Capitalism: Historical Origin And Evolution

Economics and politics are closely linked in modern society with the emergence of state’s role. As developmental state and with increase in population any country has to open up for trade and commerce. Any Political system must associate with its production and trade, and their relations with law, custom, and government, as well as with the distribution of national income and wealth. Modern democracy like any other contemporary ideologies cannot be separated from economic system. Thus, we find that modern democracy is divided into two major variants, liberal democracy which includes capitalism as its economic base and democratic socialism. With the transition to enlightenment period people became more rational and inventive. With the idea of natural right people began to demand for a new political and economic system which can answer to the growing demand of food, unemployment and to utilize the machineries invented. The origin of capitalism from feudalism’s pit holes, demands of human advancement and its evolution over the time in relation to politics has change the world’s political system at large.

It is believed that capitalism evolved from the limitations of feudalism. Marx argued that capital existed on a small scale for centuries, in the form of merchant, renting and lending activities, and occasionally also as small-scale industry with some wage labor. The ‘capitalistic era’ according to Marx dates from the 16th century. Generally it is believed that three essential pre-conditions in feudalism and mercantilism which lead to capitalism. According to Adam smith in wealth of nation he mentions that Feudalism suffered from imperfect competition, inadequate information, and externalities. A completely unconstrained market would soon run off track. Imperfect competition was Smith assumed a market comprising many small sellers and many small buyers. He understood that the market would become inefficient if any producer or buyer were big enough to influence pricing in the market. Inadequate Information was it is also recognized that if some buyers and/or sellers had better information than others, the market would be distorted and become inefficient. The resultant transactions were also likely to be unjust and potentially dangerous. Externalities were one should be aware that the market would not be efficient unless all costs were included in a product’s price. An externality is a distortion of the market that occurs when someone other than the buyer or seller suffers a cost. In such a situation Adam smith contributed to an ideology asserts that “nation’s wealth was not determined: as had previously been thought by the amount of gold found in its treasury. Rather the wealth of nation is determined by their productivity.”

Adam smith advocates for the principle of laissez-faire, which demand that government should pursue no economic policy and must be guided by profit motive. Instead government should remain aloof from economic matters, thus encoring competition. According to Smith the fundamental principles of economic competition within a “free market” to maximize efficiency are as follows.

1. The economic system works if each individual pursues his or her own self-interest, through the greatest profit.
2. The profit motive drives economics. The only basis for making economic decisions should be what brings the highest monetary profit.
3. In order to make economic decisions, everything must have a price. Money provides the measuring rod of economic value.
4. Decisions about whom to produce things for are determined by supply and demand, by income relative to others. Private wealth determines the distribution of goods and services.
5. Wealth is primarily private property that, within certain legal limits, one can does with as one will.

During the industrial Revolution, industrialists replaced merchants as a dominant factor in the capitalist system and affected the decline of the traditional handicraft skills of artisans, guilds, and exploiters. Also during this period, the surplus generated by the rise of commercial agriculture encouraged increased mechanization of agriculture. Industrial capitalism marked the development of the factory system of manufacturing, characterized by a complex division of labor between and within work process and the routine of work tasks; and finally established the global domination of the capitalist mode of production. Capitalism was carried across the world by broader processes of globalization and, by the end of the 18th century, became the dominant global economic system, in turn intensifying processes of economic and other globalization. Later, in the 20th century, capitalism overcame a challenge by centrally-planned economies and is now the encompassing system worldwide, with the mixed economy being its dominant form in the industrialized Western world. Industrialization allowed cheap production of household items using economies of scale, while rapid population growth created sustained demand for commodities. Globalization in this period was decisively shaped by 18th-century imperialism. In spite of difference between Marx and Weber have much in common in their understanding of modern capitalism: they both perceive it as a system where ‘the individuals are ruled by abstractions. Marx, where the impersonal and thing like replace the personal relations of dependence, and where the accumulation of capital becomes an end in itself, largely irrational. Their analysis of capitalism cannot be separated from a critical position, explicit in Marx, more ambivalent in Weber. But the content and inspiration of the criticism are very different. And, above all, while Marx wagers on the possibility of overcoming capitalism thanks to a socialist revolution, Weber is rather a fatalist and resigned observer, studying a mode of production and administration that seems to him inevitable.

The anti-capitalist critique is one of the main force-fields which run across Marx’s work from the beginning to the end, giving it its coherence. This does not prevent the existence of a certain evolution: while the Communist Manifesto (1848) insists on the historically progressive role of the bourgeoisie, Capita is more inclined to criticize the disgrace of the system. The usual opposition between an ‘ethical’ young Marx and a ‘scientific’ one of the mature years is unable to account for this development. Marx’s anti-capitalist critique is organized around five fundamental issues: the injustice of exploitation, the loss of liberty through alienation, venal (mercantile) quantification, irrationality, and modern barbarism. Examining briefly these issues, emphasizing the less known ones:

1. The injustice of exploitation. The capitalist system is based, independently of the workers’ unpaid surplus labor, source, as ‘surplus value,’ of all the forms of rent and profit. The extreme manifestations of this social injustice are the exploitation of children, starvation wages, inhuman labor hours, and miserable life conditions for the proletarians.
2. The loss of liberty through alienation, reification, commodity fetishism. In the capitalist mode of production, the individuals their own products, which take the form of autonomous fetishes and escape their control
3. The materialistic view of social life. Capitalism, regulated by exchange value, the calculation of profits and the accumulation of capital, tends to dissolve and destroy all qualitative values: use values, ethical values, human relations, and human feelings. Having replaces being, and only subsists the monetary payment.

In conclusion, the evolution of capitalism was the answer to the feudalism and it draw backs; Adam Smith regarded as the father of capitalism laid the foundations and later followed by David Ricardo and Thomas Malthus. Gradually the idea of liberal democracy became best suited to the capitalist idea of economy. Though as socialism developed as the answer to the capitalist ideology and its effects of exploitation and creation of stratified society; but after the down fall of soviet union and cold war capitalist emerge as the best form of economy though there are still some features of socialism in welfare state, labor protection and so on present in the current government forms. The concept of natural rights and philosopher like lock and Rousseau gave importance to property. Right Property was seen as the means to exercise other rights and liberty, which capitalist ideology provided. Thus capitalist ideology emerged much consent manner than other ideologies.