Re-reading Chalmers Johnson

Chalmers Johnson, one of the key contributors to Asian studies since the early 1960s, died on November 20, 2010. (Here are several notices -- link, link, link.)  Johnson has been an important contributor to Asian studies since the appearance of his first book in 1962, Peasant Nationalism and Communist Power: The Emergence of Revolutionary China, 1937-1945, based on his doctoral dissertation at Berkeley.  The book created a long debate about the causes of the Chinese revolution -- patriotism or class? -- which shed new light on the nature of Communist mobilization.  

Johnson was a brilliant thinker who was exceptionally attuned to language -- both in his own writing and in the importance of making nuanced use of Chinese and Japanese sources in studying Asian history.  And he was a figure who seemed to relish controversy, from this early debate about the Revolution to his focus on American empire in the past half dozen years (Dismantling the Empire: America's Last Best Hope).  

Here is a posting on the debate about Johnson's theory of peasant nationalism and current thinking about the Chinese Revolution that I provided for ChinaBeat.

Chalmers Johnson, co-founder and president of the Japan Policy Research Institute at the University of San Francisco and long-time professor of political science at the University of California, Berkeley and University of California, San Diego, died on November 20, 2010. (Here are several notices -- link, link, link.) In the past ten years or so Johnson has become widely known for his critical books about American empire (Blowback: The Costs and Consequences of American Empire (2004), The Sorrows of Empire: Militarism, Secrecy, and the End of the Republic (2005), Nemesis: The Last Days of the American Republic(2008), and Dismantling the Empire: America's Last Best Hope (2010)). The bulk of his career, however, was devoted to the study of China and Japan, and this posting examines one of his most notable contributions to these areas.

His earliest contribution to China studies was his 1962 book, Peasant Nationalism and Communist Power: The Emergence of Revolutionary China, 1937-1945. The core of the book was written as a Ph.D. dissertation at Berkeley, making use of archives of secret Japanese wartime materials collected by Robert Scalapino. (Johnson describes the origins of the book in "Peasant Nationalism Revisited: The Biography of a Book"; link.) The book was one of the early efforts to provide a more systematic explanation of the success of the Chinese Communist Party in mobilizing mass support during the Anti-Japanese War. The book became one of the linchpins of later debates about the Chinese Revolution. As a political scientist, Johnson was mindful of the inherent unlikelihood of a successful revolution anywhere, and this seemed particularly true in China in the 1920s and 1930s. Large-scale mobilization is inherently difficult to sustain, and local discontents rarely escalate to national scale. (Lucien Bianco made this point about China, writing in Peasants Without the Party: Grass-Roots Movements in Twentieth-Century China that "The essential difference between chronic peasant agitation and revolutionary action is that the latter is deliberately offensive in nature, whereas the former resembles the defensive reaction of a beleaguered organism. If peasant agitation was chronic ... , it was because the occasions for such conduct were endemic in rural China" (4).)

Johnson's book is based almost entirely on secret Japanese archives, and Johnson takes special care to attempt to validate these sources as legitimate indications of the nature of events in China during these war years. He believed that the fact that these documents were "secret" gave them an evidentiary status they would lack if they had been produced for the sake of propaganda or political influence by the army or other officials; but rather than representing an effort to spin events in one direction or another, they were intended as "realistic appraisal of military and political developments in China by Japanese leaders" (x). So Johnson is emphatic in arguing that these secret wartime archives provide a valid window of knowledge into both Japanese and Chinese strategies and actions.

So what structural or institutional factor was present in China that permitted mass mobilization by the Communist Party during this period? According to Johnson, it was nationalist identity and a patriotic desire to resist the Japanese invaders on the part of millions of rural Chinese people. The Communist Party was able to offer itself as the most effective force available to achieve the patriotic goals of defeating the Japanese and restoring China's peace and security. The central thesis of the book, then, and the element that generated the greatest controversy, is Johnson's view that the Communists succeeded in the crucial period because they mobilized a mass following around patriotic resistance to the Japanese invaders.

On the basis of a study of wartime resistance in China, the view advanced here is that the Communist rise to power in China should be understood as a species of nationalist movement. (ix)

It is the thesis of this study that the rise to power of the CCP and YCP [Yugoslav Communist Party] in collaboration with the peasantry of the two countries can best be understood as a species of nationalism. (19-20)

Johnson's definition of nationalism is what he labels "functionalist". What he means by this, however, is not a Mertonian "structural-functional" analysis; rather, it is closer to a behavioral-causal analysis. "This study employs a functional definition of nationalism -- in other words, one which identifies specific physical pressures that by acting upon given political environments give rise to nationalist movements" (ix). He draws largely from Karl Deutsch's Nationalism And Social Communication: An Inquiry Into The Foundations of Nationality (1953) in laying out a definition of nationalism and mass mobilization. Johnson identifies social mobilization of the masses around a national myth as the heart of modern nationalism. This is what nationalism is, according to Johnson; and the causes that brought it about in China were Japanese invasion and subsequent harsh treatment of rural people, and skillful mobilization of the countryside by Communist political officers in enhancing a sense of shared cause.

In essence, the Party is seen as the leader of a war-energized, radical nationalist movement.... The Chinese masses, the peasants, were unified and politicized as a concomitant of the drastic restructuring of Chinese life that accompanied the Japanese conquest of north and east China.... This wartime awakening became the basis for a new order in China following Japan's collapse. (ix-x)

Since patriotic nationalist mobilization is primary, then radical mobilization around peasant interests must be secondary. So Johnson is particularly concerned to refute the idea that it was economic issues and class exploitation that led to peasant support. (Mark Selden's The Yenan Way in Revolutionary China (1971) was a central advocate of this position.) Johnson expressly rejects the idea that the Communist Party's overall strategy depended on a class appeal to poor peasants during these years. One key argument to this conclusion is the markedly different fortunes of the Communist movement in China in the 1920s versus the wartime years. The Communist movement in the 1920s was plainly based on a mobilization strategy around revolution and social change, and, according to Johnson, it failed in achieving mass following. The Japanese invasion and subsequent brutality in attempting to govern the rural areas, however, coincided with a massive increase in the movement's following in the countryside; and, according to Johnson, the mobilization rhetoric of Communist leaders of that period was about patriotic self-defense rather than social upheaval.

Although the Communists were in effective control of various small enclaves in the Chinese countryside from 1927 on, their painful efforts during that period to set up rural "soviets" were incomparably less successful than their activities during the blackest period of the Sino-Japanese War. (1)

During the Anti-Japanese War period the Party abandoned the radical land program altogether and carried out a policy designed to create maximum unity for national defense. All plans for agrarian reform were abrogated during the war while a mild policy of rent reduction and general rationalization of debts was carried out. (19)

Later historians have largely taken a critical view of this central theoretical argument. Some historians -- notably Donald Gillin in a 1964 review in the Journal of Asian Studies (link) -- have argued compellingly that Johnson mis-estimates the importance and persistence of class strategies during the period. (Johnson had harsh words for Gillin in his retrospective article in China Quarterly (link).)

