In part I, we saw how for Wood and Brenner the defining characteristic of capitalist society, the one that sets entirely novel “laws of motion” into play, is market-dependence. Following Chomsky, I rather prefer the term ‘market discipline’—the dependence on the market for their very survival means that everybody has to obey market imperatives. In capitalism, it is market discipline that replaces “extra-economic” forms of coercion that characterize surplus extraction in non-capitalist societies. Market competition generates remorselessly rising productivity. But markets have always existed, as did the drive for profits. What is new in “true capitalism,” pace Wood, is that producers do not have non-market access to the means of production and subsistence. It is competition for access to the means of production (land, labor, and capital) and subsistence (food and shelter), that gives the market its bite. That is, it is the market for the factors of production and life’s necessities that turns market competition into market discipline. I submit that what Wood and Brenner are describing—“true capitalism”— is not capitalism but market society. I am, of course, borrowing Karl Polanyi’s famous phrase. In The Great Transformation, Polanyi goes at great lengths to emphasize the role played by the state in coercing society to accept market discipline. The divorce between politics and economics that Wood makes so much of, never happened. But I digress.

Capitalism does not equal ‘market society’ for the simple reason that capital has been in the saddle far, far longer than market society has been in existence. Capitalism is not merely an economic system; for were it to be so, there would be no need for a new word, we might as well refer to it as the “free-market.” No, the element of domination simply cannot be taken out of capitalism. The history of capitalism is not merely an economic history. When I speak of the history of capitalism, I am interested in the political career of capital. To regard the “extra-economic” coercion as pre-capitalist is to miss this crucial point entirely. This is why in Wood’s telling, Britain’s overseas activities were never really “capitalist.” For Wood, the distinction between “on the one hand, the practice of gaining economic ascendancy by means of commercial monopolies, and, on the other, innovative and competitive production to ‘undersel’ [sic] all others, nicely sums up the differences between non-capitalist patterns of commercial imperialism and the new [capitalist] conception of empire.” [i]

But the English would “never be able, in any settler colony, to reproduce England’s distinctive property relations.” The drive for profit that led the English merchants to corner the slave trade, set up slave plantations in the New World for the extraordinarily profitable production of sugar, tobacco, and cotton were “non-capitalist.” Slavery “is a striking example of how capitalism has, at certain points in its development, appropriated to itself, and even intensified, non-capitalist modes of exploitation.” It is “unclear” what role Canada played in British capitalism. As for India, “Beginning as a commercial empire dominated by a monopolistic trading company, British domination gradually took the form of a territorial empire dominated by the Imperial state. In both these guises, the empire was essentially non-capitalist in its logic.” What about global capitalism under American primacy? “Actually existing globalization, then, means the opening up of subordinate economies and their vulnerability to imperial capital, while the imperial economy remains sheltered as much as possible from the obverse effects. Globalization has nothing to do with free trade. On the contrary, it is about the careful control of trading conditions, in the interests of imperial capital.”[i] Staying true to the definitions offered, we should regard neoliberal globalization—can you get more capitalist than this?—as a “non-capitalist” regime of accumulation. Alright then.

The problem is clear as daylight. By defining capitalism as a market society, the Marxist framework, while being internally consistent, offers little explanation of the central dynamics of capitalism in the real world. There is no explanation of why “globalization has nothing to do with free trade.” No explanation of the core-periphery structure of the global economy. No explanation of the role played by “central governments.” There are no sea lanes as far as the eye can see. The state is relegated to foster markets at arms’ length. Capitalists’ profit maximization is restricted to price competition. “Monopoly capitalism” is regarded as a “late development,” as is “finance capitalism”—could anything be further from the truth? There is a deeper problem however. In really competitive markets, there is no fat, cigar-smoking capitalist to be found. Great wealth through profit—real capitalism—is simply impossible without what Wood calls “non-capitalist” accumulation. This is because capitalism is not about the market; it is about the anti-market: market power, unfair trade, and yes, “extra-economic” advantages.

