Americans didn’t invent free market capitalism.
But you might say they perfected it. In doing so, they created more wealth for
more people than any society in the history of the world. To begin to understand this
fascinating and complex story, we have to travel back in time to the very first settlers
of America. But before we get to the history, let me define
what I mean by capitalism. It’s not an easy term to pin down because it developed over
thousands of years of human interaction. Adam Smith, the great English thinker, first described
it in his famous 1776 treatise, The Wealth of Nations, but he didn’t invent it. For our purposes here, I define capitalism
as an economic system in which individuals freely decide what they will produce and who
they will serve. Since both parties have to consent, it’s a system in which success
demands that you serve the needs of others before you are rewarded for your work. Now back to history: When the first settlers arrived—at Jamestown
in 1607 then Plymouth in 1620—they were operating under an economic system common
to all European nations at that time, known as mercantilism. Under mercantilism businesses,
especially in colonies, were operated for the benefit of the state. While governments
permitted the companies to make profits, their primary purpose was to advance the national
interest of England or Spain or France. The early American settlements were set up to
be self-sufficient so that the English government didn’t have to support them. And they had
to stake out territory. That was key to the colonial game: if England held the territory,
Spain and France didn’t. The early colonists began their adventure
with what they thought was a beautiful idea. They set up a common storehouse of grain from
which people were supposed to take what they needed and put back what they could. Lands
were also held in common and were worked in common. The settlers owned no land of their
own. Though there was no name for this system, it was an ideal socialist commune. And you
can probably guess what happened. It began to fall apart almost immediately. As the colonists
learned, when everyone is entitled to everything, no one’s responsible for anything. A colonist
who started his workday early or stayed late received the same provision of food as a colonist
who showed up late, went home early, or didn’t work at all. After about two years, the settlement was
reduced to eating shoelaces and rats. Half of them died of starvation. Captain John Smith
(of Pocahontas fame) took control of the colony and scrapped the socialist model. Each colonist
received his own parcel of land. Private property had come to the New World. “He who won’t
work, won’t eat!” Smith told them, citing the Biblical admonition. Well they worked.
And they ate. And the colony was saved. The same story unfolded further north in the
Plymouth colony 10 years later. Although this was a Puritan colony with religious goals,
its plan was the same as Jamestown’s. And it also failed. As its young governor, William
Bradford, noted, by adopting the communal system “We thought we were wiser than God.”
So they quickly abandoned the commune for private ownership. Soon, they had an abundance,
which they celebrated with the holiday we now know as “Thanksgiving.” Over the next
150 years, this hard-learned lesson, that men should be responsible for their own economic
fate, became conventional wisdom in the colonies. The American Revolution was largely fought
over the burden that British mercantilism placed on the colonies. Two unpopular taxes—The
Stamp Act and The Tea Act—are well known examples. The Americans saw the British government
regulating and controlling almost all of their economic activities—and didn’t like it. Now, it’s true that even after gaining independence,
none of the Founders could be called capitalists. The idea of capitalism as a description of
an economic system was only just beginning to be discussed in America. Yet many of the
most influential Founders intuitively gravitated toward free market principles. Thomas Jefferson’s
ideas of private land ownership shaped the famous Land Ordinance of 1785 that made public
land available to private citizens, while Alexander Hamilton’s concepts of individual
responsibility and sanctity of contracts could be seen in the Panic of 1791-92, in which
he steadfastly refused to allow the US government to bail out bankers who had triggered the
panic. Benjamin Franklin, of course, had practiced capitalism all his life with his printing
business and with his maxims in Poor Richard’s Almanac. The Constitution itself is awash in core concepts
of a free market: sanctity of contracts, freedom of expression; powerful limits on the government’s
ability to regulate or tax; an emphasis on paying debts; and so on. In short, it was the wisdom of experience,
not academic ideology, that created America’s free-market principles. The result has been
the most prosperous and free nation in the history of the world. I’m Larry Schweikart of the University of
Dayton for Prager University.

