Capitalism is both an economic and sociological term; in its origin, historically/medieval times, capitalism was referred to as mercantilism which can abstractly be defined as the movements of goods from one location to another with the aim of making profits. Mercantilism is attributed to the expansion of the Roman Empire; during the 5th century when the Roman Empire shrunk, mercantilism also suffered the constriction. Mercantilism was also practised along the Arab peninsula, from the horn of Africa to Europe through Asia. In fact, it is presumed that from the trade with Arabs, mercantilism in Europe was enriched with new terms to make it stronger, for instance, the introduction of tariffs. This practise of trade (maximization of profits) sprawled all over until it became part of life and gained the change of name to Capitalism.
The people involved were called capitalists; they owned the goods/materials, land and tools beneficial for running of the trade. They then hired labourers who they paid wages while ensuring they got the fullest profit out of the whole production process. Thus capitalism as an economic term is the practise where production and labour is manipulated to realize the maximum profit possible. The elite members of the society who inherited property or by some virtues were in ownership of property, spent the surplus they yielded on luxury but the capitalists use the surplus in expanding their economic status by division of labour and production. As a sociological term, the capitalists exploit the labourers to their advantage without any restrictions.
To maximize profits, the capitalists would put the labourers to longer hours of work with less wages. (Ingham, 2008, 1-10) Before the rise of capitalism, some nations such as France and later England, were defined by the feudalism, where all the land was owned by the elite/Royal who divide and allocated part of the land to the church and some part was leased out under very strict conditions. The lessee were to be men trusted by the King, wealthy and vowed loyalty to the King, they had the freedom of how to turn the land into profits which they eventually shared with the Royals.
The third class were the labourers who were subordinate to the Royal and land owners and were given food in return for their services, they owned nothing that could be termed as property. The need for liquid money and independence between the Royal and the land owners opened way for
expansion of capitalism as well as the extension of the markets where the Royals also got indulged in the long distance trade for access to the new commodities like tobacco, coffee and tea.
Food stuffs were not the only commodity brought back in Europe, gun powder was introduced and a shift from the cavalryman armour to cannon. Nations had to fortify their borders to withstand cannon fire and this required more money/resources. The need for more resources brought internal wrangles as the land owners felt the new taxes were detrimental to their property making a breakthrough for mercantilism. (Hansen, 2001, 57-9) Mercantilism practises differed from nation to nation, British for instance had less restrictions unlike the one experienced in France; the French regulated the production and specification of goods quality while the British decentralized her industries. This led to the advent of the English Common Law where courts rose up to check the powers of the King on businesses. With the advent of colonization, the English laws and style of rule were spread to all the colonies including America where to date some of those policies are still in practise albeit amendments and modifications.
(Hansen, 2001, 64-5)
Transportation of the good was a daunting task that was hampered by many obstacles which proved to be costly. The most common means of transportation was sea as much as it was slow but less costly. Sea transportation was determined by the climatic conditions of different regions. In the middle ages, the widely accepted form of payment was the silver coin but with the scarcity of metal supply in the market, gold became a common means of payment. The demand for silver led to the exploration of mines in Germany, Austria and Hungary. Gold’s availability was from the exploration of mines at the horn of Africa thus with the sources of the precious metal in the market the circulation of money in Europe was fundamentally boosted.
Nevertheless, this did not improve the much needed change in the economic system yearned in Europe. There was the formation of Rhenish Monetary Confederation which sought to stabilize the currency by adopting one legal currency. (Di Vittorio, 4-6) The peak of the European
expansion was first laid in the 15th century whereby the European cultures were transferred; economic changes were recorded which automatically affected the cultural, social and political lifestyle of the nations.
