of political economy—first as a branch of moral philosophy and later as a distinct academic discipline—offers significant clues about the development of the capitalist system from the Enlightenment (eighteenth century) and the Industrial Revolution (1780–1840) to the New Deal (1933–1939), and beyond. However, a quick glance at the history of political economy reveals a stunning peculiarity: though devoted to the study of material life, the functioning of the market, and the role of the state, political economy defined capitalism only after socialism (understood both as a social movement and as an inchoate alternative to the existing order) appeared on the historical stage. Hence, the question arises: Was this simply an oversight on the part of the early political economists? Or did the emergence of socialism force political economy to conceptualize capitalism as a historical system?
Though renowned as the progenitor of the Physiocratic School of political economy, François Quesnay, the author of the Tableau Oeconomique (1758), never employed the term “capitalism.” Instead, Quesnay demarcated the relations among three social classes: farmers (classe productive), landlords (classe distributive), and merchants (classe stérile). Though recognized as the founder of the classical school of political economy, Adam Smith, the author of The Wealth of Nations (1776), produced a thoroughgoing analysis of commodities, capital, and the division of labor, but not of “capitalism” qua social formation or historical epoch. For his part, David Ricardo, the author of the Principles of Political Economy (1817), delineated the relationship between the social classes of capital and labor without invoking the expression “capitalism.” In fact, the Oxford English Dictionary traces the first use of the term not to the early political economists (i.e., precisely the figures who pioneered the study of capitalism), but to the English novelist William Makepeace Thackeray in 1854.
Though celebrated not only as the successor to Smith and Ricardo, but also as the first significant theorist of capitalism qua social formation and historical epoch, Karl Marx refrained from using the term “capitalism” in his innovative interventions in political economy: The Gründrisse (1857–1858), A Contribution to the Critique of Political Economy (1859), and Capital I (1867). Doubtless, Marx criticized Smith and Ricardo for naturalizing the categories of political economy (and hence failing to recognize the historical character of capitalism and previous modes of production). Moreover, Marx’s immanent critique of political economy reconfigured the timeless, ahistorical categories of his forebears to highlight the conflict between the capitalist class (i.e., the owners of the means of production) and the working class (i.e., the sellers of labor power). Nevertheless, the term “capitalism” did not appear in Marx’s oeuvre until his famous letter to a Russian Populist in 1877. Instructively, Marx reproached his Russian interlocutor for attempting to turn his “historical sketch of the genesis of capitalism in Western Europe” into an ironclad “theory of the general path imposed by fate upon every people [irrespective of their historical circumstances].”
Although Marx believed that the first proletarian revolution would occur in an “advanced” capitalist country (e.g., France, Germany, or Great Britain), he recognized the potential for revolutionary change in a “backward” country such as Russia. Accordingly, he hoped that his “disciples” in the international working-class movement would resist the temptation to transform his analysis of the structural logic of capitalism into a blueprint for human history. In this light, it is noteworthy that Marx grounded his vision of socialism in a concrete analysis of capitalist development.
Owing to Marxism’s profound influence not only on the academic disciplines of history, sociology, and economics, but also on the working-class movement (especially in western Europe and Russia), it became commonplace to conceptualize capitalism as a mode of production, social formation, or historical era. More precisely, by relegating capitalism to its proper historical context, Marxism incited disputes not only on the hypothesized transition from feudalism to capitalism (e.g., the Dobb-Sweezy debate), but also on the projected shift—revolutionary or evolutionary—from capitalism to socialism (e.g., the debates between social democrats and communists). Phrased differently, if capitalism had a history, it followed that the system could be reformed or even abolished.
