Social Scientist

Capitalism in History
Author(s): Irfan Habib
Source: Social Scientist, Vol. 23, No. 7/9 (Jul. - Sep., 1995), pp. 15-31
Published by: Social Scientist
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IRFAN HABIB*

Capitalism in History"*

Today as the twentieth century comes to close, with the collapse of

socialism in Eastern Europe and the passing away of the Soviet Union,
the belief has become widespread that capitalism is the only possible
present and future system of economic and social organisation. Even
theories of 'mixed' or 'welfare' economies, or of development under
state-guidance and protection, which had held the ground in so much
of the Third World till the other day, are regarded in influential
circles as obsolete and unacceptable. 'Globalisation', rather than
'independence', is the slogan most often issuing from statesmen's lips;
and firm revolutionaries are having to make hopefully temporary
truces with indigenous and foreign capital. There is danger, then, that
to historians too capitalism may begin to seem so much the ordinary
business of economic life that in respect to it at least, History may be
deemed to have met its end. Some of us are already tempted to turn to
the varied historical fashions now available in western intellectual
arsenals, from the marginalist to the post-modern, and to forget the
past debates about classes and exploitation.
For this reason alone, I should like to urge that this occasion of
capitalism's seemingly ultimate triumph is the most opportune to
attempt a fresh scrutiny of its historical credentials, and to ask once
again many previously asked questions, in the light of the growing
amount of evidence at our disposal and the possible benefits of
hindsight.

The
question
first must relate to the origins and attainment of
The first question must relate to the origins and attainment of
dominance by capitalism, especially in England, the first industrial
nation. Owing to Marx's listing of the successive modes of production in
his Preface to the Critique of Political Economy (1859),1 it came to be

*Centreof Advanced Study in History, Aligarh Muslim University, Aligarh.

*Revised version of Address Presented to the Paschim Banga Itihas Samsad, Calcutta,5
November1995.

SocialScientist,Vol. 23 Nos. 7-9, July-September1995

16 SOCIALSCIENTIST

widely held that capitalism had its roots inevitably in feudalism, of

which it was held to be the direct successor. This was reinforced by
Marx's own references to 'the transforrnation of the feudal mode of
production into the capitalist mode' in Capital (1867).2 There was a
further development, for which there was strictly no sanction in Marx,
namely, the tendency to extend the 'feudal mode' to cover practically
the entire agrarian regions of the old world, beginning with the
Leningrad discussions in the Soviet Union in 1931.3 This was
accompanied by an insistence that within each region all major
changes in the mode of production arose out of 'internal' factors or
contradictions-a thesis especially prominent in Maurice Dobb's major
work on the rise of capitalism.4 It could thus be stipulated that every
country that had developed peasant agriculture and some commodity-
relations (a) had already had a passage into feudalism and (b) would
have generated its own capitalism given some more time. Thus Mao
Zedong (1939) declared that precolonial China 'would of itself have
developed into a capitalist society even without the impact of foreign
capitalism'.5 R.P. Dutt (1940) speculated on the probability of the way
being prepared, on the eve of the British conquest 'in the normal course
of evolution, for the rise of [indigenous] bourgeois power' in India.6
It seems, however, that such an assumption of a normal internal
growth of capitalism out of seeds naturally germinating within pre-
capitalist or 'feudal' societies, allegedly found almost universally,
misses out the essential features of the actual genesis of capitalism:
the role of force and of the subjugation of external economies on the
world scale. Without these twin elements, capitalism simply could not
have become a dominant mode of production in England or Western
Europe. This is the basic thrust of a short but seminal chapter in
Capital, Vol.I;7 but the point needs now to be established by an
exploration of both theory and history.
In a symposium which followed Dobb's Studies in the Development
of Capitalism, a major historical problem confronted the protagonists
of the seemingly settled theory that capitalism arose out of feudalism
in Western Europe, viz., the gap between the decline of serfdom
(already fairly advanced by 1400) and the beginnings of the 'era of
capital', which could not be placed before the sixteenth century.8 There
is, however, no doubt that the gap which has to be explained is much
longer. If serfdom was already in retreat by 1400, the capitalist mode
of production did not become dominant until the English industrial
revolution of the latter half of the eighteenth century. What had
appeared from the sixteenth century onwards were enterprises where
wage-labour was employed to produce for the market, but these
'capitalist' enterprises still accounted for only a small portion of the
total production. As Dobb acknowledges, 'it seems evident that in
seventeenth-century England the domestic industry ... remained the
 CAPITALISMIN HISTORY 17

most typical form of production.9 In other words, peasant and artisanal

production, not capitalist production, was still the dominant form.
There is no sanction in Marx, or in historical facts, to classify such
non-capitalist commodity production as 'feudal', and so, by a sleight of
hand, as it were, bridge the entire gap of three and a half centuries
between c.1450 and c.1750, whereafter the industrial revolution began.
This extension of feudalism is achieved by Dobb essentially by taking
the term 'serfdom' to cover not only a peasant tied to the land and
rendering labour service or paying rent-in-kind, but also a legally free
tenant paying money-rent to the landowner. The two categories of
forms of labour-process represented are so different in nature that to
class them together does the greatest violence to any coherent
conception of a mode of production. Contrary to Dobb's claim that Marx
supposes money-rent to be feudal rent 'by manifest implication',10 Marx
states expressly that money-rent 'presupposes a considerable
development of commerce, of urban industry, of commodity production
in general.'ll One must come to grips with the reality that during the
period between the aftermath of the feudal crisis and the onset of the
industrial revolution it was the rent-receiving landowners within a
system of commodity production who formed the economically
dominant class as well as the ruling class.
It is this post-feudal system to which Marx gave the name 'Petty
Mode of Production': it was the mode out of which capitalism
originated, and by destroying which capitalism triumphed.12 Marx's
statements in respect of the nature of this mode are fairly clear-cut:
Of course this petty mode of production exists also under slavery,
serfdom and other states of dependence. But it flourishes, it lets
loose its whole energy, it attains its adequate classic form, only
where the labourer is the private owner of his own means of labour
set in motion by himself.13

