02. Capitalism and Socialism: Crash Course. Part 1.
Hi, I'm John Green, this is Crash Course World History and today we're going to talk about capitalism. Yeah, Mr. Green, capitalism just turns men into wolves. Your purportedly free markets only make slaves of us all.
Oh, God, Stan, it's Me from College. Me from the Past has become Me from College. This is a disaster. The reason he's so unbearable, Stan, is that he refuses to recognize the legitimacy of other people's narratives and that means that he will never, ever be able to have a productive conversation with another human in his entire life. So, listen, Me from the Past, I'm going to disappoint you by being too capitalist. And I'm going to disappoint a lot of other people by not being capitalist enough. And, I'm going to disappoint the historians by not using enough jargon. But, what can I do? We only have 12 minutes. Fortunately capitalism is all about efficiency so let's do this. Me from College.
Randy Riggs becomes a bestselling author; Josh Radnor stars in a great sitcom; it is NOT GOING TO WORK OUT with Emily, and DO NOT go to Alaska with a girl you've known for 10 days. OKAY, LET'S TALK CAPITALISM. [Intro music]
So, capitalism is an economic system, but it's also a cultural system. It's characterized by innovation and investment to increase wealth. But today we're going to focus on production and how industrial capitalism changed it. Stan, I can't wear these emblems of the bourgeoisie while Karl Marx himself is looking at me. It's ridiculous. I'm changing. Very hard to take off a shirt dramatically.
So let's say it's 1,200 CE and you're a rug merchant. Just like merchants today, you sometimes need to borrow money in order to buy the rugs you want to resell at a profit, and then you pay that money back, often with interest, once you've resold the rugs. This is called mercantile capitalism, and it was a global phenomenon, from the Chinese to the Indian Ocean trade network to Muslim merchants who would sponsor trade caravans across the Sahara.
But by the 17th century, merchants in the Netherlands and in Britain had expanded upon this idea to create joint stock companies. Those companies could finance bigger trade missions and also spread the risk of international trade.
But the thing about international trade is sometimes boats sink or they get taken by pirates, and while that's bad if you're a sailor because, you know, you lose your life, it's really bad if you're a mercantile capitalist because you lost all your money. But if you own one tenth of ten boats, your risk is much better managed. That kind of investment definitely increased wealth, but it only affected a sliver of the population, and it didn't create a culture of capitalism. Industrial Capitalism was something altogether different, both in scale and in practice.
Let's use Joyce Appleby's definition of industrial capitalism: "An economic system that relies on investment of capital in machines and technology that are used to increase production of marketable goods.” So, imagine that someone made a Stan Machine. By the way, Stan, this is a remarkable likeness. And that Stan Machine could produce and direct ten times more episodes of Crash Course than a human Stan. [not super sure Stan's not a robot, btw] Well, of course, even if there are significant upfront costs, I'm going to invest in a Stan Machine, so I can start cranking out ten times the knowledge. Stan, are you focusing on the robot instead of me? I am the star of the show! Stan Bot, you're going behind the globe. So, when most of us think of capitalism, especially when we think about its downsides (long hours, low wages, miserable working conditions, child labor, unemployed Stans) [doing yo-yo tricks on the Indy streets] that's what we're thinking about. Now admittedly this is just one definition of industrial capitalism among many, but it's the definition we're going with. Alright, let's go to the Thought Bubble. Industrial capitalism developed first in Britain in the 19th century. Britain had a bunch of advantages: It was the dominant power on the seas and it was making good money off of trade with its colonies, including the slave trade. Also, the growth of capitalism was helped by the half-century of civil unrest that resulted from the 17th century English Civil War.
Now, I'm not advocating for civil wars or anything, but in this particular case it was useful, because before the war the British crown had put a lot of regulations on the economy - complicated licenses, royal monopolies, etc. - but during the turmoil, it couldn't enforce them, which made for freer markets. Another factor was a remarkable increase in agricultural productivity in the 16th century. As food prices started to rise, it became profitable for farmers, both large and small, to invest in agricultural technologies that would improve crop yields. Those higher prices for grain probably resulted from population growth, which in turn was encouraged by increased production of food crops.
A number of these agricultural improvements came from the Dutch, who had chronic problems feeding themselves and discovered that planting different kinds of crops, like clover that added nitrogen to the soil and could be used to feed livestock at the same time, meant that more fields could be used at once.
This increased productivity eventually brought down prices, and this encouraged further innovation in order to increase yield to make up for the drop in prices. Lower food prices had an added benefit – since food cost less and wages in England remained high, workers would have more disposable income, which meant that if there were consumer goods available, they would be consumed, which incentivized people to make consumer goods more efficiently, and therefore more cheaply.
You can see how this positive feedback loop leads to more food and more stuff, culminating in a world where people have so much stuff that we must rent space to store it, and so much food that obesity has become a bigger killer than starvation.
Thanks, Thought Bubble. So this increased productivity also meant that fewer people needed to work in agriculture in order to feed the population.
To put this in perspective, in 1520, 80% of the English population worked the land. By 1800, only 36% of adult male laborers were working in agriculture, and by 1850, that percentage had dropped to 25. This meant that when the factories started humming, there were plenty of workers to hum along with them.
Especially child laborers. So far all this sounds pretty good, right? I mean, except for the child labor. Who wouldn't want more, cheaper food? Yeah, well, not so fast. One of the ways the British achieved all this agricultural productivity was through the process of enclosure.
Whereby landlords would re-claim and privatize fields that for centuries had been held in common by multiple tenants. This increased agricultural productivity, but it also impoverished many tenant farmers, many of whom lost their livelihoods.
Okay, for our purposes, capitalism is also a cultural system, rooted in the need of private investors to turn a profit. So the real change needed here was a change of mind. People had to develop the capitalist values of taking risks and appreciating innovation. And they had to come to believe that making an upfront investment in something like a Stan Machine [silent mode not optional] could pay for itself and then some.
One of the reasons that these values developed in Britain was that the people who initially held them were really good at publicizing them. Writers like Thomas Mun, who worked for the English East India Company, exposed people to the idea that the economy was controlled by markets.
And, other writers popularized the idea that it was human nature for individuals to participate in markets as rational actors. Even our language changed: the word “individuals” did not apply to persons until the 17th century.
And in the 18th century, a “career” still referred only to horses' racing lives. Perhaps the most important idea that was popularized in England was that men and women were consumers as well as producers and that this was actually a good thing because the desire to consume manufactured goods could spur economic growth. “The main spur to trade, or rather to industry and ingenuity, is the exorbitant appetite of men, which they will take pain to gratify.” So wrote John Cary, one of capitalism's cheerleaders, in 1695. And in talking about our appetite, he wasn't just talking about food.