During the Bolshevik Revolution (1917–1923), the incipient Soviet Republic capitalized on its prestige to provoke a schism in the international working-class movement. In the view of the Bolsheviks, the parties of the Second International had compromised themselves by voting for war credits, thereby consenting to send their constituents to the battlefields in an interimperialist conflict (i.e., World War I). Accordingly, the Bolsheviks called for the formation of the Communist International (Comintern)—an organization designed to bolster the fledgling Soviet regime by exporting the revolution. Thereafter, working-class parties advocating the parliamentary path to socialism would be considered “socialist,” whereas working-class parties espousing the revolutionary road to socialism (while pledging allegiance to the Soviet Union) would be considered “communist.” It is not surprising, therefore, that the emergence of the Soviet Union as the first socialist state had a pronounced effect on the discipline of political economy.
Fittingly, the most important controversy in the history of Soviet Marxism (i.e., the Stalin-Trotsky debate [1924–1929]) pivoted on the problem of economic development (be it “capitalist” or “socialist”). Doubtless, Russian intellectuals had long debated the country’s status as the “weakest link” in Europe and the “strongest link” in the East. In fact, since the early nineteenth century, “Westernizers” had advocated applying the European model of industrialization to the Russian context, whereas “Slavophiles” had advocated building a new society based on the old peasant commune. However, with the unanticipated Bolshevik seizure of power in October 1917, this debate reached a fever pitch. Could the Soviet Union “catch up” with the West? Would it need to undergo an “industrial revolution” to do so? Would it matter that the Soviet Union had not experienced a “bourgeois revolution” (notwithstanding the efforts of Aleksandr Kerensky’s short-lived provisional government)? Owing to the allied intervention in the civil war in 1918, the Bolshevik regime was not sanguine about the prospect of receiving aid from the West. The unsuccessful revolutions in Germany and Hungary had only heightened the fear of communism among the allies. Over time, as the prospect of revolution in the West dimmed, the Bolsheviks were forced to grapple with their “encirclement” by hostile capitalist powers.
Though fraught with personal intrigue (owing to the competition between the two antagonists, both of whom aspired to succeed Vladimir Lenin at the helm of the regime), the Stalin-Trotsky controversy had its roots in the Soviet Union’s indeterminate position as a massive territorial state (encompassing several “levels” of development), a multinational empire (encompassing a hundred languages), and a vanguard of the international proletariat. This contradiction was expressed in Soviet foreign policy. On the one hand, the Soviet Union pursued diplomatic relations with the West (and hence attempted to function as an ordinary nation-state). On the other hand, the Soviet Union used the Comintern to spread the gospel of proletarian revolution across the world (through the mediation of communist parties in France, Germany, and elsewhere).
Whereas Joseph Stalin espoused the policy of socialism in one country (i.e., the notion that the Soviet Union could achieve socialism on its own), Leon Trotsky espoused the policy of a world revolution (i.e., the notion that the “backward” Soviet Union could not survive in the absence of revolutions in the “advanced” capitalist countries). For a variety of reasons (including the exile of Trotsky and the ensuing purge of suspected Trotskyites), Stalin’s policy won the day. The historian Arno Mayer illuminates the historical conditions under which the policy was inaugurated, “By quarantining and isolating the revolutionary regime diplomatically, economically, and financially, the outside world helped create the preconditions for Stalin’s Socialism in One Country.” The attempt to isolate the Soviet Union “provided much of the rationale and justification for the furious pace of the industrialization and collectivization of the Second Revolution of the 1930s.” In fact, the two five-year plans (1929–1938), which privileged the development of heavy industry, produced a substantial increase not only in the proportion of the labor force employed in manufacturing, but also in the proportion of national income resulting from manufacturing. Thus, the Soviet Union was said to have undergone successful industrialization (though at tremendous human cost). Though neither feasible under Western conditions nor desirable to Western policy makers, Soviet planning (known as “central” or “command” planning) attracted the attention of Western economists (especially during the Great Depression and World War II), leading, ultimately, to the adoption of “indicative” planning in many places.
