Private capitalism. Basic types of capitalism. Large forms of enterprises

The conditions for the emergence of capitalism in Russia (an economic system based on private property and freedom of enterprise) developed only in the second half of the 19th century. As in other countries, it did not appear out of nowhere. Signs of the birth of a completely new system can be traced back to the era of Peter the Great, when, for example, in the Demidov Ural mines, in addition to serfs, civilian workers also worked.

However, no capitalism in Russia was possible as long as there was an enslaved peasantry in a huge and poorly developed country. The liberation of villagers from a slave position in relation to the landowners became the main signal of the beginning of new economic relations.

The end of feudalism

Russian serfdom was abolished by Emperor Alexander II in 1861. The former peasantry was a class. The transition to capitalism in the countryside could only occur after the stratification of rural residents into the bourgeoisie (kulaks) and the proletariat (farmers). This process was natural, it occurred in all countries. However, capitalism in Russia and all the processes accompanying its emergence had many unique features. In the countryside, they consisted of preserving the rural community.

According to the manifesto of Alexander II, peasants were declared legally free and received the rights to own property, engage in crafts and trade, conclude transactions, etc. However, the transition to a new society could not take place overnight. Therefore, following the reform of 1861, communities began to appear in villages, the basis of whose functioning was communal land ownership. The team monitored the equal division into individual plots and a three-field system of arable land, in which one part of it was sown with winter crops, the second with spring crops, and the third was left fallow.

Peasant stratification

The community equalized the peasants and slowed down capitalism in Russia, although it could not stop it. Some villagers became poor. One-horse peasants became such a stratum (two horses were required for a full-fledged farm). These village proletarians subsisted on outside earnings. The community did not let such peasants go to the city and did not allow them to sell plots that formally belonged to them. The free de jure status did not correspond to the de facto status.

In the 1860s, when Russia embarked on the path of capitalist development, the community delayed this evolution due to its adherence to traditional farming. Peasants within the collective were not required to take initiative and take risks for their own entrepreneurship and desire to improve agriculture. Compliance with the norm was acceptable and important to conservative villagers. In this way, Russian peasants of that time were very different from Western ones, who had long ago become entrepreneurial farmers with their own commercial farming and sales of products. Domestic village residents for the most part were collectivists, which is why revolutionary ideas of socialism spread so easily among them.

Agrarian capitalism

After 1861, landowners' farms began to be restructured using market methods. As in the case of the peasants, a process of gradual stratification began in this environment. Even many inert and inert landowners had to understand from their own experience what capitalism is. The historical definition of this term necessarily includes reference to civilian labor. However, in practice, such a configuration was only a cherished goal, and not the original state of affairs. At first, after the reform, the landowners' farms relied on the labor of peasants, who took rented land in exchange for their labor.

Capitalism in Russia gradually took root. The newly liberated peasants, going to work for their former owners, worked with their equipment and livestock. Thus, the landowners were not yet capitalists in the full sense of the word, since they did not invest their own capital in production. The labor of that time can be considered a continuation of dying feudal relations.

The agricultural development of capitalism in Russia consisted of a transition from archaic natural to more efficient commodity production. However, in this process, old feudal features can be noted. Peasants of the new school sold only part of their products, consuming the rest themselves. Capitalist commodification implied the opposite. All products had to be sold, while in this case the peasant family bought their own food using funds from their own profits. Nevertheless, already in its first decade, the development of capitalism in Russia led to an increase in demand for dairy products and fresh vegetables in cities. New complexes of private gardening and livestock farming began to form around them.

Industrial Revolution

An important result to which the emergence of capitalism in Russia led was the gradual stratification of the peasant community that swept the country. Handicraft and handicraft production developed.

For feudalism, the characteristic form of industry was crafts. Having become widespread in the new economic and social conditions, it turned into At the same time, trade intermediaries appeared who connected consumers of goods and producers. These buyers exploited artisans and lived off trade profits. It was they who gradually formed a layer of industrial entrepreneurs.

In the 1860s, when Russia embarked on the path of capitalist development, the first stage of capitalist relations began - cooperation. At the same time, the process of a difficult transition to wage labor began in large-scale industries, where until then, for a long time, only cheap and powerless serf labor had been used. Modernization of production was complicated by the disinterest of the owners. Industrialists paid workers low wages. Poor working conditions significantly radicalized the proletariat.

