From the dawn of history until well into the twentieth century, most people were peasants—subsistence farmers living in tightly knit communities. Survival depended on common effort. Such was particularly true in the great river basins of the Middle East, India, and China, which relied on irrigation, but even in regions of dry farming like Europe, planting and the harvest required that the entire community work together. Peasant communities had a variety of social gradations, ranging from those who enjoyed some luxuries to others who had barely enough to survive, but most of the time a sense of common interest overrode such divisions—particularly when it came to dealing with outsiders.
Although peasants usually generated a surplus, they faced a constant struggle with landlords and tax collectors eager to appropriate it. This class—for the lack of a better term, the gentry—sometimes planned and coordinated valuable public works like irrigation projects, but for the most part it contributed little to economic life, instead focusing on government and culture. The elite’s levies financed art, literature, religion, and philosophy, and it usually cited these accomplishments as proof of its superiority to the peasantry, on which it depended. Yet the gentry’s own language often revealed the ugly truth of exploitation. Russian landlords spoke of “screwing” money out of peasants; Chinese mandarins devised “squeezes” to get cash; and medieval European nobles used “Bad Customs” to extract payments from villages. A wide variety of social gradations existed within the gentry, but with respect to the peasantry, most recognized their common interest in maintaining control.
The gentry were not capitalists. Their primary occupation was politics, and most invested whatever surplus they had in political or cultural pursuits. The rulers described in the Iliad and Beowulf used their wealth to secure and reward followers; Egypt’s pharaohs built pyramids and temples; and medieval Europe’s elite constructed castles and endowed monasteries and cathedrals. When members of the gentry did invest for income, they usually bought more land farmed by more peasants.
Even had some of the gentry wanted to become rural capitalists, they would have faced daunting obstacles. The communal nature of farming and the constant struggle between peasants and gentry encouraged the development of incredibly complex systems of ownership for society’s chief economic asset: farmland. Sometimes villages owned land in common, with different families having the right to grow crops on certain portions of the common patrimony, while other parts, like meadows, were open to all. A landlord would usually receive rent from the village and perhaps other benefits as well, such as the labor of peasants for one or two days a week in fields that he farmed himself. In other cases, one individual collected rent from land while another had the right to farm it, a right he could lease to a third party. Each society—sometimes it seems each village—had its own rules, but the point was always the same: to eliminate conflict among villagers and between them and the gentry by specifying clearly who was entitled to what. Unfortunately, harmony proved elusive because all interpreted, or reinterpreted, the rules in their own favor, and each conflict usually spawned a new set of rules. Generally, the more advanced and stable a society, the denser the network of rules governing land.
Ownership of land meant not control but specific rights—the grain from a certain part of the common fields, or an annual payment from the cultivator of a rice paddy. Any significant innovation required the consent of many, which was usually difficult to obtain because change conferred benefits unevenly or, for some involved, not at all. Intense distrust between the gentry and the peasantry further complicated the situation. Technical progress accrued but at an evolutionary rather than revolutionary pace. In the tenth century, peasants in northern Europe began to use heavy moldboard plows with iron blades that allowed them to exploit fully the dense, rich soil of the region. These devices not only made farming possible in hitherto barren areas, but by turning over the heavy earth and bringing nutrients to the surface, they made agriculture more productive. This useful technology spread by osmosis, with villages adopting the new plow when they saw others prospering from it. Generations passed before these devices became standard.
Traditional societies also included craftsmen and merchants. The former ranged from the village blacksmith to the masters of large workshops who ranked among the urban elite. Rural craftsmen were usually valued members of their communities and generally shared the outlook of well-to-do peasants. Urban craftsmen sought to create their own version of the peasant village by banding together in guilds that regulated prices, quality, and most important, entry into the trade. Most craftsmen approached economics as did peasants and the gentry, assuming that wealth was more or less fixed and that they could best secure their fair share of it by collective action and legal restriction. The object was to provide a living for all engaged in the trade, albeit not an equal one. The practical result was a welter of rules that governed almost every dimension of each craft and, perhaps more important, an attitude that discouraged innovations which might disrupt the guild’s complex balance of power. In one extreme case, authorities in Danzig, Poland (now Gdańsk), apparently killed the inventor of a loom that could weave several ribbons at once, because it threatened established producers with ruin. Technical advances did accrue but, again, in an evolutionary rather than a revolutionary fashion.