Only when this stage was achieved in Western Europe by the sixteenth
century, was the road cleared for the emergence of capitalism, since
commodity production is a necessary pre-requisite for its existence.
Prosperous artisans and peasants could now grow 'into small
capitalists', by engaging hired labour. But, as Marx recognised, this
could give no more than a 'snail's pace' to capitalist development.14 In
fact, the limits of profits out of hiring more labour were soon reached:
Prosperous farmers, thereafter, moved into positions of squires, buying
up lands, so as to 'charge the rent, when custom allows, which a farm
will stand', and engaging in trade-Tawney's 'agricultural capitalism'
(but not Marx's), which Tawney sees as the bedrock of the rise of the
gentry in England in the sixteenth and seventeenth centuries.15 Others,
from amongst artisans, after extending their own domestic craft
production, would invest their larger incomes not in engaging more
hired hands under their roofs, but in 'putting-out' their funds to make
18 SOCIALSCIENTIST

contracts with rural households, that produced goods for sale on their
own. Advantage here lay in the fuller use of family labour and the
cheaper costs of domestic employment during the slack times of
agricultural seasons. This is the 'proto-industrialisation' with which
Mendel has now made us familiar.16 But Dobb himself noted as a
general phenomenon of the early seventeenth century, 'the rising
predominance of merchant-employers [i.e. merchants engaged in the
putting-out system] from the ranks of the craftsmen themselves from
among the yeomanry of the large companies'.17
In other words, left to itself the spontaneous tendency within the
Petty Mode (and comparable parallels could be cited for this from
China and India) was to intensify landlord-exploitation (through the
increasing strength of the gentry) and enlarge merchant-capital at the
expense of small producer's capital (through the Putting-out System).
Both tended to delay-as Marx explicitly argued in respect of the
putting-out system-the rise of the capitalist mode of production
properly so-called.18
Capitalism proper cannot develop unless there is a concentration of
labourers for production of goods disposed of on the market by their
employer. The first form of such concentration was the workshop
('manufactory') based on hand-labour ('manufacture' in Marx), the
advantage coming from gains out of developing the division of labour,
through skill-specialization. Adam Smith (1776) gave the classic
exposition of this;19 and F. Braudel has now given us a very stimulating
historical description of these workshops.20 But there was the obvious
limitation here in that the growth of division of labour must constrict
correspondingly the mobility of labour and so delay the creation of a
proletarian 'reserve army', so necessary for obtaining lower wage-costs
and higher profits on capital.
The second and true unit of capitalist production is the factory,
based on machinery, which received its introduction in political
economy from Ricardo (1821).21 In the factory, the old division of
labour collapses, machinery tends to depress all labour to the
denomination of the unskilled, mobility of labour begins to develop and
the mass proletariat enters history. One of Marx's major concerns in
Capital, I, is to underline the contrast between the economic basis of
the workshop and that of the factory.22 The factory, a creation of
machine-industry, became the dominant form of industrial
organisation only in the last quarter of the eighteenth century, and
that too, first of all, only in England. Its sudden emergence out of a long
period of domestic industry, with manufactories as isolated islands,
needs explanation.
Braudel is right in saying that there was no 'natural and logical
transition from the manufactory to the factory'.23 Still less was there
such a transition from proto-industrialization to machine-industry: the
opportune moment when rural entrepreneurs shifted from the
 CAPITALISMIN HISTORY 19

exploitation of family-labour to that of factory-hands was not

manifestly determined by conditions of the growth of rural industry.
The ordinary text-book attribution of the industrial revolution to a
sudden, rather fortuitous spate of mechanical inventions in post-1760
England seems equally unsatisfactory. Dobb has some excellent points
to urge against technology being an independent factor.24 The
immensity of the achievement of the European craftsman and
technological theorist from the sixteenth century onwards is beyond
question. But there is equally no doubt that almost all the basic
mechanical principles that were relied upon by the inventors of the
age of the industrial revolution had been worked out by the early years
of the eighteenth century. Newcomen's engine began working in 1712;
the secret of making coke out of coal was discovered before 1709; the
helmsman's steering wheel came into use in 1705. Indeed, it seems as if
there was a plateau in technological invention for the next fifty years
(leaving aside Kay's fly-shuttle, 1733). Why the inventions of specific
machines should suddenly come with the 1760s cannot, then, be
explained solely by impulses of imitation and improvement within the
technological sphere: they were undoubtedly linked to 'the state of
industry and of economic resources' (Dobb's words),25 from which the
impetus needed to come.
The key-word is surely 'economic resources'. Could a growth at a
'snail's pace' have either created capital large enough to acquire and
use the newly invented machinery, or provided a mass market ('home
market') for the cheaper, but non-luxury, mass-duplicated products of
the machine? To Marx it was clear that such economic resources could
not come out of the savings from the incomes of the small capitalists,
generated by the Petty Mode: it came only out of massive 'primitive' or
'primary accumulation', that is, out of wealth and resources acquired
from non-capitalist sectors and economies.26

