The history of
capitalism
Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price system, private ...
is diverse and the concept of capitalism has many debated roots. The history of the past 500 years is concerned with the development of capitalism in its various forms.
Capital
Capital may refer to:
Common uses
* Capital city, a municipality of primary status
** List of national capital cities
* Capital letter, an upper-case letter Economics and social sciences
* Capital (economics), the durable produced goods used fo ...
accumulated by a variety of methods, at a variety of scales, became associated with much variation in the
concentration of wealth and
economic power
Economic power refers to the ability of countries, businesses or individuals to improve living standards. It increases their ability to make decisions on their own that benefit them. Scholars of international relations also refer to the economic p ...
. Capitalism gradually became the dominant economic system throughout the world.
[
]
Historiography
The processes by which capitalism emerged, evolved, and spread are the subject of extensive research and debate among historians. Debates sometimes focus on how to bring substantive historical data to bear on key questions. Key parameters of debate include: the extent to which capitalism is a natural human behavior, versus the extent to which it arises from specific historical circumstances; whether its origins lie in towns and trade or in rural property relations; the role of class conflict; the role of the state; the extent to which capitalism is a distinctively European innovation; its relationship with European imperialism; whether technological change is a driver or merely a secondary byproduct of capitalism; and whether or not it is the most beneficial way to organize human societies.
[Ellen Meiksins Wood (2002), '' The Origin of Capitalism: A Longer View'' (London: Verso, 2002).]
The historiography of capitalism can be divided into two broad schools. One is associated with
economic liberalism
Economic liberalism is a political and economic ideology that supports a market economy based on individualism and private property in the means of production. Adam Smith is considered one of the primary initial writers on economic liberalis ...
, with the 18th-century economist
Adam Smith as a foundational figure. The other is associated with
Marxism
Marxism is a left-wing to far-left method of socioeconomic analysis that uses a materialist interpretation of historical development, better known as historical materialism, to understand class relations and social conflict and a dialec ...
, drawing particular inspiration from the 19th-century economist
Karl Marx
Karl Heinrich Marx (; 5 May 1818 – 14 March 1883) was a German philosopher, economist, historian, sociologist, political theorist, journalist, critic of political economy, and socialist revolutionary. His best-known titles are the 1848 ...
.
Liberals view capitalism as an expression of natural human behaviors that have been in evidence for millennia and the most beneficial way of promoting human well-being. They see capitalism as originating in trade and commerce, and freeing people to exercise their entrepreneurial natures.
Marxists view capitalism as a unique
mode of production
In the Marxist theory of historical materialism, a mode of production (German: ''Produktionsweise'', "the way of producing") is a specific combination of the:
* Productive forces: these include human labour power and means of production (tool ...
involving the
bourgeoise
The bourgeoisie ( , ) is a social class, equivalent to the middle or upper middle class. They are distinguished from, and traditionally contrasted with, the proletariat by their affluence, and their great cultural and financial capital. The ...
and
proletariat
The proletariat (; ) is the social class of wage-earners, those members of a society whose only possession of significant economic value is their labour power (their capacity to work). A member of such a class is a proletarian. Marxist philo ...
that emerged as a result of the fall of
feudalism
Feudalism, also known as the feudal system, was the combination of the legal, economic, military, cultural and political customs that flourished in medieval Europe between the 9th and 15th centuries. Broadly defined, it was a way of structu ...
and the beginning of the
Industrial Revolution
The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe, and the United States, that occurred during the period from around 1760 to about 1820–1840. This transition included going f ...
. This rejects the notion that capitalism has existed for millennia and is a part of
human nature
Human nature is a concept that denotes the fundamental dispositions and characteristics—including ways of thinking, feeling, and acting—that humans are said to have naturally. The term is often used to denote the essence of humankind, or ...
.
Origins
The origins of capitalism have been much debated (and depend partly on how capitalism is defined). The traditional account, originating in classical 18th-century liberal economic thought and still often articulated, is the 'commercialisation model'. This sees capitalism originating in trade. In this reading, capitalism emerged from earlier trade once merchants had acquired sufficient wealth (referred to as '
primitive capital
In Marxian economics and preceding theories,Perelman, p. 25 (ch. 2) the problem of primitive accumulation (also called previous accumulation, original accumulation) of capital concerns the origin of capital, and therefore of how class distinctio ...
') to begin investing in increasingly productive technology. This account tends to see capitalism as a continuation of trade, arising when people's natural entrepreneurialism was freed from the constraints of
feudalism
Feudalism, also known as the feudal system, was the combination of the legal, economic, military, cultural and political customs that flourished in medieval Europe between the 9th and 15th centuries. Broadly defined, it was a way of structu ...
, partly by urbanisation. Thus it traces capitalism to early forms of
merchant capitalism
Some economic historians use the term merchant capitalism to refer to the earliest phase in the development of capitalism as an economic and social system. However, others argue that mercantilism, which has flourished widely in the world without t ...
practiced in Western Europe during the
Middle Ages
In the history of Europe, the Middle Ages or medieval period lasted approximately from the late 5th to the late 15th centuries, similar to the post-classical period of global history. It began with the fall of the Western Roman Empire ...
