Capitalism’s Origins
Capitalism is often discussed as if it is a recent invention. Even in Wikipedia, which I typically find a very reliable source of information, they state that capitalism has its roots in the activities of 9th to 12th century Arab traders. In Europe capitalism is generally thought to have arisen in the middle ages. Some of this has to do with the types of private property rights that were enabled (vs. property rights of the state.) However, Sparta, Ancient Egypt, Carthage and almost every other major civilization had a merchant class, collected taxes and had some form of private enterprise. Thus, it is difficult to see how these civilizations were not capitalist.
What Is The Definition of Capitalism?
Some of the problem is definitional. That is if an economic system is not capitalism then what is it? Typically the different economies are defined as capitalist, socialist, or command (aka centrally planned). Although it is a very loaded word, capitalism in fact has a humble definition.
An economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state. – Apple Dictionary
This would only eliminate civilizations that did not have private owners, but which everything is state controlled and owned. The vast majority of economies through history were certainly not centrally planned and they were not socialist in that they had a small or no safety net when compared to socialist economies that we define as socialist today. Thus, its hard not to come to the conclusion that the majority of economies presently, and through human history have been capitalist.
A little known fact to most Americans is that centrally planned command economies like the one implemented by the Soviet Union are quite rare in economic history. People seem to generally enjoy denouncing communism, but firstly, the Soviet Union was not actually communist, and secondly, centrally planned economies are an aberration historically. It seems historically incoherent to rail against something that was a really just a historical anomaly.
Missing Scholarship
Another problem is that of scholarship. From my literature review I did not find many books that dealt with capitalism past the last few hundred years.
Fernand Braudel’s The Wheels of Commerce is considered one of the most comprehensive historical account of capitalism, but it only covers back to the 15th century.
Therefore its important to consider that economics history is not a significant topic in the study of history generally. History has a much stronger emphasis on art, politics and warfare. Notice the number of books on these topics vs. the history of economics. In all of my exposure to economics only one person, Michael Hudson, has brought up much about the history of economics. He actually pointed out that the Mesopotamians had in a way a better understanding of banking than we do today, because they understood that debt grows in a constant linear fashion, while the economy grows in an S pattern. The result being that interest payments eventually outstrip many borrower’s ability to repay this debt. The answer was that after a new king came to power, the debt was forgiven and the slate was wiped clean. It is unlikely that Goldman Sacks would like most people today to be aware of what the Mesopotamians understood thousands of years ago.
The study of economics is incredibly restricted in its historical analysis. Providing examples from the 1920s is about as far back as most economists go. In fact this is a tremendous blind spot of the profession because its sampling of the human experience is just so small, and it makes the recent history seem more important than it actually is. While political historians think nothing of going back to ancient Egypt to discuss the system at the time vs. more modern systems, economists almost never do this.
Much more seems to be known about Renaissance painting than the Renaissance economic system. However, this painting my Michelangelo was paid for by the Catholic Church, which was in fact a capitalist enterprise and was apart from the state. Secondly, books in history are filled with discussions of merchants, seafaring traders and marketplaces. These are all hallmarks of capitalism.
Missing Importance of Oil
Most people who write on economics and business tend to lack historical economics training or understanding, and almost always have a low exposure level to science. Deprived of this exposure, they tend not to know what is and is not possible in science. However, the problem is that understanding economics requires understanding science at at least a basic level. Because they largely do not, this causes writers to overemphasize economic systems vis-a-vis technological changes. This much is certainly true:
- Current economic patterns would cease to exist without cheap a power source.
- World population and economic growth correlate much more strongly with the discovery of and exploitation of petrochemicals rather than with capitalism.
Why Oil Made Such a Difference
It is important to consider how energy dense oil is. Oil contains as much energy in one gallon as a man can produce work in one entire year. This gallon can be purchased for $2 in the US. It also is comparatively easy to transport, store and handle. However, if this amazingly cheap and concentrated energy source is clearly such a boon for human civilization, why is it rarely discussed by economists? Why do most the discussions regarding the phenomenal economic growth over the past 100 years always tend to focus on the economic system? Why is capitalism seen as something novel when it goes back at least 6000 years to ancient Egypt?
Conclusions and the Misinterpreting History
The problem of misinterpretation of history is a serious one. If we are lead to believe that it is economic systems that were responsible for the change in standards of living over the past century, then we will focus on our economic system. However, what if that interpretation is wrong. What if capitalism has been there all along, but it was the discovery of an unlimited (in the medium term) and cheap fuel source that has been responsible for the growth. How does this change things? And also how does this change our interpretation of the future when this fuel source runs out, which it is about to. Furthermore, how does it interpret out projections for the future if we come to learn that there is no substitute source of energy that can match what oil offered us in terms of power density, transportability and ease of access?
