Review | A Brief History of Commercial Capitalism

Nick Evans reviews a new book that calls for a radical rethinking of the history of capitalism.

A photo of ships in Istanbul taken in 1854
Istanbul Panorama Taken from the Beyazit Tower (1854), James Robertson.

Jairus Banaji, A Brief History of Commercial Capitalism (Chicago, IL: Haymarket, 2020). 197 pp. $19.95.


Jairus Banaji’s short new book argues that most Marxist historians have got the history of capitalism wrong. They have, he claims been too ‘formalist’: they have tried to force historical evidence into preconceived categories and periodisations. As a consequence, they have failed to see how merchant capital dominated production processes over much of Eurasia for several centuries before, and then alongside, the rise of industrial capital. Banaji argues that the idea that capitalism began with ‘free’ wage labourers in the English countryside (as the ‘political Marxists’ have argued) or in English factories is parochial and misleading.

Banaji is developing a provocative line of analysis, elements of which he has been making since the 1970s. [1] Uncomfortably for defenders of existing formulations, he can back it up with a command of a daunting range of literature in multiple modern and medieval languages. Frustratingly for those sympathetic to his arguments, Banaji mostly leaves the reader with the challenge of extracting the historical and political implications from the examples and critical insights he scatters through his text.

Mercantile dominance

The central argument is that merchant capitalists controlled more of global production, and for longer, than Karl Marx and subsequent Marxists have appreciated. Marx explicitly downplayed mercantile control over production: in book three of Capital, he argued that the period when merchant capital dominated was ‘synonymous with the non-subjection of production to capital’. [2] Marx then described a process of the ‘subordination of commercial capital to industrial capital’, in which industrial capitalists took charge of the whole process of production and circulation. [3]

Banaji shows that Marx ‘telescoped this process massively’ (p. 28). In fact, Banaji argues, the dominance of industrial over commercial capital was not established in Marx’s lifetime at all, but in the final decades of the nineteenth century. Friedrich Engels, unlike Marx, did live to see what other historians have referred to as the ‘second Industrial Revolution’, when ‘oil, steel, and chemicals, not textiles, became the typical face of large-scale industry’. In the meantime, ‘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’ (p. 127).

These were the developments that the next generation of Marxists, revolutionaries such as Rosa Luxemburg, Vladimir Lenin and Nikolai Bukharin analysed as characteristic of imperialism, leading to the cataclysm of the First World War. ‘Imperialism’, points out Banaji, quoting the historian Eric Hobsbawm, ‘was a novel term devised to describe a novel phenomenon’, and it replaced ‘the liberal-cosmopolitan order that British commerce had held in place’ through the nineteenth century (p. 122). Banaji’s objective in this book is to outline the long preceding phase of ‘commercial capitalism’. In the process, he reveals patterns of control over labour and trajectories of capital accumulation that were far more complex than is suggested in much of the existing literature on the ‘transition to capitalism’.

How then should the period of commercial capitalism be characterised? Above all, it should not be characterised by ‘the non-subjection of production to capital’. Chapter five is the critical chapter for this argument. In the ‘classic form’ of the ‘putting-out system’, workers owned their instruments of work, were supplied with raw materials by merchant capitalists, and were paid by the piece for the finished product. Workplaces were dispersed but – much more than Marx had recognised – merchants nevertheless ‘controlled, managed and coordinated production itself’ (p. 86). Merchants dominated production through their monopoly over the raw material (sometimes maintained through fierce class struggle with artisans) and their ‘ability to organize the overall production process’ (p. 88). In chapter two, Banaji outlines the infrastructures that enabled merchant capital to exercise this control: trading colonies, wholesale markets, and bills of exchange. In chapter five, Banaji shows how merchants used their knowledge of the market to combine quite different labour processes, some on the employers’ own premises, many others in widely dispersed domestic settings. Only the former would qualify as the ‘real subsumption of labour to capital’ in Marx’s terms, but Banaji stresses the combination of different forms of labour exploitation under commercial capitalism. A key difference between Banaji and many other Marxists is his insistence that modes of production cannot be reduced to modes of exploitation: capitalism is not synonymous with wage labour, but has always depended on combinations of free and unfree labour.

Commercial capital and the state

This Brief History does not identify a single point of origin for ‘commercial capitalism’, but it analyses a series of relationships between state power and merchant capital from the eleventh century onwards. Banaji traces the armed takeover of commercial networks in the Mediterranean and Black Sea and then the Indian Ocean, by Italian city-states, the Portuguese monarchy, the Dutch Republic and then England. This story starts in chapter three with Byzantium: Banaji argues that a brief eleventh-century alliance between the Byzantine state and an indigenous merchant class was overturned by an aristocratic reaction that led to the privileging of Italian merchants, who thereby gained access to the world’s largest common market outside China (pp. 29–33). In the sixteenth century, the Portuguese crown transposed the ‘habitual use of force as an acceptable part of the competition between substantial blocs of capital’ from the Mediterranean to the Indian Ocean (p. 41), as it attempted the violent takeover of existing networks of Muslim commercial capital.

