After Feudalism: What the Transition Period Before Capitalism Reveals About Economic Transformation Today

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It’s hard to imagine a world without capitalism. Other than the emergence of socialism in Russia, capitalism has been the dominant global economic system for more than two centuries.

But capitalism didn’t emerge overnight nor did it emerge in a vacuum. It evolved over several centuries as new technologies emerged, facilitating increasing amounts of production and global trade. As production grew and European powers benefited from trade, a new political system and social order emerged too.

To understand how capitalism came to be – and what could lie ahead in our own time – you have to look at the conditions that produced capitalism’s predecessors. Capitalism wasn’t so much a rejection of agrarian society of the noble-led European order, it was a necessary evolution of changing perspectives around wealth, power, and production.

Feudalism began its decline in the 14th century as a result of the Black Death and the Hundred Years’ War. The plague wiped out half of Europe’s population, reducing the number of serfs available to work noble-held lands. The demand for labor rose, and with it, wages. Inflation inevitably followed.

Around the same time the plague made its way through Europe, war broke out between Britain and France. More than 100 years of fighting emptied the coffers of the French and British monarchies, plunging both European powers into debt. 

Global trade opened up new markets for European products while the discovery of gold in the Americas provided a much-needed influx of cash for the European economy. Once Columbus discovered the New World, the race was on to build new colonial empires as quickly as possible.

The transition to capitalism was a natural and necessary byproduct of the social, political, and economic changes that followed major transformative events in Europe. By the time Adam Smith published The Wealth of Nations in 1776, the Western world entered into a period of revolutionary fervor, establishing capitalism as the new economic system moving forward.

Just as new technologies and changes in global trade led to the rise of capitalism in Europe, new technologies like artificial intelligence and the emergence of a digitally native economy will lead to similar changes in our lifetime. Analyzing the transition to capitalism holds clues as to what our own not-so-distant-future may hold.

This essay will analyze the economic systems that preceded capitalism. It will evaluate the manor system during the feudal period, the rise of mercantilism during the Age of Exploration, and the emergence of Physiocrat economic thought on the eve of revolution in France. These economic systems reveal how changes in beliefs around wealth, labor, and power created the necessary conditions for capitalism’s inevitable emergence.

Manorialism was a system of small-scale agricultural production that operated within a rigid social and political hierarchy

After the fall of Rome in the 5th century, Europe was plunged into the Dark Ages. Trade came to a halt and with it, the existing economic, political, and social order.

Feudalism emerged in its wake. Under feudalism, land ownership – and the means of providing sustenance for one’s self – was limited. 

Noble lords owned large manors that serfs farmed. Rather than earning a wage, serfs retained a portion of whatever they produced. In exchange, noble lords provided protection and pledged fealty to the reigning monarch to keep the whole system going.

The economic, political, and social system that emerged during this time was referred to as manorialism. Production happened on a small scale within a manor. Serfs could not own land and were completely dependent on this system for their survival. 

In the manor, social mobility didn’t exist. The manor consisted of a fixed social hierarchy governed by traditions and customs, rather than mathematical formulas focused on efficiency and output. 

Serfs worked solely to feed themselves, keep their lord happy, and stay out of purgatory. Without the means to produce the things they needed for survival, they were dependent on selling their labor, often under highly exploitative circumstances.

While the vast majority of peasants were agrarian serfs, skilled craftsmen also existed within the peasant population. These individuals joined guilds – the equivalent of local trade unions – and learned a craft under a master. Over time they became master craftsmen and passed their trade along to their offspring.

Under manorialism, power and economic production was concentrated at the top. Aside from the nobility, the Catholic Church was the largest landowner in Europe. They controlled access to farmland and the ability of serfs to produce their keep.

The guilds, too, tended to be monopolistic in nature. You couldn’t pick up a trade and start practicing it on a whim. The guilds were self-regulating, in part to ensure quality, but also to provide economic protection against outside competition.

 Like the economies of Ancient Babylon and Greece, increased agricultural output led to the emergence of trade. Cities grew as a byproduct of larger populations that could be sustained by higher agricultural yields. Those cities created markets for finished goods, enabling trade to take place at increasingly greater distances. 

Manorialism waned as trade grew. A rising class of merchants facilitated trade between manors and cities. This class existed outside of the feudal power structure, challenging the nobility’s hold on power. 

Because merchants needed to earn a living without working the fields this necessitated a change to the meaning of work and how laborers functioned within the economy. Rather than working to produce things for survival – like food – merchants began generating money from traded goods that could be used to purchase the things they needed.

