The Emergence of Capitalism -- the primal link between State militarism and early industrial capitalism

 

... or, the difference between mass production and massive production.

But first -- how do you hide the fact that the US economy depends on weapons production?

You probably think it doesn't or at least that nobody hides it, since it's a known fact that the US outspends all of its allies and enemies by miles: according to the International Institute for Strategic Studies, in 2020 the US spent $738 Billion on its defense budget, which -- in order to equal it -- would require the combined military spending of the next fourteen highest-spending nations to exceed it (China, India, UK, Russia, France, Germany, Japan, Saudi Arabia, South Korea, Australia, Italy, Brazil, Canada, and Israel).

That, however, is only a tiny fraction of the story. The US is the world's largest arms exporter, racking up $10.752 Billion in 2020. That actually doesn't seem very large, considering that the entire US exports the same year were valued at $208.6 Billion, meaning that arms exports only accounted for 5.2% of the total.

That, however is a carefully crafted lie. Look at what counts in the tally of US arms exports:

Arms transfers cover the supply of military weapons through sales, aid, gifts, and those made through manufacturing licenses. Data cover major conventional weapons such as aircraft, armored vehicles, artillery, radar systems, missiles, and ships designed for military use. Excluded are transfers of other military equipment such as small arms and light weapons, trucks, small artillery, ammunition, support equipment, technology transfers, and other services.

In order to understand the value of that minor-looking exclusion,  you must first realize what is excluded from the estimate of "US military exports" and even the total value of all US exports: 

• Direct government-to-government sales (Congressional notification sales)
• Direct commercial sales to foreign governments approved by the US Government

In 2020 these totaled (wait for it) $175.1 Billion. Go back and look -- total reported exports the same year were $208.6 Billion. Are you beginning to get the picture? According to what the government tells you, we exported $208.6 Billion and had a trade deficit of $45.3 Billion, because we imported $253.9 Billion in foreign goods. The reality , however, is that when you add in arms transfers that are not considered exports because they are sales to foreign governments, not foreign consumers, you end up with the following comparison:

Without military transfers

US Exports $208.6 Billion (5.2% military)

US Imports $253.7 Billion

US Trade deficit $45.3 Billion

With military transfers

US Exports $383.7 Billion (48.3% military)

US Imports $253.7 Billion

US Trade surplus $130 Billion

In other words, almost half of all US goods sold abroad are arms transfers. Our entire economy is based on military production. It's actually in front of you -- all the data I just provided are either direct from federal websites or gleaned from them by other analysts -- but it has been hidden very, very carefully in plain sight.

Capitalism is causally linked to military production? Yes, actually. And it has been from the start.

Let's explore how and why ...

The history of Europe coming out of the Middle Ages and into the Renaissance period is essentially a history of wars, religion, trade, and technological innovation. All of these elements were inextricably linked together, and founded on earlier trends.

The revolution in commercial trade across Europe and into the Islamic regions of the Mediterranean and Near East that occurred between about 950-13500 rested firmly on preceding the agricultural revolution, and required the concurrent wave of technological innovation (especially in architecture, iron production, and power generation via waterworks) to get started. Likewise, the geographic opposition of the Christian west to the Muslim Near East would lead to an increase in both religious fervor (on both sides) and military developments -- even before the origination of the Ottoman Empire, which was to play so great a role in European history.

This was also the time in which great independent (or at least semi-independent) city-states like Venice, Genoa, and Antwerp, or alliances of such city-states (e.g. the Hanseatic League) emerged to control commerce and finance to the great consternation of the Kings and Queens in England, France, Spain, and Hungary, as well as the assorted principalities of the Holy Roman Empire. City-states maintained their independence (or at least independence of action) by a combination of strong naval power and the virtually impregnable fortifications of their walled cities, which -- generally having seaborne supply lines -- could not be taken by siege under normal conditions.

Had the city-states remained invulnerable throughout the Renaissance into the Early Modern Period, the history of Europe would have been much different, because the strong, increasingly centralized kingdoms that grew into the earliest nation-states (chiefly England, France, Spain, and Hungary) would never have evolved as such.

The answer that these monarchs found was in siege artillery and the earliest form of industrial capitalism.

The first recorded use of cannon in a European battle was at Crecy (between the French and English) during the Hundred Years War in 1346, as an innovative if minor feature of the fighting, completely overshadowed by the English decimation of the French army with their longbows. By the last battle of that war -- Castillon in 1453 -- French cannon shattered the English army. (By the way, due to several truces that lasted for years, the Hundred Years War also lasted for more than 100 years, in case you were wondering.)

