What is Capitalism?

In a capitalistic system, the means of production are privately owned. As a result of privately-owned production means, concepts such as market competition, wage labor, and capital accumulation are all brought into existence. In the time that capitalism has existed, economists and historians have engaged in heated debate surrounding their outlook on the system’s execution and implications.

Origins of the System

The foundation of the system can be described as the utilization of capital in order to accrue a higher amount of capital. Land was occasionally lent out in return for in coin in the Middle Ages, though in that time, it was looked down upon as an infringement rather than a strategy.

By the turn of the 13th century, Europe’s development in trade created a surplus of profit from capitalistic endeavors. Merchants developed strategies for profiting from their buying and selling habits at a rapid pace, and within 100 years, high-class banking families had emerged from the efforts of those who had been the most successful.

14th century Florence held some of the earliest traces of what might be compared to the modern idea of a capitalistic structure. It was in Florence that the first organization of workers with grievances about the fairness of their pay (compared to the profits of their bosses) banded together for a strike.

Over the following two centuries, increased innovation in the art of foreign merchandise investment gave rise to a higher proliferation of chartered companies. Chartered companies were created out of the need for merchants engaging in risky trade gambits in foreign lands to have some form of reliable security to better secure the potential success of their trip; this, of course, was done for the sake of hopefully increasing the capital gain and influence of the host countries from which they hailed.

To counterbalance the risk of an oceanic trade endeavor without any guarantee of a profitable turnaround, joint-stock enterprises were invented so that multiple shareholders could collectively bear the risk together. The 17th century Reformation assisted in the growth of English capitalistic support with Calvinistic sanction of money-lending to state religion, and along with it came the first speculative market runs.

By the tail end of the 18th century, there was a higher amount of capital devoted to manufacturing facilities than there was to land. The late 19th century showed an ebb and flow of significant highs and crushing lows for American investors. The constant sway between the profitable and endemic effects of capitalistic speculation would repeat itself many times over with the postwar booms and economic crises observed in 20th century America, where the mobility of workers and their capital reached unprecedented heights.

Divisions of Class

Essentially, the traditional structure of the system is one in which only a small minority of people own the rights to produce and transport goods; these goods are generally segments of land, transport systems, technologies, and facilities for manufacturing consumer goods for everyday use. In exchange for the labor and time provided to manufacture society’s commodities, a wage is disbursed.


Though the roots of capitalism are oftentimes linked to Reformation, its true origins began as far back as the Middle Ages. The methods in which to accrue capital have evolved and shifted dramatically, but the core concept of wealth-driven wealth and probabilistic speculation in the hopes of high return has remained well-preserved.