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100 thoughts on “America’s Socialist Origins”

  1. Both Jamestown and Plymouth were founded by people who had no idea how to work the land or hunt. The Natives were living in "Ideal Socialist Communes" and had been for thousands of years. They seemed to be doing alright enough to give their surplus to the weak colonists. I bet they regret that action now. Just throwing that out there.

  2. Fan fact: "if you don't work you don't eat" is exactly how soviet union worked. Like. Exactly. Maybe you just need to learn more about your enemy before starting to blame it?

  3. Communism doesn't work outside of a household, farm, or very small congregation of very close people. It doesn't translate any larger. Merit must be tracked further away from those places.

  4. I love how Prager U ignores the vast portion of history wherein female lead communes—Iroquois confederacy style—went ransacked by gun-wielding thieving and murdering white refugees. I am no real feminist, but it takes a truly ignorant white male to blabber about freedom and liberty while he threatens you with a weapon.

    The whole continent was absolutely fine until Europe barged in and took everything by force. Capitalism my ass.

  5. I would like to stop seeing this poorly researched propaganda/overt duplicity as advertisement. As usual, whoever wrote this has no idea what socialism is, it is unsourced, which isn't surprising- even if it were I suspect that it would have little bearing in reality. You know, like peer reviewing your own analysis.

  6. now Democrat has brainwashed all the younger people that they deserve everything and they will end up with nothing. Their sense of entitlement will be their downfall in life.

  7. Capitalism needs to focus on the flexibility of everyone and every unit in society to be the best economic system.

  8. Communism fails because, despite this being the pride of Communists, it was created from subjective and emotional arguments.
    Capitalism works because it was the product of reality.

  9. Throughout history, communism has worked in small, local communities (and I don't just mean hunter-gatherer societies). To date, on a wide scale, I think regulated capitalism or a mixed economy has raised the standard of living more than either true pure capitalism or Marxist government policies have.

  10. Good grief you really need a history and geography lesson don't you. Adam Smith was British (Scottish not English), the ships that sailed to Jamestown would have flown English flags not British Union Jacks (Union of the Crowns in 1603 but no Union of Parliaments until 1707)), the Union Flag is not the English flag (the English flag is contained in the Union flag). And the map of the United Kingdom of Great Britain and Northern Ireland is not the map of England. If you get the basics wrong (and these are very, very basic) how do you expect people to go along with your overall premise?

  11. No no this can't be true! All people are equal and work as equally hard as everybody else. They all take only what they need and nothing more. It's Trump's fault people are greedy and the poor exist. Without him, socialism would take over and everything would be perfect! If we took all the assets of the world and divided them equally, all that would happen is we would just be back to the beginning of this debate.

  12. Except America is still socialist, if your wealthy. Capitalism for the poor and working class, and socialism for the rich as they say. If you don't believe me, I just want you to add up all the privileges our government gives to corporations and the wealthy.

    In truth corporations and the rich love socialism and oligarchys, just only if it exclusively benefits them. If the poor and the working class got the same governmental privileges, they believe the world would come to an end. (Sarcasm)Oh no, every one gets to pay $0 in taxes just like Amazon, the horror! (/Sarcasm).

  13. Just, extraordinary: the most successfull economical and political structure in the world was not a made by "academic ideology", but by wisdom of experience (5:10)! Perhaps we can replicate one they down here in Brazil!!!!!!!!!!!!!

  14. Well.. Argentina was at the top 10 until around 1940, but then the socialism came and destroyed our liberal principles, and with that, our economy began to fall positions non-stop.

  15. It is unfortunate that socialism gets such a bad rap. Although it admittedly doesn't work except in the smallest communities, I don't see it as the caricature that "socialophobic" people are always dredging up. I reckon the earliest socialists not only did NOT want "big government," but respected the human person more than they're credited. They were idealists who believed that, at heart, people were neither lazy nor selfish. People wanted to work because labor empowered them and gave them a feeling of accomplishment, and because they were naturally altruistic they would be willing to share any surplus they had with the less fortunate. This was not "big government"; this was reciprocity, which was an economic system that until very recently still existed in primitive cultures. And since socialism is naturally so primitivist, it's really ironic that "secular-progressives" get the label slapped upon them. What annoys me is that anyone who voices an idea that is even remotely socialist gets saddled with all kinds of left-wing stereotypes. They get called "hippies" (when in fact actual hippies don't care about politics, and really are lazy and narcissistic) and are accused of pursuing all manner of vices and pleasures and leading "immoral" lives (many communes, although they may have practiced polyamory, could otherwise be very moralistic and often frowned on gratuitous luxuries).

