History of capitalism

History of capitalism

Max Weber's model of capitalist development

The history of capitalism can be traced back to early forms of merchant capitalism practiced in Western Europe during the Middle Ages.[1] It began to develop into its modern form during the Early Modern period in the Protestant countries of North-Western Europe, especially the Netherlands and England. Traders in Amsterdam and London created the first chartered joint-stock companies driving up commerce and trade, and the first stock exchanges and banking and insurance institutions were established.[2]

Over the course of the past five hundred years, capital has been accumulated by a variety of different methods, in a variety of scales, and associated with a great deal of variation in the concentration of economic power and wealth.[3] Much of the history of the past five hundred years is concerned with the development of capitalism in its various forms.

Since 2000 the new scholarly field of "History of Capitalism" has appeared, with courses in history departments. It includes topics such as insurance, banking and regulation, the political dimension, and the impact on the middle classes, the poor and women and minorities.[4][5]


  • Origins of capitalism 1
    • Crisis of the 14th century 1.1
    • Rise of towns 1.2
    • Agrarian capitalism and enclosure 1.3
  • Merchant capitalism and mercantilism 2
    • Precedents 2.1
    • Emergence 2.2
    • Doctrines 2.3
    • Chartered trading companies 2.4
  • Industrial capitalism 3
    • Industrial revolution 3.1
    • Finance 3.2
    • Free trade and globalization 3.3
  • Twentieth century 4
    • Keynesianism and free markets 4.1
    • Globalization 4.2
  • Today 5
  • Future 6
  • Stages of Capitalism 7
  • See also 8
  • References 9
  • Further reading 10

Origins of capitalism

Crisis of the 14th century

Map of a medieval manor. Notice the large commons area and the division of land into small strips. The mustard-colored areas are part of the demesne, the hatched areas part of the glebe.
William R. Shepherd, Historical Atlas, 01923

According to some historians, the modern capitalist system has its origin in the "crisis of the fourteenth century", a conflict between the land-owning aristocracy and the agricultural producers, the serfs. Manorial arrangements inhibited the development of capitalism in a number of ways. Because serfs had obligations to produce for lords, they had no interest in technological innovation; because serfs produced to sustain their own families, they had no interest in co-operating with one another. Because lords owned the land, they relied on force to guarantee that they were provided with sufficient food. Because lords were not producing to sell on the market, there was no competitive pressure for them to innovate. Finally, because lords expanded their power and wealth through military means, they spent their wealth on military equipment or on conspicuous consumption that helped foster alliances with other lords; they had no incentive to invest in developing new productive technologies.[6]

The demographic crisis of the 14th century upset this arrangement. This crisis had several causes: agricultural productivity reached its technological limitations and stopped growing; bad weather led to the Great Famine of 1315–1317; the Black Death in 1348–1350 led to a population crash. These factors led to a decline in agricultural production. In response, feudal lords sought to expand agricultural production by expanding their domains through warfare; they therefore demanded more tribute from their serfs to pay for military expenses. In England, many serfs rebelled. Some moved to towns, some purchased land, and some entered into favorable contracts to rent lands from lords who needed to repopulate their estates.[7]

The collapse of the manorial system in England created a class of tenant-farmers with more freedom to market their goods and thus more incentive to invest in new technologies. Lords who did not want to rely on rents could buy out or evict tenant farmers, but then had to hire free-labor to work their estates – giving them an incentive to invest in two very different kinds of commodity owners; on the one hand, the owners of money, means of production, means of subsistence, who are eager to valorize the sum of value they have appropriated by buying the labour power of others; on the other hand, free workers, the sellers of their own labor-power, and, Free workers, in the double sense that they neither form part of the means of production nor do they own the means of production that transformed land and even money into what we now call "capital".[8] Marx labeled this period the "pre-history of capitalism".[9]

In effect, feudalism began to lay some of the foundations necessary for the development of mercantilism, a precursor to capitalism. Feudalism took place mostly in Europe and lasted from the medieval period up through the 16th century. Feudal manors were almost entirely self-sufficient, and therefore limited the role of the market. This stifled any incipient tendency towards capitalism. However, the relatively sudden emergence of new technologies and discoveries, particularly in the industries of agriculture[10] and in exploration, facilitated the growth of capitalism. The most important development at the end of feudalism was the emergence of what Degan calls "the dichotomy between wage earners and capitalist merchants".[11] With mercantilism, the competitive nature means there are always winners and losers, and this is clearly evident as feudalism transitions into mercantilism, an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.

Rise of towns

The transition from the feudal organization of society to early forms of capitalism happened in periods differing from country to country. According to Cambridge political philosopher and historian Quentin Skinner, the towns of North Italy were the first urbanised parts of Europe from the 12th century. German bishop Otto of Freising recorded the growth of town life there, the loyalty of landed nobility to town authorities, and the emergence of republicanism and belief in civic liberty.[12]

Agrarian capitalism and enclosure

Decaying hedges mark the lines of the straight field boundaries created by a Parliamentary Act of Enclosure.

