Nepali Wanderer

For a long time in history, the world was filled with small, fragmented villages ruled by local kings or lords. Although there were larger empires in many parts of the world, these empires were not as centralized as today’s modern states.
Despite the varying ruling structures, there were two common denominators across societies as diverse as Europe, India, and China. The first was the means of production, which was predominantly agriculture, and the second was the general disdain for the merchant class.

Religion, the predominant force in most societies, viewed merchants with suspicion and contempt. In Christianity, for example, merchants were expelled from temples. Confucian philosophy regarded traders as parasites relying on the labor of others, and in India, merchants were relegated to the third tier in the caste hierarchy. Merchants and traders struggled to climb the social ladder across different societies.

However, as the world became more interconnected and the demand for goods from different regions increased, the merchant class began to rise, as discussed in the context of the Mongols and the Silk Roads. Events like the Treaty of Westphalia, which separated state from religion, signaled a structural change. As religious control waned, the influence of money grew, eventually manifesting as capitalism.

Capitalism is an economic system in which trade and industry are controlled by private owners rather than the state. The resources and labor invested for production are known as capital. The ultimate goal of capitalism is profit, and the production of goods and services is based on supply and demand in the market, also known as the free market economy.

Central to capitalism is the concept of reinvesting profit back into capital, which drives the cycle of capitalism. A king who hoards wealth is not a capitalist, whereas a shoemaker who reinvests profits into shoemaking is. In capitalism, what matters is the reinvestment of capital, not the mere accumulation of wealth. Capitalism has played a significant role in shaping human history. To understand its influence, we need to explore its origins.

One important milestone in the birth of capitalism was the creation of joint-stock companies, as seen with the Dutch Empire. The idea of investing in the present with the hope of generating more in the future made these companies possible. For much of human history, the economy remained stagnant, with only the wealthy able to invest. Capitalism allowed even those with minimal resources to make investments, thanks to a special kind of money that allows us to trust in the future: credit.

The concept of credit existed for a long time, but the credit system that could operate outside a small circle was made possible by financial institutions like banks. These institutions not only facilitated credit but also created a concept known as credit creation, which grew the economy instead of just cutting up the same old pie. The belief in the future, coupled with the birth of science and engineering, fueled capitalism’s fire. Powerful ships sailed the seas, leading to the discovery of new worlds.

As production shifted from agriculture to industry, capitalism’s influence grew, leading to industrial capitalism, characterized by investments in heavy machinery and innovation for greater long-term profits. Industrial capitalism increased the production of goods at lower costs, leading to a rise in consumption known as consumerism. Capitalism and consumerism thus reinforced each other’s growth.

But remember, Capitalism can not run on money alone. It needs two other fuels: resources and labor. The growth in capitalism only meant more demand and competition for natural resources. And this is where Capitalism would take its course towards Colonialism.
In our next story, we will discuss capitalism-led colonialism and its historical consequences.