Capitalism and the Nation-State

         

The purpose of this essay is to explore the relationship between capitalism as we understand it today, and the nation-state as an institution.  In particular I will attempt to extrapolate the extent to which the two are interdependent, and the extent to which they are contradictory forces in human civilization.  I will trace the origins of both capitalism and the nation-state in the European civilization of the medieval and early modern periods, examining their relationship both with each other and with other important forces of that culture such as Christianity, before assessing their development into the global civilization of the present, and their likely significance in human life for the future.

 

What is capitalism?  The Collins English Dictionary defines it as “an economic system based on the private ownership of the means of production, distribution and exchange, characterized by the freedom of capitalists to operate or manage their property for profit in competitive conditions.”  This seems like a useful enough starting point, throwing the focus straightaway on the private ownership element of capitalism.  There is, however, a certain naivety in the subsequent assumption that capitalists will operate in “competitive conditions”; since the ultimate objective of a market is to eliminate competition, it should not therefore surprise that this is frequently what happens in the real world, with energy and transport companies, for example, frequently operating monopolies.  Similarly there is a certain naivety in the assumption that a privately owned economic system will necessarily be run for profit.  But capitalism as I will interpret it traces its origins to privately-financed enterprises which developed in Europe in the later medieval period, and I therefore take the element of private ownership of economic means as central to what I define as capitalism.

 

Turning to the nation-state, the CED calls it “an independent state inhabited by all the people of one nation and one nation only”.  This again serves as a useful enough starting point, throwing as it does the focus straightaway on the element of independence inherent in the nation-state.  However again there is a certain naivety in the assumption that such a state will be inhabited by all the people of one nation and one nation only” in a modern world in which nations are typically inhabited by people who may claim affiliation to many other nations.  I believe that this definition, while grasping one important element of the nation-state, that of its independence from others, ignores another important element, that of its possession of a discrete physical territory.  The implications of this, not least its right to possession of that territory, and its right to govern the inhabitants of that territory, will be significant features of the nation-state which will be examined in this essay.  I believe a more satisfactory definition of the nation-state would be “an independent state with possession of a discrete physical territory, and exercising governance over the land and inhabitants of that territory”.  It is this definition which I will be following in this essay.

 

Why, and for what purpose, did the nation-state develop?  It developed partly as a response to the chaos and near-anarchy which developed in Europe in the early medieval period.  The East Frankish kingdom, for example, was composed of a myriad of independent tribal groupings in this period, each with their own laws and customs.  Carolingian rule often amounted to little more than a loose overlordship on both sides of the Rhine.  Magnates beneath the King derived authority from association with the King, but would withdraw support and cooperation when the king didn’t seem to be serving their ends, as in the 670s when the Frankish kingdom virtually collapsed.  Rulers desired stronger control over their peoples, and the idea of developing the right to rule over a particular territory, as well as the people within it, slowly evolved as a response to this, implying as it did the inalienable right to rule the land’s inhabitants.

 

The right to rule the inhabitants of a particular land was not the only potential benefit to accrue to a ruler by the development of a nation-state with a discrete physical territory.  It also endowed the right to hold that territory exclusively from the rulers of other lands, implying as this did an end to interminable, expensive warfare.  Early Germanic society, which dominated the development of Europe in the post-Roman era, was headed by a community of free warriors led by a ruler, established by a voluntary personal bond between the leader and his followers, who swore an oath of allegiance and loyalty and received subsistence in return.  It was based on ties of kin and predicated on the need for constant warfare, and did not necessarily imply rule over discrete territories, or even over peoples with linguistic, religious, or ethnic commonalty.  It was appropriate and effective in an era of plunder, conquest, and territorial expansion, such as that of the world of early medieval Europe following the collapse of the Roman Empire.  But it became inadequate to the needs of rulers in an era when trade between kingdoms was becoming more important, and constant warfare was becoming a costly inconvenience.  In the early medieval era all free peasants had the right to be conscripted into battle, but by the 8^th-9^th centuries, they were losing the rights to bear arms or engage in warfare, as they were losing the right to attend and share decisions of assemblies.  According to one capitulary in this period, a peasant required 12 mansi to be an armoured horseman.  This was the start of the long evolution of the medieval knight, from a peasant with property to a member of the aristocracy, and was driven by the needs to raise finance for the increasingly costly business of war, as technology rendered it an increasingly sophisticated business.

 

Frankish rulers continued to bestow land as private property in the eighth century, which implied right by conquest, but also implied the endowment of sovereignty over that land to the recipient.  In 741, for example, Charles Martel bestowed the villa of Clichy to the monastery of St Denis, by private charter.  Furthermore, succession to lands was not assured by heirs, and the Carolingians divided lands among offspring in unpredictable ways, as when Martel divided his lands between his two eldest sons Carloman and Pippin III, and left his third son Grifo none.

 

And the tradition persisted, into the 9^th century, of viewing rule as being over people rather than land.  Louis the Pious committed “ourself … in the administration of this realm, that peace and justice be kept in the whole generality of our people.”FN1 – Monumenta Germaniae Historica  The dawn of the era of pan-English overlordship did not kill it either, charters replacing titles such as ‘King of the Saxons, Mercians, and Northumbrians’ with ‘King of the English’.  In Francia around the same time, the Ottonians were, similarly, Kings ‘of the Saxons and the Franks’.  There was a primitive form of democracy inchoate in this early form of Germanic warrior society.  The Lombards of the eighth century, for example, established following their conquest of Italy the practice of endowing all freemen, ie those offering military service, with a share of political sovereignty, in particular via an assembly through which legislation had to pass.

 

But gradually, in the domain of the West Franks, the concept of a realm being of territory rather than people began to develop.  Odo came to rule this realm in 888 amid controversy, plotting, and finally by conquest over the Northmen.  Yet he passed it on ten years later in its entirety to a single agreed successor, Charles the Straightforward.  And he did so amid a sense that this was a single, discrete West Frankish territory.  His ability to deal with the Northmen had been critical to his winning the support he needed to secure the kingship.  But critical to gaining and maintaining control over this territory was his ability to keep royal control over principalities and dukedoms which in other lands and in other times would have splintered and destroyed central royal power.  He maintained a distinction between royal and comital power, for example in the Loire valley where his brother was dominant, thus ensuring that he was able to maintain royal power in these areas.  Ecclesiastical principalities were not allowed to develop separately from royal power either, Odo having control of lay abbacies which enabled him to control and exploit ecclesiastical resources, enmeshing in the process the Church with royal sovereignty.

 

Here, in larval form, were the principal ways by which rulers came to establish, maintain and develop their control over discrete physical territories, as well as the reasons why.  His victory over the Northmen impressed the noble and ecclesiastical dignitaries who ensured Odo’s passage to power in West Francia, not because it represented conquest, but because it ensured the defence and security of the realm.  And this was of increasing importance to those who enriched themselves by trade and couldn’t afford the exigencies created by endless warfare.

 

Trade had long been an important source of revenue when Odo was consolidating royal power in West Francia.  Evidence of coinage evinces that it drove an economy of nascent capitalism.  Frisian merchants were attempting to issue their own coinage by the turn of the eighth century, before the King succeeded in reimposing a royal monopoly, but even the royal coinage was then expanded for private profiteering rather than simply for royal purposes.  Kings were using coinage to maintain fiscal control of the economy, as when Charles the Bald imposed realm-wide taxation to pay off war-bands in 866.  In 808 The Danish King Godfrid destroyed an emporium which he’d previously used for tolling, and forced traders to a portus at Schleswig which he then protected with a rampart.

 

Most manufactures in this period were performed on lands owned by great landowners such as the Church or nobility, a point to be discussed later in this essay, and because of this the manorial centers of the king and Church played a central role in the distribution and exchange as well as production of manufactures.  Markets were established on estates with royal permission, for example the Prum estate at Rammersheim in 861 or Munstereifel in 898.  Tenants generally sold products directly onto the markets.  In Italy towns had a continuous history from the Roman period, and consequently continued to serve as centers for the exchange of goods.  In towns such as Pavia, Milan, and Mantua, ecclesiastical landowners such as Bobbio, and Sta Giulia di Brescia, had subsidiaries to which they brought their surpluses.  Traders in this period were mostly agents in the employ of the king or the great estates, some of whom were unfree, and while they grew in numbers and wealth in this period, they continued to be minuscule in political status, subservient even to lawyers as well as royal officers.  Towns in turn started to become the foci of governmental control over surrounding areas, which would continue into modern times, but insomuch as they came to be controlled by guilds and powerful merchants, rulers in the era of absolutism sought to maintain control of them.  Medieval city-states of Italy were subsumed into larger states by the 17^th century.  By this time some industries, such as mining and metals, were effectively controlled by governments through crown monopolies.  European countries were developing international trade and empires through monopolies, such as the English and Dutch East India companies, and were using colonies as sources of raw materials and as a market for exports.  Cotton from India, for example, became a vital raw material for the development of the British textile industry.

