Though the beginning of the capitalistic practice goes back to thir­teenth and fourteenth centuries when Sienese Bank were used by the Pa­pacy to handle the revenues drawn by it from various sources. But it was only in the fifteenth century that number of capitalist enterprises made their appearance. The century also saw the opening of a number of silver and gold mines in Germany and Austria.

However, it was the discovery of the sea-route to India which gave an impetus to the capitalistic activities. The rise of strong monarchies in France, England and Spain and the growing expenses of the state under the monarchs obliged these states to take certain measures to meet their demands which resulted in formation of capitalist bodies, though in a rudimentary form.

The advancement in the techniques of engineering and industry and the introduction of double entry book-keeping also helped the growth of capitalism. But above all, in was Puritanism which provided a great fillip to the development of capital­ism.

Soon large modern stock companies came into existence for the purchase of carrying on overseas trade. The practice of making purchases on the basis of sample also gained currency. Above all the discount and deposit banks also started expanding. All this can very well be described as early capitalism.


It may be noted that during the early period of capitalism only a very small section of the population was involved in trade. Though the primary’ urge to get rich quickly was there but the early capitalism lacked rationality and spirit of a fully developed capitalism. At that stage the state also played an important role in up building of the capitalist organiza­tion. Another outstanding feature of capitalism at this stage was its highly ethical character.

Most of the merchants began their contracts with an invocation of the Trinity and regarded the profit as ‘the blessing of God’. There was a tendency to charge only just price. The element of competi­tion, which is an outstanding feature of modern capitalism, was also absent.

The modern notions of large sales and small profits were unknown. The expansion of business and free use of credit was also not favoured. Another peculiar feature of the early capitalistic business was that it was highly secretive. The secret nature of the business was retained to ensure that outsider did not get too wise.

As regards the business form of the early capitalistic enterprises it was based on the three principles viz. (i) the notion of business as a Legal entity-the Firm; (ii) business as an accounting entity; and (iii) business as a credit entity. The notion of firm, first of all developed in France in the sixteenth century.


The concept of business enterprise as an economic entity spread with the introduction of double entry book keeping and the idea of balance sheet. The lead in this regard was provided by Italy. The emergence of systematic book-keeping greatly contributed to the growth of capitalism.

It made it possible for the business entrepreneurs to know the exact position of their business at a given time and to determine their future activities. The notion of business as credit entity also played an important role in the development of capitalism. According to this notion the proprietor of an enterprise was conceived as a third person or creditor of the enterprise.

In the subsequent centuries certain associations of an impersonal char­acter developed. The earliest forms of this association was the partnership which was designated by law in France as public business association. It was necessarily based upon specific contract. In course of time, the capi­talistic associations further developed and assumed the form of Stock Companies.

The stock companies first of all appeared in England and remained quite rare till the end of the eighteenth century. In spite of the impersonal character of the associations the stock-holders maintained
personal relationship. The dividends of the company were shared by all the share-holders according to the number of the shares held by them.


The state also participated-either directly or indirectly-in the develop­ment of the capitalistic forms of business. Some of the enterprises worked exclusively under state management. They were worked by the state for purely motives.

An example of such capitalist enterprise of the period is the Prussian Arms Factory set up at Potsdam in 1722. Certain concerns were also run on the basis of co-operation between the state and the private capitalists.