Robert Brenner's critique of the market-focused theories of development which overlook class structures and relations, opening the door for third-worldist ideology.

The appearance of systematic barriers to economic advance in the course of capitalist expansion—the ‘development of underdevelopment’—has posed difficult problems for Marxist theory. [*] There has arisen, in response, a strong tendency sharply to revise Marx’s conceptions regarding economic development. In part, this has been a healthy reaction to the Marx of the Manifesto, who envisioned a more or less direct and inevitable process of capitalist expansion: undermining old modes of production, replacing them with capitalist social productive relations and, on this basis, setting off a process of capital accumulation and economic development more or less following the pattern of the original homelands of capitalism. In the famous phrases of the Communist Manifesto: ‘The bourgeoisie cannot exist without constantly revolutionizing the instruments of production and thereby the relations of production, and with them the whole relations of society. Conservation of the old modes of production in an altered form was, on the contrary, the first condition of existence for all earlier industrial classes. Constant revolutionizing of production, uninterrupted disturbance of all social conditions, everlasting uncertainty, and agitation distinguish the bourgeois epoch from all earlier ones. The bourgeoisie . . . draw all, even the most barbarian nations into civilization. The cheap prices of its commodities are the heavy artillery with which it batters down all Chinese walls . . . It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilization into their midst, to become bourgeois themselves. In a word, it creates a world after its own image.’

Many writers have quite properly pointed out that historical developments since the mid-nineteenth century have tended to belie this ‘optimistic’, ‘progressist’ prognosis, in that the capitalist penetration of the ‘third world’ through trade and capital investment not only has failed to carry with it capitalist economic development, but has erected positive barriers to such development. Yet the question remains, where did Marx err? What was the theoretical basis for his incorrect expectations? As can be seen from the above quotation and many others from the same period, [1] Marx was at first quite confident that capitalist economic expansion, through trade and investment, would inevitably bring with it the transformation of pre-capitalist social-productive relations—i.e. class relations—and the establishment of capitalist social-productive relations, a capitalist class structure. It was clearly on the premise that capitalist expansion would lead to the establishment of capitalist social relations of production on the ruins of the old modes, that he could predict world-wide economic development in a capitalist image.

But, suppose capitalist expansion through trade and investment failed to break the old modes of production (a possibility which Marx later envisaged [2]); or actually tended to strengthen the old modes, or to erect other non-capitalist systems of social relations of production in place of the old modes? In this case, Marx’s prediction would fall to the ground. For whatever Marx thought about the origins of capitalist social-productive relations, he was quite clear that their establishment was indispensable for the development of the productive forces, i.e. for capitalist economic development. If expansion through trade and investment did not bring with it the transition to capitalist social-productive relations—manifested in the full emergence of labour power as a commodity—there could be no capital accumulation on an extended scale. In consequence, the analysis of capitalist economic development requires an understanding, in the first place, of the manner in which the capitalist social-productive relations underpinning the accumulation of capital on an extended scale originated. In turn, it demands a comprehension of the way in which the various processes of capitalist expansion set off by the accumulation of capital brought about, or were accompanied by, alternatively: 1. the further erection of capitalist class relations; 2. merely the interconnection of capitalist with pre-capitalist forms, and indeed the strengthening of the latter; or 3. the transformation of pre-capitalist class relations, but without their substitution by fully capitalist social-productive relations of free wage labour, in which labour power is a commodity. In every case, it is class relations which clearly become pivotal: the question of their transformation in relationship to economic development.

I. Introduction

I shall argue here that the method of an entire line of writers in the Marxist tradition has led them to displace class relations from the centre of their analyses of economic development and underdevelopment. It has been their intention to negate the optimistic model of economic advance derived from Adam Smith, whereby the development of trade and the division of labour unfailingly bring about economic development. Because they have failed, however, to discard the underlying individualistic-mechanist presuppositions of this model, they have ended up by erecting an alternative theory of capitalist development which is, in its central aspects, the mirror image of the ‘progressist’ thesis they wish to surpass. Thus, very much like those they criticize, they conceive of (changing) class relations as emerging more or less directly from the (changing) requirements for the generation of surplus and development of production, under the pressures and opportunities engendered by a growing world market. Only, whereas their opponents tend to see such market-determined processes as setting off, automatically, a dynamic of economic development, they see them as enforcing the rise of economic backwardness. As a result, they fail to take into account either the way in which class structures, once established, will in fact determine the course of economic development or underdevelopment over an entire epoch, or the way in which these class structures themselves emerge: as the outcome of class struggles whose results are incomprehensible in terms merely of market forces. In consequence, they move too quickly from the proposition that capitalism is bound up with, and supportive of, continuing underdevelopment in large parts of the world, to the conclusion not only that the rise of underdevelopment is inherent in the extension of the world division of labour through capitalist expansion, but also that the ‘development of underdevelopment’ is an indispensable condition for capitalist development itself.

Frank and Capitalist Development

It has thus been maintained that the very same mechanisms which set off underdevelopment in the ‘periphery’ are prerequisite to capital accumulation in the ‘core’. Capitalist development cannot take place in the core unless underdevelopment is developed in the periphery, because the very mechanisms which determine underdevelopment are required for capitalist accumulation. In the words of André Gunder Frank, ‘economic development and underdevelopment are the opposite faces of the same coin’. As Frank goes on to explain: ‘Both [development and underdevelopment] are the necessary result and contemporary manifestation of internal contradictions in the world capitalist system . . . economic development and underdevelopment are relational and qualitative, in that each is actually different from, yet caused by its relations with, the other. Yet development and underdevelopment are the same in that they are the product of a single, but dialectically contradictory, economic structure and process of capitalism. Thus they cannot be viewed as the product of supposedly different economic structures or systems . . . One and the same historical process of the expansion and development of capitalism throughout the world has simultaneously generated—and continues to generate—both economic development and structural underdevelopment.’ [3] Specifically: ‘The metropolis expropriates economic surplus from its satellites and appropriates it for its own economic development. The satellites remain underdeveloped for lack of access to their own surplus and as a consequence of the same polarization and exploitative contradictions which the metropolis introduces and maintains in the satellite’s domestic structure.’ [4]

Obviously such a view of underdevelopment carries with it a view of development, the unitary process which ostensibly brought about both. Frank’s primary focus has in fact been on the roots of underdevelopment, so it has not been essential for him to go into great detail concerning the origins and structure of capitalist development itself. Yet, to clarify his approach, it was necessary to lay out the mainsprings of capitalist development, as well as underdevelopment; accordingly, Frank did not neglect to do this, at least in broad outline. The roots of capitalist evolution, he said, were to be found in the rise of a world ‘commercial network’, developing into a ‘mercantile capitalist system’. Thus ‘a commercial network spread out from Italian cities such as Venice and later Iberian and Northwestern European towns to incorporate the Mediterranean world and sub-Saharan Africa and the adjacent Atlantic Islands in the fifteenth century . . . until the entire face of the globe had been incorporated into a single organic mercantilist or mercantile capitalist, and later also industrial and financial, system, whose metropolitan centre developed in Western Europe and then in North America and whose peripheral satellites underdeveloped on all the remaining continents.’ [5] With the rise of this system, there was ‘created a whole series of metropolis-satellite relationships, interlinked as in the surplus appropriation chain noted above’. As the ‘core’ end of the chain developed, the ‘peripheral’ end simultaneously underdeveloped.

Frank did not go much further than this in filling out his view of capitalism as a whole, its origins and development. But he was unambiguous in locating the dynamic of capitalist expansion in the rise of a world commercial network, while specifying the roots of both growth and backwardness in the ‘surplus appropriation chain’ which emerged in the expansionary process: [6] surplus appropriation by the core from the periphery, and the organization of the satellite’s internal mode of production to serve the needs of the metropolis. In this way, Frank set the stage for ceasing to locate the dynamic of capitalist development in a self-expanding process of capital accumulation by way of innovation in the core itself. Thus, for Frank, the accumulation of capital in the core depends, on the one hand, upon a process of original surplus creation in the periphery and surplus transfer to the core and, on the other hand, upon the imposition of a raw-material-producing, export-dependent economy upon the periphery to fit the productive and consumptive requirements of the core.

It has been left for Immanuel Wallerstein to carry to its logical conclusion the system outlined by Frank. Just as Frank and others have sought to find the sources of underdevelopment in the periphery in its relationship with the core, Wallerstein has sought to discover the roots of development in the core in its relationship with the periphery. Indeed, in his magisterial work, The Origins of the Modern World System, [7] Wallerstein attempts nothing less than to establish the origins of capitalist development and underdevelopment and to locate the mainsprings of their subsequent evolutions.