.
[Jairus Banaji (2007), "Islam, the Mediterranean and the rise of capitalism", ''Journal Historical Materialism'' 15#1 pp. 47–74, Brill Publishers.]
Other views
A competitor to the 'commercialisation model' is the 'agrarian model', which explains the rise of capitalism by unique circumstances in English agrarianism. The evidence it cites is that traditional mercantilism focused on moving goods from markets where they were cheap to markets where they were expensive rather than investing in production, and that many cultures (including the early modern
Dutch Republic
The United Provinces of the Netherlands, also known as the (Seven) United Provinces, officially as the Republic of the Seven United Netherlands ( Dutch: ''Republiek der Zeven Verenigde Nederlanden''), and commonly referred to in historiography ...
) saw urbanisation and the amassing of wealth by merchants without the emergence of capitalist production.
The agrarian argument developed particularly through
Karl Polanyi
Karl Paul Polanyi (; hu, Polányi Károly ; 25 October 1886 – 23 April 1964),''Encyclopædia Britannica'' (Chicago: Encyclopædia Britannica Inc. 2003) vol 9. p. 554 was an Austro-Hungarian economic anthropologist and politician, best known ...
's ''
The Great Transformation'' (1944),
Maurice Dobb's ''Studies in the Development of Capitalism'' (1946), and
Robert Brenner
Robert Paul Brenner (; born November 28, 1943) is a professor emeritus of history and director of the Center for Social Theory and Comparative History at UCLA, editor of the socialist journal ''Against the Current'', and editorial committee member ...
's research in the 1970s, the discussion of which is known as the
Brenner Debate. In the wake of the
Norman Conquest
The Norman Conquest (or the Conquest) was the 11th-century invasion and occupation of England by an army made up of thousands of Norman, Breton, Flemish, and French troops, all led by the Duke of Normandy, later styled William the Conq ...
, the English state was unusually centralised. This gave aristocrats relatively limited powers to extract wealth directly from their feudal underlings through political means (not least the threat of violence). England's centralisation also meant that an unusual number of English farmers were not peasants (with their own land and thus direct access to subsistence) but
tenants
A leasehold estate is an ownership of a temporary right to hold land or property in which a lessee or a tenant holds rights of real property by some form of title from a lessor or landlord. Although a tenant does hold rights to real property, a l ...
(renting their land). These circumstances produced a market in leases. Landlords, lacking other ways to extract wealth, were motivated to rent to tenants who could pay the most, while tenants, lacking security of tenure, were motivated to farm as productively as possible to win leases in a competitive market. This led to a cascade of effects whereby successful tenant farmers became agrarian capitalists; unsuccessful ones became wage-labourers, required to sell their labour in order to live; and landlords promoted the privatisation and renting out of common land, not least through the
enclosures
Enclosure or Inclosure is a term, used in English landownership, that refers to the appropriation of "waste" or "common land" enclosing it and by doing so depriving commoners of their rights of access and privilege. Agreements to enclose land ...
. In this reading, 'it was not merchants or manufacturers who drove the process that propelled the early development of capitalism. The transformation of social property relations was firmly rooted in the countryside, and the transformation of England's trade and industry was result more than cause of England's transition to capitalism'.
21st-century scholarship
The 21st century has seen renewed interest in the history of capitalism, and "History of Capitalism" has become a field in its own right, with courses in history departments. In the 2000s, Harvard University founded the Program on the Study of U.S. Capitalism; Cornell University established the History of Capitalism Initiative; and Columbia University Press launched a monograph series titled ''Studies in the History of U.S. Capitalism''. This field includes topics such as insurance, banking and regulation, the political dimension, and the impact on the middle classes, the poor and women and minorities. These initiatives incorporate formerly neglected questions of race, gender, and sexuality into the history of capitalism. They have grown in the aftermath of the
financial crisis of 2007–2008
Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline of ...
and the associated
Great Recession
The Great Recession was a period of marked general decline, i.e. a recession, observed in national economies globally that occurred from late 2007 into 2009. The scale and timing of the recession varied from country to country (see map). At ...
.
Some academic institutions which are managed in part by free-market think tanks, such as the Clemson Institute for the Study of Capitalism, reject the notion that race, gender, or sexuality have any significant relationship to capitalism at all and instead seek to show that laissez-faire capitalism, in particular, provides the moral foundations of a just society and the most numerous economic opportunities for all people.
Agrarian capitalism
Crisis of the 14th century

According to some historians, the modern capitalist system originated in the "
crisis of the Late Middle Ages
The Crisis of the Late Middle Ages was a series of events in the fourteenth and fifteenth centuries that ended centuries of European stability during the Late Middle Ages. Three major crises led to radical changes in all areas of society: demogr ...
", a conflict between the land-owning aristocracy and the agricultural producers, or
serfs
Serfdom was the status of many peasants under feudalism, specifically relating to manorialism, and similar systems. It was a condition of debt bondage and indentured servitude with similarities to and differences from slavery, which developed ...
.
