Capitalism

1776 was a watershed year in human history. On July 4th, the founding fathers declared independence for the 13 British Colonies and created the United States of America.

That same year Adam Smith published a work called The Wealth of Nations.

The Wealth of Nations espoused a new concept in doing business more suited to the new industrial revolution than the system used by the old agricultural era. Steam had created factories. Factories required capital and as the industries gained steam they needed more and more capital.

At the time, this was only happening in Britain, as the Kings of Europe, afraid of losing their grip on their realms, banned industrial development, just as China had done two thousand years before. The first factories were mechanized looms for making cloth but soon ironworks began to expand and steam was put to another purpose that changed the face of the world...

Railroads.

Adam Smith proposed that capital be arranged by tradeable shares so that the wealthy could pool their money to create greater and grander projects. The Free Trading Stock Exchange was created in London and in no time at all made London the financial center of the known universe.

The seed that grew into the British Empire was planted by Queen Elizabeth in the 1500's with the charter of the East India Company granted to a small group of families close to the royal house, to organize and operate British interests in the spice trade where the only real competition came from the Dutch.

Being an island nation, Britain was a country of seafarers and concentrated on building the most powerful navy on the seven seas. As the industrial revolution expanded, people were needed for the factories located mainly close to the sources of coal and water in the northwest of England causing a major population shift from the agricultural southeast. People were taken from their drudgery on farms and crammed into rapidly growing slum cities where the appalling living conditions caused widespread discontent.

In 1770, the throne of England was left vacant by a king with no heirs. They looked around for a family with royal blood and chose a German king to sit on their throne. George I came to the throne and ruled England without even learning the language. It was George who demanded the colonies pay the stamp tax to fund the rebuilding of the British Navy, which had been neglected and was falling into disrepair. The Stamp Act was the cause of the American Revolution. The sick condition of the "navy that ruled the oceans" was the weakness that allowed the Americans to win their war of independence with the gleeful backing of the King of France. The French were able to disrupt the British supply lines preventing arms and men from reinforcing the sparse British army that had gone into decline in North America with the defeat of the French in Quebec.

With the loss of the United States, England needed a new supply of raw materials for their factories and new markets for their manufactured goods. They funded the South American war of independence from the Spanish King; and when the dust settled, the newly independent nations found themselves in deep debt to the British financiers. The Bitish learned an important lesson in Buenos Airies. When Napoleon marched into Madrid and put his brother on the throne, the British invaded Buenos Aires only to find that the locals were strong enough to throw them out. They came up with a new idea of empire. Don't conquer these countries and have to maintain huge armies to hold them, simply own them and control their banking systems. This new strategy at first employed British war ships that would sail into a port and demand that the ports be opened to "free trade". Since they controlled the shipping routes, they were the only "free trade partners" with the South Americans. By secretly funding the independence armies of San Martin and Bolivar they avoided war with Spain while stealing their colonial wealth.

Indeed, when the United States declared independence, most of their wealth was still in the hands of British families that sent sons to America to live and look after their financial interests. This is still the basis of the "special relationship" between Great Britain and the United States.

In the East Indies (or as it was also known, the West Pacific) the Dutch had come up with a new weapon of war: OPIUM. The Dutch got opium from India and would flood a target country with it, addict as many people as possible and then march in and conquer people too laid back to resist. The British loved the idea, so they marched into India, kicked out the Dutch and took over the opium trade. When the British discovered that opium was also grown in Afghanistan, they became a foreign power that learned the hard way that these rugged mountain people were not giving in to subjugation so they moved to China to set up opium growers in the parts of that country that were suitable. To get their way, they used the Dutch tactic of flooding China with opium addicting as many as possible making them unable to resist the British forces.

The opium growers would accept no paper money from anyone; only gold and diamonds. This meant that a system of payment had to be created without being dragged into war for breaking treaties over the transfer of gold and precious gems. One family went to South Africa to open gold and diamond mines to pay the opium growers. The British created their colony of Hong Kong as home of the banking establishment to handle the secret transfers of gold and diamonds to the growers. They also needed ships to transport the opium and the payments for it so they established the Hong Kong and Shanghai Bank and the Pacific and Orient Shipping Company. They found that diamonds were far easier to transfer so they created a monopoly on diamonds that we know today as De Beers to maintain a stable, although artificial, price.

As the 19th century opened, the only money acceptable to most people was coinage. The only paper money was promisory notes written personally between parties. With the explosion of the industrial revolution and the business growth that accompanied it, shipping metals back and forth and around the world was just too cumbersome and costly, paper notes increased in usage as banks began to issue them instead of coins. Bank notes were slow to gain acceptance until the railroads and telegraph sped up the market so much the use of paper notes as promises to pay in real goods (originally denominated in specific weights of gold or silver) that began to be passed from person to person in daily trade and became the medium of exchange. The original pound sterling was just that. A promise to pay one pound of sterling silver on demand. Anyone could issue a note as long as they had the goods to back the note. Banks printed them, governments printed them and soon the dominant notes became the currencies on which the concept of nations was redifined in the late 1800's. This redefining of nations led to the two great wars of the 20th century.

As these events were unfolding, two German students living in London, Marx and Englels, wrote a critque of the newly emerging capital system of finance called "Das Kapital". This book became the rallying point for the creation of the concept of Communism. Although Lenin tried to create commune-ism in Russia, the movement was subverted by Trotsky and then Stalin into a totalitarian dictatorship calling itself Communist even though it was not, and giving the concept of commune-ism, or shared ownership of the means of production, a bad name.

The patchwork money system of the industrial era suited the financiers as it gave them the tools to control the creation of money backed by their industrial output and their armies and police.

The dawn of the information age has made this patchwork money system obsolete. We are witnessing the meltdown of the system through "loss of confidence".

It is time to ask the hard questions. Do we continue patching up the old systems of exchange of goods and services leaving the creation of new money as needed for market expansion in the hands of the "old money" people? Or do we start to create a just system of expansion of the money supply for the use and benefit of all people?

I welcome your thoughts and ideas. A just global monetary system is the ticket to introducing the Utopian Era of human existence. Or, as we learned from Star Trek, the abolition of money as the basis of providing the goods and services of human endeavour to the population of our tiny planet that has become, for all intents and purposes, one large city state still divided into barrios like New York in the era of West Side Story.