Marx’s Capital, Volume 1, Chapter 31: A Critical Summary

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Lord Keynes
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This chapter contains Marx’s views on the relationship between imperialism and colonialism and early capitalist development in Europe, which some modern Marxists have used to argue that imperialist looting and theft of wealth was a necessary precondition for Western capitalism (Brewer 1984: 82; Harvey 2010: 297). And Marx indeed does seem to think that the many aspects of the imperialist exploitation of the Americas were “the chief momenta of primitive accumulation” in Europe (Marx 1906: 823).

Already this argument runs into difficulties, because even though the Spanish were often the chief beneficiaries of the imperialist conquest of the New World, modern industrial capitalism did not develop in Spain.

At any rate, there is much that is of interest and even insightful in this chapter, but mixed up with Marxist myths and propaganda.

Marx begins with this historical sketch:

“The genesis of the industrial capitalist did not proceed in such a gradual way as that of the farmer. Doubtless many small guild-masters, and yet more independent small artisans, or even wage-labourers, transformed themselves into small capitalists, and (by gradually extending exploitation of wage-labour and corresponding accumulation) into full-blown capitalists. In the infancy of capitalist production, things often happened as in the infancy of mediaeval towns, where the question, which of the escaped serfs should be master and which servant, was in great part decided by the earlier or later date of their flight. The snail’s-pace of this method corresponded in no wise with the commercial requirements of the new world-market that the great discoveries of the end of the 15th century created. But the middle age had handed down two distinct forms of capital, which mature in the most different economic social formations, and which, before the era of the capitalist mode of production, are considered as capital quand même [sc. nevertheless]—usurer’s capital and merchant’s capital.” (Marx 1906: 822).

“The money capital formed by means of usury and commerce was prevented from turning into industrial capital, in the country by the feudal constitution, in the towns by the guild organization. These fetters vanished with the dissolution of feudal society, with the expropriation and partial eviction of the country population. The new manufacturers were established at sea-ports, or in inland points beyond the control of the old municipalities and their guilds. Hence in England an embittered struggle of the corporate towns against these new industrial nurseries.” (Marx 1906: 823).

Marx thinks that imperialism was a crucial part of “primitive accumulation”:

“The discovery of gold and silver in America, the extirpation, enslavement and entombment in mines of the aboriginal population, the beginning of the conquest and looting of the East Indies, the turning of Africa into a warren for the commercial hunting of black-skins, signalised the rosy dawn of the era of capitalist production. These idyllic proceedings are the chief momenta of primitive accumulation. On their heels treads the commercial war of the European nations, with the globe for a theatre. It begins with the revolt of the Netherlands from Spain, assumes giant dimensions in England’s anti-Jacobin war, and is still going on in the opium wars against China, &c.

The different momenta of primitive accumulation distribute themselves now, more or less in chronological order, particularly over Spain, Portugal, Holland, France, and England. In England at the end of the 17th century, they arrive at a systematical combination, embracing the colonies, the national debt, the modern mode of taxation, and the protectionist system. These methods depend in part on brute force, e.g., the colonial system. But they all employ the power of the State, the concentrated and organised force of society, to hasten, hothouse fashion, the process of transformation of the feudal mode of production into the capitalist mode, and to shorten the transition. Force is the midwife of every old society pregnant with a new one. It is itself an economic power.” (Marx 1906: 823–824).

He states:

“The colonial system ripened, like a hot-house, trade and navigation. The ‘societies Monopolia’ of Luther were powerful levers for concentration of capital. The colonies secured a market for the budding manufactures, and, through the monopoly of the market, an increased accumulation. The treasures captured outside Europe by undisguised looting, enslavement, and murder, floated back to the mother-country and were there turned into capital. Holland, which first fully developed the colonial system, in 1648 stood already in the acme of its commercial greatness. It was ‘in almost exclusive possession of the East Indian trade and the commerce between the south-east and north-west of Europe. Its fisheries, marine, manufactures, surpassed those of any other country. The total capital of the Republic was probably more important than that of all the rest of Europe put together.’ Gülich forgets to add that by 1648, the people of Holland were more overworked, poorer and more brutally oppressed than those of all the rest of Europe put together.

To-day industrial supremacy implies commercial supremacy. In the period of manufacture properly so-called, it is, on the other hand, the commercial supremacy that gives industrial predominance. Hence the preponderant role that the colonial system plays at that time. It was ‘the strange God’ who perched himself on the altar cheek by jowl with the old Gods of Europe, and one fine day with a shove and a kick chucked them all of a heap. It proclaimed surplus-value making as the sole end and aim of humanity.” (Marx 1906: 826–827).

