Virtually all conflict is economic in origin, be it the control of natural resources at the national level or control of the sale of indulgences that led to the Reformation and the making of the modern world, or of one’s personal ownership of wealth. “By the 17th century, Thomas Hobbes and John Locke had posited the individual as one whose essence consisted of proprietorship over his own person, a revolutionary idea. Owning himself, he owed nothing to society. He was free insofar as he existed independently of others’ wills. Persons who were economically dependent on others were therefore not free. An unceasing struggle for hegemony raged between men – and the marketplace was the battlefield. Social relations were seen as market relations among proprietors of various selves, some their own.
The struggle of owners for dominance in their field was said to be the natural condition of [modern] man. To safeguard that natural striving, and especially to ensure the security of its outcome, democratic government was instituted – the rise of the English Parliament after the execution of Charles I in 1648 being the most pertinent example. Protection of individually-accumulated capital (any form of wealth capable of being employed in the production of more wealth, which is called “an abundance of valuable resources”) was [proposed as] the most fundamental function of government, a function said to be required not by common decision but by the very nature of man. Macpherson calls this conception “possessive individualism”
As happens frequently, the epistemology of a word tells of its meaning almost more than the formal definition. The term capitalist, as referring to an owner of capital (rather than its meaning of someone adherent to the economic system) shows earlier recorded use than the term capitalism, dating back to the mid-17th Century. Capitalist is derived from capital, a late-Latin word based on caput, meaning “head” – also the origin of chattel and cattle in the sense of movable property (only much later to refer only to livestock). Capitale emerged in the 12th to 13th Centuries in the sense of referring to funds, stock of merchandise, sum of money, or money carrying interest. By 1283 it was used in the sense of the capital assets of a trading firm. It was frequently interchanged with a number of other words — wealth, money, funds, goods, assets, property, and so on.
Periodicals in Holland used capitalists in 1633 and 1654 to refer to owners of capital. In French, Etienne Clavier referred to capitalistes in 1788, six years before its first recorded English usage by Arthur Young in his work Travels in France (1792). David Ricardo, in his Principles of Political Economy and Taxation (1817), referred to “the capitalist” many times. Samuel Taylor Coleridge, the English poet, used capitalist in his work Table Talk (1823). Pierre-Joseph Proudhon used the term capitalist in his first work; What Is Property? (1840) to refer to the owners of capital. Legendary British Prime Minister Benjamin Disraeli used the term capitalist in his 1845 work Sybil.
The initial usage of the term capitalism in its modern sense has been attributed to Louis Blanc in 1850 and Pierre-Joseph Proudhon in 1861. Karl Marx and Friedrich Engels referred to the capitalistic system (kapitalistisches system) and to the capitalist mode of production (kapitalistische produktionsform) in Das Kapital (1867). The use of the word “capitalism” in reference to an economic system appears twice in Volume I of Das Kapital, p. 124 (German edition), and in Theories of Surplus Value, tome II, p. 493 (German edition). Marx did not extensively use the form capitalism, but instead those of capitalist and capitalist mode of production, which appear more than 2600 times in the trilogy Das Kapital.
According to the Oxford English Dictionary (OED), the term capitalism first appeared in English in 1854 in the novel The Newcomes, by novelist William Maepeace Thackeray, where he meant “having ownership of capital”. Also according to the OED, Carl Adolph Douai, a German-American socialist and abolitionist, used the term private capitalism in 1863.
An 1877 work entitled Better Times by Hugh Gabutt and an 1884 article in the Pall Mall Gazette also used the term capitalism. A later use of the term capitalism to describe the production system was by the German economist Werner Sombart, in his 1902 book Modern Capitalism(Der moderne kapitalismus). Sombart’s close friend and colleague, Max Weber, also used capitalism in his 1904 book The Protestant Ethic and the Spirit of Capitalism(Die Protestantische Ethik und der Geist des Kapitalismus).
