Why did capitalism begin in the West?

Culture, class, and the origins of capitalist development

This month’s guest post is from Erald Kolasi, author of The Phyiscs of Capitalism. Erald is a PhD physicist who writes about energy, technology, and economics - you can subscribe to his substack here.

For better or worse, there’s no question that capitalism has changed the world. It has been responsible for economic growth and technological transformation, as well as human misery and environmental catastrophe. But what underlying processes have driven all these changes?

This question has been debated for more than a century. Max Weber believed that certain religious ideas and cultural values helped create the ‘spirit’ that made modern capitalism more likely to take root. He argued that capitalism took root in western Europe because the attitudes and behaviors encouraged within Protestant culture were particularly conducive to capitalist development.

In contrast, Marx was a historical materialist – he believed that a society’s development was shaped by the way it produced things, and the class relationships production entails. Factors like who owns the land and natural resources influence the production process, which in turn shapes the dominant ideas of that society. Economic transformation is often catalyzed by conflicts between different social classes – whether aristocrats and serfs, or workers and bosses.

In much mainstream economic history and development economics, materialist explanations are often sidelined in favour of culture- and institutions-first accounts. And few people are more prominently associated with the cultural school of thought than Joel Mokyr, whose metaphor of the ‘marketplace of ideas’ has come to define the liberal understanding of economic development.

Culture and Growth

In his major 2016 book, A Culture of Growth, Mokyr argues that the Industrial Revolution was the product of unique cultural and institutional forces acting in certain parts of Europe. He maintains that the beliefs, values, and preferences of early modern Europe led to profound changes in behavior that hastened scientific advances and pioneering inventions. Mokyr emphasizes that he’s talking about the beliefs of elite intellectuals, whom he credits with making most of the major breakthroughs that would precipitate the Industrial Revolution.

Mokyr then introduces a metaphor: the “market of ideas.” According to this framework, intellectual leaders and innovators try to persuade “buyers” of the utility and superiority of their ideas, as if they were acting in a market with goods and services. As these intellectuals persuade more people, their social reputation increases and their ideas become more dominant.

His central claim is that, between 1500 and 1700, the European educated elite developed a cultural and institutional framework that allowed for greater intellectual innovation and the proliferation of more useful knowledge. Mokyr opposes what he considers to be the extremes of materialism, with its emphasis on ecological and economic forces that apparently leave no room for human agency, as well as the abstractions of idealism.

Why materialism matters

Those who insist on cultural explanations for the evolution of human history often run into problems with scope and causality. Definitions of culture, including Mokyr’s, are so broad and vague that they could apply to virtually all conceivable aspects of human society – from politics, to economics, to philosophy. Culture acts like a black box, capable of accommodating any and all preconceptions of the world.

But even if Mokyr’s thesis was correct, it could not tell us why the Industrial Revolution started in Britain. Any theory about the rise of capitalism and the emergence of the Industrial Revolution must explain the central role that Britain played in the entire process. Plenty of European societies had intellectuals exchanging ideas during this time, and so did Ancient Greece two thousand years before. The challenge for the cultural school is to explain why this process led to the Industrial Revolution in Britain, and not in Portugal, Italy, or Ancient Greece. This is a problem that Mokyr himself has acknowledged. It’s a serious flaw because it highlights the profound limitations of using cultural factors for causal explanations of broad historical trends.

Ultimately, the problems with Mokyr’s argument demonstrate the importance of materialist analysis. If we want to understand why the industrial revolution happened in Britain, we have to acknowledge the highly unusual economic and ecological circumstances that the country faced in the early modern period. For example, deforestation incentivized the use of coal as a substitute for wood; enclosures accelerated proletarianisation in many areas, weakening common rights and pushing more people toward wage dependence; and high relative labor costs incentivized the development of labor-saving technology.

These dynamic material conditions highlight that culture is bounded and constrained by external forces. For that reason alone, ‘culture’ can never serve as an ultimate explanation of economic growth and the economic trajectory of human history. Which is why Marx’s historical materialism remains so important.

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