It is summed up with Marx’s statement that

“The colonial system ripened, like a hot-house, trade and navigation. The ‘societies Monopolia’ of Luther were powerful levers for concentration of capital. The colonies secured a market for the budding manufactures, and, through the monopoly of the market, an increased accumulation. The treasures captured outside Europe by undisguised looting, enslavement, and murder, floated back to the mother-country and were there turned into capital.” (Marx 1906: 826).

Modern historical research by Paul Bairoch puts all this into doubt, which can be seen here and here.

The British industrial revolution had its origins in the agricultural revolution of 1680–1700 which accelerated from 1720–1760 and resulted in a large grain surplus even by the 1730s (Bairoch 1993: 80). But that arose from internal progress in the yields of crops and agricultural productivity (Bairoch 1993: 80), not imperial conquests. Many of the necessary technological innovations existed by 1750, but these had nothing to do with British imperialism.

Did non-European markets in the colonies provide a necessary condition for the British industrial revolution? Bairoch argues cogently that they did not.

The role of colonial trade in spurring industry in England seems minor. In the 18th century as the first phase of the industrial revolution gathered pace, the total export sector of the UK accounted for between 4–8% of Britain’s GDP, and of this only 33–39% of exports were bound for the Third World. But, crucially, only 2–3% of total national output was exported to the Third World (Bairoch 1993: 82). It was what Marx called the “home market” that largely provided the demand-side inducement to industrialisation in Britain.

Even in individual sectors where the importance of exports to the Third World was somewhat higher such as textiles and iron, the contribution of this colonial or Third world demand was not decisive for industrial development (Bairoch 1993: 84).

There was one sector in the 19th century in Britain which was oriented largely towards colonial markets: the cotton textile industry (Bairoch 1993: 84–85). By 1819/1821 cotton textile exports accounted for about 53% of production and a significant proportion of these went to colonies and the Third World (Bairoch 1993: 85). But this was only one industry amongst many in the industrial revolution, and even if colonial trade markets had been unavailable the sector would still have developed but just at a lower level of production.

Importantly, Bairoch (1993: 59) has demonstrated that right up until the post-WWII era the West was almost completely self-sufficient in energy, and as late as the 1930s much of the developed world had an export surplus in products used to create energy, such as coal (Bairoch 1993: 59). It follows therefore that the imperialist exploitation of the Third World was not necessary to provide the energy needs of early industrial capitalism.

With respect to other important factor inputs, Bairoch first notes that the West was almost wholly self-sufficient in iron ore: most production occurred in Europe where around 1914 Europe produced 28 million of the 32 million tons in global production (Bairoch 1993: 63). In 1914, the West only depended for 2% of its total metal ore consumption on Third World production – an extraordinarily low figure which means that 98% of metal ores were produced domestically (Bairoch 1993: 65).

In production of glass, cement, paper and clay products the West was almost completely independent and not reliant on imports (Bairoch 1993: 68).

Bairoch (1993: 68) estimates that in terms of value the West was about 94–96% self-sufficient in raw materials as late as 1913.

It is also extremely doubtful that the West needed some captive Third World or colonial market to achieve the industrial revolution.

As late as the early 20th century, the export sector accounted for only about 8–9% of GNP of most developed nations, and total exports to the Third World were as low as 1.3 to 1.7% of the total volume of production. Exports to actual Western colonial territories accounted for as little as 0.6 to 0.9% of the total volume of production (Bairoch 1993: 73).

Great Britain – the colonialist superpower of the 19th century – exported only about 4–6% of its total production (Bairoch 1993: 73), and not all of that to its colonies, a figure which remains a low percentage. At most, Bairoch notes, exports to the Third World might have helped certain given UK sectors for limited periods of time (such as textiles), but this hardly vindicates Marxism, since it does not follow at all that this was a necessary condition for the British industrial revolution nor that British imperialism had a fundamental and underlying economic motive.

A final point is that the Spanish and Portuguese had richer, larger colonial empires than Britain did in the early modern period, but why didn’t the Spanish and Portuguese undergo an industrial revolution? As late as the 1700s, the Spanish and Portuguese empires even had an export trade five to seven times larger than that of Britain’s empire (Bairoch 1993: 82).

Clearly, the possession of a colonial empire was not a sufficient condition for industrialisation, and, as we will see below, nor was it a necessary condition of the British industrial revolution. Rather, as Bairoch argues, the European conquest of the world occurred more as a consequence of the superior technology and wealth of Europeans (and power politics) which was in turn a result of industrialisation, not a condition for it (Bairoch 1993: 82, 85–86).

