Understanding the Capitalist System: Origins and Principles

The Origins of the Capitalist System

Mercantilism

Mercantilism is an economic theory driven by the need to build national wealth, understood as the accumulation of wealth, gold, and silver. As countries generally do not possess large natural reserves of these precious materials, the only way to accumulate them was through trade. This meant developing a positive trade balance, or in other words, ensuring that exports exceeded imports, as international payments were made in gold and silver.

Physiocracy

Physiocracy is an economic theory that considers the primary sector to be the only genuinely productive sector of the economy, capable of generating a surplus upon which all else depends. It is the only sector capable of creating wealth.

Economic Liberalism

Economic liberalism emerged during the early stages of the Industrial Revolution. Its fundamental basis is that individual interest is the motive that guides people in their economic activity, and through this self-interest, the general interest can be achieved. It therefore supports maximizing the role of the private sector. The state should intervene as little as possible in an economy that is governed by natural laws.

Economic liberalism and industrial liberalism are associated with British thinkers, mostly from the eighteenth century to the last third of the nineteenth century.

Capitalism

• Private Ownership of the Means of Production: The use of the means of production corresponds to their owners, who can use them personally, transfer their use in exchange for a fee, or even choose not to use them or permit others to use them if they deem it to be in their best interests.
• Freedom and Self-Interest: Both the owners of capital and those working for them are free and seek to maximize their welfare and benefits, so they try to get the most out of their resources and labor.
• Free Market System: The distribution of products among consumers occurs through a free market system in which free competition between buyers and sellers (demand and supply) allows for the formation of a price, but none of them has the capacity to impose on others. This principle affects all commodities, including labor.
• Basic Principles: Self-interest and the pursuit of profit are fundamental principles.
• Limited State Intervention: The state should not control the private sector. It is believed that economic activity will regulate itself.