Chapter 2 The Historical Development of Capitalism Feudalism

Chapter 2 The Historical Development of Capitalism • • • Feudalism and the Birth of Capitalism The Emergence and Nature of Capitalism The Industrial Revolution Colonialism: Capitalism on a World Scale Summary

The Importance of Historical Processes • The present economic landscape can only be understood as the result of an historical process • Decisions to site production facilities “yesterday” produce the spatial pattern that is the foundation for trade and patterns of consumption today • We can visualize these processes at various geographic scales

Feudalism and the Birth of Capitalism • From hunting & gathering to domesticated agriculture (animals and crops) • Slave-based empires (e. g. Roman) and their feudal successors (ca. 5 th Century) • A form of economic and social relations that extended in Europe to ca. 15 th century • Settlement in North America did not succeed feudalism, but was capitalist in character from the outset

Characteristics of Feudalism • Tradition shaped life and work • In Europe the church was the dominant political and ideological institution • Aristocratic land-owners formed the ruling class, who extracted rents from tenant farmers (often serfs) in low productivity agriculture • Feudal cities – often fortified – with guilds – markets, where universities were established • A hierarchy of feudal towns, mostly small trading centers, with negligible interregional trade

Feudal Regions & The Beginnings of Trade Agricultural innovations; bubonic plague; the European Renaissance

Characteristics of Early Capitalism • Markets: buyers and sellers of goods & services at agreed upon prices • Market types: perfect competition – perfect monopoly – oligopoly (and other types) • The profit incentive = revenue – cost • Dynamic behavior of buyers and sellers, including incentives from innovation in products and production processes • Class relations: merchants & burghers vs. the old aristocracy. “Unlike feudal Europe, workers under capitalism must sell their labor power to survive. Thus the process of commodification extended to include the capacity to labor. ”

The Emergence and Nature of Capitalism • Rise of trade-based city states – links to old trade routes to the Far East and in Europe

Alternative Models of Competition Barriers to Entry - High Barriers to Entry - Low

Attributes of Alternative Market Types “Pure” Monopoly

Early Capitalism, Continued • Finance: replacing barter with money, and institutions to handle and regulate money • Uneven development as an inevitable outcome, historically persistent, at scales ranging from local to global • Long-distance trade – fueled by transport innovation – allowing regional specialization based on principle of comparative advantage • Ideological change – printing/reading, religion, science, the Enlightenment – “a worldview that stressed secularism, individualism, rationality, progress, and democracy. ”

Early Capitalism, Continued • Feudal empires (e. g. Holy Roman Empire, Figure 2. 11) with multiple nation-states • Replaced feudal monarchies with nation-states • Nation states supporting development of capitalism through regulations, public investment and programs (e. g. education, defense, trade protectionism… • BUT: these institutions do not preclude transnational capitalist development, evident in this era of globalization

The Industrial Revolution • Industrialization as a process with multiple transformations in inputs, output, and technologies. Driven by: – Harnessing inanimate sources of energy (Figure 2. 12), wood-coal-petroleum & gas – Technological innovation (Table 2. 1) – Rising Productivity (Figure 2. 14) • Spatial diffusion of the Industrial Revolution

Spread of the Industrial Revolution

Global Diffusion of the Industrial Revolution

Cycles of Industrialization – Kondratiev Long Waves The Fifth Wave – IT & producer Services

Consequences of the Industrial Revolution • Creation of an Industrial Working Class – Rise of organized labor • Urbanization – industry as “city forming” activity • Population Effects: Malthus’ warning vs. productivity increases, health improvements, lowered birth rates • Growth of Global Markets & International Trade – transport improvement, international finance, timing of development