Merchants, ranging from itinerant peddlers to rich men who owned warehouses and ships, represented the chief exception to this pattern. They existed from a very early date. Early in the second millennium B.C., Assyrian merchants exchanged cloth from southern Mesopotamia for copper and silver from Anatolia, often financing this trade with credit. Their activity had a capitalist flavor to it, but no one claims that ancient Assyria was a capitalist society simply because some of its merchants acted like capitalists, any more than ancient Rome, classical China, Mogul India, or medieval Europe were capitalist societies because they had wealthy merchants. However successful in their own sphere, merchants rarely penetrated other sectors. The individual peasant might not count for much in traditional societies, but collectively they were powerful. Peasants were deeply suspicious of outsiders, whom they believed—often with good reason—sought to exploit them. They were cautious about innovation because they lived close to subsistence. An unsuccessful experiment meant not simply the loss of an investment but quite possibly starvation. Because of the common effort required to farm the land and to resist the exactions of the gentry, peasants faced tremendous pressure to conform. The individualist was rare. These prejudices all worked against the reorganization of rural life along capitalist lines; that is, making constant changes to secure maximum economic returns. Peasants were happy to sell their surplus to merchants, but it was difficult for capitalists to penetrate any deeper into the countryside.
The gentry were as suspicious of merchants as the peasantry were. They resented the wealth that some merchants accumulated simply by moving things from one place to another. Such fortunes challenged not simply the established power structure but also the moral order: virtue and culture, not an aptitude for buying low and selling high, should determine access to wealth. The gentry controlled the government and imposed various restrictions on capitalists, such as the prohibition by Islam and the Catholic Church on charging interest, and the sharp constraints on foreign trade by China’s Ming and Qing dynasties and Japan’s Tokugawa Shogunate. Facing limits on their social and political aspirations, successful merchants often bought their way into the gentry, purchasing land for themselves and offices and titles for their children, in the process abandoning capitalist enterprise. At the same time, outsiders like Jews or Armenians gravitated to trade. Such merchants could amass large fortunes, but as outsiders they faced particularly stiff barriers if they wanted to expand their activities beyond commerce.
Traditional societies differed from each other in many important ways. The gentry of medieval Europe was a military aristocracy with a leavening of clerics, whereas that of classical China consisted of well-educated bureaucrats. Peasants grew rice, wheat, or barley, each of which imposed a very different discipline on farmers. Christianity, Islam, Buddhism, or paganism predominated at different times in different regions. Some governments were despotisms, others republics that sought to balance various social interests. Some states encompassed only a city whereas others extended over much of a continent. Yet the constant struggle between gentry and peasantry, the insularity of peasants, and the complex rules governing the chief industry—agriculture—as well as many crafts, were universal. In almost every case, merchant capitalists played an important role in commerce and enjoyed considerable wealth, but they remained subordinate to the gentry and excluded from the largest industry by far, agriculture.
These societies did advance economically, applying new technology and expanding trade so that producers could specialize. The Roman Empire, the Islamic world under the Abbasid Caliphate, Europe during the High Middle Ages, Mogul India, and China during the Sung, Ming, and Qing dynasties all supported large populations with an average per capita income well above subsistence. Yet progress was incremental. Sung China developed blast furnaces that used coke rather than charcoal, and medieval Europe pioneered wind and water mills; but these advances did not inaugurate an industrial revolution. The Chinese and Europeans adopted these advances gradually—in the case of China, only a few provinces ever had coke blast furnaces. Instinctive conservatism accounts for part of this caution. Italians developed double-entry bookkeeping in the medieval era, but despite its obvious advantages centuries passed before it became universal even among merchants. Structural factors also limited growth. Money for improvements had to come from current income because credit for capital investment was almost unknown. Markets were small. Much of the population was poor, and many supplied their own wants. Perhaps most important, social and political institutions blocked innovation. Because landholding was fragmented, changing agricultural practices was a slow process, requiring generations. Guilds resisted innovations that might disrupt markets and hurt some members, and they could usually mobilize political support for their efforts. Even in prosperous eras, the output of traditional societies grew only a little faster than the population, and the balance of power within society changed no more rapidly.