Probably the most consistent line of response to Johnson's peasant nationalism theory in the intervening years is that it is too comprehensive and couched at too high a level. The concept of nationalism paints too broad a brush when applied to tens of millions of Chinese rural people in many different settings. Conditions varied across the many base areas where the CCP held power, and subsequent historians have concluded that patriotism and village self-defense played a highly variable role across China. As Odoric Wou writes, "In a recent article, Tony Saich called our attention to the fact that the Chinese Communist revolution was a series of 'local revolutions.' Unless we go deeply into the localities, carefully examining the social structure and networks, patterns of elite dominance, and local politics of these communities, it is not likely that we can obtain a clear picture of the actual process and dynamics of the Communist base building and the reasons behind the success in its revolutionary mobilization" (link). 

Subsequent historians such as Chen Yung-fa (Making Revolution: The Communist Movement in Eastern and Central China, 1937-1945), Odoric Wou (Mobilizing the Masses: Building Revolution in Henan), Pauline Keating (Two Revolutions: Village Reconstruction and the Cooperative Movement in Northern Shaanxi, 1934-1945), and others have argued instead for a more differentiated and local approach to the success of Communist mobilization in the 1937-1949 period. Tony Saich summarizes much of this consensus in these terms:

Writing on the Chinese revolution has always attracted proponents of the "Grand Theory." This is not surprising, for the revolution itself was on a grand scale in both time and space. New research has made the field more hesitant to put forward bold ideas to encapsulate the majestic sweep of the revolution and has contented itself with compiling details and hammering away at previously held explanations. The debate between those who argued that the Communist success was primarily a result of its nationalist appeal in the anti-Japanese war and those who stressed the CCP's capacity to mobilize the peasantry through its socio-economic programmes, while stimulating, has been left behind by recent research. There is now an infinitely more complex picture of the Party's policies and its relationship to the different social forces in China than was possible previously. (link)

Joseph Esherick puts some of the current understanding of the Chinese Revolution into a series of theses (link), and several are particularly important in the context of Chalmers Johnson's argument:

1. The triumph of the CCP was the product of a series of contingent events.
2. The revolution was produced by a conjuncture of domestic and global historical processes among which the worldwide depression and Japanese imperialism were particularly important.
3. The larger structures of China's state and society did not make revolution inevitable, but they imposed significant constraints on the agents of revolution and counterrevolution.
4. The CCP was a social construct of considerable internal complexity, not an organizational weapon of obedient apparatchiks commanded by the Party Center.

So the nationalist hypothesis has not prevailed as a comprehensive explanation of Communist success at mobilizing revolution. In fact, even the project of providing a single theoretical framework for explaining this success has largely been abandoned.

What is not often recognized, however, is the fact that Peasant Nationalism also contains a substantial empirical historical core that is valuable whether or not we accept the overriding nationalism interpretation.

First, Johnson provides a detailed accounting of Japanese military-political strategies and failures that could not have been conceived of without Johnson's deep and extended immersion in the Japanese secret archives. He makes sense of the very complex and confusing story of Japanese invasion and occupation of north and east China, with multiple military commands and a difference of opinion within high leadership about the best way of defeating Communist opposition.

Equally interesting and important is his lengthy narrative of Communist military and political strategies during the period. This narrative takes up almost half the book, and it is still one of the most detailed and clear expositions of this complex story. (There is also some detail on Guomindang strategies as well.) Johnson pieces together the complicated military movements of Communist armies in north and central China in a masterful way.

In short, Johnson's narrative of military and political developments of the Anti-Japanese War is an important permanent contribution.

So we might say that the theoretical framework of the book has run its course; whereas the empirical and historical findings continue to be an important source of knowledge about the period. And in an ironic way, this suits rather well Johnson's later polemics against rational choice theory and his insistence on the primacy of close, factual research in area studies. (These arguments are found in "A Disaster in the Making: Rational Choice and Asian Studies" (with E.B. Keehn) (link) and "Preconception vs. Observation, or the Contributions of Rational Choice Theory and Area Studies to Contemporary Political Science" (link).) Here is how he characterizes these issues in a 2005 interview with Hidenori Ijiri:

What we mean by areas studies, however, it seems to me, is simply empirical, inductive research about other cultures. Not research that is theoretically driven but driven by knowledge of the culture and a proficiency in the language. In that sense, it is mor einthe classical anthropological mode of trying to understand a culture that is alien to you by personally, inductively getting inside of it, reading the main classics in the field, being able to talk with felllow scholars in the area, and in some cases, doing field research in a particular topic for which your research may very well have theoretical implications. But such research was not driven by a theoretical issue at first. (link)

The more serious challenge to area studies -- one that I have been deeply involved in fighting against and that has affected above all my own field of political science -- is the influence of mathematical economics. The charge is that area studies are un-theoretical, that they do not partake of grand systems of theory. Moreover it is argued that the amount of time spent learning a language like Chinese or Japanese is a waste of time. According to this fad, what a good scholar needs is an education in abstract theory. If he understands theory he can study any place.... Today, political science departments have very elaborate models, often mathematical, and formal ones from which you can supposedly deduce outcomes.... A political science Ph.D. today has been increasingly defined in terms of an ability in rational choice theory, game theory, the manipulation of economic models, and the formal creation of models in which the mode of analysis is deductive rather than inductive. (link)

The central point here is that theory can only be a support for concrete historical and social research, not a substitute. But this is no less true in the study of Communist mobilization in China than in Japanese technology policies. And perhaps there is a larger point here as well: Chalmers Johnson did a great job of "area studies" in his Peasant Nationalism and Communist Power: The Emergence of Revolutionary China, 1937-1945, in spite of his adherence to the single theoretical framework of nationalism.

Re-reading Chalmers Johnson

Chalmers Johnson, one of the key contributors to Asian studies since the early 1960s, died on November 20, 2010. (Here are several notices -- link, link, link.)  Johnson has been an important contributor to Asian studies since the appearance of his first book in 1962, Peasant Nationalism and Communist Power: The Emergence of Revolutionary China, 1937-1945, based on his doctoral dissertation at Berkeley.  The book created a long debate about the causes of the Chinese revolution -- patriotism or class? -- which shed new light on the nature of Communist mobilization.  

Johnson was a brilliant thinker who was exceptionally attuned to language -- both in his own writing and in the importance of making nuanced use of Chinese and Japanese sources in studying Asian history.  And he was a figure who seemed to relish controversy, from this early debate about the Revolution to his focus on American empire in the past half dozen years (Dismantling the Empire: America's Last Best Hope).  

Here is a posting on the debate about Johnson's theory of peasant nationalism and current thinking about the Chinese Revolution that I provided for ChinaBeat.

Chalmers Johnson, co-founder and president of the Japan Policy Research Institute at the University of San Francisco and long-time professor of political science at the University of California, Berkeley and University of California, San Diego, died on November 20, 2010. (Here are several notices -- link, link, link.) In the past ten years or so Johnson has become widely known for his critical books about American empire (Blowback: The Costs and Consequences of American Empire (2004), The Sorrows of Empire: Militarism, Secrecy, and the End of the Republic (2005), Nemesis: The Last Days of the American Republic(2008), and Dismantling the Empire: America's Last Best Hope (2010)). The bulk of his career, however, was devoted to the study of China and Japan, and this posting examines one of his most notable contributions to these areas.

