William J. Blake: An American Looks at Karl Marx
The capitalist system, as studied by Marx, is a European product. It was an outgrowth, indirectly, of the “feudal” system, as modified by the free towns, with guilds and traders, and later, still more highly by workshops and large mercantile and finance companies.
In no other continent did the economic development transcend the merchant and artisan class, although in 1500 the productive capacities of the antique and polished societies of India and China may have exceeded that of the best parts of Europe, and certainly they were more populous.
The Arabian Nights testify to a society of keen traders and adventurers, saturated with commercial traditions. India developed village communities, largely self-contained, with an extraordinarily high level of workmanship both in weaving and in beaten metals. The skilled horticulture of the Chinese, as well as their interesting discoveries of print blocks, gunpowder, ingenious machines, rudimentary chemical devices, their silks, embroideries, and potteries, testify to a high material culture. The same was true of the workmen of Samarkand, the carpet-weavers of Persia, etc.
The intellectual level was distinctly as high as, if not higher than, that of medieval Europe. The poetry of the Chinese and Persians, their administrative organizations, as shown by the unification of Chinese culture and the inauguration of the scholarly Mandarin system, the enlightened early Mogul administration in India and the military talents of Turks, as well as the scientific and deductive curiosity of the Arabians, gave little reason to think that the primacy of culture, wealth, and power would not rest forever in Asia.
Even in America, the Spanish conquerors found to their amazement, in Mexico, in the Maya districts of Central America (far higher than the Aztec), and above all in the masonry and government of Peru, a state of society to which they were not greatly superior in material accomplishments, if the superiority is to be allowed at all.
Yet, despite this, none of these civilizations were to develop capitalism except the Europeans (later, through forcible intervention, the Europeans conferred this boon on them). The capitalist system is a specific product of Europe and of colonies peopled by Europeans.
The technical origin of the capitalist system was dependent on a prior accumulation of capital. Without it, there would have been no such complex development. How did that primitive accumulation come about?
Primitive Accumulation
At the end of the Middle Ages, Europe, though far richer than during the so-called Dark Ages (before 1100), was still both thinly peopled and, outside of Northern Italy and Flanders, almost wholly rural. The feudal relations prohibited, or rather obstructed, any gain in wealth. So long as goods were produced on the manor, paid to the lord in kind, and he in turn provided the king with men-at-arms rather than with money, production was fundamentally on a manorial basis. The towns, with their merchants and usurers, had begun to develop trades, markets, money. From them, kings who had to obtain revenue over and above personal homage, received goods and coins and, in return, granted charters and exclusive trade privileges. But production was still done only by hand, markets were almost wholly local, and, as no one but a master could employ an apprentice, production could never advance seriously outside traditional rules.
Cities were ridiculously small. London had about 40,000 and Paris, the queen of Europe, probably under 200,000. Only two cities existed with over 100,000, besides Paris—Venice and Naples. Marts such as Bruges, commercial and industrial metropolis of the North, had about 60,000. The total population of non-Moslem Europe in cities above 20,000 was probably under a million, or about that of Marseilles today. England probably had no more than three million inhabitants.
Population Better Off than Previously
That is not to say that the people were in misery. There is reason to think that the free workmen and the yeoman farmers of England and Aragon and the Rhineland, for example, made up a population relatively happy, the memory of which is enshrined in the phrase “Merrie England.”1
But of wealth, measured by our present standard, that is, total quantity of goods, the amount was pitiable. It could not have been one per cent of that today.
So long as the mass of workers were either bound to the soil, or owned the soil, or were working on their own account, or were bound to those who had trained them in a trade and whose footsteps they must follow, the rising merchant class and manufacturers were helpless. They lacked one necessity, to obtain in “free” labor, and that necessity had to be created in two ways. One was the enclosure of the common lands and the expropriation of the farmers. The other was the extension of the world market, which ruined the guildsman, whose limited trade required a small market.
