Merchant capitalism Facts for Kids

Merchant capitalism is a term used by some historians to describe the very first stage of capitalism. It's a way of doing business that came before the big factories and modern banks we see today. The term was first used by a German thinker named Werner Sombart in 1902.

This early form of capitalism was mostly about buying goods in one place where they were cheap and selling them in another place where they were expensive. Think of merchants traveling far and wide to trade spices, textiles, or other goods. It was different from later forms of capitalism because it didn't involve:

Making goods in factories (no industrialization).
Big banks or complex financial systems (commercial finance).

Instead, businesses were often run by "merchant houses." These were like family businesses that traded goods. They got money from smaller private financiers, who helped them exchange debts and manage money between different producers and buyers. So, merchant capitalism was a way to gather wealth (called capital accumulation) before the modern factory system began. To move from merchant capitalism to industrial capitalism, a lot of initial wealth had to be gathered. This wealth then helped create large-scale factories and jobs for many workers.

History of Merchant Capitalism

Early forms of merchant capitalism started a long time ago.

It appeared in the 9th century during the Islamic Golden Age, a time when science, culture, and trade flourished in the Middle East.
In medieval Europe, it began around the 12th century. You could see signs of it in the wool trade, even in the time of the famous writer Chaucer.
By the 16th century, merchant capitalism became a very important way of doing business in Europe.

This period, often called the mercantile era, started to end around 1800. That's when industrial capitalism began to take over. Industrial capitalism focused on making things in factories using machines.

However, merchant capitalism stuck around in some places, even into the 19th century. For example, in the Southern United States, the plantation system (large farms using enslaved labor) kept merchant capitalism strong. This system limited the growth of factories and modern businesses there. It also made it harder for the U.S. government to pass laws that would help the whole country's economy grow, like creating a national banking system or building a railroad across the country.

Merchant capitalism facts for kids

History of Merchant Capitalism

See also