Joint stock companies

In total, capitalism in Russia in the 19th century experienced several waves of rapid industrial growth. One of them occurred in the 1890s. During that decade, gradual improvements in economic organization and developments in production techniques led to significant market growth. Industrial capitalism has entered a new developed phase, epitomized by numerous joint-stock companies. The economic growth figures of the late 19th century speak for themselves. In the 1890s. Industrial output doubled.

Any capitalism experiences a crisis when it degenerates into monopoly capitalism with bloated corporations owning a certain economic sphere. In Imperial Russia, this did not fully happen, including due to diverse foreign investments. Especially a lot of foreign money flowed into transport, metallurgy, oil and coal industries. It was at the end of the 19th century that foreigners switched to direct investment, whereas previously they preferred loans. Such deposits were explained by greater profits and the desire of businessmen to earn money.

Export and import

Russia, without becoming advanced, did not have time to begin the massive export of its own capital before the revolution. The domestic economy, on the contrary, willingly accepted injections from more developed countries. Just at this time, “surplus capital” accumulated in Europe, which was looking for its own application in promising foreign markets.

There were simply no conditions for the export of Russian capital. It was hampered by numerous feudal remnants, huge colonial outskirts, and relatively unimportant development of production. If capital was exported, it was mainly to eastern countries. This was done in production form or in the form of loans. Significant funds settled in Manchuria and China (about 750 million rubles in total). Transport was a popular area for them. About 600 million rubles were invested in the Chinese Eastern Railway.

At the beginning of the 20th century, Russian industrial production was already the fifth largest in the world. At the same time, the domestic economy was the first in terms of growth indicators. The beginning of capitalism in Russia was left behind; now the country was hastily catching up with its most advanced competitors. The empire also occupied a leading position in terms of production concentration. Its large enterprises were places of work for more than half of the entire proletariat.

Character traits

The key features of capitalism in Russia can be described in a few paragraphs. The monarchy was a country of a young market. Industrialization began here later than in other European countries. As a result, a significant part of the industrial enterprises were built quite recently. These facilities are equipped with the most modern technology. Mostly such enterprises belonged to large joint-stock companies. In the West, the situation remained exactly the opposite. European enterprises were smaller and their equipment less sophisticated.

With significant foreign investment, the initial period of capitalism in Russia was distinguished by the triumph of domestic rather than foreign products. It was simply unprofitable to import foreign goods, but investing money was considered a profitable business. Therefore, in the 1890s. Nationals of other states in Russia owned approximately a third of the share capital.

A serious impetus to the development of private industry was given by the construction of the Great Siberian Railway from European Russia to the Pacific Ocean. This project was a state project, but the raw materials for it were purchased from entrepreneurs. The Trans-Siberian Railway provided many manufacturers with orders for coal, metal and steam locomotives for years to come. Using the highway as an example, we can trace how the formation of capitalism in Russia created a sales market for a wide variety of sectors of the economy.

Domestic market

Along with the growth in production, there was also a growth in the market. The main items of Russian export were sugar and oil (Russia provided about half of world oil production). Cars were imported en masse. The share of imported cotton decreased (the domestic economy began to focus on its Central Asian raw materials).

The formation of the internal national market took place in conditions when labor became the most important commodity. The new distribution of income turned out to be in favor of industry and cities, but infringed on the interests of the village. Therefore, there followed a lag of agricultural areas in socio-economic development compared to industrial areas. A similar pattern was characteristic of many young capitalist countries.

The same railways contributed to the development of the domestic market. In 1861-1885. 24 thousand kilometers of tracks were built, which was about a third of the length of the tracks on the eve of the First World War. Moscow became the central transport hub. It was she who connected all regions of the huge country. Of course, such a status could not but accelerate the economic development of the second city of the Russian Empire. Improved communication routes facilitated the connection between the outskirts and the center. New interregional trade ties emerged.

It is significant that during the second half of the 19th century, bread production remained at approximately the same level, while industry developed everywhere and increased production volumes. Another unpleasant trend was the anarchy in tariffs in the field of railway transportation. Their reform took place in 1889. The government took charge of regulating tariffs. The new order significantly helped the development of the capitalist economy and the internal market.

Controversies

In the 1880s Monopoly capitalism began to take shape in Russia. Its first sprouts appeared in the railway industry. In 1882, the “Union of Rail Manufacturers” appeared, and in 1884 - the “Union of Rail Fastening Manufacturers” and the “Union of Bridge Building Plants”.

