Why 'Capitalism' is all wrong

By the middle of the 19th century, it was becoming clear that the world had changed. An industrial revolution had taken place - though it was more than just industrial. How were all these new changes to be explained?

The answer that was adopted was a strange one - capitalism. Was it perhaps because Karl Marx had written a powerful book on the subject? Was it perhaps because Weber adopted the word in the title of his most powerful work, linking it with the Protestant ethic? Whatever the reasons, the ‘Capitalism’ explanation has been extraordinarily successful, and has even been adopted by the proponents of very different philosophies- notably Milton Friedman in his Capitalism and Freedom as the word to denote the free market economy.

Yet capitalism is a poor explanation of what actually happened. Many businesses do not need capital in their development: most of the great cotton enterprises for instance began small with an entrepreneur making some vital invention, and then finding their invention hugely profitable so that they were able to expand without the use of outside capital.

Then take for instance medicine. This is one of the greatest advances of the ‘Industrial Revolution’ yet the hospitals were almost call charities and many of the advance were made by often pig-headed doctors who rammed their new ideas through often against their conservative superiors. Yet this is where some of the greatest changes and advances were made.

Or think of the ‘Agricultural Revolution’ that went alongside the Industrial Revolution. Again the pioneers were often wealthy farmers who may indeed have inherited their properties, but they needed no outside capital to push through the changes that did so much to improve the output of food throughout this period.

There were of course some enterprises that needed capital, notably the railways, but these are the exception rather than the rule.

The other major problem with ‘the ‘capitalism’ explanation lies in its analysis of society. According to Capitalist theory, Capitalism leads inevitably to a concentration of wealth in society, with capital being increasingly concentrated in the lands of the few, leading to the general impoverishment of the masses. But the very reverse has happened. The industrial revolution has led to a flattening of society and the rise of the huge middle classes to which today the vast majority of us belong. I want to look in particular at the changes in society: in particular I want to use the insights of anthropology to look at the change-over from a kin based society to an open society, which is paralleled by a change from a gift-exchange society to a market economy.

The trouble with using the term ‘capitalism’ is that inevitably one at least semi-adopts all the other baggage that comes with it. The original Marxist analysis is always there, looming in the background. Thus if you try to defend ‘capitalism’, one is bound to lose, because the term was invented as a ‘boo-word’ to denote something that is inheritably bad. And if you use capitalism as a basis to analyse the past, one also adopts a viewpoint that predates the insights of modern anthropology. If we are to analyse the past coherently, and indeed if we wish to understand the world today, we need to have a philosophy that corresponds rather more closely to the real world.

How the Industrial Revolution came about

The Open society and its Friends

The three bases for a market economy.

How can a market economy be distinguished, archaeologically?

Notes on this web site

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First draft, 4th April 2006