The Rise of Capitalism in Industry

In the thirteenth century (the late Middle Ages), there were two forces at work creating a more
complicated economic system than that of the craft guilds. (See the notes on the 12 th and 13th
centuries). First, there was the widening market. So long as trade was confined to the town, it
was easy for the craftsman to keep in touch with his customers. A wider market made this
difficult, if not impossible. The final consumer of his goods might be in another town or another
country. The craftsman could not hope to keep in touch with him or carry through the whole
transaction himself. By himself, he would be unable to finance the complete transaction from
the buying of the raw material to the selling of the finished goods, because this would involve
laying out money over a lengthy period of time. In other words, the time had come when there
was room for someone with capital and knowledge of the market to act as intermediary
between producer and consumer.

Another circumstance operated to the same end. So far, the masters of the guilds had been
carrying out all the tasks involved in the process of production. In the woollen industry, for
example, the raw wool had to be combed before becoming yarn; then it had to be woven,
cleaned and dyed until the final piece of cloth was ready to be sold. With a wider market,
craftsmen needed to become more efficient, and thus, division of labour tended to disintegrate
the processes of production. The making of a single commodity came to be split up into several
processes, each being occupied by a single craft. Thus we find distinct crafts of wool-combers,
spinners, weavers, fullers and dyers. This stage of industrial development furnished the basis for
the capitalistic control of industry. On the one hand, the subdivision of processes made the
craftsmen more expert at their jobs, but it also created the necessity for some sort of co-
ordination between the crafts.

It was at this point that the capitalist merchant-employer came on the scene. He combined the
functions of merchant and employer. He purchased the raw material, gave it out to the
craftsmen, collected the partly finished product and then sold the finished article. The craftsmen
were in fact his employees. Though they generally worked at home or in their own workshops
and with their own tools, they were dependent for employment on the merchant, who paid
them on a piece-work basis, e.i. according to the amount of work they had done.

The industrial system thus created has been called the “domestic” or “putting out” system.
Under the guild system, the industrial and mercantile functions were combined in the hands of
the craftsman; under the domestic system these functions were separated. The merchant
managed the commercial side directly, and left the craftsman a purely manual function. The
domestic worker still owned his tools, and, to a certain extent, was his own master. He worked
at home or in his own little workshop with no supervision, but he no longer owned the materials
on which he worked. He was in effect a wage-earner, working on a piecework basis for a
capitalist employer. The market was the pace-maker and production for profit the power that
moved the industrial system.

In Britain the domestic system appeared first in the woollen industry, and in course of time it
became the predominant type of productive organization, and remained so until the industrial
revolution of the 18th century.