His earliest contribution to China studies was his 1962 book, Peasant Nationalism and Communist Power: The Emergence of Revolutionary China, 1937-1945. The core of the book was written as a Ph.D. dissertation at Berkeley, making use of archives of secret Japanese wartime materials collected by Robert Scalapino. (Johnson describes the origins of the book in "Peasant Nationalism Revisited: The Biography of a Book"; link.) The book was one of the early efforts to provide a more systematic explanation of the success of the Chinese Communist Party in mobilizing mass support during the Anti-Japanese War. The book became one of the linchpins of later debates about the Chinese Revolution. As a political scientist, Johnson was mindful of the inherent unlikelihood of a successful revolution anywhere, and this seemed particularly true in China in the 1920s and 1930s. Large-scale mobilization is inherently difficult to sustain, and local discontents rarely escalate to national scale. (Lucien Bianco made this point about China, writing in Peasants Without the Party: Grass-Roots Movements in Twentieth-Century China that "The essential difference between chronic peasant agitation and revolutionary action is that the latter is deliberately offensive in nature, whereas the former resembles the defensive reaction of a beleaguered organism. If peasant agitation was chronic ... , it was because the occasions for such conduct were endemic in rural China" (4).)

Johnson's book is based almost entirely on secret Japanese archives, and Johnson takes special care to attempt to validate these sources as legitimate indications of the nature of events in China during these war years. He believed that the fact that these documents were "secret" gave them an evidentiary status they would lack if they had been produced for the sake of propaganda or political influence by the army or other officials; but rather than representing an effort to spin events in one direction or another, they were intended as "realistic appraisal of military and political developments in China by Japanese leaders" (x). So Johnson is emphatic in arguing that these secret wartime archives provide a valid window of knowledge into both Japanese and Chinese strategies and actions.

So what structural or institutional factor was present in China that permitted mass mobilization by the Communist Party during this period? According to Johnson, it was nationalist identity and a patriotic desire to resist the Japanese invaders on the part of millions of rural Chinese people. The Communist Party was able to offer itself as the most effective force available to achieve the patriotic goals of defeating the Japanese and restoring China's peace and security. The central thesis of the book, then, and the element that generated the greatest controversy, is Johnson's view that the Communists succeeded in the crucial period because they mobilized a mass following around patriotic resistance to the Japanese invaders.

On the basis of a study of wartime resistance in China, the view advanced here is that the Communist rise to power in China should be understood as a species of nationalist movement. (ix)

It is the thesis of this study that the rise to power of the CCP and YCP [Yugoslav Communist Party] in collaboration with the peasantry of the two countries can best be understood as a species of nationalism. (19-20)

Johnson's definition of nationalism is what he labels "functionalist". What he means by this, however, is not a Mertonian "structural-functional" analysis; rather, it is closer to a behavioral-causal analysis. "This study employs a functional definition of nationalism -- in other words, one which identifies specific physical pressures that by acting upon given political environments give rise to nationalist movements" (ix). He draws largely from Karl Deutsch's Nationalism And Social Communication: An Inquiry Into The Foundations of Nationality (1953) in laying out a definition of nationalism and mass mobilization. Johnson identifies social mobilization of the masses around a national myth as the heart of modern nationalism. This is what nationalism is, according to Johnson; and the causes that brought it about in China were Japanese invasion and subsequent harsh treatment of rural people, and skillful mobilization of the countryside by Communist political officers in enhancing a sense of shared cause.

In essence, the Party is seen as the leader of a war-energized, radical nationalist movement.... The Chinese masses, the peasants, were unified and politicized as a concomitant of the drastic restructuring of Chinese life that accompanied the Japanese conquest of north and east China.... This wartime awakening became the basis for a new order in China following Japan's collapse. (ix-x)

Since patriotic nationalist mobilization is primary, then radical mobilization around peasant interests must be secondary. So Johnson is particularly concerned to refute the idea that it was economic issues and class exploitation that led to peasant support. (Mark Selden's The Yenan Way in Revolutionary China (1971) was a central advocate of this position.) Johnson expressly rejects the idea that the Communist Party's overall strategy depended on a class appeal to poor peasants during these years. One key argument to this conclusion is the markedly different fortunes of the Communist movement in China in the 1920s versus the wartime years. The Communist movement in the 1920s was plainly based on a mobilization strategy around revolution and social change, and, according to Johnson, it failed in achieving mass following. The Japanese invasion and subsequent brutality in attempting to govern the rural areas, however, coincided with a massive increase in the movement's following in the countryside; and, according to Johnson, the mobilization rhetoric of Communist leaders of that period was about patriotic self-defense rather than social upheaval.

Although the Communists were in effective control of various small enclaves in the Chinese countryside from 1927 on, their painful efforts during that period to set up rural "soviets" were incomparably less successful than their activities during the blackest period of the Sino-Japanese War. (1)

During the Anti-Japanese War period the Party abandoned the radical land program altogether and carried out a policy designed to create maximum unity for national defense. All plans for agrarian reform were abrogated during the war while a mild policy of rent reduction and general rationalization of debts was carried out. (19)

Later historians have largely taken a critical view of this central theoretical argument. Some historians -- notably Donald Gillin in a 1964 review in the Journal of Asian Studies (link) -- have argued compellingly that Johnson mis-estimates the importance and persistence of class strategies during the period. (Johnson had harsh words for Gillin in his retrospective article in China Quarterly (link).)

Probably the most consistent line of response to Johnson's peasant nationalism theory in the intervening years is that it is too comprehensive and couched at too high a level. The concept of nationalism paints too broad a brush when applied to tens of millions of Chinese rural people in many different settings. Conditions varied across the many base areas where the CCP held power, and subsequent historians have concluded that patriotism and village self-defense played a highly variable role across China. As Odoric Wou writes, "In a recent article, Tony Saich called our attention to the fact that the Chinese Communist revolution was a series of 'local revolutions.' Unless we go deeply into the localities, carefully examining the social structure and networks, patterns of elite dominance, and local politics of these communities, it is not likely that we can obtain a clear picture of the actual process and dynamics of the Communist base building and the reasons behind the success in its revolutionary mobilization" (link). 

Subsequent historians such as Chen Yung-fa (Making Revolution: The Communist Movement in Eastern and Central China, 1937-1945), Odoric Wou (Mobilizing the Masses: Building Revolution in Henan), Pauline Keating (Two Revolutions: Village Reconstruction and the Cooperative Movement in Northern Shaanxi, 1934-1945), and others have argued instead for a more differentiated and local approach to the success of Communist mobilization in the 1937-1949 period. Tony Saich summarizes much of this consensus in these terms:

Writing on the Chinese revolution has always attracted proponents of the "Grand Theory." This is not surprising, for the revolution itself was on a grand scale in both time and space. New research has made the field more hesitant to put forward bold ideas to encapsulate the majestic sweep of the revolution and has contented itself with compiling details and hammering away at previously held explanations. The debate between those who argued that the Communist success was primarily a result of its nationalist appeal in the anti-Japanese war and those who stressed the CCP's capacity to mobilize the peasantry through its socio-economic programmes, while stimulating, has been left behind by recent research. There is now an infinitely more complex picture of the Party's policies and its relationship to the different social forces in China than was possible previously. (link)

Joseph Esherick puts some of the current understanding of the Chinese Revolution into a series of theses (link), and several are particularly important in the context of Chalmers Johnson's argument:

1. The triumph of the CCP was the product of a series of contingent events.
2. The revolution was produced by a conjuncture of domestic and global historical processes among which the worldwide depression and Japanese imperialism were particularly important.
3. The larger structures of China's state and society did not make revolution inevitable, but they imposed significant constraints on the agents of revolution and counterrevolution.
4. The CCP was a social construct of considerable internal complexity, not an organizational weapon of obedient apparatchiks commanded by the Party Center.

