When giving defenses of capitalism, people often free markets or free enterprise as a "natural" freedom that's gone on since the dawn of civilization.

However, capitalism, both as an idea and organization of economy and political power, is only a few centuries old.

What really was going on economically before capitalism, that is similar enough to be considered by some to be basically the same thing today? Why was a new term coined and a new idea constructed?

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    What is wrong with wikipedia's answer? – MCW Apr 19 '16 at 8:06
  • How do you define capitalism? – Felix Goldberg Apr 19 '16 at 8:56
  • I disagree. What was truly new was consumerism - a notion that wide population can buy stuff above subsistence level (more stuff than they require to just survive). The "capitalism" is just an appendix; just a way to organize production to feed consumerism. Until there was no consumerism, nobody was interested in capitalism although all the prerequisities were there. And look how badly it ended for USSR who had capitalism (state capitalism - the higher form of monopoly) but stayed behind in consumerism. – kubanczyk Apr 19 '16 at 11:54
  • Were the bazaars of Babylon not run on capitalist principles? – TheMathemagician Apr 19 '16 at 15:13

As I said above, Wikipedia provides a fairly thorough explanation. Briefly though capitalism focuses on the role of capital in production. Summarizing a complex concept into a simple sentence, traditional societies produce for use, while capitalist societies produce for sale.

Traditional societies engaged in industry and commerce, but they did so with an immediate end in mind. They made things to use them and bought and sold things to acquire things to use.

Capitalist societies engage in industry and commerce with the option to accumulate capital. Industry continues to produce for use, but also for sale, and the sale accumulates capital that can be subsequently invested.

Capitalism permits accumulation of liquid capital, pooling of capital and investment of capital. Return on investment allocates capital more efficiently than any other economic system.

Obviously wikpedia's answer is superior; I'm merely trying to boil it down to a few sentences.


According to Marxism, both Feudalism and Slavery use non-economic means of coercion on workforce.

  • I'm not sure that this answers the question. – MCW Apr 19 '16 at 8:05
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    @MarkC.Wallace It sorta does - capitalism does not do non-economic coercion. I don't think it's a satisfactory answer but it is an answer. – Felix Goldberg Apr 19 '16 at 8:55

Capitalism is both a result of the environment and a factor building it.

In other ages, to effectively produce goods there was needed a relatively small investment:

  • Were you a farmer? All you needed was a plot of land (owned or rented), seeds, a few tools were all you need. If you were affluent enough, you could improve that with some oxen to help you plow the land, but that meant you had to feed them too.

  • Were you an artisan? Similarly, you would own your own tools, which would have been expensive but not that much.

Some capitalism was seen in the Modern Era (after the Middle Ages), with the trade companies. In those, the cost of preparing a trade expedition was too much for most individuals, so they would share the costs between them.

But the main difference was the Industrial Revolution. Industrial machines were very useful and increased production, but also they were too much expensive for the average individual to buy and maintain. So the individual worker no longer could sustain himself as an independent producer of goods (because without machines he could not make goods cheap enough), and was forced to work in the factories for the owner of the machinery (the capitalist) to (barely) sustain himself and his family.

Industrialization also lead to less reliance in highly specialized work (they were no longer smiths that had spent years learning the trades of their job, they were operators who knew of a small part of the production chain), so workers were easier to replace by others, thus reducing their bargaining power in relation to the employer.

And the increased production rate meant that less manpower was needed, so a surplus workforce was created that helped keep wages low. Also, the need to get raw materials and sell the surplus did provide a new impulse to the colonization of new territories.

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