Capitalism: A Short History, by Jürgen Kocka, translated by Jeremiah Riemer (Princeton University Press 208 pp., $29.95)

Among pundits, the enthusiasm generated by Donald Trump and Bernie Sanders can be explained by a breakdown of capitalism. Trump’s supporters—especially working-class voters—are motivated by anger at the economic harm they have suffered. Sanders is an avowed socialist and, according to the Wall Street Journal’s William Galston, his younger supporters “have no experience of a successful capitalist system and no memory of communism’s failure.” Meanwhile, Senator Ted Cruz and others have accused Trump of being a “crony capitalist.”

Given the severity of the 2008 financial crisis and its aftermath, it may not be too surprising if the 2016 election turns out to be a debate on capitalism. Phenomena such as income inequality and the thinning out of middle-income jobs have caused many Americans to wonder just what kind of capitalism they want to have. Over the past few years, several publications have run series on “capitalism in crisis.” And, the debate isn’t confined to the United States. Debt crises and depression in Europe have renewed hostility toward capitalism, and recent economic troubles in China have led to questions about the future of capitalism there.

Debates about capitalism are nothing new—the word itself originated, according to German historian Jürgen Kocka, as a “politically tendentious term” in the nineteenth century. The concept of “capitalism” emerged in response to industrialization as both a tool of criticism and of scholarly analysis. Yet as Kocka demonstrates in his new book, Capitalism: A Short History, capitalism developed well before the 1800s. In a pithy synthesis of historical scholarship, he homes in on the three essential elements of capitalism: decentralization (as exemplified by individual property rights); commodification (which allows the market to allocate and coordinate resources); and accumulation (credit and investment for the future).

Using these “capitalist principles,” Kocka charts the course of capitalism’s development over many centuries. He begins with the rise of merchant capitalism—based on trade—in China and the Middle East. During the Sung dynasty (960-1279 A.D.), China experienced some measure of capitalist dynamism, and the spread of Islam helped strengthen trade routes. In both cases, there were strict political constraints on commercial activity. Strikingly, in contrast to the anti-commercial doctrine of the Catholic Church, hostility was not evident among Arab writers. Kocka quotes fourteenth-century Muslim historian Ibn Khaldun’s approving descriptions of commerce, profit-making, and the accumulation of capital.

Early capitalism really developed and expanded in Europe. In part, this was due to political fragmentation—political and economic competition worked together in Europe in a way they couldn’t in the more centralized states of China and Arabia. In northern Italy and Germany, a series of innovations in law, finance, and trade created “islands of capitalism” across the continent. Widespread suspicion of capitalist activity still persisted in many places, to be sure, but by the eighteenth century, capitalism was fully developed in England and the Netherlands.

This laid the groundwork for industrialization after 1800, which brought forth a “fundamental improvement of living conditions” and new types of capitalism. Kocka describes managerial—or organized—capitalism, as well as financial—or investor—capitalism, and looks at how they developed in the United States, Europe, and Japan. He is not a fan of the financialization of capitalism, in which investors and capital markets play an influential role in the management of companies, and he attributes rising indebtedness (both public and private) to this process. His most compelling analysis is of the commodification of work and the development of “wage labor.” Industrialization created new notions of jobs, working conditions, and the structure of work. Despite persistent complaints about the plight of workers in a system of wage labor, Kocka points out that, relative to all other historical forms of work, wage labor is the freest. “Only in capitalism,” he writes, “could autonomous labor movements become strong.” Bernie Sanders and his followers should consider that juxtaposition.

In capitalism, “change, growth, and progress are inscribed.” It has proved a superior system for freedom and prosperity because of its adaptability—capitalism looks different from place to place. Despite what some believe, the power of the state has been “indispensable” for capitalism’s survival and expansion. Yet Kocka concludes with a provocative question: How does global capitalism develop and adapt when it is outside the political boundaries of nation-states? So far, there is no good answer.

Kocka writes briskly and, as befits a “short history,” rarely dwells on a topic for long. His conclusions are balanced, and he treats capitalism’s challenges in a straightforward way, while also defending its record in generating prosperity. Kocka mixes broad discussion with fun facts. I didn’t know, for example, that Buddhist cloisters in medieval China “operated as centers of capital formation.” Perhaps inevitably in a translated work, some minor editing errors and clunky sentences creep in. Some key contributors to scholarship on capitalism are apparently left out, such as Albert Hirschman, Deirdre McCloskey, and William Baumol. A discussion of contemporary China should probably have warranted more than two pages; Kocka seems rather bearish on the future of capitalism in China, and mostly focuses on the negative role of the Communist state. But China boasts one of the highest levels of entrepreneurial dynamism in the world, and the next phase of what Kocka calls capitalism’s “immense mutability” will likely be played out there.

It’s doubtful that any candidate will take time out from the campaign to read this short book. For the sake of prosperity and freedom, and the future of capitalism, however, let’s hope their supporters can spare the time.

Photo by Joe Raedle/Getty Images


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