II
There were two major pillars of primary accumulation: internal
exploitation, constituting, above all, the expropriation of the
peasantry; and external plunder, linked to global colonial dominance.
When serfdom declined, lordship in England began to be converted
into landlordism, and the manor into the lord's private estate. This
wholesale legal annexation of the serfs' land into the demesne was the
other side of the coin of the conversion of labour services into money
rent. The divestiture of the lord of all major military and judicial
functions and obligations completed his transformation into a private
land-owner, whose basic instrument of exploitation was rent. Thus his
position was different from that of his counterpart in France, who
continued with his fief to launch a 'seigneurial reaction' in the
seventeenth and eighteenth centuries, imposing various dues on the
20 SOCIALSCIENTIST

peasants, without claiming to be the owner of the peasants' land

inherited from their serf forebears.27 The English peasant learnt what
he had lost when under the Tudor enclosures large areas of arable were
converted into sheep walks by the landowners. Under the pressure of
the gentry, custom fell away, and rent-increases left the inflation of
the price revolution well behind in 1540-1640 and again in the
eighteenth-century.28 The drive for rent led to the eighteenth century
enclosures, since large landowners found that capitalist farmers, using
the methods of new husbandry, could pay them higher rents. The result
was that by the early years of the nineteenth century, the bulk of the
English peasants had been evicted through private enclosures (where
the estates of the large landowners were fairly well consolidated) as
well as through parliamentary enclosures (where in areas of mixed
properties, the landowners needed acts of parliament to consolidate
estates and terminate existing tenancies). It is characteristic of the
English historians' acceptance of the lords' original usurpations of
peasant rights that to many of them the private enclosures seem quite
unobjectionable; and of parliamentary enclosures too there has been a
growing amount of scholarly defence with much criticism of the
Hammonds' classic work.29 The major concern seems to be only with the
gratifying survival of the small number of 'owner-occupants', who
cultivated merely 10-12 per cent of the land in the late nineteenth
century. To such historiography the practically complete elimination
of the English peasantry, an event unique in human history, seems to be
a perfectly natural case of tenants having necessarily to bow out at the
will of the owners.
Where the drive for rent could thus bring about such an awesome
social revolution, one can visualise the huge extent of the increase in
the revenues of the English landlord class in the period preceding and
accompanying the industrial revolution. This increase in rent-revenues
kept pace with the creation of a rural proletariat, which ultimately
was to become a reserve force for British town industry. The two
processes were complementary to each other, and equally momentous.30
The contribution of landlords' accumulation to industrial capital is
often underestimated by authors like Ashton, who believe that the
manufacturers largely provided the capital themselves.31 But one must
remember that, according to Pollock's estimate, the annual English
investment in stocks (? 2 million) equalled that in machinery c.1790-
93; and a large part of circulating capital (stocks plus wages) came in
short-term loans from banks and solicitors who had large funds from
rent incomes deposited with them. Moreover, nearly a third of the
stock invested in canals (? 0.8 million annually) came from the
landowners.32 All this represented a massive conversion of primary
accumulation into industrial capital, in the crucial phase of the
industrial revolution.
 CAPITALISMIN HISTORY 21

British historians-and this is equally true of Dobb and

participants of the Transition discussion of the early 1950s-have
tended to pay little attention to what Marx regarded as the second
major source of primary accumulation, namely, colonial plunder.33 Such
indifference is unfortunate; for it is not possible to imagine how a
credible history of capitalism can be reconstructed without
comprehending colonialism.
Three major components of colonial exploitation from the sixteenth
to the eighteenth century must be distinguished: the Spanish mining of
silver with forced labour in the Americas; the forcible transfer of
millions of Africans as slaves across the Atlantic; and the levying of
tribute on Asian shipping and land.34 England came in time to be the
major beneficiary from all these three practically simultaneous
processes of forcible subjugation and destruction of non-European
economies.
The latest estimate of the population of central Mexico at the time
of the Spanish conquest (1518) puts it at 25 million; by the 1620 it had
been reduced to just three per cent of that figure-a nearly total
annihilation.35 Not only Old World epidemics, but the forced
requisition of labour for the silver mines, was responsible for such
massive depopulation of Mexico and Peru. But Spain (and Western
Europe) practically got its silver free. Between 1500 and 1650 nearly
112.5 metric tons of silver were annually transported into Spain
through official channels. E.J. Hamilton, who gave this estimate,
speculated about its influence on prices in Europe-the so-called price
revolution-and the redistributive consequences of such inflation,
benefiting mainly the employers and the merchants, at the cost of
wage-labourers and custom-bound rentiers. This, he thought, generated
capital in Western Europe that could ultimately ignite the industrial
revolution.36 It must be remembered that the crucial link here is not
between the rise of capitalism and some incidental monetary process,
but between it and the reckless exploitation of the Amerindian
peoples, who because of deficiencies in their instruments of war, were
absolutely helpless victims of their rapacious conquerors.
There is yet another aspect of silver influx which Hamilton and his
critics do not consider. As silver stocks rose in Western Europe, and
silver prices in terms of gold plummeted year after year, Western
Europe gained a continuous advantage over the rest of the world in the
transactions of trade. By 1600 Western Europe exported possibly 100
tons of silver annually; during the seventeenth, the annual average
rose to 150-160 tons.37 There was a wholesale diversion of Asian
exports of manufactures, especially textiles, and drugs and spices from
interregional traditional commerce to Western Europe in return for
bullion. The new trade was largely controlled by European merchant-
capital, spearheaded by the Dutch and English East India Companies;
22 SOCIALSCIENTIST

