Explained:

A short history of Capitalism

By ANNA LEA JAKOBS | November 25, 2019

Cover photo by Ibrahim Rifath / Unsplash

Trading is deeply ingrained within us. When using my contactless debit card on the beeping machine, I do not usually think about where this all comes from. At a very early age, we are trained to trade. Holding my 50 cents pocket money in my hand, my younger self proudly went to the ice cream store. The schoolyard turned into a flourishing stock market of marbles and stickers. In all honesty, before my studies, economics seemed to be the most tedious subject on Earth. This aversion against numbers held on even further. In economics class, I could barely fight my inner anger. Commodification seemed to invade every aspect of life, anything could magically turn into a number; your satisfaction, the worth of a life. 

The title of our first lecture was called “greed is good”. My fight or flight mechanism kicked in and the latter dominated. I wanted to flee the classroom, leave the country or even Europe to be saved from the overwhelming economic rationale, this monster invading my life. I turned into a competitive animal when solving the exercises. I remember feeling inner satisfaction when I had the right solution and my neighbor did not. Like a magic trick, economics turned me into a self-interested greedy individual, the opposite of what I strived to be.

 When learning all these formulas, I could not make sense of them. I used to wonder where all this came from. When trying to solve these foreign formulae, I began to wonder: how did capitalism come into existence? To answer this question, a non-deterministic approach is required. Capitalism is a cross-cultural product. 

Free trade and banking were widely used by Arabs. Books, full of numbers, ruled the trade. Muhammad, the founder of Islam, went around the city of Medina and told people to invest in bricks and mortar. He, himself, was a merchant – post mortem, he is believed to be the richest Arab of his time. This connection between religion and capitalism almost seems ironic to us. We are taught that capitalism is caused by the decline of religion. The Koran itself declares: “God has permitted trading and made usury unlawful.” (Koran 2:275) 

In our current system, where prices rise and fall depending on the quantity supplied, the famines in Medina increased the prices. This infuriated people. They went to Muhammad and complained. He, the prophet and the most influential businessman, should do something! Muhammad explained, “Everyone, calm down. I know I am the prophet but, I am not God. I cannot regulate prices.” Though he did not use those exact same words, the message was clear. If the prophet himself could not intervene in price setting, how could any government authority?

When Muhammad opposed price regulation, he threw the Mesopotamian rulebook away. In the Mesopotamian times, the government prescribed prices and anytime someone charged too much, customers could complain. By letting the market set the prices, Muhammad was among the first to induce pro-market policies! Libertarian politicians nowadays seem to have more in common with Islam than they first might think they have.

We all know the success stories of Venice and other city republics. One could easily produce a Netflix series about the glorious times of dynasties in Italy, fighting over fame and fortune. In the limelight: the Medici, the founders of the modern banking industry. And even in the middle ages in Italy, Arabs and their intelligent way of trading had a major influence.

Nowadays, everyone with $262 can buy an Apple stock on the internet. Most of us have seen  The Wolf Of Wallstreet (Scorsese, 2013), where Leonardo DiCaprio threw parties in oversized houses with undersized women. The stock market has made it into the entertainment business. It has found a home in the goggle-box of the average consumer. When zapping through the canals, we see wildly gesturing anchors announcing stock prices in front of mountain-like graphs. The roots of this system lie in the city we live in today: Amsterdam. Founded by the Dutch East India Company, this system has survived over the centuries. 

Perhaps economics is not so boring after all. I should give it a chance. It seems quite fascinating – learning how the various time periods in history have shaped today’s capitalist world. Capitalism is multicultural at its core, influenced by the Arabs, Dutch, Italians, Germans and so forth. Surprisingly, it has its roots in religion. Nowadays, the relationship between religion and economics is far more complicated. It seems that economics has turned into our religion. And praying, into consumption.

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