Pre-Capitalist & Feudal Economies: Evolution & Transition
Unit 1: Pre-Capitalist Economy
Features
- Diverse social and economic forms
- Organic base economy
- Predominance of agriculture and manual production
- Use of hydraulic, eolic, human, and animal energy
- Limited factor mobility
- Family-based economic units
- Low specialization and surplus accumulation
Pre-Capitalist Feudal Economy and Business
This system dominated Europe from the 9th to mid-19th centuries.
Features
- Agriculture as the foundation
- Serfdom (peasants tied to the land)
- Full private ownership (lords extracting surplus through coercion)
- Surplus appropriation through labor (corvée), in-kind payments, and cash
- Corporative production organization (villages and guilds)
- Fragmented political sovereignty
- Increasingly important trade
Stages
- Transition (5th-9th centuries)
- Classic Feudalism (10th-13th centuries)
- Crisis and Late Feudalism (14th-16th centuries)
- Old Regime (16th-18th centuries)
The Dynamics of Feudalism
Agricultural production challenges drove the dynamics of feudalism. A growing population strained resources, leading to:
- Difficulties increasing food production
- Population fluctuations due to mortality and birth rate changes
Fluctuations in the European feudal system:
- Contraction (5th-8th centuries)
- Contraction (14th-15th centuries)
- Rise (16th century)
- Contraction (17th century)
- Rise (18th century)
Pre-Capitalist Companies: Medieval Precedents
Modern companies emerged with the Industrial Revolution and the transition to capitalism. Feudal production focused on use-value, not exchange-value. Constraints on business development included:
- Limited free labor
- Underdeveloped markets
- Technological limitations
- Legal gaps, corporations, limited liability
- Limited credit institutions and financing
Some of these limitations eased during late feudalism.
Development and Typology within Late Feudalism
Late feudalism (16th-18th centuries) transitioned to capitalism, creating conditions for the Industrial Revolution. Mercantilism (merchant capital growth) marked this period.
a) The Proto-industry
Manufacturing development clashed with guilds. Merchants moved production to rural areas, employing farmers for cheaper labor. This “proto-industrial” system offered production flexibility but had limitations:
- Lack of production control by merchants
- Increasing marginal costs and distribution costs as production expanded
- Difficulty monitoring and controlling output
- Reduced profits
- Difficulty meeting growing demand
These issues led to early factories and mechanization.
b) Financial and Commercial Companies
The credit system developed alongside trade, with early banking in Italian cities. Later, state banks emerged, offering modern features like deposits, bill discounting, and public debt management. Early banking was driven by trade and state monetary needs. Joint-stock companies emerged in the mid-16th century, reducing individual risk.
c) Mercantilism
This economic policy of nation-states aimed to improve their economic position through intervention. The goal was to increase wealth (identified with circulating money) through a favorable trade balance and manufacturing development. However, this approach had limited success due to its artificial nature and failure to address feudal production relations.
Crisis of the Old Regime
The period between 1750-1760 and 1850-1860 saw two key events: the bourgeois revolution and the Industrial Revolution. These led to the decline of the old regime, legally and economically. The bourgeois revolution established the rule of law and redefined property rights, paving the way for economic transformation.