The First Era of Capitalism: 1870–1919

The first era of capitalism saw strong economic growth in the core economies and, for the first time in history, a steady improvement in average living standards for people in those countries. These successes were rooted in continued technological change, which was enabled by capitalist institutions—the balance between firms, workers, and the government in the “narrow corridor.” For the first time, a better life was a realistic possibility for average people. This new capitalist system brought novel challenges as well, with deflation and financial crises repeating themselves throughout the 1890s and 1900s. The macroeconomic tools to manage capitalist economies were not yet developed, but the need for them became clear. Outside of the core capitalist economies, there was some growth in independent countries in south and central America, but most of the rest of the world was colonized. Early capitalism enabled early imperialism, and most of the globe was integrated into the world economy either as a trading partner exporting primary goods or a colony. Imperialism showed the continuing brutal side of early capitalist countries and led Lenin to declare that capitalism itself would bring upon its own destruction in a massive conflict.