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The Evolution of Business: Feudalism, Mercantilism, and Capitalism BUS/210 April 15, 2012
the necessity for diverse products did not permit total self-sufficiency because people. 2007). the aristocrats. The aristocrats. innovation. Those business systems. While such a statement is applicable to many areas. “Only understand the origins of an institution or instrument and you will find its present day role much easier to grasp” (p. in turn. the business concepts of commerce. who wanted to charge as much rent as they could. Instead. The Origins of Business. and capitalism. which depended on commerce and property rights and were transformed by the Industrial Revolution. 1 ). Money. include feudalism. property rights. and Markets. The monarchs. for one reason or another. they can be documented in the variety of business systems that evolved through time.THE EVOLUTION OF BUSINESS 2 Introduction In his book. Feudalism The first business system after ancient times was that of feudalism. and tenant which are still used today. mercantilism. This negotiation created the terms landlord. for example. and others are not 21st century creations. In exchange for the land the tenants provided the landowner a share of their produce or appropriate rent. A monarch. provided land for aristocrats in exchange for their loyalty and protection in times of war. which established both a commitment of loyalty and a system of business. lease. profitability. However. provided land to tenant farmers. Roberts uses the words to explain the value of understanding the origins of business in order to truly understand the contemporary business world. After all. The amount of rent became the source of negotiations because of the competing interests between the landowners. over time. and the tenant farmers. could not . Roberts (2011) quotes author Niall Ferguson’s words. profit. who desired to profit from their hard work even after paying the rent (Jones. and the tenant farmers lived and worked together with a goal of self-sufficiency.
Such actions expanded the economy’s structure from a mere dependence on land and labor to one which depended on trade and. political structures also changed. they became more willing to risk their capital in new business ventures. 46). The most important political change to economic practices was the signing of the Magna Cara which created a powerful shift in property rights because aristocrats gained private property rights. an important factor in the system of capitalism. 2007. When people were granted private property rights. p. eventually. For example. This system developed as “merchants and bankers organize the trade of products across markets and countries until they are put to their most valued use” (Jones. the merchant bought the product at a low rate. Capitalism Capitalism is the business and economic system which is dependent on the private ownership of resources as the basis for the production and distribution of goods and services. these ventures used the technological changes associated with the Industrial Revolution to alter the production of goods from the costly production of products .THE EVOLUTION OF BUSINESS 3 produce all the necessary products. By doing so. This allowed the merchant to sell the product at a much higher price than he paid for the product. a merchant desired to purchase a product in a market where there was an extensive supply of that particular product. While mercantilism became the prevalent business and economic system. To earn a profit. Mercantilism Bartering and trading was the foundation of another major business system—mercantilism. the merchant then sold the product where there is a limited supply of the product but a high demand for it. enterprise or the ability “to increase land and capital in ways that were not obtainable by focusing on their landed estates” (p. As a result people began to barter and trade in order to obtain products that could not be produced on their estates. In time. 45).
commerce depended on bartering or exchanging one good or service for another. Commerce As the business and economic systems emerged and changed. though. . it also became an important source of capital beyond land and labor. because both people needed to want what the other was offering and find a way to create an equal exchange. money facilitated specialization in the labor force which allowed people to use their time to create more profit and capital. These laborers were known as proletariats. Thus. so did business commerce. many capitalists exploited their labor supply by offering low wages and demanding extensive work hours in unpleasant conditions. the process of lending money at an interest rate became another way for people to use their money to increase their capital. In a desire to make additional profit. These principles of commerce developed over time and remain an important part of the world’s current economic structure. exchange. To move beyond these challenges. and trade goods and services” (Jones. or “the process through which people produce. As a result.THE EVOLUTION OF BUSINESS 4 made by skilled workers to the production of large quantities of low-cost products. 2007. Since money is associated with value. people began to learn the monetary value of various products and services.11). The creation of the proletariats and the capitalists not only changed business but also the entire world. Money allowed for an exchange standard because a particular value was assigned to the money which had a store of value. The rate charged for the loan varied on the riskiness of the loan—the higher the risk of money loss. p. Bartering was complicated. the higher the interest rate. In early times. This change forced skilled workers to compete for unskilled jobs in order to find economic success. money was introduced to use to buy products or services. With this standardization.
they were nothing more than a resource owned by the estate for their labor. and enterprise has been another essential part of business systems. owning land and whatever existed on that land has been a critical property right. stocks. began with the invention of the steam engine which altered production.THE EVOLUTION OF BUSINESS 5 Property Rights Property rights or the rights people have to own. money). labor. or sell valuable resources including land. Instead. While the Industrial Revolution spurred on industrial development. In fact. and trade (Jones. use. communication. it may have been altered the most during the Industrial Revolution in Western Europe and the United States. labor. property rights have been and continue to be critical to the success of a business person. As a result. Industrial Revolution While business has developed throughout history.g. according to most scholars. Once people had the property rights of land and labor. The innovation. people could then venture into unknown business territories through enterprise. they generally had the property right to capital or financial assets (e. This revolution occurred in the 18th and 19th centuries and improved production and trade through the innovative use of technology. Those who did have the property rights of labor owned their own labor and had the right to work freely. capital.. 2007). it also affected farming because the steam engine and other innovations increased productivity and reduced the labor supply needed to work the land. or the right to use the land. those without land generally had no property rights. travel. within feudalism. bonds. While the importance of specific property rights may have differed at various points in history. The steam engine helped provide power for the new machines developing in the rapidly expanding manufacturing companies. With capital. many farmers were forced to . Throughout history. and capital to increase their personal wealth and power.
Despite all the changes. From the beginning of feudalism to contemporary capitalism. and capitalism. including feudalism. and the Industrial Revolution. The methods of commerce changed within each economic system—feudalism. the evolution of business. . and capitalism. Significant changes in the production and distribution of goods changed with the Industrial Revolution. mercantilism. The changes stemming from the Industrial Revolution pushed forward capitalism. property rights. economic concepts have been in place for a long time and understanding how they developed does help one have a deeper appreciation for the business world today. property rights have been critical to defining who can find economic success. the economic system on which the United States is based today. mercantilism. has been influenced by commerce. Conclusion In conclusion.THE EVOLUTION OF BUSINESS 6 move into urban areas and take jobs in manufacturing companies.
New York. and markets. R. (2011). . Roberts. Introduction to business: How companies create value for people. NY: Columbia University Press. New York. money. K.THE EVOLUTION OF BUSINESS 7 References Jones G. The origins of business. (2007). NY: McGraw-Hill/Irwin.
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