To return to Marx’s analysis, the system of public debt and central banks is seen by him as vital in the process of primitive accumulation:

“The system of public credit, i.e. of national debts, whose origin we discover in Genoa and Venice as early as the middle ages, took possession of Europe generally during the manufacturing period. The colonial system with its maritime trade and commercial wars served as a forcing-house for it. Thus it first took root in Holland. National debts, i.e., the alienation of the state—whether despotic, constitutional or republican—marked with its stamp the capitalistic era. The only part of the so-called national wealth that actually enters into the collective possessions of modern peoples is—their national debt. Hence, as a necessary consequence, the modern doctrine that a nation becomes the richer the more deeply it is in debt. Public credit becomes the credo of capital. And with the rise of national debt-making, want of faith in the national debt takes the place of the blasphemy against the Holy Ghost, which may not be forgiven.

The public debt becomes one of the most powerful levers of primitive accumulation. As with the stroke of an enchanter’s wand, it endows barren money with the power of breeding and thus turns it into capital, without the necessity of its exposing itself to the troubles and risks inseparable from its employment in industry or even in usury. The state-creditors actually give nothing away, for the sum lent is transformed into public bonds, easily negotiable, which go on functioning in their hands just as so much hard cash would. But further, apart from the class of lazy annuitants thus created, and from the improvised wealth of the financiers, middlemen between the government and the nation—as also apart from the tax-farmers, merchants, private manufacturers, to whom a good part of every national loan renders the service of a capital fallen from heaven—the national debt has given rise to joint-stock companies, to dealings in negotiable effects of all kinds, and to agiotage, in a word to stock-exchange gambling and the modern bankocracy.

At their birth the great banks, decorated with national titles, were only associations of private speculators, who placed themselves by the side of governments, and, thanks to the privileges they received, were in a position to advance money to the state. Hence the accumulation of the national debt has no more infallible measure than the successive rise in the stock of these banks, whose full development dates from the founding of the Bank of England in 1694. The Bank of England began with lending its money to the Government at 8%; at the same time it was empowered by Parliament to coin money out of the same capital, by lending it again to the public in the form of bank-notes. It was allowed to use these notes for discounting bills, making advances on commodities, and for buying the precious metals. It was not long ere this credit-money, made by the bank itself, became the coin in which the Bank of England made its loans to the state, and paid, on account of the state, the interest on the public debt. It was not enough that the bank gave with one hand and took back more with the other; it remained, even whilst receiving, the eternal creditor of the nation down to the last shilling advanced. Gradually it became inevitably the receptacle of the metallic hoard of the country, and the centre of gravity of all commercial credit. What effect was produced on their contemporaries by the sudden uprising of this brood of bankocrats, financiers, rentiers, brokers, stock-jobbers, &c, is proved by the writings of that time, e.g., by Bolingbroke’s.

With the national debt arose an international credit system, which often conceals one of the sources of primitive accumulation in this or that people. Thus the villanies of the Venetian thieving system formed one of the secret bases of the capital-wealth of Holland to whom Venice in her decadence lent large sums of money. So also was it with Holland and England. By the beginning of the 18th century the Dutch manufactures were far outstripped. Holland had ceased to be the nation preponderant in commerce and industry. One of its main lines of business, therefore, from 1701–1776, is the lending out of enormous amounts of capital, especially to its great rival England. The same thing is going on to-day between England and the United States. A great deal of capital, which appears to-day in the United States without any certificate of birth, was yesterday, in England, the capitalised blood of children.” (Marx 1906: 827–829).

Marx sees the regressive taxes of the early modern period and 19th century as hitting the poor:

“As the national debt finds its support in the public revenue, which must cover the yearly payments for interest, &c, the modern system of taxation was the necessary complement of the system of national loans. The loans enable the government to meet extraordinary expenses, without the tax-payers feeling it immediately, but they necessitate, as a consequence, increased taxes. On the other hand, the raising of taxation caused by the accumulation of debts contracted one after another, compels the government always to have recourse to new loans for new extraordinary expenses. Modern fiscality, whose pivot is formed by taxes on the most necessary means of subsistence (thereby increasing their price), thus contains within itself the germ of automatic progression. Over-taxation is not an incident, but rather a principle. In Holland, therefore, where this system was first inaugurated, the great patriot, De Witt, has in his ‘Maxims’ extolled it as the best system for making the wage-labourer submissive, frugal, industrious, and overburdened with labour. The destructive influence that it exercises on the condition of the wage-labourer concerns us less however, here, than the forcible expropriation resulting from it, of peasants, artisans, and in a word, all elements of the lower middle-class. On this there are not two opinions, even among the bourgeois economists. Its expropriating efficacy is still further heightened by the system of protection, which forms one of its integral parts.” (Marx 1906: 829).