Briefly, the American economy became predominantly capitalist only by 1900. The earlier years fall into three periods. The first, from 1600 to 1790, is characterized by handicraft-subsistence production alongside elements of a semi-capitalist economy stemming from surplus commercial production of tobacco especially in the South. The most commercialized sectors of the economy were predominantly staffed by enslaved and semi-enslaved workers [indentured servants].
Some of the first settlers even experimented with what today is known as Socialism. After the Pilgrims landed in 1620, they decided that they would plant a community garden and share the fruits and vegetables equally at the end of the season. The idea was that all would work together and share equally at the end of the season. However, no one wanted to work in the gardens. Most were reluctant to do the planting and weed a garden that was not theirs. That first year, the gardens were not well kept and they had poor crops, which led to hunger the next winter.
Under this system, by 1623 the colony was facing starvation. It was decided that a new system be used the following year. Each family was given a plot of land to garden in proportion to its size. They would be allowed to keep the fruits and vegetables for themselves. Governor William Bradford’s account. . .
“This had very good success, for it made all hands industrious, so as much more corn was planted than otherwise would have been by any means the Governor or any other could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression.”
The lesson for Americans here seems to be – when you own it you take care of it. If it belongs to someone else, you won’t take interest in it or care for it. But if it is yours to own, you take interest in it and take care of it. The Pilgrims started out with socialism for the first two years but abandoned it in favor for capitalism after those two years, which worked much better.
The first period saw profits of the slave trade; returns from a growing tobacco output; the general utility of slave labor – all or even any single one sufficed as a justification of slavery. English law had long been congenial to the practice of debt-slavery [indentured servitude] in the coal regions of Scotland. During the 17th and 18th centuries, as we have seen, propertied interests, including the Crown, hastened to monopolize the bounties of bound-labor forthcoming from Africa.
The very [early] philosophy of individualism facilitated the adoption of slavery. To Locke, as we said earlier, the central tenet of individualism was man’s domain over his own labor, even to the point of selling it. That right carried no social, or moral, obligation other than the expectation of buying cheap and selling dear. Enslavement was thus regarded as another expression of an individual’s unceasing drive to accumulate property. And because this drive was alleged to belong to the inborn nature of man – it has arisen in the state of nature, Locke tells us – it’s every expression in civil society seemed only “natural.” [Fortunately, later “enlightenment” over the concept of inalienable natural rights and their hierarchy led to the abolition of slavery.]
During the second period, 1790-1865, several [new] industries became organized along capitalist lines and some sectors of agriculture lost their subsistence character until, by the period’s end, agriculture as a whole was producing for the market. A working class of free and unfree elements was then growing rapidly.
In the third period, 1865-1920, economic development attained an extraordinary pace as industry and, increasingly, agriculture became subject to capitalist forces. Understand that all capitalist economies are commercialized but not all commercialized economies are capitalist.
Without land, the developments in nearly two centuries of colonial history would have been unthinkable. During the 17th and 18th Centuries, land was the principal means of production in America. Every level of government set up by European colonists was given a voice in the distribution of land. Not surprisingly, politics revolved around how best to channel the choicest parcels of land to those closest to the seats of political power.
Two years before the Declaration of Independence, wealth and income were concentrated in extreme fashion. This pattern continued in every seaboard town. As settlement moved westward, frontier communities repeated the pattern, whether in Paducah, Kentucky or Milwaukee, Wisconsin. To be sure, the European immigrants, even those who were semi-slaves in the form of indentured servants, stood a better chance of becoming landowners than if they had remained in England or Europe.
In fact, the opportunity to own land is what drew the secular among the immigrants to the colonies in the first place. Few, outside of a tiny circle of insiders, received free land but others earned it by working it for an indentured period. However, even during a time of presumed success in spreading ownership, fully half the adult white males owned no land. This, for example, was the case during the decades around the Civil War (1850-1870). The proportion grew in the next generation or two as “land” became synonymous with “home”.