The Universal Market
The outstanding change from the Middle Ages was the extension of anonymity. The capitalist system is anonymous. Whereas formerly tinker Tom Smith made pots and pans for the goodwives of Coventry or the weaver Jacques Bonhomme glowingly showed his wares in the cathedral place of Chartres to the good dames Jeanne, Marie, and Fransoise, with whom he had played from childhood, the market was known. Everyone knew for whom he was producing, knew the names of his clients, just as today, in suburbs, the remaining independent grocer still knows the tastes of every family he serves and that there is no use stocking up on candies because the children of Mrs. Jones and Mrs. Robinson have the mumps.
But by the end of the fifteenth century, the development of towns due to the Oriental trade and the gains of production due to primitive manufacture, had already changed the face of markets. Bruges was an entrepós and the shepherds of Norfolk consigned their fleece to Mynheer this or that, without having met him.
The commercial fleet of Venice left annually for Crete and the Levant, and combined the offerings of hundreds of makers of stuffs to exchange for carpets made by the subtle Greeks of Smyrna.
The Rise of City Merchants
So far, though, there is no essential difference from Sindbad the Sailor. But locally the differences, grew too. In London, Cheapside became a street crowded with shops, a wilderness of hanging signs (the people could not read), where a clatter of apprentices cried to strange passers-by, “What d’ye lack?” The cities, as the people were driven from the soil, filled up quickly. The suburbs outside the walls became the center of crime and slum life, and the ill-assorted paupers knew few of their neighbors, if any. For the first time since antiquity men lived with human beings they did not know. Society, formerly maintained by the mutual ties of manor and guild and church confraternity, was now bound together by the constable and the dread of jail. The market for goods reflected this. The customer was anonymous. Journeymen became less careful of their products. Cheating became the rule. The “smart” trader, the “slick” salesman became the ideal, the clever boy. The less adept took the hint and became pickpockets.
Writing Replaces Speaking
As St. Paul had preached the Unknown God on the Areopagus, so the unknown market, at home and abroad, the unseen client, became the object of trade. Now the conditions of capitalism were fulfilled, for there was a floating mass of helpless humanity, a crack of the neighborly relations of selling. Chaffer, higgling, the age-old modes of bargaining, were replaced by price lists and correspondence. The pen, formerly used for scrolls and royal edicts, now became the weapon of commerce. The scribe served trade where once he served God. (But his name, “clerk,” the cleric, survives.) The Bible was printed but the quill was transferred to business.
The state, too, occupied with trade, developed boards of secretaries. Red tape bound the primitive offices. Geoffrey Chaucer was a forerunner. By the time of Philip II and Elizabeth correspondence had become a disease. Human contact diminished. All social relations on a big scale, trade and political, were anonymous. That assisted the market-trade at a distance.
Moslem Economics Reduces Accumulation
By 1500 the European utilization of certain inventions was already ahead of their competitors. Navigation, through the compass and sextant, husbandry by reason of an ingenious method of harnessing horses and sharper tools, better roads than those of the vaunted Romans, printing from movable types, and artillery, were superior, on the whole, to Asia’s. At first, the fall of the only really rich city in Christendom, Constantinople,2 gave the Moslems the advantage, but this was soon counterbalanced by the conquest of Spain by the Christians, and Spain looked upon the Atlantic.
Whatever may have been the superiority of Moorish over Castilian society (and it was competitive, at the least), the conquering destiny of Spain and the decay of Morocco point to a more mobile, adaptive society in Western Europe.
By 1600, with the conquest of half Europe by the Turks, it looked as if the thousand-year battle of Cross and Crescent might end in a Moslem triumph. At least most of Europe thought so. The roads to Asia were barred, the road to the Atlantic was open.
But Turkish society was based on a pastoral, nomadic organization, and regarded agricultural societies of Christians exclusively as taxpayers (mostly in kind). For this reason there was little accumulation of capital in the regions they conquered (Ukraine, Rumania, the Balkans, Hungary, Greece). Holding the conquered Christian trader, whether Greek or Armenian, in contempt, Turkish commerce stagnated. The greatest empire in Europe and the Levant was arrested in commercial development. Its military basis, the Janissaries, was communistic in organization!