In the wake of the stock market crash in 1929, John Maynard Keynes, the last in a series of great political economists, posed two interrelated questions: (1) Could economic science be used not only to displace class conflict, but also to limit the potential for economic disequilibrium? (2) Could these modifications be made within the confines of the capitalist system? In The General Theory of Employment, Interest and Money (1936), Keynes argues that the Great Depression had invalidated the classical paradigm (devised by Smith and Ricardo and modified by Alfred Marshall and the Cambridge School). Since the classical paradigm presupposed the validity of Say’s Law of Markets (i.e., the dictum that the balance between supply and demand will guarantee full employment), it could not explain the persistence of involuntary unemployment. Hence Keynes proposed a clear-cut but revolutionary therapy for chronic unemployment: deficit spending on public works to create jobs for and augment the purchasing power of the working class. In short, Keynes believed that the preservation of the capitalist system depended on the ability of the interventionist state not only to deflect the potential for a socialist revolution, but also to diminish the probability of economic disequilibrium.
Notwithstanding his renown as an innovative economist, Keynes did not exert a direct influence on the policies of the New Deal until the recession of 1937–1938. However, the slump persuaded Franklin D. Roosevelt not only to use deficit spending as a means of “priming the pump,” but also to take Keynes’s General Theory seriously as a framework for managed capitalism. Having taken root in the Roosevelt Brain Trust and the Harvard Fiscal Policy Seminar, Keynesian ideas influenced the financing of the American war effort and the architecture of the Bretton Woods institutions. In fact, despite the death of Keynes in 1946, Keynesianism contributed greatly to the postwar reconstruction, recovery, and expansion of the capitalist system. By channeling popular unrest into the expansion of the system (primarily through productivity bargains in the wealthier regions and development assistance in the poorer regions), the U.S.-sponsored Keynesian Consensus brought about a golden age in capitalist history.
However, the old consensus dissolved amid the fiscal crises, deindustrialization, and “stagflation” of the 1970s. Following on the heels of Margaret Thatcher’s victory in Great Britain, Ronald Reagan’s arrival in 1981 contributed to the creation of a new consensus (built on monetarism, Chicago School economics, supply-side economics, and other variants of neoclassical thought). In combining the reduction of welfare expenditures with the intensification of the arms race, the “Reagan Revolution” reconfigured the American economy in keeping with such neoliberal precepts as privatization and deregulation. This process continued through successive administrations, culminating in the Welfare Reform Act of 1996. On a global scale, the process of liberalization, which picked up speed with the unexpected dis-integration of the Soviet bloc (and the attendant “opening” of Eastern Europe and the former Soviet Republics to Western capital) and the ratification of the North American Free Trade Agreement, has also continued to the present day (actualized by the policies of the IMF, the World Bank, and the WTO).
Mark Frezzo
See also: Ricardo, David; Smith, Adam.
Abu-Lughod, Janet L. Before European Hegemony: The World-System: A.D. 1250–1350. Oxford: Oxford University Press, 1989.
Arrighi, Giovanni. The Long Twentieth Century: Money, Power, and the Origins of Our Time. London: Verso, 1994.
Braudel, Fernand. Civilization and Capitalism, 15th–18th Century: The Perspective of the World, trans. Siân Reynolds. Berkeley: University of California Press, 1992.
Heilbronner, Robert L. The Nature and Logic of Capitalism. New York: Norton, 1985.
Hodgson, Geoffrey M. How Economics Forgot History: The Problem of Historical Specificity in Social Science. London: Routledge, 2001.
Mayer, Arno. The Furies: Violence and Terror in the French and Russian Revolutions. Princeton: Princeton University Press, 2000.
Perelman, Michael. The Invention of Capitalism: The Secret History of Primitive Accumulation. Durham: Duke University Press, 2000.
Tomich, Dale. “World of Capital, Worlds of Labor: Reworking Class in Global Perspective.” In Reworking Class: Cultures and Institutions of Economic Stratification and Agency, ed. John R. Hall. Ithaca: Cornell University Press, 1997.
Wallerstein, Immanuel. The Modern World-System I: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century. San Diego: Academic Press, 1974.