Development of capitalism

The history of capitalism has diverse and much debated roots, but fully-fledged capitalism is generally thought to have emerged in north-west Europe, especially in the Low Countries (mainly present-day Flanders and Netherlands) and Britain, in the sixteenth to seventeenth centuries. Over the following centuries, capital has been accumulated by a variety of different methods, in a variety of scales, and associated with a great deal of variation in the concentration of economic power and wealth, and capitalism has gradually become the dominant economic system throughout the world. Much of the history of the past five hundred years is, therefore, concerned with the development of capitalism in its various forms.

It is an ongoing debate within the fields of economics and sociology as to what the past, current and future stages of capitalism consist of. While ongoing disagreement about exact stages exists, many economists have posited the following general states. These states are not mutually exclusive and do not represent a fixed order of historical change, but do represent a broadly chronological trend.

The processes by which capitalism came about, evolved, and spread, are the subject of extensive research and debate among historians. Debates sometimes circle around how capitalism is defined, but a significant body of work has been able to bring substantive historical data to bear on key questions. Key parameters of debate include: how far capitalism is a natural human behaviour and how far it arises from specific historical circumstances; whether its origins lie in towns and trade or in rural property relations; the role of class conflict; the role of the state; how far it is a distinctively European innovation; its relationship with European imperialism; whether technological change is a driver or merely an epiphenomenon of capitalism; and whether or not it is the most beneficial way to organise human societies.

The historiography of capitalism can be divided into two broad schools. One is associated with economic liberalism, with the eighteenth-century economist Adam Smith as a foundational figure, and one with Marxism, drawing particular inspiration from the nineteenth-century economist Karl Marx. Liberals tend to view capitalism as an expression of natural human behaviours which have been in evidence for millennia, and the most beneficial way of promoting human wellbeing. They tend to see capitalism as originating in trade and commerce, and freeing people to exercise their entrepreneurial natures. Marxists tend to view capitalism as a historically unusual system of relationships between classes, which could be replaced by other economic systems which would serve human wellbeing better. They tend to see capitalism as originating in more powerful people taking control of the means of production, and compelling others to sell their labour as a commodity. For these reasons, much of the work on the history of capitalism has been broadly Marxist.

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