How Capitalism Arose
“The expropriation of the mass of the people from the soil forms the basis of the capitalist mode of production,” is Marx’s dictum. So long as the mass of the people were bound to the soil, either as serfs, or as servants, or as lieges or, better still, as freeholders—that is, yeomen or, in the most favored instances, as small capitalist farmers, men of means with large barns and heads of cattle—whatever the condition, so long as town population was small and rural population the rule, it was impossible to obtain a supply of labor for the newly rising workshops in the towns.
Without a large group of persons forced to work for a living through having no attachment to the soil, it was impossible to combine labor. The artisans, long resident in the towns, worked with their own tools. A large floating population of plebeians, living by a hundred devices from theft to chicane and beggary, filled the towns, especially in the Elizabethan time, but these were not as yet laborers but the first mass of surplus population driven off the land.
Soon they were impressed into service as the harsh poor laws delivered them up to the mercies of magistrates. But it was not until the feudal lands were parceled among favorites and speculators, and the church lands despoiled, that millions of their dependents were expelled from family farming to make room for sheep and forage crops.3 Wherever this process was carried out to the full, as in England, the Low Countries, and Northern Germany, the foundation of a labor supply was raised. Where feudal custom, linked with the church, retarded this spoliation, as in Spain, industry developed slowly; in fact, in the case of Spain, it even went back, despite the abundant supply of precious metals extracted from America.
Free Labor Essential to Capitalism
The proletariat, in modern Europe, and latterly in America, is free labor. It has no gens, or tribal relation, like most of the antique Roman proletariat. It is not bound to observe rules in a guild, as in the Middle Ages. It is not in serfdom or slavery, like the old Russian mujik before 1861, or the American Negro before 1863. It had (until the intervention of Fascism) the right to sell its labor freely to masters who were supposed to bid competitively for its services. It could leave any job, as soon as its period of contract or engagement was terminated, and sell its labor-power again to another master, whose offer might be more advantageous. While this legal freedom, according to Marx, is masked slavery, he nevertheless insists on the high importance, from the economic viewpoint, of this freedom. It reminds one of the celebrated quip of Anatole France that in France, Rothschild and a beggar are equally punished for stealing a loaf of bread or for sleeping under bridges. Still this civic equality, however ludicrous in social content, is a gain. It was necessary for the Rothschilds to allow such a system to endure.
The freedom of labor, whatever its social content, is an economic need for capitalism to develop its full productive forces. A man must be free to change his trade so that changes in technique can be immediately made available. A laborer must be free to change his domicile, if his labor can be exploited to yield the most profits. Until this freedom, including the mobility of labor, was attained, capitalism was limited and weak. Wherever capitalism abandons this form, as in Germany at the present time, for the Marxians it indicates a hardening of the arteries of the capitalist system. It shows that it is no longer accumulating a real capital fund out of the creation of new values by labor, but that it is centering on the unproductive use of labor.
Class Legislation against Labor
But in order to make this labor free for its uses, it was first necessary to enslave it so that it could not use its freedom to other purposes. Labor, driven off the soil and abandoned in the cities, was forbidden to wander under the vagabondage acts. The poor were bound to their parish by the niggardly poor laws. The statute of laborers, the crowning piece of class legislation in England’s history, forbade masters, under severe penalties, to pay more than a minimum wage for labor. Queen Elizabeth’s maternal solicitude for her people was consecrated in a series of whippings, pillories, stocks, driving of awls through the ear, and other pleasures reserved for the obstinate laborer who tried to obtain more wages, and by a series of fines for the master who raised the wages of these wretches. The colonial companies were presented with laborers kidnaped by dragoons and magistrates, to be shipped to the plantations. The mercantile marine and the Royal Navy were recruited by pressgangs who took up the poor men and tore them from their families.
From the Wat Tyler rebellion (1381) to the Reformation (1529), English labor, to take one instance, had enjoyed relatively humane treatment. The shock of these brutal laws was required to break its spirit and make of it a miserable wage worker, resident in slums. And in England, the condition of labor was relatively better, even so, than in most of Europe.