Manorial
Manorialism, also known as the manor system or manorial system, was the method of land ownership (or "tenure") in parts of Europe, notably France and later England, during the Middle Ages. Its defining features included a large, sometimes forti ...
arrangements inhibited the development of capitalism in a number of ways. Serfs had obligations to produce for lords and therefore had no interest in technological innovation; they also had no interest in cooperating with one another because they produced to sustain their own families. The lords who owned the land relied on force to guarantee that they received 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
In sociology and in economics, the term conspicuous consumption describes and explains the consumer practice of buying and using goods of a higher quality, price, or in greater quantity than practical. In 1899, the sociologist Thorstein Veblen ...
that helped foster alliances with other lords; they had no incentive to invest in developing new productive technologies.
The
demographic
Demography () is the statistical study of populations, especially human beings.
Demographic analysis examines and measures the dimensions and dynamics of populations; it can cover whole societies or groups defined by criteria such as edu ...
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 Great Famine of 1315–1317 (occasionally dated 1315–1322) was the first of a series of large-scale crises that struck Europe early in the 14th century. Most of Europe (extending east to Russia and south to Italy) was affected. The famine ...
, and the
Black Death of 1348–1350 led to a population crash. These factors led to a decline in agricultural production. In response,
feudal lord
An overlord in the English feudal system was a lord of a manor who had subinfeudated a particular manor, estate or fee, to a tenant. The tenant thenceforth owed to the overlord one of a variety of services, usually military service or ser ...
s sought to expand agricultural production by extending their domains through warfare; therefore they demanded more tribute from their serfs to pay for military expenses. In England, many serfs rebelled. Some moved to towns, some bought land, and some entered into favorable contracts to rent lands from lords who needed to repopulate their estates.
The collapse of the ''
manorial
Manorialism, also known as the manor system or manorial system, was the method of land ownership (or "tenure") in parts of Europe, notably France and later England, during the Middle Ages. Its defining features included a large, sometimes forti ...
'' system in England enlarged the class of
tenant farmer
A tenant farmer is a person ( farmer or farmworker) who resides on land owned by a landlord. Tenant farming is an agricultural production system in which landowners contribute their land and often a measure of operating capital and managemen ...
s with more freedom to market their goods and thus more incentive to invest in new technologies. Lords who did not want to rely on renters 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 kinds of commodity owners. One kind was those who had money, the means of production, and subsistence, who were eager to
valorize the sum of value they had appropriated by buying the labor power of others. The other kind was free workers, who sold their own labor. The workers neither formed part of the means of production nor owned the means of production that transformed land and even money into what we now call "capital". Marx labeled this period the "pre-history of capitalism".
[Marx, Karl 8671976 ''Capital: A Critique of Political Economy Volume One'' trans. Ben Fowkes. Harmondsworth and London: Penguin Books and New Left Review. 875]
In effect,
feudalism
Feudalism, also known as the feudal system, was the combination of the legal, economic, military, cultural and political customs that flourished in medieval Europe between the 9th and 15th centuries. Broadly defined, it was a way of structu ...
began to lay some of the foundations necessary for the development of
mercantilism, a precursor of capitalism. Feudalism lasted from the medieval period 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 agriculture and exploration, facilitated the growth of capitalism. The most important development at the end of feudalism was the emergence of what Robert Degan calls "the dichotomy between wage earners and capitalist merchants". The competitive nature meant there are always winners and losers, and this became clear as feudalism evolved into mercantilism, an economic system characterized by the private or corporate ownership of capital goods, investments determined by private decisions, and by prices, production, and the distribution of goods determined mainly by competition in a free market.
Enclosure

England in the 16th century was already a centralized state, in which much of the feudal order of
Medieval Europe
In the history of Europe, the Middle Ages or medieval period lasted approximately from the late 5th to the late 15th centuries, similar to the post-classical period of global history. It began with the fall of the Western Roman Empire a ...
had been swept away. This centralization was strengthened by a good system of roads and a disproportionately large capital city,
London
London is the capital and List of urban areas in the United Kingdom, largest city of England and the United Kingdom, with a population of just under 9 million. It stands on the River Thames in south-east England at the head of a estuary dow ...
. The capital acted as a central market for the entire country, creating a large internal market for goods, in contrast to the fragmented feudal holdings that prevailed in most parts of the
Continent
A continent is any of several large landmasses. Generally identified by convention rather than any strict criteria, up to seven geographical regions are commonly regarded as continents. Ordered from largest in area to smallest, these seven ...
. 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. The system put pressure on both the landlords and the tenants to increase agricultural productivity to create profit. The weakened coercive power of the
aristocracy to extract peasant
surpluses encouraged them to try out better methods. The tenants also had an incentive to improve their methods to succeed in an increasingly competitive
labour market. Land rents had moved away from the previous stagnant system of custom and feudal obligation, and were becoming directly subject to economic market forces.
An important aspect of this process of change was the
enclosure
Enclosure or Inclosure is a term, used in English landownership, that refers to the appropriation of "waste" or " common land" enclosing it and by doing so depriving commoners of their rights of access and privilege. Agreements to enclose land ...
of the
common land
Common land is land owned by a person or collectively by a number of persons, over which other persons have certain common rights, such as to allow their livestock to graze upon it, to collect wood, or to cut turf for fuel.