An industrial bourgeoisie was formed. Its ranks included large merchants, former tax farmers, and tenants of estates. Many of them received financial incentives from the government. The merchant class was actively involved in capitalist entrepreneurship. A Jewish bourgeoisie emerged. Because of the Pale of Settlement, some outlying provinces of the southern and western strip of European Russia were overflowing with merchant capital.

In 1860, the government founded the State Bank. It became the foundation of a young credit system, without which the history of capitalism in Russia cannot be imagined. It stimulated the accumulation of financial resources among entrepreneurs. However, there were also circumstances that seriously hampered the increase in capital. In the 1860s. Russia experienced a “cotton famine”; economic crises occurred in 1873 and 1882. But even these fluctuations could not stop the accumulation.

Encouraging the development of capitalism and industry in the country, the state inevitably took the path of mercantilism and protectionism. Engels compared Russia at the end of the 19th century with France during the era of Louis XIV, where protecting the interests of domestic producers also created all the conditions for the growth of manufactures.

Formation of the proletariat

Any in Russia would not make any sense if a full-fledged working class had not been generated in the country. The impetus for its appearance was the industrial revolution of the 1850-1880s. The proletariat is a class in a mature capitalist society. Its emergence became the most important event in the social life of the Russian Empire. The birth of the working masses changed the entire socio-political agenda of the huge country.

The Russian transition from feudalism to capitalism, and consequently the emergence of the proletariat, was a rapid and radical process. In their specificity, there were other unique features that arose due to the preservation of remnants of the previous society, landownership and the protective policy of the tsarist government.

In the period from 1865 to 1980, the increase in the proletariat in the factory sector of the economy was 65%, in the mining sector - 107%, in the railway sector - an incredible 686%. At the end of the 19th century, there were about 10 million workers in the country. Without analyzing the process of formation of a new class, it is impossible to understand what capitalism is. The definition from history gives us a dry formulation, but behind the laconic words and numbers stood the fate of millions and millions of people who completely changed their way of life. Labor migration of huge masses led to a significant increase in the urban population.

Workers existed in Russia even before the industrial revolution. These were serfs who worked in factories, the most famous of which were Ural enterprises. Nevertheless, the main source of growth of the new proletariat were the liberated peasants. The process of class transformation was often painful. Impoverished peasants who had lost their horses became workers. The most extensive retreat from the villages was observed in the central provinces: Yaroslavl, Moscow, Vladimir, Tver. This process affected the southern steppe regions least of all. There was also little waste in Belarus and Lithuania, although it was there that agricultural overpopulation was observed. Another paradox was that people from the outskirts, and not from the nearest provinces, flocked to the industrial centers. Vladimir Lenin noted many features of the formation of the proletariat in the country in his works. “The Development of Capitalism in Russia,” dedicated to this topic, was published in 1899.

Low wages for proletarians were especially characteristic of small industry. It was there that the most merciless exploitation of workers was observed. The proletarians tried to change these difficult conditions through difficult retraining. Peasants engaged in small trades became long-distance otkhodniks. Transitional economic forms of activity were common among them.

Modern capitalism

The domestic stages of capitalism associated with the tsarist era can today only be viewed as something distant and infinitely separated from the modern country. The reason for this was the October Revolution of 1917. The Bolsheviks who came to power began to build socialism and communism. Capitalism, with its private property and freedom of enterprise, is a thing of the past.

The revival of a market economy became possible only after the collapse of the Soviet Union. The transition from planned production to capitalist production was abrupt, and its main embodiment was the liberal reforms of the 1990s. It was they who built the economic foundations of the modern Russian Federation.

The transition to the market was announced at the end of 1991. In December, hyperinflation was carried out. At the same time, voucher privatization began, necessary to transfer state property into private hands. In January 1992, the Decree on Free Trade was issued, which opened up new opportunities for entrepreneurship. The Soviet ruble was soon abolished, and the Russian national currency experienced default, exchange rate collapse and redenomination. Having gone through the storms of the 1990s, the country built a new capitalism. It is in these conditions that modern Russian society lives.

This social formation, which is characterized by the advantage of commodity-money relations, has become widespread throughout the world in different variations.

