How Did Capitalists Get So Rich?: On the Marriage Between Capitalism and Government

James Leach | Social Economics | Commentary | April 20th, 2019

It is difficult to know what to say to the smug self-satisfaction of the business class who gaze upon the enormous wealth of their country, and then pat their back for the capitalist utopia they have built. In critical analyses of capitalism, considerable weight is put on examining the contradictions in the modes of exchange, the formation of crises, and the tension between labour and capital. But I want to address how capitalism developed, and how the considerable wealth of developed nations was produced, as well as how it became so acutely concentrated within a few pockets. As Marx asks in Wages, Prices and Profit, "how does this strange phenomenon arise, that we find on the market a set of buyers, possessed of land, machinery, raw material, and the means of subsistence… and on the other hand, a set of sellers who have nothing to sell except their labouring power, their working arms and brains?"

"Primitive Accumulation": Enclosures and Erasing the Commons

There is no concrete date which we can mark as the first day of capitalism, or the last day of feudalism, since its development was somewhat gradual. The results of the English Revolution in the seventeenth century, for example, saw movements away from feudal society and towards capitalist society, but it was not until two centuries later, during the Industrial Revolution, where capitalism truly flourished. However, a significant policy which marked a shift towards the dominance of private property is the agricultural enclosures. This involved the fencing of farmland into private property, mostly within the hands of large, propertied landowners. Before this, agricultural labourers either worked on common land within their village, or they were peasants working for a local lord. A portion of the labourer's produce would be seized by the lord as a tax and the labourers would then sell what was left in local markets. Enclosures saw the new dominance of wage labour, the separation of agricultural workers between themselves and their means of production, the formation of the first labour market, and of the first proletariat.

Before enclosures, common land was able to significantly rival wage labour. Jane Humphries essay Enclosures, Common Rights, and Women, published in the Journal of Economic History, explores the results of enclosures, as well as the significance of common land. Humphries finds that the family possession of a single cow on common land could "remain significant compared with landowner's wages" and on an annual basis "the comparison would probably be even more favourable to cowkeeping." Keeping cows communally also had other benefits. The by-product of rearing cows was goods such as skim-milk, which provided a 'gratifying addition to the monotonous diet of the adult farm workers', and was crucial to the healthy development of the labourer's children. However, after enclosures, due to high rents and resistance from farmers, common cowkeeping virtually vanished, and labourers could not often afford to buy milk.

Now that the efficiency of "communing" has been briefly established, to what extent did this communal lifestyle exist? Peter Linebaugh's exceptional text Stop, Thief! The Commons, Enclosures and Resistance is instrumental in answering these questions. Linebaugh documents the work of the seventeenth century statistician Gregory King, who estimated that were was "twenty million acres and pasture, meadow, forest, heath, moor, mountain, and barren land in a country of thirty-seven million acres', Linebaugh continues to say that 'even if common rights were exercised in only half of these, it means that in 1688 one quarter of the total area of England and Wales was common land.' Such an enormous measure of common land would have been extremely valuable to agricultural workers. Naturally, enclosures reversed this. 'Between 1725 and 1825 nearly four thousand enclosure acts appropriated more than six million areas of land… to the politically dominant land owners.' It does not take a genius to work out the effects on the newly formed working class. Reliance on Poor Relief went up, there was a poverty crisis in the eighteenth century, and as Greek economist Yanis Varoufakis simply puts: 'More than 70 percent of the peasants were thrown out of their houses and off their ancestral lands. It was devastating, brutal, cruel and… highly effective.' E.P Thompson called enclosures a plain case of class robbery.