Wallerstein’s System

Wallerstein aims to systematize the elements of the preliminary sketch put forward in Frank’s work. His focus is on what he terms the ‘world economy’, defined negatively by contrast with the preceding universal ‘world empires’. So the world empires, which ended up by dominating all economies prior to the modern one, prevented economic development through the effects of their overarching bureaucracies, which absorbed masses of economic surplus and prevented its accumulation in the form of productive investments. In this context, Wallerstein declares that the essential condition for modern economic development was the collapse of world empire, and the prevention of the emergence of any new one from the sixteenth century until the present. Wallerstein can argue in this way because of what he sees to be the immanent developmental dynamic of unfettered world trade. Left to develop on its own, that is without the suffocating impact of the world empires, developing commerce will bring with it an ever more efficient organization of production through ever increasing regional specialization—in particular, through allowing for a more effective distribution by region of what Wallerstein terms systems of ‘labour control’ in relation to the world’s regional distribution of natural resources and population. The trade-induced world division of labour will, in turn, give rise to an international structure of unequally powerful nation states: a structure which, through maintaining and consolidating the world division of labour, determines an accelerated process of accumulation in certain regions (the core), while enforcing a cycle of backwardness in others (the periphery). [8]

Without, for the moment, further attempting to clarify Wallerstein’s argument, it can be clearly seen that his master conceptions of world economy and world empire were developed to distinguish the modern economy, which can and does experience systematic economic development, from the pre-capitalist economies (called world empires), which were capable only of redistributing a relatively inflexible product, because they could expand production only within definite limits. Such a distinction is both correct and necessary. For capitalism differs from all pre-capitalist modes of production in its systematic tendency to unprecedented, though neither continuous nor unlimited, economic development—in particular through the expansion of what might be called (after Marx’s terminology) relative as opposed to absolute surplus labour. That is, under capitalism, surplus is systematically achieved for the first time through increases of labour productivity, leading to the cheapening of goods and a greater total output from a given labour force (with a given working day, intensity of labour and real wage). This makes it possible for the capitalist class to increase its surplus, without necessarily having to resort to methods of increasing absolute surplus labour which dominated pre-capitalist modes—i.e. the extension of the working day, the intensification of work, and the decrease in the standard of living of the labour force. [9]

To be specific, a society can achieve increases in labour productivity leading to increases in relative surplus product/labour when it can produce a greater mass of use values with the same amount of labour as previously. Put another way, a given labour force achieves an increase in labour productivity when it can produce the means of production and means of subsistence which makes possible its own reproduction (continued existence) in less time than previously (working at the same intensity); or when, given the same amount of time worked as before, it produces a larger surplus above the means of production and means of subsistence necessary to reproduce itself than previously. This cannot take place without qualitative changes, innovations in the forces of production, which have historically required the accumulation of surplus, i.e. ‘plough back of surplus’, into production. The basis, in turn, for the operation of this mechanism as a more or less regular means to bring about economic development was a system of production organized on the basis of capitalist social-productive or class relations. As Marx put it, relative surplus value ‘presupposes that the working day is already divided into two parts, necessary labour and surplus labour. In order to prolong the surplus labour, the necessary labour is shortened by methods for producing the equivalent of the wage of labour in a shorter time. The production of absolute surplus-value turns exclusively on the length of the working day, whereas the production of relative surplus-value completely revolutionizes the technical processes of labour and the groupings into which society is divided. It therefore requires a specifically capitalist mode of production, a mode of production which, along with its methods, means and conditions, arises and develops spontaneously on the basis of the formal subsumption of labour under capital. This formal subsumption is then replaced by a real subsumption.’ (emphasis added). [10]

A Crucial Objection

It is the fundamental difficulty in Wallerstein’s argument that he can neither confront nor explain the fact of a systematic development of relative surplus labour based on growth of the productivity of labour as a regular and dominant feature of capitalism. In essence, his view of economic development is quantitative, revolving around: 1. the growth in size of the system itself through expansion; 2. the rearrangement of the factors of production through regional specialization to achieve greater efficiency; 3. the transfer of surplus. Thus, according to Wallerstein, the collapse of world empire made possible a worldwide system of trade and division of labour. This, in turn, determined that what for Wallerstein were the three fundamental conditions for the development of the world economy would be fulfilled: ‘an expansion of the geographical size of the world in question [incorporation], the development of variegated methods of labor control for different products and different zones of the world economy [specialization] and the creation of relatively strong state machinery in what would become the core states of this capitalist world economy [to assure transfer of surplus to the core]. (mws. p. 38.) However, as we shall show, neither the expansion of trade leading to the incorporation of greater human and natural material resources, nor the transfer of surplus leading to the build-up of wealth in the core, nor the specialization of labour control systems leading to more effective ruling-class surplus extraction can determine a process of economic development. This is because these cannot determine the rise of a system which ‘develops itself spontaneously’; which can and must continually ‘revolutionize out and out the technical processes of labour and composition of society’.

Wallerstein does not, in the last analysis, take into account the development of the forces of production through a process of accumulation by means of innovation (‘accumulation of capital on an extended scale’), in part because to do so would undermine his notion of the essential role of the underdevelopment of the periphery in contributing to the development of the core, through surplus transfer to underwrite accumulation there. More directly, Wallerstein cannot—and in fact does not—account for the systematic production of relative surplus product, because he mislocates the mechanism behind accumulation via innovation in ‘production for profit on the market’: ‘The essential feature of a capitalist world economy . . . is production for sale in a market in which the object is to realise the maximum profit. In such a system, production is constantly expanded as long as further production is profitable, and men constantly innovate new ways of producing things that expand their profit margin.’ (rfd, p. 398.)

Now, there is no doubt that capitalism is a system in which production for a profit via exchange predominates. But does the opposite hold true? Does the appearance of widespread production ‘for profit in the market’ signal the existence of capitalism, and more particularly a system in which, as a characteristic feature, ‘production is constantly expanded and men constantly innovate new ways of producing’. Certainly not, because production for exchange is perfectly compatible with a system in which it is either unnecessary or impossible, or both, to reinvest in expanded, improved production in order to ‘profit’. Indeed, we shall argue that this is the norm in pre-capitalist societies. For in such societies the social relations of production in large part confine the realization of surplus labour to the methods of extending absolute labour. The increase of relative surplus labour cannot become a systematic feature of such modes of production.

To state the case schematically: ‘production for profit via exchange’ will have the systematic effect of accumulation and the development of the productive forces only when it expresses certain specific social relations of production, namely a system of free wage labour, where labour power is a commodity. Only where labour has been separated from possession of the means of production, and where labourers have been emancipated from any direct relation of domination (such as slavery or serfdom), are both capital and labour power ‘free’ to make possible their combination at the highest possible level of technology. Only where they are free, will such combination appear feasible and desirable. Only where they are free, will such combination be necessitated. Only under conditions of free wage labour will the individual producing units (combining labour power and the means of production) be forced to sell in order to buy, to buy in order to survive and reproduce, and ultimately to expand and innovate in order to maintain this position in relationship to other competing productive units. Only under such a system, where both capital and labour power are thus commodities—and which was therefore called by Marx ‘generalized commodity production’—is there the necessity of producing at the ‘socially necessary’ labour time in order to survive, and to surpass this level of productivity to ensure continued survival.

What therefore accounts for capitalist economic development is that the class (property/surplus extraction) structure of the economy as a whole determines that the reproduction carried out by its component ‘units’ is dependent upon their ability to increase their production (accumulate) and thereby develop their forces of production, in order to increase the productivity of labour and so cheapen their commodities. In contrast, pre-capitalist economies, even those in which trade is widespread, can develop only within definite limits, because the class structure of the economy as a whole determines that their component units—specifically those producing the means of subsistence and means of production, i.e. means of survival and reproduction, rather than luxuries—neither can nor must systematically increase the forces of production, the productivity of labour, in order to reproduce themselves.

If, then, the class-structured system of reproduction in which labour power is a commodity lies behind capitalist economic development, while ‘production for profit in the market’ cannot in itself determine the development of the productive forces, it follows that the historical problem of the origins of capitalist economic development in relation to pre-capitalist modes of production becomes that of the origin of the property/surplus extraction system (class system) of free wage labour—the historical process by which labour power and the means of production become commodities. Wallerstein, like Gunder Frank, is explicit in his renunciation of this position. Consistently he argues that since ‘production on the market for profit’ determines capitalist economic development, the problem of the origins of capitalism comes down to the origins of the expanding world market, unfettered by world empire. He is at pains to distinguish the emergence of the capitalist world economy in the sixteenth century—the rise of the world division of labour which emerged with the great discoveries and expansion of trade routes—from the emergence of a system of free wage labour, and contends that the latter is derivative from the former.

II. Adam Smith and the Class Basis of Economic Development

The issues raised here were, of course, at the centre of the controversy in the 1950s over the transition from feudalism to capitalism, [11] as well as of subsequent controversy over the rise of capitalist underdevelopment. Indeed, it is necessary to understand Wallerstein’s position as a direct outgrowth of the arguments put forward then by Paul Sweezy, as well as of the theses advanced more recently by Frank. To grasp this line of thought, what is essential is to see that the basic theoretical underpinnings for the positions set out by all three of these writers is the model put forward by Adam Smith in The Wealth of Nations, Book 1. [12] The elements of Smith’s model are very familiar. The development of a society’s wealth—quite sensibly equated with the development of the productivity of labour—is a function of the degree of the division of labour. By this, Smith simply means the specialization of productive tasks—classically achieved through the separation of agriculture and manufacturing, and their assignment to country and town respectively. In turn, for Smith the degree of specialization is bound up with the degree of development of trade: the degree to which a potentially interdependent, specialized labour force can be—and is—linked up via commercial nexuses. Thus, we get Smith’s famous principle that the division of labour is limited by the extent of the market—literally, the size of the area and population linked up via trade relations.