But it was both mobile and heavy cannon -- field, naval, and siege artillery -- that changed both the political map of Europe, the calculus of military strategy, and the economics of the world. Here excerpted from Fernand Braudel's Civilization and Capitalism (1400-1800), Vol. 1, The Structures of Everyday Life, is the general outline of the story:

But cannon mounted on gun-carriages, drawn by teams of powerful horses, only made its appearance in Italy with Charles VIII in September I494. It shot iron cannon-balls (which quickly came into general use) instead of stone ones, and these missiles were no longer aimed only at the houses in a besieged town but also at its walls. No fortified city, where the action had hitherto consisted of defending or surrendering the gates, could stand up to such pointblank bombardments. For the guns were taken right up to the foot of the ramparts on the outer bank of the moats and immediately placed under protective taudis (hovels), according to Jean d' Auton, Louis XII' S chronicler. These weapons accounted for the chronic vulnerability of fortified towns for over thirty years: their ramparts were demolished like theatre sets.

...

Artillery and firearms quite transformed inter-state warfare, economic life and the capitalist organization of arms production. Only rich states were capable of bearing the enormous costs of the new warfare. They were eventually to eliminate the independent cities ...

How did this happen? The need for thousands, perhaps tens of thousands of pieces of artillery across Europe between 1500 - 1800 required the creation of multiple new industries that -- because they had to be dispersed across the continent (you mine where there is ore; you machine tool weapons where there is water power, and etc.), they became the province of sprawling industrial empires such as Geer Enterprises in Sweden, that almost solely existed to service the needs of the emerging nation-state because no one else had the resources to engage them.

Metallurgical war industries sprang up: at Brescia on the Venetian mainland from the fifteenth century; around Graz in Styria very early on; around Cologne, Ratisbon, Nordlingen, Nuremberg and Suhl (the arsenal for Germany and the most important centre in Europe until its destruction by Tilly in 1634); at Saint-Etienne where over 700 workers were employed in the 'powerful arsenal of the lame husband of Venus' in 1605; and last but not least, the blast furnaces built in Sweden in the seventeenth century with capital from Holland or England. The Geer enterprises there were able to deliver in almost a single consignment the 400 pieces of artillery that enabled the United Provinces to block the advance of the Spanish south of the Rhine delta in 1627. 

The rapid progress of firearms stimulated the copper industries, as long as cannon were still being manufactured from bronze, and cast by the same process as church bells (the right combination - different from the one used for bells - eight parts of tin to ninety-two of copper, was already known in the fifteenth century) . However, iron or rather cast-iron cannon appeared in the sixteenth century. Of the 2431 cannon of the Invincible Armada 934 were iron. This cheap cannon was to replace the expensive bronze pieces and to be manufactured on a large scale. 

There was a link between the development of artillery and the development of blast furnaces (like those set up by Colbert in Dauphine) . 

Note that this was not mass production in the sense that von Mises and others would identify as the sine qua non of capitalism, because we are looking back at a time before division of technical labor had little more than begun. Each firearm; each piece of field, naval, or siege artillery; each gun truck or carriage; were individual pieces, with no parts interchangeable -- it was only in the standardization of the shot to seven calibers across Europe that this was foreshadowed.

No, it was not mass production, but massive production. Think of each piece of siege artillery as a single ICBM missile, and the complexity of the industrial, logistical, and capital investment that each would represent. This was early industrial production that based very modern private ownership of capital against what was essentially a late medieval production base.

The original industrial capitalism, and Murray Rothbard would so characterize it, was state capitalism, and the essential product that led to its creation was armaments for whom the primary (often only) customer was the emerging nation-state.

And it was not only massive production, but the guns, their ammunition, their support trains reached relative levels of expense that equaled anything the United State spends today.

But the cost of artillery did not end when it had been built and supplied with ammunition. It had also to be maintained and moved. The monthly bill for maintenance of the fifty pieces the Spaniards had in the Netherlands in 1554 (cannon, demi-cannon, culverins and serpentines) was over forty thousand ducats. To set such a mass in motion required a 'small train' of 473 horses for the mounted troops and a 'large train' of 1014 horses and 575 wagons (with 4 horses each) , or 4777 horses in all, which meant almost 90 horses per piece. At the same period a galley cost about 500 ducats a month to maintain.

Here is a key sentence that you should read with reference to my opening paragraphs, noting that in the Mediterranean economy the city-state of Venice long occupied a position of dominance.

The Venetian Arsenal c. 1590

Venice's security was 1,800,000 ducats' worth of powder at the lowest estimate, or more than the equivalent of the annual receipts of the city itself. This shows the huge scale of war expenditure, even when there was no war. 

