Jairus Banaji, A Brief History of Commercial Capitalism, Haymarket Books, Chicago, 2020. Hbk £48, pbk £19.99.
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RATING: 85
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Buy this book?
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Yes
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This is just what it says it is: a history of commercial capitalism, in 124 pages, with a useful appendix on Islam and capitalism, and 43 pages of notes, primarily on sources, which show just how much accumulated research has gone into it. It does contain a trap for the unwary, in the form of muddled account in the brief first chapter of the 'reticence' of Marxism in relation to merchant or commercial capital, to which I shall return. From there on, however, it is a pleasure to read, beautifully illustrating, among much else, my fifth law of reading.
Banaji's account of commercial capital begins with a description of its infrastructure, with his ability to combine a clear analytical framework with a wealth of pertinent illustration in evidence from the start. While the bare bones of his account (the hugely cosmopolitan trading colonies spanning Asia, Africa and Europe, the wholesale markets they sustained, and the significant role played by bills of exchange) are conventional, the picture presented is rich and compelling, drawing heavily not only on the secondary literature, but also on contemporary accounts. The key points are that dispersed networks of merchants, generally settled in discrete national or cultural quarters in 'trading colonies that spanned the entire globe, wherever this was accessible' (15), were key to the shaping of the world market; that wholesale markets with a global reach 'are attested in various sources from the seventh to the tenth centuries' (20); that a step change came when the volume of international trade 'grew fivefold in the central decades [of the nineteenth century] between 1840 and 1870' and the emphasis switched to industrial inputs and mass consumption goods (23); and that bills of exchange dominated money markets from the fourteenth to the nineteenth century (25), with London eventually emerging as the dominant centre. Chapter Three, 'The Competition of Capitals', depicts the struggles for commercial dominance from the twelfth to eighteenth centuries, beginning with Constantinople (and the dominant role played there by Genoese merchants from 1261), and passing through Venice, Portugal and Amsterdam to close, again, with England's rise to dominance. The story is told with flair, bringing fully into view the cosmopolitan and highly differentiated character of the 'world market' throughout this period. The discussion of Byzantium/Constantinople, Venice and Portugal (29-46) is a tour de force, filled with delights and affording glimpses too of debates over proto-colonial initiatives and class struggles from the fourteenth century on that point the interested reader beyond this slim volume. The fulcrum on which the chapter turns is the observation that 'Portugal's opening of the Atlantic reconfigured the whole shape of commercial capitalism as the world had known it till then' (46). Banaji then largely follows Jonathan Israel on the ending of the brief period of Dutch dominance as a consequence of 'the wave of new-style industrial mercantilism which swept practically the entire continent [of Europe] from around 1720' (53, citing Israel, 1989, p. 383). On the rise of England to dominance he makes the point that the major commercial interests centred around the import trade throughout the seventeenth century: 'English overseas commerce was ... highly concentrated and of course remained so as long as it was organised as a cluster of commercial monopolies ruled by a handful of big London merchants', with the closely connected Levant Company (1592) and the East India Company (1599) at their core (54). The rise of the slavery-based plantation economy in the West Indies transformed the pattern of imports over the course of the century, as tobacco and sugar joined Indian calico (unbleached cotton) as goods that were destined to build mass markets, while the restrictive practices of the Levant Company rendered it uncompetitive in European markets, leading to its rapid decline by the early eighteenth century. To reinforce the point: 'If the Mediterranean had been the seminal ground of England's commercial expansion in the latter part of Elizabeth's reign, by the eighteenth century the decisive centres of gravity had firmly shifted to the Atlantic and the East Indies. By 1750 almost half of England's merchant fleet was engaged in the transatlantic trade'; and by the 1770s 'the American colonies provided 40 percent of British imports and took over 40 percent of British exports' (58-9). Significantly, there was a fundamental difference between the production regimes to the East and to the West: the slavery-based plantation system of the 'West Indies' contrasted sharply with the use in India of local merchants as intermediaries, with cash advances to weavers securing the flow of production. Only when the local merchants lost their capacity to act as intermediaries did the East India Company begin to contract with weavers directly, seeking in the last quarter of the eighteenth century 'to reduce weavers to the status of Company employees, with restrictions on their mobility, tighter supervision of looms, and a more overtly coercive use of debt' (61).
The third chapter then concludes by looking forward to the second period, or 'epoch', of British commercial capitalism in the 'long nineteenth century' from 1784 to 1914. The ending of the American War of Independence gave rise to 'a new conjuncture that saw banking revolutions on both sides of the Atlantic, a dramatic expansion of the cotton industry in Britain, and a surge in manufactured exports to the US and other international markets' (64).
Following on, Chapter Four, 'British Mercantile Capitalism and the Cosmopolitanism of the Nineteenth Century', paints a vivid picture of around 1,500 British merchant houses dotted around the globe in mid-century, and their counterparts in England. The 1860s were a 'watershed' for such agencies, as they were for the world market as a whole (66), and over the following decades many of them evolved into 'managing agencies' and 'investment groups', resulting in 'a blurring of the lines between commercial and industrial capital' (67). Banaji illustrates these changes from the 1820s through to the end of the century, taking first the example of the opium trader William Jardine, who was pushed out of the trade by the Sassoon Group (Le Fevour, 1968). 'Beaten out of opium, Jardines diversified into shipping, railway-construction, banking and insurance, and later bought out Matheson & Co, which was probably the biggest managing agency in China, with its own interests in mining, insurance, and railways' (69). The agencies active in the second half of the nineteenth century increasingly managed trade in industrial inputs and mass consumption goods consumed by the working class, as well as involving themselves in the infrastructure of the world market, whether in the form of railways, shipping, or insurance, and it is important for Banaji that 'the agencies remained merchant houses and commercial firms and can hardly be compared with the industrial enterprises that had emerged both in the UK itself and elsewhere in the world by 1914' (72). Again, the detail is instructive. I had no idea that that impeccable Liberal, William Gladstone, ‘had an exceptionally large holding in Egyptian government bonds: £40,567, or 37 percent of his entire portfolio’ (77-8, citing Mansel, 2011, p. 117). Hence, no doubt, the bombardment of Alexandria in the second week of July 1881. That's Liberals for you.
