Ask anyone with a passing interest in economics about who was the founder of capitalism, and they’ll probably bark back "Adam Smith" before you can even finish the sentence. It’s the standard answer. It’s what we’re taught in high school. 1776, The Wealth of Nations, the "invisible hand"—it’s a tidy, convenient narrative.
But it’s also kinda wrong.
Economic systems aren't like iPhones. Nobody sat in a garage in the 1700s and "invented" capitalism. It wasn't a product launch. Smith didn't even use the word "capitalism" in his writing; he preferred "commercial society." The truth is that capitalism was a messy, accidental evolution that took centuries to cook. If you're looking for one single founder, you're going to be disappointed, but if you're looking for the people who actually built the engine, the story gets a lot more interesting.
Adam Smith: The man, the myth, the philosopher
Smith was a Scottish moral philosopher. That’s a key distinction. He wasn't a "businessman" in the modern sense. When he wrote An Inquiry into the Nature and Causes of the Wealth of Nations, he was trying to figure out why some countries were getting rich while others stayed stuck in the mud.
At the time, the world was obsessed with mercantilism. This was a system where kings and queens thought the only way to be powerful was to hoard as much gold as possible and screw over their neighbors through high tariffs. Smith thought this was total nonsense. He argued that if you let people pursue their own interests, they’d end up helping everyone else as a side effect.
Think about your local baker. He doesn't wake up at 4:00 AM because he loves you and wants you to have a nice croissant. He does it because he wants your money. But because he wants your money, you get fresh bread. Everyone wins. Smith called this the "invisible hand." It’s a brilliant observation, but describing a system that’s already starting to happen isn’t the same as founding it.
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The Dutch did it first (mostly)
If we’re being honest, the real "founders" of the capitalist spirit were probably the Dutch. Long before Smith was even a glimmer in his parents' eyes, the Dutch East India Company (VOC) was doing things that would make a modern Wall Street trader blush.
In 1602, they created the first publicly traded company. They invented the first stock exchange in Amsterdam. They figured out how to pool capital from thousands of regular citizens to fund massive, risky voyages to the spice islands. This was the actual birth of "capital"—the idea that you can take money, invest it, and turn it into more money without actually "making" anything yourself.
It was brutal. It was efficient. It was capitalism in its rawest, most aggressive form. The Dutch didn't write a philosophy book about it; they just built the infrastructure because they wanted to dominate the global spice trade.
The weird role of David Ricardo
By the early 1800s, capitalism needed a bit more math. Enter David Ricardo. If Smith provided the soul, Ricardo provided the bones. He was a stockbroker who became incredibly wealthy, and he’s the guy who gave us the "Law of Comparative Advantage."
Basically, he proved that countries should specialize in what they’re best at and trade for the rest. Even if you’re better at making everything than your neighbor, it still makes sense to trade. It sounds counterintuitive, but it’s the foundation of global trade today. Ricardo’s work made capitalism feel less like a philosophy and more like a hard science. He turned the "commercial society" into a system of quantifiable laws.
What about Karl Marx?
It sounds weird to mention the father of communism when talking about who was the founder of capitalism, but Marx is actually the person who popularized the term. He was obsessed with it. While Smith was looking at the benefits, Marx was looking at the "cracks."
He argued that capitalism wasn't just a way to trade; it was a specific historical phase characterized by the struggle between those who own the "means of production" (the factories and tools) and the workers. You can't really understand what capitalism is today without understanding the critiques Marx leveled against it in the mid-19th century. He defined the "ism" that we now take for granted.
The 20th century shift: Hayek and Keynes
Fast forward to the 1900s, and the "founder" question gets even muddier. After the Great Depression, people realized that totally unregulated capitalism tended to explode every few decades.
John Maynard Keynes argued that the government needs to step in and spend money when things go south. On the other side, Friedrich Hayek (and later Milton Friedman) argued that any government interference was a "road to serfdom." These two guys basically fought a 50-year war over the steering wheel of capitalism. Most modern economies are a weird, messy hybrid of both their ideas. We have free markets, but we also have social security and bank bailouts.
Why it matters who we point to
Why do we keep saying it was Adam Smith? Honestly, it’s because his version is the most optimistic. Smith’s capitalism is about freedom, individual choice, and the "natural" order of things. It’s a lot easier to sell that than the Dutch version (colonialism and monopolies) or the Ricardian version (cold, hard math).
But if you’re looking for the "founder," you have to look at:
- The Italian merchants of the Renaissance who invented double-entry bookkeeping.
- The Dutch traders who invented the stock market.
- The British philosophers who gave it a moral justification.
- The Industrial Revolution inventors who gave it the machines to actually scale.
The dark side of the origin story
We can't talk about the foundations of capitalism without acknowledging the role of unfree labor. A lot of the early capital that built the modern West didn't come from "bakers and butchers" trading fairly. It came from the Atlantic slave trade and the exploitation of colonies. The sugar plantations in the Caribbean were some of the most "capitalist" enterprises of their time—meticulously managed, highly profitable, and utterly horrific. It’s a part of the history that often gets glossed over in econ textbooks, but it’s baked into the DNA of the system.
Actionable insights: What you can learn from this
If you're trying to navigate the capitalist world today, stop looking for a single "rulebook" written by one founder. It doesn't exist. Instead, look at the mechanics that actually drive the system:
- Capital is fuel, not just money. The Dutch didn't just have coins; they had a system to move those coins into productive ventures. In your own life, look at how you’re deploying your "capital" (your time, your skills, your savings). Are they sitting stagnant, or are they invested in something that grows?
- Specialization is the only way to win. Ricardo was right. Trying to be "okay" at everything is a recipe for mediocrity. Figure out your comparative advantage—the thing you can do more efficiently than others—and double down on it.
- Systems require trust. Capitalism only works if people believe the contracts will be honored and the money has value. If you’re building a business, your most valuable asset isn't your product; it’s the trust people have in your brand.
- Watch for the "Invisible Hand" but keep your eyes open. Smith’s idea that self-interest helps society is often true, but it’s not a universal law. Markets fail. Monopolies happen. Being a "capitalist" today means knowing when to let the market run and when to realize the market is acting like a lunatic.
The search for who was the founder of capitalism usually ends with a portrait of a guy in a powdered wig. But the reality is that capitalism is a collective human invention, a giant, evolving machine that we’re all still building and breaking every single day. There was no single "Aha!" moment. Just a series of people—some brilliant, some greedy, some cruel—trying to figure out a better way to trade their time for stuff.
Understand the history, and you'll understand why the system works the way it does. You'll see that it's not a static thing. It's changed before, and it’s changing right now. The next "founder" of whatever comes next might be someone working on a blockchain, or a circular economy model, or something we haven't even named yet.
Key takeaway for the modern investor
Don't get bogged down in the "pure" definitions of capitalism you see on social media or in political debates. Real-world capitalism has always been a "mixed" system. Whether you're looking at the 17th-century Dutch or 21st-century Silicon Valley, the winners are always the ones who understand how to leverage the existing system while preparing for the next shift in how we value labor and resources. Keep your eyes on the "invisible hand," but don't forget to look at the people moving the strings.