England in the sixteenth century was already a centralized state, in which much of the feudal order of Medieval Europe had been swept away. This centralization was strengthened by a good system of roads and a disproportionately large capital city, London. The capital acted as a central market hub for the entire country, creating a very large internal market for goods, instead of the fragmented feudal holdings that prevailed in most parts of the Continent. The economic foundations of the agricultural system were also beginning to diverge substantially; the manorial system had broken down by this time, and land began to be concentrated in the hands of fewer landlords with increasingly large estates. Instead of a serf-based system of labour, workers were being employed as part of a broader and expanding money economy. The system put pressure on both the landlords and the tenants to increase the productivity of the agriculture to make profit; the weakened coercive power of the aristocracy to extract peasant surpluses encouraged them to try out better methods, and the tenants also had incentive to improve their methods, in order to flourish in an increasingly competitive labour market. Terms of rent for the land were becoming subject to economic market forces rather than the previous stagnant system of custom and feudal obligation.[13]

An important aspect of this process was the enclosure[14] of the common land held in the open field system where peasants had traditional rights, such as mowing meadows for hay and grazing livestock. Once enclosed, these uses of the land became restricted to the owner, and it ceased to be land for commons. The process of enclosure began to be a widespread feature of the English agricultural landscape during the 16th century. By the 19th century, unenclosed commons had become largely restricted to rough pasture in mountainous areas and to relatively small parts of the lowlands.

Marxist and neo-Marxist historians argue that rich landowners used their control of state processes to appropriate public land for their private benefit. This created a landless working class that provided the labour required in the new industries developing in the north of England. For example: "In agriculture the years between 1760 and 1820 are the years of wholesale enclosure in which, in village after village, common rights are lost".[15] "Enclosure (when all the sophistications are allowed for) was a plain enough case of class robbery".[16]

Other scholars[17] argue that the better-off members of the European peasantry encouraged and participated actively in enclosure, seeking to end the perpetual poverty of subsistence farming. "We should be careful not to ascribe to [enclosure] developments that were the consequence of a much broader and more complex process of historical change."[18] "[T]he impact of eighteenth and nineteenth century enclosure has been grossly exaggerated...."[19]

Merchant capitalism and mercantilism


A painting of a French seaport from 1638, at the height of mercantilism.

The earliest recorded activity of long-distance profit-seeking merchants can be traced back to the Old Assyrian merchants active in the 2nd millennium BCE.[20] The Roman Empire developed more advanced forms of commerce, and similarly widespread networks existed in Islamic Nations, but capitalism took shape in Europe in the late Middle Ages and Renaissance. However, while trade has existed since early in human history, it was not capitalism.

An early emergence of commerce occurred on monastic estates in Italy and France and in the independent city republics of Italy during the late Middle Ages. Innovations in banking, insurance, accountancy, and various production and commercial practices linked closely to a 'spirit' of frugality, reinvestment, and city life, promoted attitudes which sociologists have tended to associate only with northern Europe, Protestantism and a much later age. The city republics maintained their political independence from Empire and Church, traded with North Africa, the Middle East and Asia, and introduced Eastern practices. They were also considerably different from the absolutist monarchies of Spain and France, and were strongly attached to civic liberty.[21][22][23]


Modern capitalism, however, only fully emerged in the early modern period between the 16th and 18th centuries, with the establishment of mercantilism or merchant capitalism.[24][25]

Early evidence for mercantilistic practices appears in early modern Venice, Genoa, and Pisa over the Mediterranean trade in bullion. The region of mercantilism's real birth, however, was the Atlantic Ocean.[26]

Sir Josiah Child, an influential proponent of mercantilism. Painting attributed to John Riley.

England began a large-scale and integrative approach to mercantilism during the Elizabethan Era. An early statement on national balance of trade appeared in Discourse of the Common Weal of this Realm of England, 1549: "We must always take heed that we buy no more from strangers than we sell them, for so should we impoverish ourselves and enrich them."[27] The period featured various but often disjointed efforts by the court of Queen Elizabeth to develop a naval and merchant fleet capable of challenging the Spanish stranglehold on trade and of expanding the growth of bullion at home. Queen Elizabeth promoted the Trade and Navigation Acts in Parliament and issued orders to her navy for the protection and promotion of English shipping.

These efforts organized national resources sufficiently in the defense of England against the far larger and more powerful Spanish Empire, and in turn paved the foundation for establishing a global empire in the 19th century. The authors noted most for establishing the English mercantilist system include Gerard de Malynes and Thomas Mun, who first articulated the Elizabethan System. The latter's England's Treasure by Forraign Trade, or the Balance of our Forraign Trade is The Rule of Our Treasure gave a systematic and coherent explanation of the concept of balance of trade. It was written in the 1620s and published in 1664.[28] Mercantile doctrines were further developed by Josiah Child. Numerous French authors helped to cement French policy around mercantilism in the 17th century. French mercantilism was best articulated by Jean-Baptiste Colbert (in office, 1665–1683), although his policies were greatly liberalised under Napoleon.


