Capital I, Chapter 31

Genesis of the Industrial Capitalist

The evolution of the capitalist farmer proceeds over centuries. The creation of the industrial capitalist is much more rapid, though some may have evolved from being guild masters, artisans and even workers.

The Medici were one of the great
Merchant families that developed
in the Mediterranean City States.  But,
Merchant Capital like Usurers Capital
makes profits from unequal exchange,
not from the creation of Surplus Value.  It
sucks the surplus product away from
the producers undermining capitalist
 production.  They drained the peasant
producers so much, that Capitalism proper
was smothered at birth in these states.

“In the infancy of capitalist production, things often happened as in the infancy of medieval towns, where the question, which of the escaped serfs should be master and which servant, was in great part decided by the earlier or later date of their flight. The snail’s pace of this method corresponded in no wise with the commercial requirements of the new world market that the great discoveries of the end of the 15th century created. But the middle ages had handed down two distinct forms of capital, which mature in the most different economic social formations, and which before the era of the capitalist mode of production, are considered as capital quand même — usurer’s capital and merchant’s capital.” (p 702)

As Marx has previously stated, the dominance of these two forms of capital is inimical to the existence of Capitalism proper. Both acts a a drain on surplus value that could be used for accumulation. From the Middle Ages, various laws are passed across Europe restricting the level of interest rates that can be charged. The quote Marx previously gave from Martin Luther, indicates the extent to which these kinds of capitalists were loathed. Shakespeare's “Merchant of Venice” is another example.

Rodin's "The Burghers Of Calais".  Burghers or Burgesses were
the representatives of the rising bourgeoisie in the towns, as they
developed as centres of bourgeois power in opposition to feudalism.

“The money capital formed by means of usury and commerce was prevented from turning into industrial capital, in the country by the feudal constitution, in the towns by the guild organisation. These fetters vanished with the dissolution of feudal society, with the expropriation and partial eviction of the country population. The new manufactures were established at sea-ports, or at inland points beyond the control of the old municipalities and their guilds. Hence in England an embittered struggle of the corporate towns against these new industrial nurseries.” (p 703)

This provides a glimpse of the way this bourgeoisie does not just grow the capitalist mode of production within feudal society, but also at the same time, develops its own geo-political strongholds. Within these strongholds, the bourgeoisie develops its own political and state structures, arising from the economic base, long before any struggle for state power itself is undertaken.

The further elements of primitive accumulation, previously discussed, of piracy, slave trading, and the colonisation and plunder of foreign lands, then all provide impetus to this process.

The first British capitalists were pirates like
Sir Francis Drake, who under sanction from
the British Crown roamed the seas murdering
and plundering.  By these means they accumulated
loot, turned into Money Capital, as well as opening
up Colonial Markets, as they seized foreign territory.

“The different momenta of primitive accumulation distribute themselves now, more or less in chronological order, particularly over Spain, Portugal, Holland, France, and England. In England at the end of the 17th century, they arrive at a systematical combination, embracing the colonies, the national debt, the modern mode of taxation, and the protectionist system. These methods depend in part on brute force, e.g., the colonial system. But, they all employ the power of the State, the concentrated and organised force of society, to hasten, hot-house fashion, the process of transformation of the feudal mode of production into the capitalist mode, and to shorten the transition. Force is the midwife of every old society pregnant with a new one. It is itself an economic power.” (p 703)

Of Holland, which was the main capitalist power of the 17^th Century, Thomas Stamford Raffles, Lieutenant Governor of Java, wrote, it,

“is one of the most extraordinary relations of treachery, bribery, massacre, and meanness”. (p 704)

The same was true of the activities of the East India Company.

“But even in the colonies properly so called, the Christian character of primitive accumulation did not belie itself. Those sober virtuosi of Protestantism, the Puritans of New England, in 1703, by decrees of their assembly set a premium of £40 on every Indian scalp and every captured red-skin: in 1720 a premium of £100 on every scalp; in 1744, after Massachusetts-Bay had proclaimed a certain tribe as rebels, the following prices: for a male scalp of 12 years and upwards £100 (new currency), for a male prisoner £105, for women and children prisoners £50, for scalps of women and children £50. Some decades later, the colonial system took its revenge on the descendants of the pious pilgrim fathers, who had grown seditious in the meantime. At English instigation and for English pay they were tomahawked by red-skins. The British Parliament proclaimed bloodhounds and scalping as “means that God and Nature had given into its hand.”” (p 705)

The colonies played an important role in the process of primary accumulation and transition from feudalism, and its relation to Merchant and Money Capital.

