AP Group Study Project-Capitalism
What is the dictionary definition for this idea/event?
An economic system based on private ownership and opportunity for profit-making.
Who (give me precise people) started this idea/event?
Adam Smith is the man who defined capitalism. He was a Scottish social philosopher
who was born in 1723 and died in 1790. He wrote “An Inquiry into the Nature and
Causes of the Wealth of Nations” which was the first work to explain the economy of a
nation as a system. There were other Enlightenment thinkers that influenced the way
we do things such as John Locke who argued in 1690 that governments were created
to protect life, liberty, and property and that the people had a right to rebel when a
monarch violated these natural rights. Another Enlightenment thinker was JeanJacques Rousseau who asserted that the will of the people was sacred and that the
legitimacy of the monarch depended on the consent of the people.
What were the reasons that this happened (previous philosophies/events that led
up to this)?
Some of the things that led to the use of capitalism was both the Spanish and
Portuguese exploration voyages in the 15th and 16th centuries were government
ventures and both of them tried to keep their overseas trade and colonies royal
monopolies. However it was proved that monopoly control was expensive and
inefficient. The success of the Atlantic economy in the 17th and 18th century was owed
much to private enterprises, which made trading venues more efficient and profitable.
European private investors were attracted by the profits they could make from an
established and growing trading and colonial system, but their successful
participation in the Atlantic economy depended on new institutions and a significant
measure of government protection that reduced the likelihood of catastrophic loss
List and describe the major events and people in this idea/event?
During the early beginnings of this idea, much power was invested in Holland as they
had the premiere stock exchange and many important institutions. To make a profit,
the banks invested the funds into real estate, local industries, loans to governments,
and overseas trade. If individuals wanted higher returns then they can buy shares in a
joint-stock company. These shares were bought and sold in specialized financial
markets called stock exchanges. This early capitalism was supported by mercantilism,
policies adopted by European states to promote their citizens’ overseas trade and
accumulate capital in the form of precious metals. Mercantilist policies strongly
discouraged citizens from trading with foreign merchants and used armed force when
necessary to secure exclusive relations. Then as charter companies were created with
the English and French leading it and the Dutch were basically cut out. European’s
capitalism also affected the Atlantic system as they had transformed regions beyond
recognition including Africa although not as much as the West Indies and northern
Brazil. In July of 1944, economic specialists representing over 40 countries met at a
New Hampshire resort and they agreed to fix exchange rates and to create the
International Monetary Plan (IMF) and the World Bank. The IMF was to use currency
reserves from member nations to finance temporary trade deficits, and the World Bank
was to provide funds for reconstructing Europe and helping needy countries after the
war. The Soviets had attended and signed the agreements but deepening suspicion
with the USA and Britain undermined cooperation. So the Soviets established a closed
monetary system for itself and the new communist regimes in Eastern Europe.
What countries/civilizations were affected most by this idea/event?
In reality it was the entire world that was affected by this idea as people all over the
world tried to propel themselves forward. However back then it was North America
(U.S.A.), Europe, and Asia (China) that were and still are the main “guys in the pool”.
China particularly has adopted its capitalistic ways in order to survive and now it’s the
forefront of the business world. Even in the tiniest island you can find, capitalism has
somehow changed that island was structured and in some way is making money.
What effects of this idea/event do we encounter today?
Basically all we have today is a direct result of Adam Smith and other Enlightenment
thinkers defining capitalism. Everything today no matter what is some sort of trade
and that is what turns the wheels of capitalism; trade. There is someone always selling
a service or product and with the money they get, they go to buy something and that
person or corporation goes on to buy something else. It’s a never ending cycle.