A person who has ...
previously held in the
open field system
The open-field system was the prevalent agricultural system in much of Europe during the Middle Ages and lasted into the 20th century in Russia, Iran, and Turkey. Each manor or village had two or three large fields, usually several hundred acre ...
where peasants had traditional rights, such as
mowing
A mower is a person or machine that cuts (mows) grass or other plants that grow on the ground. Usually mowing is distinguished from reaping, which uses similar implements, but is the traditional term for harvesting grain crops, e.g. with reapers ...
meadow
A meadow ( ) is an open habitat, or field, vegetated by grasses, herbs, and other non- woody plants. Trees or shrubs may sparsely populate meadows, as long as these areas maintain an open character. Meadows may be naturally occurring or artif ...
s for
hay
Hay is grass, legumes, or other herbaceous plants that have been cut and dried to be stored for use as animal fodder, either for large grazing animals raised as livestock, such as cattle, horses, goats, and sheep, or for smaller domesticate ...
and
grazing
In agriculture, grazing is a method of animal husbandry whereby domestic livestock are allowed outdoors to roam around and consume wild vegetations in order to convert the otherwise indigestible (by human gut) cellulose within grass and other ...
livestock
Livestock are the domesticated animals raised in an agricultural setting to provide labor and produce diversified products for consumption such as meat, eggs, milk, fur, leather, and wool. The term is sometimes used to refer solely to anima ...
. 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
The working class (or labouring class) comprises those engaged in manual-labour occupations or industrial work, who are remunerated via waged or salaried contracts. Working-class occupations (see also " Designation of workers by collar colo ...
that provided the labour required in the new industries developing in the
north of England
Northern England, also known as the North of England, the North Country, or simply the North, is the northern area of England. It broadly corresponds to the former borders of Angle Northumbria, the Anglo-Scandinavian Kingdom of Jorvik, and the ...
. 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". "Enclosure (when all the sophistications are allowed for) was a plain enough case of class robbery". Anthropologist
Jason Hickel notes that this process of enclosure led to myriad peasant revolts, among them
Kett's Rebellion
Kett's Rebellion was a revolt in Norfolk, England during the reign of Edward VI, largely in response to the enclosure of land. It began at Wymondham on 8 July 1549 with a group of rebels destroying fences that had been put up by wealthy landowne ...
and the
Midland Revolt
The Midland Revolt was a popular uprising which occurred in the Midlands of England in 1607. Beginning in late April in Northamptonshire, in Haselbech, Pytchley and Rushton, it spread to Warwickshire and Leicestershire in May. The riots were ...
, which culminated in violent repression and executions.
Other scholars argue that the better-off members of the European
peasant
A peasant is a pre-industrial agricultural laborer or a farmer with limited land-ownership, especially one living in the Middle Ages under feudalism and paying rent, tax, fees, or services to a landlord. In Europe, three classes of peasan ...
ry encouraged and participated actively in enclosure, seeking to end the perpetual poverty of
subsistence farming
Subsistence agriculture occurs when farmers grow food crops to meet the needs of themselves and their families on smallholdings. Subsistence agriculturalists target farm output for survival and for mostly local requirements, with little or no ...
. "We should be careful not to ascribe to
nclosuredevelopments that were the consequence of a much broader and more complex process of historical change." "
e impact of eighteenth and nineteenth century enclosure has been grossly exaggerated...."
Merchant capitalism and mercantilism
Precedents

While trade has existed since early in human history, it was not capitalism. The earliest recorded activity of long-distance profit-seeking merchants can be traced to the Old
Assyria
Assyria (Neo-Assyrian cuneiform: , romanized: ''māt Aššur''; syc, ܐܬܘܪ, ʾāthor) was a major ancient Mesopotamian civilization which existed as a city-state at times controlling regional territories in the indigenous lands of the As ...
n merchants active in
Mesopotamia
Mesopotamia ''Mesopotamíā''; ar, بِلَاد ٱلرَّافِدَيْن or ; syc, ܐܪܡ ܢܗܪ̈ܝܢ, or , ) is a historical region of Western Asia situated within the Tigris–Euphrates river system, in the northern part of the F ...
the 2nd millennium BCE. The Roman Empire developed more advanced forms of commerce, and similarly widespread networks existed in Islamic nations. However, capitalism took shape in Europe in the late Middle Ages and Renaissance.
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
In the history of Europe, the Middle Ages or medieval period lasted approximately from the late 5th to the late 15th centuries, similar to the post-classical period of global history. It began with the fall of the Western Roman Empire ...
. Innovations in banking, insurance, accountancy, and various production and commercial practices linked closely to a 'spirit' of frugality, reinvestment, and city life, promoted attitudes that sociologists have tended to associate only with
northern Europe,
Protestantism
Protestantism is a Christian denomination, branch of Christianity that follows the theological tenets of the Reformation, Protestant Reformation, a movement that began seeking to reform the Catholic Church from within in the 16th century agai ...
