ABSTRACT
This chapter describes the roots of capitalism in England. It discusses Adam Smith’s ideas regarding how he thought capitalism would work, and why he thought it was preferable to mercantilism. The chapter examines the triumph of laissez–faire ideas in the debates over the Poor Laws, macroeconomic crises, and restrictions on trade. 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. The reasons for the Industrial Revolution’s conception in England, as opposed to elsewhere, are important because they help understand the key institutions that provide the basis for a capitalist economic system. The key difference between the capitalist economic system and mercantilism would be its effect on economic growth. The key institutions include a money–driven, scientifically–oriented culture, secure property rights, and a large domestic and colonial market.
