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The Rise of

the Merchant, Industrialist, and the . Capital Controller. A . Small . P. eninsula…. From the fifteenth century on, European soldiers and sailors carried the . flags of their rulers to the four corners of the globe, and European merchants established their storehouses from Vera Cruz to Nagasaki. .

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The Rise of






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Slide1

The Rise of the Merchant, Industrialist, and the Capital ControllerSlide2

A Small Peninsula…

From the fifteenth century on, European soldiers and sailors carried the flags of their rulers to the four corners of the globe, and European merchants established their storehouses from Vera Cruz to Nagasaki. Dominating the

sea-lanes of the world, these merchants invaded existing networks of exchange and linked one to the other. In the service of “God and profit” they located sources of products desired in Europe and developed coercive systems for their delivery. In response, European craft shops, either singly or aggregated into manufactories, began to produce goods to provision the wide-ranging military and naval efforts and to furnish commodities to overseas suppliers in exchange for goods to be sold as commodities at home. The outcome was the creation of a commercial network of global scale.

—Eric Wolf,

A People

Without HistorySlide3

The Rise of Capitalism

The rise of capitalismDid not just emerge out of nothingTraceable trends in global markets and the colonization process

Ecological, cultural, social costs of “doing business”

The global spread of

“conspicuous-consumption” oriented

capitalism

has

been both a blessing and a curseSlide4

A Small Peninsula off the

Landmass of AsiaAbout four or five hundred years ago, the movement of goods and global communications became dominated by “a small peninsula off the landmass of Asia”

While European powers certainly used political and military power to extend their control, it was accomplished through economic domination of trade and market expansion. Slide5

Image from http://www.allthingsdistributed.com/2008/12/amazon_ec2_in_europe.htmlSlide6

Refresher on the World System

The Modern World-System, 1974

Looked at how the capitalist systems penetrated non-capitalist systems

A binary distinction between the core area and the peripheral area

Argued that world economies linked by exchange relations were largely impossible before about 1500 Slide7

Continued

The capitalist world economy, which appeared around 1500, coincided with the expansion of commerce

The states of Northwestern Europe were able to impose a regional division of labor and specialization of production - e.g. sugar in the Caribbean, bullion in the Andes, and cereals in Eastern Europe Slide8

Little More…

Through increasingly powerful state bureaucracies, European powers continued to consolidate the flow of surplus toward the core countries

The world system theory urges us to examine the history of cultural conflicts to understand the change in any given cultural area

Slide9

Eric Wolf

Europe and the People without History

(1982)

A Critique of Civilization as a response to appeals from indigenous peoples to seek out the actual nature of the roots of the exploitative and oppressive conditions which are forced on humanity

Wolf emphasized the importance of the social relations that structured the organization of production and the distribution of goods and labor within and between societies Slide10

More Wolf

In his view, the motor for the rise of international capitalism was located in the West, and the system itself was built on exploitation, enslavement, genocide, and the formation of class structures and states

It also involved

ethnogenesis

- the creation of peoples without history both inside and outside EuropeSlide11

People without History?

What did Wolf mean by this statement?People living at the margins of history

People who live outside of the Western European historical timeline

But also those who live within the history of the West but in a

marginal or subordinate

position

"People Without History“ refers to those peoples whose cultures lack a formally written articulation of their historiesSlide12

Comfort for Capitalism

Returning to Robbins…Where

are we today?

Corporations have the same economic rights as citizens

Governments are opening markets economically and militarily

Nation states maintain armies to protect investments

Governments, educational institutions, and the media encourage consumers to spend

These are the conditions of doing business…Slide13

This is not “Natural” or “Old”

For most of human history we lived in small, relatively isolated communitiesUntil 10,000 years ago we were all foragersThen came agriculture, longer work hours, harder labor

However, additional labor maintains denser populations

Populations continued to increase…Slide14

Modes of Production

The major way in which human beings organize their production

“The concept of mode of production aims…at revealing the political-economic relationships that underlie, orient, and constrain interactions in a society…” (Wolf 1982: 76)

Kin-ordered

Production and consumption organized through kinship

May be real or fictitious kinship

May or may not serve to restrict access to resources Slide15

Modes of Production

Tributary the laborer has access to the means of production with the obligation of tribute to a lord or a ruling elite

