Free Market Capitalism

History of Free Market Capitalism

Humans began establishing community systems which included elements of labor, reward and trade in prehistory. In time, we began to domesticate plants and livestock, creating more tradeable goods and forcing people to set up foundations on the land and develop economies.

Less than 5% of the population of Europe lived in towns before the 12th century. The workers who were in the cities were operating under feudalism. When the Black Plague struck, a labor shortage was created from the number of people who were killed. Soon, nobles were fighting to hire serfs to keep their estates running, and trades needed to train outsiders. Because of this, people started to move into towns.

Business started as trade between towns, but it wasn’t competitive trade. Each town had different products and services which were standardized over time. Once they were standardized, trade was carried out on a larger scale, starting with town to town and eventually reaching nation to nation. Soon, multiple nations provided the same goods and trade became competitive.

Most colonies were set up with the characteristics of feudalism. Raw goods went from the colonies back to the motherland and then the colonies were forced to buy the finished product back. Adam Smith noticed that this was not leading us to development and change, but rather keeping us from moving forward. The ideas he published opened the world’s eyes to capitalism.

Adam Smith

Adam Smith didn’t necessarily invent many of his ideas, he is responsible for making known the fundamental ideas of classical economics. Some of his main ideas were minimizing the role of the government and taxation in the free markets, and that an "invisible hand" guides supply and dem...

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...ause they’re in need of the product and they believe that the vendor is in need of the the money that they have in exchange for the product. The consumer goes ahead and buys/trades the money in return for the product because he’s free to do what he wants with his money and doesn’t have to think about taxes/regulation.

Person 1 and Person 2 decided to trade products because each have what the other person wants. They can trade as is or they can sell the items and set whatever price they want because in a free market economy, the government can’t regulate what the producers do.

After the American Civil War the American economy nearly doubled in size. This period was called the Gilded age, where new technologies were introduced. Throughout this period Free market Capitalism flourished and helped The United States become the largest industrial nation.