Rise of capitalism in Europe. Main body

Rise of capitalism in Europe

Intro

Capitalism is an economic system based on the private ownership of the factors of production and their operation for profit. Capitalism emerged from earlier trade once merchants had acquired sufficient wealth to begin investing in increasingly productive technology. People’s natural entrepreneurialism was freed from feudalist (feudalism - political and economic system where a landowner granted land to a vassal in exchange for homage and military service) constraints (partly by urbanization).

Capitalism started to emerge during the 17th Century. At first the merchants, or “buyer uppers”, as they became known, were a link between the consumer and producer. However, gradually, they began to dominate the latter, first by placing orders and paying in advance, then by supplying the raw materials, and paying a wage for the work done in producing finished goods.

Main body

Capitalism didn’t just emerge out of nowhere, it had a lot of different economic, institutional and cultural origins dating back to the 16^th century.

The relatively static feudal way of life, which had endured for centuries, began to break down at the beginning of the 16th Century. A primary cause of the shift away from feudalism was increased foreign trade, which led to the emergence of a new class of merchant capitalist. These new merchants amassed great fortunes by purchasing foreign goods cheaply and selling them on at huge profits to Europe’s aristocracy.

This boom led to many European countries growing rich from taxes and attempting to boost their share of trade by establishing colonial empires. Once a country established a colony, it would try to impose a trading monopoly by banning foreign merchants and ships. For example, the riches of Spanish colonies in the Americas could only be exported to Spain, where they were traded on to other European countries at a tremendous mark up, enriching both Spanish merchants and the Spanish state.

The growth in trade both outside and within Europe led to increased money exchange. This in turn led to inflation being injected into the feudal economies for the first time, so that the 16th Century witnessed a price revolution. For instance, in Britain, wheat prices, which had been static for centuries, more than trebled between 1500 and 1574.

Increased use of money and inflation began to undermine the feudal order. The gentry wanted money to buy new luxury goods that flooded Europe. Meanwhile, spiralling prices meant they could make money either by producing and trading agricultural goods directly, or by renting the land to a growing class of large-scale farmers. Thus, capitalism was quick to penetrate into English agriculture, where part of the land-owning class formed a bloc with the new capitalist farmer.

These changes in the economy led to a dramatic change in social relations. The peasantry, who had been tied to the land and virtually owned by the lords, were set “free” - in other words, evicted. Evictions gathered pace as trade increased, especially as the growth of the textile industry raised the demand for high quality English wool. The landed gentry enclosed more and more common land, to raise sheep. Such land was owned collectively by the peasantry and was forcibly taken over - stolen - by the aristocracy.

Evicted from the land and faced with massive price rises for basic foods, the lives of an increasing number of landless peasants became ones of desperation and growing starvation. Evictions were to carry on in Britain for the next three centuries. (It is interesting to note that the transition from feudalism to capitalism took a different route in France due to the French revolution. The land, which under feudalism was jointly owned by the lord and the peasant, was taken from the defeated aristocracy and handed to the peasantry, making France a country of small-scale peasant holdingsthe opposite of what occurred in Britain.)

The feudal order was also breaking down in towns. There throughout the 16th Century, the guild system suffered due to the increased trade. The new merchant capitalists now bought goods locally for export. Hence, these were no longer produced for sale locally, but were instead sold to merchants. As merchants could travel the country to buy the cheapest goods, craftsmen soon found themselves competing with each other in a national market. This undermined the guild system, which could only operate through control of regional economies, maintaining monopoly production, and keeping market forces at bay.

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