Introducing Capitalism: A Graphic Guide (Graphic Guides)

by Dan Cryan

medieval Europe’s first great international trade venture – the Crusades, which started in 1095.

The Crusades led to conquests along the eastern rim of the Mediterranean and gave Europeans more control over traditional trade routes. As a result, the kingdoms of Europe found themselves shipping goods and people across relatively long distances for the first time since the days of the Roman Empire.

The rise of trade and banking in 14th-century Europe eventually became the Renaissance,

The first commercial banks appeared in the late 13th century in Italian towns like Siena.

The word comes from banco – Italian for bench – since at first banking services were provided on benches at the town’s centre. But banking does not begin with the Italian merchants – its origins lie with the Knights Templar, an order of warrior monks founded in 1096

The Templars got immensely rich during the heyday of the Crusades. Because they were so vital to the survival of the Crusader states, they were granted permission by the Pope to run their own affairs, which meant they were effectively answerable to no one.

The order was dissolved in 1314, its leaders were put to the stake, and its wealth confiscated and divided up.

By the end of the 15th century, improvements in the design of ships and inventions like the clock and the compass meant that crossing the ocean became feasible.

The newly formed Christian kingdoms of Spain and Portugal saw it worthwhile to send Columbus westward and Vasco da Gama southward in search of a naval route to India that would bypass the Muslim-dominated land routes.

Spain and Portugal found themselves suddenly with trading options all along the African and Asian coasts, as well as vast and ri...

From the 16th century onwards, international trade offered prospects of wealth far superior to the grain produced by the small feudal fiefs of Europe. With the arrival of that wealth, the feudal system faded away and was repl...

The rise in trade led to expansionism, and any European power that could afford it would send off ships, hoping to find new territory that “no one” (i.e. no other European) had discovered yet. Controlling land overseas gave these Europeans access to resources that could be exploited, often at the cost of the local inhabitants.

The transition to a mercantile economy also played a major role in the formation of the modern state out of the loose array of feudal estates.

Rich merchants could also be knighted and accepted to the king’s service. In this way, the king’s government reinforced its position as the main avenue of social, political and financial advance.

While a powerful, centralized monarchy created the first great European empires, it held back the development of a strong and independent merchant class, and that held back private enterprise. As a result, capitalism did not grow out of the empires of Spain and Portugal, but out of the disadvantaged newcomers to the race for international trade, and especially England and the Netherlands.

the Dutch created the only true European “empire of trade” and never joined in the imperialist land grab that happened after the Industrial Revolution.

The Dutch held the chain of islands in the Indian ocean now known as Indonesia, and a few small bases in the Caribbean, but their trading posts spanned the globe in the 17th and 18th centuries.

Amsterdam itself was the greatest trade city in Europe up to the Industrial Revolution, and was home to the first stock exchange and insurance company. The Netherlands is considered by many historians to be the first truly capitalist nation in the world.

The Dutch East India Company, formed in 1602, was one of the first multi-national companies.

Like the Netherlands, England was a Protestant country threatened by the Catholic might of Spain at sea and France on land. As things stood in the second half of the 16th century, the English crown had nothing to lose by encouraging private ship-owners to make a living out of pirating the slow and heavy Spanish merchant ships returning from South America laden with gold and silver.

Thomas Hobbes (1588–1679). Hobbes was basically the first great capitalist philosopher.

Hobbes put the individual at the centre of political theory.

Smith thought that specialization and efficiency of production was the very mark of progress.

in the Jewish ghetto of Frankfurt-am-Main, Mayer Rothschild (1744–1812) and his sons had begun building the now famous finance house. What made their business unique was that Rothschild sent his five sons to open branches in the five busiest cities in Europe.

The Rothschilds developed the very idea of the international investment bank – they could transfer their funds wherever there was peace and prosperity, and thus enjoy high interest on their investments no matter what the situation was. Importantly, they were happy to fund private and government ventures by lending money. These two factors made them a financial machine of a completely new sort.