So the nationalist hypothesis has not prevailed as a comprehensive explanation of Communist success at mobilizing revolution. In fact, even the project of providing a single theoretical framework for explaining this success has largely been abandoned.

What is not often recognized, however, is the fact that Peasant Nationalism also contains a substantial empirical historical core that is valuable whether or not we accept the overriding nationalism interpretation.

First, Johnson provides a detailed accounting of Japanese military-political strategies and failures that could not have been conceived of without Johnson's deep and extended immersion in the Japanese secret archives. He makes sense of the very complex and confusing story of Japanese invasion and occupation of north and east China, with multiple military commands and a difference of opinion within high leadership about the best way of defeating Communist opposition.

Equally interesting and important is his lengthy narrative of Communist military and political strategies during the period. This narrative takes up almost half the book, and it is still one of the most detailed and clear expositions of this complex story. (There is also some detail on Guomindang strategies as well.) Johnson pieces together the complicated military movements of Communist armies in north and central China in a masterful way.

In short, Johnson's narrative of military and political developments of the Anti-Japanese War is an important permanent contribution.

So we might say that the theoretical framework of the book has run its course; whereas the empirical and historical findings continue to be an important source of knowledge about the period. And in an ironic way, this suits rather well Johnson's later polemics against rational choice theory and his insistence on the primacy of close, factual research in area studies. (These arguments are found in "A Disaster in the Making: Rational Choice and Asian Studies" (with E.B. Keehn) (link) and "Preconception vs. Observation, or the Contributions of Rational Choice Theory and Area Studies to Contemporary Political Science" (link).) Here is how he characterizes these issues in a 2005 interview with Hidenori Ijiri:

What we mean by areas studies, however, it seems to me, is simply empirical, inductive research about other cultures. Not research that is theoretically driven but driven by knowledge of the culture and a proficiency in the language. In that sense, it is mor einthe classical anthropological mode of trying to understand a culture that is alien to you by personally, inductively getting inside of it, reading the main classics in the field, being able to talk with felllow scholars in the area, and in some cases, doing field research in a particular topic for which your research may very well have theoretical implications. But such research was not driven by a theoretical issue at first. (link)

The more serious challenge to area studies -- one that I have been deeply involved in fighting against and that has affected above all my own field of political science -- is the influence of mathematical economics. The charge is that area studies are un-theoretical, that they do not partake of grand systems of theory. Moreover it is argued that the amount of time spent learning a language like Chinese or Japanese is a waste of time. According to this fad, what a good scholar needs is an education in abstract theory. If he understands theory he can study any place.... Today, political science departments have very elaborate models, often mathematical, and formal ones from which you can supposedly deduce outcomes.... A political science Ph.D. today has been increasingly defined in terms of an ability in rational choice theory, game theory, the manipulation of economic models, and the formal creation of models in which the mode of analysis is deductive rather than inductive. (link)

The central point here is that theory can only be a support for concrete historical and social research, not a substitute. But this is no less true in the study of Communist mobilization in China than in Japanese technology policies. And perhaps there is a larger point here as well: Chalmers Johnson did a great job of "area studies" in his Peasant Nationalism and Communist Power: The Emergence of Revolutionary China, 1937-1945, in spite of his adherence to the single theoretical framework of nationalism.

Marx on a global wage

What is the longterm tendency in the wage for relatively unskilled labor?  In the United States we've been thinking about this problem in the past three decades in the context of "outsourcing" and the flight of manufacturing jobs to low-wage countries. Moderate- and high-wage industrial jobs have left the country in large numbers.  In the 1970s and 1980s apparel manufacture largely left the US for Latin America and Asia, and in the 1990s and 2000s heavy manufacturing jobs (in the auto industry in particular) were widely perceived to have fled to Asia.

What are the effects of these global shifts in manufacturing for the wage in all countries?  It turns out that Karl Marx had some remarkably prescient ideas about this question in the 1860s that still seem important today.  Here are some markedly current observations from Marx's Capital (link) on the wage in a competitive international context:

A writer of the 18th century, often quoted already, the author of the "Essay on Trade and Commerce," only betrays the innermost secret soul of English capitalism, when he declares the historic mission of England to be the forcing down of English wages to the level of the French and the Dutch. [37] With other things he says naively: "But if our poor" (technical term for labourers) "will live luxuriously ... then labour must, of course, be dear.... When it is considered what luxuries the manufacturing populace consume, such as brandy, gin, tea, sugar, foreign fruit, strong beer, printed linens, snuff, tobacco, etc." [38] He quotes the work of a Northamptonshire manufacturer, who, with eyes squinting heavenward moans: "Labour is one-third cheaper in France than in England; for their poor work hard, and fare hard, as to their food and clothing. Their chief diet is bread, fruit, herbs, roots, and dried fish; for they very seldom eat flesh; and when wheat is dear, they eat very little bread." [39] "To which may be added," our essayist goes on, "that their drink is either water or other small liquors, so that they spend very little money.... These things are very difficult to be brought about; but they are not impracticable, since they have been effected both in France and in Holland." [40] (Capital I, chap. 24)

And the footnote amplifies:

[40] Today, thanks to the competition on the world-market, established since then, we have advanced much further. "If China," says Mr. Stapleton, M.P., to his constituents, "should become a great manufacturing country, I do not see how the manufacturing population of Europe could sustain the contest without descending to the level of their competitors." (Times, Sept. 3, 1873, p. 8.) The wished-for goal of English capital is no longer Continental wages but Chinese.

In other words, Marx's view in 1867 was that there is an inevitable competitive pressure on British firms (high wages) to seek out manufacturing locations in other countries where labor costs are lower; and, of course, this movement brings competitive downward pressures on the domestic manufacturing wage.  So the British manufacturing wage falls as low-wage European competitors (eventually Chinese competitors) are able to produce commodities at lower unit cost.  This has a long-term global result: the unskilled manufacturing labor market becomes global, and the wage approaches a global equilibrium that is significantly lower than the present.

One thing is striking about this observation in 1867 is the reference to China.  Mr. Stapleton's observations in 1873 were highly speculative; China was a century from becoming a great manufacturing country.  But Marx's eye was focused on the long-term patterns; and he (and Mr. Stapleton) correctly noted the inherent logic of global competition for low-wage labor.  The long-term result, apparently unavoidably, is that production processes that involve low-skill labor will be involved in a rapid race to the bottom, leading to an equilibrium wage across nations that is barely sufficient for subsistence.

