Rise of Capitalism in Western Europe summary

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Rise of Capitalism in Western Europe summary

Rise of Capitalism in Western Europe
1450-1750

Definitions of capitalism are difficult and complex, but at bottom it can be defined as an economic system with a division between labor and ownership. In short, the people whose labor creates wealth are not the investors or owners of the raw materials and machinery (means of production). Therefore, the wealth created by labor goes not to the worker but to the capitalist (investor-owner).

An example here could be the joint stock companies of Britain and the Netherlands (the East Indies Company and the VOC.) Joint stock companies pulled together the resources of investors to pay for a voyage to the Spice Islands of Southeast Asia. The sailors were paid by these investors and owned neither the ship nor the cargo; the profits went to the investors who sometimes made many times the value of their initial investment in return.

Early Capitalism: Proto-industrialization

Putting-out system
Guilds, which developed in towns in the Middle Ages, hindered profits and free-market economics so capitalists sought to use labor from rural areas. They moved production to the countryside (outsourcing). In this system, capitalists delivered raw materials to households who then manufactured them into a finished product. The capitalists paid them for their labor and picked up the final product. Labor in the countryside was plentiful, little had to be spent on wages. This system, known as proto-industrialization, would remain until the rise of industrial factories in the 19th century.

Adam Smith’s book The Wealth of Nations (1776) was the great text on capitalism. Nations prosper with free market economies. When each individual is free to pursue his or her own economic interests, all of society will benefit.

Social results
The putting-out system introduced large sums of money into the countryside; the material standards of life increased. This placed strains on rural social customs; people who pursued their own incomes often abandoned family and local obligations. New social tensions and banditry arose.

Agricultural production favored the extended family; uncles, aunts, cousins, grandparents all worked together. Marriage was often seen as a necessary social arrangement. With the rise of proto-industrialization, the nuclear family became more economically independent, and as a result, socially dependent. Marriage began to be more about romantic love and emotions than about social and economic convenience.

Commercialization and inflation caused significant changes. Individuals who invested gained at the expense of others who simply possessed property. Thus the aristocracy was challenged. At the lower end of the social scale a proletariat emerged, people whose income and wealth was separated from possession of real property. They were associated with the rise of domestic manufacturing and urbanization. The process created new social classes and social tensions. There was a wave of popular protests against poverty and proletarianization up to 1650. Associated with the unrest was a hysteria over witchcraft, which demonstrated a distrust of the poor as a potentially revolutionary group.

Also, some Christians denounced capitalism as selfish. The idea of interest (usury) went against the teachings of the Medieval Catholic Church.

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