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McNally. Political Economy and the Rise of Capitalism

McNally. Political Economy and the Rise of Capitalism

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Published by: Charles Cobalt Forsythe on Jun 22, 2010
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Political Economy and the Rise of Capitalism
 A Reinterpretation
David McNally
Berkeley · Los Angeles · Oxford 
© 1990 The Regents of the University of California
This book challenges the conventional wisdom about classical political economy and the rise of capitalism. It is written in theconviction that modern interpretations of political economy have suffered terribly from acceptance of the prevailing liberal view of the origins and development of capitalist society. By the liberal account, capitalism emerged out of the centuries-old competitiveactivities of merchants and manufacturers in rational pursuit of their individual economic self-interest. Over time, this account claims,the persistent activity of these classes developed new forms of wealth and productive resources and new intellectual and culturalhabits, which eroded the existing structure of society. The rise of capitalism is thus explained in terms of the rise to prominence of themost productive, rational, and progressive social groups—merchants and manufacturers. Not surprisingly, classical political economycame to be seen as an intellectual reflection of the ascendence of merchants and manufacturers and as a theoretical justification of their interests and activities.This book argues that capitalism was the product of an immense transformation in the social relationships of landed society and thatthis fact is crucial to understanding the development of classical political economy. Without a radical transformation of the agrarianeconomy, the activities of merchants and manufacturers would have remained strictly confined. By no inexorable logic of their ownwere mercantile and industrial activities capable of fundamentally transforming the essential relations of precapitalist society. Rather,the changes in agrarian economy, which drove rural producers from their land, forced them onto the labour market as wage labourersfor their means of subsistence, and refashioned farming as an economic activity based upon the production of agriculturalcommodities for profit on the market, established the essential relations of modern capitalism. In what follows, these processes aredescribed in terms of the emergence of 
agrarian capitalism
I further argue that the classical economists of the seventeenth and eighteenth centuries were generally aware of the crucialimportance of agrarian social change, that such change figured centrally in their account of the emergence of modern society, and thatthey conceived of capitalist society in largely agrarian terms. Classical political economy thus represents a social and economictheory of agrarian capitalism. The greatest political economists of the period constructed a comprehensive theory of state and societyin which the essential relations of economic life were those between landlords, capitalist employers, and wage labourers. Agricultural production was for them the most fundamental sphere of the emerging capitalist economy; they generally conceived commercial andindustrial activity as subordinate (for economic, political, and moral reasons) to production on the land.My argument thus challenges the traditional view that the classical political economists constructed an economic liberalism designedto justify the individualist and self-seeking activities of merchants and manufacturers in a market society. According to the traditionalline of thought, political economy developed a theoretical defence of commercial and industrial capitalism which contained threeinterrelated elements. First, it conceived of the capitalist market as a mechanism which automatically harmonized the selfish actionsof individuals without intervention by the state. Second, it saw an expansion of national wealth as the automatic result of a system of market exchange which harnessed selfish individual passions, created a network of economic interdependence (organized in a socialdivision of labour), and rewarded industry and frugality. Third, it presented the self-seeking economic behaviour of merchants andmanufacturers, through the wonder of competitive markets, as beneficial to society as a whole and as the most enlightened basis uponwhich to found the economic policies of the state. For all these reasons, the traditional line argued that classical political economyconstituted an ideological defence of the modern system of industrial capitalism.Adam Smith is widely identified as the dominant figure in the development of economic liberalism. In his writings more than those of any other political economist, the traditional view finds a sustained theoretical rationalization for industrial capitalism and itsrepresentatives. Harold Laski writes, for example, in
The Rise of European Liberalism
thatWith Adam Smith, the business man is given his letters of credit. Liberalism has now a fully analysed economicmission. Let the business man but free himself, and, thereby, he frees mankind.... With Adam Smith the practicalmaxims of business enterprise achieved the status of a theology.
Consistent with this approach, another commentator has argued that the central achievement of Adam Smith was to "justify theactivities of embryonic industrialists" through the elaboration of "an economic analysis of civil society."
Likewise, Eric Roll in
 A History of Economic Thought 
has claimed that Smith "gave theoretical expression to the essential interests of the business class"; hemaintains that Smith was merely building upon an intellectual justification for industrial capitalism which had been in process of construction for nearly two centuries:
In the eighteenth century the development of modern industrial capitalism was greatly accelerated. Its theory,embodied in the works of the classical economists, comes to maturity in the period of forty years that separatesSmith's
Wealth of Nations
and Ricardo's
. But its roots reach back almost two centuries.
According to this view, the development of economic liberalism, advanced most clearly by Adam Smith, was a theoretical expressionof developments in the economic and social spheres—the rise of industrial captialism—and an intellectual justification for theactivities and practices of that class most closely associated with this process, the industrial bourgeoisie. Indeed, one moderncommentator has begun a study of Smith on the "axiomatic premise" that "capitalism is an embodiment of Smithian principles."