Chapter 5, 'Commercial Practices: Putting-Out or the Capitalist Domestic Industries', then documents the widespread involvement of merchants in organising production in the 'putting-out system', in which individuals working in their homes were provided with materials to work up, handloom weavers and garment-makers being good examples. The crucial point here, Banaji says, is that 'it was essential that the merchant controlled, managed, and coordinated production itself, that is, the interconnected labor processes through which the commodity was finally produced' (86). The remainder of the chapter (89-98) documents 'merchant manufacturing', and again the level of detail and the illustration of the very varied production structures and relationships in the cotton, woollen, and silk industries, the connections that linked home-based weavers to international markets, and the age-old practice (described here for the silk industry) of pirating samples and copying cutting-edge designs for the mass market are fascinating; as is the final extended example of the operations of Oriental Carpet Manufacturers Limited, an early twentieth century concern that operated 'across a vast region from Anatolia through Iran to Mirzapur in northern India' , with links to the London firm of GP and J Baker (95), and was eventually sold in 1969 to Ralli brothers.
The final chapter discusses the circulation of commercial capitals in terms of competition, velocity and verticality (vertical integration), and offers final reflections. Generally, a few larger merchant houses dominated trade in any particular commodity, and at the same time they were highly diversified. They relied for the most part on local agents and brokers (many of whom operated on a large scale themselves) to reach the direct producers, and cash advances to secure future production. Conflicts of interest between foreign merchant houses and local brokers were endemic (102-7), while the character of production chains varied from region to region and from crop to crop (107-13). Given its limitations, the main route to the greater productivity of commercial capital was to increase the ‘velocity of circulation’ (get goods to market quickly in order to release capital for new investment). Where long sea journeys were involved, capital was tied up for months on end, and where money was advanced at the outset to stake a claim on goods not yet produced, turnaround time could stretch into years. Notably, though, ‘these temporalities of capital were revolutionized in the third quarter of the nineteenth century with the expansion of railways, steam shipping, and new communications technologies’: as Banaji notes, Engels saw these developments as genuinely establishing the world market for the first time (114-5). ‘With some exaggeration', Banaji adds, but Engels was right. In fact, nothing is more characteristic of this ‘brief history’ than the fact that Banaji takes us up to the point of what he earlier called the ‘watershed’ of the 1860s, and registers its significance, but brings his account to an end with an illustration (via the autobiography of Dimitrios Vikelas, who was sent to London to work in the family business, Melas Brothers, in 1852) of the impact of the new times: ‘The few merchants who succeeded in applying the new system are still trading in a profitable way. The old Greek trade does not exist anymore and those old merchant houses, where new generations of merchants found work in succession, are now dissolving, causing national damage’ (cited p. 118). Melas Brothers, along with many other merchant houses, was wound up over the 1870s, and Vikelas took to translating Shakespeare into Greek, and writing his own works of fiction, notable among which was Loukis Laras, published in 1879 (Smith, 2006). Banaji’s ‘Final Reflections’ (118-24) strike an elegiac note, registering the ‘subordination of commercial to industrial capital’, and noting once again that ‘Between the writing of Capital and Engels’s additions to the text [in the 1890s] a completely new world had emerged, defined by a much sharper sense of nationality, greater aggression in world politics, and a sense of living at new velocities’ (122). The fact that Banaji’s account tails off at this point with a couple of decidedly random illustrations of the new world that was coming suggests that his heart is with the old one.
So far, though, so good. Chapters 2-6 provide an excellent discussion of the significant role of commercial capital in the world market over centuries, primarily from the Mediterranean eastwards, and are very well worth reading. However, as noted at the outset, the first chapter sets a trap for the unwary in the form of a very muddled account of ‘Marxist reticence about merchant’s (sic) capital’ (3). It’s only a small part of the book, but it has to be addressed, as it is confused and misleading. It also contains an unwarranted and regrettable personal attack on Maurice Dobb and misrepresents his work, all the more unfortunately because the chapter Banaji discusses also shows him to be one of the earliest and most acute critics of marginal or neo-classical economics and the quantitative theory of money (Dobb 1946: 27-32). I refer at some length to Dobb in what follows, as there is no other way to show just how Banaji misreads this source, with the consequence that he advances as contrary to Dobb a position which is to all intents and purposes the same. The same can be said of his reading of Marx, on which however I shall be brief.
