Capitalism and Free Enterprise Economy


However, a new way of thinking was gradually beginning to take hold upon how people were seeing their world. This new way of thinking would become known as the Enlightenment. Observations of the natural world had started to show that the world had natural laws that governed the interaction of objects with each other. Some thinkers began to investigate whether human interaction was also guided by the same natural laws. As a result, a series of thinkers created new ideas about how people should interact with rulers and the idea of freedom. This encouraged different thinking, which had a large effect on economic thinking.

At the beginning of the Industrial Revolution, England was a monarchy ruled by a king and queen, but it also had a parliamentary system of government in which members of Parliament represented the needs of the people in their areas. This political system gave individuals the freedom to explore new ways of making money. Although Britain had clearly divided social classes, a person could move ahead with diligent work and new ideas.

According to the new thinkers of the Enlightenment, economics as an offshoot of human interaction was also governed by the same natural laws as the physical world. To them the factors of production (land, labor, and capital) were sources of wealth and everything that was produced beyond the needs for survival was a surplus. Surplus, they felt, should be used to fuel industrial production to produce wealth. They believed that individuals should be free to interact within that market and make their own economic decisions. This free market would result in an increase in trade and greater wealth for all.