 

In the era of European imperialism rulers also ensured that they maintained control of the discovery and exploitation of alien lands, explorers typically requiring, and obtaining, royal patronage.  Columbus approached at least two noble houses and four sovereigns, requesting funding for his voyages to the Indies.  John Cabot had a pension form Henry VII of England and a royal commission to explore.  Florentines financed Vasco da Gama’s mission to India.  The Portuguese royal family took control of the exploration of Guinea in 1475, boosting the prestige of African enterprise, and centralizing control of commerce.

 

The development of towns was also both a threat and an opportunity to rulers and the developing nation-state.  Many towns in this period were fortified enclosures, and the markets within were therefore controlled by the king as part of planned towns.  But as trade and industry developed towns increasingly came under the control of guilds and local merchants, who developed powers to levy taxes on citizens, and control matters such as road-building and even policing.  Insomuch as this constituted a threat to royal power, rulers increasingly sought to bring the guilds under their control.  Frederick William I reorganized the guilds in 1732-5, bringing them under governmental control.  Joseph II ended the guilds’ monopoly of trade.

 

Such attempts by national state rulers to seek control of trade and capitalism have been a sporadic feature of Western civilization throughout its history, being characteristic of periods when the latter appears to be damaging the nation-state.  During the economic depression of the 1930s the various governments of the West turned to bickering and blaming each other, thus obviating cooperation, and seeking their own national remedies for the problems of unemployment and recession they were facing, often at the expense of other nations.  The Americans, for example, thought that the British were responsible for being tardy repaying wartime loans.  The British thought that the Germans were responsible for being tardy repaying wartime reparations.  The Germans blamed everyone for being excessively hard demanding repayments. The British government took the United Kingdom off the gold standard in September 1931, causing massive fluctuations in foreign exchange, thus exacerbating international trade.  Many countries, including Britain, took to imposing protective tariffs in an attempt to protect their own industries and economies, without discussing them with each other, which also damaged trade and the international economy.  In Europe the ideas of John Maynard Keynes, the Cambridge economist who advocated government spending and other inflationary policies as a way of reigniting economic growth, were largely rejected by governments who continued to keep faith with laissez-faire orthodoxy, as initially they were by the Hoover administration in the United States, but they came to be adopted by President Roosevelt from 1933, whose New Deal sought to take greater governmental control of Wall Street and the banking system, as well as creating the Civilian Conservations Corps, taking millions of young men off the dole queues to carry out public works such as road-building and reafforestation.  In Germany, meantime, the Depression was partly responsible for aiding the rise to power of the Nazi Party, who exploited the economic problems of the country by blaming a Marxist-Jewish-American conspiracy. 

 

If gaining and maintaining control of trade was critical to the development of rule over a nation-state, no less so was the need to gain control over its inhabitants, and the development of feudalism was central to achieving this in the medieval period.  The feudal system which developed in this period tied people at all levels together in a society of mutual rights and obligations, tied to ideas of land ownership.  The King demanded military and revenue-raising services from nobles and knights, in return for which they enjoyed the status of being great men of the realm, as well as great landowners who enjoyed the benefits and status of their territory.  The nobility demanded rents and produce from the peasantry on their land, in return for which they offered protection and access to markets to sell surplus produce.  A system which brought order and stability to European society following the near-anarchy of the early medieval period, but it also succeeded in tying in inhabitants of the ruler’s land at all levels to an acceptance of his rule, forcing the nobility to accept his sovereignty over their land, in return for hereditary rights, and forcing the peasantry to accept a diminution of their status from members of the king’s armed retinue, to serfs who were little more than chattels to be bought and sold as part of land inheritance.

 

Kings would sometimes use the feudal system to extend administrative control over their territories.  Initially rulers would wield power over duchies in Italy, for example, more as overlords than as feudal lords, and their power over the dukes diminished the further away the duchy was.  The Kings of Lombardy overcame this by using gastaldi, public-appointed administrators, hireable and fireable by the king, who controlled royal revenue in the territory, and this office was sometimes unified with that of duke, an effective means of expanding royal power over duchies.

 

The Carolingians gained control of Italian duchies by appointing them directly and removing them at will.  Control of these borderlands was imperative because independent kingdoms allied with the Byzantines against the Franks.  Although Charlemagne initially allowed Lombards to retain their national law, he gradually replaced Lombards with Franks as the ruling class, and with them went the Lombards’ political traditions.  Counts appointed by the emperor supplanted the dukes, and gastaldi gradually came to be subordinated to the Counts.  These counts were invaluable to rulers in keeping social order, presiding over local courts, and repressing crime.  Ealdormen performed a similar role in England.  In order to ensure maintenance of power over the counts, who were mostly local nobles, the Carolingians used ‘missi dominic’ to report on the counts.  These were usually greater counts with land in the regions, but also acted with royal authority and this system compelled counts to comply.

 

The king’s bestowal of honores such as countships, reinforced the power of centralized patronage over the aristocracy.  Such positions could be hereditary, although a king could strip them from a nobleman at will.  Honores created competition between aristocrats, as when Matfrid and Odo fought over the countship of Orléans, Louis the Pious having replaced the former with the latter.  Matfrid killed Odo, although he too subsequently lost the position again.  By the 15^th century English nobles and smaller landowners were acting as local government officials in their territories, ensuring harmonious centralized government.  Such patronage and office-holding bestowed privileges and wealth on holders, but also set noble against noble, often in the same family, promoting a sense of loyalty to a wider group than family. 

 

The use of the feudal system was not the only way in which rulers were able to gain control over the incipient nation-state.  Rulers periodically summoned regnal assemblies of lords, abbots, and other great men of the territory, which were typically a mix of social events and fora to discuss issues such as coinage, law, and foreign contracts.  The assemblies at Bath in 973, and at Quedlinburg by Otto in the same year, discussed such issues as well as being showcases of royal ritual and power.  They also evinced a nascent sense of a united Latin Christendom.  Such assemblies helped to endue the kingdom with a sense of collective identity.  As well as settling disputes attendees acted as witnesses to royal charters and disseminated copies of the assemblies’ findings in their localities, acting as representatives of their localities. 

 

Crimes came to be regarded as an offence against the king’s authority, and rulers, such as Alfred the Great of Wessex, would sometimes preside over cases personally, thus enduing a sense of direct rule over all the state’s inhabitants.  Later in England the development of a common law was critical to the development of the nation-state.  In the 11^th and 12^th centuries it developed as an adjunct of Norman rule, and was common to the whole of England. Three innovations in particular were critical to its development, the practice of sending royal judges on tour to dispense a justice which was sovereign over the jurisdiction of any local court, the issuing of royal writs which were also binding on local courts, and lastly the establishment of a supreme royal court at Westminster, independent of the King’s direct judgment.  The sense of royal judgment over the lives of all English citizens was an important factor in the development of the English nation-state.

 

In order to gain the respect and acceptance of the ruled, rulers have to be able to justify their possession of power.  In the pre-feudal era, Germanic rulers were essentially leaders of war-bands, and justified their position through success in battle.  As the nation-state developed alongside the feudal system, rule over a discrete physical territory endued an assumption of the right to rule the inhabitants of that territory, in peace as well as in war, which required a moral justification beyond merely being a successful warrior-leader.  It is principally for this reason that medieval rulers turned to Christian theology to provide a justification for their rule.  The concept that man’s position and status in the temporal world was ordained by God implied the divine right to rule, as it conversely implied the obligations of obedience on the peasantry, which became an important adjunct to state power in this period.

 

Early medieval European society became dominated by the Augustinian concept of society as being determined by God, with all within it having a specific role ordained by the position they were born into.  Gregory VII declared in 1079 that “divine providence disposed that grades and different orders should be distinct … as long as the lesser revered the greater and the more powerful cared for the lesser, a single concord would arise from diversity … the heavenly hosts tells us that the creation cannot be arranged … in a single and undifferentiated equality; the fact that there are angels and archangels shows that they are not equal.”  FN2 While the implication of this is ostensibly inequality and hierarchy, there was also the implication of a kind of social equality insomuch that the roles of all classes had equal merit before God and all would be assured of salvation before God.  The main social divisions were nobiles, liberi, liberti, and servi.  Liberi (freemen) maintained the right to own property and to freedom of movement, but by the 8^th century were progressively losing the right to attend and vote in assemblies, and to perform military service.

