Capitalism is an economic system based on a free market, open competition, profit motive and private ownership of the means of production. Capitalism encourages private investment and business, compared to a government-controlled economy. Investors in these private companies (i.e. shareholders) also own the firms and are known as capitalists. Capitalism as a social structure works on individualism rather than collectivism, however it believes that through individuals with different skills, the community will benefit. During the 19th century, capitalism was the dominant economic and social system throughout the world until World War I introduced modern communism.
Some historians believe that capitalism emerged from the seventeenth century onwards - from the opening of the first stock exchange in Holland or the 19th century Industrial Revolution. Others believe that capitalism was given a greater push as a reaction to feudalism, where land is "claimed" by a monarch, and loaned to the vassals, who in turn use the serfs to farm the land. Under capitalism, landowners still needed serfs to work the land, but the system allowed the workers to accumulate savings and have the opportunity to invest and become shareholders in the means of production.
The Industrial Revolution was important in the growth of capitalism because it took the emphasis off land ownership as a source of wealth and onto manufacturing enterprises. Capitalism became popular after the revolution as it allowed mass production, and profit could be gained by owning a part of these sources of production. It gave a variety of people (aristocracy, merchants, industrialists) the opportunity to invest in new ventures.
With the industrial revolution, a new "class" was bred into society - the working class. The working class were the most disadvantaged in a capitalistic society, with very little rights or privileges. The class system was still prevalent within capitalism. At the top sat the dominant capital class - based on family wealth and inherited power. Through social revolutions since the 17th century, the old aristocracy as a class had been abolished, but were now transformed into these capitalist land-renters. They were followed by the middle class who were internally heterogeneous in terms of property ownership, education, public/private sector, and they were generally supportive of market capitalism. At the bottom were the working class, who had strained rights and were the strongest supporters of overthrowing capitalism and implementing socialism.
To understand the social tension under capitalism at this time, one can divide society in to two groups: the employers and the employees. The employees, adopting the values of socialism, aimed for a society with no class distinctions - thus the capitalists and workers all collected under one heading....