The imperative for early merchants wasn’t to necessarily derive a large profit from their activities, but they certainly needed to generate a surplus to cover their own costs. This, along with the emergence of Protestantism and the rise of the Protestant work ethic, changed the economic culture such that acquisition and boundless growth became more important than mere survival. 

Mercantilism was a trade-based system that enabled the acquisition of wealth and power

The advent of trade undermined the social, economic, and political power structure of manorialism. Trade facilitated the free flow of products – and new ideas – that led to the development of an entirely new economic paradigm – capitalism.

Before capitalism took shape, early capitalism centered around trade. It created a new merchant-capitalist class that acquired surplus off the production of others rather than producing it for themselves.

Growing demand for finished goods beyond agricultural produce changed how society was structured. Rather than producing goods within the parameters of a guild based on custom and tradition, merchants began subcontracting craftsmen for the skills to produce goods destined for faraway markets. 

This became known as the putting-out system. It represented a shift in labor where craftsmen were paid a fee – or a wage – for production and generated a source of discretionary income from their labor.

As trade grew, new financial instruments emerged to facilitate trade. Just as coins were invented to facilitate trade in Ancient Greece, merchants relied on money to cover their costs. They used their earnings to purchase goods they needed for their own survival.

In an effort to protect their property – and its economic value – the nobility began enclosing their lands. This limited how they could be used, adversely affecting farmers who generated their own sustenance from their lord’s land. 

Bands of peasants began roaming around England with no means for survival. As a result, they were drawn to cities under the promise of work. By earning a wage, landless peasants joined a growing number of workers earning monetary wage and created what later became known as the labor market.

As wage-based labor emerged, the definition of value within the economy changed. Instead of looking at value solely on the basis of something you could use for your own survival, value was now something that could be earned and exchanged. 

Money took on an increasingly important role for merchants who leveraged it as a capital. They saw how money could be used to pay wages and increase production, thereby increasing the volume of finished goods they owned that could be sold in the market.

While capital was not yet defined during this time, it emerged from the stores of inventory merchants held and the facilities used to produce finished goods. Land was no longer the only source of economic value as it had been under the manor system. This threatened the nobility and their hold on social and political power.

The introduction of capital into the economy created a path of social mobility that did not previously exist. Merchants could acquire inventory that could be sold in the future. As facilitators of trade, they controlled trade routes and distributions. And as the demand for production displaced the guild system, owning small factories and the wage laborers that worked in them became a source of capital that allowed merchants to build wealth.

Growth replaced sustenance as the raison d’etre for participation in the economy. But it wasn’t necessarily to generate for growth's sake. Growth is a necessary byproduct of competition. 

Social mobility created competition that didn’t exist under the previous, rigid social hierarchy of the manor system. In order to retain one’s status, merchants had to constantly stay ahead of the new competition. Growth was essential if you wanted to survive.

During this time new naval technologies allowed European powers to compete with one another on a global scale, establishing overseas colonies and trading posts. Needing gold to pay off past wars – and finance ongoing ones – European powers invested in exploratory campaigns in the Americas and Asia.

New economic paradigms emerged to govern the entire mercantilist system as a result. European powers saw a positive balance of trade as essential which meant they worked hard to export more than they imported. This was measured in bullion which was becoming increasingly extracted from colonies in the Americas. 

At the same time, merchants believed that profit was the difference in exchange. Rather than focusing on finding efficiencies to increase output, merchants prioritized keeping prices high.

The convergence of interests between the European powers and the new merchant class led to the rise in state-sponsored monopolies. Powerful companies like the Dutch East India Company emerged, generating new forms of wealth that had never been seen before outside of the land-owning nobility.

As with capitalism today, growth for the sake of growth alone is unsustainable. By the 18th century, a trade-based global economy was flourishing but it was underpinned by the exploitation of labor and the accumulation of capital.

In France, a small group of intellectuals emerged to provide a critical look at the nascent mercantilist-capitalist economy that had emerged. They attempted to create a theory to establish a more holistic economic system.

Physiocrats observed economic cycles and economic inequality, identifying a class structure to re-organize society

Led by Francois Quesnay, the Physiocrats emerged during the Enlightenment and tried to develop an economic system that brought humans into harmony with the environment around them. The core beliefs of Physiocratic economic thought revolved around the laws of nature and the flow of value between economic classes.

In his Tableau Economique, Quesnay argued that production is cyclical and has natural limits. Rather than accumulating the surpluses of production – and hoarding wealth – he argued that surpluses should be reinvested into the next economic cycle.

By using the outputs of one cycle as the inputs of another, the Physiocrats believed the economy would exist at a natural state of equilibrium. 

