Let me preface this with the fact that the history of capitalism is extremely vague and complicated. This attempt to summarize it is focused on getting the general idea down, rather than the specifics (which are debated).
- For centuries merchants have been buying and selling (trading) goods to make a profit.
- The profit is made by exploiting the different value of a good in different markets.
- e.g. Pepper is bought cheaply in the east and sold for a profit in Europe.
- First joint-stock corporation is created to lower risk of international trade voyages.
- Still not really capitalism.
- Wealthy people with money (capitalists) start to build factories for the processing of goods to make a profit.
- They need people to work in these factories (labourers).
- They pay people (and children) wages to work in the factories.
- This is a big deal, as previously most people didn't get paid wages.
- More people become wage-labourers, selling their "labour power" to capitalists.
- More people have money, more demand for goods.
- Which in turn means more capitalists go into production (the positive feedback loop of capitalism).
- To decrease costs (increase profits), capitalists deconstruct the labour process into small steps.
- A worker now only works on one small step of the production process.
- Capitalists can then employ the cheapest labour for each step.
- Scientific management theory further reduces inefficiency in the production process.
- Workers no longer sell their labour, but their labour power.
- Unions are created as a mediating force between the capitalist's desire for cheap labour and the worker's desire for better pay.
- Capitalism now owns the means to production (factory, machines), and the knowledge of production (process), and only needs to purchase cheap labour.
- This is full blown capitalism!
1900s and beyond
- The State becomes involved in regulating capitalist markets.
- Foreign trade and currencies allow for more complex forms of capitalism.
- Market speculation becomes a popular way to increase capital.
- Basically, everything gets really messy and complex from here on out, so let's stop here for now...