Banaji begins by suggesting that this ‘reticence’ stems in part from a failure to grasp Marx's method, and his distinctions between 'capital as such', 'the study of capital in its reality', and the 'real history of the relations of production'. But he does not pursue this further, and in fact goes on to identify some deficiencies in Marx’s own approach without saying whether they arise from his method or from his failure to apply it. As a result, the content of ‘Marxist reticence’ in unclear from the start. Worse, he goes on immediately to assert that ‘it stems also and even more perhaps from the polemical divide that was created in the postwar tradition by the decisive rejection of Pokrovsky’s work in Russia and the concomitant stigmatization of any general category like “merchant capitalism”’, to accuse Maurice Dobb of transmitting this ‘constructed orthodoxy’ in his Studies in the Development of Capitalism (1946), and to imply his guilt by association with Pokrovsky’s subsequent recantation and ‘prostration before Stalin’ (4). This is pretty strong stuff, but there is no substance to it.
Banaji misses a crucial point. Dobb begins his discussion with Marx’s conceptualisation of capitalism as a mode of production, and as ‘not simply a system of production for the market … but a system under which labour-power had “itself become a commodity” and was bought and sold on the market like any other object of exchange’ (Dobb, 1946: 7). ‘What differentiates the use of this definition from others’, he goes on to say, ‘is that the existence of trade and of money-lending and the presence of a specialized class of merchants or financiers … does not suffice to constitute a capitalist society’ (ibid: 8). In the passage on which Banaji draws directly, Dobb writes:
If we are speaking of Capitalism as a specific mode of production, then it follows that we cannot date the dawn of this system from the first signs of the appearance of large-scale trading and of a merchant class, and we cannot speak of a special period of “Merchant Capitalism”, as many have done. We must look for the opening of the capitalist period only when changes in the mode of production occur, in the sense of a direct subordination of the producer to a capitalist’ (ibid: 17, emphasis mine).
And in a footnote at exactly this point, he elaborates further as follows:
‘Some seem, however, to have used the term “Merchant Capitalism” to apply, not to the mere existence of large capitals and specialized merchants in the sphere of trade, but to the early period of Capitalism when production was subordinated to the “merchant manufacturer" under the putting-out system. The strictures in the text do not, of course, refer to this usage of the term’ (ibid: ft. 1).
So, he suggests:
‘When we look at the history of Capitalism, conceived in this way, it becomes clear that we must date its opening phase in England, not in the twelfth century as does Pirenne (who is thinking primarily of the Netherlands) nor even in the fourteenth century with its urban trade and gild handicrafts as others have done, but in the latter half of the sixteenth and the early seventeenth century when capital began to penetrate production on a considerable scale, either in the form of a fairly matured relationship between capitalist and hired wage-earners or in the less developed form of the subordination of domestic handicraftsmen (sic), working in their own homes, to a capitalist on the so-called “putting-out” system”’ (ibid: 18).
And he goes on to propose that
‘what the industrial revolution represented was a transition from an early and still immature stage of Capitalism, where the pre-capitalist petty mode of production had been penetrated by the influence of capital, subordinated to capital, robbed of its independence as an economic form but not yet completely transformed, to a stage where Capitalism, on the basis of technical change, had achieved its own specific production process resting on the collective large-scale production unit of the factory, thereby effecting a final divorce of the producer from his remaining hold on the means of production and establishing a simple and direct relationship between capitalist and wage-earners’ (ibid: 19).
Dobb explicitly recognises that the pioneers of the industrial revolution ‘had often to rely for capital on partnership with capitalists of longer standing; sometimes merchant manufacturers who had previously financed domestic industry set up factories; and gradually capital was transferred from the old into the new, so that antagonism between the older capitalist strata and the nouveaux riches of the new industry never went very deep’ (ibid: 22). And his closing summary strikes a balance: ‘The emphasis of our approach to the interpretation of Capitalism is that changes in the character of production, and in the social relations that hinge upon it, have generally exerted a more profound and potent influence upon society than have changes in trade relations per se. But this must not be held to imply that trade and markets have not in their turn had an important reciprocal influence on production and are not to be assigned a leading role at various points in the story (ibid: 25-6). Trade, in short, was ‘the soil from which a bourgeoisie first grew’; in the medieval village it promoted ‘a differentiation among the peasantry into well-to-do peasants and poor, thereby fostering the growth of a rural semi-proletariat from the latter’; markets ‘shaped the moulds into which industry settled, as well as themselves being contingent on the growth of production’; and periods of rapidly expanding markets as well as of expanding labour supply were ‘periods par excellence of industrial expansion, of progress both in productive technique and in forms of organization’ (ibid: 26).
These themes are developed at length throughout the book. In the face of this, Banaji’s critique, based on Dobb, pp.17-18 only, and making specific reference to the ‘important footnote at 17’, is as follows:
‘Dobb himself was deeply ambiguous about the term [merchant capitalism]. Thus, early on in Studies he told the reader he was willing to accept “merchant capitalism” in the specific sense of an “early period of capitalism when production was subordinated to the ‘merchant manufacturer’ under the putting-out system,” but unwilling to see it as a characterization of the “existence of large capitals and specialized merchants in the sphere of trade” at any time before the later sixteenth century when, he claims, capital began to “penetrate production on a considerable scale”’ (3-4).
This is a misreading. First, what Dobb was unwilling to see was the use of “merchant capitalism” to designate a special period in the development of capitalism on the basis of the “existence of large capitals and specialized merchants in the sphere of trade”. This has to do with how the capitalist mode of production should be understood and defined. Second, it was not the ‘existence of large capitals and specialized merchants in the sphere of trade’ that Dobb found newly significant from the latter half of the sixteenth century, but specifically the penetration of capital into production on a considerable scale, as cited above, ‘either in the form of a fairly matured relationship between capitalist and hired wage-earners or in the less developed form of the subordination of domestic handicraftsmen (sic), working in their own homes, to a capitalist on the so-called “putting-out” system”’ (emphasis mine). Dobb specifically credits merchant capital with a significant role in the development of capitalism in the putting-out system in particular, and is not reticent on the subject of merchant capital at all; nor was he ‘ambiguous’ about its role. He recognised its significance in relation to the rise of large-scale industry, but argued against it as a basis for the definition of a distinct mode of production. And despite Banaji’s passing reference to a ‘theory of commercial capitalism’ (107) late in the book, he does not argue for a merchant capitalist mode of production himself either. So I cannot see where precisely he would differ from Dobb if he read Dobb’s work with care.