, and a much later age. The city republics maintained their political independence from
Empire
An empire is a "political unit" made up of several territories and peoples, "usually created by conquest, and divided between a dominant center and subordinate peripheries". The center of the empire (sometimes referred to as the metropole) ex ...
and
Church
Church may refer to:
Religion
* Church (building), a building for Christian religious activities
* Church (congregation), a local congregation of a Christian denomination
* Church service, a formalized period of Christian communal worship
* Ch ...
, traded with
North Africa
North Africa, or Northern Africa is a region encompassing the northern portion of the African continent. There is no singularly accepted scope for the region, and it is sometimes defined as stretching from the Atlantic shores of Mauritania in t ...
, the
Middle East
The Middle East ( ar, الشرق الأوسط, ISO 233: ) is a geopolitical region commonly encompassing Arabia (including the Arabian Peninsula and Bahrain), Asia Minor (Asian part of Turkey except Hatay Province), East Thrace (Europ ...
and
Asia
Asia (, ) is one of the world's most notable geographical regions, which is either considered a continent in its own right or a subcontinent of Eurasia, which shares the continental landmass of Afro-Eurasia with Africa. Asia covers an ...
, and introduced Eastern practices. They were also considerably different from the absolutist monarchies of Spain and France, and were strongly attached to civic liberty.
Emergence
Modern capitalism only fully emerged in the
early modern period between the 16th and 18th centuries, with the establishment of
mercantilism or merchant capitalism.
[Burnham, Peter ''Capitalism, the Concise Oxford Dictionary of Politics'', 2003 Oxford: Oxford University Press][''Encyclopædia Britannica'' (2006)] Early evidence for mercantilistic practices appears in early modern
Venice
Venice ( ; it, Venezia ; vec, Venesia or ) is a city in northeastern Italy and the capital of the Veneto region. It is built on a group of 118 small islands that are separated by canals and linked by over 400 bridges. The isla ...
,
Genoa
Genoa ( ; it, Genova ; lij, Zêna ). is the capital of the Regions of Italy, Italian region of Liguria and the List of cities in Italy, sixth-largest city in Italy. In 2015, 594,733 people lived within the city's administrative limits. As of t ...
, and
Pisa
Pisa ( , or ) is a city and ''comune'' in Tuscany, central Italy, straddling the Arno just before it empties into the Ligurian Sea. It is the capital city of the Province of Pisa. Although Pisa is known worldwide for its leaning tower, the ...
over the
Mediterranean
The Mediterranean Sea is a sea connected to the Atlantic Ocean, surrounded by the Mediterranean Basin and almost completely enclosed by land: on the north by Western and Southern Europe and Anatolia, on the south by North Africa, and on th ...
trade in
bullion. The region of mercantilism's real birth, however, was the
Atlantic Ocean
The Atlantic Ocean is the second-largest of the world's five oceans, with an area of about . It covers approximately 20% of Earth#Surface, Earth's surface and about 29% of its water surface area. It is known to separate the "Old World" of Afr ...
.

England began a large-scale and integrative approach to mercantilism during the
Elizabethan Era
The Elizabethan era is the epoch in the Tudor period of the history of England during the reign of Queen Elizabeth I (1558–1603). Historians often depict it as the golden age in English history. The symbol of Britannia (a female person ...
. 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." The period featured various but often disjointed efforts by the court of
Queen Elizabeth
Queen Elizabeth, Queen Elisabeth or Elizabeth the Queen may refer to:
Queens regnant
* Elizabeth I (1533–1603; ), Queen of England and Ireland
* Elizabeth II
Elizabeth II (Elizabeth Alexandra Mary; 21 April 1926 – 8 September 2022 ...
to develop a naval and merchant fleet capable of challenging the Spanish stranglehold on trade and of expanding the growth of bullion at home. 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
The Spanish Empire ( es, link=no, Imperio español), also known as the Hispanic Monarchy ( es, link=no, Monarquía Hispánica) or the Catholic Monarchy ( es, link=no, Monarquía Católica) was a colonial empire governed by Spain and its prede ...
, 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
Gerard de Malynes (fl. 1585–1627) was an independent merchant in foreign trade, an English commissioner in the Spanish Netherlands, a government advisor on trade matters, assay master of the mint, and commissioner of mint affairs. His dates of ...
and
Thomas Mun
Sir Thomas Mun (17 June 157121 July 1641) was an English writer on economics and is often referred to as the last of the early mercantilism, mercantilists. Most notably, he is known for serving as the director of the East India Company. Due to ...
, who first articulated the
Elizabethan System
The Elizabethan era is the epoch in the Tudor period of the history of England during the reign of Queen Elizabeth I (1558–1603). Historians often depict it as the golden age in English history. The symbol of Britannia (a female personific ...
. 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
The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balance ...
. It was written in the 1620s and published in 1664. Mercantile doctrines were further developed by
Josiah Child
Sir Josiah Child, 1st Baronet, , (c. 1630/31 – 22 June 1699) was an English economist, merchant and politician. He was an economist proponent of mercantilism and governor of the East India Company. He led the company in the Anglo-Mughal Wa ...
. Numerous French authors helped to cement French policy around mercantilism in the 17th century.
