The essence of mercantilism is "accumulating bullion, establishing colonies and a merchant marine, and developing industry and mining to attain a favorable balance of trade," (The American Heritage Dictionary of the English Language, Third Edition copyright1992 by Houghton Mifflin Company). Ownership of land was still important, as exemplified by the fact that the founders of most of the American colonies were wealthy nobles or landowners in Great Britain, but it was no longer the sole determining factor. This was the economic model, more than a modern industrial society that Adam Smith was writing of in The Wealth of Nations.
Even as Smith was writing his magnum opus, the death of mercantilism was already approaching on feet of iron. The Industrial Revolution, fostered by men like James Watt and Richard Arkwright, would change the world in a manner not seen since the discovery of iron. England was uniquely situated economically to take advantage of industrialization, the pound sterling being the standard upon which all other specie was judged.
The other half of the rise of our modern economic dragon came about at the time of the French Revolution in 1789. A broad wave of nationalism was felt for the first time in Europe, and its repercussions are still being felt to this day. The hiring of the mercenary was replaced by the levee en masse, the drafting of a nation's manpower for total war. This fact (together with Napoleon's genius) permitted France to dominate Europe on land for twenty years: subjugating Austria, Prussia, and Spain (for a while); incorporating Holland, Italy and western Germany into the French Empire; neutralizing Russia and the Ottomans; leaving Great Britain to face Napoleon essentially alone, behind the moat of the English Channel, from 1807 to 1811.
With the coming of the industrial revolution, land in and of itself became less important in the assessment of individual wealth. A property's capital improvements increasingly determined the land's value.
Even today, farm and grazing lands have a finite capacity of production. You can only graze so many herd animals of a specific type per acre, or raise so many bushels of corn or any other crop. The Industrial Revolution did increase agriculture's numbers, especially with innovations like McCormick's mechanical reaper, Whitney's cotton gin, and Smith's barbed wire. But land is still a finite resource, and overworking a particular piece of land--either by grazing or planting--can ruin its productive value for years.
When manufacturing was done entirely by hand, the number of items that could be produced by a shop was limited by the speed and dexterity of the human workers. The arrival of machines to do the work of humans changed all that.
A steam or water powered loom could weave more cloth in a day than a dozen human workers; automatic spinning jennies spun vast spools of yarn to keep up with the demand; sewing machines permitted the rapid stitching of a seam with a precision that few seamstresses could match. Precision lathes and drills permitted the creation and production of mechanical devices--including guns--with interchangeable parts, easing supply and repair concerns.
Most importantly for manufacturing, the machinery in the same building could be replaced and upgraded, over and over again, to increase production capacity, without changing the size of the building.
So it came to pass that wealth was redefined by the term capital. This term included not only land and money, but many forms of financial instruments (stocks, bonds, etc.), and all of the non-human business assets including machinery.
Ah, what a brave new world, to have such creatures in it.
The new economic system was not without problems. Although the beginning of the Industrial Revolution heralded an end to the institution of slavery in the European dominated nations, it also was the beginning of the exploitation of the proletariat in place of the slaves by the capitalist elite. These industrial magnates' social, political and economic practices more closely mirrored those of the feudal lords of the Middle Ages, than the human centered, democratic ones propounded by Locke, Rousseau, Jefferson, Madison, and Paine. In the subconscious of too many of the new lords of capital, the chattel slave had been replaced by the wage slave.
While capitalism may, in its own way, have been a very moral system, as Karl Marx pointed out in his chapter on "Human Requirements and the Division of Labor," in his Economic and Philosophical Manuscripts, (see Erich Fromm, Marx's Concept of Man, p.144, 1966); it is not a fair or humane one. The capitalist, "By counting the most meagre form of life (existence) as the standard, indeed, as the general standard--general because it is applicable to the mass of men. He turns the worker into an insensible being lacking all needs," Marx wrote, "...therefore, every luxury of the worker seems to be reprehensible, and everything that goes beyond the most abstract need--be it in the realm of passive enjoyment, or a manifestation of activity--seems to him [the capitalist] a luxury"This science of marvellous industry is simultaneously the science of asceticism, and its true ideal is the ascetic but extortionate miser and the ascetic but productive slave "The less you eat, drink and buy books; the less you go to the theatre, the dance hall, the public house; the less you think, love, theorise, sing, paint, fence, etc., the more you save--the greater becomes your treasure which neither moths nor rust will devour--your capital. The less you are, the less you express your own life, the more you have, i.e., the greater is your alienated life, the greater is the store of your estranged being."
What Marx is essentially saying is that pure, laissez faire capitalism, or what I call antisocial capitalism, only works for a community of monks, who have taken a vow of poverty, and are expecting their reward in the afterlife.
Under such a system, human beings can only survive in the long term if they become mindless, unquestioning automatons. (Kind of makes you wonder if the war on drugs was ever supposed to work?)
Marx was not the first to question the inhumanity of antisocial capitalism: Charles Fourier, the Count de Saint-Simon, Robert Owen, Jeremy Bentham, Thomas Paine, and Thomas Jefferson all questioned aspects of this dehumanizing system before Marx did. To quote Jefferson, "How soon the labor of men would make a paradise of the whole earth, were it not for misgovernment, and a diversion of all his energies from their proper object--the happiness of man--to the selfish interest of kings, nobles, and priests." (Letter to Ellen W. Coolidge, 1825; The Complete Writings of Thomas Jefferson, Memorial Edition; volume18, page 341; 1904.)
Such a system, exploiting human beings for profit, is contrary to the ideals of most of the architects of our nation and its Constitution. This is because it devalues the common man in general, and his labor in particular, and signals the establishment of an aristocracy based on capital.