Capitalist society is a relatively recent development. As Murray Bookchin points out, for a "long era, perhaps spanning more than five centuries," capitalism "coexisted with feudal and simple commodity relationships" in Europe. He argues that this period "simply cannot be treated as 'transitional' without reading back the present into the past." [From Urbanisation to Cities, p. 179] In other words, capitalism was not a inevitable outcome of "history" or social evolution.

He goes on to note that capitalism existed "with growing significance in the mixed economy of the West from the fourteenth century up to the seventeenth" but that it "literally exploded into being in Europe, particularly England, during the eighteenth and especially nineteenth centuries." [Op. Cit., p. 181] The question arises, what lay behind this "growing significance"? Did capitalism "explode" due to its inherently more efficient nature or where there other, non-economic, forces at work? As we will show, it was most definitely the later one — capitalism was born not from economic forces but from the political actions of the social elites which its usury enriched. Unlike artisan (simple commodity) production, wage labour generates inequalities and wealth for the few and so will be selected, protected and encouraged by those who control the state in their own economic and social interests.

The development of capitalism in Europe was favoured by two social elites, the rising capitalist class within the degenerating medieval cities and the absolutist state. The medieval city was "thoroughly changed by the gradual increase in the power of commercial capital, due primarily to foreign trade. . . By this the inner unity of the commune was loosened, giving place to a growing caste system and leading necessarily to a progressive inequality of social interests. The privileged minorities pressed ever more definitely towards a centralisation of the political forces of the community. . . Mercantilism in the perishing city republics led logically to a demand for larger economic units [i.e. to nationalise the market]; and by this the desire for stronger political forms was greatly strengthened. . . . Thus the city gradually became a small state, paving the way for the coming national state." [Rudolf Rocker, Nationalism and Culture, p. 94]

The rising economic power of the proto-capitalists conflicted with that of the feudal lords, which meant that the former required help to consolidate their position. That aid came in the form of the monarchical state. With the force of absolutism behind it, capital could start the process of increasing its power and influence by expanding the "market" through state action.

As far as the absolutist state was concerned, it "was dependent upon the help of these new economic forces, and vice versa. . . ." "The absolutist state," Rocker argues, "whose coffers the expansion of commerce filled. . ., at first furthered the plans of commercial capital. Its armies and fleets . . . contributed to the expansion of industrial production because they demanded a number of things for whose large-scale production the shops of small tradesmen were no longer adapted. Thus gradually arose the so-called manufactures, the forerunners of the later large industries." [Op. Cit., p. 117-8]

Some of the most important state actions from the standpoint of early industry were the so-called Enclosure Acts, by which the "commons" — the free farmland shared communally by the peasants in most rural villages — was "enclosed" or incorporated into the estates of various landlords as private property (see section F.8.3). This ensured a pool of landless workers who had no option but to sell their labour to capitalists. Indeed, the widespread independence caused by the possession of the majority of households of land caused the rising class of merchants to complain "that men who should work as wage-labourers cling to the soil, and in the naughtiness of their hearts prefer independence as squatters to employment by a master." [R.H Tawney, cited by Allan Elgar in The Apostles of Greed, p. 12]

In addition, other forms of state aid ensured that capitalist firms got a head start, so ensuring their dominance over other forms of work (such as co-operatives). A major way of creating a pool of resources that could be used for investment was the use of mercantilist policies which used protectionist measures to enrich capitalists and landlords at the expense of consumers and their workers. For example, one of most common complaints of early capitalists was that workers could not turn up to work regularly. Once they had worked a few days, they disappeared as they had earned enough money to live on. With higher prices for food, caused by protectionist measures, workers had to work longer and harder and so became accustomed to factory labour. In addition, mercantilism allowed native industry to develop by barring foreign competition and so allowed industrialists to reap excess profits which they could then use to increase their investments. In the words of Marian-socialist economic historian Maurice Dobbs:

"In short, the Mercantile System was a system of State-regulated exploitation through trade which played a highly important rule in the adolescence of capitalist industry: it was essentially the economic policy of an age of primitive accumulation." [Studies in Capitalism Development, p. 209]

As Rocker summarises, "when abolutism had victoriously overcome all opposition to national unification, but its furthering of mercantilism and economic monopoly it gave the whole social evolution a direction which could only lead to capitalism." [Op. Cit., pp. 116-7]

