Myths of Capitalism

Return to The Wondrous Free Market

Part 1: No state intervention in formation

Along with profit never being realised without enough money in circulation, which has been chiefly designated by states [Monetary System], the history of capitalism shows how the state influenced and coerced people to align with the capitalist beliefs once it emerged. Before capitalism arose, throughout Europe, there was feudalism and manorialism2. Manorialism was characterised by the vesting of legal and economic power in a Lord of the Manor, supported economically from his own direct landholding in a manor (sometimes called a fief), and from the obligatory contributions of a legally subject part of the peasant population under the jurisdiction of himself and his manorial court. These obligations could be payable in several ways, in labour (the French term corvée is conventionally applied), in kind, or, on rare occasions, in coin.

Arising from this time came mercantile and agricultural capitalism, in which the conditions and controls for capitalism to emerge started to develop. Previously the land was the main producer of wealth, with the aristocracy, landowners and merchants controlling/owning most of the resources; then as machinery and manufacturing changed the face of production, so too did emerge another set of people controlling the wealth. During the formative years of capitalism in the 19th Century is when laissez-faire3 actions and attitudes were rife. Although the governments of the time did little to control what the capitalists could do, multiple legislations came into force to ensure workers were kept in line for their masters. This was a time of the Industrial Revolution of the UK, where a new class emerged – the capitalist.

Karl Polanyi argued that the hallmark of capitalism is the establishment of generalized markets for what he called the ‘fictitious commodities’, i.e. land, labour and money. Accordingly, he argued that ‘not until 1834 was a competitive labour market established in England, hence industrial capitalism as a social system cannot be said to have existed before that date’.4 Even so, the conditions before then came from a period of industrialisation through capitalism. The Enclosure Acts5,6, can be seen as the start of this process, where between 1604 and 1914, over 5,200 individual enclosure acts were passed, covering 6.8 million acres. Commencing in the reign of Henry VII and increasing after the Reformation7 in the 16th century, this eliminated opportunities for many people and enriched a few.

The aristocracy also abolished feudal tenures and converted their own estate in the land, until then ‘only a feudal title’, into ‘rights of modern private property’. In the process, they abolished the tenure rights of copy-holders. Copy-holders were de jure tenants under feudal law, but once they paid a negligible quit-rent fixed by custom, the land was theirs to sell or bequeath. In substance copyhold tenure was a manorial equivalent of freehold; but since it derived from custom it was enforceable only in the manor courts. Under the ‘reform’, tenants in copyhold became tenants at-will, who could be evicted or charged whatever rent their lord saw fit8.

Once industrialisation started, many Lords of the Manor benefited from the Enclosure Acts, especially if coal was within their land. So the aristocracy welcomed the emergence of the manufacturers and often, through patronage, built the logistical structures for capitalism to flourish, e.g. canals, railways9. During this period, many spinners, weavers and apprentices borrowed money (capital) and set up their manufacturing businesses and some acquired great wealth. As the state of the day increasingly became engrained and intertwined with the manufacturing classes, further Acts of Parliament formed that solidified the wealth disparity between workers and masters.

As circumstances changed, the old manorial and parish systems developed ways to placate the working populace on their land and also try to benefit from unfortunate events. As the Enclosure Acts dispossessed a large number of agriculturists, Poor Laws10 were implemented to deal with the, often newly, impoverished masses. The administrative unit of the system was the parish and these oversaw what relief was given and was responsible for the poor. Generally the able-bodied poor were to be set to work in a House of Industry. Materials were to be provided for the poor to be set to work and pauper children would become apprentices. One such as the Speenhamland system11 that subsidised workers wages to ensure they could buy grain. Another was the roundsman12 system where unemployed men were put up to sale periodically, via an auction. Parishes often supplied employers with adults and also children from orphanages and workhouses, as parish apprentices13. These Poor Laws underwent refinements14 in the belief that workhouses could be a deterrent to people of poverty and/or destitution and workhouses were at long last abolished in 192915.

To ensure no unionisation of the workforce, the Combination Act16,17 was introduced, which wasn’t repealed until 1824,18, came back the following year19; with trade unions finally getting proper recognition in 187120. Ironically, it was a free-market proponent that helped reform the initial Combination Act. Francis Place21,22was a journeyman who became a master, who while disliking any legislative interference with wages, adverse to legislation that might hamper the capitalist; and believed that attempts to regulate industry would be a dangerous encroachment on the free direction of capital, and an unjust disturbance on the world of labour. He also thought that if men and masters were left to themselves, wages would follow a law as immutable as gravity. So he helped repeal the Combination Laws in 1824. For 5 years from 1822, the Tory party were under the direction of three men, Canning, Huskisson and Peel, who had all assimilated the ideas of economists and whose policy it was to remove obstacles to trade and industry. This repeal didn’t last long and the next year, another Act was introduced that although allowed Trade Unions to exist, severely limited their actions. Collected bargaining was formally recognised but all the measures necessary to make it effective, were forbidden.

While the Combination Acts were meant to preclude both masters and workers from combining, in effect this was just used on the workers23. As the majority of time, when masters combined to drive down wages or set prices; then due to the magistrate positions often being occupied by family or former manufacturing owners, combined with masters not being obliged to give evidence against each other, it was virtually impossible for workmen to prosecute employers. The Combination Laws gave masters unlimited power to reduce wages and make conditions more severe. Every working man was either to accept the wages that his employer, with the law’s backing, chose to give; or become a vagrant.