  16. First settlers, uhm…Jamestown, 1607. 🤪 Ahah, mentioned later. Yep all near death til OWNERSHIP introduced. No bern!

  17. Ironic, that Marx wrote his communist manifesto and had the means to do so in a free market society, enjoying the benefits of capitalism.
    Socialism does not work

  18. I'm glad I gave my life to Jesus Christ! I'm glad I'm saved. Born again. I couldn't live this life without the Lord.

  19. Free market capitalism does not exist in America today. We have socialism for the wealthy and wealthiest businesses with direct subsidies, bailouts, targeted tax deductions and favorable terms. For the rest of us and the small business owner capitalism is alive and well with the possibility of failure always looming. It’s not capitalism when tax dollars are allowed to cover the loses of a select wealthy group while the rest of us are fighting for the scraps. No wonder they get all those subsidies and tax breaks, they are the ones funding those in congress that legislate them. Open your eyes America, our Republic is being purchased. The gift our forefathers left us and brings to us is being sold.

  20. Socialism is a massive failure, but so is capitalism. Just look at the Industrial Revolution, people lived miserable lives with horrible working conditions. Same in the Soviet Union. Pure socialism and capitalism are awful systems, but when put together they create prosperous and wealthy societies. No country is truly capitalist and no country is truly socialist, this is an undeniable fact. You don’t have to pay for your own personal fire department (which is how it started out) and you don’t have to pay for a private police force. These things are collectively owned. At the same time manufacturing isn’t controlled by a giant government monopoly, these things are privately owned and traded freely. Do those two things sound familiar? This is what is called a mixed market economy. Companies are privately owned and traded, but there are limits on what they can do to protect the consumer and the society as a whole. No one is arguing against a mixed Market economy, they debate is over how much of a mixed market economy we should have. The end stage of capitalism is Socialism. Without someone to prevent companies from becoming consolidated they will consolidate, and they will become the government. Capitalism only works with competition, competition which is waining. Corporate consolidation is becoming a major problem in America and the people funding PragerU are for it. How else do you Explain videos like “Money in Politics, what’s the Problem,” or “Lower Taxes Higher Revenue,” or my personal favorite “Democratic Socialism is still socialism.” A video where famed soyboy Stephen Crowder makes the point of I guess people elect bad leaders. The goal of prageru is to blur the lines between Socialism, Communism, and Social Democracy, until they don’t exist. The line between government and big corporations is becoming blurred this is especially evident in the Trump administration where many of the positions are filled by CEOs. I’m not a liberal, but I can’t ignore the damage PragerU and other YouTube conservatives are doing and you shouldn’t either.

  21. This is a great video. Incidentally enough I have been reading “Of Plymouth Plantation” by William Bradford and noticed the exact same thing. For the first few years after landing, masses of people died from famine. Then, they made the hard decision to turn away from the communal system and let everyone work for himself. After that, Bradford never mentioned any famine or anyone dying of starvation for the years following. Amazing how that works!

  22. What a great idea! But what should we do about San Francisco, Seattle, Los Angeles, and all the other places in this GREATEST, FREEST, RICHEST COUNTRY in the world, that has a grotesque homelessness population filled with drugs, and disease, and mental illness which is getting bigger, and bigger and more dirty, and dangerous every day, and encroaches on the general population of those WEALTHY PEOPLE, and their NEIGHBORHOODS?
    The situation is very ugly, and with all of the wealth going around no one has a solution.
    How about these Bible verses? "You shall love thy neighbor as you love thyself." And, "You, are your brothers keeper."

