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In the United States, it takes courage to be critical of capitalism. More than other wealthy nations, the United States has kept alive the notion of the so-called “communist menace” and lurking socialism. Of wealthy countries, only the United States endured the McCarthy period.
- Overview
- History of capitalism
Also known as: free enterprise economy, free market economy, private enterprise economy
Written byRobert L. Heilbroner,
Robert L. Heilbroner
Norman Thomas Professor Emeritus of Economics, New School for Social Research, New York City. Author of The Worldly Philosophers; The Nature and Logic of Capitalism; and others.
Peter J. Boettke
Peter J. Boettke
Although the continuous development of capitalism as a system dates only from the 16th century, antecedents of capitalist institutions existed in the ancient world, and flourishing pockets of capitalism were present in Europe during the later Middle Ages. The development of capitalism was spearheaded by the growth of the English cloth industry during the 16th, 17th, and 18th centuries. The feature of this development that distinguished capitalism from previous systems was the use of accumulated capital to enlarge productive capacity rather than to invest in economically unproductive enterprises, such as pyramids and cathedrals. This characteristic was encouraged by several historical events.
In the ethic fostered by the Protestant Reformation of the 16th century, traditional disdain for acquisitive effort was diminished while hard work and frugality were given a stronger religious sanction. Economic inequality was justified on the grounds that the wealthy were more virtuous than the poor.
Another contributing factor was the increase in Europe’s supply of precious metals and the resulting inflation in prices. Wages did not rise as fast as prices in this period, and the main beneficiaries of the inflation were the capitalists. The early capitalists (1500–1750) also enjoyed the benefits of the rise of strong national states during the mercantilist era. The policies of national power followed by these states succeeded in providing the basic social conditions, such as uniform monetary systems and legal codes, necessary for economic development and eventually made possible the shift from public to private initiative.
Beginning in the 18th century in England, the focus of capitalist development shifted from commerce to industry. The steady capital accumulation of the preceding centuries was invested in the practical application of technical knowledge during the Industrial Revolution. The ideology of classical capitalism was expressed in An Inquiry into the Nature and Causes of the Wealth of Nations (1776), by the Scottish economist and philosopher Adam Smith, which recommended leaving economic decisions to the free play of self-regulating market forces. After the French Revolution and the Napoleonic Wars had swept the remnants of feudalism into oblivion, Smith’s policies were increasingly put into practice. The policies of 19th-century political liberalism included free trade, sound money (the gold standard), balanced budgets, and minimum levels of poor relief. The growth of industrial capitalism and the development of the factory system in the 19th century also created a vast new class of industrial workers whose generally miserable working and living conditions inspired the revolutionary philosophy of Karl Marx (see also Marxism). Marx’s prediction of the inevitable overthrow of capitalism in a proletarian-led class war proved shortsighted, however.
Adam Smith, paste medallion by James Tassie, 1787; in the Scottish National Portrait Gallery, Edinburgh.
Courtesy of the Scottish National Portrait Gallery, Edinburgh
May 8, 2024 · Capitalism is an economic system characterized by private ownership of the means of production, with labor solely paid wages. Capitalism depends on the enforcement of private property rights,...
- Daniel Liberto
- 2 min
Oct 18, 2023 · Our article aims to advance a definition of capitalism, which is designed to accommodate such plurality, both in terms of the multiple forms of capitalism that exist today but also sensitive to the constantly shifting understandings of capitalism in social science, especially within social theory.
The term ‘biocapitalism’ recently has emerged to map the growing significance of the life sciences and biotechnology as an innovation within late capitalism that controls, changes and experiments with the material basis of life.
May 24, 2018 · The idea that capitalism is more than an economic system, and instead, as Marx first framed it, a ‘definite mode of life’ that shapes our relationships with others, our sense of ourselves and our capacities, practices, and actions in the material world, should be rather obvious.
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Capitalism turned techniques of biopower and its penetrating control of body into a market principle, namely: wage labor is voluntary; all capital accumulations are public and fair price mechanisms.
