The Origins of Commercial Capitalism

I’m not a professional historian, but I get to play one on the Internet.

One of the historical debates that I have been absorbed with since the mid-1990s is over capitalism’s origin. When James Blaut, an anthropology professor who died in 2000, showed up on the Marxism list around then, he had just published “The Colonizer’s Model of the World.” In this book and the next installment for a planned trilogy on Eurocentrism, he challenged the idea that capitalism originated in England and diffused to the rest of the world. The second book was titled “Eight Eurocentric Historians” and included a chapter on Robert Brenner, a professor emeritus at UCLA who gathered disciples under the banner of “Political Marxism.” In brief, Political Marxism, also known as the Brenner thesis, theorizes that capitalism began in the British countryside in the 15th century. For reasons too lengthy to detail here, lease farming on large estates set into motion a market-driven process that inevitably led to the industrial revolution and the British Empire.

As a corollary to the Brenner thesis, there is an argument that slavery and precapitalist colonialism had nothing to do with England’s “take off.” Furthermore, in the USA, as historians Charles Post and James Clegg argue, slavery was an obstacle to the growth of capitalism and had little impact on economic development in the north. Unlike the often arcane debate over whether lease farming was the prima facie basis for take off, the slavery debate had much more relevance to current days. The so-called New Historians of Capitalism, such as Edward Baptist and Sven Beckert, wrote books linking slavery to America’s capitalist success. For this transgression, the Trump administration linked their scholarship to Project 1619 and called for a curriculum purged of such anti-American propaganda.

Over the years, I have written sixty-two articles contributing to this debate, but assuredly nobody would mistake them for the work of a professional historian. On the other hand, since most of the exchanges occur in paywalled, peer-reviewed journals, my articles might be where many non-academics first learn about the issues.

This article will take up “A Brief History of Commercial Capitalism,” the latest book by Jairus Banaji, a professional historian who received the Isaac Deutscher prize in 2011 for “Theory as History.” Other critics of the Brenner thesis include Kerem Nisancioglu and Alexander Anievas, the authors of “How the West Came to Rule: The Geopolitical Origins of Capitalism,” and Irfan Habib, the author of articles such as “The rise of capitalism in England: Reviewing the Brenner thesis.”

Commercial capitalism is a term that describes entities such as the British or Dutch East India Companies. For Political Marxists they are “precapitalist” since their understanding of capitalism never strays from the narrow path that led from the tenant farms of the 15th century to the enclosure acts that followed. Once the peasants lost their means of production, they became fodder for what William Blake called “the dark Satanic mills.”

As one of the leading Political Marxists, Ellen Meiksins Wood regarded the East India companies as “non-capitalist” in her “Empire of Capital.”  Wood, like every other Political Marxist I have ever read, tiptoes around chapter 31 of volume one of Capital that is titled “The Genesis of the Industrial Capitalist.” With a chapter title like that, you can hardly mistake where Marx stands on the origin question. He refers to Holland as “the head capitalistic nation of the 17th century.” All the countries using trade monopolies were employing “the power of the State, the concentrated and organised force of society, to hasten, hot-house fashion, the process of transformation of the feudal mode of production into the capitalist mode, and to shorten the transition. Force is the midwife of every old society pregnant with a new one. It is itself an economic power.”

Banaji’s “Commercial Capitalism” is a sweeping panorama of all such state-based trading companies from the days of the Roman Empire till now. Like Kerem Nisancioglu and Alexander Anievas, Banaji has a global perspective. Like James Blaut, he sees such commercial enterprises as having a capitalist character even though they might not conform to the blueprint found in Brennerite history. For the Political Marxists, the sine qua non is the capitalist-wage labor class relationship embodied by the factory assembly-line. It is easy to understand why some might make such a connection since chapter 4 of Capital titled “The General Formula for Capital” is narrowly focused on the production of surplus-value. Under feudalism, the serf produced crops to feed his family under the protection of the lord of the manor. To pay for the protection, he had to turn over a portion of his crop. Under capitalism, you have the same kind of extortion but the wage form masks it. A factory worker produces enough to cover his wage and other expenses, such as the raw material used in commodity production. In the working-day, he also generates the profit that the boss uses for capital accumulation and his pleasure, such as mansions, servants, yachts and the like.