Before industrialization, the most important factor in determining the wealth of a country was its volume of trade, or exports minus imports. After industrialization, the value of what a country could produce became more important.

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The British East India Company even had its own private army.

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Since the cost of labour determines all major economic factors, how much of anything is being bought or sold has no significant economic consequences, in Ricardo’s view.

Bentham and his school were considered part of the “radical” movement. One central “radical” idea they had was that everyone should have the vote, including women and the poor, an idea for which Bentham was scornfully booed out of Parliament. He also thought that homosexuality should be legalized and same-sex marriages be allowed, but he never published these opinions for fear of the response.

Mill saw the state and the market as instruments designed to serve the individual, and ultimately to increase the happiness of all. This involved not only maximizing prosperity but giving people the freedom to form their own opinions and live by them.

The main economic instrument of the state is taxation. Deciding who, what and how much to tax could be a decisive factor in the way wealth is distributed throughout the population. Mill thought that taxation should be the means to publicly fund education, health, legal aid and basic living conditions for all citizens. To this day, this is a landmark of liberal economics and politics.

So it is not only labour that determines the price of goods, but also the costs involved in selling them. Mill paved the way beyond the Labour Theory of Value and towards the Supply and Demand theory that replaced it, and which is still prevalent in economic theory today.

Without any legal limit on working hours or minimum wages, the working day lasted for sixteen hours and the pay sufficed for only the most meagre existence. Trade unions began to form, but they could do little as long as labour was unskilled and each worker immediately replaceable by another.

Many of the slums were built below the level of the Thames at high tide, which meant they became a natural toilet bowl that flushed twice daily. A cholera epidemic unsurprisingly hit London in 1841. But only after the “Great Stink” of 1858 threatened to bring Parliament to a close did the building of a sewerage system begin in earnest.

With the government all but deaf to the pleas of the majority of the population, reform and protest movements sprung up outside Parliament. The first of these was led by Robert Owen (1771–1858), a self-made man who earned his fortune in the textile industry.

Owen is sometimes considered a founder of socialism, but what he was offering was really a kind of conscientious capitalism,

“People’s Charter” that was drafted by a radical MP called William Lovett (1800–77).

After its third petition was ignored by Parliament in 1848, the movement quickly deteriorated. But its cause was kept alive by a growing number of MPs, especially after the Liberal Party was officially formed in 1859. To avoid losing power completely, it was the Conservatives who eventually accepted almost all the Chartists’ demands in the Reform Act of 1867.

Bakunin, on the other hand, represents the more revolutionary concerns of socialism, and its mistrust of states and control altogether. He believed that states and government are simply means of exploiting the working class. As such, the workers should not seek political power. Rather, they should aim for the abolition of the state, as its continued existence can be used only to subjugate them to the ruling class. This makes Bakunin one of the fathers of anarchism as much as socialism.

The goods produced by labour above what is necessary for survival Marx called the “Surplus Value”.

There are three ways to increase profit: expand the market, increase the level of exploitation, and improve the technology so as to make production cheaper.

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by the late 19th century, being the largest empire no longer guaranteed having the largest economy.

Production capacity rose to levels that not even the early industrialists could dream of. Moreover, it made the cost of each product much lower than previous forms of production, so suddenly the middle classes could afford cars, phones, home electricity and everything else you had to sell.

in 1929, 0.1 per cent of the population controlled 34 per cent of the country’s wealth, and owned as much money as the bottom 42 per cent.

Keynes claimed that recessions occur when economic units begin to accumulate money instead of allowing it to circulate. For example, when too much money is accumulated in too few hands, or when investors become wary of the future and decide to start saving money rather than investing it.

Depressions happen when for some reason (like a stock market crash) the public loses faith in the economy completely, and no amount of money being fed into the market is enough to get it to spend again. In the anatomical analogy, this is similar to a cardiac arrest.

Keynes offers the first mature theory of an economy that relies on consumers in the industrialized countries. According to this theory, consumption must remain constantly high for the economy to bloom. As such, it is the backbone of consumer culture.