The development of capitalism in northwestern Europe in the modern era represents the only major exception to this pattern. Somehow capitalism moved from its traditional ghetto, commerce, to dominate most aspects of economic life. The process was complex, involving a variety of interlocking factors; were it simple, it would have happened earlier. Scholars have offered many explanations for this development. Some point to the conquest of the Americas and the opening of direct trade with Asia after 1500, which not only created immense opportunities for profit but provided the precious metals that allowed Europeans to replace barter with monetary exchange. These events certainly had extraordinary impact, but the link between them and the development of capitalism is complex. Portugal, which first opened trade with Asia, and Spain, which conquered the New World, were laggards in capitalist transformation, falling well behind the rest of Western Europe in the seventeenth and eighteenth centuries. By the seventeenth century, the Dutch and British were driving the Portuguese from the Indian Ocean and taking an ever-larger portion of the commerce of the Americas, particularly the lucrative sugar trade. The newcomers included many capitalists—the Dutch and British East India companies, sugar planters, and independent merchants—who profited immensely from the New World and trade with Asia. Yet they were the product of societies already well advanced toward capitalism.
Other thinkers, most famously sociologist Max Weber (1864–1920), advanced a cultural explanation. Weber attributed the expansion of capitalism to the development of Protestantism, particularly Calvinism. Calvinists did not share the Catholic Church’s suspicion of commerce, as they saw all honest labor as God’s work; and they rejected asceticism, viewing wealth as a mark of divine favor. They considered hard work and saving virtuous, thereby encouraging two qualities important to the successful capitalist. Though plausible, Weber’s argument has flaws. In the fifteenth and sixteenth centuries, the Catholic cities of Northern Italy were the home to Europe’s wealthiest capitalists, who developed key techniques like double-entry bookkeeping. The Reformation was, first and foremost, a German phenomenon, and it coincided with the start of a long-term relative decline of the German economy. Britain and the Netherlands, which saw the most rapid expansion of capitalism in the seventeenth and eighteenth centuries, were indeed Protestant, but France, Belgium, and western Germany, largely Catholic regions, were not too far behind. Weber nevertheless asked the right questions. Capitalism is, above all, an approach to economic life that gives profit priority over tradition and social harmony. Its triumph depended on changes in attitudes.
The enthusiasm for mercantilist thinking in the sixteenth and seventeenth centuries provides important clues to this cultural transformation. It was the first school of economic thought to address the subject separate from philosophy or religion. Today mercantilist thought gets little respect, because even compared to the economic ideas of the late eighteenth century, it seems crude and sometimes wrongheaded. Its advocates considered precious metals the true measure of national wealth and were obsessed with the danger of overproduction, even though at the time they wrote, poverty was pervasive. At times, their enthusiasm for government control shaded into the ridiculous. In the seventeenth century, French authorities issued 2,200 pages of regulations to the masters of textile workshops, of whom at least a third were illiterate. Yet the mercantilists were revolutionaries, even if few recognized it. Unlike many earlier thinkers, they considered commerce, properly directed, central to a healthy society. Thomas Mun (1571–1641), a leading English mercantilist, wrote, “Foreign trade . . . is the great revenue of the King, the honor of the kingdom, the noble profession of the merchant.” Mercantilists proposed eliminating traditional impediments to trade like private tolls, chartering companies and founding colonies to expand commerce, and encouraging manufacturing with subsidies and protection. In short, they offered the first program of economic development as that idea is understood in the early twenty-first century.
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