Under mercantilism, European merchants, backed by state controls, subsidies, and monopolies, made most of their profits from the buying and selling of goods. In the words of Francis Bacon, the purpose of mercantilism was "the opening and well-balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation of prices..."[29] Similar practices of economic regimentation had begun earlier in the medieval towns. However, under mercantilism, given the contemporaneous rise of the absolutism, the state superseded the local guilds as the regulator of the economy.

The Anglo-Dutch Wars were fought between the English and the Dutch for control over the seas and trade routes.

Among the major tenets of mercantilist theory was bullionism, a doctrine stressing the importance of accumulating precious metals. Mercantilists argued that a state should export more goods than it imported so that foreigners would have to pay the difference in precious metals. Mercantilists asserted that only raw materials that could not be extracted at home should be imported; and promoted government subsidies, such as the granting of monopolies and protective tariffs, were necessary to encourage home production of manufactured goods.

Proponents of mercantilism emphasized state power and overseas conquest as the principal aim of economic policy. If a state could not supply its own raw materials, according to the mercantilists, it should acquire colonies from which they could be extracted. Colonies constituted not only sources of supply for raw materials but also markets for finished products. Because it was not in the interests of the state to allow competition, to help the mercantilists, colonies should be prevented from engaging in manufacturing and trading with foreign powers.

Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist production methods.[3] Noting the various pre-capitalist features of mercantilism, Karl Polanyi argued that "mercantilism, with all its tendency toward commercialization, never attacked the safeguards which protected [the] two basic elements of production - labor and land - from becoming the elements of commerce"; thus with mercantilism regulation was more akin to feudalism than capitalism. According to Polanyi, "not until 1834 was a competitive labor market established in England, hence industrial capitalism as a social system cannot be said to have existed before that date."[30]

Chartered trading companies

British East India Company 1801

The Muscovy Company was the first major chartered joint stock English trading company established in 1555 with a monopoly on trade between England and Muscovy. It was an offshoot of the earlier Company of Merchant Adventurers to New Lands, founded in 1551 by Richard Chancellor, Sebastian Cabot and Sir Hugh Willoughby to locate the Northeast Passage to China to allow trade. This was the precursor to a type of business that would soon flourish in England, the Dutch Republic and elsewhere.

The British East India Company (1600) and the Dutch East India Company (1602) launched an era of large state chartered trading companies.[1][31] These companies were characterized by their monopoly on trade, granted by letters patent provided by the state. Recognized as chartered joint-stock companies by the state, these companies enjoyed power, ranging from lawmaking, military, and treaty-making privileges.[32] Characterized by its colonial and expansionary powers by states, powerful nation-states sought to accumulate precious metals, and military conflicts arose.[1] During this era, merchants, who had previously traded on their own, invested capital in the East India Companies and other colonies, seeking a return on investment.

Industrial capitalism

Gustave Doré's 19th-century engraving depicted the dirty, overcrowded slums where the industrial workers of London lived.

Mercantilism declined in Great Britain in the mid-18th century, when a new group of economic theorists, led by Adam Smith, challenged fundamental mercantilist doctrines as the belief that the amount of the world's wealth remained constant and that a state could only increase its wealth at the expense of another state. However, in more undeveloped economies, such as Prussia and Russia, with their much younger manufacturing bases, mercantilism continued to find favor after other states had turned to newer doctrines.

The mid-18th century gave rise to industrial capitalism, made possible by the accumulation of vast amounts of capital under the merchant phase of capitalism and its investment in machinery. Industrial capitalism, which Marx dated from the last third of the 18th century, marked the development of the factory system of manufacturing, characterized by a complex division of labor between and within work process and the routinization of work tasks; and finally established the global domination of the capitalist mode of production.[24]

During the resulting Industrial Revolution, the industrialist replaced the merchant as a dominant actor in the capitalist system and effected the decline of the traditional handicraft skills of artisans, guilds, and journeymen. Also during this period, capitalism marked the transformation of relations between the British landowning gentry and peasants, giving rise to the production of cash crops for the market rather than for subsistence on a feudal manor. The surplus generated by the rise of commercial agriculture encouraged increased mechanization of agriculture.

Industrial revolution

The productivity gains of capitalist production began a sustained and unprecedented increase at the turn of the 19th century, in a process commonly referred to as the Industrial revolution. Starting in about 1760 in England, there was a steady transition to new manufacturing processes in a variety of industries, including going from hand production methods to machine production, new chemical manufacturing and iron production processes, improved efficiency of water power, the increasing use of steam power and the development of machine tools. It also included the change from wood and other bio-fuels to coal.

The Spinning mule, built by the inventor Samuel Crompton.

