Merchant capitalism is a term used by economic historians to refer to the earliest phase in the development of capitalism as an economy and social system. In Europe, merchant capitalism first became a significant economic force in the 11th or the 16th century, depending on point of view. The mercantile era drew to a close around 1800, giving way to industrial capitalism.
Merchant capitalism was mostly not based on industrialisation and the factory system, but on merchant houses backed by financiers acting as intermediaries between simple commodity producers. Thus, merchant capitalism preceded the capitalist mode of production as a form of Capital accumulation. The transformation of merchant capitalism into industrial capitalism involved, according to Karl Marx, a process of primitive accumulation of capital, resulting in a rapid expansion of industrial wage labour. Industrialisation, industrialization or an industrial revolution (in general, with lowercase letters) is a process of social and economic change whereby a human society is transformed from a pre-industrial (an economy where the amount of capital accumulated is low) to an industrial state (see Pre-industrial society). ... Simple commodity production (also known as petty commodity production; the German original word is einfache Warenproduktion) is a term coined by Frederick Engels to describe productive activities under the conditions of what Marx had called the simple exchange of commodities, where independent producers trade their own products. ... The capitalist mode of production is a concept in Karl Marx’s critique of political economy. ... Most generally, the accumulation of capital refers simply to the gathering or amassment of objects of value; the increase in wealth; or the creation of wealth. ... Karl Heinrich Marx (May 5, 1818, Trier, Germany – March 14, 1883, London, England) was an immensely influential philosopher from Germany, a political economist, and a socialist revolutionary. ... Primitive accumulation of capital is a concept introduced by Karl Marx in part 8 of the first volume of Das Kapital (in German: ursprungliche Akkumulation, literally original accumulation or primeval accumulation). Its purpose is to help explain how the capitalist mode of production can come into being. ...
Merchants would eventually come to see that taking over or being more involved in the means of production would enhance their profits by giving them control over the productivity of labor.
While the merchant class was far from cohesive, disagreements about policy within the merchant class were subservient to the aims of the common goal of expanding the trade surplus.
Merchants as a class were thus compelled to become full-fledged capitalists or fade into the newly emerging working class.
Capitalism has existed in a limited form in the economies of all civilizations, but its modern importance dates at least from the Industrial Revolution that began in the 18th cent., when bankers, merchants, and industrialists—the bourgeoisie—began to displace landowners in political, economic, and social importance, particularly in Great Britain.
Capitalism is also usually considered to involve the right of individuals and groups of individuals acting as "legal persons" (or corporations) to trade in a free market.
The earliest stages of modern capitalism, arising in the period between the 16th and 18th centuries, are commonly described as merchantcapitalism and mercantilism (Burnham; EB).
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