Before I lay out my conception of capitalism, there is one more business to attend to. The labor theory of value so central to the Marxist frame—“capitalism is, by definition, based on the exploitation of wage labor”— explains a very minor fraction of economic output. Say you make 1 widget an hour and I pay you $10 an hour and sell the widgets for $100. The “surplus labor” extracted would be $90. Now suppose I installed a new machine that lets you make 10 widgets an hour and I keep paying you $10 an hour and selling each widget for $100. Am I now extracting $990 of your “surplus labor”? But you didn’t put any more work than you did before, did you? At the minimum then, the labor theory of value makes sense only if technology and know-how are held constant. Even then, one can only faithfully say that “surplus labor” has been extracted if workers are paid less than the marginal product of labor. But that is pocket change. Even purely economic profit via successful price competition is largely accounted for by innovation, not intensified extraction of “surplus labor.” But the larger point is that economic value is an emergent phenomenon and cannot be traced to anyone’s “surplus labor.” Indeed, with the advances in automation and robotics, a world where there is hardly any wage labor is already on the horizon. I can assure you, such a world will be even more capitalist than the one we live in.
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We begin then, not with Braudel, but with Winters’ theory of oligarchy. As will be clear in what follows, Winters’ theory allows us to put Braudel’s historical observations in a solid theoretical framework.

Oligarchs are defined as extremely wealthy individuals in a highly-stratified society. The extreme material endowment of the oligarchs provides them with both an overriding interest in the defense of their property and the material resources to do so. Threats to their property can come from ‘above’ (by the state), from below (by the masses), and horizontally (from other oligarchs). Winters is interested in studying how oligarchs have dealt with these vertical and horizontal threats; and the different political equilibria that have obtained. To bring the theory to bear on the question of nature of capitalism, we first need to go beyond Winters and distinguish between landed oligarchies and merchant oligarchies.

Landed oligarchs are essentially feudal lords whose property takes the form of arable land. They may be armed warrior elites, in which case one cannot really speak of a centralized state at all. In the ‘warring states’ period (fifteenth and sixteenth centuries), Japan was under the decentralized control of around three hundred warlords. Similar decentralization obtained in the ‘High Medieval’ period in Europe. In such oligarchies, there is no state ‘above’ the oligarchs to threaten confiscation. Threats emanating horizontally and from below are dealt with by direct coercion. Therefore, the crucial thread that connects these societies is the ties of vassalage between the lord and the vassal, wherein the vassal offers to fight for the lord in exchange for protection and sustenance. The “laws of motion” of such systems are straightforward: these are balance-of-power systems.

A centralized state can only coexist with a landed oligarchy if it guarantees the protection of the oligarchs’ property. In mature feudal orders, the state is necessarily weak and dependent on the support of big landlords. Micro-locally, pace Anderson, the social order in ‘late feudalism’ is characterized by a fusion of political and economic power in the person of the feudal lord. This is the state in which we find Europe when the peasant-lord conflict broke out the fourteenth and fifteenth centuries. We shall come back to this presently. For now note that the primary interests of the big landlords lie in preserving their unchallenged control of the land, maintaining mastery over the peasants, and preventing the state from using its monopoly of violence to undermine their standing.

The interests of merchant oligarchs are quite different from those of landed oligarchs. Since they derive their wealth and revenue from trade, their primary concern is access to markets, resources, and trade routes. Big merchants were invariably involved in long-distance trade (Braudel’s “super-trade”) where there was much greater scope for large-scale profits. Since it was radically cheaper to transport by sea than over land, the plumbing of the world economy has always been maritime. The protection of sea lanes was thus the paramount interest of the big merchants. Initially, just like the landed oligarchs, merchant ships were themselves armed. This insufficient, decentralized maritime self-protection was soon replaced by sea power organized by the state. The sea power that controlled the sea lanes could not only protect a merchant’s ships, it could exclude him from plying lucrative routes. It was thus supremely important to gain as much influence as possible over the dominant maritime state. We shall come back to this presently.