 

While the accession of Pippin in the 9^th century (N3), evinces an incipient sense of democracy as a justification for his rule, it is equally clear that divine approval is also needed: “by the election of all the Franks … by the consecration of the bishops … he was elevated to the kingdom.” (FN3) By the 10^th century the Ottonians had developed more sophisticated ecclesiastical rites of kingship, in accordance with his new-found status as God’s anointed shepherd.  The king was being consecrated in church, and anointed in a ceremony which transformed him from princeps into rex, his coronation raising him to be ‘king over God’s people.’  And similar practices were extant in 12^th century Iberia,  Alfonso IX of Leon promising in 1188 not to rule ‘without the consent of the bishops, nobles and good men with whose counsel I have to reign.’  Divine right remained extant in the absolutist Europe of the 18^th century, Louis XVI reviving the ceremony of “touching for the King’s evil” at his accession.  The belief that the King’s touch could cure a subject of illness or disease was happily spread by rulers in the medieval period, and was linked intimately with divine right, the king originally saying to the unfortunate subject, “the King touches you; God cures you.”  By the 18^th century it had changed to “the King touches you; may God cure you”, a change reflecting more an awareness of a less credulous age than any diminution of the King’s divine right to rule, since its very survival indicates that this remained its main purpose.  Swedish peasants during the Age of Liberty of 1719-1772 were typically ardent royalists who were inclined to view their monarch as a saviour.

 

It was not only because it endued with a God-given right to rule that the Church was invaluable to Kings in the medieval era.  It also became a vital tool for establishing and maintaining administrative control over the nation-state.  In any case it was important for kings to have control over the Church in an era when it’s position as the biggest single landowner in Europe propelled it to the forefront of the development of the medieval economy in Europe, with control not just over agricultural production and markets, but also over many manufacturing industries, such as coal and iron ore production.  The concept of interlinking papal with royal power developed early in the history of medieval Europe.  “Two there are … by which this world is chiefly ruled, the sacred authority of the priesthood and the royal power”.  So wrote Gelasius I in a letter to the Emperor Anastasius in    c.492-6 (FN4) By the 8^th century rulers were accustomed to using the Church as a way of establishing and maintaining control of society.  Charlemagne, for example, issued a detailed list of all the tasks which men and women may or may not be allowed to perform on the Sabbath.  In fairness there is evidence that subjects didn’t always take religious observance very seriously.  Injunctions issued to obviate people from leaving services early, for example, appear to have been frequently flouted, but it nonetheless created a powerful sense that the King could intervene in all aspects of his subjects’ lives, and was doing so with God’s approval.  Aristocrats might be stripped of the right to bear arms in public, as was the Lombard Haistulf in c.794 as a public penance for killing his wife.  A Lotharingian noble, Frotmund, was condemned in c.855 to make a penitential journey to the Holy Land in sackcloth and chains, as a public penance for killing his uncle, evincing the interlinking of royal with ecclesiastical power through this period.  As well as helping to create social cohesion and unity, the Church also helped to endue territorial as well as ideological shape to kingdoms, and were customarily involved in the business of administration, for example, helping to raise armies as well as controlling much of industrial and agricultural production.  The Church became enmeshed with royal power, archbishops serving as ministers, bishops acting as law and order enforcers, and organizing military support.

 

Many local rulers wanted the establishment of an ecclesiastical hierarchy in this period as a means of enhancing their own prestige and control and would appeal to Rome to erect it, as the Duke of Bavaria did in 716.  In this period the papacy frequently claimed authority over ecclesiastical affairs in these lands, but were often ignored in practice, as when Hincmar of Rheims deposed Rothard of Soissons (N5), incurring the wrath of Rome.

 

The adoption of the Franks as the main allies of the papacy was also critical in shaping the relationship between the Church and the nation-state in West Europe, the region where the latter was developing.  Relations between Rome and Byzantium, the papacy’s original benefactor, had been souring for a long time, characterized by a power struggle which would eventually be won by Byzantium, but only at the expense of the papacy aiding the rise of a new power in the West.  This manifested itself in various ways, including several conflicts such as that which led to the capture and torture of Martin I by the Byzantines in 649 due to perceived obstinacy on his part.  In 692 Justinian II of Byzantium held a council which issued various canons to be enforced on Rome, which Pope Sergius I rejected.  Justinian sent forces to seize the Pope but Sergius was protected by the Romans.  In 731 Leo III of Byzantium banned the use of images in Christian art, and tried to compel the Pope to follow suit.  Gregory II refused and denied that Leo had the right to intervene in such matters.  Leo responded by withdrawing his Italian lands from the papal province and removing revenue from the papacy.  The Popes were upset by a lack of support from Byzantium against the Lombard incursions, while Byzantium was upset by papal interference in Byzantine affairs.  In many ways the breach with Byzantium previewed the later breach with the Western powers, insomuch as it was characterized by a desire for secular leaders to enjoy power over their lands untrammelled by what they saw as alien interference.  But the effect was different, and the breach with Byzantium necessitated a new order of power in Italy, with the Popes now looking to the Franks for support against the incursive Lombards.  In 751 the latter captured Ravenna and then proceeded toward Rome.  Pope Stephen II obtained an alliance with Pippin of the Franks, who defeated the Lombards and restored the papal lands.  By 800 Charlemagne was crowned emperor by Pope Leo III, confirming and embellishing the status of the Franks as the Pope’s principal ally, as well as that of the Pope at the head of Christendom.(N6)  Frankish power over the papacy began to atrophy in the 9^th century, such that Pope Sergius I was elected and consecrated in 844 without imperial approval, the beginning of the long period of papal aggrandizement which would prove so significant to the future history of West Europe, and ultimately the world.

 

Immanent to the rise of the Papacy in the later medieval period was the centralized administrative structure which it succeeded in developing over the Western Church, enduing it with an international power structure which none of the secular leaders, great or small, could match.  The collapse of the Carolingian empire in the 9^th century left a power vacuum which only the papacy was in a position to fill.  From the 8^th century the Popes had established a network of archdioceses through which it ruled a centralized Western Church.  It thus became a Church governed by bishops through Councils.  Bernard of Clairvaux, in his De consideratione, defined the power of the Pope as superior over all of the Church.  The Pope was the ‘sole shepherd not only of all the sheep, but of all the shepherds.’  Gratian of Bologna concurred in his Decretum, citing Christ’s bestowal of the keys on Peter as indicative of Peter’s superiority over the other apostles.  Bishops, therefore, derived authority not directly from God, but from the Pope as an intermediary.  The Papacy became a court of final appeal and the Pope’s judgment was regarded as final. The Pope also came to be regarded as having authority not only over all men, but also over the law. 

 

Church structure in this period was, nonetheless, variegated, and the papacy’s control over it therefore patchy.  In some areas of Italy it effectively controlled dioceses, whereas in other areas, such as in France or England, it had little effective control over dioceses or ecclesiastical appointments.  The Papacy was often more active in more peripheral regions of Latin Christendom such as Dalmatia and Croatia, where significantly they continued to be useful to rulers eager to enhance the status and legitimacy of their power.  Here they would confirm ecclesiastical arrangements in sees such as Bremen and Magdeburg.

 

It was partly in response to the incomplete nature of its control over the dioceses, that the papacy slowly developed a tradition of rule by canons and decretals, as adumbrated by Burchard of Worms. (FN5)  Obedience to the Pope became an article of faith, and recalcitrance could lead to excommunication, as when Henry IV was excommunicated by Gregory VII.  From the time of this Pope legates were sent to enforce papal decrees, as when he confirmed in a letter an interdict which his legate Bishop Gerald of Ostia had imposed on Bishop Isembert of Poitiers.  These were sometimes standing legates, that is permanent representatives.  Papal councils and synods were also an important way of governing a centralized Church.  After 1056 Popes sat alone without emperors at councils, and promulgated canons and judicial decisions without reference to secular authority. 

 

Spreading the tentacles of Christianity was of huge potential benefit both to the secular rulers of Christendom and to the papacy, but particularly to the latter, and the development of the crusading ideal was another important way in which Popes were able to gain control over the nation-states of West Europe, as well as further afield.  The concept of fighting for God against the heathen had a long history pre-dating the great age of the Crusades to the Holy Land in the 12^th and 13^th centuries.  In the 8^th century the Franks gained the right to rule from conquest and military success, but spreading Christianity was becoming a part of royal prestige.  Fending off Arabs, Frisians, and Saxons was as much about fending off heathens as it was alien aggressors.  Conquests in Frisia and East of the Rhine aided the spread of Christianity.  The Church’s early hostility to the idea of warfare was superseded by an acceptance of its utility, for example when spreading Christianity into pagan lands or defending churches and monasteries.  Gratian, in his Decretum (FN6), claimed the right of the papacy to compel secular rulers to act in order to extirpate heresy, which could include persecution.  This endowed the Pope with the power to declare crusades, and therefore what Bernard of Clairvaux (FN7) called the power of the two swords.  Territorial aggrandizement was reciprocal for the two powers in the 12^th century, as when Alfonso I Henriques of Portugal defeated the Muslims in Iberia, and earned papal approval for it, paying the papacy 1000 gold pieces.  The King gained legitimacy for his conquest, while the papacy gained access to further lands for ecclesiastical, and even secular, control.  The Church continued to oppose the idea of Christians fighting each other, as when William the Conqueror’s soldiers were required to do penance for four years after the Battle of Hastings. But the crusading mission introduced to the warrior class the idea that they were fighting for a wider cause than just himself or his King.  Bishop Burchard of Worms, for example, issued a Decretum (FN8) which included penances, one of which was to kill heathens.  The Papacy attempted to develop an ethos of war as being about protecting and propagating a moral, Christian code, rather than being for King or secular ends.  They were circumventing the idea that warfare was sinful, as when Anselm of Lucca in his Canons, argued that ‘love for one’s neighbour can justify the use of force’. (FN9)  The crusading ideal faded because of the development of the nation-state and resurgence of kingly power, and because knights came to be more interested in localized concerns and kingly patronage and wealth, than in what came to seem distant abstract ideals.

