Controlling the economy by private owners of capital whose operations are directed toward new returns with a view to reinvesting surpluses.
Capitalism did not emerge fully as a social reality until the middle of the 19th century. This is because neither the royal absolutism of feudalism nor the tradition of mercantilism permitted it. It began in UK and spread to the European Continent and North America. The rise of the machine age, the spirit of the Puritan ethic, the human drive for more and more and the discovery and exploitation of three continents, have all been offered as reasons for this emergence.
Capitalism is a politico-economic system based on private ownership of the means of production and characterized by the pursuit of material self-interest. Under capitalism, each individual obtains the cooperation of others by means of a process of voluntary exchange, in which both parties gain.
Entrepreneurs and free agents operating within the system use bank credit as a source of investment funds and generate energy for the system by developing innovations in processes and products. These innovations, when securing in clusters, release a force of creative destruction. Traditional ways of doing things are rendered obsolete by new or better means of production, new products or new markets. The drive behind the innovations is the profit motive, but the profits that accrue to particular successful innovations gradually disappear through pressures from competing innovations.
Capitalism is a 19th century term for the free-market economy. The international free market economy of the 20th century has been the driving force behind the scientific advances in medicine, physics, mathematics, information and communication technologies, as well as in agriculture, public health and interdisciplinary studies. It is the only force that is likely to meet the challenge of the 21st century.