Banaji discusses successive subsequent phases in the history of ‘commercial capitalism’, with the rise of Dutch and English joint-stock companies backed by their respective states in the seventeenth century (p. 48), and then the rise of commission houses and non-monopoly, private enterprise (p. 64). The transition between these phases happened at different times. Already in the 1670s, the commission system operated in the British Atlantic: planters in Barbados used bills of exchange to buy slaves, and would sell their sugar in London (pp. 26–7); whereas the East Indian Company maintained its commercial dominance until over a century later (pp. 63–4). A further intermediate stage between commercial and industrial capital was the ‘evolution of the agency houses into “managing agencies”’ (p. 67). Across the nineteenth century, far from the ‘subordination of commercial capital to industrial capital’, Banaji shows the dominance of ‘managing agencies’ (‘trading companies that still earned a major part of their profit from commissions’) over a wide range of industrial enterprises (p. 72).

Parallel to his account of successive European states forcefully supporting commercial interests, Banaji argues that ‘the Islamic world had its own forms of commercial capitalism’ throughout and even before its emergence in northern Italy (p. 131). In his opening pages, and the appendix, Banaji demonstrates that Muslim thinkers articulated a political economy of commercial capitalism (including a concept of ‘capital’, and of the labour theory of value) well before European counterparts. The crucial difference, though, was that while Muslim states ‘were willing to encourage trade’, there was ‘never any Islamic counterpart of the West’s violent mercantilist expansion’ (pp. 132–3).

Class struggle

The arguments presented in this book are a challenge to the followers of Robert Brenner. Brenner and the ‘political Marxists’ argue that capitalism was the specific outcome of class struggle in the English countryside, which led to the dispossession of many of the peasantry, who were forced to work as wage-labourers for tenant farmers. For the political Marxists, it was only in this context that market imperatives systematically came to dominate production. However, Banaji shows the range of ways that capital has historically assumed control over labour (elsewhere he has referred to these as ‘trajectories of accumulation’), and it is far from clear that peasant dispossession is the central story. [4] As Banaji has repeatedly stressed, this is crucial for anti-capitalist strategy in post-colonial India. [5]

There is little direct treatment of class struggle in this book, even if the brief discussions are illuminating: where he draws on Tessie Liu’s work on the linen industry in 18th and 19th century France (pp. 88–9), or analyses the specific composition of the Ciompi revolt of 1378 (p. 91). [6] Still, Banaji’s book shows that commercial capital often linked diverse workplaces, with some parts of the production process carried out on sites owned by the capitalists, others subcontracted, and others ‘put out’ (p. 91). Histories of class struggle across these different production sites (including domestic contexts) could have important lessons for our own times. They could also correct gendered and racialised histories of working class struggle that fail to see both the diversity and interconnectedness of such struggles in the past.

Some further implications

The implications extend to histories of fossil capital. Andreas Malm has located the origins of global warming in early nineteenth century England, arguing that class struggle determined cotton manufacturers’ turn from water-power to coal and steam. Malm acknowledged that ‘the cotton-steam nexus never directly accounted for anything like the bulk of coal consumption’ and a ‘total history of the birth of the fossil economy’ would have to take account of applications of steam in shipping and the railways, and iron production. [7] The Brief History of Commercial Capital draws attention to the crucial importance of the latter in increasing ‘velocities of circulation’, reflected, as Marx had noted, in ever greater capital investment ‘in shipping, railways, telegraphs, etc.’ (p. 116). [8] Nineteenth century England may well be the right place to look for the origins of the fossil fuel economy, but Banaji’s account raises the question of whether the ‘cotton-steam nexus’ was truly its ‘beating heart’.

Finally, for readers of this website, the appearance of this book underlines yet again two of our recent losses. Already in 1978, Colin Barker welcomed Jairus Banaji’s critique of the reduction of the concept of the mode of production (e.g. capitalism) to the mode of exploitation (e.g. wage labour); we miss Colin’s response to Banaji’s latest discussion of the relationship between commercial capital and state power (and specifically, competing states). [9] Equally, Banaji’s emphasis on state power raises Neil Davidson’s question of the role of bourgeois revolutions in the history of capitalism. [10] They do not appear in this book, which stresses the cosmopolitan character of commercial capitalism, and ‘trajectories of accumulation’ rather than national ‘transitions’ to capitalism. But while the system of exploitation we all now live under is more globally interconnected than ever, it is also characterised by the class rule of bourgeoisies organised in competing nation states. Understanding how this came about, and how it can be brought to an end, is more urgent than ever.

[1] E.g. Jairus Banaji, ‘Modes of production in a materialist conception of history’ [1977], republished in Theory as History. Essays on Modes of Production and Exploitation (Leiden, 2010), pp. 45–101.
[2] Karl Marx, Capital, vol. 3, ch. 22, tr. D. Fernbach (London: Harmondsworth, 1981), p. 445.
[3] Marx, Capital, vol. 3, ch. 22, p. 451.
[4] Jairus Banaji, ‘Trajectories of accumulation of “transitions” to capitalism’ [2008–9], in: Theory as History, pp. 347–8.
[5] See e.g. Jairus Banaji, ‘The ironies of Indian Maoism’, International Socialism Journal, 128 (2010).
[6] See Tessie P. Liu, The Weaver’s Knot: The Contradictions of Class Struggle and Family Solidarity in Western France, 1750–1914 (Ithaca, 1994).
[7] Andreas Malm, Fossil Capital: The Rise of Steam Power and the Roots of Global Warming (London, 2016), p. 251.
[8] Citing Marx, Capital, vol. 3, ch. 18, p. 426.
[9] Colin Barker, ‘A note on the theory of capitalist states’, Capital & Class, 4 (1978), 113 n. 3.
[10] Neil Davidson, How Revolutionary Were the Bourgeois Revolutions? (Chicago, 2012).


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