Capitalism’s Evolution: Industrial Revolution to Ideologies
Adam Smith and Liberalism
Adam Smith emphasized the principles of liberalism: skilled labor and research are the engine of profit maximization in a market economy. The state should abstain from investing in the economy and allow free trade. However, in capitalism, the lack of planning and constant production increases are a source of recurring cyclical economic crises. These crises occur because supply tends to increase faster than demand, leading to excess inventory and worker layoffs.
Banking and Finance
Banks became a crucial institution in capitalism’s development, providing capital to companies, acting as direct investors, and facilitating payments using checks and bills of exchange. Corporations arose, dividing company capital into shares that could be bought and sold on the stock market.
Expansion of Industrial Capitalism
In the early nineteenth century, industrialization spread to France and Belgium. Between 1850 and 1870, Russia, Germany, the United States, and Japan also industrialized. Eastern Europe remained largely outside this process until well into the twentieth century. The Industrial Revolution resulted from combined economic and technological changes, beginning in Britain in the eighteenth century, profoundly transforming society and the economy.
The Demographic Revolution
Since the mid-eighteenth century, a population growth process began. The European population increased from 140 million in 1750 to 187 million in 1800 and 266 million in 1850. Causes included increased food production and advancements in hygiene and medicine, leading to decreased mortality and increased birth rates.
The Agricultural Revolution
Increased population led to higher food demand and rising agricultural prices. Land became private property, allowing owners to implement changes. Innovations like the Norfolk system (eliminating fallow land with fodder crops) and mechanization were introduced. New crops such as corn and potatoes were cultivated. The Norfolk system allowed continuous land use and provided livestock feed. Mechanical sowing and new plows improved soil cultivation and seed protection. The Industrial Revolution gave rise to capitalism as an economic model and liberalism as a political doctrine.
New Industries and Energy Sources
Electricity and oil began supplanting coal. The dynamo (1869) enabled electricity production in power stations, while transformers and alternators (1897) facilitated electrical current transfer. Electricity had multiple applications: rail, tramways, telephones, telegraphs, radio, phonographs, cinema, etc. Oil: the invention of the internal combustion engine allowed its use as fuel for automobiles. The diesel engine increased shipping capacity and speed. Aviation became possible thanks to oil. In metallurgy, steel and aluminum production boomed. The chemical industry developed significantly in Germany, producing new fertilizers, pesticides, and chemicals.
A New Industrial Organization
Mass production emerged as the best way to increase productivity, reduce time, and lower manufacturing costs. Taylorism involved the production chain, dividing the production process into specific tasks using high-precision machines. Each worker performed a very specific process. This system, originating in the United States, was implemented by Ford. Industrial concentration led to larger companies, giving rise to cartels, trusts, holding companies, and monopolies.
Marxism and Socialism
In the mid-nineteenth century, Karl Marx and Friedrich Engels criticized the exploitation of the working class and advocated for a workers’ revolution to destroy capitalism. The end of private ownership would lead to the disappearance of social classes and the achievement of a communist society—a classless society. Marxists proposed creating socialist workers’ parties.
Anarchism
Anarchism encompassed thinkers who shared three basic principles: individual freedom, collective property, and rejection of authority. Anarchists opposed participation in political life and the organization of workers.
Internationalism
Both anarchists and Marxists advocated for uniting the global working class to fight capitalism (proletarian internationalism). Marx initiated the International Workingmen’s Association. Socialist leaders founded the Second International in Paris, an exclusively socialist organization aimed at coordinating socialist parties’ programs and actions.