For all the efforts of the magistrates and the statutes it took a long time for labor to be pried from its privileged position. The average agricultural laborer worked four days a week, even in the seventeenth century. To get him to work six days for a master was not an easy task. A religious factor in the North of Europe was the substitution of Protestantism. This eliminated the numerous saints’ days and made men more toilsome. Later, the competition of Protestant lands became so severe that the more industrialized Catholic regions, such as Belgium and Bohemia, followed suit and decided that saints could be just as well honored in the factory as in the church.
American Bullion Speeds Capitalist Development
By 1600, the production of goods, movement by sea, exploration, conquest, seizure of the precious metals in the Americas,4 impressment of slaves into the newly-discovered plantations, murderous extermination of the aborigines in Peru, had led to an unprecedented volume of trade and this in turn to a perfected machinery of exchange. The Italians developed bookkeeping, the bill of exchange, banking.
Capital had a fluidity never before known. Despite the consistent triumphs and political brilliancy of the Turks, truncated Christian Europe advanced steadily in wealth. Not even the religious wars that lasted over a century, nor the everlasting state of bankruptcies, as in the world crash of 1562, nor the reduction of Germany to a skeletal population, could counterbalance this new impulsion toward the accumulation of capital.
Corruption and Plunder
Statesmen become crooks. Treason is nearly universal. Raleigh and Cecil sell out their country to Spain. Money is a mania. No one can be relied on. Fealty is missing. Venality replaces sworn obligation.
Luxury maddens the rich. The spices of Celebes and cinnamon and cloves come to Europe. The brother of Pizarro goes to the Amazonian forest for cinnamon, esteemed nearly as much as the gold of Cuzco or the unlimited silver mines of Potosi.
The discovery of Peru and Mexico shakes the world. For the first time in history, gold and silver are poured out in abundance. Prices rise. They more than rise, they become fantastic. The profits of traders, once reckoned in shillings, are now computed in pounds.
In Spain all feudal relations crack. Whole provinces seek to escape to America to make a fortune. The Italian cities wither, their Eastern trade becomes inconsequential.
Where once social changes took decades, they now take months. The old guild-worker cannot compete in this whirl. The merchant, the usurer, the trader; become general. Slow-witted serfs are replaced by nimble calculators who can carry a thousand figures in their heads. The pompous, slow, and steady noble becomes an object of sport, not of veneration. Country boys, gone to the city, like Shakespeare, hold him up to the scorn of town wiseacres. Molière buries him as M. de Porceaugnac. In other words, society is dynamic. The demand for goods is no longer fixed. Fashions change quickly. In the fourteenth century, pointed shoes took fifty years to make their way. In Elizabeth’s day, father and son, walking together, wore different clothes. Only the avid merchant and the aware manufacturer could stand up to this strain.
Variety of Goods
The variety of goods bears no comparison to that in previous ages. Pepper takes its place beside salt. Forks are used. Magnificent wooden staircases replace spiral stone steps. Quinine cures fevers. The potato creates a new population in Ireland and Pomerania. Tobacco becomes a necessity. Men travel for pleasure. They know more of other lands, they learn their languages. It all helps trade. Cotton goods replace woollen. Women’s clothing becomes graceful and poets now speak of the liquefaction of their clothes as they pass. Show, vanity replace piety, implicit obedience.
The Bourgeois
In other words, the bourgeoisie arises. Its roots are in money. Its ambition, despite some feudal survivals, such as the love of a title, is money. It is free to travel, buy and sell. But it is rich. Labor too is free. But it is poor. From now on, socially, there is nothing to stop capitalism.
The Rise of Holland and England
With the change in society came a profound change in geography, that is, economic geography. The Atlantic lands benefited by the newly discovered sources of plunder; Spain first with Portugal (especially in the East), later Holland, the real mother of mercantilism.
England slowly advanced. Owing to her island position, which meant that unlike Holland and France she needed only to defend herself at sea, the English king had no army. The bourgeoisie found it easy to defeat him and clear the way for an unimpeded mercantile society. Unlike Holland, England joined trade to manufactures and, by the defeat of France in 1763, consolidated its permanent position of mistress of the world. England, land of fen and mist, Holland of rain and swamp, became the money lands, and men mused over the canals of Venice, whose principal product became sonnets, odes, and other invocations.