 

Perhaps it is unsurprising, given it’s preponderant power and influence in the development of medieval Europe, that the Church would eventually descend form hero to zero in the eyes of the leaders of nation-states.  The Church’s view, as well as its power, covered the whole of ‘Christendom’ as the region came to be known, and therefore, as industry and technology developed, it became as much a threat as an opportunity, not just for the region’s secular leaders, but also for its more affluent citizens, those enriched by the changing opportunities of the region’s economy. 

 

By the 13^th century the papacy was not just claiming headship of the Western Church, but was also claiming authority to intervene in temporal rule when it chose. The Pope was also monarch of his own state.  He was elected by a College of Cardinals, who were mostly chosen from families of the Papal States, which helped maintain security in this region.  Popes were elected to succeed St Peter, who according to the Gospels, was identified by Christ as preeminent.  Papal councils set limits to lay power over the Church, such as the right of secular rulers to tax members of the clergy, and further had arrived at the assumption that the church had the deciding voice in any dispute between lay and ecclesiastical authority.  By the 13^th century the Popes were sometimes claiming the right to depose as well as excommunicate Kings, as when Innocent IV deposed Frederick II as Holy Roman Emperor in 1245.  Popes sometimes also claimed the right to intervene in other temporal affairs, as did Boniface VIII (N7), and to summon higher clergy to attend the Council at Rome, which the French King refused.  Boniface was seen in France as overstepping his authority, and the French Church united behind their King in deciding to have Boniface arrested and deposed in 1303. As nation-states developed in this period, coalescing around the central power of the monarch, the overweening power of the Papacy was becoming more than an inconvenience.  The long journey which would culminate in the banishment of Christianity during France’s Age of Terror had begun.

 

It was not only those wielding political power through the nation-state who were keen to diminish the role of the papacy in their territories.  Those who were enriching themselves via the incipient capitalist system developing across Europe in the later medieval period, and seeking both greater social status through entry to the aristocracy as well as greater political power, also saw little benefit in an institution which still propagated the Augustinian belief that society was determined by God and that everyone had a specific function in it determined as indicated by birthright.

 

The purpose of capitalism is, as it always has been, the enrichment of the individual through private ownership of the means of production, distribution, and exchange.  Exploring the ways in which this institution has been enmeshed with Western civilization is the primary purpose of this essay.  Before exploring the origin and development of capitalism it will be useful to explore how the economy of Europe operated before capitalism as we know it today got started.  Most manufacturing industries in the early medieval period were owned and controlled by kings or the great landowners, both secular and ecclesiastical, since the mining and production invariably fell within their territories.  Products such as textiles, tools, and weapons, glass, and pottery, were produced by tenants for landowners.  The inventory of the bishopric of Chur (N8) lists mostly iron products paid to representatives of the King, and this was commonplace for other abbeys also.  Finished products such as horseshoes or weapons were often given as rent by peasants, evincing that this was a normal sideline for peasants.  Wooden items such as plates, spoons and barrels were donated by tenants in a similar way.  Some manufactures, such as glass objects seem to have been state-run, a glass-making workshop being located in the Carolingian palace at Paderborn.  Pottery production was also controlled mainly by landowners, especially church estates such as the Archbishop of Cologne and the chapter of St Pantaleon of Cologne.  In England pottery was a town-centered industry, Ipswich, for example, having a pottery-making zone.  Salt production was mostly in the hands of landowners, especially abbeys such as Prum in Lorraine, where salt, workplaces and tools were all owned by the abbeys, and the workers were tenants who also grew crops.

 

Due to the manorial nature of most manufacture, the manorial centers of the King and Church played a salient role in the distribution and exchange as well as the production of goods.  Markets would be established on estates with royal permission, such as the Prum estate at Rommersheim (N9) in 861, which tenants would then sell directly on.  In Italy towns, many of which had had a continuous history since the Roman era, were important centers for markets.  In towns such as Pavia, Mantua, and Milan abbeys owned subsidiaries to which they brought their produce. Milan had developed mainly on its ironworking industry, based on iron ore deposits on Lakes Maggiore and Como which were owned by the monastery of S. Ambrogio.  Merchants at this time, far from being fat cats, were not necessarily freemen, being usually agents either of the bishops or of Kings.  Those who were free sometimes sought greater control and as a result frequently came into conflict with their social superiors, as when merchants sought to move the harbour of Cremona to a different location precisely so as to wrest it free of ecclesiastical control.  In parts of North Europe many towns were fortified enclosures, the markets within controlled by the King as part of planned towns.

 

The development of coinage in the medieval period also evinces the extent to which Kings sought and maintained control over their lands, currencies being used both as an adjunct of royal prestige and as a tool of royal control.  Kings used coinage to maintain fiscal control of the economy and trade, as when Charles the Bald imposed realm-wide taxation to pay off war-bands in 866.  There were sporadic attempts by merchants to gain control of currency, as when Frisian merchants in c.700 attempted to issue their own coins.  And in the 9^th century royal control appeared to loosen, the abbots of Corbie starting to put their own monogram on coins, while in England the kingdoms of Kent and East Anglia changed hands several times without the moneyers at the mint changing, suggesting that the Kings in this period had little control of coinage.  The location of the mints in this period at mercantile ports such as London, Rochester, and Southampton further evinces that merchants had a degree of control over coinage in this period.  But subsequently the Kings once again gained control, as is evinced by the increasing standardization and sophistication of coins from the late 9^th century onward.  By the reigns of Burgred of Mercia (852-74) and Ethelred I of Wessex (865-71) it was possible for them to agree to standardize coinage across their kingdoms, presumably due to increased trade.

 

As trade among the fledgling nations of Europe became more complex, however, and increasingly involved lands beyond Europe, control over trade and industry, and the merchants who facilitated it, became strained.  Economic expansion was precipitated by myriad factors, not least population growth, more sophisticated technology, and the crusades.  Towns, which had been under the egis of Kings and the great landowners, began to develop autonomy.  Increasingly they took responsibility for tax-collection, management of local services, maintenance of law and order, and administration of markets as well as large-scale construction projects.  Consequently the merchants and other important townsmen moved into pole position to capitalize on the expansion of trade, as they were better positioned and equipped than the landowners to control it.  The development of instruments such as comenda partnerships facilitated the more complex and costly trade which was, by the 13^th century, necessary.  Comenda involved one partner investing the capital and deriving 75% of the profit, while the other invested labour and derived 25% of the profit.  Another instrument which was developed in the same period, societas, featured a more balanced distribution of profit, with all partners contributing capital and deriving apportionate profit.  Other financial instruments, such as the development of banking and credit facilities, also greatly aided the expansion of trade.  The great trade fairs which had been such an important feature of the medieval economy under the egis of the great landowners, began to decline in importance, partly because of excessive taxation by Kings.

 

The increasingly globalized nature of trade and industry necessitated large amounts of capital, which landowners struggled to supply.  It was increasingly the merchants who were in a position to find investors, supply the raw materials, control manufacturing and market the product.  The transition from shallow to deep-shaft mining for ores required capital which only merchants could supply.  Demand for silver, copper, and brass was high, and therefore attractive to investors.  Merchants from South Germany began buying up rights to mines from landowners.  They established branches across Europe to sell the produce, and used the profits to, among other things, establish banking houses.  By the 15^th century towns were sometimes gaining control over the countryside, through purchase of lands by rich townsmen or by claiming jurisdiction over outburghers.  Shipping and transport were industries which came to be dominated by capitalists, with ships owned mostly by private enterprises with shares owned by investors.  

 

Mercantile activity developed through companies in a similar way, with money moved by international exchange.  Banking systems developed in Italy and North Europe.  Governments were keen to encourage trade, because it was a useful adjunct to diplomacy as well as being a way of raising revenue, whether for the state or for themselves.  Trade became more specialized, such as livestock specialization on the Spanish Mesta or Biscay iron.  The social status of merchants was still below that of the aristocracy, although social mobility in some countries was permitting access to enhanced status.  The De La Poles of Suffolk, for example, had mercantile origins.

