Author: Mohammad Asem Esmailzahi
Capitalism (part 3)
Definition of Capitalism
Capitalism, as a social system centered on the economy, is a structure in which all aspects related to the production, distribution, and exchange of economic resources are fundamentally and comprehensively controlled by private owners. In this system, the means of production—such as infrastructure, machinery, resources, and equipment—are entirely regarded as private property and remain under the ownership and control of individuals.
In essence, capitalism possesses an economic structure whose primary focus is the utilization of the means of production for the purpose of profit-making and the creation of economic value. Individuals and corporations within this system operate under market influences, and decisions are made based on profitability objectives and market competition. The inclination toward capital accumulation, attention to economic growth, and the pursuit of investment opportunities serve as the principal driving forces of this economic system.
The concept of private property in capitalism functions as an organizing principle through which ownership and control over the means of production and economic resources are determined. This concept encourages exploitation and investment in pursuit of profit and, by fostering competition and economic incentives, promotes economic progress and development. [1]
The History of Capitalism: From Its Origins to the Present
Although the continuous development of capitalism as a system began only in the sixteenth century CE, the roots of capitalist institutions can be traced back to the ancient world, and flourishing elements of capitalism existed in late medieval Europe. The development of capitalism began with the growth of the English textile industry during the sixteenth, seventeenth, and eighteenth centuries. What distinguished this development from previous systems was the use of accumulated capital to expand productive capacity, rather than investing in non-productive economic enterprises such as pyramids or grand cathedrals. This characteristic was reinforced by several historical events.
Within the ethical framework cultivated by Protestantism during the Reformation of the sixteenth century, the traditional disdain toward the pursuit of wealth diminished, while diligence and frugality gained strong religious approval. Economic inequality was justified by the argument that the wealthy were more virtuous than the poor. [2]
Capitalism has existed in various forms since ancient times; however, its real growth began during the Renaissance and the Industrial Revolution. The stages of capitalism’s historical development can be summarized as follows:
Early Capitalism (Middle Ages – Renaissance):
The expansion of maritime trade and early free markets in Europe during the fifteenth and sixteenth centuries, alongside the emergence of modern banking and commercial companies in Italy and the Netherlands.
Industrial Capitalism (18th–19th Centuries – Industrial Revolution):
The growth of factories and mass production through machinery, as well as the expansion of large companies and industrial enterprises in Britain, the United States, and Germany.
Modern Capitalism (20th–21st Centuries – Global Economy):
The globalization of the economy and the rise of multinational corporations, accompanied by the expansion of financial markets, stock exchanges, and digital investments.
Today, capitalism has merged with digital technology and has taken new forms such as the platform economy and digital currencies. [3]
The concept of capitalism, in its most general sense, has existed only since the beginning of the twentieth century. Its history can be traced approximately to the year 1902, when Werner Sombart published his famous book Modern Capitalism. In contrast, Karl Marx did not practically employ this term. Capitalist economy gradually became institutionalized in England between the sixteenth and nineteenth centuries. Although some features of this system were present in much earlier periods, the early forms of merchant capitalism flourished in the late Middle Ages.
Since the end of feudalism, capitalism has been the dominant system in the Western world. Gradually, it expanded from England to the rest of Europe, crossing political and cultural boundaries. During the nineteenth and twentieth centuries, capitalism provided the dominant—though not exclusive—means for industrialization worldwide. [4]
The wealth of Western Europe increased rapidly: gold and silver were extracted from South America to sustain banks, and enslaved people were exploited to produce consumer goods and raw materials for workshops in Western Europe. Global trade was driven forward by the seizure of new colonies, the expansion of older ones, and the widespread practice of slavery, plunder, and outright piracy. These were prominent characteristics of markets that evolved over more than two centuries. One of the key features of this commercial stage of capitalism was that it not only supplied markets but also generated the wealth that fueled the Industrial Revolution, which began in the mid-eighteenth century. [5]
Cosimo de’ Medici succeeded in building an international financial empire and was among the earliest Medici bankers. Modern capitalism can be traced to the rise of agrarian capitalism and mercantilism in the early Renaissance, particularly in city-states such as Florence. Capital initially existed on a small scale for centuries in the form of commercial activities, leasing, and moneylending, and occasionally as small-scale industry involving limited wage labor.
Simple commodity exchange—and consequently simple commodity production, which formed the primary basis for capital accumulation through trade—has a very long history. During the Islamic Golden Age, Muslims implemented economic policies resembling capitalism, such as free trade and banking. Their use of Indian and Arabic numerals facilitated accounting practices. These innovations migrated to Europe through trade partners in cities such as Venice and Pisa. Italian mathematicians traveled across the Mediterranean with Arab merchants and returned to popularize the use of Indian and Arabic numerals in Europe. [6]
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References:
[1]. Qadiri Asl, Baqer, The Course of Economic Thought: Confrontation of Schools from Plato to Post-Keynesian Economics, p. 45, Publication Year: 2008, University of Tehran Press.
[2]. Alvey, James, A History of Economics as a Moral Science, p. 56, Translated by: Ali Nemati, Autumn 2005, Tehran.
[3]. Ibid., p. 67.
[4]. Fesharaki-Zadeh, Hassan, The End of Rational Capitalism and the Collapse of Neoliberalism, p. 312, Publication Year: 2009, Qadis Publishing.
[5]. Ibid.
[6]. Heilbroner, Robert, Capitalism in the Twenty-First Century, p. 67, Translated by: Ahmad Shahsa, Edited by: Afagh Abedini, Publication Year: 1998, Scientific and Cultural Publishing Company.