By the end of the 19th century, land had receded as the central means of production. Manufacturing and railroads took the forefront, along with new financial industries. Until around 1900 or so, the distribution of wealth and income in the U.S. had been less concentrated than in Europe, reflecting mainly relatively easier access to land ownership here– but this ended around 1900 as historian Fredrick Jackson Turner’s “frontier” closed. Thereafter, concentration of wealth in the U.S. exceeded or matched that of industrial capitalist countries elsewhere. Around the same time, because of its political stability, the United States became the most favored home for great wealth throughout the world.
With wealth came the “wealthy” – the self-starters, the entrepreneurs, the risk takers, the forward thinkers, the inventors, the masters of efficiency, the leaders. In this climate, the modern business corporation became an original creation of the American imagination. It was first fashioned to extend local markets; then, it became an indispensable means to create a national market. Both American industrialization and capitalism were crucially dependent upon the corporate form of organization. The corporation was not however, a disembodied “first cause”; it spread in response to concrete economic challenges.
But the corporation had first to become a legal [ly recognized] instrument [or entity] before it could be anything else. While the law dealt amply with the internal affairs of corporations, no internal logic dictated the further development of the corporate form. Corporate law, after all, is not a branch of higher mathematics whose cogency requires a series of more elementary operations. External, primarily economic pressures helped generate the corporation. The combined force of those pressures and the nature of American legal thought determined the eventual shape of the modern business corporation.
But what is a corporation? [Recalling that the Enlightenment” led to the rediscovery of ancient Greek and Roman societies and strongly influenced the thinking of the Founders and succeeding generations as they built the framework of America; consider that; i]n ancient Rome collegia or corpora performed essentially public duties and later became part of municipal administration. In no meaningful sense could they be regarded as voluntary associations of private businessmen. A corporation, according to Roman law, had a distinct personality apart from that of its “owners” or members and existed beyond their lifetime. Also, the head of a Roman corporation who brought an action in law represented the corporation rather than its individual members.
When the Renaissance brought Greek and Roman thought back to life in Europe, in 17th Century England, numerous corporations were chartered by the Crown as monopolies over definite lines of business. It was reasoned that such organizations were carrying out work in the public interest and thus deserved government privilege. Lord Coke rendered a definition that was long considered classic:
“A corporation aggregate of many is invisible, immortal, and rests only in intendment and consideration of the law. They cannot commit treason, nor be outlawed, nor excommunicated, for they have no souls, neither can they appear in person, but by attorney. A corporation aggregate of many can’t do fealty, for an invisible body can neither be in person nor swear; it is not subject to imbecilities or death or the natural body and divers other cases.”
Coke’s definition of a corporation was much like the Roman one. A century later, Adam Smith barely discussed the corporation, pausing several times only to denounce it for conspiring to charge more than the “natural price” for goods. When, at the beginning of the 19th Century, Americans undertook to develop the corporate form, they found equally slim bodies of business practice and judicial doctrine. They had to fashion the doctrine out of the crucible of practice. Both jurists and non-jurists puzzled over the exact nature of a corporation. Lord Coke, for example, had asserted that the corporation was a creature of the law. Did it have all the legal rights of natural creatures?
In 1809, the U.S. Supreme Court decided Bank of the United States v. Devaux. Georgia had collected a state tax levied upon the Savannah branch of the Bank of the U.S., a federally-chartered corporation. The Bank sued in federal court to recover payment. Georgia denied the existence of a federal issue; Section 2, Article III of the federal Constitution extended the jurisdiction of federal courts to cases “between citizens of different states.” Corporations, insisted Georgia, were not citizens and thus could not have access to federal courts. The Supreme Court agreed.
“That invisible, intangible, and artificial being, that mere legal entity, a corporation aggregate,” declared Chief Justice John Marshall, “is certainly not a citizen.” He held that only real persons could be citizens. The officers of the corporation, being real persons, could sue and be sued. But the corporation itself could not enter into federal legal procedures. The Devaux ruling included a proposition that the firm’s owners could sue or be sued provided they lived in a state other than that of the contending side. The corporation’s legal rights did not extend to citizenship.
