Capitalism: Capitalism: Rise & SpreadRise & Spread

Review & Lecture Outline1500 to present: today’s “international”(1) NATION-STATE SYSTEM

– sovereignty – westphalian state (nation-state)

• diplomacy– society of states

• international law

(2) INTERNATIONAL LIBERALISM– elements of classical liberalism

• Individual, property, limited power, universality– liberal package

• human rights, capitalism, democracy– brief history of classical liberalism (1600 - 1860)– international liberalism

• democratic peace theory• international neoliberal theories (integration theory, regime theory, complex interdependence)

Lecture Outline 1) elements of capitalism2) Quick, pick me up, history of coffee & capitalism3) rise & spread of capitalism

a) feudalism & rise of capitalismb) expansion of capitalismc) industrialization

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Elements of Capitalism

Commodities– capital goods (C); consumer goods (C’)

Money– investment (M); sale of product (M')

Labor (L)Means of production (MP) (=capital goods)Production (= labor + means of production ==> products/commodities)

RESULTS• economic efficiency• economic growth

M'M' > M

M - M' = profitSale of Product

MMoney / Investment

MP (=C) + LProduction / Manufacture

C'Product / Commodity

Cycle of Capitalist

Production

Free Market

Quick History of Coffee & Capitalism

Coffee & Capitalism (1)Prior to 1000: native to ETHIOPIA

– People discover energy boost when they eat the coffee bush berry

Where is capitalism?

1000: Arab traders bring coffee to Arabia– develop plantations– exported from Yemen, especially port of Mocha – also begin to boil beans, call drink "qahwa”

1200s: Mecca becomes a center of coffee culture– Arab rulers forbid coffee plants to be taken out of

their domains– thousands of pilgrims come and coffee spreads...

1500s: Coffee houses found in all big cities of Near East

– Ottoman Empire controls Middle East & coffee. Coffee becomes “Turk’s drink”; they often add spices such as clove and cinnamon

Mecca

Coffee & Capitalism (2)1600: Italian traders introduce coffee to West

– some Christians call it the “devil’s beverage”– Pope Clement VIII "baptizes" coffee, making it

an acceptable Christian beverage– very expensive

Where is capitalism?

1616: Dutch smuggle coffee plants out of Mocha – to Ceylon and Java – Dutch East India Company becomes first to

commercially cultivate and transport coffee

1668: Edward Lloyd's coffeehouse opens in England– frequented by maritime traders & insurance

agents– eventually becomes Lloyds of London, the best-

known insurance company in the world

Coffee & Capitalism (3)1714: Mayor of Amsterdam presents Louis XIV a

coffee bush– descendants will produce virtually entire coffee

industry in the Americas (90% spreads from this plant)

– Seedlings from this plant brought to Martinique (1725), and spread from there to S. America

Where is capitalism?

1700s: Dutch and French cultivate coffee in S. America

– jealously guard their treasure– Brazilian official who mediates a French-Dutch

dispute in S. America romances French Guiana governor’s wife and receives coffee seedlings in a farewell bouquet...

– these seedlings spawn Brazil’s coffee industry; today Brazil is world’s largest coffee producer (33%).

Coffee & Capitalism (4)1886: Former wholesale grocer names his

popular coffee blend “Maxwell House”– after hotel in Nashville, TN where it's served

Where is capitalism?

1900: Hills Bros. begins packing roast coffee in vacuum tins– spells end of local roasting shops & coffee

mills

1901: first soluble "instant" coffee invented – invented by Japanese-American chemist

1903: German researchers remove caffeine from beans without destroying flavor– marketed under brand name "Sanka”; a

contraction of French phrase “sans caféine.”

Coffee & Capitalism (5)1946: Italian (Achilles Gaggia) perfects espresso

machine & Italians first to manufacture it– cappuccino is named for resemblance of its

color to robes of monks of the Capuchin order

Where is capitalism?

1971: Starbucks opens its first store in Seattle– 1983: a director travels to Italy; is impressed with

their "coffee bar culture"; opens 1 bar– 1987: 17 locations– 2003: 6294 locations

1988: Fair Trade Certification– an alternative trade organization– promotes organic farming and equity for farmers

Global Exchange

1000 Year World History of Coffee

Today: 2nd largest commodity in world after oil– US is largest consumer in world; consumes 1/5 of world's coffee

Rise & Spread of Capitalism

Feudalism• Feudalism was the dominant economic system during

Middle Ages in Western Europe (ca. 1000 – 1500). Capitalism emerged from feudalism. How?

• CHARACTERISTICS OF FEUDALISM

– Feudalism = decentralized organization that arises when central authority cannot perform its functions and when it cannot prevent the rise of local powers (ie, results form ineffective central government)

– = contractual system by which a king ‘rents’ his lands to local leaders in return for loyalty to him.

– Originally began as a military system.