And the figures increased with the years: in 1588, the Invincible Armada carried north with it 2431 cannon, 7000 arquebuses, 1000 muskets, 123,790 bullets and shot (or 50 per piece) , plus the necessary powder. But in 1683, France had 5619 cast-iron cannon on board its fleets, and England 8396.

Nor did this situation change. Armaments industries remained the mainstay of the industrial revolution for centuries -- literally until the present day.

As Pria Satia has recently and effective argued in Empire of Guns, The Violent Making of the Industrial Revolution, state power and what might most accurately be called state military capitalism grew hand in glove:

The story of Britain’s transformation from a predominantly agrarian, handicraft economy to one dominated by industry and machine manufacture—the commonly accepted story of the industrial revolution—is typically anchored in images of cotton factories and steam engines invented by unfettered geniuses. The British state has little to do in this version of the story. For more than two hundred years, that image has powerfully shaped how we think about stimulating sustained economic growth—development—the world over. But it is wrong: state institutions drove Britain’s industrial revolution in crucial ways: ... war made the industrial revolution.

Likewise the British East India Company [EIC] (along with its Dutch competitor of the same name) literally broke the ground for the creation of privately owned trans-national corporations as an arm of State power -- literally an empire within an empire, as William Dalrymple writes for Financial Times in "Lessons in capitalism from the East India Company":

When people voice fears today about the power of corporations and the way global companies can find ways around the laws and the legislatures of individual nation-states, it is no accident that they sound like 18th-century commentators such as Horace Walpole, who decried the way that EIC wealth had corrupted parliament: “What is England now?” he asked, but “a sink of Indian wealth, filled by nabobs [with] . . . a Senate sold and despised.”

For just as the lobbying of the Anglo-Persian Oil Company was able to bring down the government in Iran and United Fruit that of Guatemala in the 1950s; just as ITT lobbied to bring down Salvador Allende’s Chile in the 1970s and just as ExxonMobil has lobbied the US more recently to protect its interests in Indonesia, Iraq and Afghanistan, so the EIC was able to call in the British navy to enhance its power in India in the 18th century.

And just as Facebook today can employ Nick Clegg, the former UK deputy prime minister, so the EIC was able to buy the services of Lord Cornwallis, who surrendered Yorktown to Washington. The EIC, in other words, was not just the world’s first great multinational corporation, it was also the first to run amok and show how large companies can become more powerful, and sometimes more dangerous, than nations or even empires.  

This is a critically important story, so often submerged in the laudatory narratives about the mass production of consumer goods and raising the standard of living for the masses of the people, along with fierce arguments that in order to function best, capitalists and the economy must be free from state interventionism.

The grim reality is that capitalism is the product of state interventionism in the economy -- first in Europe, then in America, and then across the world ... and large-scale mass production emerged from the arms trade (not consumer goods), and has never strayed far from its origins.

The US actually had the chance to break the cycle. After powering its way into the industrial revolution during the first half of the 19th Century thanks predominantly to slave labor (thoroughly documented by Edward Baptiste in The Half Has Never Been Told: Slavery and the Making of American Capitalism), the US generated a massive industrial arms complex to defeat the Confederacy, and then did something that would have been impossible to do in Europe thereafter ... converted it to a mostly commercially based mode of production. (This miracle was possible only due to the geographical fact of being protected by two oceans and long, friendly borders.)

And the nation pulled off the same trick in World War I -- mobilizing the army and the arms industry in a hurry -- then demobilizing it immediately after the German collapse.

The industrial/commercial history of the US is anomalous when compared to the development of other industrialized, capitalist nations. But it would not remain so.

After 1945, when the US had engaged in the largest military-industrial mobilization in the history of the planet, nobody turned it off. We entered the Cold War and created the national security state based on the ability to maintain global military dominance. We could do so and mass produce consumer goods at the same time (which kept most people from noticing) because between 1945 - 1960 America possessed the only large industrial base that had not been seriously damaged or even destroyed by the war. For fifteen years, our industries literally had no external competitors.

And the result is where we started this article. The so-called crony capitalism that many people like to blame for the corporatized state of affairs in American manufacturing, commercial, and financial sectors is not a BUG but a FEATURE of capitalism.

It is even possible to speculate that large-scale industrial capitalism cannot develop without state intervention and state protection from competition. So these two entities -- the State and corporate/industrial capitalism --  have not evolved as adversaries but as symbiotes. True laissez faire capitalism not only has not existed and does not exist, but may not even be possible.