Smith’s argument that the separation of manufacture and agriculture and their allocation to town and country, consequently upon the development of trading connections, will lead to a process of economic growth, as a result of the increased productivity which ‘naturally’ follows from the producers’ concentration on a single line of production rather than a multiplicity of different ones, has a certain plausibility—in the highly abstract form in which it is presented. The appearance of new manufacturing commodities stimulates rural production, which in turn induces the growth of urban output to supply the countryside, and so on. The fact of specialization of function, with agriculture and manufacturing now carried out by separate productive units, makes possible greater efficiency and facilitates invention. A process of self-sustaining growth appears to be entrained. Yet, when the assumptions of the model are even cursorily examined, its limited historical relevance is immediately apparent: it ‘works’ only under the premise of capitalist social relations of production, as well as the specific social forces of production with which these have been historically associated.

What precisely is taken for granted? First, that labour power can and will be transferred from rural agriculture to urban manufacturing in response to market opportunities. Second, that through the separation and specialization of productive units, labour productivity will be improved and continue to be improved. Thus, for the possibility of a developing town-country division of labour, agriculturalists must be free to leave the countryside in response to urban-industrial opportunities, while adequate sanctions must exist to prevent their remaining in the countryside in the face of such opportunities. At the same time, unless the productivity of labour—in the first instance in agriculture—is increased, it will be impossible to support the entry of increasing labour power into urban manufacturing, the sine qua non of economic development. Indeed, unless agricultural surpluses continue to grow, the urban industrial population is strictly limited; for the proportion of the population in town and country depends strictly on the productivity of labour. Yet these processes rest on certain conditions, beyond an emerging market and the desire to exploit it, which cannot in fact be assumed: 1. the potential ‘mobility of labour power’ in response to the market—which is, however, bound up with the degree of freedom/unfreedom and with that of economic dependence/independence of the direct producers; 2. the potential for developing the productivity of labour through separation and specialization of tasks—which is, however, bound up with the possibilities for developing co-operative labour in connection with growing means of production; 3. the potential for enforcing continuing pressure to develop labour productivity—which is, however, bound up with the survival and reproductive needs of the direct producers and exploiters in relation to their access to the means of subsistence and production.

The First Condition

Thus the emergence of possibilities for profitable production thanks to the establishment of commerce, classically in urban manufacturing, does not necessarily mean the movement of producers to take advantage of them. For this to occur, in the countryside there must be no substantial barriers to leaving agriculture, such as serfdom or slavery. In other words, any direct forceful controls over the movement of the direct producers, arising from the social relations by which the ruling class extracts a surplus from them, must be eliminated. Concomitantly, either the advantages to entering urban production must outweigh the incentives of the agricultural producers to remain in the countryside, or they must be subject to forcible ejection from the land. In other words, the property of the direct producers in the means of agricultural production and subsistence must be broken, or else they will not have to move towards growing industrial opportunities.

The Second Condition

At the same time, increased possibilities for profit via increased output do not automatically determine the growth of production via an increase in labour productivity, by means of a growing separation and specialization of function. To begin with, the mere separation of productive functions (e.g. industry/agriculture) and their assignment to different producers (e.g. town/country)—what constitutes ‘specialization’ in the strict sense—can only up to a point bring improvement in the productivity of labour. Smith’s argument that it does so is essentially two-fold: first, that the repetition which comes with the assignment of an individual to a single task increases the efficiency of labour; second, that such concentration leads to invention. Yet despite the undoubtedly large gains which can accrue from this sort of specialization, and although the history of the world is replete with countless examples of it (classically, the emergence of town/county division of labour), nevertheless, before the onset of capitalism, each such example was undermined within a relatively short run by the declining productivity of agricultural labour. This is because the effects of specialization, in Smith’s narrow sense of the individuation of production (the separation of previously combined productive tasks), will necessarily be restricted—unless it is accompanied by the better equipment of labour power with the means of production so as to magnify its productivity. [13] Yet historically, the increasing application of increased means of production to the process of labour has been inextricably tied to the emergence of co-operation—the integration of related work activities within a unit of production. Moreover, the process of developing co-operation in connection with the adoption of new and better means of production is not merely a question of individual inventions. It is especially bound up with the economy’s capability to adopt new methods of production and the necessity for it to do so—in other words, with its capacity for innovation.

Precisely because the increase of labour productivity is historically tied up with innovation in the means of production in relationship to the development of co-operative labour—and not merely with individuated production and individual invention coming with separation—even systematic attempts to respond to market opportunities for increasing production for profit do not necessarily entail greater productiveness of labour. This is because pre-capitalist class structures—systems of surplus extraction and property—tend to fetter the application of the means of production in relation to the development of co-operative production. This is due to the predominance of forceful relationships by which a surplus is extracted from the direct producers, and/or to the predominance of individualized production bound up with property of the direct producers in the means of subsistence and means of production.

On the one hand, where labour is organized by means of force exerted by the ruling class on the direct producers, the effectiveness of collecting labour for co-operation is muted because of the lack of interest of the direct producers in the productive process. Here, the existence of direct, non-market access of the direct producers to the means of subsistence—either in the immediate sense, as in serfdom where the producers possess their own plots, or indirectly, as in slavery where the slave-owners provide the slaves’ subsistence because the latter are their property—determines that force can be of only limited utility in affecting the quality and consistency of labour in connection with increasing, and increasingly complex, tools. On the other hand, where labour is organized by the direct producers on the basis of their property in the means of production, as exemplified in peasant freeholder production, the tendency (general among all the peasant producers) to relate their individual development of the productive forces to the goal of maintaining their family and keeping their property tends to fetter the development of co-operative labour, by keeping labour individuated and preventing the accumulation and concentration in one place of labour, land and the means of production. Small property tends to dictate individualized and unspecialized production.

It was in the context of his discussion of the difficulties of the development of co-operative labour in the face of pre-capitalist social-productive relations that Marx concluded that: ‘If, then, on the one hand, the capitalist mode of production is a historically necessary condition for the transformation of the labour process into a social process, so, on the other hand, this social form of the labour process is a method employed by capital for the more profitable exploitation of labour, by increasing its productive power.’ [14] Thus the systematic barriers set up by pre-capitalist property forms to the development of increasing means of production in relation to co-operative labour have the end result that attempts to increase surplus in response to market opportunities under such systems tend to be ‘biased’ away from the means of extracting ‘relative surplus labour’ in favour of recourse to the methods of ‘absolute surplus labour’.

The Third Condition

Finally, even where major improvements in the forces of production are introduced in pre-capitalist modes of production—and their historical significance has, of course, been very great—they nonetheless tend to constitute ‘once and for all’ processes. In other words, the market exerts no pressure toward the continual revolution of the means of production. It is the essence of pre-capitalist social relations of production that both exploiters and the direct producers are, in one way or another, directly connected with their means of subsistence and means of production. As a result, their survival and reproduction is not dependent on the sale of their products on the market; consequently they do not have to compete in terms of their productive powers. Indeed, far from determining increased production via accumulation and innovation, such class systems tend to provide opportunities and create pressures for the exploiters and direct producers to follow other needs than the maximal expansion of their productive potential for the market: to use their surpluses for purposes other than ‘reinvestment’ in increased means of production, and/or even to avoid production for ‘maximum surplus’ in the first place.

Thus where the direct application of force is the condition for ruling-class surplus extraction, the very difficulties of increasing productive potential through the improvement of the productive forces may encourage the expenditure of surplus to enhance precisely the capacity for the application of force. In this way, the ruling class can increase its capacity to exploit the direct producers, or acquire increased means of production (land, labour, tools) through military methods. Rather than being accumulated, economic surplus is here systematically diverted from reproduction to unproductive labour. Correlatively, where the family plot forms the basis of individual peasant property, there is every incentive to direct production, and production for exchange, so that the multiplicity of labour processes and means of production which ensure the continued subsistence of the family plot can be carried out successfully. The capacity of the peasant proprietor to carry out these disparate labours for subsistence obviously hinders even the elementary steps towards the development of specialization of labour which are the crucial conditions for the development of the productive forces. The contrast, in such cases as these, with capitalist social relations—where the separation of the exploiters and direct producers from the means of subsistence enforces the use of surplus for accumulation and innovation to make possible survival and reproduction—could not be more stark.