In textile manufacturing, mechanized cotton spinning powered by steam or water increased the output of a worker by a factor of about 1000, due to the application of James Hargreaves' spinning jenny, Richard Arkwright's water frame, Samuel Crompton's Spinning Mule and other inventions. The power loom increased the output of a worker by a factor of over 40.[33] The cotton gin increased productivity or removing seed from cotton by a factor of 50. Large gains in productivity also occurred in spinning and weaving of wool and linen, but they were not as great as in cotton.

James Watt's 1769 steam engine was applied to a growing number of industries as a revolutionary new source of power. The efficiency of steam engines steadily increased so that they used between one-fifth and one-tenth as much fuel. The adaption of stationary steam engines to rotary motion made them suitable for industrial uses. The high pressure engine had a high power to weight ratio, making it suitable for transportation. Steam power underwent a rapid expansion after 1800.

In metallurgy, Abraham Darby substituted coke for charcoal, greatly lowering the fuel cost of pig iron and wrought iron production.[34] Using coke also allowed larger blast furnaces,[35] resulting in economies of scale. The cast iron blowing cylinder was first used in 1760. It was later improved by making it double acting, which allowed higher furnace temperatures. Henry Cort's puddling process produced a structural grade iron at a lower cost than the previous processes.[34] The rolling mill was fifteen times faster than hammering wrought iron.[34] Hot blast (1829) greatly increased fuel efficiency in iron production in the following decades.


The Rothschild family revolutionised international finance. The Frankfurt terminus of the Taunus Railway was financed by the Rothschilds and opened in 1840 as one of Germany's first railways.

The growth of Britain's industry stimulated a concomitant growth in her system of finance and credit. In the 18th century, services offered by banks increased. Clearing facilities, security investments, cheques and overdraft protections were introduced. Cheques were invented in the 1600s in England and banks settled payments by direct courier to the issuing bank. Around 1770, they began meeting in a central location, and by the 1800s a dedicated space was established, known as a bankers' clearing house. The London clearing house used a method where each bank paid cash to and then was paid cash by an inspector at the end of each day. The first overdraft facility was set up in 1728 by The Royal Bank of Scotland.

The end of the Napoleonic War and the subsequent rebound in trade, led to an expansion in the bullion reserves held by the Bank of England, from a low of under 4 million pounds in 1821 to 14 million pounds by late 1824.

Older innovations became routine parts of financial life during the 19th-century. The Bank of England first issued bank notes during the 17th century, but the notes were hand written and few in number. After 1725 they were partially printed, but cashiers still had to sign each note and make them payable to a named person. In 1844, parliament passed the Bank Charter Act tying these notes to gold reserves, effectively creating the institution of central banking and monetary policy. The notes became fully printed and widely available from 1855.

Growing international trade increased the number of banks, especially in London. These new "merchant banks" facilitated trade growth, profiting from England's emerging dominance in seaborne shipping. Two immigrant families, Rothschild and his fellow-Christian, Baring."

The operation of banks also shifted. At the beginning of the century, banking was still an elite preoccupation of a handful of very wealthy families. Within a few decades, however, a new sort of banking had emerged, owned by anonymous stockholders, run by professional managers, and the recipient of the deposits of a growing body of small middle-class savers. Although this new breed of banks was new in prominence, it was not newly invented - the Quaker family Barclays, had been banking in this manner since 1690.

Free trade and globalization

At the height of the First French Empire, Napoleon sought to introduce a "continental system" that would render Europe economically autonomous, thereby emasculating British trade and commerce. It involved such stratagems as the use of beet sugar in preference to the cane sugar that had to be imported from the tropics. Although this caused businessmen in England to agitate for peace, the government was able to persevere, in part because the United Kingdom was well into the industrial revolution. The war had the opposite effect - it stimulated the growth of certain industries like pig-iron output, which was just 68,000 tons in 1788 and soared to 244,000 tons by 1806.

19th century Great Britain become the first global economic superpower, because of superior manufacturing technology and improved global communications such as steamships and railroads.

In 1817, David Ricardo, James Mill and Robert Torrens showed that free trade would benefit the industrially weak as well as the strong, in the famous theory of comparative advantage. In Principles of Political Economy and Taxation Ricardo advanced the doctrine still considered the most counterintuitive in economics:

When an inefficient producer sends the merchandise it produces best to a country able to produce it more efficiently, both countries benefit.

By the mid 19th century, Britain was firmly wedded to the notion of free trade and the first era of globalization began.[24] In the 1840s, the Corn Laws and the Navigation Acts were repealed, ushering in a new age of free trade. In line with the teachings of the classical political economists, led by Adam Smith and David Ricardo, Britain embraced liberalism, encouraging competition and the development of a market economy.

Industrialization allowed cheap production of household items using economies of scale, while rapid population growth created sustained demand for commodities. Globalization in this period was decisively shaped by nineteenth-century imperialism. After the First and Second Opium Wars and the completion of British conquest of India, vast populations of these regions became ready consumers of European exports. It was in this period that areas of sub-Saharan Africa and the Pacific islands were incorporated into the world system. Meanwhile, 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.[36]

The gold standard formed the financial basis of the international economy from 1870-1914.

