History of Free Market Capitalism Humans began establishing community systems that included elements of work, reward, and trade in prehistoric times. Over time, we began to domesticate plants and livestock, creating more marketable goods and forcing people to establish bases on land and develop economies. Less than 5% of the European population lived in cities before the 12th century. The workers who were in the cities operated under feudalism. When the Black Death hit, it created a labor shortage due to the number of people killed. Soon, nobles began struggling to hire serfs to keep their estates running, and trades were needed to train outsiders. Because of this, people began to move to cities. Business began as trade between cities, but it was not a competitive trade. Each city had different products and services that became standardized over time. Once standardized, trade was carried out on a larger scale, starting from one city to another and eventually reaching one nation after another. Soon, multiple nations were supplying the same goods, and trade became competitive. Most of the colonies were founded with the characteristics of feudalism. The raw materials returned from the colonies to the mother country and then the colonies were forced to buy back the finished product. Adam Smith noted that this did not lead to development and change, but rather prevented us from moving forward. The ideas he published opened the world's eyes to capitalism.Adam SmithAdam Smith did not necessarily invent many of his ideas, he introduced the fundamental ideas of classical economics. Some of his main ideas were to downplay the role of government and taxation in free markets, and that an "invisible hand" guides supply and the dems... middle of paper... because they are in need of the product and they believe that the seller needs the money he has in exchange for the product. The consumer goes ahead and buys/exchanges the money for the product because they are free to do what they want with their money and don't have to think about taxes/regulations. Person 1 and Person 2 have decided to exchange products because each has what the other person wants. They can trade as is or sell the items and set the price they want because in a free market economy, the government cannot regulate what producers do. After the American Civil War, the American economy nearly doubled in size. This period was called the golden age, where new technologies were introduced. During this period free market capitalism flourished and helped the United States become the greatest industrial nation.