Advantages and disadvantages

Capitalism, which gradually replaced feudalism, arose in Western Europe in the 17th century. In Russia it did not last long, being replaced by the communist system for decades. Unlike other economic systems, capitalism is based on free commerce. The means of production of goods and services are privately owned. Other key features of this socio-economic formation include:

• the desire to maximize income and make a profit;
• the basis of the economy is the production of goods and services;
• widening gap between rich and poor;
• ability to adequately respond to changing market conditions;
• freedom of entrepreneurial activity;
• the form of government is basically democracy;
• non-interference in the affairs of other states.

Thanks to the emergence of the capitalist system, people made a breakthrough along the path of technological progress. This economic form is also characterized by a number of disadvantages. The main one is that all resources without which a person cannot work are privately owned. Therefore, the country's population has to work for the capitalists. Other disadvantages of this type of economic system include:

• irrational distribution of labor;
• uneven distribution of wealth in society;
• volumetric debt obligations (credits, loans, mortgages);
• large capitalists, based on their interests, influence the government;
• there is no powerful system for countering corruption schemes;
• workers receive less than their labor is actually worth;
• increased profits due to monopolies in some industries.

Each economic system that a society uses has its own strengths and weaknesses. There is no ideal option. There will always be supporters and opponents of capitalism, democracy, socialism, and liberalism. The advantage of a capitalist society is that the system forces the population to work for the benefit of society, companies, and the state. Moreover, people always have the opportunity to provide themselves with a level of income that will allow them to live quite comfortably and prosperously.

Peculiarities

The goal of capitalism is to use the labor of the population for the efficient distribution and exploitation of resources. A person's position in society under such a system is not determined only by his social status and religious views. Any person has the right to realize himself using his abilities and capabilities. Especially now, when globalization and technological progress affect every citizen of a developed and developing country. The size of the middle class is constantly increasing, as is its importance.

Capitalism in Russia

This economic system took root on the territory of modern Russia gradually, after serfdom was abolished. Over several decades, there has been an increase in industrial production and agriculture. During these years, practically no foreign products were imported into the country on a large scale. Oil, machinery, and equipment were exported. This situation developed until the October Revolution of 1917, when capitalism with its freedom of enterprise and private property became a thing of the past.

In 1991, the Government announced the transition to a capitalist market. Hyperinflation, default, collapse of the national currency, denomination - all these terrible events and radical changes Russia experienced in the 90s. last century. The modern country lives in the conditions of a new capitalism, built taking into account the mistakes of the past.

Capitalism (capitalism) is an economic system and social system where the distinctive features are private ownership of the means of production, the use of hired labor and freedom of enterprise.

Capitalism as a social order replaced feudalism. This transition from feudal production relations to capitalist ones in different countries had its own characteristics (for example, the English bourgeois revolution of the 17th century, the Dutch bourgeois revolution of the 16th century, etc.). One of the main and decisive economic significance for the emergence of capitalism was the process of the so-called primitive accumulation of capital, when small producers (mostly peasants) were forcibly deprived of all means and became legally free, and the means of production, on the contrary, were concentrated in the hands of the bourgeoisie.

As an economic system, capitalism is characterized by three main features: private management of the means of production; market-price mechanism for coordinating the activities of individuals; maximizing income and benefit as a business goal. In such an economic system, the problem of efficiency in the distribution and use of resources comes to the fore. And this problem is solved primarily by each individual. Therefore, capitalism (European model) presupposes personal freedom, individualism, subjectivization and rationalization. A person’s position is no longer determined by the social status of his family or religious norms. He asserts himself according to his abilities, becoming the measure of all things. As the German sociologist, historian, economist Max Weber (1864-1920) showed, the Protestant ethic played a huge role in the formation of capitalism, which is characterized by: a person’s responsibility to himself, to society, to God; the intrinsic value of labor and income obtained honestly (earned income). Such ethics were established during the religious reformation (XVI-XVII centuries) and replaced Catholic ethics, which preached not work, but consumption, pleasure, sanctified social inequality and the right to sin, since sins can be forgiven.

For countries undergoing a revolutionary and very painful transition from a planned to a market economy, it is extremely important to understand what constitutes the society that needs to be built. To do this, it is necessary to get rid of the illusion of compatibility between the market and socialism, that is, a market without private property, an efficient economy without capitalism. In the post-Soviet consciousness, the word “capitalism” is associated with exploitation, injustice, and the struggle of all against all according to the principle “man is a wolf to man.” It is difficult to imagine that a society based on such moral standards could exist for two or three hundred years.