Capitalism developed with the separation of producers from the means of production, however, this separation should be differentiated from slavery production where the land owners chase away the labourers and bought the slaves from merchants where they were exploited for maximum profits. Slavery did not improve the quality of production since it was proved to be costly, from the supervision, poor quality of goods produced by slaves and the tools of production used which were not efficient. In fact, merchants increased the prices of slaves and the landowners had to re-sought to the previous source of labour, the serfdom. In China, the Mongol empire faced an extinction when the serfdom decided to rebel around the 14th century as well as facing the agrarian crisis which was being fueled by the international foodstuff competition, these led to the birth of Ming dynasty. Concurrently with the downfall of the Mongol dynasty in China, the feudal system in Europe was in crisis too as the land owners were finding it too strenuous to maintain the Royals life style which was hampering their production which in turn would be transferred to the serfdom who were starting to show their discontent. (Harman, 2004,1)
After World War II, the European Empire had collapsed, America and other fresh independent nations sought for new policies to steer them from poverty to prosperity. The United States tried to pursed the newly independent nations from taking the socialism path if they needed to develop, rather embark on policies that would see to materialistic development, thus proposed modernization. The modernization theory as expounded on by Reinhard Bendix, was geared at legitimization of political authorities. Reinhard reiterated that the rise of capitalism and liberalization in Europe had been due to the democratic revolutions. The rise of the West has been accredited to the contact with people from different areas and of different calibres. The exchange of ideas, skills and technologies in these contacts notwithstanding the negative impact of diseases and plagues, these contacts and exchanges helped establish political, economic, social and cultural orders of the new societies. (Bently 1997 1)
Before the concept of capitalism, the means of production were primitive; capitalism shaped the evolution of the means of production which affected the social as well as the economic elements of life. For instance, competition between the capitalists was a key element in the economic growth of nations. Adam Smith, the author of The Wealth of Nations, adds that competition drove the capitalists to over produce which inevitably led to recession forcing the capitalists to cut down on the production out put. Debatably, competition reduced the profit margin of the capitalists thus resorting to increasing the productivity of labour by updating the technological means of production. It created a paradigm of change from over reliance of fixed capital to employment of variable capital too. The employment of variable capital send the capitalists to exploit the labourers further by subjecting them to longer and exhausting working hours, that as much as it demoralizes the workers, the capitalist is able to over produce.
Capitalism has been criticized for this feature of exploitation that inevitably creates class conflicts and the over production. The class conflicts led to the formation of trade unions to fight for the workers rights. Max Weber defined capitalism as the ‘satisfaction of human needs and
wants by industrial production ran by bureaucratic regimes that rationalize the profit achieved.’ (Ingham 2008, 11-18) The rational of capital accounting led to the emergence of social and political condition, industrial relations being one of them. It also made industrial production occur on a large scale and able to break the barriers of traditional and domestic obstacles. The government found a way in the management of these industrial production and by going beyond the borders, globalization became imminent. The developing European market under capitalism faced out the feudal system and replaced it which a social and political system that was conducive for capitalism growth. The members of the European nations formed a union that recognized each others sovereignty, legal rights and created a forum for economic transactions. The rules of exchange was changed, for instance, the ban on usury that was exploitative in nature as well as the recognisance of money lending. This union was also created on the background of meeting any fiscal need that a nation may need when in a financial crisis; formation of banks. (De Vries 1984
Conclusively, capitalism between 1500 and 1800 spearheaded the modernization and globalization of Europe and the countries that traded with them. Through revolutions and the repercussions of capitalism, social, cultural, economic and political life were transformed. Capitalism inevitably ushered in anew era of independence of the ruling class with the capitalists, liberalization of the market and as the workers were exploited their discontent led to trade unions and government interventions through legislation. Capitalists in search of technological means of production sought new skills thus giving rise to the demand for professionals from technical to social science and arts. Thus capitalism cannot be rebuked because with it, social structures were created that recognizes humanity and economic growth was also achieved with its advent. The growth of industrialization during capitalism expedited the urbanization which was necessary fro economic growth, in the previous regime, the low class were subjected to farms where they tilted the land and watched over it. (De Vries, 1984, 253-5)