“labor is…mobilized and committed to the transformation of nature primarily through the exercise of power and domination” (Wolf 1982: 80)

Capitalist

the laborer is separated from the means of production, access is mediated by elite owners

came into being when monetary wealth was enabled to buy labor power

for labor power to be offered for sale, the tie between producers and the means of production had to be severed for good (enclosure movement in Europe)Slide16

Capitalist Mode of Production

Historically specific: did not exist in 1400Private ownership of the means of production (bourgeoisie)

Distribution of goods controlled in a mainly market economy

People without means of production must become laborers (proletariat)

Development of capitalists class

All or most of the inputs and outputs of production are supplied commercially through the marketSlide17

The Capitalist

The merchant, industrialists, and financier…

Person who controls the capital, employs the laborers, and profits from the consumption of commoditiesSlide18

A tour of the World at 1400

Like Wolf in “Europe and a People without History” Robbins starts our trip at the year 1400.Why? This is the time pointed to by Wolf and others as the beginning of the rise of modern capitalismSlide19

Robbin’s Quest

To understand “how did the distribution of wealth change, and how did one area of the world come to dominate most others economically?”

“How and why did these transformations in the organization of capital come about?”

“How did the level of global economic integration increase, and what were the consequences for the merchant adventurer, as well as others?” Slide20

Merchant-Adventurer

What was the world like for such a person in 1400?World population at 250 million

The largest trading city in the world was Hangchow

Major market-places

Major concentration of global traders

Major ports for the movement of goods

Major overland trade routes to markets in Euro-Asia Slide21

Political Environment

Most political rulers in the 1400s still relied on a tributary mode of productionMost did not encourage tradeWhile states valued the money garnered from merchant-capitalists, they were still viewed with distain

Why? Threat to the aristocracy…Slide22

Economic Environment

No consumer economy yetWorld population lived on subsistence economy (i.e. they produced what they needed)No major currency across Europe, especially not globally

China and India richest states

Possibly no major areas of povertySlide23

The Rise of the West after 1400

China withdrawsA traditionalist movement, possible response to cultural intrusion of the “West”

Trade expansion through exploration

Voyage of Vasco da Gama around the southern tip of Africa, the “discovery” of the “New World”

The rise of new navel powers such as Portugal

The huge growth in the world economy and the amount of currency in circulationSlide24

The Collapse of the Americas

Massive wealth extracted extremely quicklyMassive die off of native populations

Population size? 8.4 million?

50-100

million

? (p. 49)

Not an unoccupied wilderness, but rather a complex social arena Slide25

Cultural Extinction…Some hard numbers

Population of Tainos in Espanola (Haiti/Dominican) at contact (1496): 8 million?

Population in 1514: 22,000.

Population in 1542: 200

By 1552 all

Tainos

people in Espanola where extinct…

95 to 98 percent of the indigenous population died as a consequence of European contact (p. 50 )Slide26

Slavery and Capitalism

How did the collapse of the native population lead to an increase

in the slave

trade?

Profitable, driving commerce in the New World

Helped to develop the plantation and ranchero systems

Environmentally destructiveSlide27

Trading Companies

By the 1600s, states began to become more involved in global trade and commerceTrading companies were very powerful

Dutch East India Company

British East India Company

Created massive wealth for the parent countries

Aided the spread of capitalismSlide28

The Rise of the Industrialist

1800, England becomes dominant over rest of European powersLost of American colonies offset by the colonization of India

Rise of industrialism in England

Iron production increases

Development of the steam engine

Development of the cotton ginSlide29

Why did England take off?

Increase in demand for goodsIncrease in the supply of capital

Growth in Population

Expansion of Agriculture

An “English Spirit”

Entrepreneurial spirit, Protestant ethic

State support of trade

The rise of a merchant class

A change in consumption patterns

Introduction of sugar, coffee, tea,

etcSlide30

Capitalism

A new pattern of capital formationMoney is converted to commodities that combine with the means of production and labor power to produce other commodities that are then sold for a greater sum than the initial investmentSlide31

Capitalism

Requires labor force removed from access to means of productionAs long as people have that access, no need to sell their labor

State sponsors restriction of access to means of production

Those who control the means of production also control the goods created

Thus labors must not only sell their labor to gain wages, but they must also purchase the products of their labor to survive

AND

HERE WE ARE!! Slide32

Rise of Imperialism

Capitalism necessarily requires growthProduction requires capital Production expands