 

The growing economic power, and occasional social status, enjoyed by the new capitalist was unmatched in many countries by any access to political power, and this would be a wellpool of much upheaval, economic as well as political and social, from the 18^th century onward.  The great thinkers of the Enlightenment period questioned many aspects of inherited European culture.  In Vol.1, Autorite Politique, of the "Encyclopédie" (1751), Diderot argued “that no man has received from nature the right to command others”, refuting both God’s presence as well as his will over human affairs.  Rousseau, in his "Contrat Social" (1762), expressed a guarded support for democratic will as the basis of governance, although he believed power should be wielded in practice by an “aristocracy of merit”.  Others, such as the marquis d’Argenson, advocated reform including curbs on noble power and economic freedom and unfettered property rights, although not the abolition of monarchy.  These ideas formed a backdrop to many of the changes which would occur in Europe in the late 18^th and 19^th centuries.  There is some evidence of a decline in religion in France before the Revolution.  Many dioceses saw a decline of ordinations after c.1760.  Secular authorities began to take over control of censorship, education, and marriage.  Censorship came under secular control in Tuscany (1743), Lombardy (1768), and Portugal (1768).  In 1774 The Austrian Netherlands forbade any religious work to be approved without governmental approval, and legalized civil marriage in 1784.  Catholic clerics had been banished in many Protestant lands by such coercive legislation as the Banishment Act of 1697, and in the early 18^th century were banned from acquiring or bequeathing land or property and were widely disfranchised from political and legal offices.  Catholics had held 22% of land in 1688.  By 1778, they held only 5%.  The Jesuits, who had been such an important influence in the development of the New World as well as Old, began to see their influence reduced across Europe.  In Parma, for example, they found it necessary to seek government approval to found schools.  An inquiry of 1770-1 castigated the University of Coimbra for rejecting the Enlightenment, forcing it to adopt a more secular curriculum, introducing colleges dedicated to the study of mathematics and the sciences.  In the Holy Roman Empire the ideas of Johann Basedow enjoyed prominence, stressing the development of rational faculties rather than religious belief.  The Church remained in possession of most land in many countries, owing 56% of land in Bavaria, for example, the elector only 15%.  But some governments were by the 18^th century systematically attempting to reduce this, adopting such measures as forbidding the further extension of mortmain.

 

While reducing the power and influence of the Church was important to the rising capitalist class, still more so was reducing that of the absolutist monarchical rulers, who in many countries continued to prohibit them obtaining political power.  The Revolution of 1789 swept away the autocratic Kings of France and attempted to install a new Revolutionary culture, based on what it saw as its triple lodestars of ‘Liberty, Equality, and Fraternity’, seeking to replace the Church with a Cult of the Supreme Being.  So important did they regard their revolution that they even instituted a new calendar which they saw as more rational.  In little more than a decade the calendar was gone and so was the Supreme Being, supplanted by the old Gregorian calendar and Napoleon, who with customary contradiction, declared, “I am the Revolution; the Revolution is dead”, before proceeded to install himself as Emperor, and whose downfall would result in a monarchical restoration. 

 

But the revolutionary movement was not dead, predicated as it was on the burgeoning capitalist class which was growing ever more powerful both economically and socially, and would culminate in the upheavals of 1848.  The Restoration regime in France had pursued protectionist policies which were not to their taste and in February of that year a Second Republic deposed Louis Philippe.  The new government included Alexandre Ledru-Rollin, a former opposition politician, guaranteeing the right to work and extending the franchise from 25,000 to 9 million.  Civil war in Switzerland resulted in victory for the liberals over the Catholic cantons.  A simultaneous revolt in Palermo forced Fernando II of Naples to accept a liberal constitution.  In Rome a liberal was elected Pope Pius IX under the egis of Carlo Alberto, King of Piedmont-Sardinia, who proceeded to announce a draft constitution with a bicameral parliament and citizens’ militia.  The Habsburg empire also fell into revolutionary fever.  By the end of March Hungary had acquired a set of laws which nominally transformed it from a feudal state, proclaiming equality before the law, banning press censorship and removing the nobility’s exemption from taxation.  In Germany demands for press freedom and constitutional government led to the summoning of a national parliament.  It consisted of lawyers, judges, writers, professors, and artists from across the German states, although no proletarians. (N10) The Revolutions of 1848 were by and for the bourgeoisie and some artisans, but not the industrial working class whose presence was transforming towns and cities in some countries in Europe and would continue to do so into the 20^th century.

 

The extent to which merchant capitalists took control of trade and industry, still less the governance of society, from Kings and the great landowners, should neither be overstated nor misunderstood as a story of a power struggle between two eternally and inevitably discrete forces.  Nor should be overrated the extent to which such forces only took control of society following the capitalist period.  Indeed, the new order of Europe soon began, as the early half of the 19^th century gave way to the late, to look more like a continuation of, rather than a departure from, the old.  This proved to be a period of enhanced nationalization of identity in Europe, established through art, architecture, literature, and dress, as the nations attempted to define themselves and compete for the world’s resources.  In cultural references, the different nations tended to portray themselves as endlessly squabbling and disparate, rather than stressing their commonalty.  The bourgeois and monarchical composition of the new French Chamber ensured a lack of sympathy with popular agitation for improvements to workers’ lives, and when they threatened to close the workshops it soon triggered insurrection.  This was suppressed and a new Constitution in November 1848 didn’t mention the right to work.  In Austria military authority triumphed over the revolutionaries under Prince Windischgratz, who declared martial law, abolished press freedom and dissolved political clubs.  In Germany the King of Prussia dissolved the Assembly and formed a new Constitution emphasizing the divine right of the monarch, with control of the executive by the King, and creating a parliament which favoured big landowners.  The united Germany which took shape from 1871 had a distinctly nationalistic and authoritarian tincture. 

 

The efforts of President Wilson of the USA to form a League of Nations after the First World War foundered in his own Congress, whose members feared that such a League would hamper their resurgent country from acting however it wanted.  Indeed by the early 20^th century nationalistic attitudes were everywhere in the ascendancy.  Imperial rivalries between Britain, France, and Germany had contributed to the Great War, ambitions which they soon reignited after its conclusion.  And it wasn’t only the great powers who were indulging in nationalism.  Ireland was striving for its independence, which it won in 1923, and new nations in East Europe such as Czechoslovakia also emerged as a result of the aftermath of the Great War.  Fascism developed in Italy in the 1920s, fostered by a crumbling economy and mounting insurrection and street violence, which Mussolini, a former socialist, formed squads to “combat”.  In fact his own squads were partly responsible for the violence, but the rise of Italian fascism was merely the first manifestation of a larger trend which dominated much of the 20^th century.  National protectionism became a natural reaction to the economic slump, falling commodity prices, and rising unemployment, eschewing the fact that they were international problems which really necessitated international solutions.  Germany, Italy, Spain, Hungary, Greece, Poland, Portugal, Bulgaria, and Romania, all adopted right-wing dictatorships in this period.  Russia also adopted a dictatorship.

 

But the extent to which the nation-state remained a potent force in Western civilization long after the development of capitalism and the establishment in power of the capitalist class, is unsurprising in the context that capitalism had always, of necessity, developed under the egis of national state power.  From the earliest period of global exploration by European adventurers, they had required patronage by royal houses.  Columbus approached at least two noble houses and four sovereigns.  John Cabot had a pension from Henry VII of England and a royal commission to explore.  The Portuguese royal family took control of the exploration of Guinea in 1475, boosting the prestige of African enterprise, and centralizing control of commerce.  And the imperialist powers developed international trade and empires largely through monopolies, usually government-controlled companies, and used colonies as a source of raw materials and as a market for exports, the English East India Company being a typical example of how royal patronage enabled the domination of imperial economies.

 

Mercantilism became standard practice in the 18^th century, founded on the belief that would persist well into the 20^th century, that one nation could only prosper at the expense of another.  In practice governmental intervention to support trade and industry developed because often only the government was capable of raising sufficient capital to invest in large-scale projects, especially where considerable risk existed.  Prussian attempts to establish an East India Company like England’s, for example, were hampered by lack of investment by merchants, forcing the government to found the Berlin Discount and Loans Bank in 1765 to facilitate lending to merchants and manufacturers.  Governments intervened in other ways as well, for revenue-raising and to promote industrial development.  They did this through taxation, guild restrictions, and protective tariffs, as well as through formation of monopolistic companies.  In Russia the liberties of merchants and manufacturers were replaced by state regulation and monopolies.  In 1719 wheat exports were banned so that the Russian government could purchase it at a low price.  Denmark established a College of Commerce whose aim was to palliate the economic crisis of the country.  France had a complex set of trade barriers.  For example, cider-based liqueurs could only be sold in Normandy and Brittany to obviate them competing with wine brandies being sold in Paris and the French colonies.  Many governments were hostile to guilds whose restrictive practices were believed to inhibit economic growth.  They were suspicious of them because their regulations were independent of government and they often were international in their composition.  Governments increasingly brought guilds under their control.  In 1732-5 Frederick William I reorganized the guilds bringing them under governmental control.  Joseph II ended the guilds’ monopoly of trade.