– Feudal leaders controlled public authority & private economic activity.

Rise of Capitalism: Marx• Capitalist mode of production grew up along side feudal modes.

• However, relatively static feudal modes of production could not meet growing demand for new goods.

• Demand created by increase in trade due to 1) development of European trade routes to Asia and 2) discovery of New World.

• Growth in trade created a demand for manufactured goods which craft production of the guilds could not meet, for 2 reasons:

– 1) High prices: guilds aimed to limit production to keep prices high – 2) Low productivity: takes a relatively long time for individual craftsmen to

make a product • So new forms of manufacturing develop.

• Productivity was initially increased by enhancing the division of labor – different workers are given task of making different parts of a product.

• Later new tools were developed to enhance each stage of production.

• (And still later, during industrial revolution, steam and then electric power, used to create better tools and automated modes of production.)

• These new forms of manufacturing are more productive for two reasons: – 1) same number of workers can produce more goods. – 2) skilled workers can be replaced with unskilled workers.

Th

eory

Reasons for Rise of Capitalism1) increase in population2) rise of “independent” towns3) separation of producer from subsistence production4) appearance of wage-labor5) emergence of trade6) emergence of property rights7) emergence of specialization8) Protestantism9) others

Conclusions: Rise of capitalism around 1500 due to a synergy of many factors.

Capitalism started local and small scale in Europe, spread slowly and fitfully, and few realized that momentous change was occurring.

Capitalism “institutionalized” of a new set of economic incentives (via free trade, wage labor, property rights, etc.) that encouraged economic efficiency and thus boosted economic growth (the watchwords of capitalism).

Th

eory

Expansion of CapitalismGreat Britain became Europe’s powerhouse of capitalism. Why?

Because it promoted free trade, protected property rights, did not control competition, etc. Why?

– Scholars such as John Locke, Adam Smith, and David Ricardo provided theoretical justification for these policies.

Because it was in Great Britain’s self-interest! Britain profited.

Radiating from Great Britain (& western Europe) in 1700s & 1800s, capitalism began its worldwide march. What was once local & small-scale became global and large-scale.

Drivers of this expansion include:– empirical: capitalism works better – colonialism– missionary impulse– capital seeking more profitable investment abroad– search for new markets– spread of democracy– advances in science & technology (rail, steamship, telegraph, etc)

During the 1800s an interdependent global (capitalist) economy began developing; it centered on Europe and its colonies.

Capitalism & Industrial RevolutionGreat Britain became a global economic hegemon during the 1800s.

At the same time capitalism was expanding, small-scale, local seeds were sown for another societal revolution in Great Britain; this time related to industry...

The INDUSTRIAL REVOLUTION

Some of the seeds included:– high literacy– population with "modern" work attitudes: willing to move from country to

city– widely available printed materials, particularly those with technical

diagrams– adequate transportation and communication networks – government commitment to subordinate foreign policy to economic ends– insularity which saved industrial development from being interrupted by

war– a commercial product needed by -- and affordable by -- many people: this

turned out to be COTTON.

Industrial RevolutionDefinition:

the vast social and economic changes that resulted from the development of steam-powered machinery and mass-production methods beginning in the late 1700s in Great Britain and extending through the 1800s elsewhere in the world.

It began with textiles.– By 1800 the number of workers needed to turn wool into yarn reduced by 80%. – By 1812 the cost of making cotton yarn had dropped by 90%.– By 1840 the labor cost of making the best woolen cloth had fallen by over 50%.

AND AGAIN, WHAT WAS LOCAL & SMALL-SCALE BECAME GLOBAL AND LARGE-SCALE.

Industrial Revolution (2)1st Phase: Textiles and Steam: 1712-1830

– 1712: Newcomen steam engine – 1733: John Kay invents the flying shuttle – 1764: James Hargreaves invents the spinning jenny – 1769: Richard Arkwright patents the water frame – 1769: James Watt patents improvements to Newcomen engine– 1779: Samuel Crompton perfects the spinning mule – 1785: Edmund Cartwright patents a power loom– 1807: Robert Fulton begins steamboat service on the Hudson River

2nd Phase: Railroads and Steel: 1830-1875– 1830: George Stephenson begins rail service between Liverpool and London – 1840: Samuel Cunard begins transatlantic steamship service – 1856: Henry Bessemer develops the Bessemer converter – 1866: Siemens brothers develop the open hearth furnace

3rd Phase: Electricity and Chemicals: 1875-1905– 1836: Samuel F. B. Morse invents telegraph – 1866: Cyrus Field lays first successful transatlantic cable – 1876: Alexander Graham Bell invents the telephone – 1879: Thomas Edison invents the incandescent light bulb – 1903: Wright Brothers make the first successful airplane flight

4th Phase: Digital Information Technologies, Miniaturization

Summary: Rise & Spread of Capitalism

capitalism

industrialization