CAPITALISM • Meaning of Capitalism and Emergence

1. The term ”capitalist” as referring to an owner of capital (rather than its meaning of someone adherent to the economic system) shows earlier recorded use than the term capitalism, dating back to the mid-17th century.

2. Capitalist is derived from capital, which evolved from ”capital”, a Latin word based on Proto-Indo-European caput, meaning “head” — also the origin of chattel and cattle in the sense of movable property (only much later to refer only to livestock). Capitale emerged in the 12th to 13th centuries in the sense of referring to funds, stock of merchandise, the sum of money, or money carrying interest.

3. By 1283 it was used in the sense of the capital assets of a trading firm. It was frequently interchanged with a number of other words — wealth, money, funds, goods, assets, property, and so on.

4. The term ‘capitalism’, in its modern sense, comes from the writings of Karl Marx. In the 20th century defenders of the capitalist system often replaced the terms capitalism with phrases such as ‘free enterprise’ and ‘private enterprise’ and ‘capitalist with investor or rentier’ in reaction to the negative connotations sometimes associated with capitalism.


Meaning of Capitalism and emergence

1. Capitalism is a social system based on the principle of individual rights. Politically, it is the system of laissez-faire (freedom).

2. Legally it is a system of objective laws (rule of law as opposed to rule of man).

3. Economically, when such freedom is applied to the sphere of production its’ result is the free-market.

4. It is an economic system based on a free market, open competition, the profit motive and private ownership of the means of production.

5. Capitalism encourages private investment and business, compared to a government-controlled economy.

6. Investors in these private companies (i.e. shareholders) also own the firms and are known as capitalists.

7. Though the beginning of the capitalistic practice goes back to the thir-teenth and
fourteenth centuries when Sienese Bank was used by the Pa-pacy to handle the revenues are drawn by it from various sources.

8. But it was only in the fifteenth century that a number of capitalist enterprises
made their appearance. The century also saw the opening of a number of silver
and gold mines in Germany and Austria.

9. However, it was the discovery of the sea-route to India which gave an impetus to the capitalistic activities.

10. The rise of strong monarchies in France, England, and Spain and the growing expenses of the state under the monarchs obliged these states to make certain measures to meet their demands which resulted in the formation of capitalist bodies, though in a rudimentary form.

11. The advancement in the techniques of engineering and industry and the
The introduction of double-entry book-keeping also helped the growth of capitalism.

12. But above all, in was Puritanism which provided a great fillip to the development of capital-ism.

13. Soon large modern stock companies came into existence for the purchase of carrying on overseas trade. The practice of making purchases on the basis of the sample also gained currency.

14. Above all the discount and deposit banks also started expanding. All this can very well be described as early capitalism.

15. It may be noted that during the early period of capitalism only a very small section of the population was involved in trade.

16. Though the primary’ urge to get rich quickly was there but the early capitalism lacked the rationality and spirit of a fully developed capitalism.

17. At that stage the state also played an important role in upbuilding of the capitalist organization. Another outstanding feature of capitalism at this stage was its highly ethical character.

18. Most of the merchants began their contracts with an invocation of the Trinity
and regarded the profit as ‘the blessing of God’. There was a tendency to charge
only just price.

19. The element of competi-tion, which is an outstanding feature of modern
capitalism, was also absent.

20. The modern notions of large sales and small profits were unknown. The expansion of business and free use of credit was also not favoured. Another peculiar feature of the early capitalistic business was that it was highly secretive.

21. The secret nature of the business was retained to ensure that outsider did not
get too wise.

22. As regards the business form of the early capitalistic enterprises it was based on the three principles viz. (i) the notion of business as a Legal entity-the Firm; (ii)
business as an accounting entity; and (iii) business as a credit entity. The
notion of firm, first of all developed in France in the sixteenth century.

23. The concept of business enterprise as an economic entity spread with the
introduction of double entry book keeping and the idea of balance sheet. The
lead in this regard was provided by Italy.