Whereas the landed oligarchs merely want the state to guarantee their property but otherwise keep out of their way, merchant oligarchs have a direct interest in a broad range of the state’s policies. Beyond the state’s maritime protection, merchant oligarchs seek to design and influence foreign affairs, trade policy, fiscal policy, industrial policy, and financial regulation. If the Rajah of Sumatra or whatever refused to allow the nation’s merchants to ply their trades or pay back a loan, the state had to be mobilized to exercise some ‘gunship diplomacy.’ If rival merchants from another country were outcompeting the nation’s merchants in the carry trade, the state had to be mobilized to secure commercial advantages. The most outstanding instance of such muscular trade policy was the Navigation Act of 1651, passed by Parliament to protect English merchants from their Dutch superiors. (The Act forbid third-parties from English ports and was thus a frontal attack on Dutch supremacy in shipping.) Merchants likewise mobilized the state to promote domestic production. This included not just tariff protection (almost a universal), but also industrial espionage. For instance, the Crown sent expeditions to study Flemish innovations in textile production to promote domestic manufacturing. Finally, banker-financiers in the City of London got Parliament to establish the Bank of England (in 1694) and carry out a number of institutional innovations to stabilize the pound sterling and lay a firm foundation for the emerging fiscal state (the English Financial Revolution). Given the vast demands placed on the state by merchant oligarchs, is it any surprise that the modern state grew up alongside capitalism?

What am I calling capitalism here?? I’ll come right out and say it: I think we should regard a polity as capitalist if is dominated by a merchant oligarchy. To be more precise, I am interested in studying the capture of the state by commercial and rentier (and later, industrial) interests. Instead of the relations between the holder of capital and the holder of labor, one is interested in the relations between the holder of capital and the holder of politico-military power. The Netflix series, House of Cards, captures this relationship nicely: Raymond Tusk, the plutocrat, bankrolls President Walker’s campaign for the White House, who in turn in tasked with looking after the former’s interests in China.

In other words, what marks off a polity as capitalist is the simply the primacy of capitalist interests. Whether these interests are predominantly commercial, industrial, or rentier makes a great deal of difference. But it does not change the essentially capitalist nature of the polity, nor does it materially alter the capitalist imperative to capture the state and influence its policies. What does change is the nature of the policies pursued. And it is precisely this dynamic—the struggle for control over state policy between competing capitalist interests—that is the object of study when one is interested in the political career of capital. In my unpublished paper, “Political Economy of the US State,” I tried to do precisely that. 

With the establishment of constitutional government, the impartial juridical guarantee of the oligarchs’ property largely removed the threat from above. The state could still impose punitive taxation, and capitalism has always mobilized to contain that threat. Ditto for threats from below (this is what the class struggle looks like in this lens). But the most important threat is usually horizontal. Why is that? Because once we have an entrenched capitalist oligarchy, the upper class can bring its extraordinary capacity for collective political mobilization to bear on the task of countering and neutralizing threats from above and below. (Braudel says, “…as if money could fail to create both social discipline and an extraordinary capacity for action.”) Therefore, capitalists’ attention and mobilization efforts are usually directed against each other. For instance, the Early American Republic was dominated by southern planters in alliance with northern mercantile interests whose fortunes were based on free-trade with mother England. The rising northern industrial interests instead wanted protection against industrial imports. It is this fight over trade policy that led to the Civil War.

The commercially progressive landlords who pioneered the market for leases in the English countryside were no longer feudal lords; they had morphed into rentiers. Unlike their forefathers who extracted surplus from the peasants directly and were personally responsible for the welfare of all those attached to the manor, the rentiers leased out their land to the highest bidder (tenant farmers who tilled the land for profit and increasingly employed propertyless peasants as wage labor). In the Marxist frame, what is important is the introduction of the market in the landlords’ relationship with the tenants. In my framework, what is more important is that the landlords came to treat their land holdings as investment capital; on which they sought the highest return.