and its continuous expansion from silver exports greatly enlarged the
size of European commercial capital.
As the Amerindian population declined so steeply, the need arose of
alternative source of labour for Brazilian, Caribbean and American
(later U.S.) plantations. This was supplied by the enslavement and
transport over the Atlantic of Africans from all along the Atlantic
African seaboard, as well as Mozambique. One cannot understand the
magnitude of this phenomenon unless one grasps the aggregate figures.
Curtin estimated a total of 8 to 11 million transported between 1440s
and 1860s. But subsequent revisions (Brazil, for example, received 5
million slaves, not 2.5 million) suggest a total of at least 10 million,
with a further minimum of one million who died aboard ship. The
main century for slave-trade was the eighteenth when over 6 million
are estimated to have been sent across.38 This was undoubtedly the
greatest forced migration in terms of person-miles ever achieved in
history. England, with the biggest fleet by the eighteenth century was
the principal participant in the slave-trade.
The slaves were put to work on the sugar, tobacco, cotton, coffee and
indigo plantations on the tropical Atlantic seaboard and islands of the
New World, in which England by the eighteenth century had carved
out a considerable colonial empire. From the West Indies alone Britain
gained free annual imports of ? 3.9 million in.1785-94 and ? 4.8 million
in 1795-1804.39 Eric Williams is undoubtedly right in perceiving a
connection between this simple fact and the rise of the capitalist
textile industry in Lancashire, with Liverpool as the -main slave-
shipping port.40
The English conquest of India dating from Plassey (1757) represented
the high point of a process of extraction of tribute, imposecq initially by
the Portuguese on Asian shipping and by the Dutch, on the peasants of
Java. But the annexation of the entire revenues of conquered territories
as gross profits of the English East India Company dwarfed, in mere
size, the earlier enterprises. The notorious Drain of Wealth began.
According to a detailed official statement the net excess of exports over
imports, representing the Indian tribute to England, amounted in the
1780s to an annual average of over ? 4.93 million.41
The tribute was, in fact, remitted mainly through exports of Indian
textiles, which, in turn, were used in part to buy African slaves, so that
the spurt in African slave trade during this period was considerably
fuelled by the attainment of English dominance over India.
There is little dispute that England annually obtained large
revenues out of external sources: About the closing years of the
eighteenth century, William Pitt put it at ? 17 million per annum. But
there has been an air of inexplicable inconclusiveness in British
scholarship when one comes to the links of the foreign income with the
financing of the industrial revolution. Deane and Cole suspended
judgement ('it is impossible to say, without detailed research').42
 CAPITALISM
IN HISTORY 23

Among Marxist historians Dobb had nothing to say about it in his

Studies in the Development of Capitalism and Sweezy, in fact,
introduces a note of doubt when he says that 'Marx says very little
about the actual methods by which these [external] accumulations
found their way into industry'.43 Dobb had, however, claimed in his
Studies that land-owners who had usurped lands by way of an earlier
process of primary accumulation, now sold their landed assets to invest
in industry.44 When taxed by Sweezy to identify the class which
would buy it from them,45 Dobb, almost without design, stumbled on to
the role of colonial plunder:
It seems an hypothesis worthy of investigation that in the
eighteenth century there was a great deal of selling of bonds and
real estates to such persons as retired East Indian 'nabobs' by men
who, then or subsequently, used the proceeds to invest in the
expanding industry and commerce of the time, so that the wealth
acquired from colonial loot fertilized the industrial revolution.46
In so far as colonial tribute comprised wage-goods (tea, tobacco, rum,
calico) and raw-materials (silk, indigo), largely obtained 'free' at the
level of national acounts, it enlarged industrial capital, by simply
reducing costs. It is, therefore, difficult to understand why one should
pore over 'the records of private companies and public institutions' to
determine whether English capitalism obtained any sustenance from
the massive colonial exploitation around the globe.47
The history of primary accumulation thus establishes beyond any
doubt that capitalism could not have arisen in England without (a)
destroying its peasantry, and (b) subjugating and exploiting external
economies all over the world. The arrival of capitalism was not a
natural internal process: Subjugation of other economies was crucial to
the formation of industrial capital within it. In other words,
colonialism, in its harshest forms, was not a mere attendant process to
the rise of capitalism, it was one of its basic, inescapable premises. The
'snail's pace' of the growth of capitalism within the petty mode could,
at last, now be changed into rapid growth 'hot-house fashion', showing
that force, the basis alike of peasant-eviction and of colonialism, 'is
itself an economic power'.48

III
If colonialism was one of the necessary pre-conditions of capitalism,
imperialism was an equally necessary element of capitalism once the
latter had developed. One unfortunate lacuna in much Marxist writing
of this century has been caused by the ignoring of this essential fact,
and the treatment of imperialism as the development only of a
particular, late phase of capitalism. Much of this was because of the
influence exercised by Hobson's book on Imperialism (1902), written
24 SOCIALSCIENTIST

from a Free-Trade Liberal's point of view.49 Rosa Luxemburg (1912)

would define imperialism as 'the political expression of the
accumulation of capital in its competitive struggle for what still
remains open of the non-capitalist environment'.50 To see imperialism
as linked to capitalist accumulation generally was undoubtedly
insightful, but then to restrict imperialism to a period when 'non-
capitalist' territory in the world had been reduced to an 'insignificant'
size was to divest it of much historical significance. Lenin introduced a
different and more basic qualification. When writing in 1916, he
defined imperialism as a product of the monopoly phase of capitalism.
He even went on to say:
In the most flourishing period of free competition in Great
Britain, i.e. between 1840 and 1860, the leading British bourgeois
politicians were opposed to colonial policy.51
Following this, Dobb reduced imperialism to 'a preoccupation with
privileged spheres of foreign trade', a feature becoming marked only in
the last two decades of the nineteenth century. That there could be no
inherent imperialism in the era of Free Trade was implied by Dobb's
aside that such pre-occupation 'recalled the Mercantilism of earlier
centuries'.52
Such a perception of imperialism seems to be far too narrow in the
light of the facts of history. In capitalism, the tendency towards
perfect competition is accompanied by a tendency of the average rate of
profit to fall, as Ricardo discovered in 1817.53 The tendency could be
counteracted through certain factors, among which Marx put the
expansion of foreign trade with less advanced countries, where a
'surplus-profit' stands to be gained, comparable to profit obtained by a
manufacturer employing a new invention before his competitors can do
so.54 Clearly, for foreign commerce to produce such a surplus-profit, it
would be necessary for the more advanced country to enforce Free Trade.
Secondly, there would be higher profits (than the average rate in the
metropolitan country) to be gained from capital invested in colonies,
from 'the use of slaves, coolies, etc.'55 This would mean maintaining
and extending the inherited pre-colonial framework. Indeed, even in
the case of foreign trade, say of Britain, it seemed that countries under
its total colonial control, like India, offered less resistance to its wares
than a semi-independent country like China, despite the formal trade
barriers having been forcibly removed, since in the former the British
had been able to introduce commercialization of agriculture through
their control of the revenue system.56 It was thus also necessary to
impose effective control over territory, if 'surplus-profits'. were to be
earned from free trade by Britain.
Given this understanding of the inner drive of pre-monopoly
capitalism, it is not surprising that Marx did not allow himself to be
deluded by the pacifist and anti-colonial pretensions of the Free
 CAPITALISMIN HISTORY 25