Another major force operating on the level of the wage for unskilled labor that Marx emphasizes is the rapid introduction of technology and innovations enhancing labor productivity -- leading to a reduction in the demand for labor and putting more downward pressure on the wage.  Writing after the American Civil War about English cotton manufacture, he writes:

The instrument of labour strikes down the labourer. This direct antagonism between the two comes out most strongly, whenever newly introduced machinery competes with handicrafts or manufactures, handed down from former times. But even in Modern Industry the continual improvement of machinery, and the development of the automatic system, has an analogous effect. "The object of improved machinery is to diminish manual labour, to provide for the performance of a process or the completion of a link in a manufacture by the aid of an iron instead of the human apparatus." [119] "The adaptation of power to machinery heretofore moved by hand, is almost of daily occurrence ... the minor improvements in machinery having for their object economy of power, the production of better work, the turning off more work in the same time, or in supplying the place of a child, a female, or a man, are constant, and although sometimes apparently of no great moment, have somewhat important results." [120] "Whenever a process requires peculiar dexterity and steadiness of hand, it is withdrawn, as soon as possible, from the cunning workman, who is prone to irregularities of many kinds, and it is t)laced in charge of a peculiar mechanism, so self-regulating that a child can superintend it." [121] "On the automatic plan skilled labour gets progressively superseded." [122] "The effect of improvements in machinery, not merely in superseding the necessity for the employment of the same quantity of adult labour as before, in order to produce a given result, but in substituting one description of human labour for another, the less skilled for the more skilled, juvenile for adult, female for male, causes a fresh disturbance in the rate of wages." [123] "The effect of substituting the self-acting mule for the common mule, is to discharge the greater part of the men spinners, and to retain adolescents and children." [124] The extraordinary power of expansion of the factory system owing to accumulated practical experience, to the mechanical means at hand, and to constant technical progress, was proved to us by the giant strides of that system under the pressure of a shortened working-day. But who, in 1860, the Zenith year of the English cotton industry, would have dreamt of the galloping improvements in machinery, and the corresponding displacement of working people, called into being during the following 3 years, under the stimulus of the American Civil War? A couple of examples from the Reports of the Inspectors of Factories will suffice on this point. A Manchester manufacturer states: "We formerly had 75 carding engines, now we have 12, doing the same quantity of work.... We are doing with fewer hands by 14, at a saving in wages of £10 a-week. Our estimated saving in waste is about 10% in the quantity of cotton consumed." "In another fine-spinning mill in Manchester, I was informed that through increased speed and the adoption of some self-acting processes, a reduction had been made, in number, of a fourth in one department, and of above half in another, and that the introduction of the combing machine in place of the second carding, had considerably reduced, the number of hands formerly employed in the carding-room." Another spinning-mill is estimated to effect a saving of labour of 10%. The Messrs. Gilmour, spinners at Manchester, state: "In our blowing-room department we consider our expense with new machinery is fully one-third less in wages and hands ... in the jack-frame and drawing-frame room, about one-third less in expense, and likewise one-third less in hands; in the spinningroom about one-third less in expenses. But this is not all; when our yarn goes to the manufacturers, it is so much better by the application of our new machinery, that they will produce a greater quantity of cloth, and cheaper than from the yarn produced by old machinery." [125] Mr. Redgrave further remarks in the same Report: "The reduction of hands against increased production is, in fact, constantly taking place, in woollen mills the reduction commenced some time since, and is continuing; a few days since, the master of a school in the neighbourhood of Rochdale said to me, that the great falling off in the girls' school is not only caused by the distress, but by the changes of machinery in the woollen mills, in consequence of which a reduction of 70 short-timers had taken place." [126]
(Capital I, Chapter 15)

The note is important as well:

[126] l. c., p. 109. The rapid improvement of machinery, during the crisis, allowed the English manufacturers, immediately after the termination of the American Civil War, and almost in no time, to glut the markets of the world again. Cloth,' during the last six months of 1866, was almost unsaleable. Thereupon began the consignment of goods to India and China, thus naturally making the glut more intense. At the beginning of 1867 the manufacturers resorted to their usual way out of the difficulty, viz., reducing wages 5 per cent. The workpeople resisted, and said that the only remedy was to work short time, 4 days a week; and their theory was the correct one. After holding out for some time, the self-elected captains of industry had to make up their minds to short time, with reduced wages in some places, and in others without. 

So is there any way out for the worker?  Is there any scenario where ordinary working people can earn a moderate to high wage and corresponding standard of living?  There is, through education and skill.  The only way of maintaining a high wage for workers is on the basis of a given workforce possessing the ability to accomplish production tasks on the basis of non-generalized knowledge and skill.  When labor is a commodity that is interchangeable in Karnataka, Guangdong, and Detroit, the wage will approach something like a low-level equilibrium.  But when workers are able to add exceptional value to the process through their skills, talents, and knowledge, they will share in that productivity in the form of higher wages and a higher standard of living.

This observation converges with several themes already discussed in earlier postings: the attractiveness of the "high-skill" alternative to mass manufacturing that is highlighted by Chuck Sabel (link), and the current urgency that we should all feel about making sure that all young people have the opportunity to complete a tertiary degree (link).

Marx on a global wage

What is the longterm tendency in the wage for relatively unskilled labor?  In the United States we've been thinking about this problem in the past three decades in the context of "outsourcing" and the flight of manufacturing jobs to low-wage countries. Moderate- and high-wage industrial jobs have left the country in large numbers.  In the 1970s and 1980s apparel manufacture largely left the US for Latin America and Asia, and in the 1990s and 2000s heavy manufacturing jobs (in the auto industry in particular) were widely perceived to have fled to Asia.

What are the effects of these global shifts in manufacturing for the wage in all countries?  It turns out that Karl Marx had some remarkably prescient ideas about this question in the 1860s that still seem important today.  Here are some markedly current observations from Marx's Capital (link) on the wage in a competitive international context:

A writer of the 18th century, often quoted already, the author of the "Essay on Trade and Commerce," only betrays the innermost secret soul of English capitalism, when he declares the historic mission of England to be the forcing down of English wages to the level of the French and the Dutch. [37] With other things he says naively: "But if our poor" (technical term for labourers) "will live luxuriously ... then labour must, of course, be dear.... When it is considered what luxuries the manufacturing populace consume, such as brandy, gin, tea, sugar, foreign fruit, strong beer, printed linens, snuff, tobacco, etc." [38] He quotes the work of a Northamptonshire manufacturer, who, with eyes squinting heavenward moans: "Labour is one-third cheaper in France than in England; for their poor work hard, and fare hard, as to their food and clothing. Their chief diet is bread, fruit, herbs, roots, and dried fish; for they very seldom eat flesh; and when wheat is dear, they eat very little bread." [39] "To which may be added," our essayist goes on, "that their drink is either water or other small liquors, so that they spend very little money.... These things are very difficult to be brought about; but they are not impracticable, since they have been effected both in France and in Holland." [40] (Capital I, chap. 24)

And the footnote amplifies:

[40] Today, thanks to the competition on the world-market, established since then, we have advanced much further. "If China," says Mr. Stapleton, M.P., to his constituents, "should become a great manufacturing country, I do not see how the manufacturing population of Europe could sustain the contest without descending to the level of their competitors." (Times, Sept. 3, 1873, p. 8.) The wished-for goal of English capital is no longer Continental wages but Chinese.

In other words, Marx's view in 1867 was that there is an inevitable competitive pressure on British firms (high wages) to seek out manufacturing locations in other countries where labor costs are lower; and, of course, this movement brings competitive downward pressures on the domestic manufacturing wage.  So the British manufacturing wage falls as low-wage European competitors (eventually Chinese competitors) are able to produce commodities at lower unit cost.  This has a long-term global result: the unskilled manufacturing labor market becomes global, and the wage approaches a global equilibrium that is significantly lower than the present.

One thing is striking about this observation in 1867 is the reference to China.  Mr. Stapleton's observations in 1873 were highly speculative; China was a century from becoming a great manufacturing country.  But Marx's eye was focused on the long-term patterns; and he (and Mr. Stapleton) correctly noted the inherent logic of global competition for low-wage labor.  The long-term result, apparently unavoidably, is that production processes that involve low-skill labor will be involved in a rapid race to the bottom, leading to an equilibrium wage across nations that is barely sufficient for subsistence.