For it was not just the market for leases where they sought to maximize their investment income. The immense wealth of rural England was funneled by the City of London into the rapidly growing commercial empire overseas. An excellent fictional illustration here is to be found in Austen’s Mansfield Park. The lord of the manor in whose care our heroine grows up, has extensive interests in the slave plantation in Antigua. Or take Downton Abbey, in which Lord Grantham’s wife’s fortune disappears with the bankruptcy of a Canadian railroad. The nexus between the banker-financiers in the City of London and the commercially progressive rentier class in the countryside is completely out of frame in the Marxist lens, but is nevertheless the single most important connecting thread of “gentlemanly capitalism” that flowered in England in the late-seventeenth, eighteenth, and nineteenth centuries (1688-1914). In the nineteenth century, they would be joined by industrialists, who would nevertheless remain inferior to the lords and the City magnates. “The great businesses of the City—private and merchant banking, insurance, broking and acceptance, the activities of the Stock Exchange—generated fortunes which were much greater than those acquired in industry before the twentieth century.”[ii]
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What I have presented above is just the domestic mechanics of a system that is in reality very far-flung. This is a maritime system. Now, a thalassocracy is obviously harder to discern than a land empire. But recognize it we must, for this goes to the heart of the debate about whether or not the United States is an empire. Well, it is an empire where it matters—where it has always mattered in the history of capitalism.

Regularized naval control of maritime routes (with naval squadrons on standby to exclude rivals, punish pirates, and protect friends) was a Mediterranean innovation. The pioneer here was Venice. By the fourteenth century, the Venetian navy controlled the highly-lucrative Levant routes. Genoa, Venice’s less geostrategically fortunate doppelganger, never managed to mount a serious navy. Nonetheless the Genoese had a few tricks up their sleeves. “For three-quarters of a century,” writes Braudel, “their handling of capital and credit” allowed the merchant-bankers of Genoa to “call the tune of European payments and transactions.” In the ‘Indian Ocean World,’ Arab, Gujarati, and South-East Asian merchant communities had largely traded free from coercion until the arrival of the Portuguese at the dawn of the sixteenth century. The Portuguese ran a straightforward protection racket: they did not have much else to play with. It was only with the arrival of the Dutch with the new century that Europeans gained control of the intra-Asian trade.

The Dutch were the most advanced players in the seventeenth century. They pioneered the stock exchange, marine insurance, and large-scale monoculture (the sugar-slave plantations in the New World, cinnamon plantations in Ceylon, and so on and so forth); they controlled the highly-lucrative trade in fine spices, and the bulk grain trade in the Baltic. They were masters of the sea, accounting for nearly half the European fleet. Their shipbuilding was so advanced that their freight rates were half as much as their rivals. Their agrarian innovations were adopted in England, as were their ship-building methods. And here is the kicker: agrarian capitalism was very much alive the Dutch countryside. For as Brenner himself concedes, “by 1500 the landed class received exclusively economic rents” and “farmers had little choice but to specialize output for exchange, for they had to buy grain in the market in order to subsist. From very early on, moreover, tenantry appears to have been widespread, further enforcing the tendency to competitive market production.” The damn Dutch were, if anything, more capitalist than the British in their heyday: they didn’t go around playing Rome; they were in it solely for the money.

