ABSTRACT
This chapter analyzes the key institutions that supported the establishment of capitalism in England. It describes the major economic concepts in Adam Smith’s critique of mercantilism. The chapter identifies the major components of Smith’s analysis of capitalism, and examines which of his ideas still hold true when applied to modern capitalism. It assesses the arguments of laissez-faire economists against English Poor Laws, macroeconomic intervention, and trade protectionism. The chapter explains Karl Polanyi’s concept of the double movement, and apply this concept to the modern world. The creation of the industrial factory signaled the rise in importance of capital, machinery, equipment, buildings, and other technological resources used to produce factory goods. Smith believed that lightly regulated capitalism was preferable to mercantilism based on how he envisioned a competitive market capitalist system working. Capitalism began in England based on set of unique institutions that help to understand the crucial ingredients in a capitalist economic system.
