Capital Before Large-Scale Industry — Jairus Banaji

[This post introduces Jairus Banaji’s new book, A Brief History of Commercial Capitalism (Haymarket, 2020).]

Since this post does not concern law in any essential way, let me start with an interesting example of how Marx tended (wrongly, of course) to downplay the role of law in structuring capitalism. What interests me about the example is the more general implication it has—namely, that it is perfectly valid for latter-day Marxists (historical materialists, if you will) to mount criticisms of Marx where these are deserved. 

Marx viewed wage-labour through two distinct, if related, lenses. On the one hand, it was simply equated with free labour in the conventional sense of workers who entered into contracts of employment and thereby “sold” their labour-power to employers. On the other hand, and more fundamentally, wage-labour was seen by Marx as capital-positing, abstract labour, where abstract labour (labour divested of all concrete attributes such as occupation, skill, gender, etc.) meant value-creating labour, labour in its determinate form or aspect as the source of value as opposed to use-value.

Now, latching onto the first of these meanings, suppose we ask, does the freedom of the free labourer also mean that they are free from coercion or even violence in the employment relation? The answer is “no”. [1] There was no suggestion in Marx that the freedom of “free” labour involved an absence of either domination or coercion in the employment relation. All the same, an important paper by Marc Steinberg has shown that Marx tended to downplay the degree to which employers in his day resorted to legal coercion in seeking control over the execution of jobs and the workplace more generally. [2] In particular, the formal subsumption of labour characteristic of numerous unmechanized workplaces (e.g. those in the Staffordshire earthenware industry before the 1880s) was characterized by large doses of legal coercion in the form of criminal prosecutions for breach of contract.     

So this is an example of how Marx could sometimes sidestep an obvious feature of the capitalism of his day. In A Brief History of Commercial Capitalism, the general argument implies two criticisms of Marx along the lines of the example just given. [3] First, Marx treats the merchant as an agent of productive capital, that is, as a mere form or agency of industrial capital. This is fine as the simplifying assumption that it is for the purposes of Capital and the analysis developed there. (On “simplifying assumptions” in Capital, see the forthcoming translation of Henryk Grossman’s book The Law of Accumulation and Breakdown of the Capitalist System, which Brill plans to publish by the end of the year.)  But it does not work historically. Historically the subordination of commercial capital in this purely logical sense took much longer than Marx seemed to suggest, and was only finally completed some years after he died, when there emerged large, vertically integrated industrial corporations of the kind that became typical of the United States in particular. And second, Marx massively telescoped the dominance of industrial capitalism, even projecting it back to centuries where it clearly does not belong.  

The key objective of Brief History is to offer a basis for constructing a passably Marxist history of capitalism, breaking out of the stagnation that has afflicted Marxist theory at this level, and this by exploring the ways in which capital created the world market. What is foregrounded here is less the circulation of commodities as such than the circulation of commodities as the bearers of capital–in other words, the circulation of capital in the form of commercial investments and of the surplus-value-bearing commodities extracted as part of those investment cycles. In short, what is foregrounded is circulation. In volume three of Capital, Marx writes that where mercantile wealth is the prevailing form of capital, the extremes it mediates (in other words, “the various spheres of production between which circulation mediates”) “remain separate from the circulation process”. When capital does master those extremes, it is as industrial capital, which is why Marx writes that in this case production “has absorbed circulation into itself as a mere moment”. What he does not consider is a situation in which it is circulation that absorbs production into itself as a moment, which would be tantamount to saying that mercantile wealth not only retains its independence but has, in his words, learnt to master its extremes. They, the extremes, are no longer external to it. All the same, in these very pages he does allow for the possibility that commercial capital “dominates production directly”, citing what he calls the colonial trade in general and “particularly” the operations of the Dutch East India Company. This, I argue, was always the case with the bigger commercial capitals that dominated much of European and global economic history from as early as the thirteenth century. [4]

