In the western world there have been a number of economic systems that have been developed and adopted. One such that ended up dominating the western world was capitalism. Capitalism can be described as an economic system in which all the means of production are mostly privately owned and operated for a private profit. Under this system the decisions concerning demand, supply, investments and price are normally made by the private owners in the free market. The profits acquired are shared by the owners who invested in the businesses, and employees are paid wages by these businesses. Capitalism dominated the western world following the end of feudalism. The earliest forms of capitalism were merchant capitalism that was practiced in Western Europe during the period of middle ages. It spread gradually throughout Europe through the nineteenth and twentieth centuries. Capitalism to the European countries was brought about by the need of a better economic and monetary union of the various European nations. This led to the formation of a single new currency and the European Union.
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In order to establish a better European and economic monetary union just before the beginning of the 90's a plan was made. This plan was accepted after the signing of the Maastricht treaty in 1991 that led to the establishment of the European Union and the laid down foundations for a single currency and the European Monetary Union. The conception of this plan was to create a single currency over three stages. In the first stage that began on first July 1990 there was to be free movement of capital and the assigning of a convergence criteria to the participating nations. After this the second stage took place on first January 1994 where by the European monetary institute was established allowing for independence of national banks in the member countries and prohibiting the financing of budget deficits using monetary instruments using loans from the central banks this was considered as the fore runner of the European central bank that was established on stage three. The third and final stage took place on first January 1999 when the single currency was to be established and after a series of suggestions for the name of the currency until finally it was agreed that it would named the euro. Also established was a common central bank for member countries of the European Union. (smith)
The euro is the official currency that is used in the euro zone. Which consists of Belgium, France Luxembourg, the Netherlands, Portugal, Slovenia ,Slovakia, Spain, Finland, Germany, Cyprus, Austria, Greece, Ireland, Italy . These sixteen countries are part of the twenty seven member states of the European Union. This currency is also used by all the European Union institutions and a further five other European countries either with formal or informal agreements. It is also used all through the world by many people on a daily basis. After the U.S dollar the euro is the second most traded currency in the world as a consequence it is also the second largest reserve currency. On the other hand the euro still has the higher combined value of coins and banknotes in circulation in the world compared to the dollar. This has made the euro zone the second largest economy in the world. The name of the euro officially was adopted on the sixteenth of December the year nineteen ninety five. The euro at first was introduced as an accounting currency to world financial markets on the first of January the year nineteen ninety nine, and it replaced the European Currency Unit at the ratio of one to one. The banknotes and coins of the euro began circulation on the first of January the year two thousand and two. (Harman)
The European Union is both a political and economical union of twenty seven states that are primarily located in Europe. It was established by the treaty of Maastricht based on foundation of European communities that were committed to regional integration. The European Union through a system of laws that are applicable to all its member states has developed a single market. It also ensures that there is free movement of capital, goods, services, and people through the enactment of legislation in justice and home affairs, and the maintenance of common policies of regional development, trade, fisheries and agriculture .One important thing that the European Union has done to ensure free movement of people is the abolition of passports controls between 22 of its member states and other three European states. Because the European Union has a legal personality it has been able to conclude many treaties with other countries by devising a Common Foreign and Security Policy for its member states. (Hooker)
Through the establishment of the European Union capitalism was given a big boost. This is because it is the main economic system that is used in many of the member states of this union. The union's systems of laws favor capitalism in that they allow for industries in the member states to be privately owned by private individuals yet this are the mains means of production. Leaving the government limited to only enforcing property rights. It has also established a free market which includes a free price system that allows supply and demand to reach equilibrium without government of the states involved interfering with them. (Robert E.)
Capitalism is the most widely used economic system in Europe. This is seen through the private ownership of many production centers. The establishment of the European Union assisted capitalism to take over many western economies especially those of the member countries.