Capitalist initiatives flourished in England throughout the seventeenth-century. In the ensuing decades, it replaced the customary arrangements for raising, making, and consuming the necessities of life locally. Its economic features included an impersonal market, private ownership of resources including one's own labor, and mechanisms like money for settling accounts. Because the traditional agrarian economy absorbed the lion's share of the country's wealth, improvements in farming had to lead the way towards economic development. Only by releasing workers and investment funds for manufacturing, transportation, and marketing could capitalism expand.
Because its free market economy generated wealth that the state could tap into for its military, England's neighbors had to imitate its capitalist practices. By the end of the nineteenth-century, Germany and the United States actually passed up the front-runner. More and more countries abandoned their old ways and became capitalistic. Latecomers did not give up all their unique ways, but they had to weave a new social fabric from their traditions and adaptations to the market. Still, the homogenizing force of capitalist practices predominates in the world today.
The greatest jump in productivity came with the invention of the steam engine which could be used in mines, railroads, ships, and textile and pottery making. From the eighteenth to the twentieth -century, capitalists drew on chemistry in addition to physics to keep up the system's momentum;
electricity followed steam; then came internal combustion engines. Now transistors and microchips drive information technology. Nothing has yet abated the flow of innovations.
Of course there had to be a supportive environment for this sequence to take place, such as laws to make sure one's property was safe; transportation to go from shops to markets; courts to adjudicate disputes, communication to carry word of better bargains; access to commodities and labor; and people's freedom to move, to invest and to enter contracts.
Every bit as influential as this ongoing economic transformation around the world have been the psychological, moral, and intellectual changes that capitalism has wrought. Capitalism's first
was psychological. It appealed to personal ambition rather than relying upon political commands as the old economy had. The people who responded to its incentives separated themselves from their group by putting into operation a private plan to make money through the market. Stoking economic self-interest, capitalism promoted individualism, a word that entered public discourse with it.
Trade, which had existed since the first bargain in Ancient Mesopotamia, could live within the interstices of traditional society. Capitalism could not. Its emphasis upon producing goods pulled more and more people into its factories and shops, transforming how people worked and lived. Success only broadened the range of markets and drew in more participants.
Life had been hard before, with widespread hunger, but work had not been demanding. When entrepreneurs mobilized their resources to turn out goods for profitable exchanges, they hired men and women for their factories, mines, and urban services. Within these private precincts, employees had to submit to closer monitoring and stricter discipline. Few could escape the psychological imperatives of capitalism.
Manufacturers at first produced goods for other industries, like heavy equipment for railroads. By the end of the nineteenth century, capitalist economies became more attuned to consumers. Now a new psychological element entered the picture. Manufacturers began to see people as potential customers and hired advertising firms to promote their vacuum cleaners, washing machines, refrigerators, and automobiles to the public. Elevators made it possible to stack floors on hotels, stores, and office buildings. Trolley cars brought housewives into the center of cities to shop and carried their husbands home at the close of day. Credit was extended to speed up sales for those eager to buy now and pay later.
The moral component of capitalism emerged in its long battle to overcome traditional restraints. Entrepreneurs had to defend themselves against the charge of selfish greed. The social advantages of innovation required articulation. Because of the communitarian ethic lodged in most religions, capitalists needed a robust set of values to counteract communitarian ones. In deconstructing the old ethic, capitalists didn't abandon morality; they instilled a different one. They extolled the virtues of working hard, deferring pleasure, and keeping promises. Their task was made easy because these traits were already admired. Inculcating them was, after all, what good parenting had always done, so their critical importance to the capitalist economy sailed beneath the radar of popular perception.
Explaining these psychological and moral imperatives required ideas. As an entrepreneurial economy took over, capitalism's intellectual demands increased. Capitalism could not have succeeded without penetrating the logic of the market system. Participants needed the guidance from explanations of how the economic novelties worked. Writers assessed the components of the market - money, contracts, costs of production, exchange rates, and credit with great sophistication. Astute analysis replaced chatty observations; some thinkers began reasoning quantitatively.
In discourse, the market became an abstraction, not a face-to-face place to purchase things. Analysts subsumed workers under the category of labor. Defending capitalists from charges of exploitation required arguing the advantages that industry conferred on the whole society. Adam Smith's masterful synthesis of how the economy of private initiative functioned provided stunning proof that it could function successfully without any apparent direction from government.
As capitalists assumed dominance in their societies, economics acquired ideological overtones, in many cases obfuscating how returns were distributed among capitalists, land-owners, and the workers themselves. Experts asserted that the economy had its own internal mechanism for correcting any imbalances in supply, prices, or investments. No intellectual contribution helped capitalists more than bold claims that the economy was a natural system, not subject to political interference.
The essential dynamic of capitalism has endured, even as the driving force in the market economy has gone from agriculture to the manufacturing of capital goods to producing consumer items to providing services to now the financial center's domination of the global economy. Through all these mutations, the psychological, moral, and intellectual responses have guaranteed constant upheaval. Change-averse human beings have had to learn with a constant stream of novelties.
Capitalism has continued to deliver the goods, but we're not always happy with their packaging. The world is getting richer, but it is getting richer with higher social costs. The prosperity that capitalism has delivered to more and more people is a tribute to the power of individual initiative, but, in a system in which no one is in charge, no one is looking out for the wellbeing of the whole planet. Rapacious economic development has brought pollution, corruption, and neglect of the most vulnerable in its wake.
The recent debacle in securitized mortgages which triggered the recession of 2008 is instructive of theses problematic dimensions of capitalism. Those in finance operated under exquisite pressure to ply stocks derived from mortgages to investors long after they had lost their value. The public has lost all respect for bankers because their leaders acted so irresponsibly. Yet how to disentangle the global economy from the shortsightedness of financiers continues to challenge us intellectually, as Colin Crouch's article in the last issue of The Montreal Review so astutely showed. Having long ago shed political oversight, capitalists have carried the market system to the point where only a strong and focused political will can save it from its excesses.