Author: Mohammad Asem Esmailzahi
Capitalism (part 4)
Feudalism: The Root of Capitalism
Capitalism emerged from European feudalism. Until the twelfth century, less than five percent of Europe’s population lived in cities. Skilled workers resided in urban areas; however, instead of receiving real wages, they merely obtained subsistence payments from feudal lords.
Meanwhile, the majority of workers were serfs bound to landowning aristocrats. Nevertheless, toward the late Middle Ages, with the rise of cities as centers of industry and trade, urbanization gained increasing economic importance.
The emergence of real wages—paid through trade and commercial transactions—encouraged more individuals to migrate to cities, where they could earn monetary income rather than merely subsisting in exchange for labor.
Surplus sons and daughters of families, who previously had to be absorbed into agricultural labor, were now able to find new sources of income in commercial cities. Child labor became part of urban economic development, just as slavery had long been an integral component of rural life. [1]
Mercantilism Replaces Feudalism
Mercantilism gradually replaced the feudal economic system in Western Europe and, between the sixteenth and eighteenth centuries, became the primary early commercial economic system.
Mercantilism initially took shape through trade between cities; however, these transactions were not necessarily competitive. At first, each city possessed highly distinct goods and services, which over time gradually became homogenized in response to demand.
Following this homogenization of commodities, trade expanded across broader and wider networks: from city to city, region to region, province to province, and ultimately from nation to nation.
When multiple states began offering similar goods in trade, commerce transformed into a competitive advantage. In a continent persistently plagued by warfare, strong nationalist sentiments further intensified this competition.
Colonialism flourished alongside mercantilism; however, nations that established colonies did not genuinely seek to expand free trade. Most colonies were organized according to economic systems resembling feudalism, whereby raw materials were extracted and sent back to the metropole.
For example, British colonies in North America were compelled to purchase finished goods using a form of currency imposed upon them, while being prohibited from trading with other nations.
It was Adam Smith who recognized that mercantilism was not a force for development or transformation, but rather a regressive system that created imbalances among nations and hindered progress. His ideas on free markets ultimately guided the world toward capitalism. [2]
The Importance of Ethics in Economics
Alongside globalization and the economic development of nations, economic ethics has assumed undeniable importance. Achieving a healthy and balanced society, as well as sustainable development, fundamentally depends on the presence of ethical and social values within the community. [3]
Ethics, in general, is a set of principles intended to distinguish what is good and right from what is bad and wrong.
Alternatively, ethics may be defined in a highly practical yet dynamic manner:
Ethics is the process through which human well-being is identified, and through which the necessary behaviors and decisions required to promote that well-being are explained. [4]
Within societies, ethics—alongside shaping habits—plays a vital role in regulating economic activity.
Ethics must prevail over economics, and economics must not disregard ethics. In reality, neither can be separated from the other. Many believe that the ethical crises facing the world today originate from economic issues. The fundamental tension between economics and moral values is highly complex. This is not merely a theoretical dilemma, but a practical one as well.
Work ethics demonstrate the close and inseparable relationship between ethics and economics. In essence, work ethics constitute a system that evaluates the moral legitimacy of production processes within the business world. Consequently, in pursuit of economic objectives, ethics has often been misused merely as an instrumental means.
Any economic system that attempts to operate in the absence of legal, ethical, and conscientious principles will inevitably face instability and, ultimately, collapse. If ethical rules are disregarded in economic relations, social life will be governed by the law of the jungle. [5]
Economics must play a decisive role in achieving ethical goals. Ethical values are interconnected not only with economic regulations but also with other legal frameworks. In the absence of ethical standards governing economic activity, economic values themselves lose meaning.
Both ethical and economic values are shaped by human needs and function in cooperation with one another, each serving as a foundation for the other.
Just as there exists a relationship between theory and practice, and between science and art, a similar relationship exists between economics and ethics. Today, industrialized nations place excessive emphasis on achieving economic superiority, which has contributed to the erosion of ethical values. Conversely, the need to maintain balance among the interests of diverse social groups has highlighted the importance of ethics in economic systems.
In economics, ethics is founded upon values such as individual freedom, market freedom, and responsibility toward stakeholders.
Ultimately, ethics is a matter grounded in trust. All nations must trust one another and respect each other’s interests. [6]
Continues…
Previous Part
References:
[1]. Sadaqat, Parviz, Transition from Feudalism to Capitalism, p. 66, trans. Ahmad Tadayyon, Tehran, 1980.
[2]. Sadaqat, Parviz, Transition from Feudalism to Capitalism, p. 66; and Tobias Lanz & Ji Lanz, Beyond Capitalism and Socialism: A New Reading of Ancient Ideals, p. 723, trans. Wahid Sharbati & Mohaddeseh Heydari, 2018.
[3]. Amartya Sen, Ethics and Economics, p. 55, trans. Hasan Fesharaki, Tehran: Shirazeh Publications, 1998.
[4]. Ziyudari, Mehdi, The Confrontation between Faith-Based Ethics and Capitalist Ethics and the Formation of Economic Systems, p. 193, Center for Technology Studies, Sharif University of Technology, 2007.
[5]. Ibid.
[6]. Alvey, James, A History of Economics as an Ethical Science, p. 732, trans. Ali Ne‘mati, Tehran, Autumn 2005.
