Capitalism and Industrialization: America vs. China

Introduction: Defining Capitalism and Industrialization

Capitalism is one of the oldest economic systems in the world and is founded on the concept of private ownership: what is mine is mine, and what is yours is yours. It is also grounded in the private ownership of all aspects of production — investment capital, land, and labor — employed to generate profits. Many scholars view capitalism as synonymous with the free market system. Some have argued that capitalism is fundamentally the protection of individual rights and property rights.¹

Industrialization is a term closely connected with the industrial revolution. It refers to the process by which a region or local economy transforms from one founded on agrarian pillars — such as farming — to one centered on the manufacture of goods. Through industrialization, small-scale manual labor is replaced by mass production through mechanized means, and assembly lines of workers replace individual craftspeople. While not without flaws, industrialization is generally associated with economic booms, the division of labor in society, and the harnessing of technological innovation as a means of solving problems, rather than relying strictly on human-centered or individually controlled solutions.

This paper examines the interaction between capitalism and industrialization in America and compares it with these forces in China, exploring why the manifestations were so different in each context.

Capitalism and Industrialization in America

In America, there was a very clear relationship between capitalism and industrialism: the two supported one another in a symbiotic way, each spurring the other's growth and development. Even though industrialization can exist within any economic system, in America in the late nineteenth century, the prevailing economic system was capitalism — one that is deeply individualistic and that corresponded well to the pioneer spirit and the belief in forging a better life through grit and determination. As historians have noted, entire new industries helped push economic growth forward, and more and more regions were able to export crucial raw materials to America for use in its rapid industrialization.² Working symbiotically, these two forces reinforced one another, making direct contributions to each other's development.

However, these forces were not without serious drawbacks. Both industrialization and capitalism created massive inequalities among regions of America, particularly between industrialized and unindustrialized areas. With great changes in society typically come great anxieties as well. Economic fluctuations brought uncertainties that left many people out of work, which intensified resentments as cities became crowded with people from the countryside who flocked there in search of employment. The boom of industrialization — combined with the constant need for work, periodic joblessness, and a lack of adequate childcare — meant that industrial capitalism helped enable abuses such as child labor: "In the canneries of Baltimore… children are permitted to work for long hours, even though they may be very young."³

Industrialization and Socialism in China

In China, by contrast, one could argue that capitalism and industrialization interacted with far greater tension and anxiety. China rejected capitalism initially, and one could argue that the rise of capitalism in the West pushed China to cling even more firmly to socialism. China was slow to embrace industrialization, and when it finally did, it did so cautiously, with a close eye on the West.

A dramatic illustration of this tension is the Great Leap Forward of 1958–1961, which was Mao Zedong's attempt to overtake the West in terms of industrial development. It was a misguided effort to catch up on a movement China had been slow to join, and it ended in catastrophic failure. Mao encouraged the people to stop growing crops and instead to smelt steel at home — a policy that directly contributed to the deaths of an estimated 30 million people through famine.

The way that industrialization and capitalism interacted in China is therefore more complex and ambiguous. The government remained firmly communist, yet the people increasingly embraced the principles of capitalism through private enterprise — and it is precisely this embrace that has driven China's extraordinary economic growth since the reforms of the late 1970s. Mao Zedong himself appeared willing to selectively absorb foreign capitalist influences, but insisted on doing so with caution: "We must absorb whatever we today find useful, not only from the present socialist or New-Democratic cultures of other nations, but also from the older cultures of foreign countries, such as those of the various capitalist countries in the age of enlightenment. However, we must treat these foreign materials as we do our food… we should never swallow anything raw or absorb it uncritically."⁴

Conclusion: Divergent Paths to Industrial Development

In the West, industrialization and capitalism intermingled in a way that was more organic and less encumbered by the influence of what other countries around the world were doing. In China, industrialization developed as a means of catching up to western nations — with a desire to overtake them — an ambition that ultimately backfired with devastating consequences. Industrialization was not able to intermingle freely with capitalist business norms in China until the late 1970s, but once it did, China was able to ascend from being one of the poorest nations in the world to one of the wealthiest in a remarkably short span of time. The comparison illustrates how profoundly a nation's prevailing ideology shapes the way in which economic and industrial forces are adopted, adapted, and ultimately expressed.