Traders. In respect of India, for example, he marked on the silence of

'all parties in England' over the conquest of India, including 'those
which had resolved to become the loudest in their peace-cant, after
the arrondissement of the one Indian Empire should have been
completed. Firstly, of course, they had to get it in order to subject it to
their sharp philanthropy'.57 He saw the suppression of the Indian
Rebellion of 1857 as 'the "glorious" reconquest of India' carried out 'for
securing the monopoly of the Indian market to the Manchester free-
traders'.58
Marx, therefore, saw the connection between Empire and Free Trade
long before J. Gallagher and R. Robinson published in 1953, their
discovery of 'the Imperialism of Free Trade'.59 Gallagher and Robinson
justly pointed out that it was in the very period of the 1840s when
English statesmen were supposed to be pursuing peaceful, free-trade
policies, that the British Empire forcibly annexed vast populous areas
in and around India and other parts of Asia and Africa; and this
aggressive policy continued into the 1850s and later.60 By and large, in
the discussion that has ensued, the Gallagher and Robinson thesis has
stood its ground well, the criticisms being focused on whether
individual policy-framers or thinkers were sincere or consistent
devotees of laissez-faire or not, rather than on the firm economic and
political facts of the postulated phenomenon.61
One singular fact about the imperialism of Free Trade is that there
was only one power pursuing it: Great Britain. In this sense, it was a
transitional imperialism, just as Britain was only transitionally the
sole industrial power. It was the most advanced country industrially
until the 1870s, and therefore until then all free trade was to its
obvious benefit and other countries' disadvantage. If it could not
enforce free trade on countries like Germany, France and USA, which
adopted protectionist policies, it could yet impose its authority over
weaker nations, covering them under a formal and 'informal' Empire,
i.e. zones of direct administration and spheres of influence, and so
ensure there a total unrestrained opening to its commerce. The Empire
on which the sun never set was thus a means for Britain imposing its
monopoly of free trade on a large part of the world.
It is interesting to speculate on the view of imperialism that would
have been developed by its Marxist critics, if they had started with
Marx, and not with Hobson.62 If capitalism in search of super-profits
needed control of trade (even if for free-trade purposes) as well as full-
scale colonies, then it had to pursue imperialism, whether it was in its
purely competitive or in its monopoly phase. Rosa Luxemburg's theory
that surplus-value itself could be realised only through exchange
between capitalist and non-capitalist economies should even more
have made imperialism necessary for capitalism, whatever its
phase.63 In other words, whether finance capital and monopoly arose
or not, imperialism would have continued to evolve from its free-trade
26 SOCIALSCIENTIST

stage. Now that there were more than one industrial power, after the
1870s, Britain could not have maintained its earlier high returns from
investments in its Empire,64 and free-trade would have necessarily to
be subverted by protectionism enforced by imperialist powers, including
Britian, in order to retain secure markets in their respective colonies
and spheres of influence; and there would then necessarily have been
inter-imperialist rivalries and conflicts, accentuated by crises like the
Great Depression that spanned the period from the mid-1870s to early
1890s.
Accepting the location of the source of imperialism in capitalism
per se would make the Leninist theory of imperialism far less
vulnerable to criticisms over its seemingly excessive emphasis on
export of capital to colonial possessions.65 The British-Indian
relationship down to 1914, in which such investment, outside the
railways, was of little significance, and the tribute in any case far
outbalanced the capital inflow from Britian, appears to fit far better
the pre-monopoly pattern of imperialism, as outlined above, than a
purely capital-export imperialism.66
What, perhaps, should be stressed is that the imperialism
generated by industrial capitalism, and now pursued by competing
capitalist powers, was greatly intensified by monopoly. Monopoly was
implied in Marx's description of the 'centralising' tendency in
capitalist accumulation: competition went on reducing the number of
capitalists in each branch of industry; they were becoming ever larger
and ever fewer.67 Monopoly once established would tend to restrict
production within the monopolised market, since to obtain maximum
profits, production would not be extended to the point where marginal
costs equalled price, but only till the marginal costs equalled marginal
revenue. At the same time, competition in the non-monopolised
markets would grow more intense; and so it would be of advantage to
each firm, and for firms of each capitalist nation, to enlarge the area
where their monopoly could be established through protection: Hence
a reinforced drive to imperialism. On this argument,68 one could frame
a picture of imperialism, which is not in contrast to the imperialism of
the pre-monopoly phase, but constitutes its continuation and
intensification.
There were, however, further features too: First of all, 'Finance
Capital' a la Hilferding (1910). The root source of finance capital was
the growth of banks, which now sought to intertwine with, and
dominate over, industrial capital. The strength of banking capital was
due to the generalization of banking and its practical unification in
most advanced capitalist countries. Such unification (with cheque
systems and' falling cash-deposit ratios) enhanced the capacity of
banks to 'create' money, or, what is the same thing, increase its
velocity by creating credit. What the banks did by this means was to
bring into play a new source of capital accumulation, in addition to the
 CAPITALISMIN HISTORY 27