Brief History plays with several complementary images of circulation: circulation as globally integrated (chapters 2 and 3); circulation as a hierarchy (chapter 6); circulation as a labyrinth. Global integration worked through trading colonies, wholesale markets and bills of exchange, each of these forming cornerstones of what I call the “infrastructure” of commercial capitalism. It was also accelerated by the increasingly fierce competition between major “national” blocs of capital once world trade came to be dominated by the joint-stocks floated towards the start of the seventeenth century. The competitive accumulation of capital by state enterprises (such as that pioneered by the Portuguese monarchy at the turn of the sixteenth century) and above all by the Dutch and English East India companies was a major factor driving global integration. By circulation as a hierarchy, I mean the supply chains that ran vertically from the “lead firms” (notably, the various East India companies) down to dispersed masses of household producers via intermediate levels and intricate networks of local capitalists who acted as brokers for the foreign trading companies. It was common to describe these trading hierarchies as the “machinery” of trade (the late nineteenth-century Liverpool cotton broker Samuel Smith and the Soviet economist Alexander Chayanov both used this imagery). At a more conceptual level, Chayanov himself referred to the arrangements typical of these bigger commercial firms as a “vertical concentration of capital”. [5] Circulation as a labyrinth refers to the sheer density of commercial functions that came to characterize the circulation of capital under mercantile capitalism. All of the major nineteenth-century trades or markets were essentially massive conglomerations of commercial interests—bill brokers and discount houses, merchant banks, commission merchants, importers, forwarding agents, shipping companies, agency houses and managing agencies, brokers, dealers, middlemen, all of the various categories of wholesale merchants, and so on across the entire landscape of circulation through which capital flowed. This complexity can only really be captured by some equivalent of depth-of-field in deep-focus cinematography, that is, captured as a succession of deep shots, so to speak, so that we have to inject a dimension of Orson Welles into Marx and visualize circulation beyond the abstract circuits that Marx lays out for us at the start of volume two.

Brief History thus constructs a model of the circulation of capital that allows for some level (and varying degrees) of integration between production and circulation and tries to show how much more complex merchant’s capital was in its own structure of accumulation. The book also tries to develop Georges Lefebvre’s essential insight that it was the “collusion between commerce and the State” that promoted the development of capitalism historically. [6] This feature is especially clear in the longest chapter (chapter 3), which deals with the chain of competitive struggles that extends from the Italian drive to dominate Byzantine markets in the twelfth and thirteenth centuries through the Portuguese monarchy’s attempt to set itself up as a merchant out to singlehandedly destroy the Venetian monopoly of pepper (as well as the Muslim networks on which it depended) to the triangular struggle between the Dutch, French, and English that dominated the “mercantilist” seventeenth and eighteenth centuries and engendered the doctrine known as “the jealousy of trade”. Rather than simply subsuming the struggles between these capitals and their supporting states under some abstraction like “imperialism”, the suggestion is that those conflicts encapsulated a competition between commercial capitals that inevitably drew the state into its dynamic and sharpened the embryonic nationalisms of both.  

Another goal of the study is to correct a conventional Left understanding of the British Empire as a mere appendage of British industrial capitalism. That was certainly how Marx saw colonialism in India, but both the East India Company and the managing agencies of the late nineteenth century were emblems of a purely mercantile capitalism. This, of course, is widely recognized in a strand of British historiography that spans the whole literature from Anderson and Nairn’s seminal if abortive attempts to frame the debate on the nature of British capitalism back in the 1960s to later works by Geoffrey Ingham [7] and by Cain and Hopkins [8], at least one of which (Ingham’s) attracted Anderson’s own praise. [9] (The agency houses embodied a peculiar regime of the commercial management of industrial capital if jute mills and rubber plantations are seen as “industry” in some modern sense.)   