“The system of protection was an artificial means of manufacturing manufacturers, of expropriating independent labourers, of capitalising the national means of production and subsistence, of forcibly abbreviating the transition from the mediaeval to the modern mode of production. The European states tore one another to pieces about the patent of this invention, and, once entered into the service of the surplus-value makers, did not merely lay under contribution in the pursuit of this purpose their own people, indirectly through protective duties, directly through export premiums. They also forcibly rooted out, in their dependent countries, all industry, as, e.g., England did with the Irish woollen manufacture. ….

Colonial system, public debts, heavy taxes, protection, commercial wars, &c, these children of the true manufacturing period, increase gigantically during the infancy of Modern Industry.” (Marx 1906: 830).

Marx points to the trans-Atlantic slave trade as yet another method by which the British accumulated capital (Marx 1990: 924–925).

But once again, in contrast to Marx’s anti-capitalist views, modern research has shown that the profits from slavery barely rose from 1% of national income in the late 17th century to 1.5% by 1770, and – even if this had been totally eliminated – there were vast amounts of money capital awash in the British economy in the 1700s which could have been used to finance industrial investment (Harley 2004: 197).

The contribution of the actual slave trade itself to Britain’s economy was trivial, and a significant volume of the trade occurred after the industrial take-off anyway (Eltis and Engerman 2000: 129). Moreover, the Spanish and Portuguese earned far more from the slave trade than the UK did in terms of a percentage of national income, but in neither case did profits from slavery lead to industrialisation in Spain or Portugal (Eltis and Engerman 2000: 131). On this issue, see here.

Nor is it true that industrial capitalism in England required slave-based production in the New World (Eltis and Engerman 2000: 134–135).

The reality is that the actual capital costs of the investment needed for the industrial revolution were not large at all compared to Britain’s GDP or the incomes of property owners (Harley 2004: 197).

Marx seems to imply that all these factors – colonialism, imperialism and slavery – were causally necessary for the industrial revolution in Europe:

“Tantae molis erat [sc. “so great was the effort”], to establish the ‘eternal laws of Nature’ of the capitalist mode of production, to complete the process of separation between labourers and conditions of labour, to transform, at one pole, the social means of production and subsistence into capital, at the opposite pole, the mass of the population into wage-labourers, into ‘free labouring poor,’ that artificial product of modern society. If money, according to Augier, ‘comes into the world with a congenital blood-stain on one cheek,’ capital comes dripping from head to foot, from every pore, with blood and dirt.” (Marx 1906: 833–834).

This is confirmed today by the way in which highly successful, state-led industrial revolutions have been carried out in South Korea and Taiwan, but we can see clearly that neither state had, nor required, colonies or imperial expansion or theft to effect this capitalist revolution.

Moreover, when the West itself gave up its colonial empires in the 1940s and 1950s and these former empires adopted a protectionist and state-led model of import substitution industrialisation, this did not stop massive economic growth and prosperity in the Western world.

Marx was, however, correct to note the role of protectionism and the state in early capitalist development and the crucial role of the credit system, with its emerging system of endogenous credit money.

A final point is that the non-Western world also has a long and horrific history of slavery, imperialism and colonialism. On the Marxist left and far left, there is an almost pathologically dishonest unwillingness to recognise that what the West did from 1500 to c. 1950 (in the period of its direct imperialism) was in essence what non-Western empire after empire has done through the ages, and in some respects not as bad as other empires. To blame capitalism per se for Western imperialism is short-sighted and the worst kind of Marxist mythology.

BIBLIOGRAPHY
Bairoch, Paul. 1993. Economics and World History: Myths and Paradoxes. Harvester Wheatsheaf, New York and London.

Brewer, Anthony. 1984. A Guide to Marx’s Capital. Cambridge University Press, Cambridge.

Eltis, David and Stanley L. Engerman. 2000. “The Importance of Slavery and the Slave Trade to Industrializing Britain,” The Journal of Economic History 60.1: 123–144.

Harley, C. Knick, 2004. “Trade: Discovery, Mercantilism and Technology,” in Roderick Floud and Paul Johnson (eds.), The Cambridge Economic History of Modern Britain. Volume 1: Industrialisation, 1700–1860. Cambridge University Press, Cambridge. 175–203.

Harvey, David. 2010. A Companion to Marx’s Capital. Verso, London and New York.

Marx, Karl. 1906. Capital. A Critique of Political Economy (vol. 1; rev. trans. by Ernest Untermann from 4th German edn.). The Modern Library, New York.

Marx, Karl. 1990. Capital. A Critique of Political Economy. Volume One (trans. Ben Fowkes). Penguin Books, London.