funds produced directly by realization of surplus-values. This had a

redistributive effect, since the capital formed was paid for by people
in general through a fall in the real value of their money-holdings.
The net result was a far speedier enlargement of capital than if the
surplus-value realised had been the only source of capital. (This
particular process of accumulation does not seem to have received
adequate treatment among Marxists, down to Dobb). One can infer two
consequences from such rapid enlargement of capital. Not only would
production be on a larger scale through larger single units of
investment, but the heavier investment needed for Department I
(capital goods) could be made on an increasing scale. This would speed
up monopoly, but also offset the monopolist's resistance to
technological change.
The other result would be a mounting export of surplus-capital; and
this could explain the growing importance of capital exports and
repatriated incomes in England, France, Germany and USA before
World War I. Capital would be exported generally to friendly
capitalist countries and to one's own colonies.69 It would be inherent in
such investment to have a political protection built around it, against
competitors looking for similar investment in the same territory. Thus
a still greater accentuation of inter-imperialist divisions and
coalitions would arise.
Lenin rightly took Kautsky to task for considering the inter-
imperialist struggles to be over agrarian or less industrialized colonies
only.70 The individual imperialist powers now wanted to forcibly
eliminate or weaken their rivals, annex industrialized territories to
strengthen themselves, as well as seek redivisions of the colonies
among the so-called 'have' and 'have-not' powers. World Wars I and
II followed from this struggle between two opposing coalitions of
imperialist powers. In World War II, an additional dimension was lent
by the attempt to eliminate the Soviet Union, the socialist state (the
logic behind Munich, 1938, and Hitler's attack of June 1941). These
wars, with their unprecedented national bitterness, ferocity and large-
scale massacres were not merely the products of individual
megalomania, but of the inexorable drive of capitalist imperialism
which created the space for such megalomaniacs.
All the economic forces that generated imperialism in the past are
still with us. The long resistance offered by the socialist countries and
the post-World War-II upsurge of national movements undoubtedly
modified the forms and methods of imperialism, modifications that
have to be constantly studied. Britain and France, exhausted by the
two world wars, have retired from the first line of imperialist
powers.71 The United States has come to establish an 'informal' empire
over much of the world, and occupies a position recalling that of
Britain as the unchallenged imperial power from 1815 to the 1870s. But
the essential elements of inter-imperialist competition and instability
28 SOCIALSCIENTIST

remain, as western European and East Asian capitalist economies forge

ahead. Whether the picture would be still further altered owing to
peoples' rejection of the US monopoly of war weaponry, and of her
economic dominance, and by a recovery by the forces of socialism, is for
the future to show.

NOTESAND REFERENCES

1. '.. . the Asiatic, the ancient, the feudal and the moder bourgeois modes of
production' (A Contributionto the Critiqueof Political Economy,tr. N.I. Stoke,
Bharati Library, Calcutta, n.d., p.13. The translation reads 'methods' for
'modes').
2. Capital,I Moore-Aveling tr., ed. Dona Torr, London, 1938 (facsimile ed. of the
originalSwan Sonnenscheined., London,1887),p.776. Cf. 'transitionfrom feudal
to capitalist mode of production'in Capital,III, Foreign Languages Publishing
House,Moscow,1959,p.327.
3. Cf. Karl A. Wittfogel, Oriental Despotism-a ComparativeStudy in Total
Power,New Haven, 1957,pp.402-4.
4. Studies in the Developmentof Capitalism,London, 1946. Dobb defended his
position, though making a few concessions, in response to Paul Sweezy's
criticisms in the symposium, The Transition from Feudalism to Capitalism
[henceforthreferredto as Transition].Fore Publications,London, 1954,pp.23-25.
In the same discussion H.K. Takahashitoo insisted on seeing all basic change in
'a given structureas the self-movementof its productiveforces'(ibid., p.39).
A brief protest against this tendency on the part of 'bourgeois economists' and
'even Marxists'is recorded in Paul Baranand Paul Sweezy, MonopolyCapital,
Penguin Books, Harmondsworth, 1966, p.178. They aver that capitalism has
always been an 'internationalsystem . . with one or more leading metropolises
at the top, completely dependent colonies at the bottom'.Unluckily, the point is
not furtherdeveloped.
5. SelectedWorksof Mao Tse-tung,II, Foreign LanguagesPress, Peking, 1967, p.309.
6. IndiaToday,People'sPub. House, Bombay,1947,p.85.
7. Capital, I, pp.774-86.
8. Transition,pp.14-17 (Sweezy), 25-27 (Dobb), 43-47 (Takahashi),56-57 (Dobb).
9. Studies in the Developmentof Capitalism,pp.142-3. Dobb was aware of J. Nef's
work (five indexed references); Nef speaks of the growth of 'large-scale
industry' in England, 1540-1640[EconomicHistoryReview,V (1934),reprintedin
E.M.CarusWilson (ed.), Essaysin EconomicHistory,I, London, 1954, pp.108-24].
But the argument for the overall dominance of domestic industry during the
period before 1750 has received fresh support from recent work on 'Proto-
Industrialization'(see below).
10. Transition,p.26.
11. Capital, III, p.778.
12. Chapter on 'Historical Tendency of Capitalist Accumulation', Capital, I,
pp.786-90.
13. Capital,I, p.787. We have to bear in mind this statement when we turn to the
footnote in ibid., p.325, from which Takahashi (Transition, p.42), citing the
Kerr ed. of Capital, I, p.367 ?., quotes only the observation that 'peasant
agricultureon a small scale, and the carryingon of independent handicrafts...
form the basis of the feudal mode of production', forgetting the additional
remarks that they were also 'the economic foundation of the classical
communities'and 'continueside by side with the capitalistmode'.
 CAPITALISMIN HISTORY 29