The Middleman
Now the wholesaler, jobber, factor, become important. They add more links to the chain that separates the producer from the consumer. The production of wealth is now blind, it takes a chance. Nor have all the sales charts and graphs ever rendered back to it the knowledge of the market it had in the medieval town. To get over this difficulty, goods are standardized, produced in mass. At this point the manufacturing system thirsts for the machine. The market it has created is too much for it.
Investment
In the meantime, the robbers of the common and church lands, the despoilers of the peasants, the robbers of the colonies, the slave-dealers, the assassins of native chiefs, the pirates and “adventurers,” are crammed with money.
Despite the enormous output of the precious metals, they cannot consume all of it in luxuries. Manufactures allow of the only field of investment, as does trade. For here, as the new phrase goes, money begets money. Instead of squandering the proceeds of plunder, men seek to re-enact the system of nobility, to pass on increased fortunes to their children. Where St. Thomas Aquinas had inveighed against interest as the taking of money for God’s free gift of time, the Renaissance consecrated it as good usance, and finally Bentham in England (and in Balzac’s novel, the miser Grandet) declared it to be a supreme good of man. Shakespeare, himself a money-lender and quick-trigger lawsuit enthusiast for unpaid loans, makes his Shylock explain:
Antonio: Was this inserted to make interest good?
Or is your gold and silver ewes and rams?
Shylock: I cannot tell, I make it breed as fast.5
But the rate of interest was forced down in proportion as its sanctity was attained. In other words, lending became universal, hence cheap. Hence the lending of coins became limited as against the demand, and that Italian invention, the bill of exchange, took its place.
The Banking Document
The representative of money is born. Instead of coin, bankers give receipts. The goldsmiths, as they are called, transfer evidences of deposits instead of the deposits themselves. Book entries record the claims of one such goldsmith against the other, often in another country. Private international law makes its appearance. Elaborate treaties are entered into to enforce commercial demands outside of the jurisdiction of the lender or shipper. Again capitalism is liberated, this time from the limitations of bullion and coin, and local law.
Marlowe lets Barabas speak, his assets are modern (1593):
. . . Cellars of wine and sollars full of wheat,
Warehouses stuft with spices and with drugs,
Whole chests of gold, in bullion and in coin,
. . . At Alexandria, merchandise unsold,
But yesterday, two ships went from this town,
Their voyage will be worth ten thousand crowns.
In Florence, Venice, Antwerp, London, Seville,
Frankfort, Lübeck, Moscow, and where not,
Have I debts owing, and in most of these
Great sums of money lying in the banco. . . . 6
A fully realized merchant economy is pictured.
Credit
Credit became common in the seventeenth century. That is, a merchant, who had shipped goods to the East, instead of waiting a year or two for his payments, sold his claim or, in banking parlance, received an advance on the moneys to be received, for which he gave his bill of lading as security. For this accommodation he paid interest, until the time when his receipts from the consignee were available. By this means a shipper with a capital of a million guilders could sell ten million guilders’ worth of goods and receive advances on them. If his profits on the ten million guilders of goods sold was 10 per cent, or a million guilders, and his bank accommodation of nine million guilders (the difference between his goods sold and what he owned) cost him 6 per cent, or 540,000 guilders, then his net profit was 460,ooo guilders, or 46 per cent, whereas if he worked with his own capital, he could make only 100,000 guilders. As soon as bank credit became abundant, this obvious advantage was more and more sought by merchants and manufacturers. Its later catastrophes and abuses come under another chapter (“Commercial Crises”).
Immaterial Money
The bankers required that these borrowers deposit with them as well, so that soon most of the liquid funds in the country were banked. Men’s fortunes became immaterial. In Scotland, banking and paper money were idolized by theorists, as active aids to commerce, and bullion attacked as sterile. The immaterialism resulted in a speculative frame of mind. Men were further and further removed from simple commodity production and soon it seemed that it was credit that generated production. Currency theorists make their appearance, in numbers, about 1690.
