The Journey to Capitalism

Through the mercantilist and putting out systems, Europe was making progress towards a capitalist economy.

First, we need to know and understand our destination: capitalism. Capitalism was an economic theory developed by Adam Smith. He believed that the free hand should rule the economy, not the government. In a capitalist system, a country would import (in bulk so it’s cheaper) and export. Investment in capitalism involved bigger business. If the world economy was seen as a pie, capitalists believed the pie could grow so that everyone had the opportunity to take a lot of slices. 

Mercantilism is defined as the economic theory that trade generates wealth and is stimulated by the accumulation of profitable balances, which a government should encourage by means of protectionism. Basically, a country needed to export more than import. This was a national policy directed by the government. It was a policy that affected a country and the foreign countries it traded with. Colbert was a French economist who wanted France to become completely independent so that they would only export and never import. England instituted the Navigation Acts in order to achieve  mercantilism. The Navigation Acts stated that all goods sent into Europe by the colonies would be carried on British ships so that Britain could reap all the profits. , mercantilist policies would state that in order for a country to ‘win’ it would need to take a lot of slices leaving other countries with less pie. So far, everything about mercantilism is exactly the opposite of capitalist ideas. How is mercantilism a step toward capitalism? Mercantilism and capitalism held the idea that if individuals thrive privately, the state will thrive as a result. By putting an emphasis on exports rather than imports, the government was helping industry and private capitalists, which would then assist the state economy. 

The putting out system also transitioned Europe towards a capitalist economy. This system was a relationship between individuals within the country rather than between governments of different countries. It made production more efficient and allowed individual laborers to become more independent. It was a system directed by individuals, rather than the government, and it worked for what was best for the individual. Additionally, women had great control and could be self employed as seen by the spinsters. Women were contributing to the economy. The putting out system laid the foundation for capitalism by creating an early capitalist society. There were some shortfalls, however. Merchants could not regulate their weavers. Weavers would take 3 days of rest. Monday was called “Holy Monday.” 

Relationships between workers and employers were not always pleasant. Finally, five spinners were required for every weaver. Despite such shortfalls, the putting out system was a means by which a country could achieve mercantilism and held the ideas of “freedom” seen in capitalism. Additionally, the new world was good for the cottage industry. In building the Atlantic economy, a larger market opened up. This allowed for the bigger business seen in capitalism. 

The first industry to become capitalized was the textile industry. This was because human invention created mechanical looms, which would become a part of factories powered by mills, which were powered by water. 

Evidently, mercantilism and the putting out system helped to bring Europe, Britain in particular, toward a capitalist economy.