This chart roughly estimates the decline of the world population after oil is no longer as abundant.
Its an important question, because there is no substitute for oil, which means that when peak oil comes, we will find out very quickly if our standard of living is based upon capitalism (something we created) or an inexpensive power source (something that was essentially given to use by the planet). I think it is entirely possible that we fixated on capitalism to explain the improvements in the standard of living for a reason. It makes us feel as if we are in more control of our destiny, and makes it feel as if the improvements over the past 100 years have more to do with us, and less to do with luck.
References
http://www.fjkluth.com/sparta.html
Oil, coal and gas were discovered in China about 2000 years ago, yet did not give rise to steam trains or computers. And capitalism is defined more by its tendency to produce to make money (capital) than by markets, merchants and ‘private’ owners. The mandatory goal of economic growth in money terms, driven by competition, gives the market and international trade and modern industry their ‘capitalist’ character.
The idea that we are not in control of our destiny but at the mercy of ‘luck’ or ‘the planet’ is purely superstitious.
The discovery of a material is not really the issue. if you use oil for a heating lamp, it does not necessarily mean that you have combined the necessary technologies to exploit it. Oil as only exploited in a large scale in 1920′s moving forward to the present time. All that you need to do is look at this chart (see the link), oil production was virtually nonexistent prior to the 1900s.
http://www.global-greenhouse-warming.com/images/OilProductionGraph.jpg
I am presenting a view educated by the natural sciences, but not appealing to people because of the egotism of humans, they like to propose that they are responsible to things that they really did not have much control over. We are more than 1/2 through all petroleum reserves. When oil is no longer avaialble, our civilization will completely change, and most likely the world will have to be removed of most of the world’s population as it is only sustainable through the use of petrochemicals. The decline will not be pretty, and if I know human nature, no preparations or adjustments to our wants or desires will take place, so the population will have to be thinned the “old fashioned way.”
The discovery of the material might well be the issue if you believe that the ‘phenomenal economic growth over the past 100 years’ should not ‘focus on the economic system’. Why didn’t ancient China, given a couple of millennia, develop the technologies to exploit oil as it was from the 1920s on? Why did the ‘scientific revolution’, as well as the industrial one, occur in Europe and not China? Why did Europe use Chinese inventions (gunpowder, printing, the magnetic compass) to take over much if the world, and not China?
Also, how can we be sure that oil or natural gas will run out? If the ‘abiotic’ theory is correct they might last for thousands of years. If it isn’t, then they can be made from coal, or may exist in vastly greater quantities than we beleve at present, albeit at greater depths. Why is there no substitute(s) for oil?
Finally, what is ‘human nature’? Might it not have something to do with capitalist society?
You ask a lot of questions for which I don’t have the answer to. The main issue is not who, but when the internal combustion engine was developed. A number of supporting technologies needed to be developed before this could happen. It could have happened any number of times, but it just so happened that it occurred at the turn of the century, which basically changed everything. This began the countdown to the eventual complete depletion of oil resources.
It is firmly established that oil resources are declining. This is described in the excellent documentary “A Crude Awakening,” and is widely accepted now by oil geologists. The hypothesis was proposed in the 1950s but was rejected until roughly the 1980s if my memory serves. It was not known by the general public until around the middle of this decade, and of course most people are still unaware of it. The reason they know this is that they can chart the new finds of oil, and the are constantly decreasing, with most oil being pulled from old finds such as in Saudi Arabia and the North Sea. There is another issue, which is directly related to the current catastrophe in the US gulf, as the easy oil has been drilled, it becomes necessary to go deeper and deeper and also to search for poorer and poorer quality oil. Peak oil holds that after Peak Oil, each successive gallon becomes more expensive and more environmentally damaging to harvest. BP was drilling in 5000 feet of water, when the leak began, BP had no way of capping the well, and it has never been done before at that depth. However, they were drilling to a depth of 25,000 feet, in violation of their permit. And this is the point, with each passing year, the oil get more difficult, and more dangerous to extract.
My argument is that capitalism is quite old. If you name a prosperous empire from the past, they most likely were practicing from form of capitalism. Capitalism is not particularly innovative and not new. What has been new is our ability to harvest a one time energy source. When that goes, so will much of our prosperity. This is why its so important to be begin to engaging in a crash program of global birth control in order bring down our numbers so that our ranks do not have to be thinned in the historical ways that it is done.
Sorry, I should say “if you believe that the discussions of the ‘phenomenal economic growth over the past 100 years’ should not ‘focus on the economic system’.”