French mercantilism
Colbertism ( French: ''Colbertisme'') is an economic and political doctrine of the 17th century, created by Jean-Baptiste Colbert, the Controller-General of Finances under Louis XIV of France. Colbertism is a variant of mercantilism that is someti ...
was best articulated by
Jean-Baptiste Colbert
Jean-Baptiste Colbert (; 29 August 1619 – 6 September 1683) was a French statesman who served as First Minister of State from 1661 until his death in 1683 under the rule of King Louis XIV. His lasting impact on the organization of the countr ...
(in office, 1665–1683), although his policies were greatly liberalised under
Napoleon.
Doctrines
Under mercantilism, European merchants, backed by state controls,
subsidies
A subsidy or government incentive is a form of financial aid or support extended to an economic sector (business, or individual) generally with the aim of promoting economic and social policy. Although commonly extended from the government, the ter ...
, and monopolies, made most of their profits from buying and selling goods. In the words of
Francis Bacon
Francis Bacon, 1st Viscount St Alban (; 22 January 1561 – 9 April 1626), also known as Lord Verulam, was an English philosopher and statesman who served as Attorney General and Lord Chancellor of England. Bacon led the advancement of both ...
, 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..." Similar practices of economic regimentation had begun earlier in medieval towns. However, under mercantilism, given the contemporaneous rise of
absolutism
Absolutism may refer to:
Government
* Absolute monarchy, in which a monarch rules free of laws or legally organized opposition
* Absolutism (European history), period c. 1610 – c. 1789 in Europe
** Enlightened absolutism, influenced by the E ...
, the state superseded the local
guild
A guild ( ) is an association of artisans and merchants who oversee the practice of their craft/trade in a particular area. The earliest types of guild formed as organizations of tradesmen belonging to a professional association. They sometimes ...
s as the regulator of the economy.
Among the major tenets of mercantilist theory was
bullionism
Bullionism is an economic theory that defines wealth by the amount of precious metals owned. Bullionism is an early or primitive form of mercantilism.{{Citation needed, date=October 2018 It was derived, during the 16th century, from the observatio ...
, a doctrine stressing the importance of accumulating
precious metals
Precious metals are rare, naturally occurring metallic chemical elements of high economic value.
Chemically, the precious metals tend to be less reactive than most elements (see noble metal). They are usually ductile and have a high lustr ...
. 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. They promoted the idea that government subsidies, such as granting monopolies and protective
tariff
A tariff is a tax imposed by the government of a country or by a supranational union on imports or exports of goods. Besides being a source of revenue for the government, import duties can also be a form of regulation of foreign trade and p ...
s, 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 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.
Noting the various pre-capitalist features of mercantilism,
Karl Polanyi
Karl Paul Polanyi (; hu, Polányi Károly ; 25 October 1886 – 23 April 1964),''Encyclopædia Britannica'' (Chicago: Encyclopædia Britannica Inc. 2003) vol 9. p. 554 was an Austro-Hungarian economic anthropologist and politician, best known ...
argued that "mercantilism, with all its tendency toward commercialization, never attacked the safeguards which protected
hetwo basic elements of production – labor and land – from becoming the elements of commerce." Thus mercantilist 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."
Chartered trading companies

The
Muscovy Company
The Muscovy Company (also called the Russia Company or the Muscovy Trading Company russian: Московская компания, Moskovskaya kompaniya) was an English trading company chartered in 1555. It was the first major chartered joint s ...
was the first major
chartered joint stock
A joint-stock company is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares (certificates of ownership). Shareholders are ...
English
trading company Trading companies are businesses working with different kinds of products which are sold for consumer, business, or government purposes. Trading companies buy a specialized range of products, maintain a stock or a shop, and deliver products to cus ...
. It was established in 1555 with a
monopoly
A monopoly (from Greek el, μόνος, mónos, single, alone, label=none and el, πωλεῖν, pōleîn, to sell, label=none), as described by Irving Fisher, is a market with the "absence of competition", creating a situation where a speci ...
on
trade
Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money. Economists refer to a system or network that allows trade as a market.
An early form of trade, barter, saw the direct exch ...
between England and
Muscovy Muscovy is an alternative name for the Grand Duchy of Moscow (1263–1547) and the Tsardom of Russia (1547–1721). It may also refer to:
*Muscovy Company, an English trading company chartered in 1555
*Muscovy duck (''Cairina moschata'') and Domest ...
. It was an offshoot of the earlier ''
Company of Merchant Adventurers to New Lands
The Company of Merchant Adventurers to New Lands was an early joint stock association, which began with private exploration and enterprise, and was to have been incorporated by King Edward VI in 1553, but received its full royal charter in 1555. I ...
'', founded in 1551 by
Richard Chancellor
Richard Chancellor (died 10 November 1556) was an English explorer and navigator; the first to penetrate to the White Sea and establish relations with the Tsardom of Russia.
Life
Chancellor, a native of Bristol, was brought up in the household ...
