The relentless revolution: a history of capitalism (6 page)

Aristocrats not only looked down on those in commerce but encouraged qualities absolutely opposed to traits supportive of economic development. They cultivated leisure along with contempt for those who worked for a living. They lived off rents and other privileges and spent this money buying items to grace their persons, tables, and estates. Often they spent more than they received in rents and dues, creating an enduring, sometimes hereditary indebtedness from unpaid bills. They got away with this profligacy because few storekeepers or artisans wanted to incur the wrath of their principal customers.

Noble and gentry families were the celebrities of the premodern world. They contributed learning, taste, style, and their glamorous presence to major public celebrations. They were the only candidates for high positions at court, or in the military, or in the church. They had first claim to any economic surplus. Merchants could not effectively protect their interests because they lacked the power to do so. Time and time again they were done in by insecure titles to property, onerous taxes, or outright appropriation of their goods. Those who had their ruler’s ear gave little thought to the consequences of these burdens. Still, since trading offered an alternative to taking by force what one wanted, it was considered a civilizing force.

Those in the highest ranks of society in, say, sixteenth-century Europe inherited their positions, which gave to family major importance. It was not “what you did” but “who you were” that mattered. Far from being ashamed of their inherited status, men and women of gentle birth celebrated their lineage as evidence of a divinely sanctioned order. Domination was their birthright. Even in those places like the sixteenth-century Italian city-states of Venice, Florence, and Genoa or Amsterdam, where an urban oligarchy ran things, aristocratic values commanded great respect. Society recognized three groups: the clergy, the aristocracy, and commoners. People then believed in natural inequality in a world divided between the special few and the ordinary many. They found proof of hierarchy in nature when they looked at the animal world with its lions and mice. The strong sense that this was the proper order, implanted as children were growing up, was as convincing to them as our beliefs are to us.

The reason to keep separate the ancient practice of trading from the novelty of industrial production in a history of capitalism is to fix our attention on those changes that brought into being capitalism. Trade itself is not one of them. Merchants got rich, when they did, by buying low and selling high. Sometimes they were lucky enough to get a windfall or to be able to take advantage of fortuitous shortages. The wealth from capitalism came from something else, profits from producing things. It took great capital to introduce machines into production processes, but they generated even greater profits by producing things more efficiently. The capital invested in machinery made investors rich because the machines enhanced the productivity of the workers employed. The creation of great wealth distinguished capitalism from preceding economic systems, but so did the reorganization of labor and the enlargement of the pool of consumers to buy the new products. The earth-spanning commercial networks that Europeans began laying down in the sixteenth century vastly increased the places where capitalists could send their goods. When capitalism acquired its momentum, investors didn’t stay put in Europe. They followed the trajectory of Europe’s trading empires.

The significance of expanded trade routes and partners could not possibly be overstated, but the key point to make about trade in a history of capitalism is that it had existed for centuries before capitalism and would have continued to flourish without it. Because we can see the obvious connections between the sixteenth-century voyages to the Orient and the New World, we’re tempted to connect it seamlessly to the eighteenth-century invention of the steam engine and the emergence of full-blown capitalism as though the one followed the other inexorably, but there is no inevitability in life. Nor do we ever have a very good sense of what the future holds for us. In the middle of the seventeenth century, when new trades were opening up, there was no reason for people to expect that a succession of marvelous machines would alter modes of work that had prevailed for millennia or that a fresh description of human beings and their social nature would soon supplant the traditional wisdom that had long guided people.

European Domination

Before the arrival of the Portuguese, the common attitude of all the different participants in East Asian commerce, diverse in ethnicity and religion, had been that the sea belonged to no one. This changed with the arrival of the newcomers. Albuquerque’s king showered him with titles after he had secured control of the Malabar Coast, Ceylon, Malacca, and Ormuz. Portugal achieved naval supremacy in the Indian Ocean after defeating an Egyptian fleet in 1509. When China, which possessed the only other strong naval power in the area, withdrew from the field of contest, the Portuguese controlled most of the trade until the arrival almost a century later of the Dutch, French, and English, who were equally bent on monopolizing whatever they could hold on to.

