Abstract
This chapter presents the theoretical framework. The framework addresses two fundamental questions in economic sciences. What factors explain the divergence in living standards across countries and what ensures internal and external stability of the capitalist economic system? The framework adopts a non-technical and unified approach. Using the neoclassical growth model, it shows that economic growth is dependent on access to raw materials, labour, capital, technology, and perhaps most importantly ‘economies of scale’. Then it modifies the neoclassical growth model by introducing power relations (both internal and external to a nation), which ensures scale economies through guaranteed access to markets and raw materials. Thus, imperial expansion is a natural consequence of the capitalist economic system. The stability of the system depends on growth and distribution and it is not possible to have one without the other. However, the quest for growth and imperial expansion implies one empire invariably enters into conflict with another empire. Such inherent tension in the capitalist system can be best managed by acknowledging great power spheres of influence.
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- 1.
A system run by slave labour (such as the plantation economy) relies entirely on coercion and thus workers are not compensated.
- 2.
Power can be both economic and political. In fact, one can lead to the other. See Bhattacharyya (2011a) for more discussion.
- 3.
Production systems based on slave labour (i.e. plantation economies) and colonial institutions demonstrate such characteristics.
- 4.
This is identical to the resource constraint equation in an optimal growth model (commonly known as the Ramsey Model) with a moderate twist. The optimal growth model assumes all new born babies are assigned with capital, whereas here we assume that only the children of capitalists are endowed with capital.
- 5.
Note that I am using the phrases ‘financial elite’ and ‘financial intermediary’ interchangeably here.
- 6.
Selectorates are a small group of very influential individuals.
- 7.
For two contrasting examples from British involvement in India and America, see footnote 1.
- 8.
For an alternative view on the effect of Atlantic slave trade on British industrial revolution, see Harley (2013).
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Bhattacharyya, S. (2020). A Unified Theory of Rent, Elite Feud, and Imperial Expansion. In: A History of Global Capitalism. Frontiers in Economic History. Springer, Cham. https://doi.org/10.1007/978-3-030-58736-9_2
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