New Classes
By 1650 the fabricator (workshop manufacturer), the trader, and in Holland even the investor, became important classes with which the hereditary nobility and even the more mobile clergy had to reckon. Upon the conflict of the new class of burghers and the older privileged estates, the temporary solution of absolute monarchy, above all classes, was superimposed. But the needs of the burghers broke through the shell of absolute monarchy. The triumphs of absolute monarchy (itself the gravedigger of the older feudal state dominated by nobles) proved evanescent.
In England the aroused burghers, enlisting the aid of yeomanry and workmen, cut off the head of one king and in 1688 deposed another.
Ideas of the Bourgeoisie
They produced subtle and voluble theorists to blazon their new society. Dudley North, Thomas Mun, novelists like Defoe and, in France, the first great mercantile statesman, Colbert, became typical thinkers and politicians. Locke the philosopher and Newton the physicist bother about currency. De Witt in Holland achieved a dictatorship based on taxation and the national debt.
Triumph of Merchant Capitalism
Capital comes out of the hoards kept in heavy chests and takes on the more metaphysical form of paper, stocks, bonds, bank credits, bills, discounts. Usury, the charging of hundreds per cent per annum for loans, is wiped out by the bankers who charge ten per cent or less as loanable capital takes other shapes than coin. Shylock and Sir Giles Overreach are embalmed in literary museums whereas Robinson Crusoe ends his long career with thousands of pounds of cleared profits in trade.
The courtier and the priest were considered inferior to the “honest tradesman.” Slave-dealers in Liverpool learned to use a liberal lingo at home. This fluid society, governed by one need, profit; seeking it in all lands, in all currencies, making any kind of goods that would bring in money, crashing through customs and artisan habits, was a new phenomenon, the greatest social revolution man had ever known. All previous societies, since the primitive tribes, were based on status. This was based on contract. Purchase and sale replaced the kissing of hands.
The viewpoint of this new class came to be regarded as self-evident. Rare indeed were those who remembered a previous order of thought. Here and there a de Maistre or a nostalgic Walter Scott evoked the feudal past, but as a sigh, not as reality. These vestigial groups, termed reactionaries, were flayed by the witty spokesmen of the merchants, such as Voltaire. By 1850, except for parts of Eastern Europe, the domination of capitalists was contested by no one except squires, poets, and a handful of rebels.
Companies
Toward the end of the sixteenth century it became evident that the capital of single men, or even a few associates, would not be adequate to undertake operations abroad, involving millions of pounds. Although companies were already known, such as the trading groups of Genoa and Venice, the Hansa Associations of the free commercial cities of the North of Europe, the warehouse groupings of Greeks, nevertheless these groups were made up of persons who acted together and knew each other well.
It was found needful to extend these companies. In order to extend them, it was necessary to get over the limitations of partnership. Partnership implies that each associate is liable for the full debts of his undertaking.7
To obviate this there arose gradually the system of limited-liability companies, that is, artificial persons, the interest in which was evidenced by shares in the business. These artificial persons are, in the United States today (not in England), called corporations, or, better still, in France, Anonymous Societies. They have, as a witty jurist observed, “neither a body to be kicked nor a soul to be damned.”
Share Capital
Each subscriber to a share was limited only to the extent of an admitted and publicly known liability. Either that equaled the amount of money for which his share was a receipt or it might be a multiple thereof, clearly stated on the certificate and advertised to the world of creditors. Since governments often backed pirates, adventurers, and armed merchants and yet wished to disavow them, this means of obtaining giant capital became common. The East India Company and the Bank of England became the archetypes of semi-governmental companies. They came to own an empire like India, to control the public credit at home.
