How did capitalism come about?

What is capitalism?It all depends on who you ask. Since the term was coined, many theorists have tried to define it – with very different results. In addition, capitalism in its purest form does not exist. It develops and changes; there are different temporal phases and different forms. Anglo-Saxon capitalism in North America is different from that in Europe. And in Europe, again, there are different forms, such as the German one, which is called “Rhine capitalism”. A completely different kind of game has been emerging for several years in China, Brazil and India: so-called state capitalism. Basically, capitalism is not simply about money, nor is it simply about trade or markets. All this has been around for a very long time. Rather, capitalism is an entire economic and social order that has certain characteristics and needs them in order to function. The focus on growth is central. Technology use and investment ensure that more and more goods and services can be produced. Both the money used as well as factories and machines are mainly privately owned. The economy, in which large corporations have a dominant position, is managed decentrally and through the market. The state only intervenes when it is necessary – for example, when it comes to social affairs or competition law. Good wages and strong trade unions that enforce them are also an important pillar without which the capitalism system will not work. It is important because workers must also benefit. Without them, there would be no markets for the goods. When capitalism emerged in the north of England around the middle to the end of the 18th century, this went completely unnoticed. One of the prerequisites he needed to prosper was the high wage level of the workers. It ensured that England were no longer competitive internationally with their textiles. For the first time, the expensive use of technology to become more productive and outperform foreign competition was worthwhile. New techniques such as the mechanical loom, the mechanical spinning machine and the steam engine made this development possible. In addition, there was investment in infrastructure – in the emerging railway network and in the development of canals and roads. The economy grew, and yet there was an imbalance in England: the vast majority of workers were getting poorer and poorer. The reason for this was the lack of an important pillar of capitalism: the trade unions representing the workers. It was only their foundation and their advocacy for the workers that ensured that the working class also benefited, that living standards rose and at the same time the economy was further boosted. Capitalism experienced its worst crisis in 1929: on October 24, “Black Thursday,” the Great Depression in the United States began with the stock market crash. This was preceded by years of rising productivity and profits, while wages in the US were rather stagised. As a result, the sales market shrank and the entrepreneurs literally sat on their money. To the problem of too low wages came a second one: the owners of capital began to speculate and to increase their money more or less uncontrollably in the financial market, until the house of cards collapsed out of bogus profits and speculation. The result was a multi-year global economic crisis. Even then, it became apparent that capitalism in some areas depends on a strong state and on regulations. Capitalism survived the crisis – and was more regulated for many decades. However, with the abolition of “competitor” communism in the late 1980s, the situation changed again. Formerly socialist states such as Russia and China turned to the free market economy. The capitalist states of the West relied on deregulation to remove barriers to growth. A new phase began: that of so-called “turbo-capitalism”. And while the financial markets are earning dream sums, the real economy is on the move, wages remain low, and the gap between rich and poor continues to widen. There have already been two global crises since the turn of the millennium, once triggered by the so-called “dotcom bubble” in 2000, the collapse of the market for new technology companies. And again in 2007, after the so-called “real estate bubble” had burst in the USA. And in the future? There are many proposals around the world to prevent the financial crises in the future and to make economic growth environmentally and socially acceptable. However, there is (yet) no one’s solution.

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