The relentless revolution: a history of capitalism (5 page)

Clarity about the nature of the capitalist system could enable us to make wiser policy decisions. Recognizing that capitalism is a cultural, not a natural, system like the weather might check those impulses in American foreign policy framing that assume that becoming like us is a universal imperative. Nor is the market a self-correcting system, as its apologists argue. Ideological assumptions about the autonomy of economics make it hard for us to recognize that the market serves us, not just as individual participants but as members of a society desirous of paying workers living wages, providing universal health care and good schools, as well as making humanitarian outreaches to the world. At a critical moment in the journey of capitalism to dominance, the importance of cultural influences and social considerations was dispatched to a conceptual limbo. We need to drag them back into the light.

In this book, I would like to shake free of the presentation of the history of capitalism as a morality play, peopled with those wearing either white or black hats. Even though every history is always suffused with moral implications, historians don’t have to take sides. Still, they have to recognize how morals influence what people did in the past. Economists like to treat their subject as a science and minimize the moral overtones of wealth distribution, but neglect of people’s powerful sense of right and wrong is an evasion of reality. How could it be otherwise when economic life touches so closely our values and, by extension, our politics? With a better understanding of capitalism, people in democracies can play a much more positive, vigorous role in shaping economic institutions. To those who will disagree with my proposals in this history of capitalism, what I say may seem self-serving, so I present it as an intention rather than an accomplishment. You will have to decide which it is.

Before closing my introduction, perhaps my definition of “capitalism” is in order. Capitalism is a cultural system rooted in economic practices that rotate around the imperative of private investors to turn a profit. Profit seeking usually promotes production efficiencies like the division of labor, economies of size, specialization, the expansion of the market for one’s goods, and, above all, innovation. Because capitalism is a cultural system and not simply an economic one, it cannot be explained by material factors alone. In the beginning, capitalist practices provoked an outpouring of criticisms and defenses. Competition buffets all participants in this investor-driven economy whether people are investing their capital, marketing their products, or selling their labor. The series of inventions that harnessed natural energy, first with water and coal-fired steam in the eighteenth century, made economic progress dependent upon the exploitation of fossil fuels. Coal and oil once seemed without limit, but today they have become scarce enough to make us ask if our economic system is sustainable.

My challenge is to make you curious about a system that is all too familiar. That familiarity, joined to the notion that there is something inherently capitalistic in human nature, has obscured the real conflict between capitalism and its economic predecessors. Capitalist practices represented a radical departure from ancient usages when they appeared upon the scene in the seventeenth century. Because they assaulted the mores of men and women in traditional society, it took a very favorable environment for them to gain a footing. After that, the capacity of new capitalist ways to create wealth induced imitation. And the impertinent dynamic of “more” sent entrepreneurs from the West around the world in search of commodities along with the laborers to produce them. They carried with them the engines for the relentless revolution that capitalism introduced.

TRADING IN NEW DIRECTIONS

W
HILE THE SPANISH
were linking the Old with the New World following Columbus’s voyage to the Caribbean, the Portuguese were bringing together the ancient trades of the Atlantic and Indian oceans. Commerce in the Indian Ocean after the conquests of the Arabs and Mongols had already joined the landmasses of Asia, India, North Africa, and parts of Europe by the end of the thirteenth century. Now they were in contact with northwestern Europe and European settlements in the New World. The vast East Indian trading network, organized by the caliphate in Constantinople, circulated spices, luxury fabrics, and precious woods. The Spanish sent home gold, silver, and indigenous foods from the New World. After being separated for millennia, the peoples of the earth were finally in touch with one another. Or more precisely, the curious, exploitative, and adventurous Europeans got in touch with them.