Physiocratic economic theory preferred agricultural production over the growing prevalence of industrial manufacturing. They argued that nature was the real source of value and people who worked the land were value-adding producers to the economy.

Under the Physiocratic economic model, society is organized according to three classes: productive, idle, and sterile. While agricultural producers were considered productive, manufacturers and merchant-capitalists that enabled manufacturing were considered sterile. 

The least valuable class were landowners who the Physicorats considered idle. By existing to collect rent off of the lands they owned, they contributed nothing of value to the economy.

A core belief of Physiocrats is the idea that hoarding money is undesirable. In line with their observance of economic cycles, Physiocrats argued that accumulating money reduced the overall circulation of it. With the vast majority of laborers dependent on earning a wage, the Physiocrats suggested economic crises would emerge when workers didn’t have access to enough money to cover their needs.

The Tableau Economique was written in 1758 and is one of the first works to critically evaluate the workings of the economy. The economic theories espoused by the Physiocrats reflected the economic conditions in France. At the time of its publication, the French and Indian War was in full swing and France was losing its hold as a global empire.

The Physiocrats highlighted the problems of the incumbent feudal system – arguing that landowners were idle – but because France was still using outdated agricultural production techniques, they failed to see how the transformative role of technology would eventually lead to the rise of an industrial-based economy.

Final takeaway

As the economy changes so too does the balance of power. Transition happens over long periods of time but the culmination of transitions that establish new economic, social, and political systems happen through violence. It’s no accident that capitalism took shape as America and France entered into periods of revolution.

Arguably one of the most significant things to occur during the transition from feudalism to capitalism is the emergence of new beliefs around wealth and value that led to social mobility. 

Production changed from being a means to produce goods that sustain life to production for the purpose of manufacturing goods that could be sold in a market for a fee. The inevitable outcome of that was the accumulation of money which could be used to attain social mobility, something that was impossible for peasants under feudalism. 

Once mercantilism emerged from the changes in production, it introduced a new understanding of value in society. Rather than looking at something based on how useful it was, merchants began looking at the value of exchange. A surplus in exchange value led to profit and the ability to accumulate wealth.

As trade grew and wealth emerged it became clear that human labor – rather than the physical assets of production – was the most important source of wealth. Capitalism emerged alongside the natural emergence of labor and capital, coalescing into recognizable markets.

Today we are in the midst of a similar transition. The emergence of low cost non-human cognitive labor undermines the value of human labor. At the same time, a digital economy that trades attention rather than the exchange of goods and services challenges existing beliefs around value and production.

As the pre-capitalist period shows, there is a desire for incumbents to maintain their hold on power. This precipitates wealth inequality and capital accumulation, setting the stage for inevitable revolution. 

As those beholden to the status quo feel threatened, growth will likely continue to happen at a faster pace. Just as Physiocrats recognized mercantilism wasn’t sustainable in pre-revolution France, it’s unlikely our current form of capitalism will be sustainable as wealth inequality grows.

It’s unclear what will emerge after capitalism. But what the ancient period and pre-capitalist Europe both reveal is that growth is not sustainable forever.

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Notes

ChatGPT scored this essay as an A- and provided the following feedback:

Understanding of the Reading: 5 (Excellent)
Your essay demonstrates a comprehensive understanding of the readings on pre-capitalist economic systems. You accurately discuss the transition from feudalism to capitalism, using specific examples such as manorialism, mercantilism, and Physiocratic thought. Your summary of historical contexts and evolution of ideas is both accurate and insightful.

Critical Thinking: 5 (Excellent)
The essay shows a high level of critical thinking. You effectively connect the historical transformation toward capitalism with current economic issues like AI and digital economies. This reflects an ability to synthesize ideas from the readings and draw meaningful parallels to broader, contemporary economic contexts.Clarity of

Writing: 4 (Very Good)
The organization of your paper is well thought-out, with clear sections on each historical period. Most ideas are expressed clearly, though certain transitions between sections could be smoother. Additionally, some sentences are slightly repetitive, which can be improved for even greater readability and flow.

Use of Evidence: 4 (Very Good)
You use historical examples effectively, like guild systems and the putting-out system, to support your points. Although these examples strengthen your argument, direct quotes or specific references to the course readings could enhance the essay’s depth and provide further support for your interpretations.

Reflection: 5 (Excellent)
Your concluding reflections on potential economic futures demonstrate a deep and insightful understanding of the material. By drawing a parallel between past economic transitions and current economic shifts, you show thoughtful consideration of the implications for today’s economy and possible transformations beyond capitalism.

Score: 23/25

Grade: A-

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