The global financial system was mainly tied to the gold standard in this period. The United Kingdom first formally adopted this standard in 1821. Soon to follow was Canada in 1853, Newfoundland in 1865, and the USA and Germany (de jure) in 1873. New technologies, such as the telegraph, the transatlantic cable, the Radiotelephone, the steamship, and railway allowed goods and information to move around the world at an unprecedented degree.[37]

The eruption of civil war in the United States in 1861 and the blockade of its ports to international commerce meant that the main supply of cotton for the Lancashire looms was cut off. The textile industries shifted to reliance upon cotton from Africa and Asia during the course of the U.S. civil war, and this fact created pressure for an Anglo-French controlled canal through the Suez peninsula. The Suez canal opened in 1869; in the same year the Central Pacific Railroad that spanned the North American continent was completed. Capitalism and the engine of profit was making the globe a smaller place.

Twentieth century

Several major challenges to capitalism appeared in the early part of the 20th century. The Russian revolution in 1917 established the first communist state in the world; a decade later, the Great Depression triggered increasing criticism of the existing capitalist system. One response to this crisis was a turn to fascism, an ideology which advocated state-influenced capitalism; whilst others rejected capitalism altogether in favor of communist or socialist ideologies.

Keynesianism and free markets

The New York stock exchange traders' floor (1963)

The economic recovery of the world's leading capitalist economies in the period following the end of the Great Depression and the Second World War—a period of unusually rapid growth by historical standards—eased discussion of capitalism's eventual decline or demise.[38] The state began to play an increasingly prominent role to moderate and regulate the capitalistic system throughout much of the world.

Keynesian economics became a widely accepted method of government regulation and countries such as the United Kingdom experimented with mixed economies in which the state owned and operated certain major industries.

The state also expanded in the US; in 1929, total government expenditures amounted to less than one-tenth of GNP; from the 1970s they amounted to around one-third.[25] Similar increases were seen in all industrialized capitalist economies, some of which, such as France, have reached even higher ratios of government expenditures to GNP than the United States.

A broad array of new analytical tools in the social sciences were developed to explain the social and economic trends of the period, including the concepts of post-industrial society and the welfare state.[24]

The long postwar boom ended in the 1970s, amid the economic crises experienced following the 1973 oil crisis.[39] The "stagflation" of the 1970s led many economic commentators and politicians to embrace market-oriented policy prescriptions inspired by the laissez-faire capitalism and classical liberalism of the 19th century, particularly under the influence of Friedrich Hayek and Milton Friedman. The theoretical alternative to Keynesianism was more compatible with laissez-faire and emphasized rapid expansion of the economy. Market-oriented solutions gained increasing support in the capitalist world, especially under leadership of Ronald Reagan in the U.S. and Margaret Thatcher in the UK in the 1980s. Public and political interest began shifting away from the so-called collectivist concerns of Keynes's managed capitalism to a focus on individual choice, called "remarketized capitalism." [40] In the eyes of many economic and political commentators, the collapse of the Soviet Union brought further evidence of the superiority of market capitalism over planned economy.


Although overseas trade has been associated with the development of capitalism for over five hundred years, some thinkers argue that a number of trends associated with globalization have acted to increase the mobility of people and capital since the last quarter of the 20th century, combining to circumscribe the room to maneuver of states in choosing non-capitalist models of development. Today, these trends have bolstered the argument that capitalism should now be viewed as a truly world system (Burnham). However, other thinkers argue that globalization, even in its quantitative degree, is no greater now than during earlier periods of capitalist trade.[41]

After the abandonment of the Bretton Woods system in 1971, and the strict state control of foreign exchange rates, the total value of transactions in foreign exchange was estimated to be at least twenty times greater than that of all foreign movements of goods and services (EB). The internationalization of finance, which some see as beyond the reach of state control, combined with the growing ease with which large corporations have been able to relocate their operations to low-wage states, has posed the question of the 'eclipse' of state sovereignty, arising from the growing 'globalization' of capital.[42]

While economists generally agree about the size of global income inequality, there is a general disagreement about the recent direction of change of it.[43] In cases such as China, where income inequality is clearly growing[44] it is also evident that overall economic growth has rapidly increased with capitalist reforms.[45] The book The Improving State of the World argues that economic growth since the Industrial Revolution has been very strong and that factors such as adequate nutrition, life expectancy, infant mortality, literacy, prevalence of child labor, education, and available free time have improved greatly. Some scholars contend that globalization and neoliberal economic policies are not ameliorating inequality and poverty but exacerbating it, and are expanding populations of the displaced, the unemployed and the imprisoned along with accelerating the destruction of the environment.[46][47][48]


By the beginning of the 21st century, capitalism had become the pervasive economic system worldwide. The collapse of the Soviet bloc in 1991 significantly reduced the influence of Communism as an alternative economic system. Socialist movements continue to be influential in some parts of the world, most notably Latin-American Bolivarianism, with some having ties to more traditional anti-capitalist movements, such as Bolivarian Venezuela's ties to communist Cuba, Vietnam.