Thus rise of Imperialism

Imperialism

Colonialism seen as necessary for growth and stability

Unequal exchange: colonies (individuals, states,

etc

) produce only raw materials and must import finished goods at a higher overall costSlide33

The Rise of the Corporation

Power no longer in ownership of land, but rather in the control of capitalNew elite made up of bankers, aristocracy, businessmen, manufacturers, and jurists, among others, held together through newly developed kinship ties

Capital kept within

families!!!Slide34

Corporations

Massive consolidation of industry lead to the development of huge companies dominating the marketEuropean and American powers act to divide up “influence zones”

Corporations

acting

as

“extensions

of

capitalism”

Are they becoming

the dominant governance units in the

world?Slide35

Brief History of Corporations

A social construction of the stateAllows private financial resources to be used for the state…

Allows individuals to apply massive economic and political power to accumulate

wealth

Publicize Risk/Privatize Profit

Corporate charters represented a grant from the government that limited an investors liability to losses covering the amount of the original investmentSlide36

Brief History of Corporations

Corporate law at the time was focused on protection of the public interestNot on the interests of corporate shareholdersCorporate charters were closely regulated by the states

Forming a corporation usually required an act of legislature

Investors had an equal say in corporate governance

Corporations were required to comply with the purposes expressed in their chartersSlide37

Brief History of Corporations

Fear of the power of corporation in the United States led to limits being placed on their developmentPost Civil War America Corporations made huge profits during the war, able to influence political process

Resulted in corporate land grabs, development of infrastructure

Consolidation of power and wealth continuedSlide38

Brief History of Corporations

Because of this growth in power…Corporations eventually gain corporate charters into perpetuityReduce liability of owners (accidents)

Gained the right to operate in any way not legislated AGAINST

Restricted minimum wage laws

Restricted “work day” legislationSlide39

Supreme Court Ruling on Corporate Personhood…

In the early and mid 1800s, (1819 first ruling) the U.S. Supreme Court granted corporations a plethora of rights they had not previously recognized or enjoyed

Santa Clara County v. Southern Pacific Railroad Company, 118 U.S. 394 (1886) was a United States Supreme Court case dealing with taxation of railroad properties. The case is most notable for the statement that corporations are entitled to protection under the Fourteenth AmendmentSlide40

Fourteenth AmendmentThe Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, now applies to corporationsSlide41

Corporate Personhood

Corporate charters were deemed "inviolable," and not subject to arbitrary amendment or abolition by state governmentsThe Corporation as a whole was labeled an "artificial person," possessing individuality, immortality, and most importantly freedom of speech

What

does freedom of speech allow a corporation to do?Slide42

CorporationsCorporations are granted the same protections an American citizen has…

Freedom of SpeechThe ability of corporations to lobby legislatures with the same rights as citizensThe growth in corporations use of the media to lobby consumers

Massive influence of corporations in governmentSlide43

Proponents of corporate personhood believe that corporations, as representatives of their shareholders, were intended by the founders and framers to enjoy many, if not all, of the same rights as natural persons, for example, the right against self-incrimination, right to privacy and the right to lobby the government.Slide44

Opponents claim that certain rights of natural persons, such as the right to political and other non-commercial free speech, are now exercised by corporations to the detriment of the American democratic process as provided under the Constitution.Slide45

This of course led corporations to create conditions where they could make greater profits

Eventually placed the rights and freedoms of the corporation over those of the individual The corporation came to exist as a separate entity with its own internal logic and rulesSlide46

What are the Underlying claims of the capitalist Ideology?

Western Capitalism is natural, teleology (result of all prior action) of human progress

Humans are naturally greedy, although the poor are lazy and stupid

The poor therefore require “masters” and no savings to force them to work

Economy is disembodied from socio-political structure, operates according to abstract principles

“Free” market for labor and resources to sort themselves out by “supply and demand”Slide47

Underlying claims of this Ideology?

Governments don’t “interfere” in the market except to provide basic necessities to the lazy poor, while the picked-on wealthy, who are our benefactors, pay all the taxes but get nothing in return (vs. supporting investments in military, communications, transportation, etc.)

The wealthiest are those who sacrifice, work the hardest, and are entrepreneurial

Hard work = wealth = God’s providence, favoritism

People have equal opportunity to accumulate wealthSlide48

Underlying claims of this Ideology?