The Structure of Capitalist Development

In sum, then, Smith’s fundamental proposition—that the rise of a trade-based division of labour will determine economic development through the growth of specialization and thereby the productivity of labour—is understandable only in terms of his individualistic methods and assumptions. It is only such premises which allow him to attribute the dynamic of the system as a whole to the qualities inherent in its individual parts—in particular, his connection of the rise of labour productivity to the individuation of production, and especially his attribution of a process of accumulation via innovation to individuals’ ‘self interest’ manifested in ‘profit maximization’ and ‘competition on the market’. This is how things appear, ‘how they really are’ under capitalism. But this is only because the specific functioning of the individual components (productive units) of the system—their ‘self-interest’ profit maximization in order to compete on the market—is structured by the system of capitalist class relations. Correlatively, Smith’s ahistorical determinations by ‘market forces’ are understandable only as a result of the failure to take into account the differential limitations and potentialities imposed by different class structures on differentially placed exploiters and producers responding to such market forces—and, further, the different sorts of interests or goals to which such exploiters and producers might attempt to subordinate exchange. It is precisely by determining such disparate and conflicting class interests that historically-developed structures of class relations (relations of surplus extraction and property) open up or foreclose different patterns of development—in particular by conditioning the structure of income distribution and social demand, and thereby the distribution of labour-power and the means of production between productive and unproductive production, while establishing the potential for developing the productive forces. Indeed, as I shall try to show, it is precisely the same class relations as those that fully open the way for the transfer of labour power from town to country, which also provide the basic conditions for the development of fixed capital in relation to co-operative labour and which furthermore generate continual pressure for accumulation by way of innovation—i.e. capitalist class relations where labour power is a commodity.

It follows, finally, that to discover the historical origins of the onset of a pattern of capitalist economic development it is not enough to refer, as Smith does, to the rise of the market. In this respect, Smith’s fundamental problem is not, as is often assumed, his attribution of trade to a ‘natural propensity in human nature to truck, and barter, and exchange’. Smith was, in fact, at pains to provide specific historical examples of ‘the original establishment of trade routes and trading connections’. [15] Once established, these connections of exchange set in motion, so to speak, the model of development, via the division of labour—so that for Smith both the origins and developmental pattern of capitalist production are rooted in the same process. But as I shall try to show, the rise of trade is not at the origin of a dynamic of development because trade cannot determine the transformation of class relations of production. Indeed, precisely because it does not do so, the historical problem of the origins of capitalist economic development in Europe comes down to that of the process of ‘self-transformation’ of class relations from serfdom to free wage labour—that is, of course, the class struggles by which this transformation took place.

The Line to Sweezy and Wallerstein

The parallels between the positions of both Sweezy and Wallerstein and that of Adam Smith are striking, and the defects of their arguments are the result of their adopting his assumptions. Like Smith, both Sweezy and Wallerstein, implicitly or explicitly, equate capitalism with a trade-based division of labour. They thus understand its special dynamic of accumulation through innovation as a function of the imperatives of exchange on the market and the productive effects of specialization. As a result, their accounts of the transition from feudalism to capitalism end up by assuming away the fundamental problem of the transformation of class relations—the class struggles this entailed—so that the rise of distinctively capitalist class relations of production are no longer seen as the basis for capitalist development, but as its result.

Of course, Wallerstein and Sweezy appear to differ from Smith precisely in their apparent concern for ‘class’. But, in fact, their conception of the ‘capitalist effects’ of the growth of exchange and the division of labour—the tendency to increasing output and productivity advance built into ‘production for profit on the market’—lead them to assimilate the emergence of new class relations of production to commercial development. Explicitly or implicitly, they regard the transformation of class relations as a necessary effect of continuing commercialization. They see the rise of commercial relations as forcing the individual producers continuously to develop the productive forces through the mechanisms of ‘profit maximization’ and ‘competition on the market’. At the same time, they also see that the development of the productive forces past a certain point requires the reorganization of production within the ‘productive unit’, and conclude that this will in turn require and determine the transformation of the ‘relations of production’ within that unit. The transformation of class relations, therefore, emerges as a consequence of the market-determined development of the productive forces within the individual productive units which compose the economy. Smith’s model of development is thereby ‘extended’ to subsume the transformation of class relations within the broader process of the development of a trade-based division of labour.

Thus, in the first place, both Sweezy and Wallerstein argue that the incorporation of regions dominated by feudalism—specifically, lord-peasant relations characterized by serfdom—into networks of commercial relations cum division of labour has the effect of making feudal-serf productive units function more and more like purely capitalist productive units. They are forced to accumulate and innovate. Secondly, and relatedly, both Sweezy and Wallerstein argue that once the division of labour (town/country, world economy) has been established, the ensuing process of rationalization will give rise, as an economic necessity, to a move away from traditional serf-lord relations towards the development of ‘classically capitalist’ social-productive relations of free wage labour. To develop the productive forces, at least in certain regions in certain productive lines, it eventually becomes necessary to introduce free wage labour. Thus, free wage labour arises as a techno-economic adaption within the producing unit. The class system of free wage labour emerges as a by-product of the individual actions of (de facto capitalist) producing units which reorganize production in order to maximize surplus and compete on the market. As a result, the transition to capitalism is seen to occur as a smooth unilineal process—which is essentially no transition at all. Given the rise of exchange and the techno-economic imperatives of the development of the productive forces under commercial pressures, the rise of capitalist social relations is reduced to a formality.

Sweezy and Wallerstein, like Smith, implicitly regard ‘surplus maximization’ and ‘competition on the market’ as essentially trans-historical forces, requiring only the original impetus of commerce, the rise of the market, to start working their progressive effects within the extant individual productive units. To them, therefore, as to Smith, the historical problem of the origins of capitalism becomes that of the origins of trade-based division of labour. Smith himself, as noted, was very careful to root the application of his ‘model of economic development’ in specific historical commercial/transport breakthroughs—‘a primary establishment of trading routes’. And this, indeed, is precisely the tactic followed by Sweezy and Wallerstein, both of whom found their accounts of the transition from feudalism to capitalism upon just such a primary establishment of trading routes: for Sweezy (who follows Henri Pirenne), it is the re-establishment of Mediterranean commerce after the Mohammedan invasions; for Wallerstein (who follows Frank), it is the great voyages of discovery and conquests which paved the way for the rise of the world market.

From here, Wallerstein and Sweezy follow Smith in arguing for a more or less natural emergence of increased specialization, and a resulting increase in productivity due to specialization—ultimately leading to the transformation of the productive forces, and with them the productive relations. For Sweezy, it is the emergence of Smith’s town/country division, developing in early medieval Europe. This follows upon the concentration of artisan production in the towns, originally to service the needs of newly developing settlements of long-distance traders taking advantage of the opening up of trade routes. But ultimately, the artisans begin to supply the countryside with the manufactured goods it needs on a more efficient basis, while in turn offering a growing market for agricultural products. For Wallerstein, it is the division of the Atlantic World into interdependent regions, specializing in different sorts of agricultural production and/or manufacturing. Once these ‘natural’ steps have been taken from the establishment of a trading nexus to the emergence of an interdependent specialization, the authors in question consider that capitalism is either imminent (Sweezy) or already extant (Wallerstein)—in particular, that trade-induced specialization entrains a process of rationalization via accumulation and especially innovation in the socio-technical organization of production.

Now, there is perhaps nothing wrong with ‘beginning’ in this manner with such historically-specific commercial developments, for there is no denying their importance. But the fact is that such flowerings of commercial relations cum divisions of labour have been a more or less regular feature of human history for thousands of years. Because the occurrence of such ‘commercial revolutions’ has been relatively so common, the key question which must be answered by Sweezy and Wallerstein is why the rise of trade/division of labour should have set off the transition to capitalism in the case of feudal Europe? This question is pivotal because, contra Smith, [16] Sweezy and Wallerstein, the development of trade does not determine a transition to new class relations in which the continuing development of the productive forces via accumulation and innovation become both possible and necessary. Marx encapsulated this difficulty when he wrote: ‘on the basis of every mode of production, trade facilitates the production of surplus-products destined for exchange, in order to increase the enjoyments, or the wealth, of the producers (here meant are the owners of the products). Hence, commerce . . . all development of merchants’ capital tends to give production more and more the character of production for exchange-value and to turn products more and more into commodities. Yet its development . . . is incapable by itself of promoting and explaining the transition from one mode of production to another.’ [17]

Both Sweezy and Wallerstein argue, unexceptionably, that the appearance of the new products on the market tends to increase the feudal lords’ drive to increase their consumption, and that this may lead them to systematize the means of acquiring goods which can be used to buy these new products. As Marx pointed out, under a natural economy (self-sufficiency) the demands of the feudal lord is limited by the ‘walls of his castle’—supplying the immediate necessities of supporting himself and his entourage. But to state this is not to state that the process of acquiring goods in order to exchange will lead the serf-lords systematically to increase production by means of the development of the productive forces, as both Wallerstein and Sweezy do—although each in their own manner.

