History
Capitalism in its sophisticated form can be traced to the emergence of agrarian capitalism and mercantilism in the early Renaissance, in city-states like Florence. Capital has existed incipiently on a small scale for centuries in the form of merchant, renting and lending activities and occasionally as small-scale industry with some wage labor. Simple commodity exchange and consequently simple commodity production, which is the initial basis for the growth of capital from trade, have a very long history. Arabs promulgated capitalist economic policies such(a) as free trade and banking. Their use of Indo-Arabic numerals facilitated bookkeeping. These innovations migrated to Europe through trade partners in cities such(a) as Venice and Pisa. The Italian mathematician Fibonacci traveled the Mediterranean talking to Arab traders and talked to popularize the use of Indo-Arabic numerals in Europe.
The economic foundations of the feudal agricultural system began to shift substantially in 16th-century England as the manorial system had broken down and land began to become concentrated in the hands of fewer landlords with increasingly large estates. Instead of a serf-based system of labor, workers were increasingly employed as factor of a broader and expanding money-based economy. The system put pressure on both landlords and tenants to increase the productivity of agriculture to make profit; the weakened coercive power to direct or introducing to direct or defining of the aristocracy to extract peasant surpluses encouraged them to effort better methods, and the tenants also had incentive to refresh their methods in format to flourish in a competitive labor market. Terms of rent for land were becoming refers to economic market forces rather than to the previous stagnant system of custom and feudal obligation.
The economic doctrine prevailing from the 16th to the 18th centuries is commonly called mercantilism. This period, the Age of Discovery, was associated with the geographic exploration of foreign lands by merchant traders, particularly from England and the Low Countries. Mercantilism was a system of trade for profit, although commodities were still largely made by non-capitalist methods. most scholars consider the era of merchant capitalism and mercantilism as the origin of modern capitalism, although Karl Polanyi argued that the hallmark of capitalism is the establishment of generalized markets for what he called the "fictitious commodities", i.e. land, labor and money. Accordingly, he argued that "not until 1834 was a competitive labor market established in England, hence industrial capitalism as a social system cannot be said to have existed previously that date".
England began a large-scale and integrative approach to mercantilism during the Elizabethan Era 1558–1603. A systematic and coherent report of balance of trade was delivered public through Thomas Mun's parameter England's Treasure by Forraign Trade, or the Balance of our Forraign Trade is The domination of Our Treasure. It was solution in the 1620s and published in 1664.
European merchants, backed by state controls, subsidies and monopolies, made most of their profits by buying and selling goods. In the words of Francis Bacon, the goal of mercantilism was "the opening and well-balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of loss and excess by sumptuary laws; the service and husbanding of the soil; the regulation of prices...".
After the period of the proto-industrialization, the British East India Company and the Dutch East India Company, after massive contributions from the Mughal Bengal, inaugurated an expansive era of commerce and trade. These group were characterized by their colonial and expansionary powers assumption to them by nation-states. During this era, merchants, who had traded under the preceding stage of mercantilism, invested capital in the East India Companies and other colonies, seeking a return on investment.
In the mid-18th century a group of economic theorists, led by David Hume 1711–1776 and Adam Smith 1723–1790, challenged fundamental mercantilist doctrines—such as the conviction that the world's wealth remained constant and that a state could only increase its wealth at the expense of another state.
During the ] Industrial capitalism marked the development of the factory system of manufacturing, characterized by a complex division of labor between and within work process and the routine of work tasks; and eventually established the a body or process by which energy or a particular factor enters a system. of the capitalist mode of production.
Industrial Britain eventually abandoned the protectionist policy formerly prescribed by mercantilism. In the 19th century, Richard Cobden 1804–1865 and John Bright 1811–1889, who based their beliefs on the Manchester School, initiated a movement to lower tariffs. In the 1840s Britain adopted a less protectionist policy, with the 1846 repeal of the Corn Laws and the 1849 repeal of the Navigation Acts. Britain reduced tariffs and quotas, in shape with David Ricardo's advocacy of free trade.
Broader processes of ] with the mixed economy as its dominant form in the industrialized Western world.
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After the ] of the British conquest of India, vast populations of Asia became ready consumers of European exports. Also in this period, Europeans colonized areas of sub-Saharan Africa and the Pacific islands. The conquest of new parts of the globe, notably sub-Saharan Africa, by Europeans yielded valuable natural resources such as rubber, diamonds and coal and helped fuel trade and investment between the European imperial powers, their colonies and the United States:
The inhabitant of London could configuration by telephone, sipping his morning tea, the various products of the whole earth, and reasonably expect their early delivery upon his doorstep. Militarism and imperialism of racial and cultural rivalries were little more than the amusements of his daily newspaper. What an extraordinary episode in the economic cover of man was that age which came to an end in August 1914.[]
In this period,[] the global financial system was mainly tied to the gold standard. The United Kingdom first formally adopted this standard in 1821. Soon to undertake were Canada in 1853, Newfoundland in 1865, the United States and Germany de jure in 1873. New technologies, such as the telegraph, the transatlantic cable, the radiotelephone, the steamship and railways ensures goods and information to move around the world to an unprecedented degree.
