Development of International and Trade and Commerce History

¶ … fragmentation and integration of economic and political power has contributed to the growth of market economies, but this has in fact historically been the case since the Middle Ages. The sprawling political and economic entities of the Middle Ages - especially, of course, the Holy Roman Empire - were (like feudalism) based on ancient ties of family and fealty. Until these entities were broken down by the series of lengthy wars newer and more purely economic relations between newly defined political entities could not be established.

Yet even as entities like the Habsburg Empire were disintegrated, nations were integrating their economic and political power through the process of colonization, a process that supplied the colonial powers with sufficient raw resources and cheap labor to commit themselves (without too much sacrifice to their own citizens) to the process of industrialization.

Feudalism and capitalism are based on fundamentally different assumptions about the world and, from our perspective after so many years of capitalism it is hard at first to understand how the one merged into the other, how the commercialism-uber-alles of capitalism replaced the traditional, personal and moralistic basis of feudalism.

But in fact the transition was simpler than might appear and was based in the transition from agrarianism to industry: The personal ties amongst people that were at the heart of feudalism were also duplicated and reified in the ties people held to the land that they had lived on for generations and a knowledge that if farmland is not treated responsibly by everyone than it will fail to be productive for anyone.

Factories require no such responsible oversight, for unlike the land factories have a preprogrammed obsolescence to them. Factories will have to be constantly upgraded or torn down. They do not require fealty as the land does, and as people lost their connection to the land they lost their connections to each other - finding some solace in the pursuit of profit.

Capitalism manages the costs (and risks) associated with technological innovation (upon which it depends) in two ways that are in fact closely linked to each other: The first is that risk is widely distributed, although of course this becomes less and less true during an age of globalization. Capitalization could not have arisen initially in its original form, for the distribution of the risks of innovation amongst a high number of individual entrepreneurs is an essential part of the first stage of capitalism.