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{{Short description|Economic system based on private ownership}}
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{{About|an economic system}}
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{{dablink|For other uses, see ].}} {{Redirect|Capitalist|other uses|Capitalist (disambiguation)}}
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'''Capitalism''' is an ] in which the ] are privately owned, and ] is ] in the ], ] and/or other ] of ] and ] for ]. It is also usually considered to involve the right of individuals and groups of individuals acting as "legal persons" (or ]) to ] ], ] and ] (''see'' ] and ]) in a ]. The term also refers to several theories that developed in the context of the ] and the ] meant to explain, justify, or critique the ] of capital, to explain the operation of such ], and to guide the application or elimination of government regulation of property and markets. (''See'' ], ], ].)
{{Use American English|date=January 2014}}
{{Use dmy dates|date=June 2020}}
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{{Economic systems sidebar|expanded=by ideology}}
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{{Neoliberalism sidebar}}


'''Capitalism''' is an ] based on the ] of the ] and their operation for ].<ref>{{cite book |last1=Zimbalist |last2=Sherman |last3=Brown |first1=Andrew |first2=Howard J. |first3=Stuart |title=Comparing Economic Systems: A Political-Economic Approach |publisher=] |date=October 1988 |isbn=978-0-15-512403-5 |pages= |quote=Pure capitalism is defined as a system wherein all of the means of production (physical capital) are privately owned and run by the capitalist class for a profit, while most other people are workers who work for a salary or wage (and who do not own the capital or the product). |url=https://archive.org/details/comparingeconomi0000zimb_q8i6/page/6}}</ref><ref>{{cite book |last1=Rosser |first1=Mariana V. |last2=Rosser |first2=J Barkley |title=Comparative Economics in a Transforming World Economy |publisher=] |date=23 July 2003 |isbn=978-0-262-18234-8 |page=7 |quote=In capitalist economies, land and produced means of production (the capital stock) are owned by private individuals or groups of private individuals organized as firms.}}</ref><ref>{{cite book |first=Chris |last=Jenks |title=Core Sociological Dichotomies |quote=Capitalism, as a mode of production, is an economic system of manufacture and exchange which is geared toward the production and sale of commodities within a market for profit, where the manufacture of commodities consists of the use of the formally free labor of workers in exchange for a wage to create commodities in which the manufacturer extracts surplus value from the labor of the workers in terms of the difference between the wages paid to the worker and the value of the commodity produced by him/her to generate that profit. |location=London; Thousand Oaks, CA; New Delhi |publisher=] |page=383}}</ref><ref>{{cite book |title=The Challenge of Global Capitalism : The World Economy in the 21st Century |last=Gilpin |first=Robert |author-link=Robert Gilpin |isbn=978-0-691-18647-4 |oclc=1076397003 |date=2018|publisher=Princeton University Press }}</ref><ref>{{cite journal |last1=Sternberg |first1=Elaine |title=Defining Capitalism |journal=] |date=2015 |volume=35 |issue=3 |pages=380–396 |doi=10.1111/ecaf.12141|s2cid=219373247 | issn = 0265-0665}}</ref> The defining characteristics of capitalism include ], ], ]s, ]s, recognition of ], ], ], ], ], ], ], ], ], a ] that makes possible ] and ], ], ], ], ], production of ] and ]s, and a strong emphasis on ] and ].<ref>{{cite book |last1=Heilbroner |first1=Robert L. |title=The New Palgrave Dictionary of Economics |date=2018 |publisher=] |location=London |isbn=978-1-349-95189-5 |pages=1378–1389 |url=https://link.springer.com/referenceworkentry/10.1057/978-1-349-95189-5_154 |language=en |chapter=Capitalism |doi=10.1057/978-1-349-95189-5_154}}</ref><ref>{{cite book |last1=Hodgson |first1=Geoffrey M. |title=Conceptualizing Capitalism: Institutions, Evolution, Future |date=2015 |publisher=] |location=Chicago |isbn=9780226168142 |url=https://press.uchicago.edu/ucp/books/book/chicago/C/bo18523749.html}}</ref><ref name = "harris">{{cite journal |last1=Harris |first1=Neal |last2=Delanty |first2=Gerard |title=What is capitalism? Toward a working definition |journal=] |date=2023 |volume=62 |issue=3 |pages=323–344 |doi=10.1177/05390184231203878 |doi-access=free}}</ref><ref>{{cite journal |last1=Berend |first1=Ivan T. |title=Capitalism |journal=] |date=2015 |pages=94–98 |doi=10.1016/B978-0-08-097086-8.62003-2|isbn=978-0-08-097087-5 }}</ref><ref>{{cite journal |last1=Antonio |first1=Robert J. |last2=Bonanno |first2=Alessandro |title=Capitalism |journal=The Wiley-Blackwell Encyclopedia of Globalization |date=2012 |doi=10.1002/9780470670590.wbeog060|isbn=978-1-4051-8824-1 }}</ref><ref>{{cite book |last1=Beamish |first1=Rob |chapter=Capitalism |title=Core Concepts in Sociology |date=2018 |pages=17–22 |doi=10.1002/9781394260331.ch6|isbn=978-1-119-16861-4 }}</ref> In a ], decision-making and investments are determined by owners of wealth, property, or ability to maneuver capital or production ability in ] and ]s—whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.<ref>{{cite book |last1=Gregory |first1=Paul |last2=Stuart |first2=Robert |year=2013 |title=The Global Economy and its Economic Systems |publisher=] |page=41 |isbn=978-1-285-05535-0 |quote=Capitalism is characterized by private ownership of the factors of production. Decision making is decentralized and rests with the owners of the factors of production. Their decision making is coordinated by the market, which provides the necessary information. Material incentives are used to motivate participants.}}</ref>
Capitalist economic practices became institutionalized in ] between the ] and ], although some features of capitalist organization existed in the ancient world.<ref>"Capitalism." ''Encyclopædia Britannica''. 2006. Encyclopædia Britannica Online.</ref> Capitalism has emerged as the Western world's dominant economic system since the decline of ], which eroded traditional political and religious restraints on capitalist exchange. Since the ], capitalism gradually spread from Europe, particularly from Britain, across global political and cultural frontiers. In the 19th and 20th centuries, capitalism provided the main, but not exclusive, means of industrialization throughout much of the world.<ref>"Capitalism" ''A Dictionary of Sociology''. John Scott and Gordon Marshall. Oxford University Press 2005. Oxford Reference Online. Oxford University Press.</ref>


Economists, historians, political economists, and sociologists have adopted different perspectives in their analyses of capitalism and have recognized various forms of it in practice. These include '']'' or ], ], ], and ]. Different ] feature varying degrees of ]s, ],<ref name="gregorystuart">{{cite book|last1=Gregory |first1=Paul |last2=Stuart |first2=Robert |title=The Global Economy and its Economic Systems |publisher=] |date=2013 |isbn=978-1-285-05535-0 |page=107 |quote=Real-world capitalist systems are mixed, some having higher shares of public ownership than others. The mix changes when privatization or nationalization occurs. Privatization is when property that had been state-owned is transferred to private owners. ] occurs when privately owned property becomes publicly owned.}}</ref> obstacles to free competition, and state-sanctioned ]. The degree of ] in ] and the role of ] and ], as well as the scope of state ownership, vary across different models of capitalism.<ref name="Modern Economics 1986, p. 54">{{cite book |title=Macmillan Dictionary of Modern Economics |edition=3rd |date=1986 |pages=54}}</ref><ref>{{cite magazine |last=Bronk |first=Richard |title=Which model of capitalism?|url=http://oecdobserver.org/news/archivestory.php/aid/345/Which_model_of_capitalism_.html |url-status=live |magazine=] |publisher=] |date=Summer 2000 |volume=1999 |issue=221–222 |pages=12–15 |archive-url=https://web.archive.org/web/20180406200423/http://oecdobserver.org/news/archivestory.php/aid/345/Which_model_of_capitalism_.html |archive-date=6 April 2018 |access-date=6 April 2018}}</ref> The extent to which different markets are free and the rules defining private property are matters of politics and policy. Most of the existing capitalist economies are ] that combine elements of free markets with state intervention and in some cases ].<ref name="Stilwell">{{cite book |last=Stilwell |first=Frank |author-link=Frank Stilwell (economist) |title=Political Economy: the Contest of Economic Ideas |edition=1st |publisher=] |location=Melbourne, Australia |date=2002}}</ref>
The concept of capitalism has limited analytic value, given the great variety of historical cases over which it is applied, varying in time, geography, politics and culture. Some economists have specified a variety of different types of capitalism, depending on specifics of concentration of economic power and wealth, and methods of capital accumulation (Scott 2005). During the last century capitalism has been contrasted with ]. Most ] are usually regarded as capitalist, but they are also often called ]<ref>Case, Karl E., Fair, Ray C., Principles of Macroeconomics, Chapter 22 Globalization, Prentice Hall (2004)</ref> due to government ownership and regulation of production, trade, commerce, taxation, money-supply, and physical infrastructure.


Capitalism in its modern form emerged from ] in ], as well as ] practices by European countries between the 16th and 18th centuries. The Industrial Revolution of the 18th century established ], characterized by ] and a complex ]. Through the process of ], capitalism spread across the world in the 19th and 20th centuries, especially before World War I and after the end of the Cold War. During the 19th century, capitalism was largely unregulated by the state, but became more regulated in the post–] period through ], followed by a return of more unregulated capitalism starting in the 1980s through ].
==Etymology==
''See also: ''
According to ], the root word, ''capital'', derives from the Latin word ''capitalis'', which ultimately comes from ''caput'', meaning "head". The '']'' cited its first use of the word ''capitalism'' in 1854, and ''capitalist'' in 1792.<ref>Peter Burnham "Capitalism" ''The Concise Oxford Dictionary of Politics''. Ed. Iain McLean and Alistair McMillan. Oxford University Press, 2003. Oxford Reference Online. Oxford University Press.</ref> Marxist writers originally popularized the term "capitalism" (or its equivalents in other languages, such as ''Kapitalismus'') although Marx tended to speak of the "capitalist ]" or "]." Nevertheless, the term has been widely adopted across the political spectrum, though employed in many different ways (Burnham).


The existence of market economies has been observed under many ] and across a vast array of ], ]s, and cultural contexts. The modern industrial capitalist societies that exist today developed in Western Europe as a result of the Industrial Revolution. The accumulation of capital is the primary mechanism through which capitalist economies promote ]. However, it is a characteristic of such economies that they experience a ] of ] followed by recessions.<ref name = "HP">{{cite journal |last1=Hodrick |first1=R. |last2=Prescott|first2= E. |year=1997 |title=Postwar US business cycles: An empirical investigation |journal=Journal of Money, Credit and Banking|volume=29|issue=1 |pages=1–16|doi=10.2307/2953682 |jstor=2953682 |s2cid=154995815 | url = http://www.kellogg.northwestern.edu/research/math/papers/451.pdf}}</ref>
==Perspectives on the characteristics of capitalism==
===Classical political economy ===
]
The “classical” tradition in ] emerged in Britain in the late 18th century. The classical political economists ], ], ], and ] published analyses of the production, distribution, and exchange of goods in a capitalist economy that have since formed the basis of study for most contemporary mainstream economists.


== Etymology ==
Smith devised a set of concepts that remain strongly associated with capitalism today, particularly his theory of the “]” of the market, through which the pursuit of individual interest produces a collective good for society. This belief in the market as the most fair and efficient arbitrator of resources is strongly associated with the ] doctrine of minimal government intervention in the economy.


The term "capitalist", meaning an owner of ], appears earlier than the term "capitalism" and dates to the mid-17th century. "Capitalism" is derived from ''capital'', which evolved from {{lang|la|capitale}}, a late ] word based on {{lang|la|caput}}, meaning "head"—which is also the origin of "]" and "]" in the sense of movable property (only much later to refer only to livestock). {{lang|la|Capitale}} emerged in the 12th to 13th centuries to refer to funds, stock of merchandise, sum of money or money carrying interest.<ref name="Braudel-1979">{{cite book |last=Braudel |first=Fernand |author-link=Fernand Braudel |title=The Wheels of Commerce: Civilization and Capitalism 15th–18th Century |publisher=] |date=1979}}</ref>{{rp|232}}<ref name="OED-93">]. "Capital". . ''Oxford English Press''. {{abbr|Vol.|Volume}} 2. p. 93.</ref> By 1283, it was used in the sense of the capital assets of a trading firm and was often interchanged with other words—wealth, money, funds, goods, assets, property and so on.<ref name="Braudel-1979" />{{rp|233}}
===Marxian political economy===
]
] understood capitalism as an historically specific ] (the way in which the productive property is owned and controlled, combined with the corresponding ] between individuals based on their connection with the process of production) in which capital has become the dominant ] (Burnham). The capitalist stage of development or "bourgeois society," for Marx, represented the most advanced form of social organization to date.