It is difficult, however, to drill into the minds of a global population that they do not own much besides their labour power. The Indonesian novelist Promoedya Ananta Toer reported on the response from native Indonesians to enclosures in his memoirs: 'The native people had no word for "fence"- the concept was completely foreign to their culture. They didn't recognise such manmade limitations on land-use rights.' How could such a disaster for the global population not be overthrown immediately? Unfortunately, the rich and powerful have 'experts in legitimation', to use Antonio Gramsci's words. Garret Hardin's text The Tragedy of the Commons sought to justify enclosures. Hardin's thesis appears rational. He suggests that the commoners, in their simultaneous desire to profit as much as possible from the land, and the un-fettered access to land, would bring 'ruin to all.' Hardin's misanthropy is de-bunked with plain historical fact by Linebaugh: '… the commons is always governed… [an] officer elected by the commoners will impound that cow, or will fine that greedy shepherd who puts more than his share onto the commons.'


The consequences of imperialism are, and always have been, deeply lodged within the cognitive dissonance of the body politic. For example, it takes the most basic logic to recognise that capitalism developed alongside Transatlantic slavery, and it takes little extra effort to make the connection between them, yet this line of reasoning is often left un-pursued.

Pre- Civil War America is often seen as split between the free-market north and the plantation complex of the south. They were, however, inextricably linked. Forbes, a popular and prestigious business magazine, ran an interesting article on the subject, in relation to Sven Beckert's book Slavery's Capitalism: A New History of American Economic Development. It turns out, in contrast to popular fantasy, that the capitalists of the American north were crucial in keeping slavery alive, and, of course, it was crucial to their development. The slave economy effected the north with 'plenty of merchants in New York City, Boston and elsewhere helping to organize the trade of slave-grown agricultural commodities…' The slave production of cotton 'offered a reason for entrepreneurs and investors to build manufactories… thereby connecting… Industrial Revolution to the advancing plantation frontier…' The latter point is particularly poignant. The Industrial Revolution ushered capitalism into a golden age where it could stand with two feet on a fertile ground of free trade accompanied with low tariffs (a subject which I will later address). The swollen shadow which shades the conscience of capitalism, of course, is the fact that it required the possession of human beings to help stimulate its progression. This can not be understated, since, for the first six decades of the 19th Century, raw cotton amounted to more than half of the nation's exports.

It would be tough to go through the entire history of modern imperialism to weigh its effects and thus measure the arms which propped up capitalist development, because there are simply too many cases. But it is worth addressing the very land that is now the 'United States of America'. It goes without saying that before European colonists arrived, there was a Native population who organised themselves locally and communally. It also goes without saying that this way of life has been mostly exterminated with state violence and the commodification of land. In 1845, California was part of Mexico. How did this change? Imperialism. Back in those days, the mainstream press could be more honest about the practices of the state. An article by the Washington Union said: 'Let the measure of annexation be accomplished… For who can arrest the torrent that will pour onward to the Wes? The road to California will be open to us.' In the 19th Century, the establishment did not have to wax lyrical with tales of 'democracy'. There is surely no questioning that such actions are inhuman; they create 'the wretched of the earth', to use Franz Fanon's turn of phrase. But what is the motive? It is rare for humans to be motivated by sheer violence. There must be a reward to legitimize violence. In the case of the United States' invasion of Mexico in 1847, the reward was the rich natural resources of California. Historian Howard Zinn, in his seminal text A People's History of the United States, quotes the Illinois State Register in 1846:

Shall this garden of beauty be suffered to lie dormant in its wild and useless luxuriance?... myriads of enterprising Americans would flock to its riches and inviting prairie's; the hum of Anglo-American industry would be heard in its valleys; cities would rise upon its plains and sea-coast, and the resources and wealth of the nation be increased in an incalculable degree.

This quote goes some way to explain how much the expansionist ethic of the American government meant to slave-owning economy of the south.

We need not go as far back as the 19th Century to look for examples of state force providing for the economy of a nation state. War has always been profitable. The neo-imperial oil wars of the 20 th and 21st Century have meant that the U.S and Britain have had cheap access to oil. Given that state force has brought this about, it has nothing to do with free trade.

