The Rise of Capital

2 The Rise of Capital The Antecedents of Systemic Cycles of Accumulation The rise of the contemporary free enterprise system as the dominant structure of the capitalist world-economy constitutes the latest stage of a six-centuries-long process of differentiation of business enterprises from governments. Following Frederic Lane, we can distinguish between these two kinds of organizations on the basis of their objectives, methods employed, and social consequences. Governments are power-oriented organizations which use war, the police force, and judicial procedures, supplemented by appeals to moral sentiments, as characteristic means of attaining their objectives, and which bring into existence systems of law and allegiance. Business enterprises, in contrast, are profit-oriented organizations which use as their customary activities buying and selling, and which bring into existence systems of production and distribution (Lane 1979: 38): In examining the organizations actually existing in the Western world about 1900 it is not too difficult to classify them either as governments or as business enterprises. But in examining the oceanic expansion of the fifteenth and sixteenth centuries, we cannot classify in this way the organizations initially involved. Whether we consider their motives, their methods, or their con sequences, we find that the key innovating enterprises usually combined characteristics of government with characteristics of business. (Lane 1979: 38-9) As we shall see, the enterprises that took the lead in the oceanic expansion of the fifteenth and sixteenth centuries already showed considerable specialization in the exercise of either governmental or business functions, and in about 1900 the differentiation between governmental and business organizations was not as complete as Lane's remarks seem to imply. Yet, 85 86 THE LONG TWENTIETH CENTURY Lane's observation captures the essential thrust of the evolutionary pattern of the capitalist world-economy from its beginnings in late medieval Europe to the present day. Initially, networks of capital accumulation were wholly embedded in and subordinate to networks of power. Under these circumstances, in order to succeed in the pursuit of profit it was necessary for business organizations to be powerful states, as witnessed by the experience of the capitalist oligarchies of northern Italy who were leaders not just in processes of capital accumulation, but in processes of state-making and war-making too. However, as networks of accumulation expanded to encompass the entire globe, they became increasingly autonomous from and dominant over networks of power. As a result, a situation has arisen in which in order to succeed in the pursuit of power governments must be leaders not just in processes of state-making and war-making but in processes of capital accumulation as well. The transformation of the capitalist world-economy, from a system in which networks of accumulation were wholly embedded in and sub ordinate to networks of power into a system in which networks of power are wholly embedded in and subordinate to networks of accumulation, has proceeded through a series of systemic cycles of accumulation each consisting of an (MC) phase of material expansion followed by a (CM1) phase of financial expansion. As we saw in the Introduction, the notion of successive systemic cycles of accumulation has been derived from Braudel's observation that all major trade expansions of the capitalist world-economy have .announced their "maturity" by reaching the stage of financial expansion. Following Braudel, we identify the beginning of financial expansions with the moment when the leading business agencies of the preceding trade expansion switch their energies and resources from the commodity to the money trades. And like Braudel, we take the recurrence of this kind of financial expansion as the main expression of a certain unity of capitalist history from the late Middle Ages to our own days. Unlike Braudel, however, we explicitly conceive of financial expansions as long periods of fundamental transformation of the agency and structure of world-scale processes of capital accumulation. From this point of view, our systemic cycles of accumulation resemble Henri Pirenne's stages of capitalist development. In surveying the social history of capitalism over a thousand years, from its earliest beginnings in medieval Europe to the early twentieth century, Pirenne observes that for each period into which this history could be divided there was a distinct and separate class of capitalists. That is to say, the group of capitalists of a given epoch does not spring from the capitalist group of the preceding epoch. At every change in economic organization we THE RISE OF CAPITAL 87 find a breach of continuity. It is as if the capitalists who have up to that time been active, recognize that they are incapable of adapting themselves to conditions which are evoked by needs hitherto unknown and which call for methods hitherto unemployed. They withdraw from the struggle and become an aristocracy, which if it again plays a part in the course of affairs, does so in a passive manner only, assuming the role of silent partners. (Pirenne 1953: 501-2) Their place in promoting further expansion is taken by a new class of capitalists "who ... permit themselves to be driven by the wind actually blowing and who know how to trim their sails to take advantage of it, until the day comes when ... they in their turn pause and are distanced by new crafts having fresh forces and new directions." In short, the permanence throughout the centuries of a capitalist class, the result of a continuous development and changing itself to suit changing circumstances, is not to be affirmed. On the contrary, there are as many classes of capitalists as there are epochs in economic history. That history does not present itself to the eye of the observer under the guise of an inclined plane; it resembles rather a staircase, every step of which rises abrubtly above that which precedes it. We do not find ourselves in the presence of a gentle and regular ascent, but of a series of lifts. (Pirenne 1953: 502) Our succession of systemic cycles of accumulation does indeed con stitute "a series of lifts," each lift being the result of the activities of a particular complex of governmental and business agencies endowed with the capacity to carry the expansion of the capitalist world-economy one step further than the promoters and organizers of the preceding expan sion could or would. Every step forward involves a change of guard at the commanding heights of the capitalist world-economy and a concomitant "organizational revolution" in processes of capital accumulation - a change of guard and an organizational revolution which, historically, have always occurred during phases of financial expansions. Financial expansions are thus seen as announcing not just the maturity of a particular stage of development of the capitalist world-economy, but also the beginning of a new stage. Thus, the starting point of our sequence of systemic cycles of accumulation, which we shall take as the "zero point" in the development of capitalism as world system, is the financial expansion that took off at the end of the trade expansion of the thirteenth and early fourteenth centuries. As Janet Abu-Lughod (1989) has shown, this trade expansion encompassed select locations (mostly cities) of the whole of Eurasia and parts of Africa. No single agency or organic complex of agencies can be said to have promoted or organized the expansion. The northern Italian 88 THE LONG TWENTIETH CENTURY city-states, which were among the main beneficiaries of the trade expansion and became the leaders of the subsequent financial expansion of the European world-economy, did play a critical role in creating regional links in the transcontinental chain of transactions which stretched from England to China. But neither individually nor collectively can these city-states be said to have been the promoters and organizers of the transcontinental trade expansion that made their fortunes. In this respect, their role was important but secondary both absolutely and relative to other organizations, first and foremost the Mongol empire. (See Abu-Lughod 1989: ch. 5; and Barfield 1989 on the impact of the rise and demise of the Mongol empire on the Eurasian trading system.) Since systemic cycles of accumulation are defined here as consisting of a phase of material expansion followed by a phase of financial expansion promoted and organized by the same agency or group of agencies, the trade expansion of the late thirteenth and early fourteenth centuries and the ensuing financial expansion cannot be said to constitute a systemic cycle of accumulation. Nevertheless, it was in the course of this financial expansion that the agencies of the first systemic cycle of accumulation were formed and key features of all subsequent financial expansions were foreshadowed. Neither the origins nor the structure of systemic cycles of accumulation can be fully understood without a preliminary examination of the forces at work in the financial expansion of the late fourteenth and early fifteenth centuries. The most important feature of this period - as of all closing phases of systemic cycles of accumulation - was a sudden intensification of inter- capitalist competition. Nowhere was this intensification more evident than in the northern Italian capitalist enclave, which became the main seat of the financial expansion. During the preceding trade expansion the relationships between the centers of accumulation of that enclave - that is, its city-states - had been fundamentally cooperative. Cooperation rested primarily on a division of labor among the commercial-industrial activities of the city-states. Even the "big four" occupied fairly distinct market niches in the trading system. Florence and Milan both engaged in manufacturing and in overland trade with northwestern Europe; but while Florence specialized in the textile trades, Milan specialized in the metal trades.

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