Karl Marx introduced the theory of stages of economic development, which complemented his theory of class struggle. He categorized economic evolution into five categories viz.-slavery, feudalism, capitalism, socialism and communism.
In this stage, all the work is done by human labour like hunting, preparing shelter, finding skin of animals or bark of a tree to be used as cloths. This made the human labour the most important resource which can earn income. Those who had maximum slaves were the most powerful in the society.
As the population increased, it was not possible to feed huge population with only hunting. This increased the demand for land to grow food grains to feed growing population. Mankind also started learning the art of sowing and harvesting and invented tools to increase productivity.
Shift of the economy from slavery to feudalism led to shift of strategic resources from human labour to land. Those who land became most important and powerful in the society. Fiefs held land with the permission of the king.
Fiefs were the warlords who fought among themselves to capture land from each other. Sometimes the dispute was settled by Kings. Fiefs employed serfs to work on their fields to grow foodgrains.
Main source of revenue for the government was land revenue and king was usually satisfied till the fiefs paid their land revenue obligations. In feudal economy, agriculture rather than hunting became the most important human activity.
Industrial Revolution led to generation and spread of scientific ideas and values among people. French Revolution led to realization of the need for freedom of expression and speech. These developments led to many innovations and introduction of new technology in many sectors. Technological improvements initially benefited agriculture resulting in increasing the productivity. This led to displacement of labour from agriculture. At the same time, textile and mineral sectors developed, which were able to employ labour displaced from agriculture.
Agricultural activity was located in rural areas whereas textile and mineral companies were located in urban areas. This led to shift of population from rural areas to urban areas.
As the productivity increased in agricultural sector, lesser amount of land was needed fa feeding population. This decreased the importance of land. Starting of industrial forms needed capital, which made the owners of capital the most important and powerful section of the population.
(iv) Socialism and Communism:
Maturity of capitalism will create intense class conflict between proletariat (labour class) and bourgeois (capitalist class). Ultimately, labour will unite together and over the state controlled by capitalist class through a revolution. In a socialistic economy, labour will control the state and will own the companies. Market mechanism will be substituted by planning by the state. Income of the individuals will be decided by their needs and not by market mechanism. Ultimately socialism will lead to communism whereby state itself wj wither away and there will be no shortage of products.