Chapter 2 The Historical
Development of Capitalism
•
•
•
•
•
Feudalism and the Birth of Capitalism
The Emergence and Nature of Capitalism
The Industrial Revolution
Colonialism: Capitalism on a World Scale
Summary
The Importance of Historical
Processes
• The present economic landscape can only
be understood as the result of an historical
process
• Decisions to site production facilities
“yesterday” produce the spatial pattern
that is the foundation for trade and
patterns of consumption today
• We can visualize these processes at
various geographic scales
Feudalism and the Birth of
Capitalism
• From hunting & gathering to domesticated
agriculture (animals and crops)
• Slave-based empires (e.g. Roman) and
their feudal successors (ca. 5th Century)
• A form of economic and social relations
that extended in Europe to ca. 15th century
• Settlement in North America did not
succeed feudalism, but was capitalist in
character from the outset
Characteristics of Feudalism
• Tradition shaped life and work
• In Europe the church was the dominant political
and ideological institution
• Aristocratic land-owners formed the ruling class,
who extracted rents from tenant farmers (often
serfs) in low productivity agriculture
• Feudal cities – often fortified – with guilds –
markets, where universities were established
• A hierarchy of feudal towns, mostly small trading
centers, with negligible interregional trade
Feudal Regions & The
Beginnings of Trade
Agricultural innovations; bubonic plague; the European Renaissance
Characteristics of Early Capitalism
• Markets: buyers and sellers of goods & services
at agreed upon prices
• Market types: perfect competition – perfect
monopoly – oligopoly (and other types)
• The profit incentive = revenue – cost
• Dynamic behavior of buyers and sellers,
including incentives from innovation in products
and production processes
• Class relations: merchants & burghers vs. the
old aristocracy. “Unlike feudal Europe, workers
under capitalism must sell their labor power to
survive. Thus the process of commodification
extended to include the capacity to labor.”
The Emergence and Nature of
Capitalism
• Rise of trade-based city states – links to old
trade routes to the Far East and in Europe
Alternative Models of Competition
Barriers to Entry - High
One Buyer
One Seller
A Few Sellers
Limited Quantity
of Sellers
Many Sellers
Oligopsony
Monopsony
Many Buyers
Monopoly
Oligopoly
Monopolistic
Competition
Perfect
Competition
Barriers to Entry - Low
Attributes of Alternative Market
Types
Perfect Competition
Homogeneoous products
Each producer makes a
small share of output
No one seller influences
Prices
Entry to market is easy
Flow of information is
Perfect, eliminating excess
profit
Markets are fluid
Monopoly
Unique Product
One producer makes all of
the product
Prices set to maximize
profit
High Barriers to Entry
Monopolist is able to
control the market
Market is rigid
“Pure” Monopoly
Oligopoly
Similar Products
Several sellers divide the
market
Prices set through pricing
strategies
High Barriers to Entry
Oligopolists engage in
strategic behavior—
competitive or collusive
Market may be unstable,
competitive strategies to
create stability: product
differentiation,
advertising, industry
agreements
Early Capitalism, Continued
• Finance: replacing barter with money, and
institutions to handle and regulate money
• Uneven development as an inevitable outcome,
historically persistent, at scales ranging from
local to global
• Long-distance trade – fueled by transport
innovation – allowing regional specialization
based on principle of comparative advantage
• Ideological change – printing/reading, religion,
science, the Enlightenment – “a worldview that
stressed secularism, individualism, rationality,
progress, and democracy.”
Early Capitalism, Continued
• Feudal empires (e.g. Holy Roman Empire,
Figure 2.11) with multiple nation-states
• Replaced feudal monarchies with nation-states
• Nation states supporting development of
capitalism through regulations, public investment
and programs (e.g. education, defense, trade
protectionism…
• BUT: these institutions do not preclude
transnational capitalist development, evident in
this era of globalization
The Industrial Revolution
• Industrialization as a process with multiple
transformations in inputs, output, and
technologies. Driven by:
– Harnessing inanimate sources of energy
(Figure 2.12), wood-coal-petroleum & gas
– Technological innovation (Table 2.1)
– Rising Productivity (Figure 2.14)
• Spatial diffusion of the Industrial
Revolution
Spread of the Industrial Revolution
Global Diffusion of the Industrial
Revolution
Cycles of Industrialization –
Kondratiev Long Waves
The Fifth
Wave – IT
& producer
Services
Consequences of the Industrial
Revolution
• Creation of an Industrial Working Class
– Rise of organized labor
• Urbanization – industry as “city forming”
activity
• Population Effects: Malthus’ warning vs.
productivity increases, health
improvements, lowered birth rates
• Growth of Global Markets & International
Trade – transport improvement,
international finance, timing of development