The Ottoman Empire was probably more advanced than Portugal in many ways, but Portugal had the advantage of swifter, more maneuverable ships. When they encountered an on-again-off-again hospitality in Malacca, where they sought spices, they turned to force, using their military superiority to take advantage of the chaotic rivalry among rulers in the Malay Archipelago. For those interested in naval warfare, the new Portuguese tactics are fascinating. Previously ships had really been carriers of soldiers. They would fire some guns in combat but mainly maneuvered to get their men on their opponents’ decks. The Portuguese eschewed this approach. They turned their ships into seaborne gunnery platforms from which they pounded the enemy, never fearing a direct attack because of their ships’ capacity to sail against the wind.
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It took a combination of gold, silver, and force to dominate the spice trade, but the Portuguese succeeded in doing so, laying down a new law of the seas in the East, even if they never entirely monopolized their lucrative trades.
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For a short time Portugal, a nation of a million people, succeeded in imposing its will upon the Chinese, Arabs, and Venetians who had long plied these waters. They carried European tools and weapons to Africa, silver and gold to China, Chinese goods to Japan, and spices and silks back to Europe. On both coasts of Africa, the Portuguese established fortified towns where they could store goods and refit their ships: Mozambique and Mombasa on the east, Elmina and Luanda on the west. From spices to slaves, they conducted business around the world through some fifty settlements that they defended against all comers.

Rarely have such great riches fallen into the laps of rulers with so little effort on their part. The extraordinarily lucrative spice and silver trades promoted extravagant royal habits. In both Portugal and Spain taxes were high, and the distribution of wealth followed the traditional pattern in which the few indulged their taste for grandeur and the many penurious peasants and workers struggled to survive. Two powerful kings, Charles V, the grandson of Ferdinand and Isabella, and his son, Philip II, who ruled Spain from 1556 to 1598, knew exactly what they wanted to do with this seemingly endless flow of bullion. They would wage war against the Turks, French, Italians, Protestants, and even popes in order to establish their hegemony in Europe and protect the supremacy of Catholic faith, now challenged in the East by the Ottoman Turks and in Europe by Protestants. They also needed money to quell rebellion in their own empire, for the people of the Netherlands had begun a protracted revolt for independence in the 1580s. A heretical queen ascended the throne in England. The joining of the crowns of Portugal and Spain in 1580 made Spain more politically powerful, even if economically it was stagnating.

Spanish shipbuilders flourished with the new demand for oceangoing vessels. Spain’s woolen industry also prospered under royal favor, but the royal bureaucracy battened off most of the merchants, manufacturers, and farmers through a steady diet of customs, tolls, and taxes. The Spanish kings’ pervasive fear of heresy led them to curtail the travel of their subjects during most of the sixteenth century. Bans on the importation of books obstructed the free circulation of ideas as well as enterprise. The Spanish aristocracy resisted change, and the crown stifled new industries with onerous regulations and taxes. Spanish industry reached its high-water mark in 1560. After that the demand for the goods of English, French, and Dutch artisans and traders, who had been supplying Spanish consumers, took off while Spain’s cities became as barren as its land.

The appeal of enterprise could not overcome the aristocratic contempt for commerce that permeated the society. Spanish hidalgos, those elegant gentlemen, used their considerable political influence to protect their way of life. They put ceilings on domestic prices that cut domestic profits while encouraging cheap imports from abroad. This of course undercut their own artisans. The monarchy was equally indifferent to Spanish farmers, whose crops were at risk every winter, when the highly valued merino sheep moved from the northern mountains to the warmer south. State-mandated trails existed to keep the sheep from trampling nearby fields. But the Mesta, the guild of shepherds, ignored complaints, and the king, a great beneficiary of the taxes that the wool trade generated, failed to enforce the laws.