Capitalism is not only and not so much an economic system as a form of society that unites free individuals, making enormous moral demands on them. These moral standards of life determine the viability of the market economic mechanism. They are not generated by the market, but precede it. Capitalism, as a form of society that emerged in the course of evolution, presupposes:

1. freedom as the possibility of action in accordance with a goal set independently and responsibility for one’s choice as the absence of known restrictions, except moral ones;
2. civil society as a set of institutions, unions, associations strong enough to exclude the possibility of usurpation of power, tyranny, and at the same time free enough to allow a person to freely join or leave them, in other words, this society is structured, but its structure is mobile, capable of improvement;
3. modular man, capable of being included in certain structures, associations, but not submitting to them, maintaining his freedom and the right to withdraw from these unions, associations, parties, etc., and at the same time, ready to take active action against those who limit his freedom , his rights, like the rights of others;
4. democracy, that is, a form of government that presupposes political freedom and the actions of the government elected by the people in accordance with the interests and will of the voters (the governed), which, in turn, presupposes constitutional consent and the presence of effective mechanisms to limit the power and functions of government;
5. private property as a social institution that gives all members of society equal rights to own resources;
6. market system including the capital market, labor market, land market;
7. freedom of enterprise and market competition;
8. limited role of government.

The named features and properties of capitalist society can be defined as capitalist ideology, that is, the system of values ​​and views on which this society is based and which are recognized by the absolute majority of its members.

Basics of economic theory. Lecture course. Edited by Baskin A.S., Botkin O.I., Ishmanova M.S. Izhevsk: Udmurt University Publishing House, 2000.

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Capitalism is an economic productive order of division, created on private property, legal equality and independence of entrepreneurship. The most important criterion for accepting economic issues is the desire to increase capital and make a profit.

Something passed into capitalism from previous eras of feudalism, and some of the restrictions originated in “capitalism” itself.

The Birth of Capitalism

In today's world, the word "capitalism" is used quite often. This word obliges the unified social system in which we currently live. In addition, many do not even realize that “capitalism” is A relatively new concept of social systems in the modern world and literally just a couple of centuries ago, the world history of mankind was formed differently.

Capitalism is not only an economic system, but also a form of society that combines morality and standards of life.

Capitalism, which arose in the process of evolution, offers:

1. private property and equal rights to resource ownership;
2. trading system, capital market, land of labor, technology;
3. freedom of enterprise, and market competitiveness.

Capitalism as a social the system on which most countries of the world live, according to the laws of this system for productivity and division of trade turnover, refers to a small percentage of the population, in other words, specifically defined people and they belong to the “capitalist class”.

The basis of economical capitalism is the production of trade turnover and the provision of services, commercial activities, the bulk of goods are produced solely for sale and capital accumulation.

The bulk of the population sells their physical or mental labor in exchange for wages or any other incentive; representatives of this segment of the population belong to the “working class” group. This proletarian class needs to produce goods or provide other services, which are later sold with the direct goal of enriching income, in this manner the working layers of the population are exploited by mutually beneficial, mutual agreement.

The means of production can be at the disposal of private individuals; costs in the process of producing a particular product also fall on private individuals.

Capitalist social activity arises spontaneously, individuals can make decisions themselves at their own discretion and also take risks.

The configuration of economic development, which is characterized by the following main features:

• the means of production become the property of comparatively small groups, the owners of the capitalists;
• production acquires a commercial character, everything produced is sent to the sales market;
• the section of the labor process using machines and the conveyor process is gaining a high degree of development;
• money takes on meaning and is the main stimulating tool;
• The regulator of production is the market with its demand for a particular product.

The modern Capitalist system can be viewed as a combination of private entrepreneurs and state control, but capitalism at such an ideal level cannot be found in any country in the world, There will always be free competition.

So why does capitalism exist in every country in the world?

In our modern world, there is a clear division by class.

This statement is easily explained by the reality of the world in which we live: there will be an exploiter, there will also be a hired one - this is called capitalism and this is its essential feature.

Some may say that the modern world is divided into a lot of classes, for example, the middle class, but in fact this is not true at all! There is a chain in the key to understanding capitalism. This is when there is a boss and a subordinate and it doesn’t matter how many classes there are. By definition, the result is the same - everyone will be subordinate to a superior, and this is the very small percentage of the population “capitalist class”

Capitalism and its prospects in the modern world

As practice shows, capitalism does not have the right to solve certain problems of humanity, it does not solve the problem of inequality, poverty in general, racism and much more, but the free market gives a chance to win the biggest prize, albeit for a small number of players.