,
Sebastian Cabot and Sir
Hugh Willoughby
Sir Hugh Willoughby (fl. 1544; died 1554) was an English soldier and an early Arctic voyager. He served in the court of and fought in the Scottish campaign where he was knighted for his valour. In 1553, he was selected by a company of London ...
to locate the
Northeast Passage
The Northeast Passage (abbreviated as NEP) is the Arctic shipping routes, shipping route between the Atlantic Ocean, Atlantic and Pacific Ocean, Pacific Oceans, along the Arctic coasts of Norway and Russia. The western route through the islands o ...
to China to allow trade. This was the precursor to a type of business that would soon flourish in England, the
Dutch Republic
The United Provinces of the Netherlands, also known as the (Seven) United Provinces, officially as the Republic of the Seven United Netherlands ( Dutch: ''Republiek der Zeven Verenigde Nederlanden''), and commonly referred to in historiography ...
and elsewhere.
The British
East India Company
The East India Company (EIC) was an English, and later British, joint-stock company founded in 1600 and dissolved in 1874. It was formed to trade in the Indian Ocean region, initially with the East Indies (the Indian subcontinent and Sout ...
(1600) and the
Dutch East India Company
The United East India Company ( nl, Verenigde Oostindische Compagnie, the VOC) was a chartered company established on the 20th March 1602 by the States General of the Netherlands amalgamating existing companies into the first joint-stock c ...
(1602) launched an era of large state chartered trading companies.
These companies were characterized by their monopoly on trade, granted by
letters patent
Letters patent ( la, litterae patentes) ( always in the plural) are a type of legal instrument in the form of a published written order issued by a monarch, president or other head of state, generally granting an office, right, monopoly, t ...
provided by the state. Recognized as chartered
joint-stock companies
A joint-stock company is a business entity in which shares of the company's stock can be bought and sold by shareholders. Each shareholder owns company stock in proportion, evidenced by their shares (certificates of ownership). Shareholders are ...
by the state, these companies enjoyed lawmaking, military, and treaty-making privileges. Characterized by its colonial and
expansionary
Expansionism refers to states obtaining greater territory through military empire-building or colonialism.
In the classical age of conquest moral justification for territorial expansion at the direct expense of another established polity (who of ...
powers by states, powerful nation-states sought to accumulate
precious metal
Precious metals are rare, naturally occurring metallic chemical elements of high economic value.
Chemically, the precious metals tend to be less reactive than most elements (see noble metal). They are usually ductile and have a high lu ...
s, and military conflicts arose.
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
Return on investment (ROI) or return on costs (ROC) is a ratio between net income (over a period) and investment (costs resulting from an investment of some resources at a point in time). A high ROI means the investment's gains compare favourably ...
.
Industrial capitalism
Mercantilism declined in
Great Britain
Great Britain is an island in the North Atlantic Ocean off the northwest coast of continental Europe. With an area of , it is the largest of the British Isles, the largest European island and the ninth-largest island in the world. It is ...
in the mid-18th century, when a new group of economic theorists, led by
Adam Smith, challenged fundamental mercantilist doctrines, such as that the world's wealth remained constant and that a state could only increase its wealth at the expense of another state. However, mercantilism continued in less developed economies, such as
Prussia
Prussia, , Old Prussian: ''Prūsa'' or ''Prūsija'' was a German state on the southeast coast of the Baltic Sea. It formed the German Empire under Prussian rule when it united the German states in 1871. It was ''de facto'' dissolved by an ...
and
Russia
Russia (, , ), or the Russian Federation, is a transcontinental country spanning Eastern Europe and Northern Asia. It is the largest country in the world, with its internationally recognised territory covering , and encompassing one-eigh ...
, with their much younger manufacturing bases.
The mid-18th century gave rise to industrial capitalism, made possible by (1) the accumulation of vast amounts of capital under the merchant phase of capitalism and its investment in machinery, and (2) the fact that the enclosures meant that Britain had a large population of people with no access to subsistence agriculture, who needed to buy basic commodities via the market, ensuring a mass consumer market. 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
The division of labour is the separation of the tasks in any economic system or organisation so that participants may specialise (specialisation). Individuals, organizations, and nations are endowed with, or acquire specialised capabilities, and ...
between and within work processes and the routinization of work tasks. Industrial capitalism finally established the global domination of the capitalist mode of production.
During the resulting
Industrial Revolution
The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe, and the United States, that occurred during the period from around 1760 to about 1820–1840. This transition included going f ...
, the industrialist replaced the merchant as a dominant actor in the capitalist system, which led to the decline of the traditional handicraft skills of
artisan
An artisan (from french: artisan, it, artigiano) is a skilled craft worker who makes or creates material objects partly or entirely by hand. These objects may be functional or strictly decorative, for example furniture, decorative art, ...
s,
guild
A guild ( ) is an association of artisans and merchants who oversee the practice of their craft/trade in a particular area. The earliest types of guild formed as organizations of tradesmen belonging to a professional association. They sometimes ...
s, and
journeymen
A journeyman, journeywoman, or journeyperson is a worker, skilled in a given building trade or craft, who has successfully completed an official apprenticeship qualification. Journeymen are considered competent and authorized to work in that fie ...
. Also during this period, capitalism transformed relations between the British landowning gentry and peasants, giving rise to the production of
cash crop
A cash crop or profit crop is an agricultural crop which is grown to sell for profit. It is typically purchased by parties separate from a farm. The term is used to differentiate marketed crops from staple crop (or "subsistence crop") in subsiste ...
s 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
The Industrial Revolution was the transition to new manufacturing processes in Great Britain, continental Europe, and the United States, that occurred during the period from around 1760 to about 1820–1840. This transition included going f ...