As Muslim traders pushed farther and farther to the east, their faith had spread to China, India, the Malay Archipelago, and the Philippines. Arresting the spread of Islam gave the Portuguese a religious motive for pushing beyond the Cape of Good Hope. When Tunisian traders on the Malabar Coast asked crew members of Vasco da Gama’s pioneering voyage of 1498 what had brought them so far, they were told, “Christians and spices.” Their evangelical spirit actually materialized in quite a few Japanese converts, who began to produce handsome pieces of devotional art for sale. These, along with translucent tortoiseshell bowls crafted in India and ivory spoons that African artists decorated with carvings of animals, displayed how quickly local crafts became part of global commerce.
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The spices, fabrics, and perfumed woods of the East Indies stimulated the imagination and taste buds of Europeans, not to mention their wanderlust. Bland foods turned into delicious repasts with the addition of cinnamon, cloves, nutmeg, and especially pepper. With salt and sugar rare and expensive, most people had to content themselves with tasteless meals. The thrill of seasoning sent Dutch, French, and English trading companies throughout the Indies to establish trading outposts. Going by sea made it much easier to carry heavy cargo than overland.

Since the time of the Roman Empire, Europeans had had some contact overland with the Orient, but famines and epidemics could wipe out commercial connections for decades. Arab traders were often successful in rupturing the European trade routes as well. It took experienced merchants like the Venetian family of Marco Polo to carry on this hazardous trade. The lateen-rigged ships and recently discovered sea routes gave Europeans a cheaper, safer way of establishing what turned out to be permanent contact by sea.

Four years after Dias made his way to the Orient, Columbus’s pioneering route to the New World triggered another round of explorations. These voyages took Europeans to the islands and continents of the Western Hemisphere and to the discovery of just how large the globe really was. Educated people had long known that the earth was round, but they had no idea of its circumference. The conquests of Mexico and Peru gave Spaniards access to Aztec and Incan mines as well. Gold and silver extracted from these mines began pouring into Europe. Far more important, the ships crossing the Atlantic brought animals and plants that dramatically transformed the societies on both sides of the ocean. What has been called the Columbian exchange completed the biological and botanic homogeneity of our planet.
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Alas, germs lethal to the inhabitants of the New World were part of that exchange. The arrival of newcomers in the Western Hemisphere triggered an unintended holocaust, for the Europeans carried with them lethal microorganisms against which the native population had no protection. Exposed to these Old World diseases with no immunity, the entire population of Arawaks on San Domingo died within a generation. This deadly phenomenon repeated itself over and over again from the Arawaks in the sixteenth century to the Chamorros of the Marianas in the seventeenth century to the Aleuts in the Pribilof Islands in the eighteenth century—whenever New World people encountered Europeans for the first time.

The many ships under the direction of merchants, pirates, and naval commanders breached forever the isolation of the peoples of North and South America while they awakened the curiosity of thousands of Europeans. Immediately dozens of engravings were printed to slake the curiosity of Europe’s small reading public. At first, old lithographs depicting the Garden of Eden were trotted out and reprinted, but gradually more accurate depictions of the people, animals, and plants encountered in the New World began to circulate. A whole new chapter in the history of curiosity began.

The seaborne trade that followed the great discoveries of all-water routes to the East and West Indies fitted very well with traditional European society. The noble virtues of command, mastery, ardor, aggression, and military prowess were in full display and very effective in intimidating and subduing people who were similarly impressed by manly feats of valor. Like the Spanish exploits, those of the Portuguese appealed to the aristocratic spirit with its love of military escapades. Afonso de Albuquerque exemplified the noble Iberian adventurer. Connected to the Portuguese royal family by illegitimate descent, he began his career fighting Muslims in North Africa. At age fifty-three in 1506, he sailed a squadron of ships around the Cape of Good Hope, gaining permission to build forts by helping local rulers secure their power. In 1511, he conquered the great emporium of Malacca for the king of Portugal.

In the rough-and-tumble of trade, conquest, and colonization, Albuquerque found himself imprisoned or shipwrecked more than once. At the insistence of his government, he laid an unsuccessful siege to Aden in 1513, becoming the first European to ply the waters of the Red Sea. Angered by the Egyptians, Albuquerque contemplated laying waste to the country by diverting the course of the Nile! On his return voyage after taking Ormuz in 1515, he died at sea. Commanders like Albuquerque had more in common with medieval Crusaders than modern merchants, as his sobriquet, “the Portuguese Mars,” suggests.