The ''Hollantse ({{langx|de|holländische}}) Mercurius'' uses "capitalists" in 1633 and 1654 to refer to owners of capital.<ref name="Braudel-1979" />{{rp|234}} In French, ] referred to ''capitalistes'' in 1788,<ref>E.g., "L'Angleterre a-t-elle l'heureux privilège de n'avoir ni Agioteurs, ni Banquiers, ni Faiseurs de services, ni Capitalistes ?" in (1788) ''De la foi publique envers les créanciers de l'état : lettres à M. Linguet sur le n° CXVI de ses annales'' {{Webarchive|url=https://web.archive.org/web/20150319071130/http://books.google.com/books?id=ESMVAAAAQAAJ&pg=PA19 |date=19 March 2015 }}</ref> four years before its first recorded English usage by ] in his work ''Travels in France'' (1792).<ref name="OED-93" /><ref>Arthur Young. .</ref> In his '']'' (1817), ] referred to "the capitalist" many times.<ref>Ricardo, David. Principles of Political Economy and Taxation. 1821. John Murray Publisher, 3rd edition.</ref> English poet ] used "capitalist" in his work ''Table Talk'' (1823).<ref>Samuel Taylor Coleridge. {{Webarchive|url=https://web.archive.org/web/20200223123202/https://books.google.com/books?id=ma-4W-XiGkIC |date=23 February 2020 }}. p. 267.</ref> ] used the term in his first work, '']'' (1840), to refer to the owners of capital. ] used the term in his 1845 work '']''.<ref name="OED-93" /> ] used "capitalist" in his ] presented to the United States Congress in 1791.
Following Adam Smith, Marx distinguished the ] of commodities from their ] in the market (Scott 2005). ], according to Marx, is created with the purchase of commodities for the purpose of creating new commodities with a higher exchange value higher than the sum of the original purchases. For Marx, the use of ] had itself become a commodity under capitalism (Scott 2005); the exchange value of labor power, as reflected in the wage, is less than the value it produces for the capitalist. This difference in values, he argues, constitutes ], which the capitalists extracts and accumulates. In '']'', Marx argues that the capitalist mode of production is distinguished by how the owners of capital extract this surplus from workers—all prior societies had extracted ], but capitalism was new in doing so via the sale-value of produced commodities.<ref>See Karl Marx, ''Das Kapital'', vol. iii, ch. 47 quoted in Scott (2005)</ref>


The initial use of the term "capitalism" in its modern sense is attributed to ] in 1850 ("What I call 'capitalism' that is to say the appropriation of capital by some to the exclusion of others") and Pierre-Joseph Proudhon in 1861 ("Economic and social regime in which capital, the source of income, does not generally belong to those who make it work through their labor").<ref name="Braudel-1979" />{{rp|237}} ] frequently referred to the "]" and to the "capitalist mode of production" in '']'' (1867).<ref>{{cite book |last=Saunders |first=Peter |date=1995 |title=Capitalism |publisher=] |page=1}}</ref><ref name=":0">MEW, 23, & Das Kapital. Kritik der politischen Oekonomie. Erster Band-Verlag von Otto Meissner (1867)</ref> Marx did not use the form ''capitalism'' but instead used ], ''capitalist'' and ''capitalist mode of production'', which appear frequently.<ref name=":0" /><ref>The use of the word "capitalism" appears in ''Theories of Surplus Value'', volume II. ToSV was edited by Kautsky.</ref> Due to the word being coined by socialist critics of capitalism, economist and historian ] stated that the term "capitalism" itself is a term of disparagement and a misnomer for ].<ref>Hessen, Robert (2008) "Capitalism", in Henderson, David R. (ed.) ''The Concise Encyclopedia of Economics'' p. 57</ref> ] agrees with the statement that the term is a misnomer, adding that it misleadingly suggests that there is such a thing as "]" that inherently functions in certain ways and is governed by stable economic laws of its own.<ref>Harcourt, Bernard E. (2020) ''For Coöperation and the Abolition of Capital, Or, How to Get Beyond Our Extractive Punitive Society and Achieve a Just Society'', Rochester, NY: Columbia Public Law Research Paper No. 14-672, p. 31</ref>
For Marx, this cycle the extraction of the surplus value by the owners of capital or the bourgeoisie becomes the basis of ]. However, this argument is intertwined with Marx's ] asserting that labor is the source of all value, and thus of profit. This theory is contested by most mainstream ]s, including some contemporary Marxian economists (Scott 2005).


In the ], the term "capitalism" first appears, according to the '']'' (OED), in 1854, in the novel '']'' by novelist ], where the word meant "having ownership of capital".<ref name="OED-94">]. "Capitalism" p. 94.</ref> Also according to the OED, ], a ] ] and ], used the term "private capitalism" in 1863.
Some 20th century ] understand capitalism as a social formation where capitalist class processes dominate, but are not exclusive (Resnick & Wolff). Capitalist class processes, to these thinkers, are simply those in in which ] takes the form of ], usable as capital; other tendencies for utilization of labor nonetheless exist simultaneously in existing societies where capitalist processes are predominant.


Other terms sometimes used for capitalism are:
===Weberian political sociology===
* ]<ref>{{cite book |last=Mandel |first=Ernst |author-link=Ernst Mandel |title=An Introduction to Marxist Economic Theory |url=https://books.google.com/books?id=Pf9Jd1sIMJ0C&pg=PA24 |year=2002 |publisher=] |isbn=978-1-876646-30-1 |page=24 |access-date=29 January 2017 |archive-date=15 February 2017 |archive-url=https://web.archive.org/web/20170215160137/https://books.google.com/books?id=Pf9Jd1sIMJ0C&pg=PA24 |url-status=live}}</ref>
]
* ]<ref>{{cite journal |title=Adam Smith and His Legacy for Modern Capitalism |last=Werhane |first=P. H. |journal=The Review of Metaphysics |volume=47 |year=1994 |issue=3}}</ref>
In some ]s, the understanding of the defining characteristics of capitalism have been strongly influenced by 19th century German social theorist ] (Scott 2005). Weber considered ] ], rather than production, as the defining feature of capitalism (Scott 2005); capitalist enterprises, in contrast to their counterparts in prior modes of economic activity, was their rationalization of production, directed toward maximizing ] and ]. According to Weber, workers in pre-capitalist economic institutions understood work in term of a personal relationship between ] and ] in a ], or between ] and ] in a ].
* Free enterprise<ref name="rogetfreeenterprise">{{cite encyclopedia |title=Free enterprise |encyclopedia=Roget's 21st Century Thesaurus |edition=Third |publisher=Philip Lief Group |date=2008}}</ref>{{page needed|date=July 2021}}
* Free enterprise economy<ref name="britannica" />
* ]<ref name="rogetfreeenterprise" />{{page needed|date=July 2021}}
* Free market economy<ref name="britannica" />
* '']''<ref name=Barrons>{{cite book |title=Barrons Dictionary of Finance and Investment Terms |date=1995 |page=74}}</ref>
* ]<ref>{{cite encyclopedia |url=https://www.merriam-webster.com/dictionary/market%20economy |title=Market economy |dictionary=Merriam-Webster Unabridged Dictionary}}</ref>
* Profits system<ref>{{cite book |last=Shutt |first=Harry |title=Beyond the Profits System: Possibilities for the Post-Capitalist Era |publisher=] |year=2010 |isbn=978-1-84813-417-1}}</ref>{{page needed|date=July 2021}}
* Self-regulating market<ref name="rogetfreeenterprise" />{{page needed|date=July 2021}}


== Definition ==
In his book '']'' (1904-1905), Weber sought to trace how capitalism transformed traditional modes of economic activity. For Weber, the 'spirit' of rational calculation eroded traditional restraints on capitalist exchange, and fostered the development of modern capitalism. This 'spirit' was gradually codified by law; rendering wage-laborers legally 'free' to sell work; encouraging the development of technology aimed at the organization of production on the basis of rational principles; and clarifying the separation of the public and private lives of workers, especially between the home and the workplace. Therefore, unlike Marx, Weber did not see capitalism as primarily the consequence of changes in the means of production. Instead, for Weber the origins of capitalism rested chiefly in the rise of a new ]ial 'spirit' in the political and cultural realm. In the ''Protestant Ethic'', Weber suggested that the origins of this 'spirit' was related to the rise of the ], particularly ].
There is no universally agreed upon definition of capitalism; it is unclear whether or not capitalism characterizes an entire society, a specific type of social order, or crucial
components or elements of a society.<ref name="wolf">{{cite encyclopedia |last=Wolf |first=Harald |editor1-last=Ritzer |editor1-first=George|title=Capitalism |encyclopedia=Encyclopedia of Social Theory|pages=76–80|date=2004 |publisher=Sage Publications|isbn=978-1-4522-6546-9}}</ref> Societies officially founded in opposition to capitalism (such as the ]) have sometimes been argued to actually exhibit characteristics of capitalism.<ref>{{cite journal |last1=Howard |first1=M.C. |last2=King |first2=J.E. |title='State Capitalism' in the Soviet Union |journal=History of Economics Review |date=January 2001 |volume=34 |issue=1 |pages=110–126 |doi=10.1080/10370196.2001.11733360 |s2cid=42809979 |url=https://www.tandfonline.com/doi/pdf/10.1080/10370196.2001.11733360 |language=en |issn=1037-0196}}</ref> ] describes usage of the term "capitalism" by many authors as "mainly rhetorical, functioning less as an actual concept than as a gesture toward the
need for a concept".<ref name="harris"/> Scholars who are uncritical of capitalism rarely actually use the term "capitalism".<ref name="delacroix">{{cite encyclopedia |last=Delacroix |first=Jacques |editor1-last=Ritzer |editor1-first=George |title=Capitalism |encyclopedia=Encyclopedia of Social Theory|date=2007 |publisher=Wiley|doi=10.1002/9781405165518.wbeosc004 |isbn=978-1-4051-2433-1|url=https://onlinelibrary.wiley.com/doi/10.1002/9781405165518.wbeosc004}}</ref>
Some doubt that the term "capitalism" possesses valid scientific dignity,<ref name="wolf"/> and it is generally not discussed in ],<ref name="harris"/> with economist ] suggesting that the term "capitalism" should be abandoned entirely.<ref>{{cite book |last=Acemoglu |first=Daron |date=2017 |editor1-last=Frey |editor1-first=Bruno S.|editor2-last = Iselin|editor2-first = David |title=Economic Ideas You Should Forget |publisher=Springer|pages=1–3 |chapter=Capitalism|doi=10.1007/978-3-319-47458-8_1 |isbn=978-3-319-47457-1|chapter-url=https://link.springer.com/chapter/10.1007/978-3-319-47458-8_1}}</ref> Consequently, understanding of the concept of capitalism tends to be heavily influenced by opponents of capitalism and by the followers and critics of Karl Marx.<ref name="delacroix"/>


== History ==
Capitalism, for Weber, is the most advanced economic system ever developed over the course of human history. Weber associated capitalism with the advance of the business ], public credit, and the further advance of ] of the modern world. Although Weber defended capitalism against its socialist critics of the period, he saw its rationalizing tendencies as a possible threat to traditional cultural values and institutions, and a possible 'iron cage' constraining human freedom.
{{Main|History of capitalism}}
] (pictured in a 16th-century portrait by ]) built an international financial empire and was one of the first ]ers.]]
], the centre of early capitalism<ref>{{cite encyclopedia |last1=Behringer |first1=Wolfgang |contribution=Core and Periphery: The Holy Roman Empire as a Communication(s) Universe |title=The Holy Roman Empire, 1495–1806 |date=2011 |publisher=Oxford University Press |location=Oxford |isbn=978-0-19-960297-1 |pages=347–358|url=https://perspectivia.net/servlets/MCRFileNodeServlet/pnet_derivate_00004689/behringer_core.pdf |archive-url=https://ghostarchive.org/archive/20221009/https://perspectivia.net/servlets/MCRFileNodeServlet/pnet_derivate_00004689/behringer_core.pdf |archive-date=9 October 2022 |url-status=live |access-date=7 August 2022}}</ref>]]


