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The Difference Between Markets and Capitalism

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It is often asserted that since markets of one sort or another have been around for thousands of years, that Capitalism has been around for thousands of years, and is thus an expression of mankind's nature.

I think it might be true to say the threat of Capitalism has been around for a very long time - hence the determination of the Church to suppress usury, but to say it actually has been in existence for more than about five or six hundred years is incorrect.

In Das Kapital, Marx puts the birth of Capitalism as that moment when private individuals began creating money themselves and lending it at interest. Its likely that this began in Italy during the 14th century.

Of course, people had lent wealth themselves at interest long before the 14th century - the practice created havoc in ancient Sumeria and we have plenty of accounts of it in the Old Testament. Later, when coin was invented, we have plenty of accounts of it being lent out at interest - from ancient Greece to Rome. But here, wealthy people were lending coin they had received from the state. The amount of coin entering the economy tended to lag the actual production of the economy, so that a great deal of trade was done either on credit or as forms of barter. At all times the money supply, in coin, was considerably less than the total value of actual social production.

In short, bankers could not lend money that the state had not coined, and even with interest on loans taken into account, the total finance capital could not exceed the total production of society.

Even with this restriction, these societies often managed to bring themselves to the point of collapse through debt.

However, everything changed, in the 1400s AD, when private bankers started to issue money as debt, i.e. they started to create money out of thin air on the promise that somebody would pay it back at interest. From then on, the money supply could be many times bigger than the actual production of a society, and that society could find itself in a position that it could never even pay back the interest, not to mind the principal.

This is the essence of Capitalism. It is the moment, as Marx put it, when capital became autonomous, i.e. when it was no longer directly connected to actual social production. Capital became its own logic and imperative, thus sidelining the Church and its morality, and ending the Feudal era. From then on, society ran to keep up with capital, rather than vice versa.

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