The economic systems of the past have always been complex and dynamic, with various roles and relationships between producers, merchants, and consumers. One such system that evolved over time was the ‘putting-out’ system, which played a significant role during the Mercantile era and the early Industrial period. This system saw a shift in the relationship between the primary producer and the merchant, marking a departure from earlier economic arrangements.
Understanding the ‘Putting-Out’ System
The ‘putting-out’ system is characterized by primary producers who still own their means of production, such as tools and workshops, yet their independence is compromised due to their increasing reliance on merchants. This dependence marks a pivotal change from the old system where artisans were more autonomous. In this new arrangement, merchants would provide raw materials to the producers and then collect the finished goods to sell them in the market. As a result, the producer becomes tied to the merchant for both supplies and access to markets.
Karl Marx’s Perspective on Merchants
Karl Marx, a philosopher and economist, identified two distinct paths through which individuals could become ‘putting-out’ merchants. The first path involved rich artisans transitioning into the role of merchants, while the second path saw pure merchants taking on this function. Marx regarded the first path as revolutionary and the most common route. However, he questioned the ease with which an artisan could make this transition, recognizing the inherent risks associated with the ‘putting-out’ system. Unlike the journeyman who aspired to become a master-artisan, the rich artisan faced significant challenges in becoming a putting-out merchant.
The Role of Rich Artisans and Pure Merchants
Rich artisans were individuals who had successfully managed to accumulate wealth through their craft. However, despite their financial stability, they were often hesitant to become putting-out merchants due to the high risks involved. The process required not only capital but also a vast network for distributing goods, which could be challenging to establish and maintain. On the other hand, pure merchants were those who primarily engaged in trade and commerce. They were typically better positioned to assume the role of putting-out merchants as they already had the necessary infrastructure and knowledge to navigate the market complexities.
Capital Growth and Cultural Influences
The growth of capital during the Mercantile era and the early Industrial period did not occur in isolation. It coincided with cultural and social developments, as noted by sociologist Max Weber and his contemporaries. Weber linked the spread of Protestantism with a cultural shift that emphasized frugality and the accumulation of savings. This ethos contributed to the development of capital reserves, as people became more inclined to save money, which in turn could be invested in business ventures, including the ‘putting-out’ system.
Questions for UPSC
1. How did the ‘putting-out’ system reflect the changing dynamics between producers and merchants during the Mercantile era?
2. What were the potential risks for rich artisans in transitioning to putting-out merchants, and how did these compare to the challenges faced by pure merchants?
3. In what ways did the cultural and social changes, particularly the spread of Protestantism, influence the accumulation of capital and the evolution of early industrial economic systems?