Since the East India companies did not conform to this schema, they had to be “precapitalist.” Banaji’s goal is to counter this claim and make the case that, even today, such trading companies constitute a major part of the global capitalist system.

The key to understanding trading companies is that they were critical for supplying the raw material used in the factory assembly line from iron ore to construct the machinery to cotton needed to make textiles. Not only that, they are the source of the necessities of life that the European working-class relied upon to get through the day, such as coffee, tea, sugar, tobacco, fruits, vegetables, cooking oil and the spices that kept meat from rotting. The agents of the trading companies searched the planet for the lowest price for such commodities. Ironically, the term for the settlements of agents in far-flung places in Latin America, Africa and Asia was factory. Banaji explains:

The dispersion of networks was a major instrument of capital accumulation. If the characteristic mobility of capital is what Marx calls “circulation,” then for centuries the circulation of capital presupposed the physical movement of commercial agents, which in turn would mean their ability to establish more or less stable settlements in locations abroad. The term for such a settlement was “factory.” “Factory,” according to Dr. Johnson, means “a house or district inhabited by Traders in a distant country.” Thus, the “factory” was the community of merchants of this or that nationality.

These middle-men were always searching for peasants, miners, or handicraftsmen willing to accept the wages the English, Dutch, or their countrymen were willing to pay. If none were available, the authorities would dragoon them into forced labor contingents as Marx pointed out in chapter 31: “Nothing is more characteristic than their system of stealing men, to get slaves for Java. The men stealers were trained for this purpose. The thief, the interpreter, and the seller, were the chief agents in this trade, native princes the chief sellers. The young people stolen, were thrown into the secret dungeons of Celebes, until they were ready for sending to the slave-ships.”

In Political Marxist literature, there is a tendency to regard trading companies as dinosaurs that grew extinct as the industrial revolution kicked in. Liberal economics of the sort upheld by John Stuart Mill in the 19th century characterized the epoch, not the state-owned monopolies that might have played the role of midwife to the industrial revolution as some economists might have conceded after reading chapter 31 of Capital. However, Banaji makes the case that they lived on long afterward.

Jardine Matheson & Co. was typical. Founded in 1832 by Scotsmen William Jardine and James Matheson, it trafficked opium in Asia, its main commodity, while trading cotton, tea, silk and other goods from its “factory” in Canton. When the Sassoons, Iraqi Jews who had fled persecution, cornered the opium market, Jardine had to diversify. By the end of the nineteenth century, it had expanded into sectors including shipping, cotton mills and railway construction. So, the distinction between factory production in the mother country and factory agents operating in distant lands was artificial. Banaji describes the mutual reinforcement of the two sectors of the capitalist system respectively based on production and exchange:

Strong capital growth became characteristic of many of the agency houses that developed into managing agencies in the late nineteenth century. Jardine, Skinner, & Co., a firm founded by one of Jardine’s nephews, saw its capital expand from £100,000 ca. 1845 to £660,000 by 1860 and £1.3 million in 1890. By the First World War it was “one of the biggest managing agency houses in Calcutta,” with interests in trade, industry, and shipping. Another Scottish firm, James Finlay & Co., expanded its capital by £2.21 million over the years 1861-1910, that is, at an average rate of ca.£45,000 a year. Harrisons & Crosfield (H&C), a small firm of tea merchants that evolved into a global (or, as it called itself, “Eastern”) plantations and trading company, saw the total book value of its assets grow from £564,436 in 1908 when it became a limited liability company to £2,867,168 ten years later! Much of this sort of expansion was fueled by agency houses diversifying into control of joint-stock companies in the jute, coal, tea, and rubber industries, showing how problematic the distinction between “mercantile capital” and “industrial capital” had become under this transformed form of merchant’s capital.