The Spanish conquests had a similarly aristocratic and military cast. Ardent, fearless adventurers like Christopher Columbus, Hernando Cortés, Francisco Pizarro, Juan Ponce de León, and Ferdinand Magellan planted the Spanish flag from the Canaries to the Philippines. Blocked in their effort to reach the fabulous riches of the East by a westward route, the Spanish began to explore the land they had discovered. The Spanish crown moved in quickly after Columbus’s exploratory voyages to establish settlements throughout the Caribbean. After the conquests of the Aztecs and Incas in Mexico and Peru in the first half of the sixteenth century, the Spanish fell into a gold mine—many gold and silver mines. Better at coercing labor than organizing it, they used the native people to work for them. When they proved resistant, the Spanish began to import African slaves from Portuguese slavers. From their fortified city of Havana in Cuba, the Spanish treasure fleets crossed the Atlantic twice a year, directing to a specie-starved Europe a steady stream of precious metals. Later they established a trade between Acapulco on the west coast of Mexico and Manila in the Philippines, carrying silver west and returning with silk to be transshipped to Europe. Ten percent of this bounty from the New World went straight into the royal coffers.

The spectacular discoveries of Portugal and Spain prompted the pope in 1494 to suppress any incipient rivalry between the two Catholic monarchies on the Iberian Peninsula. He divided the world between them! The pope recognized Spain’s claim to the Western Hemisphere, except for Brazil, which a Portuguese expedition headed for India had run into by mistake. Portugal gained the western coast of Africa and points east along the route to the Indian Ocean where it had set up several provisioning stations. Spain got the rest. But even the pope could not inhibit this rivalry. After Magellan discovered the Philippine Islands in the 1560s, the Spanish began to settle Manila, demonstrating that the world being round, there was a need for two boundary lines. The Portuguese were finally able to thwart subsequent Spanish intrusion into the East Indies. Originally the Spanish concentrated on establishing encomiendas, large estates in the New World, to exploit native labor while the Portuguese developed trade in the Indies. With the establishment of sugar plantations in Brazil in the late sixteenth century, the two empires came to resemble each other.
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From 1580 to 1640 they shared a monarch.

The countries on the Iberian Peninsula were Europe’s trailblazers. Both of them established fortified settlements in their new outposts and insisted upon dominating trade. The Spanish enjoyed a monopoly for a century before other Europeans arrived to challenge their dominance, and the Portuguese imposed monopolies wherever they could. Initially these events represented nothing more than new wrinkles in the old, traditional fabric of European society, but their success had profound implications. Reaching the Orient by ocean changed the geopolitics of Europe. It moved the levers of world trade from the Mediterranean Sea to the Atlantic Ocean, which washed northwestern Europe. Between the sixteenth and eighteenth centuries, the momentum of trade and conquest passed from Portugal and Spain to the other countries with access to the Atlantic: the Netherlands, France, England, Denmark, and Sweden.

The Limits of Trade

The exchanges at the heart of trade have had religious, practical, romantic, and political overtones. Potlatches in the northwestern corner of the North American continent circulated possessions through gift giving. Kings secured desired goods and services through dues and taxes, and conquerors extracted tribute, but commercial exchanges, with their dependence upon money, middlemen, and bookkeeping, have exerted the most lasting influence.

Passing goods through bargaining has been around since the first human settlements in the Mesopotamian Delta in the fourth millennium B.C.E. Yet ingrained prejudices against merchants had confined commerce to a narrow social space before the eighteenth century. Merchants were associated with making money rather than with sitting as judges, leading armies, heading diplomatic missions, writing poetry, which the nobility did, or feeding the people, as peasants did. Commercial work was important but sullied those who did it.