III. Sweezy and the Transition from Feudalism to Capitalism

Sweezy contends that the transformation of serf agricultural production was a foregone conclusion, once the basic town/country division of labour had been founded in medieval Europe: ‘the manor . . . was fundamentally inefficient and unsuited [to production for the market] . . . Techniques were primitive and the division of labour unwieldy . . . Sooner or later new types of productive relations and new forms of organization had to be found’ (emphasis added). [18] Sweezy seems to be arguing that the rational course for the lords would have been to commute labour services to money rents and to increase output on the demesne by farming it to a capitalist tenant, who would cultivate the land using improved methods (and ultimately wage labour). [19] It is now known that by the later middle ages in northwest Europe certain methods of agricultural production had been developed which would have substantially improved output. Yet, as Dobb pointed out many years ago, where serfdom existed—that is, where the lords were in a position to actually control peasant mobility and access to land—the impact of trade only induced the lords to tighten their hold over the serfs, to increase exactions (including labour rent) and, we can add, to eschew innovation in agriculture. This was as true for the areas producing for the urban food markets in England during the medieval period as it was for the East European regions producing for the world food market from the sixteenth to the eighteenth centuries. [20] Does this mean that the lords were ‘irrational?’

The Lords’ Demands

Now, Sweezy’s assumption that the lords’ desire for increased consumption goods would lead them to seek ways to increase the size of the product which they could appropriate from their peasants is certainly reasonable. [21] But why should this have led them to develop the productive forces, rather than to extract a larger surplus either by lowering the subsistence of the peasantry, thus increasing their share of the existing product, or by increasing output by making the peasantry work harder or longer—i.e. to raise what we have called ‘absolute’ rather than ‘relative’ surplus labour? Given their access to an unfree labour force, i.e. the existence of serfdom, there is no reason to take for granted that the best way to maximize the surplus available to them was to introduce new organizations of production based on new techniques, rather than to enforce more labour on the demesnes and/or increase the rent from the peasant plot—especially if the former was incompatible with the latter, given the historically developed forces of production.

In fact, the new techniques which could have substantially increased output—the revolutionary systems of ‘up and down (or convertible) husbandry’, which replaced the old ‘permanent’ two- or three-field rotations by an ‘alternation’ of animal and arable production so as to eliminate fallows, while bringing in new soil-enhancing crops—required a very carefully supervised, skilled and technically proficient agriculture. [22] This would have been quite difficult, if not impossible, to achieve using serf labour, for the serf worked on the lord’s demesne only because he was forced to. Labour applied to the demesne constituted a direct, forcible deduction from that applicable to the peasants’ plot, so he had no incentive to work carefully or skilfully. To put the problem another way, in order to use the new methods the lord would either have to increase substantially his outlay on the manorial supervision of production, and/or find some means to increase the rewards to—and possibly training of—the serfs, so as to elicit the necessary care and quality of labour.

Technically, for improvement to have been worthwhile, the increased surplus achievable from the increase in output arising from the adaption of new methods, allowing for the increased outlay in labour costs, would have had to have been greater than the increased surplus achievable through simply forcing the serf to work longer and harder and reducing, directly or indirectly, his subsistence (by decreasing the size of his plot or increasing the direct rent upon the plot’s output). Given the inherently forceful nature of the system of surplus extraction—the relationship between lord and serf—the method of ‘squeezing’ must have generally appeared to be the logical, perhaps the only feasible path. The alternative of improvement would have required at least an approach toward a somewhat collaborative relationship between the lords and a section of the peasantry. The lords would have had to give up precisely some of the advantage built into their class position which allowed them to extract a given level of surplus. [23] This was a development running directly counter to the inherently antagonistic dynamic built into the lord-serf structure.

Serfdom and Agricultural Backwardness

It is, indeed, a key confirmation of this line of argument that when the new methods of cultivation became widespread for the first time, constituting a veritable agriculture revolution in sixteenth–seventeenth-century England, it was on the basis of the emergence of an essential partnership between the landlords and richer peasants, who took over as capitalist tenant farmers supervising the introduction of innovations. By this time, serfdom had long collapsed, opening the way to an entirely different rural class structure, based on capitalist social-productive relations. On the other hand, the only examples so far adduced of the adoption of the revolutionary methods of agricultural production during the medieval period in England were in regions where the peasants had succeeded in retaining their freedom throughout the middle ages, despite the lords’ attempts to enserf them. In these instances, the lords moved to increase their surplus by first buying out the free customary peasants—whose customary rent could not be raised and who could not be simply evicted because their customary tenure guaranteed inheritance—then installing the new techniques on their consolidated demesnes using free wage labour. [24] Thus, it was only where it was difficult to increase their income by squeezing the peasantry because the peasantry were free (and property owners) that the lords turned to ‘improvement’. In other words, the lords sought to increase their income via relative surplus labour only where they were not, in fact, serf lords.

The point is, then, that the individual lord did not generally see a choice between relative and absolute surplus labour, because in reality he did not get to choose, on an individual basis, between production on the basis of serfdom and production using free labour. It needs to be noted, in this respect, that it is mistaken to regard the commutation of labour dues to money rents as the first step toward turning the demesne toward advanced methods of production on the basis of a capitalist tenant and wage labour. For this neglects to take into account that even after commutation, the peasant-serfs remained unfree, so still subject to the lord’s extra-economic exactions on their own plots. Thus commutation (the transformation of rents in labour into money rents) can in no way be equated with manumission (freeing the serfs so they could move, marry and buy land without the lord’s consent). In other words, the lords had no reason to free their peasants, even if they no longer wished to use them on their demesnes; for by forcing them to remain on their peasant plots on the estate as serfs, they held them in the best position to exploit, to squeeze, while reserving the possibility of redirecting their labour back to the demesnes at a later time. [25]

So barring actions by the peasants to free themselves—revolt or flight—even widespread commutation throughout the countryside would leave the peasantry as a whole still subject to the lords’ direct control. This would leave a formidable barrier to the emergence of a class of richer peasants who might rent the lords’ demesnes as capitalist farmers and potential improvers, as well as the rise of a free labour force. As a result, it would be difficult for individual lords to move toward a policy of estate reorganization by means of leasing and improvement even if they wished to do so—since they would still be operating within the confines of serfdom.

Finally, it needs to be realized that, even to the extent that individuals within the system (or even without) somehow moved to adopt more efficient or ‘profitable’ methods of production, it cannot be assumed that these would be generalized throughout the system, even over a relatively long run. According to Sweezy, with the development of production for exchange: ‘the inefficiency of the manorial organization of production—which probably no one recognized or at least paid any attention to, as long as it had no rival—was clearly revealed by contrast with a more rational system of specialization and division of labor’ (emphasis added). [26] Now, as we just have seen, there were in fact extremely few improving initiatives within the serf agricultural economy during the medieval period in England (or, as we shall see, in that of Eastern Europe between the sixteenth and eighteenth centuries).

Yet even had these been more widespread, there is no reason to assume that they would have been widely copied, as Sweezy seems to imply they must have been. This was partly because of the barriers we have already mentioned. But it was also because the serf lords were under no compulsion to produce at the highest level of efficiency. This was because they were not, in the last analysis, compelled to make a profit on the market in order to survive, since they could directly, without recourse to the market, supply their own basic (‘subsistence’) needs on their own demesnes with their peasants’ labour. The revelation of ‘inefficiency’ did not determine change and improvement. Thus, in fact, the adoption of more highly productive methods of production in the non-serf regions of medieval England, to which we earlier referred, did not apparently incite emulation in the feudal/serf English heartland. More significantly, as we shall see, the agricultural revolution which gathered strength in England from the sixteenth century penetrated few other European regions, least of all serf-bound Eastern Europe—even despite the latter’s inability to maintain its place on the world market, precisely as a result of its failure to innovate.

Capitalist Rationality under Feudalism

Sweezy’s mistake was obviously to assume the operation of norms of capitalist rationality, in a situation where capitalist social relations of production did not exist, simply because market exchange was widespread: ‘The possession of wealth soon becomes an end in itself in an exchange economy, and this psychological transformation affects not only those who are immediately involved . . . Hence, not only merchants and traders but also members of the old feudal society acquire what we should call today a businesslike attitude toward economic affairs.’ [27] Reasoning from the part or unit of the system to the whole, Sweezy assumed that the rise of the market would lead to what he termed ‘exchange consciousness’ among the serf lords, and that this would in turn lead, by the profit-maximizing actions of individuals, to the rise of new, more efficient social-productive relations which, by virtue of their superiority on the market, would spread throughout the economy. In fact, the existing system of class relations based on serfdom largely determined what was ‘rational’ for individual lords (producing units), i.e. how they could best increase their rent. The application of these (labour-squeezing) methods, in turn, tended to foreclose the emergence of ‘post-feudal’, let alone capitalist social-productive relations, at least by way of the lords’ maximizing initiatives. And even to the extent that a more effective productive organization might emerge, it would not necessarily prevail For the serf-lords’ survival simply did not depend on their relationship to the market.

