Old Regime to Capitalism: 17th Century Transformation

The Old Regime: Definition

The Old Regime refers to the economic, social, and political systems that emerged from the decline of feudalism and the development of capitalism, alongside the rise of authoritarian monarchies.

Key Features

• Persistence of the manorial economy
• Early development of commercial capitalism
• Stagnant population growth
• Monarchical absolutism
• Stratified society

Commerce

Domestic trade developed slowly due to limited surpluses, inadequate transportation, and low productive specialization. Colonial trade began to flourish, stimulating the European economy by providing raw materials and creating markets for manufactured colonial products. Finances also evolved, with new credit arrangements emerging to meet the needs of banks. This facilitated the growth of commercial capitalism.

Finally, mercantilism developed, a policy based on state intervention, the promotion of trade, and the accumulation of precious metals like gold and silver.

The Enlightenment

The Enlightenment was a 17th-century intellectual movement driven by French thinkers.

Core Ideas

• Emphasis on reason as the sole means of explaining and understanding reality.
• Deism, which respects the idea of God's existence while rejecting religious intolerance and doctrines.
• Advocacy for natural models over artificial ones.
• The pursuit of happiness as the primary goal of humankind.

Capitalism and Class Society

Capitalism is an economic system characterized by the division between capital and labor, technological innovation, reinvestment of profits, and individual appropriation of profits.

Liberal Economy

This doctrine was formulated by members of the Manchester School: Adam Smith, David Ricardo, and Robert Malthus.

Adam Smith

Smith argued that society is composed of individuals, not social classes. He believed that personal interest is the engine of economic activity. He advocated for minimal state intervention in the economy, including the elimination of protectionist barriers and monopolies. He also supported market equilibrium based on supply and demand.

David Ricardo

Ricardo formulated the "iron law of wages," which posits that as wages rise, prices also rise, thus maintaining purchasing power.

Robert Malthus

Malthus highlighted the demographic problem, warning that population growth outpaces resource availability, leading to social misery.