A History of Capitalism - Part 1

What is Capitalism? There are perhaps as many definitions as there are opinions on this topic; many of them very strongly held. For the purposes of this series of articles, it is useful to have a definition of Capitalism in hand before proceeding to look at its history.

Capitalism evolved gradually from Mercantilism. In its nature, it is profoundly different from other modes of thinking, particularly Feudalism which was prevalent in many parts of the world for a millennium - most notably in Europe, China and Japan. One of the best definitions of Capitalism is given in the European Enlightenment Glossary. Here, Capitalism is defined as both a set of practices and as a method of thinking.

Capitalism as a set of practices is characterized by (points taken from the European Enlightenment Glossary):

• The accumulation of the means of production into a few hands.
• The human work necessary to produce and distribute goods - labor - takes the form of wage labor.
• The means of production and labor is manipulated by the owner of capital using rational calculation to realize a profit.

Capitalism however is not just a set of practices. It is also a particular way of thinking. This involves:

• An individualistic way of thinking.
• A notion of indefinite and continued economic growth.
• Economics, the study of the production and distribution of goods, is divorced from other areas of knowledge. In other words, production and distribution are treated as endeavors separated from areas like religion, politics etc.
• The economic world view has a mechanical view of the economy and society. It assumes that all participants in an economy are rational beings who calculate the cost/benefit of each activity and pursue those that give them the maximum benefit at the least cost.
• The fundamental unit of meaning in capitalist and economic thought is the object i.e. Capitalism relies on the creation of a consumer culture. In other words, in a capitalist society, most people do not produce what they consume.

One thing that immediately stands out is that Capitalism, both as a practice and as a way of thinking, is very different from what came before it. While some of the practices of Capitalism can be traced in some form through the ages, historically there was no wholesale adoption of these practices and ways of thinking. This represents a fundamental discontinuity from the past and has resulted in a world that would not merely be materially strange to people of earlier times. The capitalist viewpoint represents a dramatically different way of viewing the world.

In the next few posts, I will trace economic history as it is a reflection of the history of capitalism. Then I will look at the changes in thinking that were wrought by Capitalism and how they resulted in the world we live in.