[The Editors' Verdict] Capitalism Cannot Stand Still

The history of capitalism is short. If one interprets capitalism as having begun only after the Industrial Revolution in the mid-18th century, when means of production other than labor became important, that is too narrow a view. However, it is difficult to separate the Industrial Revolution from the fact that the ownership of means of production such as factories and machinery became detached from labor, leading to the capitalist class playing a significant role.

Before the Industrial Revolution, it was mainly commercial capital. Although it is known to have played an important role in the emergence of capitalism, wealth was accumulated not through new technologies and means of production, but through trade and commerce.

At that time, important items in trade between the East and West were silk and spices. Silk was a specialty of the East, especially China. Although silk had been produced in China since ancient times, the silk production technology became known in Europe only after the 10th century in Italy. The technology spread to Mediterranean trading cities such as Genoa, Venice, and Florence around the 12th century, even later.

The greater profit came from the spice trade. When a large ship loaded with spices from the East safely arrived at a European port, its value was said to be comparable to a royal treasury’s annual revenue, giving an idea of the demand for spices at the time. Despite dangers such as pirates and storms lurking everywhere, it was a profitable business. The establishment of the British East India Company in 1600, with the Royal Charter granted by Queen Elizabeth I, followed by the Dutch and French, was also due to spices.

Soon after the discovery of the New World, gold and silver mines were found, and large amounts of precious metals flowed into Europe. Among them, especially silver was exported in large quantities to the East. Until the Industrial Revolution brought cotton textiles to prominence as the main fiber, Europe always ran a trade deficit with the East. This deficit, which was more than 50% of imports, was compensated by silver from the New World, which was favored by Easterners.

Despite the active trade and the discovery of the New World after the 16th century, the improvement in the living standards of the masses was minimal. This is precisely why the Industrial Revolution is the most important event in human history. The economic conditions of almost all people improved only after the Industrial Revolution, which brought about technological progress, capital accumulation, and the emergence of capitalists.

Since its emergence, capitalism has never stopped. Although some countries have tried to halt it, they disappeared into the annals of history each time. Argentina did so in the early 20th century, the former Soviet Union in the latter half, and now Venezuela is doing the same. There is no clearer lesson in history than this. Yet, it is astonishing that there are still rulers in this country who believe that halting capitalism will bring a new paradise.

The Moon Jae-in administration, which began with the unheard-of absurdity called income-led growth, has less than two years left in its term. What has been achieved by hating capitalism so much? Now, heavy taxation and regulations imposed on the real estate market and private property seem poised to halt capitalism. It is astonishing how the government and its aides can be composed of people who so poorly understand the operating principles of a capitalist economy.

Once again, I emphasize that capitalism cannot stand still. If it is stopped, it will decline from that moment. The sun has risen and set with empty slogans, and now the end is beginning to be seen. Unless the delusion that something can be achieved by stopping the market and capitalism is abandoned even now, nothing will be accomplished. The appointed time will come sooner than expected.

Jo Jang-ok, Professor of Economics, Sogang University