Precisely because the rise of trade in an economy of serfdom did not necessarily create pressures to develop the productive forces in order to increase income, let alone enforce the generalization of innovation, it could not determine a pattern of economic development, let alone a transformation of social-productive relations away from serf labour, in the direction of free labour and eventually free wage labour. Indeed, the serf social relations, under the impact of trade, tended to entrain a stagnant, often regressive, pattern of overall societal development, making a mockery of the optimistic Smithian model largely taken over by Sweezy, which was built around the assumption that an abstractly-conceived town/country division of labour would lead to productivity increase via specialization. Sweezy is, therefore, far from the mark in his fundamental contention that trade is external to feudalism—in his postulate that ‘trade can in no sense be regarded as a form of feudal economy’. [28] Precisely because trade developed as an expression of feudal class relations, in relation to needs which were structured by these relations, the specific pressures set up by the rise of commerce and of urban production to increase surplus output in the countryside determined a tendency towards declining productivity in agriculture—which in turn meant a stunted development of the division of labour itself.

Because the lords could not easily improve the productive forces under serfdom, they were largely confined to increasing their incomes via the increase of absolute surplus labour. They could, specifically, increase output only within the definite limits of the available land (subject to transport costs), population, intensity of labour and minimum subsistence level. They thus had little incentive to ‘accumulate’: to reinvest surplus in improved means of production. On the contrary, unproductive expenditures on military equipment or conspicuous consumption could make possible the attraction and equipment of followers. The resultant enhancement of military capability could make possible the improvement of the individual lord’s productive potential—that is, through the outright seizure of lands and labourers in warfare. Indeed, precisely because the potential for the development of the productive forces was so limited, development of military strength might be the most promising means to increase the productive powers of the individual lords. [29] That the rise of commerce in large part took the form of a market in luxuries and military goods was thus obviously conditioned by the needs of the feudal-serf order—while it undoubtedly intensified these needs and encouraged increased surplus extraction to fulfil them. Yet to the degree that surplus was spent on military/luxury goods, it meant a subtraction from the society’s resources available for developing the means of production or means of subsistence. Because the development of commerce was therefore not external to feudalism, determining the development of new needs in the abstract, but was rather an expression of demands emanating from feudal class relations, especially the feudal ruling class, it ended up by ‘determining’ a form of division of labour which turned in upon itself.

The impact of feudal class relations on the peasants’ ‘own’ production, on their plots, only tended to exacerbate the foregoing tendencies. The lords’ control over mobility of labour and land, deriving from serfdom, hindered the emergence of markets in labour and land, and thus the ability of peasants to accumulate the means of production requisite to improvement (a difficulty further exacerbated, as we shall see, by the general unwillingness of the peasantry to part with their land). At the same time, because the peasant plot was responsible for producing the labour power (peasant labourers) and means of production (tools) which produced the lords’ surplus (via direct labour on the demesne or levies in kind or money), there was every tendency on the part of the lords to undermine the labour power and means of production of the whole system, through undermining the peasants’ long-term reproductive power via short-term surplus extraction. Especially because the peasant plot operated as a productive unit beyond the lord’s direct supervision, there was little means and/or incentive to gauge the destructive effect of lordly levies on the peasant plot’s potential for reproducing the labour power and means of production. [30] In particular, there was a tendency to exhaust the soil through failure to allow the peasantry enough land, labour time, and means of production (enough of the economic surplus) to support the animals needed to plough and fertilize the land adequately. The resulting tendency to declining productivity meant that demographic crisis was a normal, if not inevitable outcome. [31]

Serfdom and Urban Underdevelopment

In light of the foregoing, it may be seen that the Sweezy/Smith notion of the urban centres of industry as radiating foci of a nascent capitalism—the source of pressures for progress and models for innovation—is, in the context of serfdom, misconceived. Indeed, in the last analysis, the social relations of serfdom in the rural productive sector not only circumscribed the potential for urban industrial development, but imparted to urban industry an essentially parasitic and conservative character. With declining rural productivity, the number of urban producers was naturally limited in the immediate sense by the potential food supply. On the other hand, by dramatically reducing the purchasing power of the rural producers—by first limiting their productive power, and secondly their ability to keep what they produced—the social structure of serfdom under the pressures of exchange in fact tended to prevent the emergence of a mass market for urban manufacturing, either for consumer goods (especially clothing) or for producer goods (tools).

As a consequence, there was little pressure for productive innovation in urban industry—innovation which would have cheapened the means of production or consumption in the rural-productive sector. On the contrary, effective rural demand arose largely from the landlords’ desires for limited numbers of expensive luxury products, goods which could in no way enhance rural production. It was, indeed, the character of this demand which provided the rationale for the guilds, which tended to dominate manufacturing, limiting entry and output, and determining productive methods. There was only a limited market. Moreover, what was required was highly-crafted goods—which to some extent justified the apprenticeship that was the primary method by which the guilds limited entry. Ironically, then, the development of exchange, as it operated on production, through the prism of serf class relations, tended precisely to strangle the very development of the division of labour which it made possible in the first place.

In this context, we can see the difficulty with Sweezy’s final argument that the towns not only provided the incentives for change, but also the pressures to do so, through serving as a magnet for fleeing serfs—and thus the ultimate cause for the dissolution of serfdom. This argument, in the first place, simply begs the major question of the power of the rural lords to keep the peasants on the land by force—how could they leave? On the other hand, it was not just that guild-organized artisans limited access to industrial opportunities; these opportunities were, as we have seen, sharply limited by the character of rural production. [32]

In sum, Sweezy’s entire account of the transition from feudalism to capitalism is based on the implicit assumption that capitalism already exists. This occurs because Sweezy mistakenly believes that trade/towns constitute a sort of capitalism in embryo. The expansion of trade/towns will transmit to the economy as a whole, even one dominated by serfdom, a tendency to self-transformation by means of processes of accumulation and innovation which will inevitably lead to the decline of feudalism (and ultimately the adoption of wage labour), due to the exigencies of the development of the productive forces. By virtue of what might be termed a historical functionalism, the relations of production are thus seen to change as a result of the needs of development of the social forces of production. Sweezy can apparently in this manner assume away the central problem of the transformation from a serf to a free labour force, as a result of a classical form of economic determinism: attributing a universal significance to capitalist motivations and mechanisms—‘profit maximization’ and ‘competition on the market’—given only the existence of a ‘system of exchange’, but not capitalist social-productive relations.

In the last analysis, Sweezy’s error is two-fold. It is to posit that the producers’ relationship to the market determines their operation and development and, ultimately, their relationship to one another—rather than vice versa. Correlatively, it is to locate the system’s potential for development in the capacities of its component individual units (thus, the emphasis on motivations), rather than in the system as a whole—specifically, in the overall system of class relations of production which determine/condition the nature of the interrelationships between the individual units and, in this manner, their operation and development. For Sweezy, then, it is the market relation which gives rise to new needs, engenders a ‘profit motive’ leading to specialization and the development of production, and which forces competition for survival.

Now under capitalism, of course, this is the case, at least from the viewpoint of the individual producer. But this is because, under capitalism, the producers’ relationship to the market merely expresses their fundamental relationship to one another as individual commodity producers—i.e. as producers who must sell their products at a profit in order to be able to survive, since they also must buy their means of production and subsistence in order to reproduce. This relationship, which enforces competitive production at the ‘socially necessary’ level upon each producer, in order to make it possible for them to sell and exchange, in turn expresses the fundamental class structure of capitalists and free wage labourers. It is only with free wage labour—with the producers separated from their means of subsistence and means of production—that not only labour power, but also the means of subsistence and means of production can and must appear as commodities—as forms of capital (variable capital and constant capital). Without this separation, on the one hand, there are the strictest barriers to the accumulation of capital: large masses of means of production and means of subsistence (use values) are not ‘free’, subject to be combined at the highest technological level. Use values cannot take the form of exchange values. On the other hand, with the means of production and especially the means of subsistence in the hands of the direct producers, there is no compulsion to exchange in order to reproduce, no pressure/necessity to compete, thus no requirement to accumulate especially by way of innovating in order to survive.

Thus in Marx’s words, only ‘when this [free] labour has been released from its objective conditions of existence through the process of history . . . does it also encounter the possibility of buying these conditions themselves.’ [33] Also, ‘What enables money-wealth to become capital is the encounter, on one side, with free workers; and on the other side, with the necessaries and materials etc., which previously were in one way or. another the property of the masses who have now become object-less, and are also free and purchasable.’ (Marx’s emphasis). [34] At the same time, ‘Capital proper does nothing but bring together the mass of hands and instruments which it finds on hand. It agglomerates them under its command. That is its real stockpiling; the stockpiling of workers, along with their instruments, at particular points.’ (Marx’s emphasis). [35]

‘Production for Exchange’

It is Sweezy’s topsy-turvy conception of an abstractly considered market as determining the operation of the ‘units’ which make up the class system of production, notably serfdom, which leads him logically to see the fundamental break in the transition to capitalism as between production for use and production for the market. According to Sweezy, ‘the root cause of the decline of feudalism was the growth of trade’ and ‘the important conflict in this connection is . . . between production for the market and production for use’. [36] From here it is a natural step to understand the changes in the serf class system of production as emerging as an outcome of the rise of exchange, which, as we have seen, determines in Sweezy’s view a development of the productive forces that ultimately—due to the needs of technical progress—calls free labour into being.