In many emerging markets, the influence of banking and financial capital have come to increasingly shape national developmental strategies, leading some to argue we are in a new phase of financial capitalism.[49]

State intervention in global capital markets following the financial crisis of 2007–2010 was perceived by some as signaling a crisis for free-market capitalism. Serious turmoil in the banking system and financial markets due in part to the subprime mortgage crisis reached a critical stage during September 2008, characterized by severely contracted liquidity in the global credit markets posed an existential threat to investment banks and other institutions.[50][51]


According to some,[52] the transition to the information society involves abandoning some parts of capitalism, as the "capital" required to produce and process information becomes available to the masses and difficult to control, and is closely related to the controversial issues of intellectual property. Some[52] even speculate that the development of mature nanotechnology, particularly of universal assemblers, may make capitalism obsolete, with capital ceasing to be an important factor in the economic life of humanity.

Stages of Capitalism

It is an ongoing debate within the fields of economics and sociology as to what the past, current, and future stages of capitalism consist of. While ongoing disagreement about exact stages exists, many economists have posited the following general states.

  • Agrarian capitalism, sometimes known as market feudalism. This was a transitional form between feudalism and capitalism, whereby market relations replaced some but not all of feudal relations in a society.
  • Mercantilism, where national governments sought to maintain positive balances of trade and acquire gold bullion.
  • Industrial Capitalism, characterized by its use of heavy machinery and a much more pronounced division of labor.
  • Monopoly Capitalism, marked by the rise of monopolies and trusts dominating industry, as well as other aspects of society. Often used to describe the economy of the late 19th and early 20th century.
  • Colonialism, where governments sought to colonize other areas to improve access to markets and raw materials, and improve the standing of nationally based capitalist firms. Predominant in the 1890s, notably as a response to the economic crises of the 1890s.
  • Welfare Capitalism, where mixed economies predominated and governments sought to provide a safety net to alleviate the worst abuses of capitalism. The heyday of welfare capitalism (in advanced economies) is widely seen to be from 1945–1973, as major social safety nets were put in place in most advanced capitalist economies.[53]
  • Mass Production, post-World War Two, saw the rising hegemony of major corporations, and a focus on mass production, mass consumption, and (ideally) mass employment. This stage sees the rise of advertising as a way to promote mass consumption, and often sees significant economic planning taking place within firms.[54]
  • State Capitalism, where the state intervened to prevent economic instability, including partially or fully nationalizing certain industries. Some economists characterize the economies of the USSR and the Eastern Bloc to have fallen in this category as well.
  • Corporatism, where government, business, and labor collude to make major national decisions; notable for being an economic model of fascism; can overlap with, but is still significantly different from state capitalism.
  • Financialization, or financial capitalism, where financial parts of the economy (like the finance, insurance, or real estate sectors) predominate in an economy. Profit becomes more derived from ownership of an asset, credit, rents, and earning interest, rather than actual productive processes.[55][56]