Much the same goes for Banaji’s treatment of Marx (8-12), which starts with the claim (pp. 8-9) that: ‘In Capital, Marx maintains an unbreachable separation between commercial capital and the production of capital’. This is a simple error that comes from mistaking Marx’s formal analysis of the difference between commercial capital as such and industrial capital as such. In what Banaji refers to as ‘the famous chapter of [Capital] volume three called “Historical Material on Merchant’s Capital”’ (9), Marx considers the pure circuit of merchant capital in which capital is advanced to purchase commodities which are then sold at a profit (M – C – M’). This is by definition buying cheap to sell dear, and its key feature is that it takes commodities as it finds them. Marx argues that although ‘all development of merchant’s capital tends to give production more and more the character of production for exchange-value and to turn products more and more into commodities … its development … is incapable by itself (emphasis mine) of promoting and explaining the transition from one mode of production by another’ (Marx, Capital, III, Lawrence & Wishart, 1959, 327. Note that Banaji uses the 1981 Penguin edition, which has different page numbers and some different wording in the translation, but I don't have that edition to hand). That Banaji misses the point is clear from the fact that he takes ‘clear indications scattered through the corpus of Marx’s own writings to suggest that he would not have reacted with horror to the idea that merchant capitalists might “dominate production directly,” that is, subject it to their own expansion as capital’ (9) as ‘undermining’ the statement that ‘The independent and preponderant development of capital in the form of commercial capital is synonymous with the nonsubjection of production to capital’ (9, citing Capital, III, 1981, p. 445). Banaji goes on to quote Marx as saying that ‘the merchant may take direct control of production himself’, comments that: ‘There is no doubt that in most passages with statements of the form “the merchant becomes an industrialist directly,” Marx tended to see the putting-out system as involving an actual “transformation of the merchant into an industrial capitalist”’, and quotes him as saying that the ‘transformation of the merchant into an industrial capitalist is at the same time the transformation of commercial capital into a mere form of industrial capital’ (10-11). Quite so. Whatever its origin, capital invested in production is by definition productive capital, and capital that is invested in large-scale industry is industrial capital. The merchant who invests in production is no longer acting purely as a merchant, but as an entrepreneur (or contractor, this being the term used by Engels in his Supplement to Capital III), or industrialist. Marx does indeed repeatedly address circumstances of this kind, and is no more ‘reticent’ about the role of merchant capital than Dobb is. Such is Banaji’s confusion, though, that he is led into the absurd claim that Dobb’s suggestions that ‘the capitalist merchant-manufacturer had an increasingly close interest in promoting improvements in the instruments and methods of production’ and that ‘The very division of labour which is specially characteristic of this period prepared the ground from which mechanical invention could eventually spring’ reflected ‘a radically different perspective to Marx’s’ (11). On the contrary, it is Marx’s perspective, handily outlined in Rosenberg 1974, and developed both in Capital, Volume I itself and in the Appendix on the ‘Results of the Immediate Process of Production’ (Penguin edition, 1976, pp. 948-1084), with which Banaji is familiar.
The conclusion I draw from this is not that the book is irredeemably flawed. It’s a good book. It is rather that these sections (a) are badly misjudged, and (b), as important, do not convey its significance at all but rather misdirect the reader and detract from it. Banaji would have been better served by replacing the whole section pp. 3-8 with the single sentence, ‘Among other things, this book bears out the significance that Maurice Dobb (1946: 18, 22) attributes to the deployment of merchant capital both in the “putting-out system” and in factory production proper’, and the whole section pp. 8-13 with ‘And it seeks, in accordance with distinctions made by Marx, to illuminate both the contribution of commercial capital as such to the development of capitalism, and the significance, from the latter part of the sixteenth century on, of the transformation of some merchants into industrial capitalists’. If the book had been positioned in such a way, its true merit would have emerged much more clearly. It is perfectly consistent with a classical Marxist approach, and it complements and enriches it by providing a vivid account of the role of commercial capital, primarily in the pre-industrial period, between Europe and Asia. At the same time, it signals repeatedly, and correctly, without exploring it in detail, another aspect of the story – the initial ‘turn to the Atlantic’ associated with Portugal, the slave trade and the distinctive types of production to which it gave rise, and the ‘watershed’ of the 1860s and beyond – the wave of scientific and technological advances that subordinated commercial capital to industrial capital and brought a new world into being.
References and Further Reading
Bythell, Duncan. 1978. The Sweated Trades: Outwork in Nineteenth-Century Britain. London: Batsford.
Israel, Jonathan. 1989. Dutch Primacy in World Trade, 1585-1740. Oxford: Clarendon Press.
Le Fevour, Edward. 1968. Western Enterprise in Late Ch'ing China: A Selective Survey of Jardine, Matheson and Company's Operations, 1842-1895. Cambridge, MA: Harvard University Asia Center.
Mansel, Philip. 2011. Levant: Splendour and Catastrophe on the Mediterranean. New Haven: Yale University Press.