Sweezy quotes Marx to the effect, that ‘in any given economic formation of society, where not the exchange value but the use value of the product predominates, surplus labour will be limited by a given set of wants which may be greater or less, and that here no boundless thirst for surplus labour arises from the nature of production itself’. The logical corollary, as Sweezy goes on to point out correctly, is that, on the contrary, only with the predominance of exchange values do we get the ‘pressure which exists under capitalism for continued improvement in the methods of production’. [37] Yet the question is, under what conditions does exchange value predominate. Sweezy, of course, gives the straightforward answer: with the rise of production for the market. Here we get a ‘system of production for exchange’, ‘the existence of exchange value as a massive economic fact’, and thus an erosion of ‘the system of use value’, the pressures to improvement, and the slow evolution away from feudal in the direction of capitalist social-production relations.

However, as we have seen, the mere fact of production for exchange ensures none of these things. Indeed, the opposite tendencies toward retrogression are likely, so long as serfdom predominates, and the producing units thus retain their ability directly to supply their own means of production and especially means of subsistence. It is only with the emergence of free wage labour, labour power as a commodity, that there is the separation of the producers from the means of subsistence and production; that production must be marketed to make possible reproduction; that there is, in a true sense, production for exchange. Only then is there predominance of exchange value, leading to systematic pressure to accumulate and thus develop the forces of production. As Marx puts it, ‘the domination of exchange value itself, and of exchange-value-producing production, presupposes alien labour capacity itself as an exchange value—i.e. the separation of living labour capacity from its objective conditions; a relation to them—or to its own objectivity—as alien property; a relation to them, in a word, as capital.’ (emphasis added). [38]

Thus the correct counterposition cannot be production for the market versus production for use, but the class system of production based on free wage labour (capitalism) versus pre-capitalist class systems. There may be trade, exchange on the market, in both; but the significance of trade in each is fundamentally different, for its effects on the system’s operation and development are fundamentally different. Thus in pre-capitalist modes of production, there is always production ‘for use’, in the sense that the individual production units have direct (non-market) access to the means of subsistence, even if a large amount of what is produced is traded on the market. In essence, it is surpluses above necessity (possibly proportionately large surpluses) which are traded. Since it is not means of production and means of subsistence required for reproduction which are being traded (circulated), the market—specifically other competitive producers on the market—can have only a limited impact on production, its character or the amount produced.

It is this access to the means of subsistence and production which, from the point of view of the individual unit of production, provides the ultimate barrier to the operation of capitalist pressures for surplus maximization and competition on the market. From the point of view of the whole system, it is the institutionalized social relations by which the ruling class extracts a surplus from the direct producers, which prevents the ‘factors of production’—the use values in the form of labour power, land and means of production which are ‘already there’—from being united by money capital. So whatever the level of trade in pre-capitalist societies, the fact that free wage labour does not predominate meant, in Marx’s words, that the ‘instrument itself [and the means of subsistence] is still so intertwined with living labour . . . that it does not truly circulate’. (emphasis added). [39] Because labour power and the means of production are not separated from one another (and thus ‘free’), neither are fully commodities. As a result, money cannot circulate, does not have to circulate, so as to bring about via exchange the combination of use values in the form of labour power and the means of production, so as to bring about production at the ‘socially necessary’ rate. Money, in other words cannot buy, invest in, the commodities labour power and means of production, so as to bring them together in production, in order to make more money (m–c–m’). [40]

The capitalist circulation of commodities, therefore, has a meaning radically different from trade under pre-capitalist modes. Here the exchange of commodities (circulation) is a direct and necessary expression of the class structure of the economy as a whole. Because under capitalism the immediate producers (capitalists and workers) do not and cannot produce their own means of production and means of subsistence (that is, the subsistence goods and tools for their own labour process/production), but on the other hand must produce goods necessary for others’ productive processes, their continued production and reproduction depends on circulation—which therefore forms a necessary phase in the total process of production. As Marx summarized the entirely different significances of ‘exchange’ in pre-capitalist and capitalist modes of production, its sharply contrasting position and role: ‘Money and circulation can mediate between spheres of production of widely different [pre-capitalist] organization whose internal structure is still chiefly adjusted to the output of use values. This individualization of the circulation process, in which spheres of production are connected by means of a third, has a two-fold significance. On the one hand, that circulation has not established a hold on production, but is related to it as a given premise. On the other hand, that the production process has not as yet absorbed circulation as a mere phase of production. Both, however, are the case in capitalist production. The production process rests wholly on circulation, and circulation is a mere transitional phase of production, in which the product created as a commodity is realized and its elements of production, likewise created as commodities, are replaced’. [41]

Exchange Value and Capitalism

To put it simply, the ‘predominance of exchange value’ is nothing less than the predominance of free wage labour, where labour power is a commodity. [42] But this should come as no surprise. For after all, Marx’s theory of capitalist development begins from the notion of exchange value as merely a form of value. As to value itself, it arises as an expression of a productive system based on ‘abstract labour’; abstract labour, in turn, reflects an economy of individualized, private producers, where every producer must exchange in order to re-produce—so that labour power can and must ‘move’, or be moved, through the action of capital, into productive lines, so as to get the ‘socially necessary rate’ or ‘the average rate of profit’. Such an economy exists only where the direct producers have been separated from the means of production and especially the means of subsistence—i.e. under a system of free wage labour, where labour power is a commodity, in other words capitalism. [43]

It is precisely the separation of labour power and the means of production, and their appearance as commodities in the individualistic system of private production, which determines the full development of the function of money in circulation ‘as an agent of productive capital’. This separation has this result by determining at once the radical opposition (polarization) between use values and exchange values—since exchange of commodities must take place in order to make possible their use in production—and between the commodity money and the commodities labour power and the means of production—precisely since commodities cannot directly appear as values, ‘marked’ as it were with their values (labour-time embodied), but must instead find their place in production through being circulated. The money commodity can and must function so as to circulate to ‘re-combine’ labour power and means of production, to facilitate production for the highest rate of profit (m–c–m’).

Indeed, it is the achievement of capitalism to bring with it, as it were—albeit in an unconscious and uncontrollable, ‘anarchic’ manner—the interdependence of all producers, in a way which requires that each must produce to the hilt for every other. This interdependence is manifested in, and achieved through exchange on the market; but the market neither creates this interdependence, nor determines its operation. This is a product of the class system of individualistic production, based on separation of the producers from the means of production and means of subsistence—the same separation which enforces accumulation via innovation by way of the exchange of money capital for free labour power and the means of production, in order to make the ‘socially necessary rate’ or average rate of profit.

In the foregoing context, we can see that the original historical process by which the predominance of exchange value emerged is precisely the same as that by which there arise the social productive-relations of capital and free wage labour: they are one and the same. As Marx points out, for capitalist production, ‘we suppose historical processes [of dissolution] which transform a mass of individuals . . . if not perhaps immediately into genuine free labourers, then at any rate into potential free labourers, whose only property is their labour power and a possibility of exchanging it for existing values.’ He then goes on to include among these historical processes of dissolution the destruction of serfdom, the separation of the peasantry from their means of subsistence, the breakup of guilds, and the separation of the artisan from his means of production. As Marx concludes, ‘It will be seen on closer inspection that all these processes of dissolution mean the dissolution of relations of production in which use value predominates.’ [44] We have tried to show that the mere rise of trade cannot, in itself, determine the processes of dissolution. They are understandable only in terms of the conflictual processes, processes of class transformation and class struggle, which tend to emerge from the contradictory character of the pre-capitalist social relations themselves.

IV. Wallerstein and the Modern World Economy

In Wallerstein’s The Modern World System, the Smithian theory embedded in Sweezy’s analysis of the transition from feudalism to capitalism is made entirely explicit, and carried to its logical conclusion. It is in the light of our discussion of Sweezy and Smith that we can begin to locate the central problems with Wallerstein’s approach. Thus Wallerstein straightforwardly defines capitalism as a trade-based division of labour, and it is here that he locates the dynamic of capitalist economic development. ‘Leaving aside the now defunct minisystems [tribes, etc.], the only kind of social system is a world system, which we define quite simply as a unit with a single division of labor, and multiple cultural systems’ (emphasis added) (rfd, p. 390) . . . ‘It is a “world” system, not because it encompasses the whole world, but because it is larger than any judicially defined political unit. And it is a “world economy” because the basic linkages between the parts of the system are economic’ [i.e. trade/exchange, in contrast with a world empire where the basic linkages between the parts of the system are political, via an all-encompassing, over-arching, tax-collecting bureaucracy] (emphasis added) (mws, p. 15) . . . ‘Capitalism and a world economy (that is, a single division of labor, but multiple polities and cultures) are obverse sides of the same coin’ (emphasis added) (rfd, p. 391).

