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Emergence of Capitalism
Transcript of Emergence of Capitalism
In Europe during the 17th and 18th centuries,
Europe was moving away from a feudal
economic system and towards a capitalistic system.
Under the feudal system the economy was largely
driven through land ownership and the development
of self-sufficient manors which controlled resources.
Trade did take place, but it was primarily small-scale
and was not a dynamic force in feudal economics.
The continued growth of trade, especially international
trade, during the 15th-17th centuries led to an emerging
capitalist economy in Europe.
Capitalism is an economic system based upon the private ownership of resources and production that is driven to make a profit.
During the 17th and 18th centuries, changing economic activities began to alter the economic structure of Europe and lent itself to the establishment of capitalism.
With the growth of international trade that
resulted from improved navigational techniques,
the “discovery” and colonization
of the New World,
and a growing merchant class, the economy became more complex and moved beyond the simple feudal system based on land ownership.
In response to these changes, European nations
began to develop the system of mercantilism.
Under mercantilism, governments sought to control
and regulate trade (thus it was not a pure capitalistic
system) so as to create a favorable balance of trade –
i.e. the value of their exports would be greater than
the value of their imports.
By establishing a favorable trade balance, nations could then
build their supplies of gold and silver and thereby build wealth.
Colonies were a critical component of mercantilist practice because they provided raw materials and resources as cheap imports and a market for finished products.
While the governments sought to regulate trade and foster
national wealth, the instrument through which trade operated was private ownership.
Merchants and ship owners took the risks and enjoyed
the profits of the growing international trade.
These merchants and businessmen formed the backbone
of a growing middle class in the towns and cities of Europe
and contributed to a growing market within Europe.
With new wealth,
this middle class
contributed to the
economy in Europe.
A market economy is a system in which individual
buyers and sellers interact in the marketplace to
exchange goods and services.
The development of these factors – mercantilism, international trade, rise of the middle class, developing market economy – combined with advancing technology and democratic/republican movements was critical in the creation and advancement of capitalism.