See also


  1. ^ a b c Jairus Banaji (2007), "Islam, the Mediterranean and the rise of capitalism", Journal Historical Materialism 15#1 pp 47–74, Brill Publishers.
  2. ^ Sayle, Murray (2001-04-05). "Japan goes Dutch".  
  3. ^ a b Scott (2005)
  4. ^ See Jennifer Schuessler "In History Departments, It’s Up With Capitalism" April 6, 2013New York Times
  5. ^ Lou Galambos, "Is This a Decisive Moment for the History of Business, Economic History, and the History Of Capitalism? Essays in Economic & Business History (2014) v. 32 pp 1-18 online
  6. ^ Brenner, Robert, 1977, "The Origins of Capitalist Development: a Critique of Neo-Smithian Marxism," in New Left Review 104: 36-37, 46
  7. ^ Dobb, Maurice 1947 Studies in the Development of Capitalism. New York: International Publishers Co., Inc. 42-46, 48 ff.
  8. ^ Marx, Karl [1867] 1976 Capital: A Critique of Political Economy Volume One trans. Ben Fowkes. Harmondsworth and London: Penguin Books and New Left Review. 874
  9. ^ Marx, Karl [1867] 1976 Capital: A Critique of Political Economy Volume One trans. Ben Fowkes. Harmondsworth and London: Penguin Books and New Left Review. 875
  10. ^ James Fulcher, Capitalism (New York: Oxford University Press, 2004) 19
  11. ^ Degen, Robert A. (2011). The Triumph of Capitalism. New Brunswick, New Jersey: Transaction Publishers. p. 12.  
  12. ^ # Skinner, Quentin, The Foundations of Modern Political Thought, vol I: The Renaissance vol II: The Age of Reformation Cambridge University Press, 1978)
  13. ^ "The Agrarian Origins of Capitalism". Retrieved 2012-12-17. 
  14. ^ "Enclosure" is the modern spelling, while "inclosure" is an older spelling still used in the United Kingdom in legal documents and place names.
  15. ^  
  16. ^ A comparison of the English historical enclosures with the (much later) German 19th century  
  17. ^ W. A. Armstrong
  18. ^ Chambers, J. D.; Mingay, G. E. (1982). The Agricultural Revolution 1750–1850 (Reprinted ed.).  
  19. ^ Armstrong, W A (1981). "Agricultural History Review." in The Influence of Demographic Factors on the Position of the Agricultural Labourer in England and Wales, c.1750–1914".. The Agricultural History Review 29 (British Agricultural History Society). p. 79. 
  20. ^ Warburton, David, Macroeconomics from the beginning: The General Theory, Ancient Markets, and the Rate of Interest. Paris: Recherches et Publications, 2003.p49
  21. ^ Stark, Rodney. Victory of Reason, (Random House New York, 2005)
  22. ^ Ferguson, Niall. The Ascent of Money, (Penguin,2008)
  23. ^ Skinner, Quentin, The Foundations of Modern Political Thought, vol I: The Renaissance; vol II: The Age of Reformation. Cambridge University Press, 1978)
  24. ^ a b c d Burnham, Peter Capitalism, the Concise Oxford Dictionary of Politics, 2003 Oxford: Oxford University Press
  25. ^ a b Encyclopædia Britannica (2006)
  26. ^ John J. McCusker, Mercantilism and the Economic History of the Early Modern Atlantic World (Cambridge UP, 2001)
  27. ^ Now attributed to Sir Thomas Smith; quoted in Braudel (1979), p. 204.
  28. ^ David Onnekink; Gijs Rommelse (2011). Ideology and Foreign Policy in Early Modern Europe (1650–1750). Ashgate Publishing, Ltd. p. 257. 
  29. ^ Quoted in Sir George Clark, The Seventeenth Century (New York: Oxford University Press, 1961), p. 24.
  30. ^ Polanyi, Karl. The Great Transformation. Beacon Press, Boston.1944.p87
  31. ^ Economic system :: Market systems. Encyclopædia Britannica. 2006. 
  32. ^ "chartered company". 
  33. ^  
  34. ^ a b c  
  35. ^ Rosen, William (2012). The Most Powerful Idea in the World: A Story of Steam, Industry and Invention. University Of Chicago Press. p. 149.  
  36. ^ "PBS.org". PBS.org. 1929-10-24. Retrieved 2010-07-31. 
  37. ^ Michael D. Bordo, Barry Eichengreen, Douglas A. Irwin. Is Globalization Today Really Different than Globalization a Hundred Years Ago?. NBER Working Paper No.7195. June 1999.
  38. ^ Stanley Engerman, Seymour Drescher, and Robert Paquette (2001). Slavery (Oxford Readers). Oxford University Press. 
  39. ^ Barnes, Trevor J. (2004). Reading economic geography. Blackwell Publishing. p. 127.  
  40. ^ Fulcher, James. Capitalism. 1st ed. New York: Oxford University Press, 2004.
  41. ^ Doug Henwood is an economists who has argued that the heyday of globalization was during the mid-19th century. For example, he writes in What Is Globalization Anyway?:
    Not only is the novelty of "globalization" exaggerated, so is its extent. Capital flows were freer, and foreign holdings by British investors far larger, 100 years ago than anything we see today. Images of multinational corporations shuttling raw materials and parts around the world, as if the whole globe were an assembly line, are grossly overblown, accounting for only about a tenth of U.S. trade.[2]
    (See also Henwood, Doug (October 1, 2003). After the New Economy. New Press.  )
  42. ^ For an assessment of this question, see Peter Evans, "The Eclipse of the State? Reflections on Stateness in an Era of Globalization," World Politics, 50, 1 (October 1997): 62-87.
  43. ^ Milanovic, Branko (2006-08-01). "Global Income Inequality: What It Is And Why It Matters?". DESA Working Paper 26: 9. 
  44. ^ Brooks, David (2004-11-27). "Good News about Poverty". Retrieved 2008-02-26. 
  45. ^ Fengbo Zhang: Speech at "Future China Global Forum 2010": China Rising with the Reform and Open Policy.
  46. ^ Stephen Haymes, Maria Vidal de Haymes and Reuben Miller (eds), The Routledge Handbook of Poverty in the United States, (London: Routledge, 2015) ISBN 0415673445, p. 1 & 2.
  47. ^ Saskia Sassen, Expulsions: Brutality and Complexity in the Global Economy. (Harvard University Press, 2014) ISBN 0674599225
  48. ^ Jones, Campbell, Martin Parker and Rene Ten Bos, For Business Ethics. (Routledge, 2005) ISBN 0415311357, p. 101
  49. ^ Marois, Thomas (2012) States, Banks and Crisis: Emerging Finance Capitalism in Mexico and Turkey. Cheltenham, Gloucestershire, UK: Edward Elgar Publishing.
  50. ^ "President Bush Meets with Bicameral and Bipartisan Members of Congress to Discuss Economy", Whitehouse.gov, September 25, 2008.
  51. ^ House Votes Down Bail-Out Package
  52. ^ a b Kaku, Michio (1999). Visions: How Science Will Revolutionize the 21st Century and Beyond. New York: Oxford University Press. ISBN 0-19-288018-7
  53. ^ "A People's History of the World" Chris Harman pg. 251-397
  54. ^ "The New Industrial State" J.K. Galbraith pg. 16-35
  55. ^ "Zombie Capitalism" Chris Harman pg. 142-160
  56. ^ Marois, Thomas (2012) 'Finance, Finance Capital, and Financialisation.' In: Fine, Ben and Saad Filho, Alfredo, (eds.), The Elgar Companion to Marxist Economics. Cheltenham: Edward Elgar.

