Modern capitalism traces its origins to the 13th century, with the increasing wealth and influence of a merchant class in Italy and the Netherlands, and to the inception of the first great banking families in 14th century Florence. Modern capitalism began to take recognizable shape at the onset of the Industrial Revolution, especially once stock broking became popular. Another important event in the history of capitalism is the South Sea Bubble.Continue Reading
Between the 16th and 17th centuries, individual merchants began to band together into guilds, making large speculative trading enterprises more manageable. These guilds' need for government support led to the creation of chartered companies, which relied on the government to assure trade monopolies for successful endeavors. The success of these companies led to the creation of joint-stock companies, where multiple investors would fund speculative enterprises together and share the resulting profits.
The Muscovy company, chartered in 1555, is the first joint-stock company of this kind. It was followed by the East India Company and the South Sea Company, the latter of which would go on to assume national debt in massive amounts, leading to the South Sea Bubble.
The South Sea Bubble was an important event in the history of capitalism because it exposed the public to the dangers of unrestricted economic activity, in particular when lawmakers are financially involved in a company that can essentially operate free of government regulation.Learn more about Economics