Holland, as the main capitalist power, first had
the main monopoly of the East India trade.  But,
it was supplanted by Britain, through the role
of militarists and colonialists, like Robert Clive
who headed up the East India Company's
private army.

“The colonies secured a market for the budding manufactures, and, through the monopoly of the market, an increased accumulation. The treasures captured outside Europe by undisguised looting, enslavement, and murder, floated back to the mother-country and were there turned into capital. Holland, which first fully developed the colonial system, in 1648 stood already in the acme of its commercial greatness. It was,

“in almost exclusive possession of the East Indian trade and the commerce between the south-east and north-west of Europe. Its fisheries, marine, manufactures, surpassed those of any other country. The total capital of the Republic was probably more important than that of all the rest of Europe put together.” Gülich forgets to add that by 1648, the people of Holland were more over-worked, poorer and more brutally oppressed than those of all the rest of Europe put together.” (p 705-6)

Under feudalism, the Merchants and Money Capitalists, like the landlords, live on a form of rent, in the sense that all secure a share of surplus product of the producers. The landlords obtain their share by Feudal Right, and later on the basis that they are lending out their land, just as the money capitalists are lending out their money. The merchant obtains their surplus from buying low and selling high.

The merchants, especially through Colonialism, both obtain control over foreign territories – the East India Company, which essentially colonised India and other parts of Asia, as well as the Hudson Bay Company, which did the same thing in North America, had their own private armies, and operated under a Royal Charter – which meant landlords now had vast new areas from which they could extract rent, and also also made available whole new ranges of products that those feudal rulers sought after as their consumption increased.

The Money Capitalists were also able to lend money for ventures in the colonies, which were a lucrative source of additional profits. But, contrary to Lenin's argument in Imperialism, The Highest Stage Of Capitalism it is to this period of “Mercantilism” rather than the period of Monopoly Capitalism that Colonialism can be attributed. It is during this period that the world is divided up into these Colonial Empires.

At this time, industrial capitalism has not yet developed – Colonialism is one of the means by which the primitive accumulation takes place that makes the industrialisation possible. And every country that industrialises uses it one way or another.

The United States, for example, turned the southern Confederate States into essentially internal colonies, whilst Russia did the same thing with Siberia.

“Today industrial supremacy implies commercial supremacy. In the period of manufacture properly so called, it is, on the other hand, the commercial supremacy that gives industrial predominance. Hence the preponderant rôle that the colonial system plays at that time. It was “the strange God” who perched himself on the altar cheek by jowl with the old Gods of Europe, and one fine day with a shove and a kick chucked them all of a heap. It proclaimed surplus-value making as the sole end and aim of humanity.” (p 706)

Another means by which primary accumulation was achieved was via the State. The idea of state financing is not something that arose with Keynesianism. Although the Liberals and Libertarians would have us believe that the 18^th and 19^th Centuries were golden eras of freedom and absence of state intervention, nothing could be further from the truth. The State was an active means of bringing about primary accumulation, and the growth of the National Debt, during this period was the means by which this was done.

Today, the Liberal-Tories bemoan the fact that debt to GDP stands at 70%, but in 1800, as this process of primary accumulation proceeds, it stood at 250%!!!

In 1700, as the process of Primary Capital Accumulation gets under way, UK
debt to GDP stood already at around 30%.  By 1725, it had already reached today's
 level of around 70%.  By 1750, when the Agricultural and Industrial Revolution
 commences, it has reached about 110%, and continues to rise.  By the time, the
Industrial Revolution is in full swing, and machine industry is replacing manufacture,
by 1800, it has reached over 200%, rising to a peak of more than 250% shortly after.
  A similar picture of debt build up is seen after WWII, when the new Industrial revolution
proceeded, and large amounts were spent on investment in nationalised bankrupt
 staple industries,on infrastructure in roads, and rail etc. and on the Welfare State,
 to create the conditions for meeting the needs of capitalist expansion.

Its worth quoting at length what Marx wrote about it in this context 150 years ago, given current discussion.

“The system of public credit, i.e., of national debts, whose origin we discover in Genoa and Venice as early as the Middle Ages, took possession of Europe generally during the manufacturing period. The colonial system with its maritime trade and commercial wars served as a forcing-house for it. Thus it first took root in Holland. National debts, i.e., the alienation of the state – whether despotic, constitutional or republican – marked with its stamp the capitalistic era. The only part of the so-called national wealth that actually enters into the collective possessions of modern peoples is their national debt. Hence, as a necessary consequence, the modern doctrine that a nation becomes the richer the more deeply it is in debt. Public credit becomes the credo of capital. And with the rise of national debt-making, want of faith in the national debt takes the place of the blasphemy against the Holy Ghost, which may not be forgiven.

