Monday, May 3, 2010

Book Review: Civilization and Capitalism Vol. 2

The Structures of Everyday Life
The Wheels of Commerce
15th - 18th Century
Fernand Braudel

In this volume Braudel focuses on trade, commerce, and industry. The volume contains more theoretical concerns than does the previous volume, more than I can do justice to here. As a bare outline this volume sets out to refine the distinctions set out in the first volume, especially that between the free market and capitalism, probably with a bit more focus on the free-market since I assume the third volume will focus more on capitalism itself.

The first chapter seeks to describes the mechanisms that allowed for trade in the era. It describes the system of fairs that long distance trade originally took place in as well as markets and the functioning of the stock exchange. It also deals with smaller scale topics such as early shops and pedlars.

The second chapter describes the functioning of markets. This chapter contains many interesting theoretical points. Briefly, it contains a description of trading circuits and long distance trade and tries to separate out the market from other activity. It takes up topics such as describing how production was sharply limited by supply constraints on agriculture and how demand is confined mostly to the wealth since the rest too poor to demand much else than food. He also gets into some discussion of the market as a distinct system separate from the act of exchange and examines some other theories of the market. Overall, a fascinating chapter that would take quite a bit of time to unpack fully.

The third chapter fully gets into the discussion of Braudel's conception of capitalism and in particular how it relates to production in this era. Partly, his task it to explain why capital fails to have the revolutionary effect that it would later on, though he does mention in the 2nd chapter that manufacturing production had increased 5 fold between 1600 and 1800 showing that manufacturing was more significant in the period than many believe (181). There is almost too much of interest here to relate, he discusses the origins of the term capital, discusses how capital is invested during the time, discusses various types of investments, classifications of manufacturing, etc. Some of the bits I found most interesting were that one reason for the low returns on capital was the high ratio of circulating to fixed capital in the era, wages and other costs simply consumed much of the investment making accumulation of productive fixed capital (which would also where out faster than that in the industrial revolution) far more difficult. The real profit was available in distribution and marketing, not in production. As a result of this, the state often had to play a larger role in production to attract capital, without a state role many enterprises could simply not be maintained. This is just one of many obstacles described.

Chapter four describes the primary functioning of capital, in trade and in credit. This chapter discusses the importance of the highly profitable long distance trade, other sectors of the economy represent vastly larger amounts of total production but the concentration of the most profitable sectors of the economy in the hands of a relatively small group has significant consequences for development. Here he also describe early organization of trade and capital, such as the development of partnership agreements and eventually corporations (I wish there was more detail here, I am particularly curious about the development of limited liability, here this seems to be a development of merchants forming new agreements, but surely the state played a role in allowing limited liability to replace infinite liability, this development is unclear). Capitalist behavior is also described as frequently inhibiting the functioning of the self-regulating market, capitalists seek to change the rules of the game and establish monopoly profits, either through direct manipulation of markets, collusion, or attempted control through the state.

Chapter 5 sets all this against the social background of society, described as a "set of sets." This chapter, like the others, covers a lot as well. In particular it describes the state and how it became all pervasive during the era. I felt this aspect deserved more attention than it got. Other interesting tidbits were the proliferation of unused labor (paupers and vagrants), resistance of lower part of economy to using paper while upper part preferred paper (including an example of someone who got rich trading specie for soldier's paper currency), and social mobility during the period. What was most interesting however, was that he describes Europe as containing five separate hierarchies that all co-existed, seigniorial (roughly ties between lord and peasant), theocratic, territorial state, feudalism proper (chain of lords all linked together but cutting across various states), and lastly the towns (464-465). This division persists to some degree throughout the period and plays a key role due to the capitalist class remaining below those with political power so their virtues are not resented for their privileges, the ideology of the day conceives social tensions more as an active class against an idle class and less in the type of tensions between rich and poor. There is a lot more I could go into.

I'll sum this up as Braudel sums up his volume, with a brief overview of what Braudel sees as the three key elements in the development of capitalism. First, the need for an expanding market economy as a necessary but insufficient condition, second the development of a society that gives capitalist preconditions (such as inheritance rules that allow for large accumulations and division of society into groups with some degree of social mobility) examples are Europe and Japan, and last is the long distance trading routes that make up the world economy (or world economies as he puts it, he sees them as developing and changing over time). I should also note this is an overall favorable, if often critical, view of capitalism. He frequently equates capitalism with speculation and gambling but also ultimately shows that China has a free market economy without capitalism and this fails to develop. The excesses, while real, are a necessary part of the process that gives rise to the modern world, and given the very low level of material life shown at the beginning of the period I have little doubt that this on the whole a positive development.

I haven't decided what next week's is going to be yet. I'm going to get a start on the next volume of Braudel but I've been reading these too fast to truly absorb so will take this last one a bit slower. I also want to do something more modern, too much history lately. I'm going to breeze through (I've read papers on several aspects of comparative policy, especially economics, taxation and trade, but never actually read a proper general textbook on the subject so figure an overview is worth getting, even if it is from 1990) a Comparative Public Policy textbook I've had sitting on my shelf for a few years (it got left at an old apartment of mine) but may try to finish something shorter and less boring to review.

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