This process of state aid in capitalist development was also seen in the United States of America. As Edward Herman points out, the "level of government involvement in business in the United States from the late eighteenth century to the present has followed a U-shaped pattern: There was extensive government intervention in the pre-Civil War period (major subsidies, joint ventures with active government participation and direct government production), then a quasi-laissez faire period between the Civil War and the end of the nineteenth century [a period marked by "the aggressive use of tariff protection" and state supported railway construction, a key factor in capitalist expansion in the USA], followed by a gradual upswing of government intervention in the twentieth century, which accelerated after 1930." [Corporate Control, Corporate Power, p. 162]

Such intervention ensured that income was transferred from workers to capitalists. Under state protection, America industrialised by forcing the consumer to enrich the capitalists and increase their capital stock. "According to one study, of the tariff had been removed in the 1830s 'about half the industrial sector of New England would have been bankrupted' . . . the tariff became a near-permanent political institution representing government assistance to manufacturing. It kept price levels from being driven down by foreign competition and thereby shifted the distribution of income in favour of owners of industrial property to the disadvantage of workers and customers." [Richard B. Du Boff, Accumulation and Power, p. 56]

This protection was essential, for as Du Boff notes, the "end of the European wars in 1814 . . . reopened the United States to a flood of British imports that drove many American competitors out of business. Large portions of the newly expanded manufacturing base were wiped out, bringing a decade of near-stagnation." Unsurprisingly, the "era of protectionism began in 1816, with northern agitation for higher tariffs. . . " [Op. Cit., p. 14, p. 55]

Combined with ready repression of the labour movement and government "homesteading" acts (see section F.8.5), tariffs were the American equivalent of mercantilism (which, after all, was above all else a policy of protectionism, i.e. the use of government to stimulate the growth of native industry). Only once America was at the top of the economic pile did it renounce state intervention (just as Britain did, we must note).

This is not to suggest that government aid was limited to tariffs. The state played a key role in the development of industry and manufacturing. As John Zerzan notes, the "role of the State is tellingly reflected by the fact that the 'armoury system' now rivals the older 'American system of manufactures' term as the more accurate to describe the new system of production methods" developed in the early 1800s. [Elements of Refusal, p. 100] Moreover, the "lead in technological innovation [during the US Industrial Revolution] came in armaments where assured government orders justified high fixed-cost investments in special-pursue machinery and managerial personnel. Indeed, some of the pioneering effects occurred in government-owned armouries." [William Lazonick, Competitive Advantage on the Shop Floor, p. 218] The government also "actively furthered this process [of "commercial revolution"] with public works in transportation and communication." [Richard B. Du Boff, Op. Cit., p. 15]

In addition to this "physical" aid, "state government provided critical help, with devices like the chartered corporation" [Ibid.] and, as we noted in section B.2.5, changes in the legal system which favoured capitalist interests over the rest of society.

Interestingly, there was increasing inequality between 1840 and 1860 in the USA This coincided with the victory of wage labour and industrial capitalism — the 1820s "constituted a watershed in U.S. life. By the end of that decade . . .industrialism assured its decisive American victory, by the end of the 1830s all of its cardinal features were definitely present." [John Zerzan, Op. Cit., p. 99] This is unsurprising, for as we have argued many times, the capitalist market tends to increase, not reduce, inequalities between individuals and classes. Little wonder the Individualist Anarchists at the time denounced the way that property had been transformed into "a power [with which] to accumulate an income" (to use the words of J.K. Ingalls).

Over all, as Paul Ormerod puts it, the "advice to follow pure free-market polices seems . . . to be contrary to the lessons of virtually the whole of economic history since the Industrial Revolution . . . every country which has moved into . . . strong sustained growth . . . has done so in outright violation of pure, free-market principles." "The model of entrepreneurial activity in the product market, with judicious state support plus repression in the labour market, seems to be a good model of economic development." [The Death of Economics, p. 63]

Thus the social forces at work creating capitalism was a combination of capitalist activity and state action. But without the support of the state, it is doubtful that capitalist activity would have been enough to generate the initial accumulation required to start the economic ball rolling. Hence the necessity of Mercantilism in Europe and its modified cousin of state aid, tariffs and "homestead acts" in America.