Capitalism, in its modern form, can be traced to the emergence of agrarian capitalism and mercantilism in the early ], in city-states like ].<ref>{{cite news |url=http://www.economist.com/node/13484709 |title=Cradle of capitalism |newspaper=] |date=16 April 2009 |access-date=9 March 2015 |archive-date=18 January 2018 |archive-url=https://web.archive.org/web/20180118055643/http://www.economist.com/node/13484709 |url-status=live}}</ref> ] has existed incipiently on a small scale for centuries<ref name="WarburtonDavid">{{cite book |last=Warburton |first=David |title=Macroeconomics from the beginning: The General Theory, Ancient Markets, and the Rate of Interest |location=Paris |publisher=Recherches et Publications |date=2003 |pages=49}}</ref> in the form of merchant, renting and lending activities and occasionally as small-scale industry with some wage labor. Simple ] exchange and consequently simple commodity production, which is the initial basis for the growth of capital from trade, have a very long history. During the ], ] promulgated capitalist economic policies such as free trade and banking. Their use of ] facilitated ]. These innovations migrated to Europe through trade partners in cities such as Venice and Pisa. Italian ] traveled the Mediterranean talking to Arab traders and returned to popularize the use of Indo-Arabic numerals in Europe.<ref name="Koehler, Benedikt">{{cite book |last=Koehler |first=Benedikt |title=Early Islam and the Birth of Capitalism |quote=In Baghdad, by the early tenth century a fully-fledged banking sector had come into being... |pages=2 |publisher=] |date=2014}}</ref>
===The German Historical School and the Austrian School===
From the perspective of the ], capitalism is primarily identified in terms of the organization of production for ]s. Although this perspective shares similar theoretical roots with that of Weber, its emphasis on markets and ] lends it different focus (Burnham). For followers of the German Historical School, the key shift from traditional modes of economic activity to capitalism involved the shift from medieval restrictions on credit and money to the modern ] combined with an emphasis on the profit motive.


=== Agrarianism ===
]
The economic foundations of the feudal agricultural system began to shift substantially in 16th-century England as the ] had broken down and land began to become concentrated in the hands of fewer landlords with increasingly large estates. Instead of a ]-based system of labor, workers were increasingly employed as part of a broader and expanding money-based economy. The system put pressure on both landlords and tenants to increase the productivity of agriculture to make profit; the weakened coercive power of the ] to extract peasant ] encouraged them to try better methods, and the tenants also had incentive to improve their methods in order to flourish in a competitive ]. Terms of rent for land were becoming subject to economic market forces rather than to the previous stagnant system of custom and feudal obligation.<ref>{{cite journal |last1=Brenner |first1=Robert |title=The Agrarian Roots of European Capitalism |journal=] |date=1 January 1982 |issue=97 |pages=16–113 |doi=10.1093/past/97.1.16 |jstor=650630}}</ref><ref>{{cite web |url=http://monthlyreview.org/1998/07/01/the-agrarian-origins-of-capitalism |title=The Agrarian Origins of Capitalism |access-date=17 December 2012 |date=July 1998 |archive-date=11 December 2019 |archive-url=https://web.archive.org/web/20191211183143/https://monthlyreview.org/1998/07/01/the-agrarian-origins-of-capitalism/ |url-status=live}}</ref>
In the late 19th century the German historical school of economics diverged with the emerging ] of economics, led at the time by ]. Later generations of followers of the Austrian School continued to be influential in Western economic thought through much of the 20th century. The Austrian economist ], a forerunner of the Austrian School of economics, emphasized the "]" of capitalism—the fact that market economies undergo constant change. At any moment of time, posits Schumpeter, there are rising industries and declining industries. Schumpeter, and today many mainstream economists influenced by his work, argue that resources should flow from the declining to the expanding industries for an economy to grow, but they recognized that sometimes resources are slow to withdraw from the declining industries because of various forms of institutional resistance to change.


=== Mercantilism ===
The Austrian economists ] and ] were among the leading defenders of ] against 20th century proponents of socialist ]. Mises and Hayek argued that only market capitalism could manage a complex, modern economy. Since a modern economy produces such a large array of distinct goods and services, and consists of such a large array of consumers and enterprises, asserted Mises and Hayek, the information problems facing any other form of economic organization other than market capitalism would exceed its capacity to handle information. Thinkers within ] built on the work of the Austrian School, and particular empasize ]: "supply creates its own demand." Capitalism, to this school, is defined by lack of state restraint on the decisions of producers.
{{Main|Mercantilism}}
]]]
] with the ] after the ] which began the British rule in ]]]
The economic doctrine prevailing from the 16th to the 18th centuries is commonly called ].<ref name=GSGB>{{cite book |url=https://books.google.com/books?id=Pf9Jd1sIMJ0C |title=An Introduction to Marxist Economic Theory |date= 2002 |publisher=] |via=] |isbn=978-1-876646-30-1 |access-date=27 August 2016 |archive-date=11 December 2016 |archive-url=https://web.archive.org/web/20161211173733/https://books.google.com/books?id=Pf9Jd1sIMJ0C |url-status=live}}</ref><ref name="Burnham">{{cite book |last=Burnham |first=Peter |author-link=Peter Burnham |title=Capitalism: The Concise Oxford Dictionary of Politics |publisher=] |year=2003}}</ref> This period, the ], was associated with the geographic exploration of foreign lands by merchant traders, especially from England and the ]. Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist methods.<ref name="Scott" /> Most scholars consider the era of merchant capitalism and mercantilism as the origin of modern capitalism,<ref name="Burnham"/><ref name="Encyclopædia Britannica 2006">''Encyclopædia Britannica'' (2006)</ref> although ] argued that the hallmark of capitalism is the establishment of generalized markets for what he called the "fictitious commodities", i.e. land, labor and money. Accordingly, he argued that "not until 1834 was a competitive labor market established in England, hence industrial capitalism as a social system cannot be said to have existed before that date".<ref>{{cite book |last=Polanyi |first=Karl |author-link=Karl Polanyi |title=The Great Transformation |publisher=] |location=Boston |date=1944 |pages=87}}</ref>


England began a large-scale and integrative approach to mercantilism during the ] (1558–1603). A systematic and coherent explanation of balance of trade was made public through ]'s argument ''England's Treasure by Forraign Trade, or the Balance of our Forraign Trade is The Rule of Our Treasure.'' It was written in the 1620s and published in 1664.<ref>{{cite book |first1=David |last1=Onnekink |first2=Gijs |last2=Rommelse |title=Ideology and Foreign Policy in Early Modern Europe (1650–1750) |url=https://books.google.com/books?id=M1QdbzdTimsC&pg=PA257 |year=2011 |publisher=] |page=257 |isbn=978-1-4094-1914-3 |access-date=27 June 2015 |archive-date=19 March 2015 |archive-url=https://web.archive.org/web/20150319130220/http://books.google.com/books?id=M1QdbzdTimsC&pg=PA257 |url-status=live}}</ref>
Austrian economics has been a major influence on the ideology of ], which considers laissez-faire capitalism to be the ideal economic system.


European ]s, backed by state controls, subsidies and ], made most of their profits by buying and selling goods. In the words of ], the purpose of mercantilism was "the opening and well-balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation of prices...".<ref>Quoted in {{cite book |first=George |last=Clark |title=The Seventeenth Century |location=New York |publisher=] |date=1961 |page=24}}</ref>
===Keynesian economics===


After the period of the ], the ] and the ], after massive contributions from the ],<ref name="Prakash">], "", ''History of World Trade Since 1450'', edited by ], vol. 1, Macmillan Reference USA, 2006, pp. 237–240, ''World History in Context''. Retrieved 3 August 2017</ref><ref name="ray">{{cite book |first=Indrajit |last=Ray |year=2011 |title=Bengal Industries and the British Industrial Revolution (1757–1857) |url=https://books.google.com/books?id=CHOrAgAAQBAJ&pg=PA57 |publisher=] |pages=57, 90, 174 |isbn=978-1-136-82552-1 |access-date=20 June 2019 |archive-date=29 May 2016 |archive-url=https://web.archive.org/web/20160529021839/https://books.google.com/books?id=CHOrAgAAQBAJ |url-status=live}}</ref> inaugurated an expansive era of commerce and trade.<ref name=Banaji>{{cite journal |last=Banaji |first=Jairus |year=2007 |title=Islam, the Mediterranean and the rise of capitalism |journal=] |volume=15 |pages=47–74 |doi=10.1163/156920607X171591 |url=http://eprints.soas.ac.uk/15983/1/Islam%20and%20capitalism.pdf |access-date=20 April 2018 |archive-date=29 March 2018 |archive-url=https://web.archive.org/web/20180329015002/http://eprints.soas.ac.uk/15983/1/Islam%20and%20capitalism.pdf |url-status=dead}}</ref><ref name="britannica2">{{cite book |title=Economic system:: Market systems |url=https://www.britannica.com/EBchecked/topic/178493/economic-system/61117/Market-systems#toc242146 |publisher=Encyclopædia Britannica |year=2006 |access-date=4 January 2009 |archive-date=24 May 2009 |archive-url=https://web.archive.org/web/20090524075921/https://www.britannica.com/EBchecked/topic/178493/economic-system/61117/Market-systems#toc242146 |url-status=live}}</ref> These companies were characterized by their ] and ] powers given to them by nation-states.<ref name="Banaji" /> During this era, merchants, who had traded under the previous stage of mercantilism, invested capital in the East India Companies and other colonies, seeking a ].
In his 1936 '']'', the British economist ] argued that capitalism suffered a basic problem in its ability to recover from periods of slowdowns in investment. Keynes argued that a capitalist economy could remain in an indefinite ] despite high ]. Keynes therefore raised the prospect that the ] would not end without what he termed in the ''General Theory'' "a somewhat comprehensive socialization of investment."


=== Industrial Revolution ===
]
{{Main|Industrial Revolution}}
Keynesian economics challenged the notion that laissez-faire capitalist economics could operate well on their own, without state intervention used to promote aggregate demand, fighting high unemployment and ] of the sort seen during the 1930s. However, the premises of Keynes’s work have since been challenged by neoclassical and ] and the Austrian School.
], fuelled primarily by ], propelled the ] in ].<ref>Watt steam engine image located in the lobby of the Superior Technical School of Industrial Engineers of the ]{{clarify|date=April 2016}} (]).</ref>]]
In the mid-18th century a group of economic theorists, led by ] (1711–1776)<ref>{{cite book |last=Hume |first=David |author-link=David Hume |title=Political Discourses |url=https://archive.org/details/McGillLibrary-125702-2590 |location=Edinburgh |publisher=A. Kincaid & A. Donaldson |year=1752}}</ref> and ] (1723–1790), challenged fundamental mercantilist doctrines—such as the belief that the world's wealth remained constant and that a state could only increase its wealth at the expense of another state.


During the ], ] replaced merchants as a dominant factor in the capitalist system and effected the decline of the traditional handicraft skills of ]s, guilds and ]. Industrial capitalism marked the development of the ] of manufacturing, characterized by a complex ] between and within work process and the routine of work tasks; and eventually established the domination of the ].<ref>{{cite book |last1=Burnham |first1=Peter |author1-link=Peter Burnham |year=1996 |chapter=Capitalism |editor1-last=McLean |editor1-first=Iain |editor2-last=McMillan |editor2-first=Alistair |title=The Concise Oxford Dictionary of Politics |url=https://books.google.com/books?id=8JkyAwAAQBAJ |series=Oxford Quick Reference |edition=3 |location=Oxford |publisher=] |publication-date=2009 |isbn=978-0-19-101827-5 |access-date=14 September 2019 |quote=Industrial capitalism, which Marx dates from the last third of the eighteenth century, finally establishes the domination of the capitalist mode of production. |archive-date=27 July 2020 |archive-url=https://web.archive.org/web/20200727163404/https://books.google.com/books?id=8JkyAwAAQBAJ |url-status=live}}</ref>
Another challenge to Keynesian thinking came from his colleague ], and subsequently from the ] that followed Sraffa. In Sraffa's highly-technical analysis, capitalism is defined by an entire system of social relations among both producers and consumers, but with a primary emphasis on the demands of production. According to Sraffa, the tendency of capital to seek its highest rate of profit causes a dynamic instability in social and economic relations.