The present study takes issue with this argument. In the chapters which follow I shall argue not only that classical political economy prior to Ricardo did not represent the interests of industrial capitalists but also that the classical political economists up to andincluding Smith were strongly critical of the values and practices associated with merchants and manufacturers.
Much as they mayhave approved of certain important economic effects of division of labour and market exchange, the greatest classical economists didnot seek to ground political life in the activities of self-seeking individuals. Nor did they seek to advance a justification for industrialcapitalism. On the contrary, the pre-Ricardian economists betrayed a definite bias in favour of the agrarian, not commercial or industrial, classes and a profound fear that the "commercial spirit" of their age might undermine the agrarian foundations of societyand corrupt political life by replacing the classical goal of a state operating according to public interest and public virtue with a polityravaged by the pursuit of private interest.On the basis of these concerns and of their analysis of those processes which were transforming traditional rural economy, the political economists examined in this study developed a theory of agrarian capitalism. At one level, their investigations constitutedimportant attempts to comprehend the most significant social and economic changes of their age. The industrial revolution was not afact of life before the publication of Smith's
Wealth of Nations
. The primary focus for these writers was thus agrarian, not industrial,change. At another level, their theories of agrarian capitalism contained an important element of prescription. Concerned to reap the beneficial effects of economic growth while resisting moral and intellectual corruption and the decline of civic virtues, they lookedforward to the development of a capitalist agriculture which could sustain a state uncontaminated by private interests. Their economictheory of agrarian capitalism thus served both a moral and political purpose—which is to say that it was
economy in thefullest sense.There were, however, profound differences between the conceptions of the relationship of the state and agrarian capitalism whichcharacterized British and French political economy. As I shall demonstrate, British political economy developed from theCommonwealth tradition of political thought, which conceived of the state largely in terms of the self-government of landedgentlemen. By contrast, French political economists—especially the Physiocrats—thought in terms of a centralized absolutemonarchy constituted over and above civil society as a bulwark against the influence of particular interests upon the state. Thesedifferences, as I shall show, correspond to the quite different paths of social and economic development taken by Britain and Francein the early modern period.Despite these differences with respect to the nature of the state, the British and French political economists alike advanced a theory of and program for agrarian capitalism. They sought to direct the processes of capitalist development to preserve the agrarian basis of society and, in so doing, prevent excessive influence upon economic development and political policy by commercial and industrialinterests. For the Physiocrats, such an objective required that the state shape social and economic development. For Adam Smith,however, such development required merely that the state break the manipulative activities of merchants and manufacturers andguarantee an institutional order in which no section of society would have any form of monopoly power. But such a state could not be based upon commercial or industrial interests, since these were incompatible with those of the public; instead it would have to restlargely upon enlightened, public-spirited representatives of the landowning class.Eighteenth-century Britain and France were—albeit with major divergences—societies in transition from feudalism to industrialcapitalism. The characteristics of the transitional society of eighteenth-century Britain we will describe as agrarian capitalism. France,labouring under the creaking structures of feudal absolutism, had not experienced the breakthrough to agricultural improvement andeconomic growth which had occurred in England. Yet the frame of reference for her most important political economists was withoutdoubt the system of agrarian capitalism which had emerged in Britain. No major thinker in Britain or France had yet grasped thateconomic development based on capitalist farming (which largely separated the direct producers from the land and transformed theminto wage labourers) led in the direction of industrial capitalism. Subsequent attempts to depict these earlier theorists as prophets of nineteenth- and twentieth-century capitalism have seriously distorted our understanding of their theoretical efforts and of the societythey attempted to understand and influence. As I shall show in the course of this work, the classical political economists of theseventeenth and eighteenth centuries developed an agrarian-based model of the emerging capitalist economy, adhered to valuesmarkedly different from those generally associated with industrial capitalism, and accorded priority to the formulation of just and benevolent policies which could guide civic-minded statesmen in the pursuit of wealth, power, prosperity, and justice. I shallconclude by arguing, however, that their acceptance of the basic social relations of capitalism undermines any attempt to employ thework of these theorists as the basis of a concrete and comprehensive critique of modern industrial capitalism.
Chapter One
From Feudalism to Capitalism: The Historical Context of Classical Political Economy
Classical political economy, wrote Karl Marx, "begins at the end of the seventeenth century with Petty and Boisguillebert."
Inmaking this statement, Marx not only identified the historical period of the emergence of classical political economy, he also
implicitly identified the countries of its origin—England and France, the respective homes of Petty and Boisguilbert.