Another major force operating on the level of the wage for unskilled labor that Marx emphasizes is the rapid introduction of technology and innovations enhancing labor productivity -- leading to a reduction in the demand for labor and putting more downward pressure on the wage.  Writing after the American Civil War about English cotton manufacture, he writes:

The instrument of labour strikes down the labourer. This direct antagonism between the two comes out most strongly, whenever newly introduced machinery competes with handicrafts or manufactures, handed down from former times. But even in Modern Industry the continual improvement of machinery, and the development of the automatic system, has an analogous effect. "The object of improved machinery is to diminish manual labour, to provide for the performance of a process or the completion of a link in a manufacture by the aid of an iron instead of the human apparatus." [119] "The adaptation of power to machinery heretofore moved by hand, is almost of daily occurrence ... the minor improvements in machinery having for their object economy of power, the production of better work, the turning off more work in the same time, or in supplying the place of a child, a female, or a man, are constant, and although sometimes apparently of no great moment, have somewhat important results." [120] "Whenever a process requires peculiar dexterity and steadiness of hand, it is withdrawn, as soon as possible, from the cunning workman, who is prone to irregularities of many kinds, and it is t)laced in charge of a peculiar mechanism, so self-regulating that a child can superintend it." [121] "On the automatic plan skilled labour gets progressively superseded." [122] "The effect of improvements in machinery, not merely in superseding the necessity for the employment of the same quantity of adult labour as before, in order to produce a given result, but in substituting one description of human labour for another, the less skilled for the more skilled, juvenile for adult, female for male, causes a fresh disturbance in the rate of wages." [123] "The effect of substituting the self-acting mule for the common mule, is to discharge the greater part of the men spinners, and to retain adolescents and children." [124] The extraordinary power of expansion of the factory system owing to accumulated practical experience, to the mechanical means at hand, and to constant technical progress, was proved to us by the giant strides of that system under the pressure of a shortened working-day. But who, in 1860, the Zenith year of the English cotton industry, would have dreamt of the galloping improvements in machinery, and the corresponding displacement of working people, called into being during the following 3 years, under the stimulus of the American Civil War? A couple of examples from the Reports of the Inspectors of Factories will suffice on this point. A Manchester manufacturer states: "We formerly had 75 carding engines, now we have 12, doing the same quantity of work.... We are doing with fewer hands by 14, at a saving in wages of £10 a-week. Our estimated saving in waste is about 10% in the quantity of cotton consumed." "In another fine-spinning mill in Manchester, I was informed that through increased speed and the adoption of some self-acting processes, a reduction had been made, in number, of a fourth in one department, and of above half in another, and that the introduction of the combing machine in place of the second carding, had considerably reduced, the number of hands formerly employed in the carding-room." Another spinning-mill is estimated to effect a saving of labour of 10%. The Messrs. Gilmour, spinners at Manchester, state: "In our blowing-room department we consider our expense with new machinery is fully one-third less in wages and hands ... in the jack-frame and drawing-frame room, about one-third less in expense, and likewise one-third less in hands; in the spinningroom about one-third less in expenses. But this is not all; when our yarn goes to the manufacturers, it is so much better by the application of our new machinery, that they will produce a greater quantity of cloth, and cheaper than from the yarn produced by old machinery." [125] Mr. Redgrave further remarks in the same Report: "The reduction of hands against increased production is, in fact, constantly taking place, in woollen mills the reduction commenced some time since, and is continuing; a few days since, the master of a school in the neighbourhood of Rochdale said to me, that the great falling off in the girls' school is not only caused by the distress, but by the changes of machinery in the woollen mills, in consequence of which a reduction of 70 short-timers had taken place." [126]
(Capital I, Chapter 15)

The note is important as well:

[126] l. c., p. 109. The rapid improvement of machinery, during the crisis, allowed the English manufacturers, immediately after the termination of the American Civil War, and almost in no time, to glut the markets of the world again. Cloth,' during the last six months of 1866, was almost unsaleable. Thereupon began the consignment of goods to India and China, thus naturally making the glut more intense. At the beginning of 1867 the manufacturers resorted to their usual way out of the difficulty, viz., reducing wages 5 per cent. The workpeople resisted, and said that the only remedy was to work short time, 4 days a week; and their theory was the correct one. After holding out for some time, the self-elected captains of industry had to make up their minds to short time, with reduced wages in some places, and in others without. 

So is there any way out for the worker?  Is there any scenario where ordinary working people can earn a moderate to high wage and corresponding standard of living?  There is, through education and skill.  The only way of maintaining a high wage for workers is on the basis of a given workforce possessing the ability to accomplish production tasks on the basis of non-generalized knowledge and skill.  When labor is a commodity that is interchangeable in Karnataka, Guangdong, and Detroit, the wage will approach something like a low-level equilibrium.  But when workers are able to add exceptional value to the process through their skills, talents, and knowledge, they will share in that productivity in the form of higher wages and a higher standard of living.

This observation converges with several themes already discussed in earlier postings: the attractiveness of the "high-skill" alternative to mass manufacturing that is highlighted by Chuck Sabel (link), and the current urgency that we should all feel about making sure that all young people have the opportunity to complete a tertiary degree (link).

Marx on a global wage

What is the longterm tendency in the wage for relatively unskilled labor?  In the United States we've been thinking about this problem in the past three decades in the context of "outsourcing" and the flight of manufacturing jobs to low-wage countries. Moderate- and high-wage industrial jobs have left the country in large numbers.  In the 1970s and 1980s apparel manufacture largely left the US for Latin America and Asia, and in the 1990s and 2000s heavy manufacturing jobs (in the auto industry in particular) were widely perceived to have fled to Asia.

What are the effects of these global shifts in manufacturing for the wage in all countries?  It turns out that Karl Marx had some remarkably prescient ideas about this question in the 1860s that still seem important today.  Here are some markedly current observations from Marx's Capital (link) on the wage in a competitive international context:

A writer of the 18th century, often quoted already, the author of the "Essay on Trade and Commerce," only betrays the innermost secret soul of English capitalism, when he declares the historic mission of England to be the forcing down of English wages to the level of the French and the Dutch. [37] With other things he says naively: "But if our poor" (technical term for labourers) "will live luxuriously ... then labour must, of course, be dear.... When it is considered what luxuries the manufacturing populace consume, such as brandy, gin, tea, sugar, foreign fruit, strong beer, printed linens, snuff, tobacco, etc." [38] He quotes the work of a Northamptonshire manufacturer, who, with eyes squinting heavenward moans: "Labour is one-third cheaper in France than in England; for their poor work hard, and fare hard, as to their food and clothing. Their chief diet is bread, fruit, herbs, roots, and dried fish; for they very seldom eat flesh; and when wheat is dear, they eat very little bread." [39] "To which may be added," our essayist goes on, "that their drink is either water or other small liquors, so that they spend very little money.... These things are very difficult to be brought about; but they are not impracticable, since they have been effected both in France and in Holland." [40] (Capital I, chap. 24)

And the footnote amplifies:

[40] Today, thanks to the competition on the world-market, established since then, we have advanced much further. "If China," says Mr. Stapleton, M.P., to his constituents, "should become a great manufacturing country, I do not see how the manufacturing population of Europe could sustain the contest without descending to the level of their competitors." (Times, Sept. 3, 1873, p. 8.) The wished-for goal of English capital is no longer Continental wages but Chinese.

