Where does capitalism come from?

Silver mining in the Americas in the 18th century saw enormous riches flow to Europe (Pic: Wellcome Library on Wikimedia commons)

Capitalism has its own origin story. Back in feudal society, the story goes, there were some labourers who worked hard and were frugal. They accumulated wealth.

There were others who were lazy, profligate and badly-behaved. They were destined to become workers and the poor.

The celebrated economist Adam Smith helped to popularise this fairytale version of a process he called “previous accumulation”.

Karl Marx condemned this approach as a “childish tale of original sin” packaged as political economy.

He wrote sarcastically, “From this ‘original sin’ dates the poverty of the great majority that, despite all its labour, has up to now nothing to sell but itself, and the wealth of the few that increases constantly although they have long ceased to work.”

Marx developed a very different account of how capital was accumulated by a minority—a process he called “primitive accumulation”.

Sycophantic economists painted an idyllic picture of the methods of primitive accumulation focused on peaceful trading and technological innovation.

“In actual history”, Marx wrote, “it is notorious that conquest, enslavement, robbery, murder, briefly force, play the great part.”

Rural labourers who owned small plots of land had to be forcibly “freed” from that ownership. And the common land, forests and rivers were stolen by the landlords.

Primitive accumulation was not just about the rich grabbing money or land. It meant accumulating the means of producing wealth.

And, as Michael Perelman writes in The Invention of Capitalism, it meant creating a class of landless labourers who were “compelled to do the bidding of those who would employ them.”

Primitive accumulation was a contradictory process—it involved freeing labourers from serfdom and bondage.

Bourgeois historians congratulated their system for emancipating the serfs. But, Marx wrote, “These new freedmen became sellers of themselves only after they had been robbed of all their own means of production.”

“And the history of this, their expropriation, is written in the annals of mankind in letters of blood and fire.”

Capitalism needed labourers who were doubly free—free from the bonds of feudalism and free to starve if they didn’t find work.

Primitive accumulation led to the emergence of two new social classes. One class owned the means of production and the means of subsistence—the mines, factories, mills and land.

The other class was the “free labourers”, who had no choice but to sell their labour power.

The two classes were mutually dependent. The bosses needed workers to make profits.

Workers needed to be employed in order to survive. But they were also in permanent conflict over the conditions of their exploitation.

Primitive accumulation progressed differently in different countries. But it always involved “moments when great masses of labourers are suddenly and forcibly torn from their means of subsistence and hurled as free and ‘unattached’ proletarians on the labour market”, Marx writes.

Primitive accumulation had international dimensions. The rise of merchants drove colonial conquest. Enormous riches flowed into Europe.

From the late 17th century, a highly profitable form of production developed, one based not on “free labour”, but on slavery.

Marx explained how the genocide against indigenous populations in the Americas, the enslavement of Africans and the conquest and looting of the East Indies “signalled the rosy dawn of the era of capitalist production.”

Slavery and colonial looting were elements of the same system that whipped, starved and terrorised the rural labourers from their lands in Britain.

Capitalism developed out of revolts against feudalism, the rise of mercantilism and new ways of creating wealth.

These developments depended on the primitive accumulation that cleared the way for a capitalist system born in blood and filth.