[This is a great example of the Constitution being flexible enough to accommodate new concepts within the obvious, written context. There was no need to “discover” hidden meanings or undiscovered rights. The justices [Founders all] read the words, applied them to the facts and decided the obvious. Unfortunately, the lesson has been lost on “modern” jurists.]
The Devaux doctrine was a compromise between traditional law and changing business practice. The law could not conceive yet – although single jurists did – of a totally abstract person possessing full legal rights. [At that time t]he society that had given birth to Lord Coke’s corporation was a handicraft society in which most economic activities were conducted by individual proprietors or associations of proprietors and investors. A legal order of individual property and profit had little room for enterprise by abstraction.
By 1850, America was [no longer a subsistence economy but] a surplus commercialized society. It had become normal for men to conceive of themselves as producers and sellers for impersonal ends. About a third of the total labor force worked for wages or salary and thus were sellers of their labor. In agriculture, world markets claimed major portions of the cotton and other crude materials output of the country. Factory production in the textile industry and transportation advances were hurtling America toward economic predominance. By mid-century, American per capita output lagged behind that of England, but exceeded that of France.
No institution was more significant in that growth than the business corporation. The modern business corporation was the country’s second great contribution to the world economy. (How to fight a war with paper money was the first.) With commercialization and industrialization growing apace, legal thought turned to practical business problems. The expansion of corporations forced the courts to review older doctrines and face up to altogether new problems as well. In 1844, the U.S. Supreme Court, under Roger B. Taney, declared the corporation a citizen – the first of many astonishing decisions over the next fifty years. The federal courts, it was revealed, had never been satisfied with the old Devaux ruling. John Marshall, who had written the Court’s opinion, had himself become disenchanted with the ruling.
Modern capitalism is an economic system in which trade, industries, and the means of production are largely or entirely privately owned and operated for profit. Central characteristics of capitalism include private property, capital accumulation, wage labor and, in many models, competitive markets. In a capitalist economy, the parties to a transaction typically determine the prices at which assets, goods, and services are exchanged.
The defining feature of capitalist markets, in contrast to markets and exchanges in pre-capitalist societies like feudalism, is the existence of a market for capital goods (the means of production), meaning exchange-relations (business relationships) exist within the production process. Additionally, capitalism features a market for labor.
This distinguishes the capitalist market from pre-capitalist societies which generally only contained market exchange for final goods and secondary goods. The “market” in capitalism refers to capital markets and financial markets. Thus, there are three main markets in a typical capitalistic economy: labor, goods and services, and financial.
Wage labor refers to the class-structure of capitalism, whereby workers receive either a wage or a salary [the cost of labor], and owners receive the profits [revenues minus costs] generated by the factors of production employed in the production of economic value. Individuals who possess and supply financial capital to productive ventures become owners, either jointly (as shareholders) or individually – and receive monetary distributions from the profits.
In Marxian economics these owners of the means of production and suppliers of capital are generally called capitalists. The description of the role of the capitalist has shifted, first referring to a useless intermediary between producers to an employer of producers, and eventually came to refer to owners of the means of production. “Workers” includes those who expend both manual and mental (or creative) labor in production, where production does not simply mean physical production but refers to the production of both tangible and intangible economic value.
“Capitalists” are individuals who derive income from investments [in the production of economic value in either goods or services]. Labor includes all physical and mental human resources, including entrepreneurial capacity and management skills, which are needed to produce products and services. Production is the act of making goods or services by applying labor power.
For American capitalism to emerge, historians have summarized, it was necessary to develop a “capitalist spirit”; that is, ideas and habits that favor a rational pursuit of economic gain. These ideas, in order to propagate a certain manner of life “…had to originate somewhere … as a way of life common to whole groups of men”. In his book The Protestant Ethic and the Spirit of Capitalism(1904–1905), German economist Max Weber sought to trace how a particular form of religious spirit, infused into traditional modes of economic activity, was a condition of possibility of modern Western capitalism.