Capitalism is only one of the socio-economic formations that existed in the world. The history of its formation is associated with such phenomena as colonial expansion and the exploitation of workers, for whom an 80-hour work week became the norm. T&P publishes an excerpt from Cambridge economist Ha-Joon Chang's How Does the Economy Work? , which was recently published by the publishing house "MYTH".

The economy of Western Europe is indeed
grew slowly...

Capitalism originates in Western Europe, particularly in Great Britain and the Low Countries (which today includes Belgium, the Netherlands and Luxembourg), in the 16th and 17th centuries. Why it originated there and not, say, in China or India, which were then comparable to Western Europe in terms of economic development, is the subject of intense and lengthy debate. Everything from the Chinese elite's disdain for practical pursuits (such as trade and industry) to a map of Britain's coalfields to the discovery of America has been suggested as an explanation. Let's not dwell on this debate for too long. Let us take it for granted that capitalism began to develop in Western Europe.

Before its advent, Western European societies, like all others in the pre-capitalist era, changed very slowly. People were largely organized around agriculture, which used essentially the same technologies for many centuries, with a limited degree of commerce and craft production.

Between the 10th and 15th centuries, that is, during the Middle Ages, per capita income increased by 0.12 percent per year. Consequently, income in 1500 was only 82 percent higher than in 1000. By comparison, that's what China, with its 11 percent annual growth rate, achieved in the six years between 2002 and 2008. It follows that, from the point of view of material progress, one year in China today is equivalent to 83 years in medieval Western Europe (during this time three people could be born and die - in the Middle Ages, the average life expectancy was only 24 years).

...but still faster than the economy
any other country in the world

Despite the above, economic growth in Western Europe was still much faster than in Asia and Eastern Europe (including Russia), which was estimated to grow three times slower (0.04 percent). This means that over 500 years, local incomes increased by only 22 percent. If Western Europe moved like a turtle, then other countries were more like snails.

Capitalism emerged 'in slow motion'

Capitalism appeared in the 16th century. But its spread was so slow that it is impossible to accurately determine the exact date of its birth. Between 1500 and 1820, the growth rate of per capita income in Western Europe was still 0.14 percent—essentially the same as during the Middle Ages (0.12 percent). In Great Britain and the Netherlands, growth in this indicator accelerated at the end of the 18th century, especially in the cotton textile and ferrous metals sectors. As a result, from 1500 to 1820, Great Britain and the Netherlands achieved per capita economic growth rates of 0.27 and 0.28 percent, respectively. And although by modern standards these figures are very small, they were twice the Western European average. This led to a number of changes.

The beginning of colonial expansion

From the beginning of the 15th century, the countries of Western Europe began to expand rapidly. Referred to for propriety as the Age of Discovery, this expansion included the expropriation of lands and resources and the enslavement of indigenous populations through the establishment of a colonial regime.

Beginning with Portugal in Asia, and Spain in the Americas, from the end of the 15th century, Western European peoples began to ruthlessly seize new lands. By the mid-18th century, North America was divided between England, France and Spain. Most of the countries in South America were ruled by Spain and Portugal until the 1810s and 1820s. Parts of India were ruled by the British (mainly Bengal and Bihar), the French (southeast coast) and the Portuguese (various coastal areas, particularly Goa). Around this time, the settlement of Australia began (the first penal colony appeared there in 1788). Africa at that time was not “developed” so well; there were only small settlements of the Portuguese (the previously uninhabited islands of Cape Verde, Sao Tome and Principe) and the Dutch (Cape Town, founded in the 17th century).

Francis Hayman. Robert Clive meets Mir Jafar after the Battle of Plassey. 1757

Colonialism was based on capitalist principles. It is symbolic that until 1858, British rule in India was exercised by a corporation (the East India Company) and not by the government. These colonies brought new resources to Europe. At first, expansion was motivated by the search for precious metals for use as money (gold and silver), as well as spices (especially black pepper). Over time, plantations were established in the new colonies - especially in the United States, Brazil and the Caribbean - using slave labor, mainly taken from Africa. Plantations were established to grow and supply new crops to Europe, such as cane sugar, rubber, cotton and tobacco. It is impossible to imagine a time when Britain did not have traditional chips, Italy did not have tomatoes and polenta (made from corn), and India, Thailand and Korea did not know what chilli was.

