Chapter 2 The Historical Development of Capitalism Feudalism and the Birth of Capitalism The Emergence and Nature of Capitalism The Industrial Revolution Colonialism: Capitalism on a World Scale Summary

The Importance of Historical Processes The present economic landscape can only be understood as the result of an historical process Decisions to site production facilities “yesterday” produce the spatial pattern that is the foundation for trade and patterns of consumption today We can visualize these processes at various geographic scales

Feudalism and the Birth of Capitalism From hunting & gathering to domesticated agriculture (animals and crops) Slave-based empires (e.g. Roman) and their feudal successors (ca. 5th Century) A form of economic and social relations that extended in Europe to ca. 15th century Settlement in North America did not succeed feudalism, but was capitalist in character from the outset

Characteristics of Feudalism Tradition shaped life and work In Europe the church was the dominant political and ideological institution Aristocratic land-owners formed the ruling class, who extracted rents from tenant farmers (often serfs) in low productivity agriculture Feudal cities – often fortified – with guilds – markets, where universities were established A hierarchy of feudal towns, mostly small trading centers, with negligible interregional trade

Feudal Regions & The Beginnings of Trade Agricultural innovations; bubonic plague; the European Renaissance

Characteristics of Early Capitalism Markets: buyers and sellers of goods & services at agreed upon prices Market types: perfect competition – perfect monopoly – oligopoly (and other types) The profit incentive = revenue – cost Dynamic behavior of buyers and sellers, including incentives from innovation in products and production processes Class relations: merchants & burghers vs. the old aristocracy. “Unlike feudal Europe, workers under capitalism must sell their labor power to survive. Thus the process of commodification extended to include the capacity to labor.”

The Emergence and Nature of Capitalism Rise of trade-based city states – links to old trade routes to the Far East and in Europe

Alternative Models of Competition Barriers to Entry - High Barriers to Entry - Low

Attributes of Alternative Market Types “Pure” Monopoly

Early Capitalism, Continued Finance: replacing barter with money, and institutions to handle and regulate money Uneven development as an inevitable outcome, historically persistent, at scales ranging from local to global Long-distance trade – fueled by transport innovation – allowing regional specialization based on principle of comparative advantage Ideological change – printing/reading, religion, science, the Enlightenment – “a worldview that stressed secularism, individualism, rationality, progress, and democracy.”

Early Capitalism, Continued Feudal empires (e.g. Holy Roman Empire, Figure 2.11) with multiple nation-states Replaced feudal monarchies with nation-states Nation states supporting development of capitalism through regulations, public investment and programs (e.g. education, defense, trade protectionism… BUT: these institutions do not preclude transnational capitalist development, evident in this era of globalization

The Industrial Revolution Industrialization as a process with multiple transformations in inputs, output, and technologies. Driven by: Harnessing inanimate sources of energy (Figure 2.12), wood-coal-petroleum & gas Technological innovation (Table 2.1) Rising Productivity (Figure 2.14) Spatial diffusion of the Industrial Revolution

Spread of the Industrial Revolution

Global Diffusion of the Industrial Revolution

Cycles of Industrialization – Kondratiev Long Waves The Fifth Wave – IT & producer Services

Consequences of the Industrial Revolution Creation of an Industrial Working Class Rise of organized labor Urbanization – industry as “city forming” activity Population Effects: Malthus’ warning vs. productivity increases, health improvements, lowered birth rates Growth of Global Markets & International Trade – transport improvement, international finance, timing of development