The Historical Development of Capitalism

Feudalism and the Birth of Capitalism The Emergence and Nature of Capitalism The Industrial Revolution Creation of an Industrial Working Class, Population Effects Growth of Global Markets and Colonialism: Capitalism on a World Scale Effects of Colonialism

Feudalism and the Birth of Capitalism

From hunting & gathering to domesticated agriculture (animals and crops) Slave-based empires (e.g. Roman) and their feudal successors (ca. 5th Century) A form of economic and social relations that extended in Europe to 15th century Settlement in North America did not succeed feudalism, but was capitalist in character from the outset

Characteristics of Feudalism
Tradition shaped life and work In Europe the church was the dominant political and ideological institution Aristocratic land-owners formed the ruling class, who extracted rents from tenant farmers (often serfs) in low productivity agriculture Feudal cities often fortified with guilds markets, where universities were established A hierarchy of feudal towns, mostly small trading centers, with negligible interregional trade

Characteristics of Early Capitalism

Markets: buyers and sellers of goods & services at agreed upon prices Market types: perfect competition perfect monopoly oligopoly (and other types) The profit incentive = revenue cost Dynamic behavior of buyers and sellers, including incentives from innovation in products and production processes Class relations: merchants & burghers vs. the old aristocracy. Unlike feudal Europe, workers under capitalism must sell their labor power to survive. Thus the process of commodification extended to include the capacity to labor.

Alternative Models of Competition

Barriers to Entry - High
One Seller A Few Sellers Limited Quantity of Sellers Many Sellers One Buyer Monopsony A Few Buyers Oligopsony Many Buyers Monopoly Oligopoly Monopolistic Competition Perfect Competition

Barriers to Entry - Low

Attributes of Alternative Market Types

Perfect Competition Homogeneoous products Each producer makes a small share of output No one seller influences Prices Entry to market is easy Flow of information is Perfect, eliminating excess profit Markets are fluid Monopoly Unique Product One producer makes all of the product Prices set to maximize profit High Barriers to Entry Monopolist is able to control the market Market is rigid Oligopoly Similar Products Several sellers divide the market Prices set through pricing strategies High Barriers to Entry Oligopolists engage in strategic behavior competitive or collusive Market may be unstable, competitive strategies to create stability: product differentiation, advertising, industry agreements

Pure Monopoly

Early Capitalism, Continued

Finance: replacing barter with money, and institutions to handle and regulate money Uneven development as an inevitable outcome, historically persistent, at scales ranging from local to global Long-distance trade fueled by transport innovation allowing regional specialization based on principle of comparative advantage Ideological change printing/reading, religion, science, the Enlightenment a worldview that stressed secularism, individualism, rationality, progress, and democracy.

Early Capitalism, Continued

Feudal empires with multiple nation-states Replaced feudal monarchies with nation-states Nation states supporting development of capitalism through regulations, public investment and programs (e.g. education, defense, trade protectionism BUT: these institutions do not preclude transnational capitalist development, evident in this era of globalization

The Industrial Revolution

Industrialization as a process with multiple transformations in inputs, output, and technologies. Driven by:
Harnessing inanimate sources of energy

wood-coal-petroleum & gas

Technological innovation Rising Productivity

Spatial diffusion of the Industrial Revolution

Cycles of Industrialization Kondratiev Long Waves

The Fifth Wave IT & producer Services

Consequences of the Industrial Revolution

Creation of an Industrial Working Class
Rise of organized labor

Urbanization industry as city forming activity Population Effects: Malthus warning vs. productivity increases, health improvements, lowered birth rates Growth of Global Markets & International Trade transport improvement, international finance, timing of development