Describe The Capitalist Economic System

The transition from the pre-capitalist economic system to the capitalist M.O.P. in
Western Europe was triggered by a series of economic and non-economic processes
which were largely internal to the social formation. These processes led to the transition
from Feudalism to Capitalism over a long period of time – from the 16th to 19th centuries.

In third world economies, the transition from pre-capitalist to the capitalist economic
system was mainly as a result of external factors – especially the colonial capitalist
penetration (cash crop, taxes, wage labour, forced labour etc.) and merchant capital etc.
hence in the third world the transition to capitalism was through a process of articulation.

Despite the foregoing observations, the origins of the capitalist economic system still
remains a controversial issue. Marx argues that capitalism emerged out of a bourgeoisie
revolution in the instruments and factors of production which also changed the relations
of production and the entire societal structure.
But third world economists e.g. A.G. Frank, P. Baran etc have observed that this unilineal
process where capitalism revolutionarizes the productive activities to generate more
capital failed in the poor nations. They argue that instead of the third world developing it
is underdeveloping despite the presence of the capitalist class and tools of production.

Secondly the capitalist M.O.P. has not entirely broken down pre-capitalist M.O.P. in the
third world. The emerging dependence and underdeveloped economic conditions and
relations of production are in themselves a barrier to capitalist development.

Generally, Frank and others argue that the very same mechanisms which set off
underdevelopment in the periphery are the prerequisites to capital accumulation in the
core. Capitalist development cannot take place in the core unless underdevelopment
occurs in the periphery i.e. Development and underdevelopment are 2 sides of the same coin. Each is different but is caused by the other. They are the necessary outcome and
contemporary manifestation of the internal contradictions inherent in the World Capitalist
System.

In both Europe, Latin America and Africa primitive capital accumulation marked the first
stages towards capitalist production. This process was marked by large scale (looting)
appropriation of land through enclosures, overseas plunder of minerals, forced/wage
labour, monopoly profit and enslavement.
According to Marx in DAS Capital Vol. 1, the outstanding features of this process
include:
1) The discovery of gold and silver in America.
2) The use of coerced slave labour in mining.
3) The conquest and looting of East Indies.
4) The turning of Africa into a slave hunting ground.
5) The economic rivalry among European nations for the control of the World
Market.
6) The use of state power, intervention and coercion in the extraction of taxes,
colonisation and trade protectionism to facilitate capital accumulation.

To Frank, capitalism emerged from a world commercial network which developed into a
mercantilistic capitalist system. This network spread out from Italian cities e.g. Venice
and N. Western European towns to incorporate the Mediterranean World and Africa
including the Atlantic Islands. This process, which began in the 15 th century, continued
until the entire world was incorporated into one capitalist system based on merchant
capital.

Frank argues further that the expansion of mercantile capitalism was closely followed by
the rise and spread of industrial and financial capitalism centred in Western Europe.
Another centre developed in N. America. Outside this circuit of capitalist development
emerged satellite and peripheral economies as those in the third world – Latin America,
Africa and Asia.

Therefore the rise of this world network or system created the present core-periphery or
metropolis – Satellite economic relationships based on the exploitative relations between
the two. In this context the core develops at the expense of the periphery. The periphery’s
economy was restructured to serve the interests of the core.

However, some scholars e.g. Brenner R. (1977) have criticized Frank’s thesis on the rise
of capitalism. Brenner asserts first that Frank’s approach implies that capitalist
development is not a self-expanding process of capital accumulation by way of
innovation in the core itself – which is not entirely true. The 16th - 19th century merchant
and the nascent industrial capital in Britain grew out of England’s internal economic
innovations and not from capital alienation from the 20th century capitalist peripheries of
the world.

Secondly, Frank’s conclusion that the accumulation of capital in the core depends on a
process of original surplus creation in the periphery and surplus transfer to the core is not
necessarily true in all cases. This is because capitalist production in the periphery is a
later phase in the imperialistic expansion of European capitalism and not vice versa.
Further the process of creating a dependent raw material exporting economy in the
satellite economies by the core is a feature of monopoly capitalist stage but not an aspect
of the early stages of capitalist development.

While Frank explained underdevelopment in the periphery as a product of its relationship
with the core, Immanuel Wallerstain sought to explain development in the core as
emanating from its relationship with the periphery. Wallerstein was therefore advancing
Frank’s argument by injecting a systematic analysis of capitalist development in the core.

Wallerstain argues that capitalism emerged out of the transition from world empires
characterized by the pre-capitalist communal/primitive M.O.P. to a world economy based
on capitalist relations of production. He argues that world empires e.g. the classical
Roman empire consumed the economic surplus through bureaucracies thus blocking
accumulation and the development of capitalism and investment. He concludes that the
modern capitalist system emerged out of the collapse of the world empires before the 16th
century.

Wallerstain and Frank seem agreed on the necessity of the disintegration of world
empires as a prerequisite to the growth of world capitalism. Their arguments are an
offshoot of Adam Smith’s explanation and model of capitalist development. In his book
The Wealth of Nations (1937), Smith attests that the development of a society’s wealth is
a function of the degree of the division of labour i.e. the specialization of productive tasks
achieved through the separation of agriculture and manufacturing and their allocation to
rural and urban areas respectively.

Smith has been criticized for limiting the analysis of capitalist development to the growth
of trade and the separation of trade and agriculture, alongside the accompanying social
division of labour.

Paul Sweezy (1942) basing his analysis on Smith’s conceptualization of economic
development argues that the transition from feudalism to capitalism was a foregone
conclusion once the basis town/country division of labour had been achieved in Medieval
Europe.

Hindness and Hirst (1973) point out that the transition process was not evolutionary but
was based on (1) The separation of the producer from his means of production (2) the
transformation of feudal rent into money rent (3) the rise of trade and (4) the rise of
commodity production. They reject the Marxist evolutionary scheme of societal
development from one stage to the next because social formations are complex units of
economic organization with no rigid economic laws and structural development.

Generally it is clear from the foregoing debate that feudalism was not always succeeded
by capitalism. However, for capitalism to develop out of feudalism certain conditions
must be present i.e.:-
1. Conditions facilitating primitive capital accumulation.
2. The extensive development in commodity production and trade.
3. The rise of merchant and industrial capital as well as usury.

It is from these conditions that capitalist relations of production developed.

Due to the existence of various barriers to the development of capitalism e.g. warfare
between feudal lords, robbery etc. which also limited the free movement of commodities
and labour, a state existed with legal powers to nurture and protect the entire production
system. The state was powerful enough to enforce certain political and legal institutions
against the feudal lords. This is what Hindness and Hirst refer to as the absolutist state.
The rise of absolutist states in Europe during the transition period were a central feature
of European capitalism. It is these states that intervened directly in the competition
between European powers to control the world market. Some scholars have attributed the
rise of the bourgeoisie class in Europe to the existence of powerful monarchs and state
kings who ensured that the struggle between different classes strengthened their control
over the state’s wealth.

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Titany answered the question on December 8, 2021 at 08:51