 

While the patronage of the ruling class was invaluable in supporting the rise of the capitalist class, it was aided as well as superseded by the merger of the two, a process which began in some parts of Europe long before the Age of Enlightenment.  The signori of North Italy began to rise to power from the 13^th century.  City states such as Milan and Ferrara became dominated by tyrants, who, though not technically lords of their cities, ran them as despots and bequeathed them to heirs.  Sometimes the signori were aristocratic families, such as Estensi and Da Romano of the Marca Trangiana (N11), while others were families which had risen to power and wealth through trade and commerce.  Florence was turning in the 13^th century, from a town dominated by the aristocracy into a city-state with a burgeoning capitalist class clamouring from political power.  Families, such as the De Medicis, began to gain power through the popolo which was increasingly important in the urban economy.  The popolo excluded knights and represented the interests of merchants and artisans.  In England the civil war of the 1640s and the Glorious Revolution of 1688 resulted in a restricted constitutional monarchy, and a Parliament to which it increasingly ceded real political power, representing as it did the interests of the capitalist middle class.

 

The picture which emerges, therefore, is not a Europe whose rule by an autocratic royal caste gave way in dramatic fashion to a liberal, democratic continent ruled by the masses.  Instead it is a picture of a capitalist class which slowly, haphazardly, but decisively developed from the later medieval period, wresting first economic, then social, and finally political power from the Kings, before discovering that national state power was inherently enmeshed with the very autocracy which they periodically claimed to despise.  Those who hold power do not want to lose it, and that power was wrested by the Kings reluctantly, gradually, and only willingly when they were persuaded of the benefits either to themselves or to their states. 

 

There are examples from the early medieval era onward of how Kings resisted, often successfully, attempts by merchants and the nascent capitalist class to gain control of society and the economy. Frisian merchants in c.700 attempted to start issuing their own coins.  The King quickly reimposed a royal monopoly on coin production.  In 808 the Danish King Godfrid destroyed an emporium which he had previously used for tolling, and forced traders to a portus at Schleswig which he then protected with a rampart.  In many countries merchant guilds were developing from the 10^th century onward providing for mutual assistance, poor relief, and public services such as street maintenance.  In some towns royal authority was reasserted, as when the count of Flanders granted new charters which effectively abolished communes.  In England centralized royal power effectively obviated the development of communes except in London.  Towns increasingly took political power in this period, which Kings sometimes condoned, but sometimes crushed, as when the Emperor Frederick crushed a fledgling Roman republic on behalf of the Pope in 1143.  By the 13^th century royal patents were developing the nobility as a rank royally sanctioned.  The wealthiest men in France by this time were mostly merchants, not nobles, but the royal patents prevented their entry to the nobility, thus obviating them from either social status or political power.  In some areas, such as the Low Countries, rural industries continued to be developed by local aristocrats and the Church as landowners, long into the era of capitalist ownership of manufacturing industries, and despite the fact that they often lacked the capital to create large-scale enterprises.  The aristocracy of the Austrian Netherlands, for example, developed coal-mines, invested in the iron and steel industry and brought new lands into cultivation.  This evinces that control of trade and industry remained a prize worth fighting for wherever it was feasible to do so.  And we have already witnessed how autocratic rulers resisted the revolutionary movements with all their might in the Enlightenment period, and were often successful in their attempts, in Austria Prince Windischgratz triumphing over the revolutionary forces, and in Germany the King of Prussia dissolving the Assembly and forming a new constitution emphasizing divine right and monarchical control.

 

Where merchants were succeeding in wresting power from the Kings, they were often doing so against the latter’s will or because it was beyond their ken to prevent it.  Where Kings were unable to crush the communes, they flourished.  In the 11^th and 12^th centuries townsmen of various kinds were becoming, as we have seen, more influential in civic affairs.  The communes formed partly as a way of representing their interests against those of the king. These groups would include merchants as well as lords and nobles, and families of commercial wealth became interfused with landed families, blurring the distinction between them.  Leading citizens, tenants as well as merchants, sat on judicial assemblies and tribunals, the Carolingian scabini and the English alderman.  They even succeeded in gaining control of royal appointments.  Consuls appeared in Provence, capitularii in Toulouse who formed a council of 24 consuls. Autonomous republican governments in towns were typically plutocracies led by the rich.  By 1204 Italian cities were developing sophisticated governmental institutions including professional lawyers serving in courts using Roman law.  And we have already seen how Florence was turning in this period from a city-state dominated by the aristocracy into a quasi-democratic plutocracy.  Furthermore an era when technology was becoming more sophisticated and trade more specialized required access to greater amounts of capital than Kings and landowners were able to supply.  Into this vacuum merchants stepped and thrived.  Finally the 18^th century was an era not just of enlightenment, but also of increasing economic interdependence, facilitated by the spread of a money economy and imperialism, as well as improvements in transport.  The rulers of nation-states, bound to their own lands and to prioritize the concerns of their own lands, and too often squabbling with the rulers of other states, found beyond their ken the mission to win control of a globalized economy against a capitalist class who were more naturally equipped for the purpose.

 

It would be wrong to suggest, however, that the leaders of nation-states have always embraced and patronized capitalism reluctantly or against their will.  Often they would embrace it with the conviction that the accompanying wealth would aid themselves as well as the nation.  By the 18^th century the interests of the moneyed and landed classes were concurring in a way which was far from inimical to both.  The rich merchant would frequently advance money on mortgage to cash-strapped royals or aristocrats, and would so buy landed estates, often supplanting the old squires to establish their own lines, which would sometimes attain the peerage.

 

By the late 20^th century the ideology of wealth creation as a means of improving society was central to British government policy.  In her last speech in the House of Commons as Prime Minister in November 1990, Margaret Thatcher, responding to a question by an opposition MP, declared “all levels of income are better off than they were in 1979 … he [the questioning MP] would rather the poor were poorer, just so long as the rich were less rich.  That way you never create the wealth for better public services.”  A quarter of a century later the same assumption, that money provides a greater standard of living for the nation, was still driving government policy.  In a speech on a visit to China, the Chancellor of the Exchequer George Osborne stated, “There is no economy in the west at the moment that is as open to Chinese investment as the UK.  We welcome Chinese investment.  There is huge amounts (sic) of Chinese investment coming into Britain at the moment.  Indeed, we are attracting more investment than Germany, France and Italy put together into the UK.”  China at this time was investing huge amounts into projects as disparate as the Hinkley Point C nuclear power plant, Manchester City football club, and Hamleys Toy Store.  Manchester City was being bought up by a Chinese consortium including China Media Capital and CITIC Capital who invested more than $400 billion in City Football Group.  It didn’t seem to occur to Osborne that the result would be wealth ultimately leaving the country, as the profit from these assets flooded to China while employment levels of British workers would remain static at best. 

 

Relations between Saudi Arabia and the United States also offer a glimpse into the way in which the desire for access to markets could drive government policy.  The latter’s reliance on Saudi oil led to the sheikhs transferring $100 billion to the US for administration, construction, and weapons, in return for access to the lucrative US market.  The rapid increase of US oil production, and concomitant decrease of American dependence on the Gulf States, has resulted in a souring of US-Saudi relations since 2010.

 

The belief that the wealth brought to the nation by capitalism would inevitably be accompanied by an increase of prosperity for the masses, also concurred with the more immediate interest in accruing prosperity for the person.   Brian Griffiths, a former adviser to Margaret Thatcher and raised to the peerage as Lord Griffiths of Fforestfach in 1991, echoed his former bosses’ ideology when he declared in response to criticism of huge bankers’ bonuses in the wake of the 2008 banking collapse, that the nation should “tolerate the inequality as a way to achieve greater prosperity for all”.  (FN10) It was certainly achieving greater prosperity for Lord Griffiths, who as well as sitting in the Lords, was a director of Goldman Sachs International Bank.  He was additionally a director of Times Group Newspapers.  In Directors’ Pay in Privatized Utilities, an article by M.J.Conyon in the journal “British Journal of Industrial Relations”, from June 1995, the author concluded that “salary plus bonus remuneration of top directors in the privatized utilities has increased by 12% pa since 1990.  Second, average employee pay in these utilities has grown by about 3.1% pa over the same period.  This suggests that top pay growth in the privatized utilities has outstripped that of the average worker since 1990.  Third, the analysis cannot isolate a robust statistical relationship between director’s compensation and measures of pre-dated company performance.  Finally, directors’ share option dealing can sometimes considerably inflate their overall compensation.”

 

The extent to which politicians from this era were walking the talk in terms of personally sharing in the wealth endued by capitalism was a concern to many, with many Cabinet ministers from the Thatcher and Major governments subsequently leaving the Cabinet to accept places on the boards of utilities which they had themselves had a hand in privatizing.  Other former ministers have not been slow to practice what they preach, such as John Patten, Lord Patten since 1997, who is a director of Lockheed Martin Holdings UK Ltd and Charterhouse Capital Partners LLP, as well as having shares in Burberry, Vodafone, Experian, GlaxoSmithKline, Royal Dutch Shell, Unilever, and HSBC.  Concerns have often been raised since the earliest times of China’s trading expansion with the West, about the corruption which appeared endemic in the countries’ attitude to the opportunities opening before them.  There were frequent complaints by American and other companies, including having to set up shop in hotels and paying high rents and fees for Chinese services, which went mostly to the government’s business bureaus, while the Chinese workers were being paid very low wages.  One of the reasons the Japanese were successful in securing trade deals with China in the 1980s and 1990s was their willingness to lobby Chinese bureaucracy effectively with lavish promotional trips and free trips to Japan.