Political Marxists argue that competition is the juice that makes industrial capitalism so dynamic, while commercial capitalism avoids competition by operating monopolistically in collaboration with the state—an oversimplification. There is competition, but it revolves around the need to “turn over” inventory rather than develop labor-saving technology. Like WalMart, trading agencies need to move goods from the warehouse into the retail market as rapidly as possible.

Chapter six concludes this masterful presentation of largely overlooked historical data. Banaji examines “competition, velocity, verticality” with vertical integration key to increasing velocity. Rapid turnover ensured the maximum amount of surplus value drawn from the commodity’s sale. For example, a big coffee trading company might rent the land to campesinos in El Salvador while roasting the beans in its Italian factories. The idea was to cut out intermediary firms. European companies operating in the semicolonial or colonial world were engaged in survival of the fittest. Those companies that survived had sufficient capital to elbow out smaller firms. By 1928, four large firms dominated West African trade, with two merging a year later to become Unilever’s trading arm. In Indochina, five French banks controlled 70 percent of the land used to plant rubber by 1938.

Velocity, above all, was critical for a trading company’s ability to dominate the market. In the 19th century, the Suez Canal, steamships, telegraphs and railroads were the lifeblood of imperial super-exploitation. In Engels’s addendum to volume 3 of Capital, which deals at length with commercial capital, there is an apparent anticipation of capitalism’s recent “globalization” tendencies:

The chief means of reducing the time of circulation is improved communications. The last fifty years have brought about a revolution in this field, comparable only with the industrial revolution of the latter half of the 18th century. On land the macadamised road has been displaced by the railway, on sea the slow and irregular sailing vessel has been pushed into the background by the rapid and dependable steamboat line, and the entire globe is being girdled by telegraph wires. The Suez Canal has fully opened East Asia and Australia to steamer traffic. The time of circulation of a shipment of commodities to East Asia, at least twelve months in 1847 (cf. Buch II, S. 235 [English edition: Karl Marx, Capital, Vol. II, pp. 251-52. — Ed.]), has now been reduced to almost as many weeks. The two large centres of the crises of 1825-57, America and India, have been brought from 70 to 90 per cent nearer to the European industrial countries by this revolution in transport, and have thereby lost a good deal of their explosive nature. The period of turnover of the total world commerce has been reduced to the same extent, and the efficacy of the capital involved in it has been more than doubled or trebled. It goes without saying that this has not been without effect on the rate of profit.

Engels’s addendum evokes WalMart’s “just in time” inventory techniques that have made it the largest employer in the USA and one of the most profitable. With cargo ships and jets crossing the planet carrying goods back and forth, you are seeing the logic of capital overtaking the world even as it threatens to destroy it. WalMart, Amazon, and Ali Baba are the long-lost relatives of the East India companies searching for cost-saving measures that benefit their bottom line. It doesn’t matter much to their owners and the banks that fund the companies that the constant drive to move goods faster and faster leaves the rainforests leveled and biodiversity dwindling to the point of no return. In the 18th century, after farmers had chopped down most of England’s forests to supply firewood, the colonies became a magnet for settlers anxious to continue their standard of living. What happens after all the forests have disappeared to satisfy Mammon? Perhaps, in the back of Jeff Bezos’s mind, that’s the primary motivation for investing in Blue Origin, a space exploration project he hopes could allow millions of people living in outer space satellites. He told the Miami Herald in 1982 that he could imagine a time when the Earth would become a kind of park for human recreation. He said, “The whole idea is to preserve the Earth.” Madness, sheer madness.

Louis Proyect blogged at and was the moderator of the Marxism mailing list. In his spare time, he reviewed films for CounterPunch.