By the end of the first decade of the twentieth century, with the frontier closed and cheap public land no longer there for the taking, questions of economic justice and redistribution of wealth began to be heard, especially among immigrants and the native-born laboring in the new foundries and factories in the Eastern and Midwestern cities. The rise of a small coterie of super-rich and powerful robber barons like Andrew Carnegie, John D. Rockefeller, and Cornelius Vanderbilt, whose wealth rivaled the great aristocratic families of Europe, did not sit well with millions of American men and women toiling in wretched conditions in the factories and sweatshops that these new men of commerce controlled.
President Theodore Roosevelt was the first head of state to challenge the American preoccupation with property. In 1910, he told the American people,
We are face to face with new conceptions of the relations of property to human welfare, chiefly because certain advocates of the rights of property as against the rights of men have been pushing their claims too far. The man who wrongly holds that every human right is secondary to his profit must now give way to the advocate of human welfare, who rightly maintains that every man holds his property subject to the general right of the community to regulate its use to whatever degree the public welfare may require.
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America’s flirtation with the redistribution of wealth picked up steam during the global depression in the 1930s. President Franklin D. Roosevelt’s administration’s New Deal programs were America’s first real foray into balancing property rights with human rights. The American dalliance continued through the 1960s and ended abruptly with the demise of President Lyndon B. Johnson’s Great Society programs.
By 1980, America had all but abandoned the idea of redistributive justice. The election of Ronald Reagan, a transplanted Westerner, as president signaled a return to the earlier American Dream, the one that glorified the rags-to-riches theme and held up property rights as the foundation of American freedom.
Now, however, the rationale that spawned private property relations is beginning to fray in the wake of new technologies that are once again fundamentally altering our sense of space and time. The quickening connection of the central nervous system of every human being to every other human being on Earth, via the World Wide Web and other new global communication technologies, is forcing us into a global space and a new simultaneous field of time. The result is that property exchange in national markets is going to increasingly give way in the twenty-first century to access relationships in vast global networks.
Diminished attachment to a private property regime has great potential import for the future of commerce and governance. After all, market capitalism is based on the idea of exchanging property in the form of goods and services between sellers and buyers. If the psychological and ideological attachment to private property continues to weaken, what will be the eventual fate of the marketplace?
The change from ownership to access has equally important implications for nation-state governance. Enlightenment philosophers and economists never tired of making the connection between a private property regime and the legitimacy of the nation-state. It was always assumed that the mission of the nation-state was largely to secure the private property of its citizens. If private property relations were to be subsumed by new commercial relationships—whose modus operandi is less wedded to market exchanges inside a territorially defined political unit and more geared to access in globally connected networks—what might be the effect on the future of the nation-state itself?
The conundrum is that the very commercial and political institutions that are attempting to accommodate these new spatial and temporal realities are the ones whose own futures are in doubt because of the far-reaching changes now taking place in the world. The capitalist marketplace and the nation-state are the defining institutional paradigm of the modern era, just as the Church and the feudal order were in the medieval era. And just as new spatial and temporal changes led to the demise of the medieval arrangement, now, once again, dramatic spatial and temporal changes are leading to the weakening of national markets and nation-states and the emergence of global commercial networks and transnational political spaces like the European Union. Rethinking a world beyond capitalist markets and nation-states will likely be as contentious and bitterly fought as was the struggle that led to the fall of Christendom and feudal society and the rise of the market economy and nation-state. Understanding what historian Karl Polanyi called the “Great Transformation,” the twists and turns that gave birth to modern capitalism and nation-state formation, can provide a much-needed perspective on the challenges facing our current generation as it wrestles with defining a new consciousness and new institutional models better suited to a globalized space and time.
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Forging Capitalist Markets and Nation-States
T
HE MARKET ECONOMY has become such a pervasive force in modern life that we have come to think of it as almost like a force of nature. If the truth be known, we Americans would be utterly lost were the marketplace not the centerpiece of our existence. We forget that the market economy is a relatively new institution in human history. While markets existed far back into antiquity, they were always marginal to social life. Most economic activity was traditionally based in the household. In fact, the very term “economy” comes from the Greek
oikos,
which means “home.” Members of an extended family produced what they needed for themselves, bartered with nearby neighbors, and occasionally sold any surplus production in open-air markets, which were held infrequently. Large markets, like the great Frankfurt Fair in late medieval times, were annual events that drew itinerant merchants from far afield. At the bigger fairs, one could purchase more exotic goods. Silk, books, parchment, drugs, and spices, mostly from the Far East, were among the more popular goods available for sale.
But the idea of a fully integrated modern market economy extends well beyond the notion of merchants setting up their stalls and selling their wares to local buyers. For modern markets to work, all of the elements that go into making things—land, human labor, and technology—have to be dislodged from the traditional household setting and be converted into a form that can be rationalized, abstracted, quantified, and made into property negotiable for a price in the marketplace.
Even though the concept of the modern market economy originated in Europe, it found its fullest expression in America. Europeans, early on, had mixed feelings about capitalism. Americans never did. America has long been regarded as the bastion of capitalism. So unwavering has been our faith in capitalist dogma that the idea of America and capitalism has come to enjoy a tautological status.