 

The failure of the People’s Republic of China to build an economy and society capable of delivering a satisfactory standard of living for its citizens is inseparable from the isolation, economic as well as political, which it experienced early on in its history.  As early as 1945, before the Communist Republic was even established, Mao Tse-Tung had talked of the need to establish trading relations with the United States.  He knew it would be necessary to balance the frosty relations he anticipated with the Russian bear to the North.  During the 1950s, an era when the US’s attitude to the Red Dragon was characterized by suspicion, mistrust, and even paranoia of a perceived Communist conspiracy in the East, China had trade only with the Soviet Union, largely on the latter’s terms, and the other Soviet bloc countries of East Europe.  The Sino-Soviet split of 1960 blew the myth of a Communist conspiracy, but it presaged no transformation in relations with the United States, Kennedy continuing Uncle Sam’s mistrustful attitude well into the 1960s, and that decade would be characterized by almost total economic isolation for China.  By the end of the decade the Red Dragon was suffering economically, so that the thaw in relations with the West which led to the meeting between Chairman Mao and President Nixon in 1972 seemed like a welcome breath of fresh air for the Chinese.

 

If the failure of China to resist the lure of Western-style capitalism is inseparable from the isolation it experienced as a result of its Communist ideology, the vast improvements in standards of living in the West which have occurred since the 18^th century, and the extent to which this has embraced the masses as well as the capitalist and ruling classes, is similarly inseparable from the territorial imperialism which the great powers of Europe conducted in this period.  The British cotton industry, for example, was critical in the development of industrial towns such as Manchester, whose nickname in the Industrial era became Cottonopolis.  But the industry only became possible after the establishment of the British East India Company in 1600, giving Britain access to the world’s finest cotton.  The cotton would be produced in India under British monopolies, transported to Britain on British ships, to be manufactured in British factories into the clothes and textiles which would then be transported around the world, including back to India, again on British ships.  Every stage would be to the profit of British capitalists, and initially would be to the benefit of the industrialized working class of Britain scarcely more than to the rural Indian worker.  Adam Smith had established what would become the dominant laissez-faire approach to managing economies in his Wealth of Nations (1776), arguing that governments should avoid interference as far as was practicable, and it would be some time before this orthodoxy would be seriously called into question.  In "Principles of Political Economy" (1848), John Stuart Mill contravened it by calling for the establishment of cooperatives assisted by the government to improve workers’ standards of living, but only slowly would clamour for change infuse the development of better standards of living for the British proletariat.

 

The importance of cotton to the development of the United States also evinces the extent to which the prosperity enjoyed by its citizens was aided by territorial imperialism rather than simply by the growth of a capitalist economy.  In 1793 Eli Whitney invented an improved cotton gin which facilitated the separation of the seed from the fluff of the short-fiber cotton which was all that could be grown in the deep South.  In 1814 the US produced 146,000 bales at a price of 15 cents per pound.  Only two years later she was producing 259,000 bales worth $38 million at a price of 30 cents per pound, and by 1850 she was producing 2,136,000 bales worth $131 million.  Part of the reason for the exponential increase was the vast acquisition of virgin lands to the South and West, particularly through the Louisiana Purchase from Napoleon in 1803, a territory much vaster than the State of that name today, as well as myriad acquisitions from the Amerindians.  Much of this land was suitable for cotton production, and this industry became vital to the growth of the US economy.  New states such as Alabama and Mississippi thrived on the crop, and cotton production and profits reached new heights during the 1850s.  During the economic crisis of 1857 the cotton lands remained substantially unaffected, and were able to effectively prop up the Northern economy due largely to her thriving cotton production.   One of the reasons why the US government were so determined to defeat the Confederacy during the Civil War of the 1860s was a recognition of the importance of the South’s cotton industry to the US economy.

 

The influence of the South’s politicians was instrumental in the building of enormous railroads, and track mileage in the region increased as a result to 14,000 by 1877, and it was not only here that the process of making the vast continent smaller was underway.  Steam railway was invented in England, but was adapted with alacrity in the US.  The first American railroad between Baltimore and Ohio had been opened in 1830; by the end of the Civil War there were 31,256 miles of railroad across the country.  One Stephen A. Douglas pushed for a ‘Western Programme’, which would fuse the country together by aiding settlement along the routes of emigration to Oregon and California, and would include the construction of both a transcontinental telegraph and transcontinental railroad.  Congress sold land cheaply along the railroads thus raising funds to pay for them.  This aided the exponential population increase through this period, from 31 million in 1860 to 63 million by 1890.  Iron and steel were required to build the railtracks; coal to heat the engine boilers, and these raw materials were to be found in abundance in the virgin lands of the South and West, coal in the mountains, iron in Alabama, as well as oil in Louisiana.  And when gold was discovered in California in 1848, the resultant Gold Rush boosted the population of that state from 8,000 to 92,000 within two years and to 360,000 by 1860.

 

US territorial imperialism was not confined to the North American mainland.  The Spanish-American War of 1898 finished the Spanish presence in America, giving Cuba independence, and making Puerto Rico, Guam, and the Philippines US colonies.  The Treaty of Paris gave the US a protectorate over Cuba, and in the first quarter of the 20^th century US armies entered Mexico and overthrew governments in the Caribbean.  The US also dug a canal through the isthmus of Panama between 1904 and 1914.

 

By the 1920s the motor industry had developed into the biggest employer in the country, and Detroit, center of the motor industry, into her 4^th-largest city.  The oil industry also boomed, as well as other related industries, steel, glass, rubber, paint, concrete, and road-building.  In 1920 1,905,500 cars were built in the US; by 1929 the number was 4,455,100.  Motels and restaurants mushroomed across the country.  But the prosperity which the United States enjoyed during the 20^th century was the culmination of an unprecedented period of expansion over a territory rich in natural resources, by a people whose political and cultural institutions permitted and facilitated the rapid and effective exploitation and organization of those resources for the benefit of them all.

 

Throughout this era the United States had welcomed vast numbers of new immigrants to her shores, not just from North Europe, but also from South and East Europe.  Large numbers of Poles, Lithuanians, Italians, Russians, Jews, Hungarians, and Turks, as well as the usual suspects, the British, Irish, and Germans, made the hazardous journey across the Atlantic to seek a new life in America.  It was the biggest migration in human history, and it had the same cause as the mass transformation of the southern cotton-picking Afro-Americans into the urban Afro-Americans of suburbs like Harlem, the persistent and chronic shortages of labour caused by the rapid acquisition of new lands and resources which characterized this period.  This era was effectively terminated with a series of discriminatory laws in the early 20^th century, the Immigration Act (1917), the Quota Act (1921), and the Johnson-Reed Act (1924), reducing annual immigration from c.850,000 to c.150,000, and ending it almost entirely from everywhere except North and West Europe.  The salient cause was that the era of territorial expansion to the West and South was drawing rapidly to a close, and with few new resources to discover labour shortages were being supplanted by rising unemployment levels. 

 

It was not just in North America that the era of territorial imperialism was drawing to an end.  By the late 20^th century Britain was dismantling the last of its Empire.  India was granted independence in 1947, Sudan in 1956, and the Gold Coast and Malaya followed in 1957.  Algeria was granted independence from France in 1962, a move which proved highly controversial given the large numbers of French nationals resident in the country.  In North America further territorial expansion was impossible.  For the Europeans it was rendered unfeasible by material bankruptcy.  But the end result was the same.  A new era began to dawn, which would be characterized by a form of economic imperialism which in many ways was more ruthless and dangerous than the old, but this time as much for its own people as for those of the lands they sought to dominate.

 

The idea that economic imperialism, the attempt to dominate foreign lands not politically, but by controlling access to their markets and resources, slowly became government orthodoxy in the late 20^th century.  For Margaret Thatcher, British Prime Minister from 1979-1990, as we have seen, the belief that access to capitalist markets would derive wealth, not just for the rich for also for the poor, was a central driver of her government, and it has remained the governing ideology ever since, not just in Britain but throughout the Western world.  It was partly the prospect of gaining access to vast populations in the East, not just in Russia but also in many other East European countries and in South-East Asia, which made defeating and dismantling the Soviet Union and the rest of the Communist world, such a prize worth winning for the Western powers, and it was not just Western products they were keen to sell to a new market.  The capitalist orthodoxy also found a captive audience in Communist leaders who were keen to feel the benefits they believed that trade with the West could bring, and not just to their countries, but to themselves as well.  Teng Hsiao-p’ing, paramount leader of China from 1978 to 1992, wrote in his work “Building Socialism with Chinese Characteristics” in 1985, “what’s wrong with increasing the wealth of the country and the people?”.  And his premier Chao Tzu-yang opined “to equate common wealth with equal wealth for all at the same speed was not only impossible, but would lead to common poverty.” 