Classical political economy developed in England and France during the decisive phase of the "great transformation" of Europe which usheredin capitalist society. In one sense, classical political economy was an intellectual product of this transformation. In another sense, aswe shall see, classical economics was also an active element in this historic transition; it represented in part an attempt to theorize theinner dynamics of these changes in order to shape and direct them.Although a certain commonality of problems associated with the transition from feudal to capitalist society provoked the theoreticalefforts of the classical political economists, the divergent paths of English and French development during the seventeenth andeighteenth centuries forced theorists in these two countries to conceive the problems of economic development in markedly differentways. In England, the emergence of agrarian capitalism during this period made analysis of agricultural production—and especiallythe problem of increasing the agricultural surplus—the central focus of British political economists. In France, however, the rise of the absolute monarchy (and its appropriation of a substantial share of the economic surplus) placed the issue of the relationship between state and society in the forefront of the concerns of French economic writers. Proposals to reform the rural social structurewere often central to their analysis of state and society. But French agriculture failed to make the breakthrough to self-sustaininggrowth experienced by England; and this crucial fact largely accounts for the different emphases of French and English politicaleconomists. This chapter sketches the basic patterns of social development in England and France to illuminate the background for the theoretical efforts of English and French political economists in the seventeenth and eighteenth centuries.
The Crisis of European Feudalism
The view that late medieval feudalism experienced a general social crisis appears to date from Marc Bloch's
 French Rural History,
 published in 1931. Since the 1950s, economic historians have generally identified the fourteenth century as a period of feudal crisis.Indeed, most would accept the view of Michael Postan that western Europe underwent an "agricultural crisis of the fourteenth andfifteenth centuries."
It is further agreed that this sustained crisis was preceded by a prolonged expansion of the feudal mode of  production.The basic historical sequence seems clear enough. After the year 800, European feudalism underwent a slow, sometimes sporadic, butnevertheless steady growth. In the middle of the eleventh century a sharp and qualitatively new upswing began. Bloch quiteaccurately described this period as the beginning of the "second feudal age."
At the heart of this process of growth was horizontalexpansion—the reclamation of previously uncultivated land. The period from 1150 to 1240 in particular saw a major expansion of ancient villages and the creation of new ones. Reclamation appears to have begun as a growing population pressed against theavailable cultivated land. This movement of reclamation and colonization began to exhaust itself in the middle of the thirteenthcentury. Reclamation encouraged further population growth and extended onto increasingly marginal lands. The result was a classiccase of diminishing returns: as decreasingly fertile land was brought under cultivation, productivity and per capita yields fell.
Eventually, the returns on the investment involved in reclamation could no longer be justified. Nonetheless, population continued torise for a considerable period after declining productivity had put an end to reclamation. As a result, the land-labour ratio fell as productivity slumped. The inevitable result was a crisis of subsistence.The fourteenth century experienced a catastrophic decline in the level of the European population. Famines were legion throughoutthe century. Moreover, an extended period of substandard diet probably increased the susceptibility of the population to contagiousdisease. Certainly the dimensions of the Black Death must have been influenced by the deterioration of dietary standards. Sodisastrous was the rise in mortality that the population of Europe appears to have been halved between 1315 and 1380. Moreover, thiswas a crisis which persisted. The evidence suggests that the European economy experienced two full centuries of stagnation anddecline. Stagnation set in during the middle of the thirteenth century. The crisis and decline began in the first quarter of the fourteenthcentury. From then on, most of Europe experienced a downward spiral until the middle of the fifteenth century. In other words, duringthe period from 1240 to 1440 European feudalism knew little other than stagnation and decline; and for over a century (from 1320 to1440) it underwent a major contraction.
Furthermore, so deep-rooted was this crisis of late medieval feudalism that it carried over inmuch of Europe into the seventeenth century (in some cases following a half century or so of recovery in the sixteenth century).The feudal mode of production contained no self-correcting mechanisms for resolving this crisis because of the surplus-extractiverelations which characterize feudalism. Feudal lords, as Robert Brenner has pointed out, did not have the option of increasing their incomes through capital investments that would raise the productivity of peasant labour and enable peasants to produce more outputduring their surplus labour time. Since feudal peasants possessed their own means of production, their economic reproduction was ina sense independent of the surplus-extractive demands of the lords. The production of a surplus product required extra economiccompulsion over a labour process which the lords did not control or direct. To invest in improving the technical basis of this labour  process would have been an extremely risky undertaking. Furthermore, because neither lords nor peasants depended upon access tothe market for their subsistence (although they might well enter into market transactions by choice) they were under no directeconomic pressure to produce competitively. As a result, the drive to innovate in order to raise productivity was absent as a generaldynamic of feudal economy; the market did not impose this necessity upon peasants or lords, and the organization of the labour  process was a disincentive to innovative investments by the lords.
The pressure on seigneurial incomes created by crisis did not therefore lead to investment and development. On the contrary, theefforts of lords to raise their depressed incomes further exacerbated the crisis. They tried to increase their incomes by squeezing theliving standards of their peasants, primarily through increased rents or labour services. Continual pressure from the lords tended,however, to prevent the peasants from accumulating a surplus, that is, an amount above their own subsistence needs which would beadequate to replenish the soil and maintain or improve its fertility. The response of lords to crisis thus led to a decline in the productive powers of the most basic means of production in the feudal economy—the land.

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