Colonialism leaves deep scars

There has been debate for many years about whether capitalism would have developed in the 16th to 18th centuries without colonial resources: the precious metals used as money, new foods such as potatoes and sugar, and raw materials for industrial production such as cotton. Although there is no doubt that the colonialists benefited greatly from their sale, it is likely that capitalism in European countries would have developed without them. That being said, colonialism undoubtedly devastated colonized societies.

The indigenous population was exterminated or brought to the brink of extinction, and their land with all its resources was taken away. The marginalization of indigenous peoples has been so profound that Evo Morales, the current president of Bolivia, elected in 2006, is only the second indigenous head of state in the Americas to rise to power since Europeans arrived there in 1492. (The first was Benito Juarez, President of Mexico from 1858–1872).

Many Africans - an estimated 12 million - were captured as slaves and transported to Europe and the Arab countries. Not only was this a tragedy for those who lost their freedom (even if they managed to survive the difficult journey), but it also depleted many African societies and destroyed their social fabric. The territories acquired arbitrary borders - this fact influences the domestic and international politics of a number of countries to this day. The fact that so many interstate borders in Africa are straight lines illustrates this, since natural borders are never straight, but usually follow rivers, mountain ranges and other geographical features.

Colonialism often involved the deliberate termination of existing productive activities in economically developed regions. For example, in 1700, Britain banned the import of Indian calico (we mentioned this in Chapter 2) to promote its own production, thereby dealing a severe blow to the Indian cotton industry. This industry was completely destroyed in the mid-19th century by the flow of imported fabrics, which at that time were already produced in Britain by mechanization. As a colony, India could not apply tariffs or other policies to protect its manufacturers from British imports. In 1835, Lord Bentinck, Governor General of the East India Company, famously said: “The plains of India are white with the bones of weavers.”

Start of the Industrial Revolution

Capitalism really took off around 1820 throughout Western Europe and later in the European colonies in North America and Oceania. The acceleration in economic growth was so dramatic that the next half century after 1820 came to be called the Industrial Revolution. Over these fifty years, per capita income in Western Europe grew by 1 percent, which is very little by modern standards (Japan saw such an increase in income during the so-called lost decade of the 1990s), and compared with a growth rate of 0. 14 percent, observed between 1500 and 1820, was true turbojet acceleration.

80-hour work week: suffering for some
people have only become stronger

However, this acceleration in per capita income growth was initially accompanied by a decline in living standards for many. Many people whose skills had become obsolete - such as textile artisans - lost their jobs because they were replaced by machines operated by cheaper, unskilled workers, many of whom were children. Some cars were even designed for the height of a child. People who were employed in factories or small workshops that supplied raw materials for them worked very hard: 70–80 hours a week was considered the norm, some worked more than 100 hours a week, and usually only half a day on Sunday was allocated for rest.

Working conditions were extremely dangerous. Many English cotton industry workers died from lung diseases due to the dust generated during the production process. The urban working class lived very crampedly, sometimes 15–20 people crammed into a room. It was considered quite normal for hundreds of people to use one toilet. People were dying like flies. In poor areas of Manchester, life expectancy was 17 years, 30 percent lower than in the whole of Great Britain before the Norman Conquest in 1066 (then life expectancy was 24 years).

The Myth of Free Markets and Free Trade:
how capitalism actually developed

The development of capitalism in Western European countries and their colonies in the 19th century is often associated with the spread of free trade and free markets. It is generally accepted that the governments of these states did not tax or restrict international trade in any way (called free trade) and did not interfere at all with the functioning of the market (free market). This state of affairs led to the fact that these countries managed to develop capitalism. It is also generally accepted that the UK and the US led other countries because they were the first to embrace free markets and free trade.

Free trade spreads mainly through means that are far from free

Although free trade did not cause the rise of capitalism, it did spread throughout the 19th century. Part of it emerged in the heart of the capitalist world in the 1860s, when Britain accepted the principle and signed bilateral free trade agreements (FTAs), in which both sides abolished import restrictions and customs duties on exports for each other, with a number of countries Western Europe. However, it has spread most strongly on the peripheries of capitalism - in the countries of Latin America and Asia, and as a result of what no one usually associates with the word “free” - the use of force, or at least the threat of its use.