In other words, Marx's view in 1867 was that there is an inevitable competitive pressure on British firms (high wages) to seek out manufacturing locations in other countries where labor costs are lower; and, of course, this movement brings competitive downward pressures on the domestic manufacturing wage.  So the British manufacturing wage falls as low-wage European competitors (eventually Chinese competitors) are able to produce commodities at lower unit cost.  This has a long-term global result: the unskilled manufacturing labor market becomes global, and the wage approaches a global equilibrium that is significantly lower than the present.

One thing is striking about this observation in 1867 is the reference to China.  Mr. Stapleton's observations in 1873 were highly speculative; China was a century from becoming a great manufacturing country.  But Marx's eye was focused on the long-term patterns; and he (and Mr. Stapleton) correctly noted the inherent logic of global competition for low-wage labor.  The long-term result, apparently unavoidably, is that production processes that involve low-skill labor will be involved in a rapid race to the bottom, leading to an equilibrium wage across nations that is barely sufficient for subsistence.

Another major force operating on the level of the wage for unskilled labor that Marx emphasizes is the rapid introduction of technology and innovations enhancing labor productivity -- leading to a reduction in the demand for labor and putting more downward pressure on the wage.  Writing after the American Civil War about English cotton manufacture, he writes:

The instrument of labour strikes down the labourer. This direct antagonism between the two comes out most strongly, whenever newly introduced machinery competes with handicrafts or manufactures, handed down from former times. But even in Modern Industry the continual improvement of machinery, and the development of the automatic system, has an analogous effect. "The object of improved machinery is to diminish manual labour, to provide for the performance of a process or the completion of a link in a manufacture by the aid of an iron instead of the human apparatus." [119] "The adaptation of power to machinery heretofore moved by hand, is almost of daily occurrence ... the minor improvements in machinery having for their object economy of power, the production of better work, the turning off more work in the same time, or in supplying the place of a child, a female, or a man, are constant, and although sometimes apparently of no great moment, have somewhat important results." [120] "Whenever a process requires peculiar dexterity and steadiness of hand, it is withdrawn, as soon as possible, from the cunning workman, who is prone to irregularities of many kinds, and it is t)laced in charge of a peculiar mechanism, so self-regulating that a child can superintend it." [121] "On the automatic plan skilled labour gets progressively superseded." [122] "The effect of improvements in machinery, not merely in superseding the necessity for the employment of the same quantity of adult labour as before, in order to produce a given result, but in substituting one description of human labour for another, the less skilled for the more skilled, juvenile for adult, female for male, causes a fresh disturbance in the rate of wages." [123] "The effect of substituting the self-acting mule for the common mule, is to discharge the greater part of the men spinners, and to retain adolescents and children." [124] The extraordinary power of expansion of the factory system owing to accumulated practical experience, to the mechanical means at hand, and to constant technical progress, was proved to us by the giant strides of that system under the pressure of a shortened working-day. But who, in 1860, the Zenith year of the English cotton industry, would have dreamt of the galloping improvements in machinery, and the corresponding displacement of working people, called into being during the following 3 years, under the stimulus of the American Civil War? A couple of examples from the Reports of the Inspectors of Factories will suffice on this point. A Manchester manufacturer states: "We formerly had 75 carding engines, now we have 12, doing the same quantity of work.... We are doing with fewer hands by 14, at a saving in wages of £10 a-week. Our estimated saving in waste is about 10% in the quantity of cotton consumed." "In another fine-spinning mill in Manchester, I was informed that through increased speed and the adoption of some self-acting processes, a reduction had been made, in number, of a fourth in one department, and of above half in another, and that the introduction of the combing machine in place of the second carding, had considerably reduced, the number of hands formerly employed in the carding-room." Another spinning-mill is estimated to effect a saving of labour of 10%. The Messrs. Gilmour, spinners at Manchester, state: "In our blowing-room department we consider our expense with new machinery is fully one-third less in wages and hands ... in the jack-frame and drawing-frame room, about one-third less in expense, and likewise one-third less in hands; in the spinningroom about one-third less in expenses. But this is not all; when our yarn goes to the manufacturers, it is so much better by the application of our new machinery, that they will produce a greater quantity of cloth, and cheaper than from the yarn produced by old machinery." [125] Mr. Redgrave further remarks in the same Report: "The reduction of hands against increased production is, in fact, constantly taking place, in woollen mills the reduction commenced some time since, and is continuing; a few days since, the master of a school in the neighbourhood of Rochdale said to me, that the great falling off in the girls' school is not only caused by the distress, but by the changes of machinery in the woollen mills, in consequence of which a reduction of 70 short-timers had taken place." [126]
(Capital I, Chapter 15)

The note is important as well:

[126] l. c., p. 109. The rapid improvement of machinery, during the crisis, allowed the English manufacturers, immediately after the termination of the American Civil War, and almost in no time, to glut the markets of the world again. Cloth,' during the last six months of 1866, was almost unsaleable. Thereupon began the consignment of goods to India and China, thus naturally making the glut more intense. At the beginning of 1867 the manufacturers resorted to their usual way out of the difficulty, viz., reducing wages 5 per cent. The workpeople resisted, and said that the only remedy was to work short time, 4 days a week; and their theory was the correct one. After holding out for some time, the self-elected captains of industry had to make up their minds to short time, with reduced wages in some places, and in others without. 

So is there any way out for the worker?  Is there any scenario where ordinary working people can earn a moderate to high wage and corresponding standard of living?  There is, through education and skill.  The only way of maintaining a high wage for workers is on the basis of a given workforce possessing the ability to accomplish production tasks on the basis of non-generalized knowledge and skill.  When labor is a commodity that is interchangeable in Karnataka, Guangdong, and Detroit, the wage will approach something like a low-level equilibrium.  But when workers are able to add exceptional value to the process through their skills, talents, and knowledge, they will share in that productivity in the form of higher wages and a higher standard of living.

This observation converges with several themes already discussed in earlier postings: the attractiveness of the "high-skill" alternative to mass manufacturing that is highlighted by Chuck Sabel (link), and the current urgency that we should all feel about making sure that all young people have the opportunity to complete a tertiary degree (link).

Merchant capital

Karl Marx was very interested in capital -- an abstract concept referring to society's wealth. And he was interested in the persons who owned and controlled capital -- the capitalists. But the primary focus of his lifelong analysis was upon one particular species of capital, what he referred to as "industrial capital." This is the form of wealth involved in the production process -- factories, mines, railroads.  He had less to say about the aspect of capital that designated the exchange process -- what he referred to as "merchant capital" and finance capital. This selective focus reflected one of Marx's main historical opinions -- the idea that history moves forward through the development of the "productive forces," and that industrial capitalists (as well as the industrial proletariat) are the agents of this kind of economic change. Here is a brief description from Capital of the role of merchant's capital in his analysis.

