The Economic System

2 Pages 592 Words

The Economic System

From the earliest days of civilization until the end of the Middle Ages—about 5,550 years—all societies had economic arrangements to satisfy the needs and desires of their populations. But the societies themselves were political, religious, and military units made up of the rulers and the ruled. It was the ruled who produced the wealth. They were slaves, peasants, or craftsmen, and most of their wealth went to enrich the ruling classes. In other words, nonproductive labor lived off productive labor.

Late in the Middle Ages a number of factors slowly came together to create the modern economic system called capitalism. Among these factors were the emergence of international banking, the creation of overseas colonial empires, expanded international trade, the growing independence of working people from their overlords, and the gradually lessened control by governments over economic functions. To these was added in the 18th century the start of the Industrial Revolution. This was the most potent agent of economic change (see Industrial Revolution). It was a real revolution inthat it transformed societies completely and, for the first time, into primarily economic units or collections of economic units.

Everyone in a society, from the ruler down to the lowliest worker, became involved in theeconomy. What had been a matter of convenient and random economic arrangements was changed into an economic system. Nearly everything in society became a commodity to be bought or sold. Labor itself was uprooted from its fixed place on land or in guilds and became a commodity. People offered their services to employers, who paid them instead of taking their wealth by force. Now they worked for entrepreneurs, orbusinessmen, instead of for rulers. Societies had become economies.

There were still political, military, and other institutional arrangements, but the real well-being of a society depended on its economic functi...