In this context, it is worth pointing out that any long-term study of commercial history will inevitably encounter different strands of—or perhaps throw up different meanings of—cosmopolitanism. My description of the heyday of British commercial expansion—that is, the greater part of the nineteenth century—as a period of cosmopolitanism is not intended to appeal to some abstract or invariant notion of what this constitutes. Clearly, if the same word is used to describe aspects of the economic life and culture of Asian port-cities like Masulipatnam and Malacca as well as the regime of global trade and finance that Britain presided over down to 1914, then the term must have rather different meanings.  

At a more general level, the book underscores the elements of modernity in commercial capital, contrary to Marx’s repeated description of merchant’s capital as “antediluvian”. Within the Marxist tradition, this more positive assessment was a perspective to be found in Franz Mehring (Mehring’s pages on the German Reformation were first published in 1910), and in the Russians Mikhail Pokrovsky and I. I. Rubin before Dobb’s disastrous intervention, which latched onto the Stalinist condemnation of Pokrovsky’s use of merchant capitalism. We should recall that Lenin enormously admired Pokrovsky’s history of Russia, the backbone of which was his argument about the role of merchant capitalism in shaping Russian history under tsarism. [10] Outside that tradition, of course, it was Fernand Braudel who foregrounded precisely these modernizing or dynamic aspects when he portrayed the early modern Mediterranean as the theatre of a vibrant commercial capitalism.    

The major themes and leitmotifs of the book thus foreground the competition between capitals; price domination over household producers; the vertical integration of the strongest capitals; Chayanov’s vertical concentration of capital as the concept that best captures the type of capitalist accumulation and control embedded in the so-called “produce trades” (these, remember, involved some of the most powerful commercial firms of the twentieth century, notably the United Africa Company and its two French competitors CFAO and SCOA) [11]; the symbiotic relationship between European commercial firms and indigenous brokers, especially in India with its strong prior commercial and banking traditions; and finally, the growing importance of the velocity of circulation of capital to modern trade. It also sketches a number of commercial strategies: the Dutch East India Company’s concentration on the Asian “country trade”, a largely self-contained circulation designed to minimize the Dutch need for payments in silver;  Rallis’ decision to expand globally when Russian grain was no longer competitive with the wheat pouring out of the American Midwest; the crucial role of designers in sustaining the global dominance of the Lyons silk industry, which, in Carlo Poni’s description, used annual product differentiation as a “strategic weapon” to create barriers to entry and capture important shares of the international market [12]; England’s vital reliance on the surplus on “invisibles” to offset widening trade deficits, a strategy already discernible in her trade with Italy in the seventeenth century; and others.  

The last few pages allude (only that) to a major transformation in the nature of commerce which I have not seen studied in any integrated or systematic way, namely, the commercial revolution of the late nineteenth century. Apart from obvious and well-known markers, such as steamers and intercontinental cable networks, the dramatic transformations of this period included the subordination of physical markets like Cuban sugar to futures trading in the newly emerging commodity exchanges. [13] As I say, I know of no single monograph that covers the whole of this subject to explain what was happening to commercial accumulation in these decisive decades. 

A second issue raised at the end of the book, though never stated in this way, is when does modern large-scale industry truly begin? The significance of the (very) late nineteenth century break is that this is when industrial capital in the modern sense first emerges and when the first multinationals evolve. Recall that in the famous passage of the Communist Manifesto where Marx and Engels speak of capital scouring “the whole surface of the globe” [14], it is not industrial capital they are actually describing but the numerous British-based commercial firms that spread out across the world in the main decades of the nineteenth century, straddling markets as far apart as South America, India, and China. It was only in the last two decades of that century that large industrial firms acquired the sort of mobility that had otherwise always characterized the bigger commercial capitals. This, if you like, is when modern capitalism begins, where “modern” has an even stronger sense than say in the expressions “modern history”, “early modern”, and so on. Marx never lived to see this transformation, though Engels to some degree did and was clearly excited by it.