The reason is now therefore plain why, in analysing the standard form of capital, the form under which it determines the economic organisation of modern society, we entirely left out of consideration its most popular, and, so to say, antediluvian forms, merchants' capital and money-lenders' capital. The circuit M-C-M, buying in order to sell dearer, is seen most clearly in genuine merchants' capital. But the movement takes place entirely within the sphere of circulation. Since, however, it is impossible, by circulation alone, to account for the conversion of money into capital, for the formation of surplus-value, it would appear, that merchants' capital is an impossibility, so long as equivalents are exchanged; that, therefore, it can only have its origin in the two-fold advantage gained, over both the selling and the buying producers, by the merchant who parasitically shoves himself in between them. It is in this sense that Franklin says, "war is robbery, commerce is generally cheating." If the transformation of merchants' money into capital is to be explained otherwise than by the producers being simply cheated, a long series of intermediate steps would be necessary, which, at present, when the simple circulation of commodities forms our only assumption, are entirely wanting. (Capital I, Chapter 5)

According to the labor theory of value, only the expenditure of living labor into the production process of a commodity can create new value; so only industrial capital includes a process that creates new wealth. Merchant capital plays no role in the production process, and it is therefore historically unimportant -- or so is Marx's view in Capital.

If we now look back on European history from the sixteenth century to the twentieth century, this assessment seems badly wrong as an historical observation. Merchants and their companies played key roles in the establishment of a world trading system; they actively facilitated the race for colonies by the European powers; and often they played a quasi-military role in suppressing resistance by locals in distant parts of the world. So "merchant capital" and companies established for the purpose of international trade seem to have played a key role in the creation of the modern world system.

Robert Brenner undertook to provide a detailed historical account of the role of merchants and their organizations in the sixteenth and seventeenth centuries in Merchants and Revolution: Commercial Change, Political Conflict, and London's Overseas Traders, 1550-1653 (1993). This is a departure from Brenner's important contributions to the agrarian changes associated with England's agricultural revolution in the sixteenth century (link), and it is also a much more detailed historical study than his previous works. Brenner is interested primarily in two topics: first, how did commerce evolve in the sixteenth century in England, both nationally and internationally; what were the institutions, organizations, and individuals that emerged as vehicles for pursuing individual and corporate interests by large merchants? And second, how did the emergence of large merchant fortunes and companies interact with the politics of the English state during this early modern period?

To offer a historical analysis of commerce, it is necessary to have extensive commercial data. Appropriately, Brenner's research depends heavily on good information about imports and exports throughout the period. Here is his compilation of London cloth exports 1488-1614:

So aggregation of voluminous historical economic data represents one important portion of Brenner's historical research here. The other important part, however, is at the other end of the scale -- detailed information about many of the individuals who played leadership roles in the commercial and political developments of the period.

Fundamentally the book is about the political power of the merchant class. Brenner makes the point that English commercial interests were deeply dependent upon English political and military strength in the competition for import and export markets.

English merchants found it feasible to establish the new trades in large part because of the weakening hold of Portugal and Spain over their commercial empires, as well as certain other favorable political shifts in the new areas of commercial penetration. Even so, they could successfully capitalize on the openings presented to them only because of the growing political, as well as economic, strength of English commerce and shipping in this period. (5)

The development of England's colonies was particularly important for English merchants:

During the first quarter of the seventeenth century, English traders, for the first time, sought systematically to establish commerce with the Americas. Important City merchants had opened up the new trades with Russia, Turkey, Venice, the Levant, and the East Indies that highlighted the Elizabethan expansion, and in each case, had had recourse to their favorite commercial instrument, the Crown-chartered monopoly company. (92)

This meant, in turn, that great merchants had great political interests, both in terms of military policies of the Crown and in terms of the privileges and monopolies upon which their profits depended.  And much of Brenner's narrative is a careful parsing-out of the deliberate and purposive political alignments sought out by the great merchants and their companies.

The Levant Company's privileges were indispensable for its elaborate system of trade regulation and, in turn, for the reservation of the profits of the trade to a restricted circle of merchants. As members of a regulated company, the individual Levant Company merchants traded for themselves with their own capital, but were required to adhere to rules and policies set by the corporation's general court. (66)

Political alignments were especially important during the century of conflict leading to civil war and revolution.

The political activities and alignments of London's merchant community both expressed and helped determine the character of City and national conflict in the period leading up to the outbreak of the Civil War. From November 1640, London politics and national politics became ever more inextricably intertwined, and ovesears merchants played key roles at both levels.... Civil war became inevitable when City and parliamentary conflicts became fully merged through the consolidation of alliances between the City radical movement and the opposition in Parliament, on the one hand, and the City conservative movement and the Crown, on the other. (316)

An overwhelming majority of company merchants ultimately fell into one of these two allied political categories [of royalist supporters]. But it is difficult to be sure how they were distributed between them ... because surviving evidence on the political orientation of large numbers of citizens is available only for the period beginning in July 1641. (317)

But on the other side:

The traders of the colonial-interloping leadership stood at the head of the City popular movement and played a critical role in connecting that movement to the national parliamentary opposition.  The new merchants' continuing intimate ties with London's domestic trading community (from which many of them had come) put them closely in touch with a City parliamentary movement that was overwhelmingly composed of nonmerchants. Meanwhile, their activities in the colonial field gave them pivotal links with those Puritan colonizing aristocrates who constituted a key component of the national parliamentary leadership. (317)

If we wanted a single phrase to summarize Brenner's task in this work, it is the idea that much of England's politics in the early modern period were influenced or determined by the demands of the commercial sector. The great merchants wielded great political power. And so we need to have a fine-grained understanding of these companies and their networks if we are to understand the coalitions and policies of the period. Contrary to the view put forward by Marx above, merchant capital and its associated actors and organizations were indeed a potent historical factor in modern history.

A recent book by Stephen Bown, Merchant Kings: When Companies Ruled the World, 1600--1900, picks up the story of merchant capital from a different angle and with a very different level of resolution. Bown is particularly interested in demonstrating the active (and often violent) role that large merchant companies played in the development of the world trading system and the colonial relationships that emerged from the seventeenth century forward. Bown's central focus is on the individuals and the companies that created the colonial world: Jan Pieterszoon Coen and the Dutch East India Company, Pieter Stuyvesant and the Dutch West India Company, Sir Robert Clive and the English East India Company, Aleksandr Baranov and the Russian American Company, Sir George Simpson and the Hudson's Bay Company, and Cecil John Rhodes and the British South Africa Company.

Bown opens his book with the story of the Dutch efforts in the early seventeenth century to push English and Portuguese traders out of the East Indies (Indonesia).  The central actor of this story is an employee of the Dutch East India Company and an experienced naval admiral, Pieter Verhoeven. The narrative of Verhoeven's assault on the Moluccas is a good place for Bown to begin, because it brings together the themes of armed violence and commercial interest that are the core of his book. Verhoeven's instructions from the board of directors of the Dutch East India Company were explicit:

We draw your special attention to the islands in which grow the cloves and nutmeg, and we instruct you to strive after winning them for the company either by treaty or by force. (10-11)

Bown draws out a story of global competition between nations and trading companies that illustrates the brutality and self-interestedness of colonialism throughout the three-century period he traces. And the chief victims of this violence are non-European peoples from Indonesia to Alaska to South Africa. What the book doesn't provide is what is so evident in Brenner's book -- a detailed understanding of the political and organizational relationships that underlay these military and commercial adventures.

Both books have something to add to our own efforts to understand big business in the twenty-first century. On the evidence offered here, business organizations -- corporations and companies -- have their own interests and agendas, and states have a great deal of difficulty in constraining them to the public good. This is obvious in the failures of large financial institutions to safeguard the interests of the public in 2008 -- the harmful conduct of finance capital, but it was equally evident in the behavior of the Dutch East India Company or Brenner's opening example, the Company of Merchant Adventurers. The hidden hand does not assure us that markets, commerce, and private interest will bring about the common good.