There were laws which might have enacted reform, like the Truck Acts24,25 (to stop employers paying workers with ‘tommy tickets’ that were redeemable only in company stores) and Cotton Mills and Factories Act26, 1819 (which reduced working hours to 13.5 per day for children and prohibited children under 9 from working). Often these legislations were dead letters; whereby the laws were just on paper without the required administrative backing to become effectively enforced. Indeed it was noted that from the 1819 Act only two convictions had ever taken place under it27. Or when manufacturing owners took the bench at magistrates, they often tried their own employees for offences against themselves, disregarding any wrong-doing on their own part. A Monmouthshire coalowner and magistrate, wrote to the Home Office in 183028, during a strike partly against the illegal truck system:

“The steps I shall propose to take will be to have the men apprehended who have left their employ and to have them sent to the treadmill”.29

Whenever workers tried to gain reform or recognition on their working conditions, the state has often used brute force along with the magisterial route to break any resistance. There have been countless examples of private companies having the backing of the police, army and private security forces whenever workers have gone on strike or just demonstrated for better conditions30-41. This has happened in every country that developed a capitalist economy. As we can see that industrial capitalism, to the same extent as manorialism or slavery, was founded on force. Like its predecessors, capitalism could not have survived at any point in its history without state intervention. Coercive state measures at every step have denied workers access to capital, forced them to sell their labour in a buyer’s market, and protected vested interests.

You may wonder why the working classes didn’t vote for governments favourable to their conditions. This is due to there be no voting rights for most people. A survey conducted in 1780 revealed that the electorate in England and Wales consisted of just 214,000 people; less than 3% of the total population of approximately 8 million. In Scotland the electorate was even smaller: in 1831 a mere 4,500 men, out of a population of more than 2.6 million people, were entitled to vote in parliamentary elections42. Even when the UK had a revolution, a lot of the agitators were against giving voting rights to people without land or a substantial monetary interest43,44.

As you can see, the state played a paramount role during the’laissez-faire’ period, siding mainly with the capitalist classes. The prominent freedom lays with masters on how their employees get treated and paid; any contiguous freedoms for workers came from arduous struggles. Throughout modern history, the state has often sponsored, backed and been intertwined with private capitalist enterprises. The next part will look into this subject.

1) https://en.wikipedia.org/wiki/Market_fundamentalism
2) https://en.wikipedia.org/wiki/Manorialism 
3) https://en.wikipedia.org/wiki/Free_market#Laissez-faire_economics
4) Polanyi, Karl. The Great Transformation. Beacon Press, Boston. 1944. p. 87.
5) https://en.wikipedia.org/wiki/Inclosure_Acts
6) https://en.wikipedia.org/wiki/Enclosure
7) https://www.britannica.com/event/Reformation
8) https://www.filmsforaction.org/news/the-iron-fist-behind-the-invisible-hand-corporate-capitalism-as-a-stateguaranteed-system-of-privilege/
9) The Town Labourer, J.L. & Barbara Hammond: https://archive.org/details/townlabourer00hammuoft/page/8
10) https://en.wikipedia.org/wiki/Act_for_the_Relief_of_the_Poor_1601
11) https://en.wikipedia.org/wiki/Speenhamland_system
12) https://en.wikipedia.org/wiki/Roundsman_System
13) https://spartacus-educational.com/IRworkhouse.htm
14) http://www.victorianweb.org/history/poorlaw/royalcom.html
15) https://en.wikipedia.org/wiki/Local_Government_Act_1929
16) https://en.wikipedia.org/wiki/Combination_Act_1799
17) https://www.encyclopedia.com/history/modern-europe/british-and-irish-history/combination-acts
18) https://api.parliament.uk/historic-hansard/commons/1824/may/21/combination-laws-resolutions-of-select
19) https://en.wikipedia.org/wiki/Combinations_of_Workmen_Act_1825
20) https://en.wikipedia.org/wiki/Trade_Union_Act_1871
21) https://www.encyclopedia.com/people/social-sciences-and-law/social-reformers/francis-place
22) https://archive.org/details/townlabourer00hammuoft/page/134
23) https://archive.org/details/townlabourer00hammuoft/page/133
24) https://en.wikipedia.org/wiki/Truck_Acts
25) https://www.legislation.gov.uk/ukpga/Will4/1-2/37/enacted - https://www.legislation.gov.uk/ukpga/1831/37/pdfs/ukpga_18310037_en.pdf
26) https://en.wikipedia.org/wiki/Cotton_Mills_and_Factories_Act_1819
27) https://api.parliament.uk/historic-hansard/commons/1825/may/16/cotton-mills-regulation-bill#S2V0013P0_18250516_HOC_43
28) https://archive.org/details/townlabourer00hammuoft/page/65
29) https://www.geriwalton.com/the-treadmill-for-punishmen/
30) https://www.bl.uk/romantics-and-victorians/articles/the-peterloo-massacre
31) https://en.wikipedia.org/wiki/Radical_War
32) https://en.wikipedia.org/wiki/Merthyr_Rising
33) https://en.wikipedia.org/wiki/Canut_revolts
34) https://en.wikipedia.org/wiki/1842_Pottery_riots
35) https://en.wikipedia.org/wiki/Coal_miners%27_strike_of_1873
36) https://en.wikipedia.org/wiki/1892_Broken_Hill_miners%27_strike
37) https://en.wikipedia.org/wiki/Llanelli_riots_of_1911
38) https://en.wikipedia.org/wiki/Tonypandy_riots
39) https://en.wikipedia.org/wiki/Ludlow_Massacre
40) https://libcom.org/library/us-thibodaux-massacre-1887
41) https://www.britannica.com/event/Pullman-Strike
42) http://www.nationalarchives.gov.uk/pathways/citizenship/struggle_democracy/getting_vote.htm
43) http://constitution.org/lev/eng_lev_08.htm (40 shillings was a commonly held standard for voting rights, at least by Ireton)
44) http://www.putneydebates.com/