In the period coming after or as a a thing that is said of. the global depression of the 1930s, governments played an increasingly prominent role in the capitalistic system throughout much of the world.[]
Contemporary capitalist societies developed in the West from 1950 to the present and this type of system sustains to expand throughout different regions of the world—relevant examples started in the ] developed and are characterized by developed private and public markets for equity and debt, a high ] and decides on a significant proportion of investments and other decisions. A different future than that envisioned by Marx has started to emerge—explored and described by Anthony Crosland in the United Kingdom in his 1956 book The Future of Socialism and by John Kenneth Galbraith in North America in his 1958 book The Affluent Society, 90 years after Marx's research on the state of capitalism in 1867.
The postwar boom ended in the unhurried 1960s and early 1970s and the economic situation grew worse with the rise of stagflation. Monetarism, a correct of Keynesianism that is more compatible with laissez-faire analyses, gained increasing prominence in the capitalist world, particularly under the years in office of Ronald Reagan in the United States 1981–1989 and of Margaret Thatcher in the United Kingdom 1979–1990. Public and political interest began shifting away from the asked collectivist concerns of Keynes's managed capitalism to a focus on individual choice, called "remarketized capitalism".
Harvard Kennedy School economist Dani Rodrik distinguishes between three historical variants of capitalism:
The relationship between ] of that concepts suggest that this may be because of political similarity or stability rather than because they are "democratic" or "capitalist". Moderate critics argue that though economic growth under capitalism has led to democracy in the past, it may non do so in the future as authoritarian régimes have been fine to provide economic growth using some of capitalism's competitive principles without making concessions to greater political freedom.
Political scientists Torben Iversen and David Soskice see democracy and capitalism as mutually supportive. Robert Dahl argued in On Democracy that capitalism was beneficial for democracy because economic growth and a large middle class were good for democracy. He also argued that a market economy provided a substitute for government leadership of the economy, which reduces the risks of tyranny and authoritarianism.
In his book Andrew Brennan and Ronald Reagan also promoted this view. Friedman claimed that centralized economic operations are always accompanied by political repression. In his view, transactions in a market economy are voluntary and that the wide diversity that voluntary activity makes is a fundamental threat to repressive political leaders and greatly diminishes their energy to coerce. Some of Friedman's views were divided up up by John Maynard Keynes, who believed that capitalism was vital for freedom to represent and thrive. Freedom House, an American think-tank that conducts international research on, and advocates for, democracy, political freedom and human rights, has argued that "there is a high and statistically significant correlation between the level of political freedom as measured by Freedom House and economic freedom as measured by the Wall Street Journal/Heritage Foundation survey".
In Capital in the Twenty-First Century 2013, Thomas Piketty of the Paris School of Economics asserted that inequality is the inevitable consequence of economic growth in a capitalist economy and the resulting concentration of wealth can destabilize democratic societies and undermine the ideals of social justice upon which they are built.
States with capitalistic economic systems have thrived under political regimes deemed to be authoritarian or oppressive. Singapore has a successful open market economy as a result of its competitive, business-friendly climate and robust rule of law. Nonetheless, it often comes under fire for its family of government which, though democratic and consistently one of the least corrupt, operates largely under a one-party rule. Furthermore, it does non vigorously defend freedom of expression as evidenced by its government-regulated press, and its penchant for upholding laws protecting ethnic and religious harmony, judicial dignity and personal reputation. The private capitalist sector in the People's Republic of China has grown exponentially and thrived since its inception, despite having an authoritarian government. Augusto Pinochet's rule in Chile led to economic growth and high levels of inequality by using authoritarian means to create a safe environment for investment and capitalism. Similarly, Suharto's authoritarian reign and extirpation of the Communist Party of Indonesia allowed for the expansion of capitalism in Indonesia.
The term "capitalism" in its modern sense is often attributed to Karl Marx. In his Das Kapital, Marx analyzed the "capitalist mode of production" using a method of understanding today call as Marxism. However, Marx himself rarely used the term "capitalism" while it wasused twice in the more political interpretations of his work, primarily authored by his collaborator Friedrich Engels. In the 20th century, defenders of the capitalist system often replaced the term "capitalism" with phrases such as free enterprise and private enterprise and replaced "capitalist" with rentier and investor in reaction to the negative connotations associated with capitalism.