Capitalism is based on the fact that the wealth of the people increased with time. Capitalism took so many forms according to the changes in the world. There is still no consensus of the chronological trend of capitalism, but a major outline of general states of capitalism has been defined. Some of these forms of capitalism are laissez-faire, agrarian capitalism, mercantile capitalism, industrial capitalism, Monopoly, colonization, welfare capitalism, mass production, etc. Capitalism dates back to the 13th century when the rapid development of trade and prosperity was witnessed. It was when people started using their wealth to create more money by lending the money at interest or investing it in various kinds of projects that are joint-stock companies. In the case of a single owner, all the profits went to one man, but in the case of capitalism, the profits were divided into various stakeholders in the enterprise. Netherlands and Italy were two countries that witnessed the creation of wealth rapidly. Florence and France are also good examples of wealth creation and investments and an increase in workers’ standards. Capitalism can be seen in a large scale in two forms such as the investment in the joint-stock companies where people pool money and invest it in commercial undertakings and secondly after the industrial revolution when a single firm employed a large number of employees.
Capitalism is mentioned when the feudal societal system was replaced by the mass production systems for the common people. It witnessed the change of hands of power from the upper and the rich class to the lower poor people by means of production and distribution. There were two problems that the economies of the 18th century witnessed. The expansion of the population because of which land was not a supportive resource. The number of people increased and the occupation opportunities were still limited. They did not have land to cultivate and could not move to the states for jobs in industries and another problem was the lack of raw materials. The economies faced the depletion of forest and natural resources which posed an issue of the availability of wood for the industries and the houses. The states and the upper class were clueless on how to handle the situations when the poor people started to innovate. These innovations were done by the way of production of cheaper products for everyone’s needs. This is when the beginning of mass production is noticed and the fundamental principle of capitalistic industry emerged. The production was mainly done for the masses and it formulated the base for capitalism as it exists today in the markets. Capitalism finds its existence because of the savings done by people by reducing the current consumption and accruing income for investment purposes. This increased the demand for the work and the raw materials giving benefits to all the factors of production in some way or the other.
There is criticism about capitalism, but it still remains one of the major economic systems that is followed by many economies in the world. There are several challenges that still remain. People lost faith in capitalism many times in the past centuries, but still, it is accepted as a major economic system due to its benefits and advantages to the economies and markets. Capitalism witnessed an increase in the number of monopolies and sometimes in the competitiveness of the industries.
Globalization has increased the trade and the mobility of people and capital from one place to another thus improving capitalization. The 21st century has seen the emergence of capitalization again in a very different form. This form is called the new phase of financial capitalism. The emerging markets in the field of Banking and financial capital and insurance have been promoted extensively by the government as they are more volatile and mobile across the countries. Capitalism could be stated as one of the reasons for the inevitable inequality among people across the world. Capitalism can also be traced as the reason for the increased adoption of mixed economies across the world. Even the major countries such as the US adopted a mixed economy because of the drawbacks it saw in the times of the Great Depression and the wars and the losses incurred after that.
Capitalization is important for the sustenance of the growing world population due to its ability to allot resources in a better way among the population. It has advantages and disadvantages just like any other thing. What remains is the trade-off between the adoption or elimination of such a system. Historical trends provide both criticisms and support for this system. Thus, the results could inconclusive and dependent on the discretion of the modern states.
Would you like to read more about this topic? This book might interest you: History of Capitalism.