What do you mean by Commercial Capitalism?

The Meaning of Commercial Capitalism:

According to Marxist historians, there is a series of stages in the evolution of capitalism. For instance, they identify merchant or commercial capitalism, agrarian capitalism, industrial capitalism and state capitalism. It may be noted that much of the debate on origin and progress has hinged on differing views of the significance, timing and characteristics of each stage. Mercantile or commercial capitalism, that is, the first stage provided the initial thrust and impetus for capitalism.

Merchants started becoming entrepreneurs to cater to market demands by employing wage labourers as well as by exploiting the existing craft guilds. Later, commercial capitalism metamorphosed into industrial capitalism, which in turn, gave way to socialism. Industrial capitalism was inseparably connected with problems of the working class and hence, it invariably gave rise to different currents of socialist thoughts.

Along with commercial capitalism, agrarian capitalism also started. This characterized Europe of the 16th, 17th and 18th centuries. Therefore, commercial capitalism and agrarian capitalism were two forms of capitalism that overlapped with each other. We find the diffidence between them being that one emerged out of commercial surplus while the other out of agricultural surplus. Sometimes, agrarian capitalism metamorphosed fully into commercial capitalism. This means it invested the entire surplus accumulated from agriculture into commerce and sometimes transformed directly into industrial capitalism by investing in industrial development alone.

Moreover, capital was also accumulated from both these sources, i.e. commerce and agriculture, and paved the path for the rise of industrial capitalism. Immanuel Wallerstein stressed agrarian capitalism and adopted a world-economy perspective, and considered its origin to be rooted in the agrarian capitalism.

According to Wallerstein, only transcending the national horizon, by establishing a world trade and commercial network, could it fulfill the requirements of capitalism. This world economy consisted of certain zones, namely, the periphery, the semi-periphery and the core. At the core, international and local commerce were concentrated in the hands of a powerful bourgeoisie. This means agricultural revolution played a very important role in the growth of capitalism by feeding a growing population and by creating a surplus to meet the demand for industrial raw materials during this period.

Scholars also mention a fourth form which is state capitalism. Lenin defined it as a system under which state takes over and exploits means of production in the interest of the class which controls the state. However, state capitalism is also used to describe any system of state collectivization, without reference to its use for the benefit of any particular class of the society. We may also see a fifth form called is welfare capitalism or protected capitalism in which there is an increased element of state intervention either in terms of welfare programmes or lessening the effect of business cycle.

Thus, according to Marxist historians, the first stage capitalism was merchant capitalism or commercial capitalism which may be defined as capital accumulation out of the profits of merchants to be invested in various economic activities. It may be noted that it took different forms in different stages of history as it was present in ancient Egypt and in ancient Rome. It has been observed that even where merchant capitalism existed in the ancient world, large applications of improved technology to goods production did not take place.

During the medieval period, commercial capitalism was entirely different from ancient times. It is said that it was during this time that it developed in the true sense. During this period, the capital was amassed and was available to fund the famous chartered companies (Dutch East India Company 1602, West India Company 1621). It also provided the circulating capital for merchants engaged in the ‘putting-out system’ whereby they supplied raw materials to domestic handicrafts workers and marketed the product.

This stage of capitalism based upon riches amassed from, commerce is known as commercial capitalism. For the most part, the production of goods was still carried on in a small way, on the basis of handicraft work. The feature that distinguished it from the ordinary handicraft system were that it was done on a large scale by hired labour, that the worker did not own the materials on which he worked and frequently not even his tools, and that one man controlled the whole process from start to finish.

The Arte della Lana or cloth manufacturer’s guild of Florence in the 14th century may serve as an example of the putting-out system. Its members bought wool abroad, brought it to Florence and had it made into finished cloth by carders, spinners, weavers, fullers and dyers who were paid wages. The product then was sent abroad for sale. It may be noted here that there was nothing truly comparable to the factory system of the 19th century.

Thus, capitalism was commercial and financial during the medieval period. Finally, we can say that capitalism did exist in ancient world in the form of commerce as well as guild system and merchant dominated putting-out system during the Middle Ages.