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Chapter 2 The Historical Development of Capitalism Feudalism and the Birth of Capitalism The Emergence and Nature of Capitalism The Industrial Revolution Colonialism: Capitalism on a World Scale Summary The Importance of Historical Processes

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Chapter 2 the historical development of capitalism l.jpg
Chapter 2 The Historical Development of Capitalism

  • Feudalism and the Birth of Capitalism

  • The Emergence and Nature of Capitalism

  • The Industrial Revolution

  • Colonialism: Capitalism on a World Scale

  • Summary

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The Importance of Historical Processes

  • The present economic landscape can only be understood as the result of an historical process

  • Decisions to site production facilities “yesterday” produce the spatial pattern that is the foundation for trade and patterns of consumption today

  • We can visualize these processes at various geographic scales

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Feudalism and the Birth of Capitalism

  • From hunting & gathering to domesticated agriculture (animals and crops)

  • Slave-based empires (e.g. Roman) and their feudal successors (ca. 5th Century)

  • A form of economic and social relations that extended in Europe to ca. 15th century

  • Settlement in North America did not succeed feudalism, but was capitalist in character from the outset

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Characteristics of Feudalism

  • Tradition shaped life and work

  • In Europe the church was the dominant political and ideological institution

  • Aristocratic land-owners formed the ruling class, who extracted rents from tenant farmers (often serfs) in low productivity agriculture

  • Feudal cities – often fortified – with guilds – markets, where universities were established

  • A hierarchy of feudal towns, mostly small trading centers, with negligible interregional trade

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Feudal Regions & The Beginnings of Trade

Agricultural innovations; bubonic plague; the European Renaissance

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Characteristics of Early Capitalism

  • Markets: buyers and sellers of goods & services at agreed upon prices

  • Market types: perfect competition – perfect monopoly – oligopoly (and other types)

  • The profit incentive = revenue – cost

  • Dynamic behavior of buyers and sellers, including incentives from innovation in products and production processes

  • Class relations: merchants & burghers vs. the old aristocracy. “Unlike feudal Europe, workers under capitalism must sell their labor power to survive. Thus the process of commodification extended to include the capacity to labor.”

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The Emergence and Nature of Capitalism

  • Rise of trade-based city states – links to old trade routes to the Far East and in Europe

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Alternative Models of Competition

Barriers to Entry - High

Barriers to Entry - Low

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Early Capitalism, Continued

  • Finance: replacing barter with money, and institutions to handle and regulate money

  • Uneven development as an inevitable outcome, historically persistent, at scales ranging from local to global

  • Long-distance trade – fueled by transport innovation – allowing regional specialization based on principle of comparative advantage

  • Ideological change – printing/reading, religion, science, the Enlightenment – “a worldview that stressed secularism, individualism, rationality, progress, and democracy.”

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Early Capitalism, Continued

  • Feudal empires (e.g. Holy Roman Empire, Figure 2.11) with multiple nation-states

  • Replaced feudal monarchies with nation-states

  • Nation states supporting development of capitalism through regulations, public investment and programs (e.g. education, defense, trade protectionism…

  • BUT: these institutions do not preclude transnational capitalist development, evident in this era of globalization

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The Industrial Revolution

  • Industrialization as a process with multiple transformations in inputs, output, and technologies. Driven by:

    • Harnessing inanimate sources of energy

      (Figure 2.12), wood-coal-petroleum & gas

    • Technological innovation (Table 2.1)

    • Rising Productivity (Figure 2.14)

  • Spatial diffusion of the Industrial Revolution

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Cycles of Industrialization – Kondratiev Long Waves

The Fifth

Wave – IT

& producer


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Consequences of the Industrial Revolution

  • Creation of an Industrial Working Class

    • Rise of organized labor

  • Urbanization – industry as “city forming” activity

  • Population Effects: Malthus’ warning vs.

    productivity increases, health improvements, lowered birth rates

  • Growth of Global Markets & International Trade – transport improvement, international finance, timing of development