14. Capital,I, p.774. Here is a characteristiccontrast between Marx and Dobb, for
the latter (Transition,p.27) insists on 'the outstanding role played at the dawn
of capitalism by the capitalists who had been spawned by the petty mode of
production'.
15. R.H. Tawney, 'Rise of the Gentry', Economic History Review, XI (1941), 1,
reprintedin E.M. Carus-Wilson.op.cit.,pp.153-206,esp. pp.186-7.
16. Franklin F. Mendels, 'Proto-industrialization: the First Phase of the
IndustrializationProcess',Journalof EconomicHistory,XXXII(1972),pp.241- 61.
17. Studies,& c., p. 134. This can hardly be an example of 'the revolutionaryway' of
the genesis of 'the industrial capitalist' of which Marx speaks in Capital, III,
p.329, where the producer himself has to become 'merchantand capitalist',that
is, one, who, while hiring labour for production, merchandizes the products of
that labour. This excludes the putting-out system.
18. Capital, III, p.331. See also ibid., p.322: 'The independent development of
merchant's capital, therefore, stands in inverse proportion to the general
economicdevelopmentof society'.
19. An Inquiry into the Nature and Causes of the Wealthof Nations, Dent & Co.,
London,1910,I,pp.4-11.
20. The Wheelsof Commerce,Fontana,London, 1985, pp.329-44.
21. David Ricardo, The Principlesof Political Economyand Taxation,Dent & Co.,
London, 1911, pp.263-71 (being Chapter XXXI,'On Machinery',inserted in the
3rd ed. of 1821).
22. Capital, I, pp.311-474.
23. Braudel, Wheelsof Commerce, p.302. But he is in error in attributinga contrary
view to Marx.
24. Studies,& c., pp.268-71.
25. Ibid., p.271.
26. For Marx's basic definition of such accumulation, see Capital,I, 736. Cf. Irfan
Habib, Essays in Indian History-Towards a Marxist Perception,Tulika, New
Delhi, 1995, pp.272-3.
27. For this major distinction, see Marc Bloch's perceptive remarks in FrenchRural
History-an Essay in its basiccharacteristics,London, 1966, pp.126ff.
28. Eric Kerridge,'Movementof Rent, 1540-1640'.EconomicHistoryReview,2nd ser.
VI (1953), 1, reprinted, E.M. Carus-Wilson(ed.), Essays in EconomicHistory,II,
London, 1966, pp.208-26;and R.A.C. Parker,Coke of Norfolk and the Agrarian
Revolution', EconomicHistory Review, 2nd ser., VIII (1955), 2, reprinted in
Carus-Wilson,op.cit., p.329.
29. J.L.and BarbaraHammond, The VillageLabourer,1760-1832,London, 1919, has
been strongly criticized, for example, by G.E. Mingay, Enclosureand the Small
Farmerin the Age of the Industrial Revolution, London, 1961. To Marx the
expropriationof peasant land by private eviction was no more historically legal
than the eviction sanctified by parliamentary acts (Capital, I, pp.740-757, for
the entire process).
30. Dobb has much on Tudorand Stuartenclosures,but his brief remarks,amounting
to little more than an aside, on the historically more overwhelming 18th-
century enclosures (Studies,& c., p.239) are unsatisfying. Moreover, he tends to
see the enclosuresmore as a source of creationof the proletariatthan as a source
of accumulationof resources,while Marxkeeps both aspects equally in mind.
31. T.S. Ashton, The IndustrialRevolution,1760-1831,New York, 1964, pp.66-68.
32. See for the data here cited, Francois Crouzet (ed.), Capital Formationand the
IndustrialRevolution,London, 1972, pp.24, 56; B.L.Anderson in ibid, pp.223-55;
and T.S. Ashton. An EconomicHistory: the EighteenthCentury,London, 1955,
pp.178-88.
33. Capital, I, p.775.
30 SOCIALSCIENTIST