Jairus Banaji is the author of Agrarian Change in Late Antiquity: Gold, Labour, and Aristocratic Dominance (Oxford University Press, 2007), Theory as History: Essays on Modes of Production and Exploitation (Brill, 2010), Exploring the Economy of Late Antiquity: Selected Essays (Cambridge University Press, 2015), and, most recently, A Brief History of Commercial Capitalism (Haymarket, 2020).


[1] See, e.g., Robert J. Steinfeld, Coercion, Contract, and Free Labor in the Nineteenth Century (Cambridge: Cambridge University Press, 2001), or the essays in Douglas Hay and Paul Craven (eds), Masters, Servants, and Magistrates in Britain and the Empire, 1562–1955 (Chapel Hill: University of North Carolina Press, 2004).

[2] Marc W. Steinberg, “Marx, Formal Subsumption and the Law“, 39 (2010) Theory and Society 173.

[3] Jairus Banaji, A Brief History of Commercial Capitalism (Chicago: Haymarket, 2020).

[4] Karl Marx, Capital: A Critique of Political Economy, vol. 3, trans. David Fernbach (London: Penguin, 1981 [1894]), 445–47.

[5] A. V. Chayanov, The Theory of Peasant Economy, ed. Daniel Thorner, Basile Kerblay, and R. E. F. Smith (Illinois: American Economic Association, 1966 [1925]), 257ff, esp. 262–63.

[6] Georges Lefebvre, “Some Observations”, in Paul Sweezy et al., The Transition from Feudalism to Capitalism (London: Verso, 1976), 125. 

[7] Geoffrey Ingham, Capitalism Divided? The City and Industry in British Social Development (London: Macmillan, 1984).

[8] P. J. Cain and A. G. Hopkins, British Imperialism, 1688–2000, 2nd edn (London: Longman, 2002).

[9] Perry Anderson, “The Figures of Descent“, 161 (1987) New Left Review 20, describing Ingham’s work as “perhaps the most important single contribution—at once historical and theoretical—to a better understanding of the British fate to have appeared in the eighties” (33, n. 43).  

[10] Lenin wrote to Pokrovsky to say he was “extremely pleased with your new book” (letter dated 5 December, 1920); see John Barber, Soviet Historians in Crisis, 1928–1932 (London: Lynne Rienner, 1981), 60. Barber notes that Pokrovsky continued to maintain it was correct “to speak of the epoch of commercial capitalism as an independent epoch in the development of capitalism”. 

[11] I discuss this in more detail in my paper for the Henry Bernstein Festschrift; see “Merchant Capitalism, Peasant Households, and Industrial Accumulation: Integration of a Model“, 16 (2016) Journal of Agrarian Change 410.

[12] Carlo Poni, “Fashion as Flexible Production: The Strategies of the Lyons Silk Merchants in the Eighteenth Century”, in Charles F. Sabel and Jonathan Zeitlin (eds), World of Possibilities: Flexibility and Mass Production in Western Industrialization (Cambridge: Cambridge University Press, 1977).

[13] Manuel Moreno Fraginals, “Plantations in the Caribbean”, in Manuel Moreno Fraginals, Frank Moya Pons, and Stanley L. Engerman (eds), Between Slavery and Free Labor: The Spanish-Speaking Caribbean in the Nineteenth Century (Baltimore: Johns Hopkins University Press, 1985) discusses the way commodities exchanges began to dominate the sugar market (e.g. “Appearing before a U.S. Senate hearing that was investigating a great sugar antitrust scandal, Theodore Havemeyer, president of the American Sugar Refining Company, stated that he used the stock exchange to bribe government officials and the commodities exchange to impose the prices that he wanted on the raw sugars of Cuba, Santo Domingo, and Puerto Rico.” [13]).

[14] Karl Marx and Frederick Engels, “Manifesto of the Communist Party” [1848], in Karl Marx, The Revolutions of 1848, trans. David Fernbach (London: Penguin, 1973), 71.