Rosenberg, Nathan 1974, ‘Karl Marx on the Economic Role of Science’, Journal of Political Economy, 82, 4: 713–28.
Smith, Michael Llewellyn. 2006. ‘The Exemplary Life of Dimitrios Vikelas (1835-1908)’, Historical Review/Revue Historique, 3, 7-31.
Banaji's account of commercial capital begins with a description of its infrastructure, with his ability to combine a clear analytical framework with a wealth of pertinent illustration in evidence from the start. While the bare bones of his account (the hugely cosmopolitan trading colonies spanning Asia, Africa and Europe, the wholesale markets they sustained, and the significant role played by bills of exchange) are conventional, the picture presented is rich and compelling, drawing heavily not only on the secondary literature, but also on contemporary accounts. The key points are that dispersed networks of merchants, generally settled in discrete national or cultural quarters in 'trading colonies that spanned the entire globe, wherever this was accessible' (15), were key to the shaping of the world market; that wholesale markets with a global reach 'are attested in various sources from the seventh to the tenth centuries' (20); that a step change came when the volume of international trade 'grew fivefold in the central decades [of the nineteenth century] between 1840 and 1870' and the emphasis switched to industrial inputs and mass consumption goods (23); and that bills of exchange dominated money markets from the fourteenth to the nineteenth century (25), with London eventually emerging as the dominant centre. Chapter Three, 'The Competition of Capitals', depicts the struggles for commercial dominance from the twelfth to eighteenth centuries, beginning with Constantinople (and the dominant role played there by Genoese merchants from 1261), and passing through Venice, Portugal and Amsterdam to close, again, with England's rise to dominance. The story is told with flair, bringing fully into view the cosmopolitan and highly differentiated character of the 'world market' throughout this period. The discussion of Byzantium/Constantinople, Venice and Portugal (29-46) is a tour de force, filled with delights and affording glimpses too of debates over proto-colonial initiatives and class struggles from the fourteenth century on that point the interested reader beyond this slim volume. The fulcrum on which the chapter turns is the observation that 'Portugal's opening of the Atlantic reconfigured the whole shape of commercial capitalism as the world had known it till then' (46). Banaji then largely follows Jonathan Israel on the ending of the brief period of Dutch dominance as a consequence of 'the wave of new-style industrial mercantilism which swept practically the entire continent [of Europe] from around 1720' (53, citing Israel, 1989, p. 383). On the rise of England to dominance he makes the point that the major commercial interests centred around the import trade throughout the seventeenth century: 'English overseas commerce was ... highly concentrated and of course remained so as long as it was organised as a cluster of commercial monopolies ruled by a handful of big London merchants', with the closely connected Levant Company (1592) and the East India Company (1599) at their core (54). The rise of the slavery-based plantation economy in the West Indies transformed the pattern of imports over the course of the century, as tobacco and sugar joined Indian calico (unbleached cotton) as goods that were destined to build mass markets, while the restrictive practices of the Levant Company rendered it uncompetitive in European markets, leading to its rapid decline by the early eighteenth century. To reinforce the point: 'If the Mediterranean had been the seminal ground of England's commercial expansion in the latter part of Elizabeth's reign, by the eighteenth century the decisive centres of gravity had firmly shifted to the Atlantic and the East Indies. By 1750 almost half of England's merchant fleet was engaged in the transatlantic trade'; and by the 1770s 'the American colonies provided 40 percent of British imports and took over 40 percent of British exports' (58-9). Significantly, there was a fundamental difference between the production regimes to the East and to the West: the slavery-based plantation system of the 'West Indies' contrasted sharply with the use in India of local merchants as intermediaries, with cash advances to weavers securing the flow of production. Only when the local merchants lost their capacity to act as intermediaries did the East India Company begin to contract with weavers directly, seeking in the last quarter of the eighteenth century 'to reduce weavers to the status of Company employees, with restrictions on their mobility, tighter supervision of looms, and a more overtly coercive use of debt' (61).
The third chapter then concludes by looking forward to the second period, or 'epoch', of British commercial capitalism in the 'long nineteenth century' from 1784 to 1914. The ending of the American War of Independence gave rise to 'a new conjuncture that saw banking revolutions on both sides of the Atlantic, a dramatic expansion of the cotton industry in Britain, and a surge in manufactured exports to the US and other international markets' (64).
Following on, Chapter Four, 'British Mercantile Capitalism and the Cosmopolitanism of the Nineteenth Century', paints a vivid picture of around 1,500 British merchant houses dotted around the globe in mid-century, and their counterparts in England. The 1860s were a 'watershed' for such agencies, as they were for the world market as a whole (66), and over the following decades many of them evolved into 'managing agencies' and 'investment groups', resulting in 'a blurring of the lines between commercial and industrial capital' (67). Banaji illustrates these changes from the 1820s through to the end of the century, taking first the example of the opium trader William Jardine, who was pushed out of the trade by the Sassoon Group (Le Fevour, 1968). 'Beaten out of opium, Jardines diversified into shipping, railway-construction, banking and insurance, and later bought out Matheson & Co, which was probably the biggest managing agency in China, with its own interests in mining, insurance, and railways' (69). The agencies active in the second half of the nineteenth century increasingly managed trade in industrial inputs and mass consumption goods consumed by the working class, as well as involving themselves in the infrastructure of the world market, whether in the form of railways, shipping, or insurance, and it is important for Banaji that 'the agencies remained merchant houses and commercial firms and can hardly be compared with the industrial enterprises that had emerged both in the UK itself and elsewhere in the world by 1914' (72). Again, the detail is instructive. I had no idea that that impeccable Liberal, William Gladstone, ‘had an exceptionally large holding in Egyptian government bonds: £40,567, or 37 percent of his entire portfolio’ (77-8, citing Mansel, 2011, p. 117). Hence, no doubt, the bombardment of Alexandria in the second week of July 1881. That's Liberals for you.
