Question

Describe some of the basic components of the evolution of capitalism

Answer 1

Capitalism is an economic system in which there is dominance of private entrepreneurs. A capitalist economy is in fact controlled by private organizations and their sole aim is profit maximization rather than fulfilling social causes and caring about consumers' interests. The output in a capitalist economy is determined by supply and demand forces of consumer market and firms collectively determine price of goods and services that provides them maximum profits. There is two form of capitalism i.e., pure capitalism and mixed capitalism. Under pure capitalism, government does not intervene in the market to regulate price and output of capital goods. However, under mixed capitalism, government regulates the business malpractices such as unfair monopolistic practices and cartelization and firms have to comply with statutory laws while fixing prices of goods.

Evolution of Capitalism

Capitalism initially originated in Europe. Later on, it spread over US, Canada and other countries of the world. The different stages of evolution of capitalism are given below:

Feudalism

It was the initial stage of capitalism and started in 12th century in Europe. During 12th century very less number of people used to live in urban areas and they worked in the properties of landlords and received wages from their respective landlord owners. However, landlords always exploited their workers and paid less wages for their amount of work. A huge shortfall in the urban workers was created by Black plague that took toll of thousands of skilled workers in various towns of Europe. To increase the labor supply in the farmlands, landlords invited people from rural areas and were by and large successful in adding new farm workers as serfs in their farm properties. The key feature of serfdom in 12th century was large number of children working as bonded labors in the landlord's property. The feudalism lasted till 15th century.

Mercantilism

By the end of 15th century, feudalism and serfdom was weakened in Europe. A new stage of capitalism known as mercantilism emerged in various towns of Europe. Under this form of capitalism, inter trade among different towns was first started that on the later stage advanced to inter trade between two or more provinces and nations. When there was involvement of several countries in mercantile trade, it took form of competitive trade. Emergence of competitive trade among nations also created trade wars and trade barriers. Economists like Adam Smith has therefore, described Mercantilism as the economic system that hinders the healthy and balanced trade between countries. Mercantilism lasted till 18th century.

Industrial capitalism

Industrial capitalism is the present stage of capitalism. It originated from industrial revolution of Great Britain in 18th century. The industrial revolution created a new working class known as organized workers who worked in Textile mills, mines and plantations. The main feature of industrial capitalism is the transfer of property and wealth from landlords and money lenders to the factory owners. Large number of factories were established in different towns of Europe and other regions that provided employment to large population. Increase in employment also increased purchasing power of people in various regions. For the first time, trade unions were formed that fought for the welfare of working groups. The industrial capitalism at the initial period was however, far more progressive than the present form of industrial capitalism. The present form of industrial capitalism is based on financial output and therefore, employment, wages and job conditions in a capitalist economy are determined by market forces of demand and supply.