Further reading

  • James Anderson of Hermiston (1777) Observations on the Means of Exciting a Spirit of National Industry
  • David Buchanan (1814) Observations on the Subjects Treated of in Dr. Smith's Inquiry into the Nature and Causes of the Wealth of Nations Vol 4, p. 144
  • George C. Comninel English feudalism and the origins of capitalism Journal of Peasant Studies, Volume 27, Issue 4 July 2000, pages 1 – 53 doi:10.1080/03066150008438748
  • Maurice Dobb and Paul Sweezy's famous debate on transition from feudalism to capitalism. Hilton, Rodney H. 1976. ed. The Transition from Feudalism to Capitalism. London:
    • Leftspot.com blog on the Dobb-Sweezy debate
  • Ben Dodds Peasants and Production in the Medieval North-East: The Evidence from Tithes, 1270–1536. Boydell Press, 2007, Pp. xii + 205. 50.00 (hardback) ISBN 1-84383-287-9
  • MC Howard, JE King CRISES IN MARX’S ANALYSIS OF THE MARKET countdownnet.info
  • Benedikt Koehler: Early Islam and the Birth of Capitalism, Lexington Books, 2014
  • Rosa Luxemburg What is economics?
  • Karl Marx (1867) Das Kapital
  • Adam David Morton The Age of Absolutism: capitalism, the modern states-system and international relations Review of International Studies (2005), 31 : 495-517 Cambridge University Press doi:10.1017/S0260210505006601
  • Francis William Newman Lectures on Political Economy London, pp. 131–2
  • Peter Nolan (2009) Crossroads: The end of wild capitalism. Marshall Cavendish, ISBN 978-0-462-09968-2
  • Larry Patriquin The Agrarian Origins of the Industrial Revolution in England Review of Radical Political Economics, Vol. 36, No. 2, 196-216 (2004) doi:10.1177/0486613404264190
  • Larry Patriquin Why was there no 'Old Poor Law' in Scotland and Ireland? Journal of Peasant Studies, Volume 33, Issue 2 April 2006, pages 219 - 247*Eric Richards (1973) The Leviathan of Wealth: The Sutherland Fortune in the Industrial Revolution. ISBN 0-7100-7455-7, ISBN 978-0-7100-7455-3 p. 216
  • Michael Perelman (2000) The Invention of Capitalism: Classical Political Economy and the Secret History of Primitive Accumulation. Published by Duke University Press. ISBN 0-8223-2491-1, ISBN 978-0-8223-2491-1
  • Stephen H. Rigby Historical Materialism: Social Structure and Social Change in the Middle Ages Journal of Medieval and Early Modern Studies 2004 34(3):473-522; doi:10.1215/10829636-34-3-473
  • S. H. Rigby's book review in Volume 35, Issue 1 of Journal of Peasant Studies
  • Jennifer Schuessler In History Departments, It’s Up With Capitalism April 6, 2013 New York Times
  • John Scott and Gordon Marshall "Capitalism". In A Dictionary of Sociology, Third Edition, Oxford University Press (2005). Oxford Reference Online. Oxford University Press. ISBN 0-19-860987-6
  • James Denham-Steuart [1767] An Inquiry into the Principles of Political Economy vol1, vol2, vol3
  • Mike Zmolek (2000) The case for Agrarian capitalism: A response to albritton Journal of Peasant Studies, Volume 27, Issue 4 July 2000, pages 138 - 159
  • Zmolek M. (2001) DEBATE - Further Thoughts on Agrarian Capitalism: A Reply to Albritton The Journal of Peasant Studies, Volume 29, Number 1, October 2001, pp. 129–154(26)
  • Debating Agrarian Capitalism: A Rejoinder to Albritton
  • Research in Political Economy, Volume 22
  • The Roots of Merchant Capitalism
  • World Socialist Movement. "What Is Capitalism?." World Socialism. 13, August 2007.
  • Thomas K. McCraw, "The Current Crisis and the Essence of Capitalism", The Montreal Review (August, 2011)