For Weber, the ‘spirit of capitalism’ was, in general, that of ascetic (austere) Protestantism; this ideology was able to motivate extreme rationalization of daily life, a propensity to accumulate capital by a religious ethic to advance economically through hard and diligent work, and thus also the propensity to reinvest capital. This was sufficient, then, to create “self-mediating capital” as practiced by the Massachusetts Bay colonists in 1620 and later reconceived by Marx.
The centrality of capitalism to the American experiment was cemented when President Calvin Coolidge made a famous remark in an address to the Society of American Newspaper Editors on January 17, 1925 in Washington, D.C. The speech he gave that day was titled “The Press Under a Free Government.” It focused on the role of the press in free market democracies, like America. Coolidge noted that the press was far more likely to publish propaganda in autocratic or Socialist countries [or wartime Democrat administrations]. He acknowledged concerns about whether business considerations could affect editorial positions and news reporting in a society like the U.S. [concerns that have now come to fruition in the biased and compromised press/media of today]. But he pointed out the flip side, saying:
“There does not seem to be cause for alarm in the dual relationship of the press to the public, whereby it is on one side a purveyor of information and opinion and on the other side a purely business enterprise. Rather, it is probable that a press which maintains an intimate touch with the business currents of the nation, is likely to be more reliable than it would be if it were a stranger to these influences.”
Then Coolidge added this famous quote:
“After all, the chief business of the American people is business. They are profoundly concerned with producing, buying, selling, investing and prospering in the world. I am strongly of the opinion that the great majority of people will always find these the moving impulses of our life.”
It’s hard to dispute the notion that most Americans are concerned about the economy and personal prosperity. And, Coolidge made it clear that he didn’t simply mean “greed is good.”
“Of course, the accumulation of wealth cannot be justified as the chief end of existence, but we are compelled to recognize it as a means to well-nigh every desirable achievement. So long as wealth is made the means and not the end, we need not greatly fear it…But it calls for additional effort to avoid even the appearance of the evil of selfishness. In every worthy profession, of course, there will always be a minority who will appeal to the baser instinct. There always have been, probably always will be, some who will feel that their own temporary interest may be furthered by betraying the interest of others.””
Unfortunately, the “business of the press/media” has made the selfish accumulation of access to power their “profit motive” – not economic wealth (profit)- which comes from telling the public the truth about government – resulting in the economic and financial decline of both newspapers and broadcast news operations. Newspaper readership is down about 67% since 1990; news magazines are down about 60% and the network news has lost 50% of its audience since 1990.
Yet, the compromised press/media, and their corporate bosses (who pursue the business strategy that favorable press coverage by their people will produce favorable consideration of their selfish-interests by influential people in the halls of government) persist in their bias toward the politically omnipresent PLDC. But it is not really selfishness that drives this issue – it is a pathology that approaches addiction in an age of celebrity, where pop-icons become political philosophers and “stars” automatically become sages – and we are expected to hang on their every word – signifying their “worthiness”.
If you have a high “Q-score, you are worth-y of respect and reverence. If you have a low Q-score, well, you’re just worth-less. (The Q Score is a measurement of the familiarity, likeability, popularity and appeal of a celebrity or entertainment product (e.g., television show) used in the United States. The higher the Q-Score, the more highly regarded the person is among their peers and fans. There is no consideration of education, intelligence, judgement or bias in a Q-score.)
It’s true that Coolidge was generally a pro-business, small-government, laissez-faire type politician and a capitalist, believing in the success of the economic system that had flourished in America since its earliest days and the debates between two of the greatest thinkers of their day and Founding brothers – Thomas Jefferson and Alexander Hamilton.
He was, specifically, a proponent of a free-market economy – which refers to capitalist economic system where prices for goods and services are set freely by the forces
of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy. It typically entails support for highly competitive markets and private ownership of productive enterprises. Laissez-faire is a more extensive form of free-market economy where the role of the state is limited to protecting property rights.
Next time: The economic growth of America.