 

At the end of 1984 Chao had met Margaret Thatcher and signed the agreement with her which would lead to the annexation of Hong Kong, but the greater part of China’s interest in the West would prove to be not territorial, but economic, imperialism.  On a visit to the US in 1979 Teng had affirmed that China would not interfere with the affairs of Taiwan, another disputed island historically claimed by the Red Dragon, or its relations with the US, with whom it had about a third of its total trade.  It was a necessary expedient for the Chinese, who by then were keen to foster trading relations with Uncle Sam, and it worked.  In 1978 US-China trade amounted to only $1,189 million.  By 1981 it had increased to $5,478 million, and by 1988 to $13.5 billion, about 10% of China’s total foreign trade.  Among the imports which China prized were technology, office equipment, and commercial aircraft, making it an increasingly lucrative market, not just for the Americans, but also for the Japanese, who exported myriad products including iron, steel, heavy machinery, and textiles to the Chinese.  By 1983 Japan-China trade was $10 billion, 22% of China’s total foreign trade.

 

While this assumption, that economic imperialism can continue to drive the level of prosperity and improvements to general standards of living to which the Western world has become accustomed since the 18^th century, has dominated political policy for a long time, it is only for a relatively brief period that the shortcomings of this ideology have begun to make themselves apparent in economic practice.  Japan’s trade was dwarfed by its trade with Western countries, and during the 1980s ran up an asset price bubble which saw the Nikkei stock exchange hit a record high in December 1989 of 38,957.44.  The bubble then burst, sending stocks to spiral and growth to disappear, and the countries’ economy has never fully recovered since.  On 10^th March 2009 the Nikkei closed at 7,054.98, 81.9% below its peak nearly 20 years earlier. (FN11) General prices fell into deflation in 1998, where they have mostly been ever since.  Japan became the first country in the world to use quantitative easing, the policy of purchasing financial assets from banks to raise their prices and lower their yield, while increasing the money supply, but this has had limited effect in raising general prices.  In March 2013 the Bank of Japan began a policy of purchasing 60-70 trillion yen, thus doubling the money supply in two years.  As of October 2015 the general inflation rate was at zero.  As of 2014 Japan had public debt of 231.9% of GDP, the highest in the world. (FN12).  It is not just Japan which is suffering the economic blight of falling prices.  In November 2008, in the immediate wake of the banking collapse of that year, the United States began a quantitative easing program which lasted until October 2014, and which at its peak in 2012 was running at $85 billion per month, and resulted in a total of $4.5 trillion being added to the money supply.  It has had no more impressive effect than the efforts of the Bank of Japan.  As of November 2015 US inflation was at zero.  The United Kingdom has also been engaging in an aggressive quantitative easing program since 2009, with similarly ineffective results.  As at November 2015 her prices were deflating by 0.1%. (FN13). 

 

Of course deflation could have been worse had quantitative easing never happened.  One of the difficulties with the QE program is assessing its relationship with the real economy.  While it seems likely that QE is improving banks’ liquidity, it is almost impossible to adequately identify to what extent it is boosting bank-lending to businesses, and to what extent simply the banks’ shareholders.  The deflationary tendency which much of the global economy is increasingly falling prey to is driven by certain fundamentals which monetary expansion alone appears unable to correct.  If we rewind to the era of territorial imperialism by the great powers of Europe and North America, we recall that a key feature of their economies was an urgent need for labour.  It was this which led to labour shortages on both sides of the Atlantic, seducing millions of Europeans to make the hazardous journey across the Atlantic to join the expansion West, transforming the rural peasantry of West Europe into the urban proletariat, and driving the African-Americans from the southern cotton-fields to the urban ghettoes of New York, Chicago, and Detroit.  Demand for labour creates wage inflation, and wage inflation creates upward pressure on general prices.  In the United States wages grew healthily, if sporadically, through the nineteenth century.  The daily cost of carpenters rose from $1.50 in 1800 to $2.30 in 1899, cotton-workers rose from $0.76 in 1850 to $1.19 in 1899, and iron industry workers from $0.97 to $2.03 during the same period. (FN14) Wage inflation in much of West Europe was even more persistent, rising in the United Kingdom 450-fold between 1860 and 2000.  Such upward pressure on wages creates upward pressure on general prices, which rose 80-fold in the United Kingdom during the same period. (FN15)

 

A key driver of the deflationary tendency which has gripped much of the global capitalist economy since the end of the 20^th century has been stagnant wage growth, and this has three key causative factors.  Firstly, in an era of economic rather than territorial imperialism nation-states are no longer able to acquire new lands or resources, and the natural demand for new labour is thus being destroyed. It is this which has created persistent endemic unemployment across the Western world since the late 20^th century, and it is this which has wiped out persistent endemic wage growth.  Secondly, in attempting to supplant territorial with economic imperialism, nation-states are creating rising economic inequality which is further fuelling the deflationary tendency.  No longer desirous of new people for their labour, they are desirous only of their money.  The richer the capitalist becomes, the lower the proportion of his disposable income, and indeed of the money supply, is being spent in the active economy, and with stagnant wages, the less disposable income the majority of people in the economy have available for expenditure, thus depressing demand for goods and services.  Falls in demand reduce profits, and producers tend to react to this challenge by cutting both prices and wages, while maintaining production levels in order to remain profitable.  A deflationary spiral is thus created, despite employment levels remaining constant due to increased productivity.  Thirdly, the debt trap is closing, both for governments and for consumers. With both wages and profit being continually reduced, so too is the capacity of both individuals and institutions to service debt, a key factor in the 2008 credit crunch, and a persisting problem across the global economy today, which in turn further reduces disposable incomes, demand for goods and services, and government expenditure.  Far from creating the wealth for better public services, therefore, capitalism in the era of economic imperialism is exacerbating inequality, not just among individuals but among nation-states, reducing public services, creating wealth only for the capitalist, and reducing prosperity for almost everyone.

 

The internationalized nature of the contemporary capitalist economy is therefore calling into question the true nature of reciprocity between capitalism and the nation-state, since in an era when territorial imperialism is moribund the economic warfare now being waged by the nation-states of the world is effectively creating a single economic super-nation.  Such a super-nation is destined to regress in a situation where there are no longer new lands or resources to be added, nor are there labour shortages to drive up wages, and capitalists are now behaving increasingly as a monolithic international bloc, with access to huge potential markets and profits, thus drastically reducing the amount of disposable income available for the real economy, and where expansion of the money supply through so-called quantitative easing begins to look like a desperate and ineffectual attempt to shore up liquidity  to an increasingly desiccated system.  Capitalism is therefore dependent on the continued existence of the independent nation-state and the possibility of territorial imperialism which it implies, without which, it will increasingly be characterized by stagnation and regression, and ultimately risks being engulfed altogether by mountainous debt, held both by governments and consumers.  The irony of this dependence is that, as we have seen, capitalists have spent much of their history fighting and attempting to undermine the very institution upon which their survival depends.

 

The capitalist economic system evolved, above all, as the easiest and most efficient way for nation-states to trade with one another for the goods they were unable to produce themselves.  As the medieval tribe, a race with ill-defined borders, led by a hereditary warrior leader whose right to rule derived from his success in battle, gave way to the incipient nation-state inhabiting a discrete territory with finite borders, and led by a hereditary leader whose right to rule derived, first from God’s will, and then from democratic consent, the implication of an acceptance of other nation-states with similarly finite borders, created particular economic problems and demanded particular solutions.  It implied, above all, an acceptance of economic insufficiency and consequent dependence on other nation-states for goods and resources, and demanded an economic solution which would create an easy and effective way of fulfilling this need.  The capitalist system, providing as it did, a fluid conduit for trade, enabling the purchasing of goods from abroad according to demand as imports, regardless of the quantity of exports it might be capable of supplying, and often of ability to pay, developed as the most efficient solution.  Insomuch as capitalism created a powerful new economic and social class it created a rival power-base in Western civilization which has had an uneasy relationship with the rulers of nation-states ever since, not least because of its inherently internationalized nature, and it is this relationship which has proved a key factor in the history of the West since the end of the Middle Ages, a power struggle which continues to play out, now on a global stage thanks to the near-universal triumph of Western civilization.  The nation-state can survive without capitalism, but it cannot survive without the ability to trade with other nations for the goods and resources it is unable to source at home, and an acceptance of the finite territories and borders of nation-states necessitates an easy, fluid, and corruptible, method of doing so.  The capitalist system is the least worst solution to this problem, and while the nation-state constantly threatens to engulf the world in chaos, racism and war, and while capitalism threatens constantly to engulf it in debt, inequality and recession, it is unlikely that its inhabitants will ever be able to separate these blood brothers.