Industrial revolution is believed to be the source of capitalism. Economists such as Adam Smith in his book “The wealth of nations” explained how division of labor produced new wealth beneficial to the society but this could only be achieved if the economy was left to operate on its own without government intervention through the invisible hand mechanism. However, economists such as Karl Marx and Friedrich Engels while acknowledging the advantages of capitalism were very critical of this system as it was based on class antagonisms and advocated for overthrow of capitalism and replacement with communism. He was supported by Andrew Carnegie in that capitalism created new classes of the rich and the poor but differed on how to handle the problem. For him, the main problem was the administration of wealth and instead of overthrowing capitalism. it should be left to continue but the rich to help the poor so as to bring “peace on earth, among men of good-will.” The economists thus agree on the importance of capitalism but differ on the impact on society and how to deal with its negative consequences. This paper will discuss the evolution of capitalism and its impact on society through the works of Adam Smith, Marx and Engels and Andrew Carnegie.

Adam Smith is considered as the father of free market capitalism. Capitalism which was a consequence of industrial revolution in Britain brought a lot of changes to the society. The emergence of the factory system changed work patterns such that instead of individuals producing food for own use. they were now produced commodities for exchange in the market (Sanders et al. 203). Due to lack of other means of obtaining subsistence food and keeping their race going, they opted to offer their labor to factory owners in exchange of wages.