Capitalism is a peculiar form of class society. Like previous class societies it involves a minority section of society grabbing the surplus created by the toil of the rest of society. But there are important differences. Previous ruling classes simply seized the surplus, while capitalists get it by buying people's capacity to work (what Marx called 'labour power'). And previous ruling classes used almost all the surplus on their own luxury consumption or on fighting each other. The use of any of the surplus to improve the means of production was spasmodic. Economic growth was usually slow, often non-existent, sometimes negative for centuries at a time. Capitalist ruling classes, however, are driven by economic competition within and between themselves to plough a sizeable portion of the surplus back into expansion of the means of production. There is not merely economic growth, but compulsive accumulation. It is this which has enabled capitalist ruling classes that two and a half centuries ago controlled only fringe areas of north western Europe to engulf the globe today.
Class societies began to emerge in various parts of the world from around 5,000 years ago onwards. Over a period of several centuries, what had once been communal production fell under the control of ruling minorities who ensured it provided them with an increasingly luxurious and leisurely lifestyle. At first they tended to exploit the rest of society collectively, as temple priests or royal households, rather than through private property. On this basis civilisations as diverse as those in the Nile Valley, ancient Iraq, northern China, the Indus Valley, central America, the Andes, Crete, Ethiopia and west Africa developed.25 Over time central control tended to weaken and a class of 'aristocrats', 'gentry' or 'lords' to emerge which exploited direct cultivators in each locality. At the same time, the polarisation of society into classes found its reflection in greater or lesser degrees of disintegration of the old communal forms of agricultural production and the emergence of peasant households as the main productive units. There would then be a continual tussle between the central state administration, with its corps of tax collectors, and the local rulers over who got the lion's share of the surplus which was taken from the peasants in the form of labour services, crops or, sometimes, cash. All these societies had one thing in common--the ruling class, whether made up of lords and aristocrats or of state administrators, took the surplus directly off the peasant producers, without any pretence of exchange of goods.
Such ruling classes increasingly felt the need for products that could not be obtained simply from the local cultivators. They needed materials for palace and temple building, for the making of armaments and for luxury consumption. Such things could often be obtained only by looting distant peoples, or through some sort of exchange with them.
There was some exchange long before the rise of classes. Archaeologists have found artefacts that must have been made many hundreds of miles away among the remains of hunter-gatherer settlements of southern France more than 20,000 years ago, and the circulation of the products of human labour was even more widespread in the agricultural societies that began to emerge ten millennia later. There was no other way, for instance, that the villagers of the river plain of southern Iraq could get metal ores and even wood (since the lower valley of the Tigris and Euphrates was virtually treeless). But the circulation of products in pre-class societies was not trade in the sense that we know the term today. It was not carried out according to strict calculations of profit or loss, but according to traditions of gift-giving and gift-taking, based on customary rites, much as continued to happen in pre-class societies in places like Polynesia right into the 20th century.26
The rise of the ruling classes of the new civilisations transformed this situation. They demanded distantly-obtained products on a scale that could not be satisfied by the old-established customary networks. At the same time, they were rarely prepared to face the hardship and risks involved in procuring such things themselves. People soon emerged who were--in return for a share of the surplus the ruling class had obtained through exploiting the cultivators. So specialised traders got a 'mark-up' by selling to the ruling class goods from a great distance away. Some were individuals from the exploited cultivator class, others from the nomadic peoples living between the centres of civilisation. But regardless of their origins, they began to crystallise into a privileged classes separate from the old ruling classes.
Such merchant classes emerge in similar ways in societies with little or no contact with each other: in second millennium BC Babylon and Egypt; in India, China, Greece and Rome by 300 BC; in Teotihuacan in the Valley of Mexico by AD 200; in the Arabian peninsular by AD 600; among the Mayas of the Yucatan Peninsula by AD 1000; on the northern coast of the Andean region by 1500 BC. Once in existence such a class usually left its mark ideologically and politically as well as economically. The spread of each of the great world religions--Buddhism, Hinduism, Christianity and Islam--was along trade routes travelled by the merchants. The world's major languages often developed out of the vernacular forms by which people communicated with each other along trade routes and in marketplaces. And sections of the established agrarian ruling classes repeatedly found the merchants useful allies in struggles with other sections for dominance: the rise of the Ch'in kingdom and then empire in northern China and of the Mauryan empire in India in the 4th and 3rd centuries BC depended on such manoeuvres, and the Arab dynasties that ruled the Middle East a millennium later owed their success to reliance on merchants as well as tribal armies and landed exploiting classes.
But in these alliances the merchants were always the junior partners to the rulers, and much mistrusted by them. Merchant wealth came from siphoning off some of the surplus under the control of the old ruling class, and this was resented. So the most powerful merchant could suddenly be thrown into prison, lose his head or be cut in half. He lacked the independent base in production and exploitation to do much more than kowtow to the old rulers.
