History of Capitalism


Capitalism is a kind of economic system that revolves around the exploitation of the proletariat and the private ownership of means of production, especially by the bourgeois.

According to scholars, the development of capitalism is a historical process that occurred through various stages. There is no particular date for tracking this development but there is a very old debate regarding the birth of capitalism in western Europe. Capitalism is believed to have developed since the 16th century. Capitalism is separated from its previous competitors by the fact that in capitalist economic interests were focused on the expansion of productivity and profit rather than focusing on buildings and monuments. The term "capitalist" has denoted the "capital-rich individual who has cash and huge riches and can live from his interest and rentals".

The Capitalist Concept

Although the concept of capitalism was present from the ancient world, after the 16th century it developed consistently. As compared to feudalism and other previous socio-economic systems in history, capitalism is decentralised, based on the demand and supply of the product and goods, spread and developed on the voluntary basis. In other words, capitalism seeks an increase in production capacity .

Capitalism through the Lens of Historical Research

It is through the work of Werner Sombart that the idea of capitalism as a ‘spirit of enterprise’ became popular. According to this idea, throughout history some form of bourgeois economic view always prevailed which included rationality and calculation. Hence, Sombart traced the roots of capitalism to a calculative and rational state of the human mind. Similarly, even Weber explained the spirit of capitalism as an attitude of seeking profit through rational and systematic ways.

Another historical view of capitalism sees it as a ‘commercial system’ where relation between production and consumption plays an important role. Here two different views can be outlined. According to the German Historical School, ‘market economy’ is different from ‘natural economy’. Market economy consists of several stages of growth that developed the modern economic world. One such important stage is the advent of wholesale merchants which created a gap between production and retail sale. Another view is of Bucher, according to whom, any presence of people who invest money to have an income can be considered as a presence of capitalism.

A different historical view of capitalism is born out of the contributions of Karl Marx, for whom capitalism is best understood through the ownership of means of production. This ownership gives birth to and controls certain social relations. It creates an idea of a commodity and alienation to that commodity.

Rise of Capitalism

Capitalism’s birth in Europe is still debated because many scholars argue that economic development in western Europe was at par with economic developments in India, Egypt and China during the 1800s. Therefore, it should be noted that the elements or ambience that could give rise to capitalism started worldwide. Hence, capitalism occurred due to various relations of production in different parts of the world.

One such element is the rise of class society. 5000 years ago class society started forming in different parts of the world. These class societies were ruled and exploited by minorities like priests and royal families. With time, these kinds of centralised domination started weakening with the rise of lords, zamindars or aristocrats who directly ruled and exploited local people or sections of people. These saw the rise of class polarisation and subsequent rise of peasant families which were the main hub of production. The ruling class exploited and dominated the peasants by taking away the surplus. This continued till demands increased for distant agricultural and non-agricultural products. This gave rise to the ‘merchant class’ who sold the surplus obtained by the ruling class to other ruling classes.

Beside these historical events, one of the important preconditions that gave birth to capitalism is the separation of producers from means of production. This is a Marxist view of capitalism that relies on systematic understanding of exploitation because through this separation ‘surplus’ could be extracted and this surplus was a profit made by the owners of the means of production.

Not every event of such separation led to capitalism but slavery did. At the start of the transatlantic slave trade era, the only business that carried slaves was owned by the British government namely The Royal Africa Company. This company, founded in 1672, carried 5,000 enslaved Africans annually on average between 1680 and 1686.

Further, in 1698, the law was modified and as a "fundamental and natural right," other British traders could trade in enslaved Africans and this led to an increase in the slave trade.

The "upper" or "capitalist" class in Europe used its influence over international trade to ensure that Africa became a specialist in exporting captives. Throughout the 17th and 18th century as well as for the majority of the 19th century, Europeans continued to make enormous profits from the exploitation of African natural resources and labour. In Western Europe, these earnings kept being reinvested in different industries and creation of machinery.

Monuments of slaves in Zanzibar.

Capitalist Countries

Most of the western countries follow capitalism. The major countries in this list are the United States of America, China, Canada, United Kingdom, Taiwan, Australia, New Zealand , etc.


Capitalism is an economic concept where a wealthy powerful individual or a group dictates the economy of a nation. The main motive of capitalism was to earn riches and reinvest them to earn more profits and power. The colonialism in Africa and Asia paved the way for the rise in capitalism until the common men started rebellion against such capitalistic governments. Today 20% of the world has a capitalist economy, a few exhibit socialist economies, whereas many nations have a mixed economy.


Q1. What is transatlantic slave trade era?

Ans. Transatlantic slave trade era refers to the time between 16th to 19th century, during which millions of enslaved Africans were transported across the Atlantic ocean.

Q2. What is Marx's ideology of Capitalism?

Ans. According to Marx, the industrial revolution was seen as an epochal change. He understood the social explosiveness of the expanding labour dilemma. He conceptualised capitalism in a way that allowed it to only be understood as industrial capitalism, which is centred on the factory and wage labour.

Q3. What is the basis of Capitalism?

Ans. The requirements of personal property, the choice for profits, and market opposition structure the basis of capitalism.

Updated on: 28-Feb-2023


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