. 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
Hydropower (from el, ὕδωρ, "water"), also known as water power, is the use of falling or fast-running water to produce electricity or to power machines. This is achieved by converting the gravitational potential or kinetic energy of a ...
, the increasing use of steam power and the development of
machine tool
A machine tool is a machine for handling or machining metal or other rigid materials, usually by cutting, boring, grinding, shearing, or other forms of deformations. Machine tools employ some sort of tool that does the cutting or shaping. All ...
s. It also included the change from wood and other
bio-fuels
Biofuel is a fuel that is produced over a short time span from biomass, rather than by the very slow natural processes involved in the formation of fossil fuels, such as oil. According to the United States Energy Information Administration (EIA ...
to coal.

In
textile manufacturing
Textile Manufacturing or Textile Engineering is a major industry. It is largely based on the conversion of fibre into yarn, then yarn into fabric. These are then dyed or printed, fabricated into cloth which is then converted into useful go ...
, 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
James Hargreaves ( 1720 – 22 April 1778) was an English weaver, carpenter and inventor who lived and worked in Lancashire, England. He was one of three men responsible for the mechanisation of spinning: Hargreaves is credited with inventing ...
'
spinning jenny
The spinning jenny is a multi- spindle spinning frame, and was one of the key developments in the industrialization of textile manufacturing during the early Industrial Revolution. It was invented in 1764 or 1765 by James Hargreaves in Stan ...
,
Richard Arkwright
Sir Richard Arkwright (23 December 1732 – 3 August 1792) was an English inventor and a leading entrepreneur during the early Industrial Revolution. He is credited as the driving force behind the development of the spinning frame, known as ...
's
water frame
The water frame is a spinning frame that is powered by a water-wheel. Water frames in general have existed since Ancient Egypt times. Richard Arkwright, who patented the technology in 1769, designed a model for the production of cotton thread; ...
,
Samuel Crompton
Samuel Crompton (3 December 1753 – 26 June 1827) was an English inventor and pioneer of the spinning industry. Building on the work of James Hargreaves and Richard Arkwright he invented the spinning mule, a machine that revolutionised t ...
's
Spinning Mule
The spinning mule is a machine used to spin cotton and other fibres. They were used extensively from the late 18th to the early 20th century in the mills of Lancashire and elsewhere. Mules were worked in pairs by a minder, with the help of tw ...
and other inventions. The power loom increased the output of a worker by a factor of over 40.
The cotton gin increased the productivity of removing seed from cotton by a factor of 50. Large gains in productivity also occurred in spinning and weaving wool and linen, although they were not as great as in cotton.
Finance

The growth of Britain's industry stimulated a concomitant growth in its system of
finance and
credit
Credit (from Latin verb ''credit'', meaning "one believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a de ...
. In the 18th century, services offered by banks increased. Clearing facilities, security investments,
cheque
A cheque, or check (American English; see spelling differences) is a document that orders a bank (or credit union) to pay a specific amount of money from a person's account to the person in whose name the cheque has been issued. The pers ...
s and
overdraft
An overdraft occurs when something is withdrawn in excess of what is in a current account. For financial systems, this can be funds in a bank account. For water resources, it can be groundwater in an aquifer. In these situations the account is s ...
protections were introduced. Cheques had been invented in the 17th century 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 19th century a dedicated space was established, known as a
bankers' clearing house
Cheque clearing (or check clearing in American English) or bank clearance is the process of moving cash (or its equivalent) from the bank on which a cheque is drawn to the bank in which it was deposited, usually accompanied by the movement of the c ...
. 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 Royal Bank of Scotland plc (RBS; gd, Banca Rìoghail na h-Alba) is a major retail and commercial bank in Scotland. It is one of the retail banking subsidiaries of NatWest Group, together with NatWest (in England and Wales) and Ulster Bank ...
.
The end of the
Napoleonic War
The Napoleonic Wars (1803–1815) were a series of major global conflicts pitting the French Empire and its allies, led by Napoleon I, against a fluctuating array of European states formed into various coalitions. It produced a period of Fren ...
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
The Bank Charter Act 1844 (7 & 8 Vict. c. 32), sometimes referred to as the Peel Banking Act of 1844, was an Act of the Parliament of the United Kingdom, passed under the government of Robert Peel, which restricted the powers of British banks ...
tying these notes to
gold reserves
A gold reserve is the gold held by a national central bank, intended mainly as a guarantee to redeem promises to pay depositors, note holders (e.g. paper money), or trading peers, during the eras of the gold standard, and also as a store ...
, effectively creating the institution of
central bank
A central bank, reserve bank, or monetary authority is an institution that manages the currency and monetary policy of a country or monetary union,
and oversees their commercial banking system. In contrast to a commercial bank, a centra ...
ing and
monetary policy
Monetary policy is the policy adopted by the monetary authority of a nation to control either the interest rate payable for very short-term borrowing (borrowing by banks from each other to meet their short-term needs) or the money supply, often ...
. 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,