Chapter 5, 'Commercial Practices: Putting-Out or the Capitalist Domestic Industries', then documents the widespread involvement of merchants in organising production in the 'putting-out system', in which individuals working in their homes were provided with materials to work up, handloom weavers and garment-makers being good examples. The crucial point here, Banaji says, is that 'it was essential that the merchant controlled, managed, and coordinated production itself, that is, the interconnected labor processes through which the commodity was finally produced' (86). The remainder of the chapter (89-98) documents 'merchant manufacturing', and again the level of detail and the illustration of the very varied production structures and relationships in the cotton, woollen, and silk industries, the connections that linked home-based weavers to international markets, and the age-old practice (described here for the silk industry) of pirating samples and copying cutting-edge designs for the mass market are fascinating; as is the final extended example of the operations of Oriental Carpet Manufacturers Limited, an early twentieth century concern that operated 'across a vast region from Anatolia through Iran to Mirzapur in northern India' , with links to the London firm of GP and J Baker (95), and was eventually sold in 1969 to Ralli brothers.
The final chapter discusses the circulation of commercial capitals in terms of competition, velocity and verticality (vertical integration), and offers final reflections. Generally, a few larger merchant houses dominated trade in any particular commodity, and at the same time they were highly diversified. They relied for the most part on local agents and brokers (many of whom operated on a large scale themselves) to reach the direct producers, and cash advances to secure future production. Conflicts of interest between foreign merchant houses and local brokers were endemic (102-7), while the character of production chains varied from region to region and from crop to crop (107-13). Given its limitations, the main route to the greater productivity of commercial capital was to increase the ‘velocity of circulation’ (get goods to market quickly in order to release capital for new investment). Where long sea journeys were involved, capital was tied up for months on end, and where money was advanced at the outset to stake a claim on goods not yet produced, turnaround time could stretch into years. Notably, though, ‘these temporalities of capital were revolutionized in the third quarter of the nineteenth century with the expansion of railways, steam shipping, and new communications technologies’: as Banaji notes, Engels saw these developments as genuinely establishing the world market for the first time (114-5). ‘With some exaggeration', Banaji adds, but Engels was right. In fact, nothing is more characteristic of this ‘brief history’ than the fact that Banaji takes us up to the point of what he earlier called the ‘watershed’ of the 1860s, and registers its significance, but brings his account to an end with an illustration (via the autobiography of Dimitrios Vikelas, who was sent to London to work in the family business, Melas Brothers, in 1852) of the impact of the new times: ‘The few merchants who succeeded in applying the new system are still trading in a profitable way. The old Greek trade does not exist anymore and those old merchant houses, where new generations of merchants found work in succession, are now dissolving, causing national damage’ (cited p. 118). Melas Brothers, along with many other merchant houses, was wound up over the 1870s, and Vikelas took to translating Shakespeare into Greek, and writing his own works of fiction, notable among which was Loukis Laras, published in 1879 (Smith, 2006). Banaji’s ‘Final Reflections’ (118-24) strike an elegiac note, registering the ‘subordination of commercial to industrial capital’, and noting once again that ‘Between the writing of Capital and Engels’s additions to the text [in the 1890s] a completely new world had emerged, defined by a much sharper sense of nationality, greater aggression in world politics, and a sense of living at new velocities’ (122). The fact that Banaji’s account tails off at this point with a couple of decidedly random illustrations of the new world that was coming suggests that his heart is with the old one.
So far, though, so good. Chapters 2-6 provide an excellent discussion of the significant role of commercial capital in the world market over centuries, primarily from the Mediterranean eastwards, and are very well worth reading. However, as noted at the outset, the first chapter sets a trap for the unwary in the form of a very muddled account of ‘Marxist reticence about merchant’s (sic) capital’ (3). It’s only a small part of the book, but it has to be addressed, as it is confused and misleading. It also contains an unwarranted and regrettable personal attack on Maurice Dobb and misrepresents his work, all the more unfortunately because the chapter Banaji discusses also shows him to be one of the earliest and most acute critics of marginal or neo-classical economics and the quantitative theory of money (Dobb 1946: 27-32). I refer at some length to Dobb in what follows, as there is no other way to show just how Banaji misreads this source, with the consequence that he advances as contrary to Dobb a position which is to all intents and purposes the same. The same can be said of his reading of Marx, on which however I shall be brief.
Banaji begins by suggesting that this ‘reticence’ stems in part from a failure to grasp Marx's method, and his distinctions between 'capital as such', 'the study of capital in its reality', and the 'real history of the relations of production'. But he does not pursue this further, and in fact goes on to identify some deficiencies in Marx’s own approach without saying whether they arise from his method or from his failure to apply it. As a result, the content of ‘Marxist reticence’ in unclear from the start. Worse, he goes on immediately to assert that ‘it stems also and even more perhaps from the polemical divide that was created in the postwar tradition by the decisive rejection of Pokrovsky’s work in Russia and the concomitant stigmatization of any general category like “merchant capitalism”’, to accuse Maurice Dobb of transmitting this ‘constructed orthodoxy’ in his Studies in the Development of Capitalism (1946), and to imply his guilt by association with Pokrovsky’s subsequent recantation and ‘prostration before Stalin’ (4). This is pretty strong stuff, but there is no substance to it.
