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The three booming decades that followed the Second World War, according to political economist Clara E. Mattei, were an anomaly in the history of contemporary capitalism. She writes that austerity did not originate with the emergence of the neoliberal era starting in the 1970s, but "has been the mainstay of capitalism." [41]
- 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
Jan 7, 2018 · Capitalism today is a much different economic system than it was when it debuted in Europe in the 14th century. In fact, the system of capitalism has gone through three distinct epochs, beginning with mercantile, moving on to classical (or competitive), and then evolving into Keynesianism or state capitalism in the 20th century before it would ...
Mar 23, 2024 · By the late 1700s, British business owners, supported by government policies inspired by Adam Smith, were setting up factories and hiring many of these migrant workers. During the Industrial Revolution, factories increasingly relied on machine power, most importantly the steam engine. A steam engine uses heat to transform water into steam ...
Where did capitalism come from? The origins of capitalism can be said to come from 17th-century European trading practices. This wasn't free market capitalism, though. Industrial capitalism didn't develop until the early 19th century with the Industrial Revolution and the need to make the most of the resources of capital and labour to reap profits.
Nov 28, 2020 · Capitalism In Global History. This virtual issue affirms the relevance of global history to the history of capitalism, and the relevance of capitalism to global history. Neither proposition is self-evident. ‘Global history’ emerged in the early 1990s, in the wake of the demise of the Soviet Union and an apparently triumphant New World Order ...
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Apr 19, 2012 · For nearly four centuries, from the mid-1400s to the mid-1800s, the rest of the world was drawn into an economic and political order dominated by European capitalism. This order was organized around the overseas colonial empires of the Atlantic powers: first Spain and Portugal, then the Netherlands, England, and France.