  23. But all this beauty ended in 1913 when our treasonous Congress sold free America to the thieves of the federal reserve cartel.

  24. Minute 5:10 – "In short, it was the wisdom of experience not academic ideology that created America's free market principles". He could easily have said, not academic idiots. Today we have academic idiots trying to force Marxist Socialism down our throats.

  25. and the most debt in the world. thanks to `great power` title USA never get bailout and can print money all they want. and wipe out every gold based currency.

  26. It is impossible to argue with a socialist, because once you point out flaws in socialism, they'll tell you that it wasn't the kind of socialism they believed in.

  27. America prefected free market capitalism? I guess, if you look past taxation, inflation, tariffs, subsidies, and over regulation – sure it's very free…

  28. If you don't work and u want to eat, you go liberal or democrat and be loud and march. That is how you eat now days.

  29. Richard Cantillon, not Adam Smith, first put forth this philosophy. Cantillon lived in France in the late 17th, early 18th Centuries. Smith admitted getting most of his ideas from Cantillon.

  30. I think the problem with socialists in this country is they are too caught up in the fantasy to face reality.

  31. Why is people mad at calling Adam Smith british because he was scottish?

    Scottish, Welsh, Irish, English… it's all british no matter where they live or what are their names.

  32. The first use of the actual word "capitalism" was by an associate of Karl Marx. It was meant to be a pejorative term. The mistake that "capitalist" defenders made is accepting that term in the first place since it is not a good descriptive of "free markets". The free market does not always require a person providing "capital" (i.e. ditch digger). And often the "entrepreneur" is not the same person providing "capital"(i.e. business loan).

  33. To me, you had free markets before capitalism. In feudalism and slavery, goods were produced and sold on the market. But the workers weren’t free

  34. Bernie Sanders learned just awhile ago when he couldn't pay his staff $15 dollars an hour without cutting hours.
    I can see that would destroy Businesses if all Businesses had to cut hours to pay $15 dollars an hour.
    It would be worse to pay the Managers.

  35. Thank you for discussing history as it was BEFORE the communists took over the U.S. school system. Suddenly they think history is as negotiable as other people's assets.

  36. Socialism will destroy this nation. Government needs own currency out with the private federal reserve banksters stole our money. Back to what our founding fathers gave us.

  37. Capitalism in it's true form is "FREE ENTERPRISING ENTREPRENEURIAL CAPITALISM" that practices "Free Enterprise" wherein Entrepreneurs known also as Free Enterprising businessmen and industrialists are free to practice their "FREE ENTERPRISING ENTREPRENEURIAL CAPITALISM" without any UNETHICAL ANTI-COMPETITION monopolists, cartelists, mergers, corporate takeovers, corporate raiders, price-fixing oligopolists, market cornering, and all kinds of "ANTI-FREE ENTERPRISING ENTREPRENEURIAL CAPITALISM, etc opposing them. Socialism is an evil form of politicized economic system that practices the evils of UNETHICAL ANTI-COMPETITION monopolists, cartelists, mergers, corporate takeovers, corporate raiders, price-fixing oligopolists, market cornering, politicized crony anti-capitalism capitalism that destroys real capitalism, and all kinds of "ANTI-FREE ENTERPRISING ENTREPRENEURIAL CAPITALISM with the evil blessings of an evil socialistic-communistic government that KILLS AND STIFLES CREATIVITY, INVENTIVENESS, INNOVATIVENESS, BREAKTHROUGHS, NEW DISCOVERIES, ETC.

  38. INHERENTLY EVIL SOCIALISM-COMMUNISM is a heavily politicized form of "INEFFICIENT ECONOMIC SYSTEM" wherein there are a lot of "WASTEFUL" politicized layers of bureacratic fat supervising one layer after the other before it reaches the worker which is wasteful of manpower and other resources. Whereas "FREE ENTERPRISING ENTREPRENEURIAL CAPITALISM" is a non-politicized and practical minded and common sense minded form of DIRECT MANAGEMENT with a very small 10 to 25
    men and women management team that inspects, supervises, directs, administers, manages 1,000 to 10,000 workers that are also empowered to have delegated duties to correct something on the spot and writes a report and drops on the internal business and/or industrial mail that directly goes to the office just right besides the industrial complex or business enterprise.