34. Cf. Marx: 'The discovery of gold and silver in America, the extirpation,
enslavement and entombment in mines of the aboriginal population, the
beginningof the conquestand looting of the EastIndies,the turningof Africainto
a warren for the commercialhunting of black skins, signalised the rosy dawn of
the era of capitalist production. These idyllic proceedings are the chief
momenta of primitive accumulation'(Capital,I, p.775).
35. ShereborneF. Cook and Woodrow Borah, Essaysin PopulationHistory:Mexico
and California,Berkeley, 1979, III, pp.132, 168-76.
36. Eric J. Hamilton, 'AmericanTreasureand the Rise of Capitalism', Economica,
November 1929. Cf. P. Vilar, A History of Gold and Money, London, 1976,
pp.103-93.
37. See the various estimates by Ward Barnettin James D. Tracy, ed. The Rise of
MerchantEmpires,& c. 1350-1750,Cambridge, 1990, p.251; Geoffrey Parkerin
Carlo M. Cipolla, ed., The FontanaEconomicHistoryof Europe,Glasgow, 1974,
II, p.52; P. Vilar, p.101; Artur Attman, cited by Dennis 0. Flynn in James D.
Tracy, ed., The Political Economy of Merchant Empires, & c., 1350-1750,
Cambridge, 1991, p.331; S. Moosvi, Jour.Eco. Soc. Hist. of the Orient,XXVIII,
pp.47-94.
38. Philip Curtin, TheAtlanticSlaveTrade-A Census,Madison, 1976. See also Eric
R. Wolf, Europe and the People without History, Berkeley, 1982, pp.195-6;
HerbertS. Klein in lracy, ed., TheRise of MerchantEmpires,& c., p.288; Stuart
B. Schwartz in IndianHistoricalReview,XV (1988- 89), pp.23-24. By 1750 about
one-tenth of those transportedstill died on the voyage (Klein,op.cit.,p.304).
39. Cf. Sayera I. Habib, Proceedingsof the IndianHistory Congress,36th (Aligarh)
session, Calcutta, 1976, p.xxiii.
40. Capitalismand Slavery,Chapel Hill, 1944-naturally, a much maligned book
(Cf. Crouzet, CapitalFormationin the IndustrialRevolution,pp.7-8).
41. K.N. Chaudhuri in Dharma Kumar (ed.), CambridgeEconomicIHistoryof India,
Cambridge,1983, II, p.817.
42. Phyllis Deane and W.A. Cole, BritishEconomicGrowth,1688-1959, Cambridge,
1962,pp.34-35.
43. Transition,p.19.
44. Studies,& c., p.183.
45. Transition,p.20.
46. Ibid., p.29.
47. Deane and Cole, p.35.
48. Cf. Capital,I, p.776.
49. J.A. Hobson, Imperialism-aStudy,3rd. ed., London,1988.
50. TheAccumulationof Capital,Eng. tr. by A. Schwarzchild,London, 1951, p.446.
51. Imperialism,the Highest Stage of Capitalism,Eng. tr., Progress Publishers,
Moscow, 1988, p.74 (italics by Lenin). Lenin also held 'the capitalist colonial
policy of previous stages of capitalism' to be essentially different from
Imperialism (p.78).
52. Studies,& c., p.311.
53. Ricardo, Political Economyand Taxation,p.71: 'The natural tendency of profits
then is to fall'.
54. Capital, III, pp.232-3. In Theoriesof Surplus Value, Progress Publishers,
Moscow, 1971, pp.105- 6, Marx invokes a comparison with the relationship
'existing between skilled, complex labour and unskilled, simple labour within a
country'.In [free]tradeunder such circumstances,'therichercountryexploits the
poorer one, even where the latter gains by the exchange'.
55. Capital, III, p.333.
56. Marx, Art. in New YorkDaily Tribune[NYDT], 3 December 1859 (Marx and
Engels, CollectedWorks,Moscow, 1980, vol.16, p.539).
 CAPITALISM IN HISTORY 31

57. Art. in NYDT, 11 July 1853: Marx and Engels, On Colonialism, Progress
Publishers, Moscow, 1968, p.49.
58. Art. in NYDT, 30 April 1859: Marx and Engels, Collected Works,vol.16, p.286.
59. Art. of this title in Economic History Review, 2nd ser., VI(1), reprinted in A.G.L.
Shaw (ed.) Great Britain and the Colonies, London, 1970, pp.142-63.
60. Shaw (ed.), op.cit., pp.144-5.
61. See for a summing-up of this discussion, Peter Harnetty, Imperialism and Free
Trade: Lanscashire and India in the Mid-Nineteenth Century, Manchester, 1972,
pp.2-6.
62. To be fair to them, Marx's articles in the NYDT do not seen to have been known to
either Rosa Luxemburg or Lenin.
How innately imbedded imperialism is within capitalism is shown by R.W.
Van Alstyne, who (quoted by Baran and Sweezy, Monopoly Capital, p.181 n.)
says: 'The concept of an American empire and the main outlines of its future
growth were complete by 1800'. The rise of monopoly was then many decades
away.
63. I resist the temptation here to discuss Luxemburg's important thesis. See,
however, Sayera I. Habib, 'Rosa Luxemburg's Contribution to the Marxist
Theory of Imperialism', Teaching Politics, Delhi, XIII (3-4), 1989, pp.21-29.
64. See the data in L.E. Davis and R.A. Huttenback, Mammon and the Pursuit of
Empire, obidged ed., Cambridge, 1988, pp.83-87.
65. Cf. D.K. Fieldhouse, Economicsand Empire, 1830- 1914, London, 1984, pp.53-62. A
recent long attack on foreign investment as the main lever of Imperialism is in
L.E. Davis and R.A. Huttenback, Mammon and the Pursuit of Empire, pp.35-39.
66. In India, in fact, much British-owned capital in the latter half of the nineteenth
century and later was indigenously generated (See Amiya Bagchi, Private
Investment in India, Cambridge, 1972, pp.159, 165, 168; and Irfan Habib, Essays
in Indian History, pp.290-93).
As for the Tribute, L.A. Davis and R.A. Huttenback who in their Mammon and
the Pursuit of Imperialism, are concerned mainly with the period 1860-1914, and
lose no opportunity of sneering at the 'rhetoric' and 'tale'of the critics of
Imperialism, have appropriately enough never heard of Dadabhoy Naoroji's
data nor even of S.B. Saul's estimate of India's annual unfavourable balance of
payments with Britain (? 25 million in 1880). They can therefore confidently
assure the reader that 'in summation, Great Britain provided both visible and
invisible subsidies to the Empire' (Mammon, & C., p.161). Ignorance is bliss!
67. Capital, I, pp.788-9.
68. Which may be contrasted with Hilferding's argument as to why monopoly leads
to (intensified) Imperialism. See the summary of his views in Fieldhouse,
Economics and Empire, pp.42-43. I regret I have not had access to Hilferding's
original work.
69. See the instructive tables of territories of foreign investments of Britain, France,
Germany and US, 1914, in Fieldhouse, Economics and Empire, pp. 55-59.
70. Imperialism, the Highest Stage of Capitalism, pp.86-7.
71. On Britain in its imperialist decline, see Michael Barratt Brown, After
Imperialism, 2nd. ed., London, 1970.