As England has been considered the classic case for the rise of capital­ism, we start with a study of its development in Britain. There is no unanimity among the scholars regarding the date of the origin of capital­ism in England.

While some scholars have tried to trace it from the fourteenth and the fifteenth centuries, the general view is that it originated in the sixteenth century. This view was first of all advocated by Marx and has now come to be generally accepted by the scholars.

No doubt, in the fourteenth and the fifteenth centuries certain capitalistic organizations existed in England which employed several hundred workers and involved considerable amount of capital investment, but these organizations were quite scarce. Further, compared to the later capitalist organizations they were too small and can at the most be described an_ adolescent capitalism.

It was only in the later half of the sixteenth and the early seventeenth century that capitalism as a specific mode of production originated. The capital began to penetrate production on large scale was undertaken, and mature relationship between the capitalist and the hired wage-earners, or in the less developed form of the subordination of the domestic handi­craftsmen to capitalist developed.


The factors which contributed to the growth of capitalism in England were: (i) Geographical Discoveries; (if) Emergence of Trading Compa­nies; (iii) Development of National Policies; (iv) Development of Banking and Credit Facilities. Let us examine the role of these factors in some details.

The geographical discoveries made by the Spanish and the Portuguese sailors opened up new routes to the east and gave a fillip to the colonizing activities. Though the lead in this regard was stolen by the Spanish and the Portuguese, the English adventurers tried to fall in line with them. This inevitably brought them in conflict with the Portuguese and the Spanish. However, after some initial set-backs the English ultimately suc­ceeded in defeating the Spanish Armada in 1588 arid establishing free trade with other countries.

Free trade with other countries was encouraged by the government as well as the individual traders. As a result, a number of trading companies were formed. The main considerations which prompted the government to encourage the formation of the trading companies were that they would be able to bear the probable losses involved in long distance trade; they would be in a better position to secure concessions for trade from foreign rulers: the companies would arise above greed and dishonest trading prac­tices and thus build up country’s reputation in foreign countries; and finally, it was ea.,y for the government to realize taxes from the companies and there were very little chances of being defrauded.

As the trade developed, need for a national policy was felt. This led to the rise of the mercantilism, about which we have discussed in details in one of the earlier chapters. Finally, the increase in currency, banking and credit facilities also contributed to the growth of capitalism. It may be noted that the development of banking and credit facilities in England came much later than in other European countries like Italy, Austria etc.


England set-up the first bank (The Bank of England) in 1694. But very soon England came to have one of the most modern banking system. A number of banks were also set up outside London. Even the private banks played a significant role in the development of capitalism.

The State in England also played an important role in the promotion of capitalism by undertaking measures for the protection and promotion of the interests of private entrepreneurs such as enactment of Navigation Acts, extending bounties for ship-building and establishing uniform com­mercial laws, weights and measures, construction of roads and developing other means of communication.

Above all it greatly helped the develop­ment of capitalism by establishing monetary system. However unlike the other European governments, the government of England did away with the practice of minting charges and thus started treating coinage as a function to be performed by the state in the interests of smooth com­merce.

State also served the cause of capitalism by encouraging policy of colonialism, under which the outlying possessions were exploited in the interest of the British entrepreneurs.