Anything but Free Trade, In the Name of Capitalism

If we only pay attention to the dictates of Milton Friedman, Friedrich Hayek and other free-market enthusiasts, we can be easily fooled that (with a few nuances), the un-rivalled wealth of the modern superpowers is owed to its policies of free markets and trade. If we look at economic history plainly, however, we find remarkably different results. Ha- Joon- Chang's tour-de-force Kicking Away the Ladder: Development Strategy in Historical Perspective , is a good place to start in studying what policies truly led to economic development.

Chang begins by invoking Friedrich List, the 19th Century German economist who fathered the 'infant industry promotion' theory, which proposed that budding industries require state protection from competitive markets which were dominated by experienced and long-standing manufacturing countries. List, in his albeit tediously named 'The National System of Political Economy' is important. He finds that Britain was 'the first country to perfect the art of infant industry promotion' because

[the monarchies of Britain] perceived that their newly established native manufactures could never hope to succeed in free competition with the old and long-established manufactures of foreigners… Hence, they sought, by a system of restrictions, privileges, and encouragements, to transplant to their native soil the wealth, the talents, and the spirit of enterprise of foreigners.

Chang then systematically goes through the historical development of almost every highly-developed nation, starting with Britain, 'the intellectual fountain of the modern laissez-faire doctrines…' The fourteenth century monarch Edward III is known for being the Brit to first actively start developing British wool production. His tactic was to ban imports of raw wool, centralise its trade and bring in Flemish weavers (he also only worse English cloth, to set an example). Naturally, through the most anti- free trade policies possible, Britain became the dominant exporter of wool. It was a hundred years after Henry VIII's import substitution policies of 1489 that Britain decided to be competitive in a market, which consequently drove the industries of the previously dominant Low Countries into the ground.

As already stated, the Industrial Revolution formed the blueprint for un-fettered capitalism. But how was this blueprint written? Britain had 'very high tariffs on manufacturing products as late as the 1820's, some two generations after the start of its Industrial Revolution, and when it was significantly ahead of its competitor nations in technological terms.' As well as tariff protection, Britain felt that for its businesses to develop, it needed to ban the imports of superior products from the colonies, in order for its own industries to remain economically viable. In 1700, for example, Britain banned the import of Indian cotton products, leading to the decline of the Indian cotton industry. It was then totally destroyed by the 'ending of the East India Company's monopoly in international trade in 1813.' Clearly, the economic supremacy of Britain in the 19th Century was not predicated on free trade. There was, however, developing pressure from the business community for free trade, once they had acquired enough wealth from protectionist policies to be competitive in global markets. By the 1850's, considerable steps (such as the eradication of tariffs) set in motion a liberalised capitalist economy. This did not last long. 'By the 1880's, some hard-pressed British manufacturers were asking for protection.' However, the true move away from free trade occurred in 1932, when the manufacturing advantage of Germany of the USA demanded protectionism from Britain.


What can be seen is that there have been gigantic impediments to true laissez-faire economics. These impediments have taken numerous forms: violence, colonialism, protectionism etc. Today, the impediments are slightly different. Enormous taxpayer subsidies to the corporate sector, for example, turn free-markets from fact into fantasy. The state ghosted every step capitalism took; their relationship is fascinating. Capitalism and the state are the main actors in a Sophoclean tragedy in which capitalism cannot function with or without the state. On the one hand, capitalism has considerably relied on the state for the conditions of its development, may that be enclosures, access to the captive markets of colonies, tariff protection, or plain violence to silence the rebelling masses. On the other hand, centralised government can be a leech on the efficiency of business. It has the cheek to demand

for taxes, and occasionally it represents 'we the people', and the interests of 'the people' are at odds with the interests of the capitalists. The government is often accused of being a threat to the freedom of the capitalist class, but history has shown that the latter needs the former to protect its interests. It is within this tragic comedy that we have lived since the origin of capitalism, and that we continue to live in today.