Coexisting as it does with pre-capitalist social orders, capitalism does not affect them merely at the margins. (Although this can be said to be true of Venice’s activities in the Ottoman empire.) On the contrary, everyone connected to the current gets silently (or not so silently) reoriented by the ‘rationalization’ of the Weltwirschaft (“world-economy”). The core-periphery structure is not simply a matter of “purely economic” price competition either. Braudel describes the construction process of the Weltwirschaft:

At ground level and sea level so to speak, the networks of local and regional markets were built up over century after century. It was the destiny of this local economy, with its self-contained routines to be from time to time absorbed and made part of a ‘rational’ order in the interest of a dominant zone or city, until another organizing center emerged; as if the centralization and concentration of wealth and resources necessarily favored chosen sites of accumulation…The resultant pattern of domination rests upon a dialectic between a market economy developing unaided and spontaneously, and an overarching economy which seizes these humble activities from above, redirects them and holds them at its mercy.[iv]

This is the real reason why the Black Death had opposite effects in Eastern and Western Europe, as Brenner himself partly concedes:

No doubt, in this instance, the income from grain produced by serf-based agriculture and sold by export from the Baltic to the West enhanced the class power of the Eastern lords, helping them sustain their seigniorial offensive.[iii]

I can’t deny that more favorable “balance of class forces” did not play a part in the West’s fortunes. For as Brenner points out,

But the control of grain production (and thus the grain trade) secured through their successful enserfment of the peasantry was by no means assured by the mere fact of the emergence of the grain markets themselves. In the rich grain-producing areas of northwest Germany, the peasants were largely successful in gaining command of grain output in precisely the period of developing enserfment in northeast Germany—and they appear to have done so after a prolonged period of anti-landlord resistance.[iii]

I agree with Brenner that both factors were in play. His framework suggests that the “balance of class forces” was the decisive factor. Mine suggests that the division of labor between the East and the West—‘rationalization’ from the center, in this case, at the hands of the Hanseatic league, which controlled the Baltic routes before the Dutch grew up—was the more important factor. Why, in any event, was the “balance of class forces” so uniformly favorable in the West and unfavorable in the East? Brenner, in my humble opinion, is skirting close to relying on a sort of cultural determinism. Occam’s razor suggests that the more straightforward explanation—that reserfment in the East was the flip-side of decline of feudalism in the West—is superior.

The transformation of agrarian property relations may have been underway in the countryside well before the mid-seventeenth century, but England was a backwater in capitalist circles. The capitalization of the East India Company at the turn of the century, for instance, was literally one-tenth that of the VOC. There are two decisive moments in the seventeenth century that put England on the path to the top. The first was the simultaneous emergence of the Royal Navy as an “instrument of national policy” and the passage of the Navigation Act in 1651, wherein England began seriously contesting Dutch supremacy. The second, following on the heels of the three Anglo-Dutch naval and trade wars (1652-1654, 1665-1667, and 1672-1674), was the “Glorious Revolution” of 1688. I have put quotation marks because the naming reflects one of the most successful bits of propaganda in history: it was, in fact, a highly-successful sea-borne invasion by the Dutch.[v] This wasn’t simply a case of “tidy” royal patrimony with no large-scale effects on the fortunes of the English. What followed over the course of the next few decades was a massive migration of Dutch capital, Dutch talent, and Dutch techniques into England. From agricultural techniques to shipbuilding and finance, the English had much to learn from the Dutch. They eventually did get their act together and prevail in the succession struggle against France. By 1763, England had a firm grip on the money spinner. 

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i. Wood, Ellen Meiksins. “The Agrarian Origins of Capitalism.” Monthly Review, New York, 50 (1998): 14-31.

ii. Cain, Peter J., and Anthony G. Hopkins. “Gentlemanly Capitalism and British Expansion Overseas I. The Old Colonial System, 1688‐1850.” The Economic History Review 39.4 (1986): 501-525.

iii. Brenner, Robert. “The Agrarian Roots of European Capitalism.” Past and Present (1982): 16-113.

iv. Braudel, Fernand. Civilization and Capitalism, vol. 3: The Perspective of the World.

v. Jardine, Lisa. Going Dutch: How England Plundered Holland’s Glory. HarperPress, 2008.