24. The emergence of systematic book-keeping greatly contributed to the growth of capitalism.

25. It made it possible for the business entrepreneurs to know the exact position of their business at a given time and to determine their future activities.

26. The notion of business as credit entity also played an important role in the development of capitalism. According to this notion the proprietor of an enterprise was conceived as a third person or creditor of the enterprise.

27. In the subsequent centuries certain associations of an impersonal char-acter

28. The earliest forms of this association were the partnership which was designated by law in France as public business association. It was necessarily based upon specific contract.

29. In course of time, the capi-talistic associations further developed and assumed the form of Stock Companies.

30. The stock companies first of all appeared in England and remained quite rare till the end of the eighteenth century. In spite of the impersonal character of the
associations, the stock-holders maintained personal relationships. The dividends of the company were shared by all the share-holders according to the number of shares held by them.

31. The state also participated-either directly or indirectly-in the develop-ment of the capitalistic forms of business. Some of the enterprises worked exclusively under state management. They were worked by the state for purely motives. An
example of such capitalist enterprise of the period is the Prussian Arms Factory set up at Potsdam in 1722. Certain concerns were also run on the basis of cooperation between the state and the private capitalists.


The History of Capitalism: From Feudalism to Wall Street

1. The roots of what are now common place activities - such as buying stocks, bonds, and even things like applying for a loan or balancing a portfolio - is the “evolution” of the various economic systems that have supported them. The
development of economics across time and continents is neither uniform, nor


Tooth, Nail and Plants

1. In the black hole known as pre-history, humans established a complex system of
community that includes elements of labor, reward and trade.

2. This eventually included the domestication of plants and livestock, furthering the scope of tradable goods as well as tying people to the land so economies could develop.

3. The uneven development of ancient economies suggests that many systems were attempted, but the profusion of empires suggests that the rule of powerful elite was the most successful in the early going.


The Spaces between Empires

1. The most telling fact about humanity in the ancient world is that when the external controls of a ruler were removed, people reverted to subsistence farming.

2. Although there is only one official dark age in the history text, the disconnected
ancient world used to go through dark ages much like the blackouts and brownouts that ripple across energy hungry states.

3. In these dark areas, the people went back to securing enough food for them and surviving until the next powerful figure came along to claim them as his own.



1. Up until the 12th century, less than 5% of the population of Europe lived in towns.
Skilled workers lived in the city but received their keep from feudal lords rather than a real wage, and the farmers were essentially serfs for landed nobles.

2. It took the Black Plague, one of the most devastating pandemics in human history, to shake up the system significantly. By killing scores of people in both town and
countryside, the various plagues of the dark ages actually created a labor

3. Nobles fought to hire enough serfs to keep their estates running and many trades suddenly needed to train outsiders, as entire guild families were wiped out.

4. The advent of true wages offered by the trades encouraged more people to move
into towns where they could get money rather than subsistence in exchange for labor.

5. As a result of this change, birth rates exploded and families soon had extra sons and daughters who, without land to tend, needed to be put to work. Child labor was as much a part of the town’s economic development as slavery was part of the rural life.



1. Mercantilism is now known as an attempt to create trade imbalances between nations, as well as between colonies and their imperial rulers, so that one nation prospers at the cost of others.

2. The word “mercantilism” also has a less known usage, which simply means the
principles and methods of commerce.

3. Mercantilism started as trade between towns, but it was not necessarily competitive trade.

4. Originally, each town had vastly different products and services that were slowly
homogenized by demand over time.

5. After the homogenization of goods, trade was carried out in wider and wider circles: town to town, county to county, province to province, and, finally, nation to nation.

6. When too many nations were offering similar goods for trade, the trade took on a
competitive edge that was sharpened by strong feelings of nationalism in a continent that was constantly embroiled in wars.

7. During the age of colonialism and mercantilism, the nations seeding the world with colonies were not trying to increase their trade.

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