How and why did capitalism originate?

‘Workers are most vital force created by capitalism’

Below is an excerpt from The Long View of History by George Novack, one of Pathfinder’s Books of the Month for December. This Marxist introduction to history is based on talks given in September 1955. Copyright © 1960 by Pathfinder Press. Reprinted by permission.

BY GEORGE NOVACK

How and why did capitalism originate?

Once money had arisen from the extension of trading several thousand years ago, its use as capital became possible. Merchants could add to their wealth by buying goods cheap and selling them dear; moneylenders and mortgage holders could gain interest on sums advanced on the security of land or other collateral. These practices were common in both slave and feudal societies.

But if money could be used in precapitalist times to return more than the original investment, other conditions had to be fulfilled before capitalism could become established as a separate and definite world economic system. The central condition was a special kind of transaction regularly repeated on a growing scale. Large numbers of propertyless workers had to hire themselves to the possessors of money and the other means of production in order to earn a livelihood.

Hiring and firing seem to us a normal way of carrying on production. But such peoples as the Indians never knew it. Before the Europeans came, no Indian ever worked for a boss (the word itself was imported by the Dutch), because they possessed their own means of livelihood. The slave may have been purchased, but he belonged to and worked for the master his whole life long. The feudal serf or tenant was likewise bound for life to the lord and his land.

The epoch-making innovation upon which capitalism rested was the institution of working for wages as the dominant relation of production. Most of you have gone into the labor market, to an employment agency or personnel office, to get a buyer for your labor power. The employer buys this power at prevailing wage rates by the hour, day, or week and then applies it under his supervision to produce commodities that his company subsequently sells at a profit. That profit is derived from the fact that wage workers produce more value than the capitalist pays for their labor.

Up to the twentieth century, this mechanism for pumping surplus labor out of the working masses and transferring the surpluses of wealth they create to the personal credit of the capitalist was the mightiest accelerator of the productive forces and the expansion of civilization. As a distinct economic system, capitalism is only about 450 years old; it has conquered the world and journeyed from dawn to twilight in that time. This is a short life-span… .

This speeding up in social progress is due in large measure to the very nature of capitalism, which continually revolutionizes its techniques of production and the entire range of social relations issuing from them. Since its birth, world capitalism has passed through three such phases of internal transformation. In its formative period, the merchants were the dominant class of capitalists because trade was the main source of wealth accumulation. Under commercial capitalism, industry and agriculture, the pillars of production, were not usually carried on by wage labor but by means of small handicrafts, peasant farming, slave or serf labor.

The industrial age was launched around the beginning of the nineteenth century with the application of steam power to the first mechanized processes, concentrating large numbers of wage workers into factories. The capitalist captains of this large-scale industry became masters of the field of production and later of entire countries and continents as their riches, their legions of wage laborers, social and political power, swelled to majestic proportions.

This vigorous, expanding, progressive, confident, competitive stage of industrial capitalism dominated the nineteenth century. It passed over into the monopoly-ridden capitalism of the twentieth century, which has carried all the basic tendencies of capitalism, and especially its most reactionary features, to extremes in economic, political, cultural, and international relations.

While the processes of production have become more centralized, more rationalized, more socialized, the means of production and the wealth of the world have become concentrated in giant financial and industrial combines. So far as the capitalist sectors of society are involved, this process has been brought to the point where the capitalist monopolies of a single country, the U.S., dictate to all the rest… .

The spokesmen for capitalism say that nothing more remains to be done except to perfect their system as it stands, and it can roll on and on and on….

Socialists give a completely different answer based upon an incomparably more penetrating, correct, and comprehensive analysis of the movement of history, the structure of capitalism, and the struggles presently agitating the world around us… .

Capitalism has produced many things, good and bad, in the course of its evolution. But the most vital and valuable of all the social forces it has created is the industrial working class. The capitalist class has brought into existence a vast army of wage laborers, centralized and disciplined, and set it into motion for its own purposes, to make and operate the machines, factories, and all the other production and transportation facilities from which its profits emanate.

The exploitation and abuses, inherent and inescapable in the capitalist organization of economic life, provoke the workers time and again to organize themselves and undertake militant action to defend their elementary interests. The struggle between these conflicting social classes is today the dominant and driving force of world and American history, just as the conflict between the bourgeois-led forces against the precapitalist elements was the motivating force of history in the immediately preceding centuries.