Chapter 2 The Historical Development of Capitalism

• Feudalism and the Birth of Capitalism

• The Emergence and Nature of Capitalism

• The Industrial Revolution

• Colonialism: Capitalism on a World Scale

• Summary

The Importance of Historical Processes

• The present economic landscape can only be understood as the result of an historical process

• Decisions to site production facilities “yesterday” produce the spatial pattern that is the foundation for trade and patterns of consumption today

• We can visualize these processes at various geographic scales

Feudalism and the Birth of Capitalism

• From hunting & gathering to domesticated agriculture (animals and crops)

• Slave-based empires (e.g. Roman) and their feudal successors (ca. 5th Century)

• Feudalism dominated economic and social relations in Europe to ca. 15th century

• Settlement in North America did not succeed feudalism, but was capitalist in character from the outset

Characteristics of Feudalism

• Tradition shaped life and work• In Europe the church was the dominant political

and ideological institution• Aristocratic land-owners formed the ruling class,

who extracted rents from tenant farmers (often serfs) in low productivity agriculture

• Feudal cities – often fortified – with guilds – markets, where universities were established

• A hierarchy of feudal towns, mostly small trading centers, with negligible interregional trade

Serfs workingon their “lords”farm, not earningwages, but paying a largeshare of theiroutput as “rent”in return forthe right to keep some output fortheir own consumption

Carcassonne France—a classic example of feudal urbanization

Feudal Regions & The Beginnings of Trade

Agricultural innovations, bubonic plague, the European Renaissance

Characteristics of Early Capitalism• Markets: buyers and sellers of goods & services at

agreed upon prices• Market types: perfect competition – perfect monopoly

– oligopoly (and other types)• The profit incentive = revenue – cost > 0• Dynamic behavior of buyers and sellers, including

incentives from innovation in products and production processes

• Class relations -- merchants & burghers vs. the old aristocracy-- Unlike feudal Europe, workers under capitalism must sell their labor power to survive. Thus the process of commodification extended to include labor—as well as to most goods and services

The Emergence and Nature of Capitalism – rise of trade-based city states – links to old

trade routes to the Far East and in Europe

Alternative Models of Competition

Barriers to Entry - High

Barriers to Entry - Low

One Buyer Many Buyers One Seller Monopoly A Few Sellers Oligopsony Oligopoly Limited Quantity of Sellers

Monopolistic Competition

Many Sellers Monopsony Perfect Competition

Attributes of Alternative Market Types

Perfect Competition Monopoly OligopolyHomogeneoous products Unique Product Similar ProductsEach producer makes asmall share of output

One producer makes all ofthe product

Several sellers divide themarket

No one seller influencesPrices

Prices set to maximizeprofit

Prices set through pricingstrategies

Entry to market is easy High Barriers to Entry High Barriers to EntryFlow of information isPerfect, eliminating excessprofit

Monopolist is able tocontrol the market

Oligopolists engage instrategic behavior—competitive or collusive

Markets are fluid Market is rigid Market may be unstable,competitive strategies tocreate stability: productdifferentiation,advertising, industryagreements

“Pure” Monopoly

Early Capitalism, Continued

• Finance: replacing barter with money, and institutions to handle and regulate money

• Uneven development as an inevitable outcome, historically persistent, at scales ranging from local to global

• Long-distance trade – fueled by transport innovation – allowing regional specialization based on principle of comparative advantage

• Ideological change – printing/reading, religion, science, the Enlightenment – “a worldview that stressed secularism, individualism, rationality, progress, and democracy.”

Guttenburg’s Printing Press

Early Capitalism, Continued

• Feudal empires (e.g. Holy Roman Empire, Figure 2.13) with multiple nation-states

• Replaced feudal monarchies with nation-states (Fig. 2.14)

• Nation states supporting development of capitalism through regulations, public investment and programs (e.g. education, defense, trade protectionism…).

• BUT: these institutions do not preclude transnational capitalist development, evident in this era of globalization – Key quote page 35

Fig. 2.14: European Boundaries after the Treaty of Westphalia (1648)

The Industrial Revolution

• Industrialization as a process with multiple transformations in inputs, output, and technologies. Driven by:– Harnessing inanimate sources of energy

(Figure 2.16), wood-coal-petroleum & gas– Technological innovation (Table 2.1)– Rising Productivity (Figure 2.17)

• Spatial diffusion of the Industrial Revolution

Watt’s steam engine – 1769 – a key driver of the Industrial Revolution

Spread of the Industrial Revolution

Production (Output) Versus Productivity (Output/Unit Input

Which is graphed here?

Global Diffusion of the Industrial Revolution

LaborexploitationIn the IndustrialRevolution

What abouttoday infactoriesin the Third World?

Cycles of Industrialization – Kondratiev Long Waves

Consequences of the Industrial Revolution

• Creation of an Industrial Working Class– Rise of organized labor

• Urbanization – industry as “city forming” activity (? Right-hand tail of Fig. 2.24)

• Population Effects: Malthus’ warning vs.productivity increases, health improvements, lowered birth rates

• Growth of Global Markets & International Trade – transport improvement, international finance, timing of development

The Case Study - Railroads

• New speed & low cost to move people and commodities

• Transformative impacts on spatial organization – Siberian railway, U.S. transcontinental railroads

• The rise of gateway cities, such as Chicago, St. Louis. See: William Cronon, Nature’s Metropolis

Colonialism

• Colonialism: Capitalism on a World Scale– The exploitation of foreign resources by European

industrializing nations– Simultaneous economic, political, and cultural

impacts rife with conflicts with native groups– The unevenness of colonialism (Figure 2.26)

• Transition of colonies to nations – different timing for the Americas vs. Asia & Africa – Figure 2.28, Figure 2.29, Figure 2.30, Figure 2.31

Waves of European Colonialism

Dominated bySpain & Portugal

NapoleonicWars, AmericanRevolution,Latin AmericanIndependence

British &French -dominatedexploitationof Africa,Asia, and theMiddle East

Post WW-II Collapse

Colonial Empires in 1914

Colonial Powers in S.E. Asia

Bases of Colonial Power• Technological and military advantages coincident

with the industrial revolution• Jared Diamond’s arguments re: geographical

accidents, such as the impact of diseases on local populations, and the timing of technological achievements

• Political strengths due to the Western legal and economic system & property rights

• The Historiography of Conquest: note the cases are historically and geographically specific – Latin America, North America, Africa, The Arab World, South & East Asia, Southeast Asia, Oceania

The Effects of Colonialism

• Annihilation of Indigenous Peoples• Restructuring around primary economic

sectors• Formation of dual societies• Polarized geographies (transport

networks often reshaping seats of power)• Transplantation of the nation-state• Cultural Westernization

Rail Lines from nationalexport platformsto peripherallocations

European Influences in North America ca. 1800

Slave Tradeto theAmericas

The End of Colonialism

• Early end in Latin America• Post World War I and II for much of the

rest of the planet• Different trajectories to independence• But, even with independence, many

regions in the global South remain dependent upon the global North for commodity markets, captured in the core-periphery model