As with Sweezy, although more explicitly, the mainspring of the developing division of labour is simply the ‘profit motive’, which is induced by trade and the market and which, in turn, induces accumulation (plough-back of surplus) and innovation. Capitalism, says Wallerstein, is ‘a mode of production, production for profit in a market’ (emphasis added) (rfd, p. 399). Wallerstein draws the logical consequences of this position, which in Sweezy were left unstated: trade in itself will lead to accumulation and innovation via the profit-motivated development of the division of labour; [45] therefore, it logically follows that any region which is part of the apparently interdependent system of exchange which constitutes the world division of labour is capitalist, whatever its methods of ‘labour control’ and of ‘rewarding labour power’. Once embedded within the world economy/world market, the productive regions based on serfdom (what Wallerstein calls ‘coerced cash crop labour’), in particular the grain-exporting regions of the Eastern European ‘periphery’, cease to be one bit less capitalist than the regions whose production for the market is based on free wage-labour.

Once, says Wallerstein, ‘[the] so-called reciprocal nexus we identify with feudalism, the exchange of protection for labour services . . . is contained within a capitalist world economy, its autonomous reality disappears. It becomes rather one of the many forms of bourgeois employment of proletarian labor to be found in a capitalist mode of production, a form that is maintained, expanded or diminished in relation to its profitability on the market’ (emphasis added) (ffc, pp. 278–9). So that, for Wallerstein, ‘Capitalism thus means labor as a commodity to be sure. But in the era of agricultural capitalism, wage labor is only one of the modes in which labor is recruited and recompensed on the labour market. Slavery, coerced cash cropping (. . . the so-called “second feudalism”), share-cropping and tenancy are all alternative modes’ (rfd, p. 400). Indeed, it is precisely the specialization of ‘capitalist’ systems of labour control/reward to labour by region, made possible by trade, which constitute the basis of the capitalist world economy, and account for its ability to develop. Specifically, ‘The emergence of an industrial sector [in the core] was important [in the rise of the world capitalist division of labour], but what made this possible was the transformation of agricultural activity from feudal to capitalist forms. Not all these capitalist “forms” were based on “free” labor—only those in the core of the economy. But the motivations of landlord and laborer in the non-“free” sector [in the periphery] were as capitalist as those in the core’ (mws, p. 126).

The World Division of Labour

For Wallerstein, then, the growth of the world division of labour is the development of capitalism. Not surprisingly, therefore, he can forthrightly state that the rise of free labour is merely an aspect of the development of the world division of labour, determined by the technical requirements of the development of the productive forces in given types of production and specific regions. Sweezy could not have come explicitly to this conclusion, for he seems to accept Marx’s massive emphasis, in both Capital (especially Part 8 on ‘So-called Primitive Accumulation of Capital’) and the Grundrisse (especially the passages on pre-capitalist economic formations), on the rise of free wage labour/labour power as a commodity, presented as the fundamental basis for the capitalist mode of production—for the accumulation of capital. But Wallerstein states: ‘“proletarianization of labor” and “commercialization of land” . . . do not involve the transformation of feudalism into capitalism, but, are aspects of the development of the capitalist world economy’ (Wallersteins emphasis) (ffc, p. 277). Specifically, with the rise of a trade-based division of labour, free wage labour as a system of labour control/reward to labour emerges for productive tasks using greater amounts of capital and requiring more skills. As Wallerstein succinctly puts it, ‘Free labor is the form of labor control used for skilled work in the core countries, whereas coerced labor is used for less skilled work in the peripheral areas’ (mws, p. 127).

It can immediately be seen that, like Sweezy, Wallerstein takes it for granted that ‘profit maximization’ and (implicitly) ‘competition on the market’ will lead to the accumulation of capital and innovation. Not surprisingly too, Wallerstein, like Sweezy, falls back in this regard upon the subjective motivations of the exploiting classes, in the face of the market, as if the need or desire to increase their surplus will automatically lead to the increase in production, and even the improvement of the forces of production. Yet, as I have argued, such mechanisms as profit maximization and competition on the market are ‘effective’ only insofar as they express capitalist class relations. They will operate to bring about a tendency to accumulation by way of innovation only under a system of free wage labour, where labour power is a commodity. They cannot be assumed to do so, for example, under serfdom. Thus, a historical transformation of class structures, which the market itself cannot induce, is at the centre of the feudalism-capitalism transition.

It is necessary to emphasize that Sweezy did not, explicitly, reject the foregoing viewpoint. Indeed, it was no doubt his position that a system of free wage labour is a precondition for a built-in tendency to capital accumulation and the development of the productive forces. However, in arguing that the pressures of market production would lead to an evolution away from serfdom toward capitalism due to market-induced needs of the ruling class to increase production and thus to adopt new productive forces inoperable under the old mode, he ended up contradicting this viewpoint. For the latter argument implicitly entails the idea that serfdom itself will develop a tendency to socio-technical innovation under market pressure (bringing with it ultimately a change to free labour)—so that free labour becomes a consequence rather than a condition of capitalist development.

Wallerstein attempts to cut through this contradiction by banishing it. If one contends that labour power as a commodity is the essential condition for economic development via accumulation and innovation, it is illogical to argue that trade will induce processes of development via accumulation and innovation within the old mode of production which will bring about the transformation of the old mode itself—towards free wage labour. In that case, the dynamic of development clearly resides in trade, not in the class relations of labour power as a commodity. Thus Wallerstein simply denies from the start that free wage labour is a condition for accumulation via innovation, so that he can consistently argue that a trade-based division of labour is not only responsible for the origins of capitalism, but also the source of its dynamic of development. Thus various forms of ‘labour control/reward to labour’—free wage labour included—emerge merely to facilitate the market-induced processes of economic development (and underdevelopment). Yet, as we have already seen with regard to Adam Smith, the general consequence of such a position is an ahistorical, non-class conception of the division of labour, which fails to notice that the very development of the trade-based division of labour can only be a product, not the source, of the development of the productive forces (the productivity of labour), which in turn are dependent upon and limited by the class relations in which they evolve.

A Quantitative Model of Development

The fact is that in order to see the growth of capitalism as an expression of the development of the world division of labour, Wallerstein must end up by sketching a conception of the development of the productive forces which does not really incorporate qualitative advance, specifically by way of the growth of labour productivity. The picture of development which Wallerstein lays out is essentially quantitative, for it does not actually specify the development of the productivity of labour as a regular, if neither continuous nor permanent, feature of the capitalist system, the product of capitalism’s built-in tendency to accumulate by means of innovation.

Wallerstein’s systematic refusal to integrate innovation and technical change as a regular feature of capitalist development may seem hard to credit. Yet Wallerstein is himself quite explicit. He emphasizes that there have been two, and only two, types of world system: world empires and world economies. What distinguishes economic development within the world empire is the domination of a single, surplus-extracting bureaucracy. In contrast, the world economy, consisting of a multitude of polities, is not burdened by one: ‘thus far there have only existed two varieties of . . . world systems: world empires, in which there is a single political system over most of the area however attenuated the degree of its effective control; and [world economies], in which such a single political system does not exist over all, or virtually all, of the space’ (mws, p. 348).

Wallerstein makes clear that the economic superiority of the world economy over the world empire is not really ‘positive’, to be found in its superior system of production; but ‘negative’, located in its superior system of distribution—that is, in the non-existence of a surplus-absorbing bureaucracy. Thus, says Wallerstein, ‘It is the social achievement of the modern world, if you will, to have invented the technology that makes it possible to increase the flow of the surplus from the lower to the upper strata, from the periphery to the center, from the majority to the minority, by eliminating the “waste” of too cumbersome a political structure’ (emphasis added) (mws, pp. 15–16). He makes a further specification: ‘I have said that a world economy is an invention of the modern world. Not quite. There were world economies before. But they were always transformed into empires: China, Persia, Rome. The modern world economy might have gone in that same direction—indeed it has sporadically seemed as though it would—except that the techniques of modern capitalism and the technology of modern science, the two being somewhat linked as we know, enabled the world economy to thrive, produce, and expand without the emergence of a unified political structure’ (mws, p. 16).

Wallerstein could hardly be more straightforward in asserting that the modern world economy contains no inherent dynamic toward technological innovations. It is only one in a long succession of world economies (trade-based divisions of labour with multiple polities); and none of the previous ones succeeded, by virtue of their organization of production, to transform the productive forces. The modern world economy could easily have gone the way of its predecessors, for its social organization of production was not essentially different—except for the unexplained appearance on the scene of ‘the techniques of modern capitalism and the technology of modern science’. Technical advance and innovation, to the extent they have a place in Wallerstein’s system, function as a deus ex machina.

Wallerstein’s failure specifically to incorporate innovation flows from his attempt to substitute for a qualitative model of the development of the productive forces based on ‘the accumulation of capital on an extended scale’, a quantitative model based on the expansion of the division of labour, which makes possible specialization. Specialization, as a natural result of an expanded world economy made possible by trade, thus becomes for Wallerstein the key to the development of the productive forces—in particular, specialization by ‘methods of labour control/reward to labour’. As Walle