Pre-Capitalist Economies: Feudalism and Early Business
Unit 1: Pre-Capitalist Economy Features
Highlights: Great diversity of social and economic forms, organic-based economies, predominance of agriculture, manual production techniques, use of hydraulic and wind energy, uniquely human and animal consumption, reduced mobility of production factors, adaptation of the holding unit to the family organization, little specialization, and low capacity for accumulation of surpluses.
Pre-Capitalist Feudal Economy and Business
Feudalism was the dominant socioeconomic system in Europe between the 9th and mid-18th centuries.
Characteristics:
- Agriculture remained the fundamental basis.
- Peasants were mostly serfs bound to the land (servitude). This only remained later in Central and Eastern Europe.
- There is full private ownership.
- The lords extract the surplus from peasants through coercive mechanisms.
- The ways in which the appropriation is made are threefold: work or corvée income, income in kind, and cash income.
- Production was organized in corporate form: in the countryside, organized by village communities; in cities, organized by unions.
- Political sovereignty produces a fragmentation or duplication of powers similar to property.
- Trade has a complementary role in economic life, but exchanges are progressively increasing significantly.
Stages:
- Transition: 5th-9th centuries
- Classical Feudalism: 10th-13th centuries
- Great Crisis of the System: 14th-15th centuries
- Late Feudalism or Old Regime: 16th-18th centuries
The Dynamics of Feudalism
The dynamics of feudalism are determined by the characteristics of the agricultural production process. There were significant problems increasing production and feeding a growing population. Reaching a time when it was impossible to increase the volume of food production, an adjustment was required between population and resources. This was expressed through declining population numbers because of an increased mortality rate over the birth rate. All of this determined the existence of fluctuations in the European feudal system:
- 5th to 8th Century: Higher stage of economic and demographic contraction.
- 14th to 15th Century: Contraction.
- 16th Century: Rising.
- 17th Century: Contraction.
- 18th Century: Rise.
Pre-Capitalist Companies
Medieval Precedents
The company as such emerges with the Industrial Revolution and the development of the capitalist economy. What defines modern companies are not only their own forms (the concentration of production and mechanization) but also the context in which they develop: a context dominated by the mass marketing of production, developed markets for products and labor, the division of the work process, etc.
In contrast, feudalism was oriented toward use-value, compared to capitalism, which is oriented toward exchange value and capital accumulation. Thus, not only was individual initiative needed for the conformation of the new company, but also the transformation of social, ideological, and economic molds.
Feudal society had a number of constraints to the development of the company:
- Availability of free labor, severely restricted by land subjection and feudal restrictions.
- Absence of developed markets.
- Low technological development, which limited the growth of business activity.
- Legislative lacunae: legislation for corporations or the principle of limited liability had not yet been developed.
- Weak development of credit institutions and means of financing companies.
Under advanced feudalism, especially in late feudalism, some of these limitations were modified (e.g., credit institutions were developed and trade grew significantly). However, it was not sufficient to develop capitalist enterprise in its entirety, having to wait for the changes that occurred with the liberal revolutions for its definitive implementation.