  39. The young people who fall victim to the older people who know socialism is a horrible idea, who become the leaders once a socialist state is proclaimed, will confiscate anything from rich people, if there even are any. Wealthy people leave a country once it takes all their wealth, which means that the countries wealth disappears, and so jobs disappear, people starve, they get enslaved, if they don’t work they go to prison or worse. And the sam young people under the old people, realize they’ve been swindled. And they’re now powerless to stop it.

  40. The people who push socialism are lazy greedy people who don't want to work but would gladly steal your hard earned money.

    “Socialism is a wonderful idea. It is only as a reality that it has been disastrous. Among people of every race, color, and creed, all around the world, socialism has led to hunger in countries that used to have surplus food to export…. Nevertheless, for many of those who deal primarily in ideas, socialism remains an attractive idea — in fact, seductive. Its every failure is explained away as due to the inadequacies of particular leaders. ” 

    ~ Thomas Sowell

  41. I agree entirely with PragerU's brief description of the historical development of capitalism and earlier America's denouncement of mercantilism regarding its use and efficacy when the colonies revolted against King George after he attempted to extend an unwarrantable hand in the colonies commerce, but I believe that PragerU's unwavering loyalty to the Republican party prevents them from criticizing and objectively representing the pro-merchantilist opinions of President Abraham Lincoln and the circumstances pertaining to the war Lincoln waged against the Southern Confederacy in their video " Was the Civil War about slavery". They entirely neglected to address the alterations made to the Constitution when the Confederate states created the Confederate Constitution and how those deliberate alterations explicitly condemned the use of protectionism, internal improvement subsidies, and federal government favoritism towards any industry. President Abraham Lincoln WAS NOT a man that believed in laissez faire free trade and should be rightly condemned for his abuses perpetrated against both the American people in the North and especially the South. Furthermore, Abraham Lincoln abused the authority entrusted to him by the office he held as President and violated the Constitution repeatedly. Any honest historian cannot deny that the Lincoln's Republican party grossly expanded the power of the federal government and paved the way for future presidents to abuse both their authority and utterly disregard Constitutional constraints. I myself believe in traditional values, limited government, and laissez faire capitalism; also, I am a ardent supporter of President Donald Trump and the current Republican party, though I will not allow history to be rewritten or excused. PragerU is a very good and moral organization. I would like it to be known that I am a supporter of their work and endeavor to wake up the American people to the realities of Communism/Socialism and all the dangers those two political ideologies pose to freedom, but they really should amend their stance regarding the Civil War. Here's a link about the Confederate Constitution that might interest:

  42. Yes that’s the way it should be: If you Don’t work you Don’t eat. NOT if you don’t work housing and meals are free. 🙄

    We should share this with everyone who says Socialism is the answer. 😎👍

  43. And lesson be learnt how the followers of those Democrats will plunge America into starvation but then again that's the whole idea they want to kill off as many Americans as possible it's all about saving the planet and creating the US government and the elites to rule the world

  44. For problem of depression, starvation provides remedy for depression! Someone is hungry, no time to be depressed!

  45. So… Socialism has already been tried like twice in America? And failed?

    Bet Democrats won't tell you that. Remember "Thanksgiving is cultural appropriation"

  46. Jefferson and Hamilton were at odds with each other. Jefferson was the free market capitalist, while Hamilton was more in favor of a larger role of government in economics and the old mercantile system.

  47. I hate to say this, but the origins of the base concept are in the old testament, effectively the JEwish Tanach, so the pilgrims never came up with it, though it IS innately obvious! THIS was why they made references to a storehouse during droughts.
    The system of payment is one of the DUMBEST statements EVER attributed to Jesus, though it may have been taken out of context, but IT describes this EXACT form of payment where NONE have responsibility, and the LAST get paid what the FIRST do!

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