The Stock Exchange
This further anonymization and masking of enterprise required that the shares be easily bought and sold. Hence within the framework of the older merchant exchanges (or Bourses), there arose a section for dealing in shares and in government bonds, and a group of intermediaries called brokers came into being. The Royal Exchange of London, for example, and the Bourse of Antwerp, were soon separated from this new activity, which brought about the Stock Exchange; this was especially true in Amsterdam. Shares and bonds were freely exchanged between countries. Speculation became general as gamblers sought to anticipate the profit possibilities of the companies of which these shares were parts. Those who believed they would rise in price bought for an advance; those who believed they would fall arranged an ingenious mechanism called short selling whereby they could sell what they did not have and deliver to their buyer by borrowing shares from a third party and returning them to him by buying at lower prices, at their convenience.
From this point on, no one knows to whom companies belong. Thousands of men exchange shares in companies whose business they know of only by report, and sometimes they do not know that.8
The banks extend credit not merely for commerce, but they advance money on these shares, since they have a ready market. Thus there arises margin-trading, that is, the purchase of shares by buyers who avail themselves of bank credit for the difference between what they put up and the price of the shares. This operates like bank credit in commerce; it enables a small capital to do the work of a large capital. This leads to gambling, and this in turn to appalling crises, leading to personal ruin. The tavern card-gambler—the shame of preachers and target of sermons—has become enthroned in the high places. Pliant economists point out that he anticipates values and without him the economic mechanism would have no directive. In this way there is achieved what Marx calls fetichism, that is, a masking of real relations by assuming that their disguises are primary. More and more production and its problems are disguised by money forms.
Arbitrage
Before long, there arises the arbitrageur, that is, the man who takes advantage of minute differences in quotations of currencies and shares, even fractional differences, between various stock exchanges, in different cities. In the eighteenth century a Frenchman devised options, that is, the purchase of the mere right to demand a certain share at a certain price later on. These were used by bankers to hedge, that is to protect themselves against falls in value of their shares or the shares they had taken as collateral. These financial dodges enabled machine industry, when it arose, to be quickly financed. It also resulted in manias like the South Sea Bubble of 1720, exactly like the biting manias of the Middle Ages. Money replaced religious lunacy.
National Debts
Not only was bank credit facilitated, but the governments themselves mortgaged their future taxing power in order to obtain funds for present wars or royal extravagances. That large group of bourgeois who had retired from trade or, more often, come back from the colonies loaded with plunder (as the famed Nabobs of India), sought to invest their credits. They were pleased to lend them to the government, obviously a better risk than most goldsmiths or private bankers. When wars became more costly, as in the sudden insane increase in expenditure under William Pitt, the governments contracted such large debts that their bonds became the be-all and end-all of many well-to-do persons. An increasing number of hereditary fortunes thus lost all connection with manufacture, commerce, bullion, coin, or even banking, and subsisted on taxes. In the meantime the interminable wars of Europe led to a new source of plunder, not abroad, but at home, in the shape of army contracts and “farming” of the revenue. Their descendants, whose fortunes, unlike those of the merchants, had not arisen from trade, formed the base of a new “gentle” class.
The Rentier
The French name for this class is now generally accepted. They are termed rentiers. Since many of their children took on genteel careers, among them that of university professors, this class, especially toward the end of the nineteenth century, increasingly directed the attention of economic speculation away from production toward consumption.
Since as a class they do not know how to make money, but only to enjoy it, they are timorous, conservative, and far more pliable to the wiles of statesmen than the more robust active leaders of business. Living off taxation, the state became their one business. Budget crises were their terrors, and when, as about 1789 in France, they could not be paid, revolution became the practical alternative.9
1. This golden age has been denied. Exaggerated, perhaps, but it was a period of continuous relative prosperity.
2. Even Venice, in its prime, was not a fourth as rich.
3. The Anabaptist communism of Thomas Munzer, 1525, is terrific, and the agrarian communism of Winstanley in 1650 in England anticipates Lenin even in details! It was the peasant’s answer to this spoliation
4. Engels says American silver and gold cracked open every pore of the feudal skin.
5. The Merchant of Venice.
6. The Jew of Malta.
7. Except limited partners.
8. Wall Street is full of stories of men who buy shares because they think their "tape" initials represent some play or even actress.
9. See Appendix II for critical addenda.