Industrial Britain eventually abandoned the ] policy formerly prescribed by mercantilism. In the 19th century, ] (1804–1865) and ] (1811–1889), who based their beliefs on the ], initiated a movement to lower ].<ref name="laissezf">{{cite web |title=Laissez-faire |url=http://www.bartleby.com/65/la/laissezf.html |url-status=dead |archive-url=https://web.archive.org/web/20081202050426/http://www.bartleby.com/65/la/laissezf.html |archive-date=2 December 2008}}</ref> In the 1840s Britain adopted a less protectionist policy, with the 1846 repeal of the ] and the 1849 repeal of the ].<ref>{{cite book |last1=Burnham |first1=Peter |author1-link=Peter Burnham |year=1996 |chapter=Capitalism |editor1-last=McLean |editor1-first=Iain |editor2-last=McMillan |editor2-first=Alistair |title=The Concise Oxford Dictionary of Politics |url=https://books.google.com/books?id=8JkyAwAAQBAJ |series=Oxford Quick Reference |edition=3 |location=Oxford |publisher=] |publication-date=2009 |isbn=978-0-19-101827-5 |access-date=14 September 2019 |quote=For most analysts, mid- to late-nineteenth century Britain is seen as the apotheosis of the laissez-faire phase of capitalism. This phase took off in Britain in the 1840s with the repeal of the Corn Laws, and the Navigation Acts, and the passing of the Banking Act. |archive-date=27 July 2020|archive-url=https://web.archive.org/web/20200727163404/https://books.google.com/books?id=8JkyAwAAQBAJ |url-status=live}}</ref> Britain reduced tariffs and ], in line with David Ricardo's advocacy of ].
=== Neoclassical economics ===
Today, most academic research on capitalism in the English-speaking world draws on ]. It favors extensive market coordination and relatively neutral patterns of governmental market regulation aimed at maintaining property rights, rather than privileging particular social actors; deregulated ]s; corporate governance dominated by financial owners of firms; and financial systems depending chiefly on ]-based financing rather than state financing.


=== Modernity ===
Liberal capitalist thought has generally assumed a clear division between the ] and other realms of social activity, such as the state.<ref>"Capitalism" ''Dictionary of the Social Sciences''. Craig Calhoun, ed. Oxford University Press 2002. Oxford Reference Online. Oxford University Press.</ref>
] formed the financial basis of the international economy from 1870 to 1914.]]


Broader processes of ] carried capitalism across the world. By the beginning of the nineteenth century, a series of loosely connected market systems had come together as a relatively integrated global system, in turn intensifying processes of economic and other globalization.<ref name="SAGE Publications">{{cite book |year=2007 |last1=James |first1=Paul |author-link=Paul James (academic) |last2=Gills |first2=Barry |title=Globalization and Economy, Vol. 1: Global Markets and Capitalism |url=https://www.academia.edu/4199690 |publisher=] |location=London |page=xxxiii}}</ref><ref>{{cite journal |title=Impact of Global Capitalism on the Environment of Developing Economies |url=http://s-space.snu.ac.kr/bitstream/10371/93716/1/04_Osariyekemwen%20Igiebor.pdf |journal=Impact of Global Capitalism on the Environment of Developing Economies: The Case of Nigeria |pages=84 |access-date=31 July 2020 |archive-date=20 March 2020 |archive-url=https://web.archive.org/web/20200320071239/http://s-space.snu.ac.kr/bitstream/10371/93716/1/04_Osariyekemwen%20Igiebor.pdf |url-status=live}}</ref> Late in the 20th century, capitalism overcame a challenge by ] and is now the encompassing system worldwide,<ref name="britannica">{{cite book |title=Capitalism |publisher=Encyclopædia Britannica |url=https://www.britannica.com/EBchecked/topic/93927/capitalism |date=10 November 2014 |access-date=24 March 2015 |archive-date=29 June 2011 |archive-url=https://web.archive.org/web/20110629021539/https://www.britannica.com/EBchecked/topic/93927/capitalism |url-status=live}}</ref><ref>{{cite book |last=James |first=Fulcher |title=Capitalism, A Very Short Introduction |quote=In one respect there can, however, be little doubt that capitalism has gone global and that is in the elimination of alternative systems |pages=99 |publisher=] |date=2004 |isbn=978-0-19-280218-7}}</ref> with the ] as its dominant form in the industrialized Western world.
Most today economists consider value to be subjective and thus reject the labor theory of value. They argue that what is valuable can vary from person to person and for the same person at different times. ] is the theory that economic value results from marginal utility and ] (the ]). Mainstream economists now believe that capitalists do not earn profits by exploiting workers. Instead, they believe, capitalists earn profits by forgoing current consumption, by taking risks, and by organizing production.


] allowed cheap production of household items using ], while rapid ] created sustained demand for commodities. The ] of the 18th-century decisively shaped globalization.<ref name="SAGE Publications" /><ref>{{cite journal |last1=Thomas |first1=Martin |last2=Thompson |first2=Andrew |date=1 January 2014 |title=Empire and Globalisation: from 'High Imperialism' to Decolonisation |journal=The International History Review |volume=36 |issue=1 |pages=142–170 |doi=10.1080/07075332.2013.828643 |s2cid=153987517 |issn=0707-5332|doi-access=free }}</ref><ref>{{cite journal |title=Globalization and Empire |url=https://core.ac.uk/download/pdf/47230635.pdf |journal=Globalization and Empire |access-date=31 July 2020 |archive-date=23 September 2020 |archive-url=https://web.archive.org/web/20200923063531/https://core.ac.uk/download/pdf/47230635.pdf |url-status=live}}</ref><ref>{{cite journal |title=Europe and the causes of globalization |url=https://core.ac.uk/download/pdf/7045619.pdf |journal=Europe and the Causes of Globalization, 1790 to 2000 |access-date=31 July 2020 |archive-date=7 December 2017 |archive-url=https://web.archive.org/web/20171207091124/https://core.ac.uk/download/pdf/7045619.pdf |url-status=live}}</ref>
==History of capitalism==
{{Main|History of capitalism}}


After the ] and ]s (1839–60) and the completion of the British conquest of India by 1858, vast populations of Asia became consumers of European exports. Europeans colonized areas of sub-Saharan Africa and the Pacific islands. Colonisation by Europeans, notably of sub-Saharan Africa, yielded valuable natural resources such as ], ] and ] and helped fuel trade and investment between the European imperial powers, their colonies and the United States:
In the period between the late 15th century and the late 18th century, much of Europe underwent a thoroughgoing economic transformation associated with the rise of capitalism and the shift from the town or the village to the ] as the center of the economy. Since the Industrial Revolution and the emergence of the modern capitalist economy, levels of wealth and economic output in the Western world have risen dramatically, whilst the levels of poverty therein have fallen dramatically.


{{blockquote|The inhabitant of London could order by telephone, sipping his morning tea, the various products of the whole earth, and reasonably expect their early delivery upon his doorstep. Militarism and imperialism of racial and cultural rivalries were little more than the amusements of his daily newspaper. What an extraordinary episode in the economic progress of man was that age which came to an end in August 1914.<ref>{{cite web |url=https://www.pbs.org/wgbh/commandingheights/shared/minitext/tr_show01.html |title=Commanding Heights: Episode One: The Battle of Ideas |publisher=] |date=24 October 1929 |access-date=31 July 2010 |archive-date=30 March 2010 |archive-url=https://web.archive.org/web/20100330093746/http://www.pbs.org/wgbh/commandingheights/shared/minitext/tr_show01.html |url-status=live}}</ref>}}
Over the course of the past five hundred years, capital has been accumulated by a variety of different methods, in a variety of scales, and associated with a great deal of variation in the concentration of economic power and wealth (Scott 2005). Much of the history of the past five hundred years is concerned with the development of capitalism in its various forms, its condemnation and defense, and its rejection, particularly by ].


From the 1870s to the early 1920s, the global financial system was mainly tied to the ].<ref>{{cite book|last=Eichengreen|first=Barry|author-link=Barry Eichengreen|date=6 August 2019|title=Globalizing Capital: A History of the International Monetary System|edition=3rd|publisher=]|doi=10.2307/j.ctvd58rxg|isbn=978-0-691-19458-5|s2cid=240840930 |lccn=2019018286}}{{page needed|date=December 2023}}</ref><ref>{{cite book|last1=Eichengreen|first1=Barry|author-link=Barry Eichengreen|last2=Esteves|first2=Rui Pedro|date=2021|editor1-last=Fukao|editor1-first=Kyoji|editor2-last=Broadberry|editor2-first=Stephen|editor2-link=Stephen Broadberry|section=International Finance|title=The Cambridge Economic History of the Modern World|publisher=]|volume=2: ''1870 to the Present''|pages=501–525|isbn=978-1-107-15948-8}}</ref> The United Kingdom first formally adopted this standard in 1821. Soon to follow were ] in 1853, ] in 1865, the United States and Germany ('']'') in 1873. New technologies, such as the ], the ], the ], the ] and ]s allowed goods and information to move around the world to an unprecedented degree.<ref>{{Cite web|url=https://www.nber.org/papers/w7195 |last1=Bordo |first1=Michael D. |author1-link=Michael D. Bordo |last2=Eichengreen |first2=Barry |author2-link=Barry Eichengreen |last3=Irwin |first3=Douglas A. |title=Is Globalization Today Really Different than Globalization a Hundred Years Ago? |series=NBER |number=Working Paper No. 7195 |date=June 1999|doi=10.3386/w7195 }}</ref>
===Merchant capitalism and mercantilism===
{{Main article|Mercantilism}}
]


In the United States, the term "capitalist" primarily referred to powerful businessmen<ref>{{Cite book |last=Andrews |first=Thomas G. |title=Killing for Coal: America's Deadliest Labor War |publisher=] |year=2008 |isbn=978-0-674-03101-2 |location=Cambridge |page=64 |author-link=Thomas G. Andrews (historian)}}</ref> until the 1920s due to widespread societal skepticism and criticism of capitalism and its most ardent supporters.
The earliest stages of modern capitalism, arising in the period between the 16th and 18th centuries, are commonly described as ] and ] (Burnham; EB). This period was associated with geographic discoveries by merchant overseas traders, especially from England and the Low Countries; the ]; and the rapid growth in overseas trade. Referring to this period in the ''Communist Manifesto'', Marx wrote:


] ] (1963)]]
<blockquote>“The discovery of America, the rounding of the Cape, opened up fresh ground for the rising bourgeoisie. The East-Indian and Chinese markets, the colonisation of America, trade with the colonies, the increase in the means of exchange and in commodities generally, gave to commerce, to navigation, to industry, an impulse never before known, and thereby, to the revolutionary element in the tottering feudal society, a rapid development.” </blockquote>


Contemporary capitalist societies developed in the West from 1950 to the present and this type of system continues throughout the world—relevant examples started in the ], ], ], ], and others. At this stage most capitalist markets are considered{{by whom|date=July 2021}} developed and characterized by developed private and public markets for equity and debt, a high ] (as characterized by the ] and the ]), large institutional investors and a well-funded ]. A significant ] has emerged{{when|date=July 2021}} and decides on a significant proportion of investments and other decisions. A different future than that envisioned by Marx has started to emerge—explored and described by ] in the United Kingdom in his 1956 book '']''<ref>{{cite book |last=Crosland |first=Anthony |title=The Future of Socialism |publisher=Jonathan Cape |year=1956 |location=United Kingdom}}{{page needed|date=December 2023}}</ref> and by ] in North America in his 1958 book '']'',<ref>{{cite book |last=Galbraith |first=John Kenneth |title=The Affluent Society |publisher=] |year=1958 |location=United States}}{{page needed|date=December 2023}}</ref> 90 years after Marx's research on the state of capitalism in 1867.<ref>{{cite book |last=Shiller |first=Robert |title=Finance and The Good Society |publisher=] |year=2012 |location=United States}}{{page needed|date=December 2023}}</ref>
Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist production methods (Scott 2005). Noting the various pre-capitalist features of mercantilism, ] argued that capitalism did not emerge until the establishment of ] in Britain in the 1830s.