Colonialism was for civilizing the savages or for saving oppressed people from totalitarian archaic states

Peripheral peoples are poor because racially or culturally inferior, not because colonized and exploited

Major capitalist countries are the most “civilized”, promoting peace and human rights

The UN, World Bank, and IMF are philanthropic, development-oriented institutionsSlide49

Underlying claims of this Ideology?

Capitalism = democracy, with the most important decisions made by the masses

“Economic Growth” means betterment for all; and when wealthy do well, all do well

Standards of Living rise with global capitalism, and

standard of living

is the same as

quality of life

Science & Industrial Revolution spurred capitalist growth, not vice versa

Humans vs. Nature: Human can dominate their natural surroundings and growth knows no limits

If not “free market” capitalism, the only alternative is “godless” communismSlide50

Corporate Ideology and Globalization

As corporate libertarianism expands…International Bank for Reconstruction and Development

Allowed development of markets in periphery countries

The International Monetary Fund

Allowed currency exchange on a global level

General Agreement on Tariffs and Trade

Created a forum for nations to negotiate trade policy that eventually lead to…

The World Trade Organization

Global forum for trade agreements

Intended to “level playing field” but benefits wealth elite who drive the negotiationsSlide51

Global Capital Control

Development of the World Bank resulted in massive lending campaignsResulting in large-scale debt in periphery countries who received the World Bank loans

Why/How did this happen?

What went wrong?

Currency backing

Lending

Glut in money due to Oil boomsSlide52

Global Debt

The change in how money is constructedOriginally based on the gold standard in most countriesBretton Woods accords: other counties would use the American Dollar as the primary currency of trade (as backed by gold at a rate of 35 dollars per ounce)

Mid 1960s, US begins printing cash in excess of its gold supply

By 1971, US declares it will no longer re-deem dollars on demand for goldSlide53

Global Debt

This move divorced the American dollar from any tangible baseDollar is now “covered” by “the expectation that people will exchange it for things of value”

“Money” became unsecured credit

And countries began to print more and more of it

Which lead to more and more lending

However, money was lent via loans with adjustable interest rates

Debts quickly began to accumulate as loans grew beyond the levels that borrowing counties could afford to pay back

Does this sound

familiar to you personally? Slide54

The Power of Capital Controllers

Corporate capitalism has allowed the development of capital controllers who have power over vast sums of wealthThis wealth is necessary for the working of the economy/infrastructureHowever, these controllers are beholden to virtually no one

Their goals often conflict with the goals of the state Slide55

Financialization Process

Modern global economy is based on a process involving the flow of finance capital, money, and securities, rather than the actual production and distribution of goods and services

The flow of capital is now more important than the flow of actual goods. By the 1990s, 90 percent of the worlds commercial transactions involved stocks, bonds, and commodity futures

By 2000, 75 percent of American wealth was financial

By 2003, the entire world had become integrated into a single financial network working on a computerized backbone.

This allows the movement of global capital across the globe in

nano

-secondsSlide56

In 2010 the number of high-net-worth individuals in the world -- those with at least $1 million in investable assets excluding primary residences -- grew 8.3% to 10.9 million, and their wealth rose 9.7% to $42.7 trillion

Wealth is still concentrated in the U.S., Japan and Germany, which accounted for 53% of the world's high-net-worth populationSlide57

Power in Motion

The global flow of capital into and out of communities How much? On

any given day, nearly 1 Trillion dollars move across the globe

Power

has consolidated

into the hands of a few global elite

Who are not restrained by government

oversight…Slide58

US International Direct Investment Flows

Period

FDI Inflow

FDI Outflow

Net Inflow

1960–69

$ 42.18 bn

$ 5.13 bn

+ $ 37.04 bn

1970–79

$ 122.72 bn

$ 40.79 bn

+ $ 81.93 bn

1980–89

$ 206.27 bn

$ 329.23 bn

– $ 122.96 bn

1990–99

$ 950.47 bn

$ 907.34 bn

+ $ 43.13 bn

2000–07

$ 1,629.05 bn

$ 1,421.31 bn

+ $ 207.74 bn

Total

$ 2,950.72 bn

$ 2,703.81 bn

+ $ 246.88

bn

http://www.bea.gov/international/xls/table1.xls