Where do capitalists come from?

Where do capitalists come from? How did we get from medieval feudalism with its kings and queens, knights and ladies, and poor exploited peasantry to the economic system that now dominates most of today’s world: capitalism?

Ancient humans barely got by day to day. Everything the typical man and woman did during the day was for themselves and their family. All the goods they produced, be it a freshly killed antelope or a bag of fruit, were produced for consumption by their immediate family or clan.

But as technology developed, humans were able to specialize and begin to produce goods not just for family or clan consumption, but to trade with other groups of humans in order to get goods for their own family to consume. You can imagine a small tribe of people living by the ocean. They would concentrate on fishing, trading some of their fish for meat and hides from cattle herders who lived in the interior, specialized in cattle raising, and rarely, if ever, engaged in fishing. Both groups learned to specialize in what they were good at so that they could consume more products. The fishermen were better at fishing. They could get more beef and hides by trading with the herdsmen than they could if they divided their own time between fishing and raising cattle. And the herdsmen could get more fish by specializing in raising cattle rather than practicing both fishing and raising cattle.

This development of commodity production, the production of goods for trade on the market, was a necessary condition for the development of capitalism and capitalists. And, the development of the market led to the development of social classes, breaking down old clan relationships where everyone shared all the goods more or less equally.

Trade, and the market, were necessary, but not sufficient conditions to create capitalism. Capitalism needs two classes of people: the capitalists, who own private property for production purposes and who hire workers to produce for them; and the workers, who, not having enough property with which to produce goods (tools, factories, etc.), work for the capitalists for wages or salaries.

The earliest form of capital was merchant capital. Merchant capital developed when people began trading between distant lands. The merchants were the ones who grew wealthy and powerful from this trade. Under feudalism, trade between nations grew immensely. In the 11th and 12th centuries, maritime trade between countries grew especially rapidly, leading to the development of large seaports. The Crusades stimulated even more commerce between Europe and Asia.

As trade expanded, the demand for luxury goods from Asia, such as spices, carpets, and silks, grew in the feudal courts. This demand was paid for in money that the feudal lords raised by exploiting the peasants. Under feudalism, a lord would allow peasants to farm parts of his land. In exchange, the peasant either had to give up a portion of his own crop to the lord and/or work part of the week on the lord’s own land and crops.

As their demand for luxury goods rose, the feudal lords had to squeeze more and more out of their peasants. Instead of demanding the peasant give one-third of his crop in exchange for the right to farm, the lord might now require the peasant to turn over half the crop. In the past, land ownership and loyalty of the serfs had been the lord’s source of power. Now increasingly, money itself became power.

These developments were multiplied by the European encounter with and conquest of the Americas. Money and commerce set about slowly, but surely, destroying medieval society.

As the lords began to desire more and more goods that could only be purchased with money, they began taking loans from the merchant capitalists and selling off portions of their lands. And as the lords grew more and more parasitical, taking more of the peasants’ crops each year, the peasants had less and less incentive to care for the land, knowing that every improvement on their part would likely end up in the lord’s pocket. Medieval production actually began to decrease, the lords grew less and less powerful, and the peasantry angrier and angrier. Meanwhile, the merchants and manufacturers grew stronger and stronger.

In the independent towns of Europe, the merchants and small businessmen carried on guerilla warfare against the domination of the feudal lords. The townspeople took small but important steps to free themselves from the feudal domination that hindered the growth and prosperity of their businesses. They fought against military service, the lord’s monopolies in milling grain and baking bread, and the tyranny of the lord’s sheriffs. Reinforced by merchant capital, the townspeople often won these struggles, slowly taking the lord’s monopoly powers away from him. In turn, they created monopolies themselves, holding down prices of goods they purchased from the countryside and raising the prices of goods they sold to the lords and peasants.

The feudal labor guilds, once a fraternity of equals, changed in character also, as a small class of masters began to dominate and create rules that left them with a monopoly in any particular handicraft. A society that passed on the rules of the craft from master to journeyman now became a total monopoly that controlled prices and kept journeymen in subjugation.

Because of the growth of foreign and internal trade, the guilds could no longer keep up with the local, national, and worldwide demand for goods. This forced many of the handicraftsmen out of business and into the arms of the more successful guild masters who turned around and hired them as employees for large scale capitalist production. But, at the same time, the bigger merchant capitalists, frustrated with the low production levels of the guilds, began buying up the guilds and creating their own capitalist factories, eliminating the middle man. We thus begin to see a twofold development of capitalist manufacturing.

The emerging capitalist class became stronger and stronger. As it did so, it sought more and more state power, control of the government, so that it could buy and sell land freely, manufacture and sell whatever goods they wanted whenever they wanted, as well as employ whom they wanted to employ when they wanted to employ them.

The more access and control of governments that capitalists had, the more they used that access and control to create the economic conditions for their further development. The major task was to force the peasantry off the land. This allowed the feudal aristocracy to become more capitalist-oriented with larger, more market-based farms and farming techniques while simultaneously creating a force of hungry workers with no way to produce food for themselves or for sale as commodities. These peasants ended up having no recourse but to work for the nascent capitalists.

And that, boys and girls, is where the capitalists came from.