The public debt becomes one of the most powerful levers of primitive accumulation. As with the stroke of an enchanter’s wand, it endows barren money with the power of breeding and thus turns it into capital, without the necessity of its exposing itself to the troubles and risks inseparable from its employment in industry or even in usury. The state creditors actually give nothing away, for the sum lent is transformed into public bonds, easily negotiable, which go on functioning in their hands just as so much hard cash would. But further, apart from the class of lazy annuitants thus created, and from the improvised wealth of the financiers, middlemen between the government and the nation – as also apart from the tax-farmers, merchants, private manufacturers, to whom a good part of every national loan renders the service of a capital fallen from heaven – the national debt has given rise to joint-stock companies, to dealings in negotiable effects of all kinds, and to agiotage, in a word to stock-exchange gambling and the modern bankocracy.

At their birth the great banks, decorated with national titles, were only associations of private speculators, who placed themselves by the side of governments, and, thanks to the privileges they received, were in a position to advance money to the State. Hence the accumulation of the national debt has no more infallible measure than the successive rise in the stock of these banks, whose full development dates from the founding of the Bank of England in 1694. The Bank of England began with lending its money to the Government at 8%; at the same time it was empowered by Parliament to coin money out of the same capital, by lending it again to the public in the form of banknotes. It was allowed to use these notes for discounting bills, making advances on commodities, and for buying the precious metals. It was not long ere this credit-money, made by the bank itself, became. the coin in which the Bank of England made its loans to the State, and paid, on account of the State, the interest on the public debt. It was not enough that the bank gave with one hand and took back more with the other; it remained, even whilst receiving, the eternal creditor of the nation down to the last shilling advanced. Gradually it became inevitably the receptacle of the metallic hoard of the country, and the centre of gravity of all commercial credit. What effect was produced on their contemporaries by the sudden uprising of this brood of bankocrats, financiers, rentiers, brokers, stock-jobbers, &c., is proved by the writings of that time, e.g., by Bolingbroke’s.” (p706-7)

But, then as now, these huge debts run up in the interests of capital do not fall on capital to repay. It is society at large that must cover these debts, in redemption payments and interest. Then as now, of course, it is not capital that pays the taxes that make these repayments possible. The burden of the taxes falls on the producers.

“As the national debt finds its support in the public revenue, which must cover the yearly payments for interest, &c., the modern system of taxation was the necessary complement of the system of national loans. The loans enable the government to meet extraordinary expenses, without the tax-payers feeling it immediately, but they necessitate, as a consequence, increased taxes. On the other hand, the raising of taxation caused by the accumulation of debts contracted one after another, compels the government always to have recourse to new loans for new extraordinary expenses. Modern fiscality, whose pivot is formed by taxes on the most necessary means of subsistence (thereby increasing their price), thus contains within itself the germ of automatic progression. Overtaxation is not an incident, but rather a principle. In Holland, therefore, where this system was first inaugurated, the great patriot, DeWitt, has in his “Maxims” extolled it as the best system for making the wage labourer submissive, frugal, industrious, and overburdened with labour. The destructive influence that it exercises on the condition of the wage labourer concerns us less however, here, than the forcible expropriation, resulting from it, of peasants, artisans, and in a word, all elements of the lower middle class. On this there are not two opinions, even among the bourgeois economists. Its expropriating efficacy is still further heightened by the system of protection, which forms one of its integral parts.” (p 707-8)

Alongside this state intervention in relation to debt and fiscal policy, as Marx says, also comes the policy of Protectionism.

“The system of protection was an artificial means of manufacturing manufacturers, of expropriating independent labourers, of capitalising the national means of production and subsistence, of forcibly abbreviating the transition from the medieval to the modern mode of production. The European states tore one another to pieces about the patent of this invention, and, once entered into the service of the surplus-value makers, did not merely lay under contribution in the pursuit of this purpose their own people, indirectly through protective duties, directly through export premiums. They also forcibly rooted out, in their dependent countries, all industry, as, e.g., England did. with the Irish woollen manufacture. On the continent of Europe, after Colbert’s example, the process was much simplified. The primitive industrial capital, here, came in part directly out of the state treasury. “Why,” cries Mirabeau, “why go so far to seek the cause of the manufacturing glory of Saxony before the war? 180,000,000 of debts contracted by the sovereigns!”

Colonial system, public debts, heavy taxes, protection, commercial wars, &c., these children of the true manufacturing period, increase gigantically during the infancy of Modem Industry.” (p 708-9)

Back To Chapter 30

Forward To Chapter 32

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