Economic historians use the term merchant capitalism to refer to the earliest phase in the development of capitalism as an economic and social system. Merchant capitalism is distinguished from more fully developed capitalism by the lack of industrialization and of commercial finance. Merchant houses were backed by relatively small private financiers acting as intermediaries between simple commodity producers and by exchanging debt with each other. Thus, merchant capitalism preceded the capitalist mode of production as a form of capital accumulation. A process of primitive accumulation of capital, upon which commercial finance operations could be based and making application of mass wage labor and industrialization possible, was the necessary precondition for the transformation of merchant