The ] ended in the late 1960s and early 1970s and the economic situation grew worse with the rise of ].<ref>{{cite book |last=Barnes |first=Trevor J. |title=Reading economic geography |publisher=] |isbn=978-0-631-23554-5 |page=127 |year=2004}}</ref> ], a modification of ] that is more compatible with ''laissez-faire'' analyses, gained increasing prominence in the capitalist world, especially under the years in office of ] in the United States (1981–1989) and of ] in the United Kingdom (1979–1990). Public and political interest began shifting away from the so-called ] concerns of Keynes's managed capitalism to a focus on individual ], called "remarketized capitalism".<ref name="Fulcher, James 2004">{{cite book |last=Fulcher |first=James |title=Capitalism |edition=1st |location=New York |publisher=] |date=2004}}{{page needed|date=December 2023}}</ref>
Under mercantilism, European ]s, backed by state controls, ], and ], made most of their profits from the buying and selling of goods. In the words of ], the purpose of mercantilism was “the opening and well-balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation of prices...”<ref>Quoted in Sir George Clark, ''The Seventeenth Century'' (New York: Oxford University Pres, 1961), p. 24.</ref> Similar practices of economic regimentation had begun earlier in the medieval towns. However, under mercantilism, given the contemporaneous rise of the ], the state superseded the local ]s as the regulator of the economy.


The end of the ] and the ] allowed for capitalism to become a truly global system in a way not seen since before ]. The development of the ] global economy would have been impossible without the fall of ].<ref>{{cite book |last=Gerstle |first=Gary |author-link=Gary Gerstle |date=2022 |title=The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era |url=https://global.oup.com/academic/product/the-rise-and-fall-of-the-neoliberal-order-9780197519646?cc=us&lang=en& |location= |publisher=] |pages=10–12 |isbn=978-0-19-751964-6}}</ref><ref>{{cite book |last=Bartel |first=Fritz |date=2022 |title=The Triumph of Broken Promises: The End of the Cold War and the Rise of Neoliberalism |url=https://www.hup.harvard.edu/catalog.php?isbn=978-0-674-97678-8 |location= |publisher=] |pages=5–6, 19 |isbn=978-0-674-97678-8}}</ref>
Among the major tenets of mercantilist theory was ], a doctrine stressing the importance of accumulating ]. Mercantilists argued that a state should export more goods than it imported so that foreigners would have to pay the difference in precious metals. Mercantilists asserted that only raw materials that could not be extracted at home should be imported; and promoted government subsides, such as the granting of monopolies and protective ]s, were necessary to encourage home production of manufactured goods.


Harvard Kennedy School economist Dani Rodrik distinguishes between three historical variants of capitalism:<ref>{{citation |last=Rodrik |first=Dani |title=Capitalism 3.0 |date=2009 |url=https://www.jstor.org/stable/j.ctt46mtqx.23 |work=Aftershocks |volume= |pages=185–193 |editor-last=Hemerijck |editor-first=Anton |publisher=] |jstor=j.ctt46mtqx.23 |isbn=978-90-8964-192-2 |access-date=14 January 2021 |editor2-last=Knapen |editor2-first=Ben |editor3-last=van Doorne |editor3-first=Ellen}}</ref>
Proponents of mercantilism emphasized state power and overseas conquest as the principal aim of economic policy. If a state could not supply its own raw materials, according to the mercantilists, it should acquire colonies from which they could be extracted. Colonies constituted not only sources of supply for raw materials but also markets for finished products. Because it was not in the interests of the state to allow competition, held the mercantilists, colonies should be prevented from engaging in manufacturing and trading with foreign powers.
* Capitalism 1.0 during the 19th century entailed largely unregulated markets with a minimal role for the state (aside from national defense, and protecting property rights);
* Capitalism 2.0 during the post-World War II years entailed Keynesianism, a substantial role for the state in regulating markets, and strong welfare states;
* Capitalism 2.1 entailed a combination of unregulated markets, globalization, and various national obligations by states.


==== Relationship to democracy ====
===Industrial capitalism and laissez-faire===
The relationship between ] and capitalism is a contentious area in theory and in popular political movements.<ref>{{cite journal |last1=Milner |first1=Helen V |title=Is Global Capitalism Compatible with Democracy? Inequality, Insecurity, and Interdependence |journal=] |date=2021 |volume=65 |issue=4 |pages=1097–1110 |doi=10.1093/isq/sqab056 |doi-access=free}}</ref> The extension of adult-male ] in 19th-century Britain occurred along with the development of industrial capitalism and ] became widespread at the same time as capitalism, leading capitalists to posit a causal or mutual relationship between them. However, according to some authors in the 20th-century, capitalism also accompanied a variety of political formations quite distinct from liberal democracies, including ] regimes, ] and ].<ref name="Burnham" /> ] asserts that democracies seldom fight other democracies, but others suggest this may be because of political similarity or stability, rather than because they are "democratic" or "capitalist". Critics argue that though economic growth under capitalism has led to democracy, it may not do so in the future as ] régimes have been able to manage economic growth using some of capitalism's competitive principles<ref>{{cite magazine |first=Gady |last=Epstein |title=The Winners And Losers in Chinese Capitalism |url=https://www.forbes.com/sites/gadyepstein/2010/08/31/the-winners-and-losers-in-chinese-capitalism/ |magazine=] |access-date=28 October 2015 |archive-date=5 November 2015 |archive-url=https://web.archive.org/web/20151105210914/http://www.forbes.com/sites/gadyepstein/2010/08/31/the-winners-and-losers-in-chinese-capitalism/ |url-status=live}}</ref><ref>{{cite news |title=The rise of state capitalism |url=http://www.economist.com/node/21543160 |newspaper=] |access-date=24 October 2015 |issn=0013-0613 |archive-date=15 June 2020 |archive-url=https://web.archive.org/web/20200615124603/https://www.economist.com/leaders/2012/01/21/the-rise-of-state-capitalism |url-status=live}}</ref> without making concessions to greater ].<ref>{{cite web |last=Mesquita |first=Bruce Bueno de |url=http://www.foreignaffairs.org/20050901faessay84507/bruce-bueno-de-mesquita-george-w-downs/development-and-democracy.html |title=Development and Democracy |date=September 2005 |access-date=26 February 2008 |work=] |url-status=dead |archive-url=https://web.archive.org/web/20080220154505/http://www.foreignaffairs.org/20050901faessay84507/bruce-bueno-de-mesquita-george-w-downs/development-and-democracy.html |archive-date=20 February 2008}}</ref><ref>{{cite journal |last1=Siegle |first1=Joseph |last2=Weinstein |first2=Michael |last3=Halperin |first3=Morton |date=1 September 2004 |title=Why Democracies Excel |url=http://www.mafhoum.com/press7/212S28.pdf |journal=] |volume=83 |issue=5 |pages=57 |doi=10.2307/20034067 |jstor=20034067 |access-date=26 August 2018 |archive-date=12 April 2019 |archive-url=https://web.archive.org/web/20190412055541/http://www.mafhoum.com/press7/212S28.pdf |url-status=live}}</ref>
] is one of the oldest ]s. It was founded in 1694. and ] in 1946.]]
Mercantilism declined in Great Britain in the mid-18th century, when a new group of economic theorists, led by ], challenged fundamental mercantilist doctrines as the belief that the amount of the world’s wealth remained constant and that a state could only increase its wealth at the expense of another state. However, in more undeveloped economies, such as ] and ], with their much younger manufacturing bases, mercantilism continued to find favor after other states had turned to newer doctrines.


Political scientists ] and ] see democracy and capitalism as mutually supportive.<ref>{{cite book |last1=Iversen |first1=Torben |url=https://www.jstor.org/stable/j.ctv4g1r3n |title=Democracy and Prosperity: Reinventing Capitalism through a Turbulent Century |last2=Soskice |first2=David |date=2019 |publisher=] |jstor=j.ctv4g1r3n |isbn=978-0-691-18273-5}}</ref> ] argued in ''On Democracy'' that capitalism was beneficial for democracy because economic growth and a large middle class were good for democracy.<ref name=":0a">{{cite book |last=Dahl |first=Robert A. |url=https://books.google.com/books?id=ZG4JEAAAQBAJ |title=On Democracy |date=2020 |publisher=] |isbn=978-0-300-25799-1 |language=en}}</ref> He also argued that a market economy provided a substitute for government control of the economy, which reduces the risks of tyranny and authoritarianism.<ref name=":0a" />
The mid-18th century gave rise to industrial capitalism, made possible by the accumulation of vast amounts of capital under the merchant phase of capitalism and its investment in machinery. Industrial capitalism, which Marx dated from the last third of the 18th century, marked the development of the ] system of manufacturing, characterized by a complex ] between and within work process and the routinization of work tasks; and finally established the global domination of the capitalist mode of production (Burnham).


In his book '']'' (1944), ] (1899–1992) asserted that the free-market understanding of ] as present in capitalism is a requisite of ]. He argued that the market mechanism is the only way of deciding what to produce and how to distribute the items without using coercion. ] and ] also promoted this view.<ref>{{cite journal |last1=Pryor |first1=Frederic L. |title=Capitalism and freedom? |journal=Economic Systems |date=2010 |volume=34 |issue=1 |pages=91–104 |doi=10.1016/j.ecosys.2009.09.003}}</ref> Friedman claimed that centralized economic operations are always accompanied by ]. In his view, transactions in a market economy are voluntary and the wide diversity that voluntary activity permits is a fundamental threat to repressive ]s and greatly diminishes their power to coerce. Some of Friedman's views were shared by ], who believed that capitalism was vital for freedom to survive and thrive.<ref>{{cite journal |first=Friedrich |last=Hayek |author-link=Friedrich Hayek |title=The Road to Serfdom |journal=] |volume=154 |issue=3911 |pages=473–474 |publisher=] |year=1944 |isbn=978-0-226-32061-8 |bibcode=1944Natur.154..473C |doi=10.1038/154473a0 |s2cid=4071358}}</ref><ref>{{cite book |last=Bellamy |first=Richard |title=The Cambridge History of Twentieth-Century Political Thought |publisher=] |year=2003 |isbn=978-0-521-56354-3 |page=60}}</ref> ], an American ] that conducts international research on, and advocates for, democracy, political freedom and ], has argued that "there is a high and statistically significant correlation between the level of political freedom ] and economic freedom ]".<ref>{{cite book |first=Adrian |last=Karatnycky |title=Freedom in the World: The Annual Survey of Political Rights and Civil Liberties |publisher=] |date=2001 |isbn=978-0-7658-0101-2 |page=11}}</ref>
During the resulting ], the industrialist replaced the merchant as a dominant actor in the capitalist system and affected the decline of the traditional handicraft skills of ]s, ]s, and ]. Also during this period, capitalism marked the transformation of relations between the British landowning gentry and peasants, giving rise to the production of ]s for the market rather than for subsistence on a ] ]. The surplus generated by the rise of commercial agriculture encouraged increased mechanization of agriculture.


In '']'' (2013), ] of the ] asserted that inequality is the inevitable consequence of economic growth in a capitalist economy and the resulting ] can destabilize democratic societies and undermine the ideals of social justice upon which they are built.<ref>{{cite book |author-link=Thomas Piketty |last=Piketty |first=Thomas |date=2014 |title=Capital in the Twenty-First Century |publisher=] |isbn=978-0-674-43000-6 |page=571}}</ref>
The rise of industrial capitalism was also associated with the decline of mercantilism. Mid- to late-nineteenth-century Britain is widely regarded as the classic case of ] capitalism (Burnham). Laissez-faire gained favor over mercantilism in Britain in the 1840s with the repeal of the ] and the ]. In line with the teachings of the classical political economists, led by ] and ], Britain embraced ], encouraging competition and the development of a ].