Americans may be the only pure capitalists left in the world. Adam Smith’s idea of an unfettered marketplace where individual sellers and buyers compete to maximize their property holdings is the primary playing field for living out the American Dream. Were the capitalist arena to be seriously compromised, the American Dream would suffer. That’s why Americans are so fiercely loyal to the tenets of capitalist theory. They are the alpha and omega of our way of life, without which the American Dream would be an impossibility.
The capitalist market is not held in as high esteem by Europeans. It is the very different set of historical circumstances that led Europeans to temper their enthusiasm for capitalism while Americans became its most ardent champion.
The Struggle for Free Markets
As mentioned earlier, a spate of new technologies in the early modern era in Europe shortened distances traveled, sped up exchanges, and decreased transaction times, making possible much bigger markets. Feudal governing institutions were too small and parochial to manage the new potential reach of human activity. In fact, these same institutions, for the most part, saw larger markets as a potential threat and acted to thwart them.
By the late medieval era, more than one thousand towns had sprung up throughout Europe. The towns had graineries, shops, and inns, and were served by local craftsmen. They produced a variety of goods and services requiring expertise not available on every manorial estate. Masons, fine weavers and dyers, metalworkers, and armorers, and later the broiderers and glovers, the scriveners, the upholsterers, and the hatters, clustered together in these prototype urban areas, establishing “free cities”—regions independent of the reach of the local lords. If a serf, for example, were to escape his lord and flee to a city and remain there for a year and a day, he was deemed to be free, having passed from the jurisdiction of his lord to the jurisdiction of the city burghers.
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Each craft industry established a guild to regulate the activity of its members. The guilds were responsible for maintaining quality standards for their industry, determining how much would be manufactured and sold, as well as the fair price for the sale of their goods and services. The guild economy operated by custom, not by market forces. The point was not to make a profit but, rather, to maintain a way of life. Guilds opposed an open market, free labor, the commercialization of land, and competitive prices—all of the essential hallmarks of a modern economy. For more than four centuries, the guilds fought off the emerging capitalist class by using city codes and regulations to enforce their will. Craft guilds were not abolished in France until 1791, England in 1813 and 1814, Austria and Germany in 1859 and 1860, and Italy in 1864.
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In the sixteenth century in England, an independent merchant class was beginning to challenge the guilds’ control over the production of goods and services. Economic conditions in England, and later on the Continent, were making the guild system increasingly untenable. The wave of land enclosures was freeing up peasants, providing a new exploitable workforce. Advances in transportation—the laying down of better roads and improvements in river navigation—were making it easier to move raw materials and finished goods between the countryside and towns. A burgeoning population was demanding more goods at cheaper prices.
The textile guilds were the first to be hurt by the new market forces being unleashed. Rogue merchants began to skirt guild controls and urban jurisdictions by dispersing work to cheaper labor in the countryside—called the “putting-out” system. New breakthroughs in technology and the organization of work led to a “division of labor,” substantially reducing the costs of manufacturing goods and the time necessary to produce them. The new production model was better able to meet the upsurge in consumer demand.
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The new method of doing business had a second, more profound effect. Under the guild system, the masters and journeymen owned their own tools, giving them control over production. The new class of independent merchants began to “take possession directly of production,” providing the tools and machinery used by their rural labor force.
4
Poor cottagers engaged in the putting-out system for weaving were among the first to feel the full effects of the new capitalist way of conducting business. Living at the very margins of poverty, a cottager was often unable to pay for the purchase of material in advance of the sale of his cloth and had to seek credit from the merchant employer. That generally meant pledging his most valued asset, his loom, as security against a money advance for the raw material he needed. If unable to pay off the debt, he would have to forfeit his loom to the merchant employer, putting the means of production directly into the hands of the capitalist—further strengthening his position vis-à-vis the craftsmen.
5
By providing the raw material and the tools necessary for production and by controlling the transport of supplies and finished products between country and town, the new merchants were able to exercise far greater control over labor costs. Already destitute, desperate, and without any other means to make a livelihood, peasant workers had little choice but to accept the conditions of employment imposed on them by a fledgling capitalist class. The guilds, for their part, could not compete with either the pace or the volume of production or the price of the finished products.
The introduction of the factory into Europe further eroded the power of the master craftsmen and their guilds. In the latter half of the sixteenth century, factory manufacture came to England. Paper mills, ironworks, cannon factories, and, later, textile factories introduced the idea of centralizing all of the production tasks under one roof with a common energy source—first using water and windmills, and later using coal and steam-powered machinery. Factory manufacture required large sums of capital—often several thousand pounds or more—well beyond the means of even the wealthiest master craftsmen. Only the new class of merchant capitalists could afford the cost of this new kind of manufacturing model.
6
Historian Maurice Dobb makes the point that “the subordination of production to capital, and the appearance of this class relationship between capitalist and the producer is, therefore, to be regarded as the crucial watershed between the old mode of production and the new.”
7
Master craftsmen were finding it difficult to stem the capitalist tide. Many simply gave up and became paid employees in the new capitalist factories. Others fought back by putting up as many firewalls as they could in an effort to prevent the new merchant capitalists from breaking out of the countryside and into larger trading markets. For example, notes the late economist and historian Robert Heilbroner, “Over a journey of a hundred miles, a traveling merchant might fall under a dozen different sovereignties, each with different rules, regulations, laws, weights, measures, money.”
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