In a general history of this era, Spain and Portugal would get a great deal of attention, but this is a brief history of capitalism, to which they contributed little. Neither at home nor in their settlements did they move beyond the conceptual universe of hidalgos, honor, and heroic deeds. Don Quixote, created by Miguel de Cervantes in 1605, epitomizes the qualities that spelled economic failure for the Spanish. Perhaps his mistaking a windmill for a mighty opponent was Cervantes’s way of saying that Spanish gentlemen, mired in the past, couldn’t even recognize this benign source of energy for productive work.

We are so used to listening to the upbeat story of progress that it is only with difficulty that we can imagine a different narrative, one that is truer to the past than the future. What happened to Spain and Portugal was not dissimilar to the earlier arrests of prosperity in the Roman, Asian, or Islamic worlds. This was what had always happened: short-lived bursts of energy followed by inevitable decline as yet another ascendant power failed to vault the limits held in place by its resources, its institutions, and its internal contradictions. These tales of empires, rising and falling, spawned a strong sense that history was cyclical and that change brought catastrophes more often than sustained accomplishments.

Portugal and Spain did not fail at what was important to them, and their empires lasted longer than those of other imperial powers. What is striking is how little their amazing exploits in navigation, explorations, and trade changed their societies at home. Spain could halt the expansion of Islam when it defeated the Turks at sea near the Greek city of Lepanto in 1571 (at which Cervantes fought), but they could not or would not tolerate a restructuring of their societies.

Formal and informal warfare became intense and brutal in Atlantic waters. As early as 1564 Spain began to convoy its gold and silver fleets from the New World to the House of Trade in Seville. The convoys, leaving the Americas in April and August, continued for a century. The English too organized convoys once the tobacco grown in its Chesapeake settlements grew valuable enough to attract raiders. Europe’s endemic warfare lent some legitimacy to attacks on the high seas because all countries issued what were called letters of marque—licenses—to the owners of vessels to arm them for the purpose of capturing enemy merchant ships. As long as two countries were at war, as was much of the time, privateers were part of the nations’ armed forces. Dutch, English, and French privateers repeatedly raided Spanish settlements, and they lay in wait for straggling ships in the Spanish silver convoys, twice capturing the entire fleet. Not yet in possession of their own colonies, these countries chipped away at the profits of the trailblazers.

The most famous privateer in the English world was Sir Frances Drake, who repeatedly attacked Spanish settlements and ships in the Caribbean. On one occasion he seized Santo Domingo, freeing the slaves, burning the city, destroying the ships in the harbor, and receiving a handsome sum after returning the city to the Spanish. His audacity in sailing to the Pacific around Cape Horn in 1572 to attack the unarmed Spanish silver fleet going to the Philippines thrilled the English public, whose queen, the Protestant Elizabeth, had long been a target of the Spanish king. When war between the Spanish and English broke out, Drake once again was in business as a privateer. Leading fleets of two dozen ships, he raided up and down the north coast of South America, known as the Spanish Main. Another pirate, Henry Morgan, mobilized dozens of ships and thousands of buccaneers in his attacks on Spanish possessions in the Caribbean. He was arrested for breaking the peace, but the outbreak of a new war won him a reprieve, a knighthood, and command of England’s new colony of Jamaica.

On occasions like this when Europe’s warring powers signed peace treaties, many of the licensed privateers like Morgan became pirates, taking out after merchant ships without the cover of royal licenses. Drake, like the Portuguese sailors who commandeered the trade in the Indian Ocean, represented more of the old order than the new. Sixteenth-century pirates took advantage of the new trades to the Orient and New World and adopted the superior designs for boats, but these adventurers would have been recognizable to the Phoenicians who plied the Mediterranean in ancient times. The trade in silks and spices from the East Indies enticed pirates because one such prize would pay the outfitting cost of an entire voyage. Turkish pirates preyed on ships in the Mediterranean, though the pashas of Tripoli later found it more rewarding to exact tribute in formal treaties. Piracy also flourished in the Red Sea, Indian Ocean, the Strait of Malacca, and the South China Sea, but especially in the Caribbean because of the allure of the gold and silver carried home by the Spanish.