States with capitalistic economic systems have thrived under political regimes deemed to be authoritarian or oppressive. ] has a successful open market economy as a result of its competitive, business-friendly climate and robust rule of law. Nonetheless, it often comes under fire for its style of government which, though democratic and consistently one of the least corrupt,<ref>{{cite web |title=Transparency International Corruption Measure 2015 |url=https://www.transparency.org/country/#SGP |website=Transparency International Corruption Measure 2015 – By Country / Territory |publisher=Transparency International |access-date=20 September 2016 |archive-date=31 March 2016 |archive-url=https://web.archive.org/web/20160331114640/http://www.transparency.org/country/#SGP |url-status=dead}}</ref> operates largely under a one-party rule. Furthermore, it does not vigorously defend freedom of expression as evidenced by its government-regulated ], and its penchant for upholding laws protecting ethnic and religious harmony, judicial dignity and personal reputation. The private (capitalist) sector in the People's Republic of China has grown exponentially and thrived since its inception, despite having an authoritarian government. ]'s ] led to economic growth and high levels of inequality<ref>] (2008). ''].'' ]. {{ISBN|0-312-42799-9}} {{Webarchive|url=https://web.archive.org/web/20150319071518/http://books.google.com/books?id=PwHUAq5LPOQC&lpg=PP1&pg=PA105 |date=19 March 2015 }}.</ref> by using authoritarian means to create a safe environment for investment and capitalism. Similarly, ]'s authoritarian reign and ] of the ] allowed for the expansion of capitalism in ].<ref>{{cite journal |last=Farid |first=Hilmar |date=2005 |title=Indonesia's original sin: mass killings and capitalist expansion, 1965–66 |journal=] |volume=6 |issue=1 |pages=3–16 |doi=10.1080/1462394042000326879 |s2cid= 145130614}}</ref><ref>{{cite book |last=Robinson |first=Geoffrey B. |date=2018 |title=The Killing Season: A History of the Indonesian Massacres, 1965–66 |url=https://press.princeton.edu/titles/11135.html |publisher=] |page=177 |isbn=978-1-4008-8886-3 |access-date=1 August 2018 |archive-date=19 April 2019 |archive-url=https://web.archive.org/web/20190419011656/https://press.princeton.edu/titles/11135.html |url-status=live}}</ref>
===Finance capitalism and monopoly capitalism===
<!--Try to find an older pic. This section deals with the late 19th century, and the picture should correspond to the section.]]]-->
In the late 19th century, the control and direction of large areas of industry came into the hands of financiers. This period has been defined as “]”, characterized by the subordination of process of production to the accumulation of ] profits in a ] (Scott 2005). Major features of capitalism in this period included the establishment of huge industrial cartels or ]; the ownership and management of industry by financiers divorced from the production process; and the development of a complex system of ], an ], and corporate holdings of capital through ] ownership. Increasingly, large industries and land became the subject of profit and loss by financial ]s.


The term "capitalism" in its modern sense is often attributed to ].<ref name="Scott">{{cite book |title=Industrialism: A Dictionary of Sociology |last=Scott |first=John |publisher=] |year=2005}}</ref><ref>{{cite web |title="capitalism, n.2". OED Online |url=http://www.oed.com/view/Entry/27454?rskey=ZVI1hr&result=2&isAdvanced=false |access-date=19 January 2013 |archive-date=23 September 2020 |archive-url=https://web.archive.org/web/20200923063611/https://www.oed.com/start;jsessionid=A9CBE07460C68ED291D7D6CDCE84A1B1?authRejection=true&url=%2Fview%2FEntry%2F27454%3Frskey%3DZVI1hr%26result%3D2%26isAdvanced%3Dfalse |url-status=live}}</ref> In his '']'', Marx analyzed the "]" using a method of understanding today known as ]. However, Marx himself rarely used the term "capitalism" while it was used twice in the more political interpretations of his work, primarily authored by his collaborator ]. In the 20th century, defenders of the capitalist system often replaced the term "capitalism" with phrases such as free enterprise and private enterprise and replaced "capitalist" with ] and ] in reaction to the negative connotations associated with capitalism.<ref name="Williams 1983 51">{{cite book |last=Williams |first=Raymond |title=Keywords: A vocabulary of culture and society, revised edition |publisher=] |year=1983 |isbn=978-0-19-520469-8 |page= |chapter=Capitalism |chapter-url=https://archive.org/details/keywordsvocabula00willrich/page/51}}</ref>
Late 19th and early 20th century capitalism has also been described as an era of “]”, marked by the movement from the laissez-faire phase of capitalism to the concentration of capital into large monopolistic or ] holdings by banks and financiers, and characterized by the growth of large ]s and a division of labor separating ]s, owners, and managers (Scott 2005).


== Characteristics ==
By the last quarter of the 19th century, the emergence of large industrial trusts had provoked legislation in the U.S. to reduce the monopolistic tendencies of the period. Gradually, the U.S. federal government played a larger and larger role in passing ] laws and regulation of industrial standards for key industries of special public concern.
{{further|Academic perspectives on capitalism}}
In general, capitalism as an economic system and mode of production can be summarized by the following:<ref>{{cite web|url=http://publishing.cdlib.org/ucpressebooks/view?docId=ft3n39n8x3&chunk.id=d0e1212&toc.id=&brand=ucpress |title=Althusser and the Renewal of Marxist Social Theory |access-date=24 March 2015 |archive-date=2 April 2015 |archive-url=https://web.archive.org/web/20150402094835/http://publishing.cdlib.org/ucpressebooks/view?docId=ft3n39n8x3&chunk.id=d0e1212&toc.id=&brand=ucpress |url-status=live}}</ref>
* ]:<ref name=ch32>{{cite book|url=https://www.marxists.org/archive/marx/works/1867-c1/ch32.htm |title=Economic Manuscripts: Capital Vol. I |chapter=Thirty Two |first=Karl |last=Marx |author-link=Karl Marx |access-date=24 March 2015 |via=] |archive-date=21 February 2015 |archive-url=https://web.archive.org/web/20150221104326/https://www.marxists.org/archive/marx/works/1867-c1/ch32.htm |url-status=live}}</ref> production for profit and accumulation as the implicit purpose of all or most of production, constriction or elimination of production formerly carried out on a common social or private household basis.<ref name=xxx31 />
* ]: production for exchange on a market; to maximize ] instead of ].
* Exchange of goods or services, can be enabled by ]s.<ref name="y015">{{cite book | last=Goldberg | first=Victor P. | title=The Oxford Handbook of Capitalism | chapter=Contracts | publisher=Oxford University Press | date=21 November 2012 | isbn=978-0-19-539117-6 | doi=10.1093/oxfordhb/9780195391176.013.0010 | pages=250–274}}</ref> Exchange of services can be in form of ].<ref name="Steinfeld 2009 3"/>
* ] of the means of production:<ref name="Modern Economics 1986, p. 54" />
* The ] of money to make a profit.<ref>James Fulcher, ''Capitalism A Very Short Introduction'', "the investment of money in order to make a profit, the essential feature of capitalism", p. 14, Oxford, 2004, {{ISBN|978-0-19-280218-7}}.</ref>
* The use of the ] to allocate resources between competing uses.<ref name="Modern Economics 1986, p. 54" />
* Economically efficient use of the ] and raw materials due to maximization of value added in the production process.<ref>{{cite book|title=Capitalism: A complete understanding of the nature and value of human economic life |last=Reisman |first=George |year=1998 |isbn=0-915463-73-3 |publisher=Jameson Books}}</ref><ref>{{cite book|title=History of Economic Thought: A Critical Perspective |last1=Hunt |first1=E.K. |last2=Lautzenheiser |first2=Mark |year=2014 |publisher=PHI Learning |isbn=978-0-7656-2599-1}}</ref>
* Freedom of capitalists to act in their self-interest in managing their business and investments.<ref>{{cite book|title=Capitalism: A complete understanding of the nature and value of human economic life |last=Reisman |first=George |year=1998 |isbn=978-0-915463-73-2 |publisher=Jameson Books}}</ref>
* Capital suppliance by "the single owner of a firm, or by ]s in the case of a ]."<ref name=":1">{{Cite book |title=The Desk Encyclopedia of World History |publisher=] |year=2006 |isbn=978-0-7394-7809-7 |editor-last=Wright |editor-first=Edmund |location=New York |pages=111–112}}</ref>


=== Market ===
By the end of the 19th century, ]s and ] ]s had become a recurring problem. In particular, the ] of the 1870s and 1880s and the ] of the 1930s affected almost the entire capitalist world, and generated discussion about capitalism’s long-term survival prospects. During the Great Depression of the 1930s, Marxist commentators often posited the possibility of capitalism’s decline or demise, often in contrast to the ability of the ] to avoid suffering the effects of the global depression.<ref>Stanley L. Engerman "Capitalism" ''The Oxford Companion to United States History''. Paul S. Boyer, ed. Oxford University Press 2001. Oxford Reference Online. Oxford University Press.</ref> ] has argued that it was caused by too little capitalism, blaming the depression on the ]’s misguided policy. The Federal reserve asserts that is has now learned enough to prevent any similar depression.
In ] and '']'' forms of capitalism, markets are used most extensively with minimal or no regulation over the pricing mechanism. In mixed economies, which are almost universal today,<ref>James Fulcher, ''Capitalism A Very Short Introduction'', "...in the wake of the 1970 crisis, the neoliberal model of capitalism became intellectually and ideologically dominant", p. 58, Oxford, 2004, {{ISBN|978-0-19-280218-7}}.</ref> markets continue to play a dominant role, but they are regulated to some extent by the state in order to correct ]s, promote ], conserve ]s, fund ] and ] or other rationale. In ] systems, markets are relied upon the least, with the state relying heavily on ] or indirect economic planning to accumulate capital.


Competition arises when more than one producer is trying to sell the same or similar products to the same buyers. Adherents of the capitalist theory believe that competition leads to innovation and more affordable prices. ] or ] can develop, especially if there is no competition. A monopoly occurs when a firm has exclusivity over a market. Hence, the firm can engage in ] behaviors such as limiting output and raising prices because it has no fear of competition.
===Capitalism following the Great Depression===


Governments have implemented legislation for the purpose of preventing the creation of monopolies and cartels. In 1890, the ] became the first legislation passed by the United States Congress to limit monopolies.<ref>{{Cite news|url=http://www.investopedia.com/terms/m/monopoly.asp|title=Monopoly|author=<!--Staff writer(s); no by-line.-->|date=24 November 2003|work=Investopedia|access-date=2 March 2017|language=en-US|archive-date=22 February 2017|archive-url=https://web.archive.org/web/20170222204011/http://www.investopedia.com/terms/m/monopoly.asp|url-status=live}}</ref>
The economic recovery of the world’s leading capitalist economies in the period following the end of the Great Depression and the ] — a period of unusually rapid growth by historical standards — eased discussion of capitalism’s eventual decline or demise (Engerman 2001).


=== Wage labor ===
In the period following the global depression of the 1930s, the state played an increasingly prominent rôle in the capitalistic system throughout much of the world. In 1929, for example, total U.S. government expenditures (federal, state, and local) amounted to less than one-tenth of ]; from the 1970s they amounted to around one-third (EB). Similar increases were seen in all industrialized capitalist economies, some of which, such as France, have reached even higher ratios of government expenditures to GNP than the United States. These economies have since been widely described as “]”.
{{Main|Wage labor}}
Wage labor, usually referred to as paid work, paid employment, or paid labor, refers to the ] relationship between a ] and an ] in which the worker sells their labor power under a formal or informal ].<ref name="Steinfeld 2009 3">{{Harvnb|Steinfeld|2009|p=3}}: "All labor contracts were/are designed legally to bind a worker in one way or another to fulfill the labor obligations the worker has undertaken. That is one of the principal purposes of labor contracts."</ref> These transactions usually occur in a ] where ]s or ] are ].<ref>{{Harvnb|Deakin|Wilkinson|2005}}</ref>


In exchange for the money paid as wages (usual for short-term work-contracts) or salaries (in permanent employment contracts), the work product generally becomes the ] of the employer. A wage laborer is a person whose primary means of income is from the selling of their labor in this way.<ref>{{cite book|page=278|title=Concise Dictionary of Economics|isbn=978-93-5057-032-6|publisher=V&S Publishers|year=2013|author=Editorial Board|chapter=W}}</ref>
During the postwar boom, a broad array of new analytical tools in the social sciences were developed to explain the social and economic trends of the period, including the concepts of ] and ] (Burnham). The phase of capitalism from the beginning of the postwar period through the 1970s has sometimes been described as “]”, especially by Marxian thinkers.<ref>] and ] have been particularly prominent advocates of the analysis of post-war conditions as ]. See, for example, {{cite web | title=The Theory of “State Capitalism” (June 1951) | url=http://www.ernestmandel.org/en/works/txt/FI/theory_of_statecapitalism.htm | author=Ernest Mandel | accessdate=June 24 | accessyear=2006}}</ref>


=== Profit motive ===
The long postwar boom ended in the 1970s, amid the economic crises experienced following the ]. The “]” of the 1970s led many economic commentators politicians to embrace ] policy prescriptions inspired by the laissez-faire capitalism and ] of the 19th century, particularly under the influence of ] and ]. In particular, ], a theoretical alternative to ] that is more compatible with laissez-faire, gained increasing support in the capitalist world, especially under the leadership of ] in the U.S. and ] in the UK in the 1980s.
{{Main|Profit motive}}
The ], in the theory of capitalism, is the desire to earn income in the form of profit. Stated differently, the reason for a business's existence is to turn a profit.<ref>
Compare:
{{cite book
| last1 = Duska
| first1 = Ronald F.
| year = 1997
| chapter = The Why's of Business Revisited
| title = Contemporary Reflections on Business Ethics
| url = https://books.google.com/books?id=dANmdJHsqu0C
| series = Issues in Business Ethics
| volume = 23
| location = Dordrecht
| publisher = Springer Science & Business Media
| publication-date = 2007
| page = 41
| isbn = 978-1-4020-4984-2
| access-date = 8 July 2019
| quote = In microeconomics courses, profit maximization is frequently given as the goal of the firm. ... In microeconomics, profit maximization functions largely as a theoretical goal, with economists using it to prove how firms behave rationally to increase profit. Unfortunately, it ignores many real-world complexities.
}}
</ref> The profit motive functions according to ], or the theory that individuals tend to pursue what is in their own best interests. Accordingly, businesses seek to benefit themselves and/or their shareholders by maximizing profit.