Banaji misses a crucial point. Dobb begins his discussion with Marx’s conceptualisation of capitalism as a mode of production, and as ‘not simply a system of production for the market … but a system under which labour-power had “itself become a commodity” and was bought and sold on the market like any other object of exchange’ (Dobb, 1946: 7). ‘What differentiates the use of this definition from others’, he goes on to say, ‘is that the existence of trade and of money-lending and the presence of a specialized class of merchants or financiers … does not suffice to constitute a capitalist society’ (ibid: 8). In the passage on which Banaji draws directly, Dobb writes:
If we are speaking of Capitalism as a specific mode of production, then it follows that we cannot date the dawn of this system from the first signs of the appearance of large-scale trading and of a merchant class, and we cannot speak of a special period of “Merchant Capitalism”, as many have done. We must look for the opening of the capitalist period only when changes in the mode of production occur, in the sense of a direct subordination of the producer to a capitalist’ (ibid: 17, emphasis mine).
And in a footnote at exactly this point, he elaborates further as follows:
‘Some seem, however, to have used the term “Merchant Capitalism” to apply, not to the mere existence of large capitals and specialized merchants in the sphere of trade, but to the early period of Capitalism when production was subordinated to the “merchant manufacturer" under the putting-out system. The strictures in the text do not, of course, refer to this usage of the term’ (ibid: ft. 1).
So, he suggests:
‘When we look at the history of Capitalism, conceived in this way, it becomes clear that we must date its opening phase in England, not in the twelfth century as does Pirenne (who is thinking primarily of the Netherlands) nor even in the fourteenth century with its urban trade and gild handicrafts as others have done, but in the latter half of the sixteenth and the early seventeenth century when capital began to penetrate production on a considerable scale, either in the form of a fairly matured relationship between capitalist and hired wage-earners or in the less developed form of the subordination of domestic handicraftsmen (sic), working in their own homes, to a capitalist on the so-called “putting-out” system”’ (ibid: 18).
And he goes on to propose that
‘what the industrial revolution represented was a transition from an early and still immature stage of Capitalism, where the pre-capitalist petty mode of production had been penetrated by the influence of capital, subordinated to capital, robbed of its independence as an economic form but not yet completely transformed, to a stage where Capitalism, on the basis of technical change, had achieved its own specific production process resting on the collective large-scale production unit of the factory, thereby effecting a final divorce of the producer from his remaining hold on the means of production and establishing a simple and direct relationship between capitalist and wage-earners’ (ibid: 19).
Dobb explicitly recognises that the pioneers of the industrial revolution ‘had often to rely for capital on partnership with capitalists of longer standing; sometimes merchant manufacturers who had previously financed domestic industry set up factories; and gradually capital was transferred from the old into the new, so that antagonism between the older capitalist strata and the nouveaux riches of the new industry never went very deep’ (ibid: 22). And his closing summary strikes a balance: ‘The emphasis of our approach to the interpretation of Capitalism is that changes in the character of production, and in the social relations that hinge upon it, have generally exerted a more profound and potent influence upon society than have changes in trade relations per se. But this must not be held to imply that trade and markets have not in their turn had an important reciprocal influence on production and are not to be assigned a leading role at various points in the story (ibid: 25-6). Trade, in short, was ‘the soil from which a bourgeoisie first grew’; in the medieval village it promoted ‘a differentiation among the peasantry into well-to-do peasants and poor, thereby fostering the growth of a rural semi-proletariat from the latter’; markets ‘shaped the moulds into which industry settled, as well as themselves being contingent on the growth of production’; and periods of rapidly expanding markets as well as of expanding labour supply were ‘periods par excellence of industrial expansion, of progress both in productive technique and in forms of organization’ (ibid: 26).
These themes are developed at length throughout the book. In the face of this, Banaji’s critique, based on Dobb, pp.17-18 only, and making specific reference to the ‘important footnote at 17’, is as follows:
‘Dobb himself was deeply ambiguous about the term [merchant capitalism]. Thus, early on in Studies he told the reader he was willing to accept “merchant capitalism” in the specific sense of an “early period of capitalism when production was subordinated to the ‘merchant manufacturer’ under the putting-out system,” but unwilling to see it as a characterization of the “existence of large capitals and specialized merchants in the sphere of trade” at any time before the later sixteenth century when, he claims, capital began to “penetrate production on a considerable scale”’ (3-4).
This is a misreading. First, what Dobb was unwilling to see was the use of “merchant capitalism” to designate a special period in the development of capitalism on the basis of the “existence of large capitals and specialized merchants in the sphere of trade”. This has to do with how the capitalist mode of production should be understood and defined. Second, it was not the ‘existence of large capitals and specialized merchants in the sphere of trade’ that Dobb found newly significant from the latter half of the sixteenth century, but specifically the penetration of capital into production on a considerable scale, as cited above, ‘either in the form of a fairly matured relationship between capitalist and hired wage-earners or in the less developed form of the subordination of domestic handicraftsmen (sic), working in their own homes, to a capitalist on the so-called “putting-out” system”’ (emphasis mine). Dobb specifically credits merchant capital with a significant role in the development of capitalism in the putting-out system in particular, and is not reticent on the subject of merchant capital at all; nor was he ‘ambiguous’ about its role. He recognised its significance in relation to the rise of large-scale industry, but argued against it as a basis for the definition of a distinct mode of production. And despite Banaji’s passing reference to a ‘theory of commercial capitalism’ (107) late in the book, he does not argue for a merchant capitalist mode of production himself either. So I cannot see where precisely he would differ from Dobb if he read Dobb’s work with care.
