Merchant capital, usurer capital, have been ubiquitous, but they have not by themselves brought about any decisive alteration of the world.footnote It is industrial capital that has led to revolutionary change, and been the highroad to a scientific technology that has transformed agriculture as well as industry, society as well as economy. Industrial capitalism peeped out here and there before the nineteenth century, but on any considerable scale it seems to have been rejected like an alien graft, as something too unnatural to spread far. It has been a strange aberration on the human path, an abrupt mutation. Forces outside economic life were needed to establish it; only very complex, exceptional conditions could engender, or keep alive, the entrepreneurial spirit. There have always been much easier ways of making money than long-term industrial investment, the hard grind of running a factory. J.P. Morgan preferred to sit in a back parlour on Wall Street smoking cigars and playing solitaire, while money flowed towards him. The English, first to discover the industrial highroad, were soon deserting it for similar parlours in the City, or looking for byways, short cuts and colonial Eldorados.

Wide variations within modern capitalism go with the fact that however much a novelty, it could only develop within moulds shaped by the past. A very important one was feudalism, of the exceptional westEuropean kind, whose nearest relative was Japanese. Capitalism and feudalism were not mutually exclusive in their modes of thinking or feeling. A dominant class’s ideology spreads downward, as Marx and Engels saw early; and the instincts of any class may be, like its religion, surprisingly flexible and adaptable. Laura Stevenson shows how Londoners of Shakespeare’s day could look back on their city’s great figures not so much as great businessmen but as merchant-princes, animated by the same nobility of character as any feudal magnates of their time.footnote1 Three centuries later American workmen took the proud title ‘Knights of Labour’.

In most cases the ‘nation-state’ was built much more by the state than by the nation or people, and to a great extent the same is true of its economy. It has been recognized that mercantilism was largely a translation into economic terms of the bureaucratic machinery set up by the ‘absolute monarchies’. There must always have been mutual exchanges between the methods and techniques of the counting house or factory, and those of officialdom. When full-grown, businessmen plumed themselves on their rugged independence, and were all for laissez faire, as they still are in America; but this only meant that they wanted no interference from government, while they did want government to come to their help whenever there was occasion. Manchester wanted cotton-textile production in British India curtailed, in order to restrict competition. Free enterprise has always been ready to accept gifts, and not quite in the spirit of Pooh-Bah pocketing bribes in order to mortify his excessive family pride. Much more reluctantly, businessmen had to learn to submit at times to a degree of regulation by the state, for the sake of social peace.

After several false starts, chiefly in Italy and the Netherlands, it was in England that the new mode of production eventually got going, and then by the roundabout route of agrarian capitalism, nowhere else adopted over a whole country. It was capitalism of a very bastard sort, working within a framework nearly as ‘feudal’ as the serf-worked estates of eastern Europe. As there, state power was essential to get it going and police it, mainly in the period when a peasantry felt by its masters to have grown too independent, or uppity, was being degraded into a landless labour force available for hire. At that stage foreign mercenary troops might have to be brought in to crush resistance—a sidelight on the patriotism that Tudor Englishmen are always credited with. The system could then be comfortably run by the landlord who rented his land to farmers, petty capitalists, and controlled the labourers on their behalf by his authority as Justice of the Peace, or seigneur with a government licence. ‘His decree’, a writer could still complain in the nineteenth century, ‘so far as his labourers and cottage tenants are concerned, is as good as law.’footnote2 In other countries by then, governments were coming forward to help in setting up industry; in Britain this was less necessary because centuries of capitalist agriculture had familiarized the use of wage-labour, and inured the masses to discipline. At the same time, however, they had consolidated the power and influence of the landed aristocracy to a point that would make it a heavy clog on later industrial development.

Inseparable from the rise of modern states were their standing armies and navies. Whilst warfare was terribly destructive (but least so for England, which learned to fight all but its civil wars abroad), it could provide profitable opportunities for a good many. Northampton’s staple trade of sheomaking got its start through orders for footwear for the parliamentary army in the civil war, and all hostilities for the next two centuries gave it a further fillip. Less of a mixed blessing than war was Europe’s perpetual preparation for war. Armies generated ancillary activities from the building of forts to the sewing of uniforms. All these cost money, and the chief concern of the English political arena was deciding who should foot the bill. For a while, landowners found themselves paying more than they liked, but as statesmanship matured, things were better managed, and most of the paying was transferred to the lower classes—an arrangement doing credit to the Age of Reason (and admirably described of late by John Brewer).footnote3