In capitalist theoretics, the profit motive is said to ensure that resources are being allocated efficiently. For instance, ] ] explains: "If there is no profit in making an article, it is a sign that the labor and capital devoted to its production are misdirected: the value of the resources that must be used up in making the article is greater than the value of the article itself".<ref>Hazlitt, Henry. "The Function of Profits". ''Economics in One Lesson''. Ludwig Von Mises Institute. Web. 22 April 2013.</ref>
===Globalization===
]]]


Socialist theorists note that, unlike mercantilists, capitalists accumulate their profits while expecting their profit rates to remain the same. This causes problems as earnings in the rest of society do not increase in the same proportion.<ref>"What is capitalism" ''Australian Socialist'' https://search.informit.org/doi/10.3316/informit.818838886883514</ref>
Although overseas trade has been associated with the development of capitalism for over five hundred years, some thinkers argue that a number of trends associated with ] have acted to increase the mobility of people and capital since the last quarter of the 20th century, combining to circumscribe the room to maneuver of states in choosing non-capitalist models of development. Today, these trends have bolstered the argument that capitalism should now be viewed as a truly ] (Burnham). However, other thinkers argue that globalization, even in its quantitative degree, is no greater now than during earlier periods of capitalist trade.<ref>] is an economists who has argued that the heyday of globalization was during the mid-19th century. For example, he writes in ''What Is Globalization Anyway?'':
<blockquote>Not only is the novelty of "globalization" exaggerated, so is its extent. Capital flows were freer, and foreign holdings by British investors far larger, 100 years ago than anything we see today. Images of multinational corporations shuttling raw materials and parts around the world, as if the whole globe were an assembly line, are grossly overblown, accounting for only about a tenth of U.S. trade.</blockquote>
(See also {{cite book | title=After the New Economy | last=Henwood | first=Doug | publisher=New Press | date=October 1, 2003 | id=ISBN 1565847709}})</ref>


=== Private property ===
After the abandonment of the ] and the strict state control of foregin exchange rates, the total value of transactions in foreign exchange was estimated to be at least twenty times greater than that of all foreign movements of goods and services (EB). The internationalization of finance, which some see as beyond the reach of state control, combined with the growing ease with which large corporations have been able to relocate their operations to low-wage states, has posed the question of the 'eclipse' of state sovereignty, arising from the growing 'globalization' of capital.<ref>For an assessment of this question, see Peter Evans, "The Eclipse of the State? Reflections on Stateness in an Era of Globalization," ''World Politics'', 50, 1 (October 1997): 62-87.</ref>
{{Main|Private property}}
The relationship between the ], its formal mechanisms, and capitalist societies has been debated in many fields of social and political theory, with active discussion since the 19th century. ] is a contemporary Peruvian economist who has argued that an important characteristic of capitalism is the functioning state protection of property rights in a formal property system where ownership and transactions are clearly recorded.<ref>{{cite web|url=http://www.imf.org/external/pubs/ft/fandd/2001/03/desoto.htm|title=The mystery of capital|author=Hernando de Soto|access-date=26 February 2008|archive-date=8 February 2008|archive-url=https://web.archive.org/web/20080208180121/http://www.imf.org/external/pubs/ft/fandd/2001/03/desoto.htm|url-status=live}}</ref>


According to de Soto, this is the process by which physical assets are transformed into capital, which in turn may be used in many more ways and much more efficiently in the market economy. A number of Marxian economists have argued that the ]s in England and similar legislation elsewhere were an integral part of capitalist ] and that specific legal frameworks of private land ownership have been integral to the development of capitalism.<ref>{{cite web|url=http://www.marxists.org/archive/marx/works/1867-c1/ch27.htm|title=Capital, v. 1. Part VIII: primitive accumulation|author=Karl Marx|access-date=26 February 2008|archive-date=3 March 2008|archive-url=https://web.archive.org/web/20080303162047/http://www.marxists.org/archive/marx/works/1867-c1/ch27.htm|url-status=live}}</ref><ref>{{cite journal |author=N.F.R. Crafts |title=Enclosure and labor supply revisited |journal=Explorations in Economic History |issue=2 |date=April 1978 |pages=172–183 |doi=10.1016/0014-4983(78)90019-0 |volume=15}}</ref>
Economic growth in the last half-century has been relatively strong. ] has almost doubled in the developing world since the postwar years and is starting to close the gap on the developed world where the improvement has been smaller. ] has decreased in every developing region of the world. <ref></ref> ] for the world as a whole is diminishing. <ref></ref> Many other variables such as per capita food supplies, literacy, child labor, and access to clean water have also improved. <ref> The proportion of the world’s population living in countries where per-capita food supplies constitute fewer than 2,200 ]s (9,200 ]s) per day decreased from 56% in the mid-] to below 10% by the ]. Between ] and ], global literacy increased from 52% to 81% of the world. Women made up much of the gap: female literacy as a percentage of male literacy has increased from 59% in ] to 80% in 2000. The percentage of children in the labor force has fallen from 24% in 1960 to 10% in 2000. There are similar trends in electric power, cars, radios, and telephones per capita, as well as the proportion of the population with access to clean water.</ref>


Private property rights are not absolute, as in many countries the state has the power to seize private property, typically for public use, under the powers of ].
== Democracy, the state and legal frameworks ==
{{Main|History of theory of capitalism}}


=== Market competition ===
The relationship between the ], its formal mechanisms, and capitalist societies has been debated in many fields of social and political theory, with active discussion since the 19th century. ] is a contemporary economists who has argued that an important characteristic of capitalism is the functioning state protection of property rights in a formal property system where ownership and transactions are clearly recorded. This is the process which transforms physical assets into capital which may be then be used in many more ways and much more efficiently in the economy.
{{Main|Competition (economics)}}
In capitalist economics, market competition is the rivalry among sellers trying to achieve such goals as increasing profits, market share and sales volume by varying the elements of the ]: price, product, distribution and promotion. Merriam-Webster defines competition in business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favourable terms".<ref>{{cite web |url=http://m-w.com/dictionary/competition |title=Definition of COMPETITION |access-date=24 March 2015 |archive-date=4 July 2008 |archive-url=https://web.archive.org/web/20080704114809/http://m-w.com/dictionary/competition |url-status=dead}}</ref> It was described by ] in '']'' (1776) and later economists as allocating productive ]s to their most highly valued uses<ref>{{cite encyclopedia |first=George J. |last=Stigler |author-link=George J. Stigler |date=2008 |title=competition |dictionary=] |edition=2nd |url=http://www.dictionaryofeconomics.com/article?id=pde2008_C000261&q=competition&topicid=&result_number=6 |archive-url=https://web.archive.org/web/20150215032134/http://www.dictionaryofeconomics.com/article?id=pde2008_C000261&q=competition&topicid=&result_number=6 |archive-date=15 February 2015}}</ref> and encouraging ]. Smith and other ]s before ] were referring to price and non-price rivalry among producers to sell their goods on best terms by bidding of buyers, not necessarily to a large number of sellers nor to a market in final ].<ref>{{cite encyclopedia |first=Mark |last=Blaug |author-link=Mark Blaug |date=2008 |title=Invisible hand |dictionary=] |edition=2nd |volume=4 |page=565 |url=http://www.dictionaryofeconomics.com/article?id=pde2008_I000220&edition=current&q=Invisible%20hand&topicid=&result_number=1 |archive-url=https://web.archive.org/web/20130605204024/http://www.dictionaryofeconomics.com/article?id=pde2008_I000220&edition=current&q=Invisible%20hand&topicid=&result_number=1 |archive-date=5 June 2013}}</ref> Competition is widespread throughout the ]. It is a condition where "buyers tend to compete with other buyers, and sellers tend to compete with other sellers".<ref name=ewot2014 /><!-- p. 102 --> In offering goods for exchange, buyers competitively bid to purchase specific quantities of specific goods which are available, or might be available if sellers were to choose to offer such goods. Similarly, sellers bid against other sellers in offering goods on the market, competing for the attention and exchange resources of buyers. Competition results from ], as it is not possible to satisfy all conceivable human wants, and occurs as people try to meet the criteria being used to determine allocation.<ref name=ewot2014>{{cite book |last1=Heyne |first1=Paul |last2=Boettke |first2=Peter J. |last3=Prychitko |first3=David L. |title=The Economic Way of Thinking |date=2014 |publisher=Pearson |isbn=978-0-13-299129-2 |pages=102–106 |edition=13th}}<!--|access-date=24 December 2014 --></ref>{{rp|105}}


In the works of Adam Smith, the idea of capitalism is made possible through competition which creates growth. Although capitalism had not entered mainstream economics at the time of Smith, it is vital to the construction of his ideal society. One of the foundational blocks of capitalism is competition. Smith believed that a prosperous society is one where "everyone should be free to enter and leave the market and change trades as often as he pleases."<ref name="W.W. Norton">{{cite book |last1=Warsh |first1=David |title=Knowledge and the Wealth of Nations |date=2007 |publisher=] |page=42}}</ref> He believed that the freedom to act in one's self-interest is essential for the success of a capitalist society. In response to the idea that if all participants focus on their own goals, society's well-being will be water under the bridge, Smith maintains that despite the concerns of intellectuals, "global trends will hardly be altered if they refrain from pursuing their personal ends."<ref>{{cite book |last1=Lippit |first1=Victor |title=Capitalism |date=2005 |publisher=] |location=ProQuest |page=2}}</ref> He insisted that the actions of a few participants cannot alter the course of society. Instead, Smith maintained that they should focus on personal progress instead and that this will result in overall growth to the whole.
The relationship between ] and capitalism is a contentious area in theory and popular political movements. The extension of universal adult male ] in 19th century Britain occurred along with the development of industrial capitalism, and democracy become widespread at the same time as capitalism, leading many theorists to posit a causal relationship between them, or that each affects the other. However, in the 20th century, according to some authors, capitalism also accompanied a variety of political formations quite distinct from liberal democracies, including ] regimes, monarchies, and single-party states (Burnham). While some thinkers argue that capitalist development more-or-less inevitably eventually leads to the emergence of democracy, others dispute this claim.


