HIST363: Global Perspectives on Industrialization

I am jumping forward by one century. In Werner Sombart's and Max Weber's analysis of capitalism, for example, there was much confidence in the economic superiority and the economic rationality of capitalism. However, these authors did not see capitalism anymore as a carrier of human progress, moral improvement, and civilizational uplift. On the contrary, liberals like Weber feared the increasing rigidity of the system that he anticipated would threaten human freedom by coercing economic actors to function according to its increasingly compulsive rules of relentless competition and growth, or to drop out of the market altogether. Among conservatives as well as on the left, capitalism was seen as an irresistible force of erosion: Custom was seen to be replaced by contract, Gemeinschaft by Gesellschaft, the traditional by the modern, and social bonds by the market. On the right, anti-capitalism frequently went hand in hand with anti-liberalism and anti-Semitism, particularly after the Great Depression of the 1870s. The socialist critique of capitalism was different, and the most powerful one. On the one hand, it attacked the exploitation of labor by capital, the increase of social inequality, the lack of a fair deal, and alienation and suppression in the workplace. On the other hand, it predicted the decline of capitalism due to its internal contradictions and its replacement by something new; namely socialism. Many of those who did not enjoy this perspective did not contest it either, but were fearful of its arrival.

The discourse of ascent and flourishing had largely been replaced by a discourse of fall and decline. I mentioned at the beginning that this was the intellectual, mental situation in which the concept of capitalism emerged, first as a critical and polemical concept; soon to be turned into a powerful analytical tool. The concept emerged, one might say, as a concept of difference. It was used to identify and critically underline certain features of the present, in contrast to what it was thought to have been in previous times, and to what it might become under socialism in the future. The contrast with a selectively commemorated past and with an imagined future was constitutive for the emergence of the concept "capitalism," and in a way this mechanism still works today when it comes to more basic discussions of capitalism.¹⁰

How can we explain this change in the evaluation of capitalism between the late eighteenth, late nineteenth, and early twentieth century; this change of mood from appreciation to criticism? Let me pick out three relevant issues.

1. While Adam Smith had known capitalism before industrialization, nineteenth-century capitalism mainly spread in the form of industrial capitalism, based on the factory system and wage labor en masse. Now the capitalist principle of commodification was fully extended into the sphere of work and labor, to the activities of human beings on a grand scale. Work relations were becoming capitalist, which meant that they became dependent on changing market mechanisms, subject to ever stricter calculation, and subordinated to supervision by employers or managers. At the same time, industrial wealth was accumulated to an unprecedented degree, due to an increasing need for large-scale fixed capital in mines, factories, railways, and other institutions of industrial capitalism. As a consequence, wealth differences became more visible, and stricter controls of profitability over time were felt to be needed and were practiced by employers and managers. The class difference had been built into capitalism as a potentiality from the start; now it became more manifest. It could be directly experienced, widely observed, and critically discussed. This was the constellation - industrial capitalism with the factory system, large-scale capital accumulation, and wage labor as a mass phenomenon - which served as the empirical base for the classic narratives of Marx and Engels, and for the rise of labor movements critical of or hostile to (basic elements of) capitalism.¹¹

2. Technological and organizational innovation became much more important, frequent, and regular under industrial capitalism than ever before. In other words, what Joseph A. Schumpeter would later call "creative destruction" became the rule and a widespread experience. Factories pushed aside cottage work in the spinning of yarn and the weaving of clothes. Steamships replaced traditional forms of transportation on rivers, canals, and oceans. Producers of electrical installations gained superiority over the providers of gas-powered lighting. This was a process opening up new opportunities to many and new roads towards success, but there were also numerous losers at the same time. Ascent and decline are mechanisms anchored right at the core of capitalism. Permanent competition, sustained insecurity, and threatening dangers were institutionalized; and resented. There were many losers. All of this came in cycles, with ups and downs, booms and busts. Nineteenth-century crises impacted on large segments of the populations. The crises helped to delegitimize capitalism and increase anti-capitalist resentment.¹²

3. There was a rise of expectations. Partly as a precondition and partly as a consequence of capitalist industrialization, previous patterns of social control were loosened, the standard of living was raised, fast historical change was experienced, and human affairs appeared - in fact proved - to be changeable. The level of education was raised, and public spaces emerged in which intellectuals and the media played a dynamic, frequently a critical, role. As a consequence, people became less patient, more demanding, and more critical. In a way, capitalism's critique followed from capitalism's success; something analyzed by Joseph Schumpeter and Albert Hirschman as capitalism's propensity to undermine itself.

All of this had surfaced by the end of the nineteenth and the start of the twentieth century, very much in contrast to the period of Adam Smith. While capitalism developed its strengths and powerfully expanded - both internally (into different spheres of life) and externally (towards different parts of the world) - its image darkened, its evaluation became increasingly pessimistic, and its past and its present were heavily criticized.