Marx made a distinction between merchant capital (that profits from financing trade), usurers' capital (that makes profits from interests on lending) and productive capital (that profits from employing workers to operate its means of production). Merchant capital and usurers' capital existed under all the old empires, wherever there was large-scale trade or moneylending. But productive capital made only a rare and fleeting appearance. In ancient Rome, for instance, the most successful 'capitalists' were the 'tax farmers', whose wealth came from the contracting out of tax collecting by the state. In Ch'in and Han China (300 BC-AD 300) the merchants collaborated with the state in running the salt and iron monopolies. In the Arab empires of the Middle East the goods traded by the merchants were produced by peasants exploited by big landowners, by self employed artisans or, occasionally, by state enterprises--not by enterprises run by the merchants themselves.
The system as we know it today could only come into existence because at some point a capitalist class emerged that did directly control production and was therefore able to directly exploit people on its own account, rather than simply being an intermediary between other exploiters.
One precondition for the emergence of true capitalism, as Marx showed, was the separation of the immediate producers (those who did the work) from the means of production, which passed into the hands of the new exploiting class. The producers then had only one way to get a livelihood. They had to persuade the members of this exploiting class to make use of their capacity for labour (their 'labour power') in return for a remuneration sufficient to keep them alive and fit for work. But the level of that remuneration was substantially lower than the value of the goods produced by their work. The difference, the 'surplus', went straight into the pockets of the owners of the means of production. They gained the fruits of the exploitation of labour, even if it was legally 'free', just as much as the old ruling class that exploited unfree labour.
Marx described in Capital the forcible separation of the workforce in Britain from control over the means of production by the driving of people from the land with the enclosures of the 16th, 17th and 18th centuries and the 'clearances' of the 19th century. In many parts of the world the process continued right into the 20th century with the seizure of 'native' lands in places like southern Africa by white colonists--and also with the so called 'collectivisation' of agriculture under Stalinism.
Without such a separation of the workforce from the means of production the spread of production for the market could lead, not to capitalism, but to a new variant of serfdom, the so called 'second serfdom' of eastern and southern Europe, or to the encomienda system in Latin America. The output of production in these regions was directed towards world markets, but the internal dynamic was very different to that of capitalism, with its drive to competitive accumulation.
Productive capitalism was not possible before a certain point in human history. This was when there was a massive escalation of the use of the products of past labour to increase the productivity of present labour, when the use of relatively simple tools began to give way to the first mechanisation, in the broadest sense of the term.36
This could have a fourfold effect. It (1) increased the output--and therefore the potential surplus--to be obtained from a given quantity of labour. It (2) increased the cost of equipment and materials needed to undertake production--and therefore the likelihood that the individual producers would not be able to supply them themselves. It (3) increased the dependence of production on the initiative and commitment of the producer (if only because more care needed to be taken on the expensive equipment) and therefore the advantage of exploiting 'free' as opposed to serf or slave labour. And it (4) increased the importance of trading networks which could supply raw materials and dispose of the increased output.
Where 'mechanisation' had all four effects it separated immediate producers from control over the means of production on the one hand and encouraged the use of 'free' labour by the new class of controllers on the other. It also increased the integration of the whole production process with the market.
All four effects were not always present. Often in the early stages the individual producer still partially owned and controlled the means of production, although becoming increasingly dependent on merchants, landowners or moneylenders for funds and raw materials. In these cases transitional forms to fully capitalist production flourished--for instance, the putting-out system in the towns, share-cropping in the countryside. As we have seen, there were also many cases in which slave or serf labour was used in early forms of industrial production. And in some cases at least, mechanised forms of production were quite compatible with the denial of any initiative to some groups of labourers. This was true on the sugar plantations of the Caribbean in the 18th century and the cotton plantations of the American South through the first half of the 19th century.
Yet once 'mechanised' processes were under way the possibilities of a transition to capitalist forms of production were there. The development of productive capitalism depended on such developments in the forces of production. By contrast, where such developments did not occur, merchant and usurer capitalism were possible, but not productive capitalism.
This explains why capitalism did not develop in the ancient civilisations of the Middle East and the Mediterranean lands or in the pre-Hispanic civilisations of the Americas. In neither case were the forces of production sufficiently advanced for a new class of capitalist exploiters independent of the old ruling classes to emerge.
But back to Britain today we are currently living in a finance based capitalism based on merchant capital. This has been the more favoured system since the 1960's when Harold Wilson the labour prime minister decided to favour finance capital over industrial capital. This was due to various things really the fact that the workers were getting strong in the industrial field with mining strikes frequent and workers gaining confidence this had to be smashed and a turn to more finance capital where union uptake was sparse and fragmented. The battle for the more dominant form of capitalism was born out and today we survive on a service/finance capitalism system where little value is produced rather than money is transfered and borrowed and delt with. This as Marx tells us produces no long term value as it doesnt have much labour value embodied in what finance capital produced if at all.
In the coming period we may see another battle between finance and industrial capital as i've explained on another post the finance capitalists may be forced to take the wrap for getting the people striking and rioting. To quell this anger the financial sector may be tempered down a bit to relieve the anger but industrial capitalism which may come back into play in the future with an experiment in Greece taking place right now to see if Greek workers will accept very low wages if so they may become competitive with the likes of China in terms of wages.
I cant see this happening myself so a huge class struggle will braek out bigger than what we have at the moment. It is just the start of this crisis in capitalism and the ruling class's have very little answer to the problems they find themselves with.
The only way out of this crisis as we continue to say is a socialist answer a planning of the economy based on needs not greed of a few.