Colonization was the most obvious way to spread “unfree free trade,” but even those many countries that were lucky enough not to become colonies had to accept it too. Using “gunboat diplomacy” methods, they were forced to sign unequal treaties that deprived them, among other things, of tariff autonomy (the right to set their own tariffs). They were allowed to use only a low flat tariff rate (3–5 percent)—enough to raise some government revenues, but too low to protect fledgling industries. The most shameful of these facts is the Treaty of Nanjing, which China had to sign in 1842 after defeat in the First Opium War. But unequal treaties also began to be signed with Latin American countries until they gained independence in the 1810s and 1820s. Between 1820 and 1850, a number of other states were also forced to sign similar treaties: the Ottoman Empire (predecessor of Turkey), Persia (today's Iran), Siam (today's Thailand) and even Japan. Latin American unequal treaties expired in the 1870s and 1880s, while treaties with Asian countries continued into the 20th century.

This statement is too far from the truth. The government played a leading role in the initial stage of the development of capitalism both in Great Britain and in the United States and other countries of Western Europe.

The inability to protect and defend their fledgling industries, whether as a result of direct colonial rule or unequal treaties, contributed significantly to the economic regression of Asian and Latin American countries during this period: they experienced negative growth in per capita income (at a rate of -0.1 and - 0.04 percent per year respectively).

Capitalism shifts into higher gear: the beginning of mass production

The development of capitalism began to accelerate around 1870. Between 1860 and 1910, clusters of new technological innovations emerged, resulting in the rise of so-called heavy and chemical industries: electrical equipment, internal combustion engines, synthetic dyes, artificial fertilizers, and other products. Unlike the technologies of the Industrial Revolution, which were conceived by practical men with good intuition, new technologies were developed through the systematic application of scientific and engineering principles. Thus, any invention could be reproduced and improved very quickly.

In addition, the organization of the production process in many industries was revolutionized by the invention of the mass production system. Thanks to the introduction of a moving assembly line (conveyor belt) and interchangeable parts, costs dropped dramatically. In our time, this is the main (almost universally used) system, despite frequent statements about its demise that have been heard since 1908.

New economic institutions emerged to manage the growing scale of production

At its peak, capitalism acquired the basic institutional structure that still exists today; it includes limited liability companies, bankruptcy laws, central banking, the social security system, labor laws and much more. These institutional shifts occurred largely due to changes in underlying technologies and policies.

Due to the growing need for large-scale investments, the principle of limited liability, which was previously applied only to privileged companies, has become widespread. Consequently, it could now be used by any company that met certain minimum conditions. With access to an unprecedented scale of investment, limited liability companies became the most powerful vehicle for the development of capitalism. Karl Marx, who recognized their enormous potential before any ardent supporter of capitalism, called them “capitalist production in its highest development.”

Before the British reform of 1849, the essence of bankruptcy law was to punish the insolvent businessman with, at worst, a debtor's prison. New laws introduced in the second half of the 19th century gave failed entrepreneurs a second chance by allowing them to avoid paying interest to creditors while reorganizing their business (under Chapter 11 of the US Federal Bankruptcy Act, introduced in 1898) and forcing the latter to write off some of their debts. Now running a business is not so risky.

The Rhodes ColossusStriding from Cape Town to Cairo, 1892

As the size of companies increased, banks also began to grow larger. At that time, there was a danger that the failure of one bank could destabilize the entire financial system, so to combat this problem, central banks were created to act as lender of last resort - and the Bank of England became the first in 1844.

Due to widespread socialist agitation and increasing pressure on the government from reformists regarding the condition of the working class, a number of social security and labor laws were introduced starting in the 1870s: accident insurance, health insurance, old-age pensions and insurance were introduced. case of unemployment. Many countries have banned the work of young children (usually under the age of 10–12 years) and limited the number of working hours for older children (initially to only 12 hours). New laws also regulated the conditions and hours of work for women. Unfortunately, this was not done out of chivalrous motives, but because of an arrogant attitude towards the weaker sex. It was believed that, unlike men, women lacked mental abilities, so they could sign unfavorable employment contracts - in other words, women needed to be protected from themselves. These welfare and labor laws smoothed out the rough edges of capitalism and made life better for many poor people—even if just a little at first.

Institutional changes contributed to economic growth. Limited liability companies and debtor-friendly bankruptcy laws have reduced the risk associated with business activity, thereby encouraging wealth creation. The central bank, on the one hand, and social security and labor laws, on the other, also contributed to growth by increasing economic and political stability, respectively, which allowed for greater investment and hence a further acceleration of economic recovery. The growth rate of per capita income in Western Europe rose from 1 percent per year during the peak period 1820–1870 to 1.3 percent during 1870–1913.