Much the same goes for Banaji’s treatment of Marx (8-12), which starts with the claim (pp. 8-9) that: ‘In Capital, Marx maintains an unbreachable separation between commercial capital and the production of capital’. This is a simple error that comes from mistaking Marx’s formal analysis of the difference between commercial capital as such and industrial capital as such. In what Banaji refers to as ‘the famous chapter of [Capital] volume three called “Historical Material on Merchant’s Capital”’ (9), Marx considers the pure circuit of merchant capital in which capital is advanced to purchase commodities which are then sold at a profit (M – C – M’). This is by definition buying cheap to sell dear, and its key feature is that it takes commodities as it finds them. Marx argues that although ‘all development of merchant’s capital tends to give production more and more the character of production for exchange-value and to turn products more and more into commodities … its development … is incapable by itself (emphasis mine) of promoting and explaining the transition from one mode of production by another’ (Marx, Capital, III, Lawrence & Wishart, 1959, 327. Note that Banaji uses the 1981 Penguin edition, which has different page numbers and some different wording in the translation, but I don't have that edition to hand). That Banaji misses the point is clear from the fact that he takes ‘clear indications scattered through the corpus of Marx’s own writings to suggest that he would not have reacted with horror to the idea that merchant capitalists might “dominate production directly,” that is, subject it to their own expansion as capital’ (9) as ‘undermining’ the statement that ‘The independent and preponderant development of capital in the form of commercial capital is synonymous with the nonsubjection of production to capital’ (9, citing Capital, III, 1981, p. 445). Banaji goes on to quote Marx as saying that ‘the merchant may take direct control of production himself’, comments that: ‘There is no doubt that in most passages with statements of the form “the merchant becomes an industrialist directly,” Marx tended to see the putting-out system as involving an actual “transformation of the merchant into an industrial capitalist”’, and quotes him as saying that the ‘transformation of the merchant into an industrial capitalist is at the same time the transformation of commercial capital into a mere form of industrial capital’ (10-11). Quite so. Whatever its origin, capital invested in production is by definition productive capital, and capital that is invested in large-scale industry is industrial capital. The merchant who invests in production is no longer acting purely as a merchant, but as an entrepreneur (or contractor, this being the term used by Engels in his Supplement to Capital III), or industrialist. Marx does indeed repeatedly address circumstances of this kind, and is no more ‘reticent’ about the role of merchant capital than Dobb is. Such is Banaji’s confusion, though, that he is led into the absurd claim that Dobb’s suggestions that ‘the capitalist merchant-manufacturer had an increasingly close interest in promoting improvements in the instruments and methods of production’ and that ‘The very division of labour which is specially characteristic of this period prepared the ground from which mechanical invention could eventually spring’ reflected ‘a radically different perspective to Marx’s’ (11). On the contrary, it is Marx’s perspective, handily outlined in Rosenberg 1974, and developed both in Capital, Volume I itself and in the Appendix on the ‘Results of the Immediate Process of Production’ (Penguin edition, 1976, pp. 948-1084), with which Banaji is familiar.
The conclusion I draw from this is not that the book is irredeemably flawed. It’s a good book. It is rather that these sections (a) are badly misjudged, and (b), as important, do not convey its significance at all but rather misdirect the reader and detract from it. Banaji would have been better served by replacing the whole section pp. 3-8 with the single sentence, ‘Among other things, this book bears out the significance that Maurice Dobb (1946: 18, 22) attributes to the deployment of merchant capital both in the “putting-out system” and in factory production proper’, and the whole section pp. 8-13 with ‘And it seeks, in accordance with distinctions made by Marx, to illuminate both the contribution of commercial capital as such to the development of capitalism, and the significance, from the latter part of the sixteenth century on, of the transformation of some merchants into industrial capitalists’. If the book had been positioned in such a way, its true merit would have emerged much more clearly. It is perfectly consistent with a classical Marxist approach, and it complements and enriches it by providing a vivid account of the role of commercial capital, primarily in the pre-industrial period, between Europe and Asia. At the same time, it signals repeatedly, and correctly, without exploring it in detail, another aspect of the story – the initial ‘turn to the Atlantic’ associated with Portugal, the slave trade and the distinctive types of production to which it gave rise, and the ‘watershed’ of the 1860s and beyond – the wave of scientific and technological advances that subordinated commercial capital to industrial capital and brought a new world into being.
References and Further Reading
Bythell, Duncan. 1978. The Sweated Trades: Outwork in Nineteenth-Century Britain. London: Batsford.
Israel, Jonathan. 1989. Dutch Primacy in World Trade, 1585-1740. Oxford: Clarendon Press.
Le Fevour, Edward. 1968. Western Enterprise in Late Ch'ing China: A Selective Survey of Jardine, Matheson and Company's Operations, 1842-1895. Cambridge, MA: Harvard University Asia Center.
Mansel, Philip. 2011. Levant: Splendour and Catastrophe on the Mediterranean. New Haven: Yale University Press.
Rosenberg, Nathan 1974, ‘Karl Marx on the Economic Role of Science’, Journal of Political Economy, 82, 4: 713–28.
Smith, Michael Llewellyn. 2006. ‘The Exemplary Life of Dimitrios Vikelas (1835-1908)’, Historical Review/Revue Historique, 3, 7-31.