Rise of Capitalism: Understanding the Micro-Economics

In today’s world, most of the economy is generated through capitalism. Capitalism is a system of economy and politics in which the private sector owns the goods while the masses working for them receive a fixed wage. This system has existed since the last century, but do you know how the free market or laissez-faire concept started?

RISE OF CAPITALISM
RISE OF CAPITALISM

Rise of Capitalism

Till 12th-century Europe, only a handful of people resided in cities; most lived in small villages and extensive lands. In this era, a social system known as Feudalism was operating.

In this system, the prosperous landlords had skilled labourers working as serfs. These skillful labourers were not paid by actual money or through a wage system but in the form of security. Serfs constituted 75% of the population in the medieval century.

The Development of Trade

In the 16th century, a new economic policy began to develop known as Mercantilism. This policy undertook the device of Trade. The mercantilism system started in the 16th century and became a primary financial source until the 18th century.   During the 16th century, the Towns began to trade with each other. However, there was no competitive trade as every town had different products and services. With time the demand harmonised, and the business was done on a larger scale.

Rise of capitalism
Rise of capitalism

The work broadened from town to town and country to country. Due to this Trade, competition started to initiate as well. Multiple provinces or countries offered the same service and goods, leading to wars and feuds. This transformation also brought a difference in employment status. The feudalistic approach was now in decline as a more defined idea of the market was initiated.

Role of Colonialism

Colonialism became the backbone of Mercantilism. Mercantilism bloomed due to international Trade, which was attained at a very cheap cost. The colonisers intended to avoid taking their business on a large scale but to exploit the colonies. They brought exotic raw goods from different colonial areas to their home country through unfair economic systems and laws.

How did the idea of a free market come to be then?

The idea of a free market began through Adam Smith, a Scottish economist and political thinker. Adam believed Mercantilism was not a form of development as this system was causing inconstancy and trade imbalance. He believed that wealth is generated through prosperous labour. His theory was to make people feel protected and motivate them to use their expertise best. Adam created a view of the free market, also known as laissez-faire. Smith also believed that the government should not be involved in the market. And for a booming trade, the freedom to produce and exchange goods should exist.

Industrial Revolution
Industrial Revolution

The theory of Adam Smith came to exist at the commencement of the Industrial Revolution. As the colonies brought tremendous wealth, demand for production increased as well. The order led to expanding production Industries, leading to a revolution. In the 18th-19th century, a significant transformation took place In Europe. The agricultural societies started to transform into industrial states. The money Tycoons could now accumulate their wealth, and the people also began to believe in achieving a stable income.

In conclusion, during this process, in 1850, the term Capitalism was finally coined by Luis Blanc 1850. The term stands for “head of cattle.” Implicating sole ownership.

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Paras
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