Competition between participants, "who are all endeavoring to justle one another out of employment, obliges every man to endeavor to execute his work" through competition towards growth.<ref name="W.W. Norton"/>
Some commentators argue that though economic growth under capitalism has led to democratization in the past, it may not do so in the future. Under this line of thinking, authoritarian regimes have been able to manage economic growth without making concessions to greater political freedom.<ref>Bruce Bueno de Mesquita, George W. Downs, (2005). . ''Foreign Affairs'', September/October 2005. Joseph T. Single, Michael M. Weinstein, Morton H. Halperin, (2004). . ''Foreign Affairs'', September/October 2004.</ref>


=== Economic growth ===
While some analysts argue that democracy has no direct effect on economic growth, one ] (Doucouliagos and Ulubasoglu) finds that democracy has significant ''indirect'' effects which contribute to growth. Democracy is associated with higher human capital accumulation, lower inflation, less political instability, and greater ]. Further evidence suggests that democracy is associated with larger governments and more restrictions on international trade.
{{further|Economic growth}}
{{expand section|date=January 2021}}


] is a characteristic tendency of capitalist economies.<ref name=joff>{{cite journal|title=The root cause of economic growth under capitalism |journal=] |year=2011 |issue=5 |pages=873–896 |first=Michael |last=Joff |volume=35 |quote=The tendency for capitalist economies to grow is one of their most characteristic properties. |doi=10.1093/cje/beq054}}</ref><ref>{{cite book |last1=Baumol |first1=William J. |title=The Free-Market Innovation Machine: Analyzing the Growth Miracle of Capitalism |date=2004 |publisher=] |location=Princeton |isbn=9780691116303}}</ref> However, capitalist economies may experience fluctuations in growth that cannot be accounted for by demographic or technological changes. These fluctuations, which involve sustained periods of economic growth and recession, are referred to as business cycles in macroeconomics. Economic growth is measured as growth in investment, economic output, and economic consumption per capita. Changes in hours of employment on their own are not considered as a factor of economic growth.<ref name = "HP"/>
==Criticisms of capitalism==
''Main article: ], ]''


=== As a mode of production ===
Capitalism has met with strong opposition throughout its history, largely from the ] but also from the ], and from religious elements. Many 19th century conservatives were among the period's most strident critics of capitalism, seeing market exchange and commodity production as threats to longstanding cultural and religious traditions.{{fact}} Prominent lines of criticism on the left have included ] and ], such as ], ], ], ], ], ], ], ], and others. Movements like the ]s, ]s, ], ]s, and others have also opposed capitalism with various motivations. More recently, various aspects of capitalism have come under attack from the ] movement.
{{further|Mode of production}}
The capitalist mode of production refers to the systems of organising production and distribution within capitalist ]. Private money-making in various forms (renting, banking, merchant trade, production for profit and so on) preceded the development of the capitalist mode of production as such.


The term capitalist mode of production is defined by ] of the ], extraction of ] by the owning class for the purpose of ], ] and, at least as far as ] are concerned, being ].<ref>{{cite web |url=http://www.marxists.org/glossary/terms/c/a.htm#capitalism |title=Capitalism |publisher=] |access-date=8 July 2011 |author=Encyclopedia of Marxism at marxism.org |archive-date=7 May 2019 |archive-url=https://web.archive.org/web/20190507154837/https://www.marxists.org/glossary/terms/c/a.htm#capitalism |url-status=live}}</ref>
Marxism influenced the creation of ] and ] parties. However, they rejected the need for a revolution, and instead sought change through existing democratic channels. Today these parties do not advocate the abolishment of capitalism, only that it should be heavily regulated.


Capitalism in the form of money-making activity has existed in the shape of merchants and money-lenders who acted as intermediaries between consumers and producers engaging in ] (hence the reference to "]") since the beginnings of civilisation. What is specific about the "capitalist mode of production" is that most of the inputs and outputs of production are supplied through the market (i.e. they are commodities) and essentially all production is in this mode.<ref name="Modern Economics 1986, p. 54" /> By contrast, in flourishing feudalism most or all of the factors of production, including labor, are owned by the feudal ruling class outright and the products may also be consumed without a market of any kind, it is production for use within the feudal social unit and for limited trade.<ref name=ch32 /> This has the important consequence that, under capitalism, the whole organisation of the production process is reshaped and re-organised to conform with economic ] by capitalism, which is expressed in price relationships between inputs and outputs (wages, non-labor factor costs, sales and profits) rather than the larger rational context faced by society overall—that is, the whole process is organised and re-shaped in order to conform to "commercial logic". Essentially, capital accumulation comes to define economic rationality in capitalist production.<ref name=xxx31>{{cite web|url=http://www.dsp.org.au/node/31 |title=The contradictions of capitalism – Democratic Socialist Perspective |publisher=dsp.org.au |url-status=dead |archive-url=https://web.archive.org/web/20150406094810/http://www.dsp.org.au/node/31 |archive-date=6 April 2015}}</ref>
Some problems claimed to be associated with capitalism by its critics include unfair ] (and thus power), a tendency toward market ] or ] or government by ], ] and other forms of human and economic ], and phenomena such as social ], ], ], and economic instability. Near the start of the 20th century, ] advanced the thesis that state use of military power to defend capitalist interests abroad was an inevitable correlary of monopoly capitalism.<ref>{{cite web | url=http://www.marxists.org/archive/lenin/works/1916/imp-hsc/index.htm | title=Imperialism: The Highest Stage of Capitalism | author=Vladimir Lenin | accessdate=June 29 | accessyear=2006}}</ref> Another critisism, often cited by ], is that capitalism relies on continued economic growth. The material capacity of the earth means that capitalism will continually experience crisis's associated with resource depletion or loss. An example of this could be the vulnerability that capitalist development has in regards to access to oil.


A society, region or ] is capitalist if the predominant source of incomes and products being distributed is capitalist activity, but even so this does not yet mean necessarily that the capitalist mode of production is dominant in that society.<ref>{{Cite web|title=Capitalism|url=https://www.investopedia.com/terms/c/capitalism.asp|access-date=14 February 2022|website=Investopedia|language=en}}</ref>
In response to criticism, proponents of capitalism have argued that its advantages are supported by empirical research. For example, advocates of the ]'s ] point to a statistical correlation between nations with more economic freedom (as defined by the Index) and higher scores on variables such as income and life expectancy, including the poor in these nations.


] rely on the nation they are in to provide some goods or services, while the free market produces and maintains the rest.<ref name=":1" />
==Notes==
<div style="font-size:85%">
<references />
</div>


=== Role of government ===
==See also==
Government agencies regulate the standards of service in many industries, such as airlines and broadcasting, as well as financing a wide range of programs. In addition, the government regulates the flow of capital and uses financial tools such as the interest rate to control such factors as inflation and unemployment.<ref>"Capitalism." World Book Encyclopedia. 1988. p. 194.</ref>
*]
* ]
*],
*]
*]
*]
*]
**],
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*]
*]
*]
*]
*]
*]
*]


== Supply and demand ==
==External links==
{{Main|Supply and demand}}
{{wikiquote}}
] at each price (demand D): the diagram shows a positive shift in demand from D<sub>1</sub> to D<sub>2</sub>, resulting in an increase in price (P) and quantity sold (Q) of the product.]]
In capitalist economic structures, supply and demand is an ] of ] in a ]. It postulates that in a ], the ] for a particular ] will vary until it settles at a point where the quantity demanded by consumers (at the current price) will equal the quantity supplied by producers (at the current price), resulting in an ] for price and ].


The "basic laws" of ] and ], as described by David Besanko and Ronald Braeutigam, are the following four:<ref name="besanko-and-braeutigam-2010">{{cite book |last1=Besanko |first1=David |last2=Braeutigam |first2=Ronald |year=2010 |title=Microeconomics |publisher=] |edition=4th}}</ref>{{rp|37}}
* ''MSN Encarta''
# If demand increases (demand curve shifts to the right) and supply remains unchanged, then a shortage occurs, leading to a higher equilibrium price.
* ''Britannica Concise'' (EB)
# If demand decreases (demand curve shifts to the left) and supply remains unchanged, then a surplus occurs, leading to a lower equilibrium price.
* ''The Columbia Encyclopedia''
# If demand remains unchanged and supply increases (supply curve shifts to the right), then a surplus occurs, leading to a lower equilibrium price.
*
# If demand remains unchanged and supply decreases (supply curve shifts to the left), then a shortage occurs, leading to a higher equilibrium price.


=== Supply schedule ===
==Further reading==
A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied.<ref name="Boundless Economics 2017">{{cite web |title=Supply |website=Boundless Economics |date=13 June 2017 |url=https://courses.lumenlearning.com/boundless-economics/chapter/supply/ |access-date=27 October 2021}}</ref>
* Tom Bottomore ''Theories of Modern Capitalism'' (1985)
* ]. ''Civilization and Capitalism : 15th - 18th Century'' 3 vols.
* Peter Burnham "Capitalism" ''The Concise Oxford Dictionary of Politics''. Ed. Iain McLean and Alistair McMillan. Oxford University Press, 2003. Oxford Reference Online. Oxford University Press.
* {{cite journal | author=Doucouliagos, H., Ulubasoglu, M | title=Democracy and Economic Growth: A meta-analysis | journal=School of Accounting, Economics and Finance Deakin University Australia | year=2006 }}
* James Fulcher ''Capitalism'' (2004)
* Milton Friedman, ''Capitalism and Freedom'' (1952, rev. ed. 1981)
* J. K. Galbraith, ''American Capitalism'' (1952, repr. 1982)
* ]. "The Political-Economic Transformation of Late Twentieth Century Capitalism." In Harvey, David. ''The Condition of Postmodernity''. Cambridge, MA: Blackwell Publishers, 1990. ISBN 0631162941
* R. L. Heilbroner and L. C. Thurow, ''Economics Explained'' (1987)
* ]. ''Capital: A Critical Analysis of Capitalist Production'', 3 vol., 1886&ndash;1909; first published in German as ''Das Kapital: Kritik der politischen Oekonomie'', 1867&ndash;1894.
* ] & ] (1987). ''Knowledge & Class: a Marxian critique of political economy''. Chicago: University of Chicago Press.
* ] ''The Stages of Economic Growth: A Non-Communist Manifesto''. Cambridge: Cambridge University Press, 1960.
* J. A. Schumpeter, ''Capitalism, Socialism, and Democracy'' (1983)
* John Scott ''Corporate Business and Capitalist Classes'' (1997).
* ]. ''An Inquiry into the Nature and Causes of the Wealth of Nations'', 1776.
* "Capitalism" ''A Dictionary of Sociology''. John Scott and Gordon Marshall. Oxford University Press 2005. Oxford Reference Online. Oxford University Press.
* Susan Strange, ''Casino Capitalism'' (1986)
* ]: The Modern World System.


=== Demand schedule ===
A demand schedule, depicted graphically as the ], represents the amount of some ] that buyers are willing and able to purchase at various prices, assuming all determinants of demand other than the price of the good in question, such as income, tastes and preferences, the price of ]s and the price of ]s, remain the same. According to the ], the demand curve is almost always represented as downward sloping, meaning that as price decreases, consumers will buy more of the good.<ref name="axes">Unlike most ], supply & demand curves are plotted with the independent variable (price) on the vertical axis and the dependent variable (quantity supplied or demanded) on the horizontal axis.</ref>


Just like the supply curves reflect ] curves, demand curves are determined by ] curves.<ref>{{cite web|title=Marginal Utility and Demand |url=http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=marginal+utility+and+demand |access-date=9 February 2007 |archive-date=6 November 2006 |archive-url=https://web.archive.org/web/20061106121422/http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=marginal+utility+and+demand |url-status=live}}</ref>
]
]
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]
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=== Equilibrium ===
]
{{further|Economic equilibrium}}
]
In the context of supply and demand, economic equilibrium refers to a state where economic forces such as ] are balanced and in the absence of external influences the (]) values of economic variables will not change. For example, in the standard text-book model of ] equilibrium occurs at the point at which quantity demanded and quantity supplied are equal.<ref>{{cite book |author-link=Hal Varian |first=Hal R. |last=Varian |title=Microeconomic Analysis |edition=Third |publisher=Norton |location=New York |year=1992 |isbn=978-0-393-95735-8 |url=https://archive.org/details/microeconomicana00vari_0}}</ref> Market equilibrium, in this case, refers to a condition where a market price is established through competition such that the amount of goods or services sought by ] is equal to the amount of goods or services produced by ]. This price is often called the competitive price or ] price and will tend not to change unless demand or supply changes.
]

]
=== Partial equilibrium ===
]
{{Main|Partial equilibrium}}
]
Partial equilibrium, as the name suggests, takes into consideration only a part of the market to attain equilibrium. Jain proposes (attributed to ]): "A partial equilibrium is one which is based on only a restricted range of data, a standard example is price of a single product, the prices of all other products being held fixed during the analysis".<ref>{{cite book |last=Jain |first=T.R. |title=Microeconomics and Basic Mathematics |year=2006 |publisher=VK Publications |location=New Delhi |isbn=978-81-87140-89-4 |page=28 |url=https://books.google.com/books?id=fUUoFwco2Z8C }}{{Dead link|date=January 2023 |bot=InternetArchiveBot |fix-attempted=yes }}</ref>
]

]
=== History ===
]
According to Hamid S. Hosseini, the "power of supply and demand" was discussed to some extent by several early Muslim scholars, such as fourteenth century ] scholar ], who wrote: "If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down".<ref name=Hosseini>{{cite book |title=A Companion to the History of Economic Thought |chapter=Contributions of Medieval Muslim Scholars to the History of Economics and their Impact: A Refutation of the Schumpeterian Great Gap |last=Hosseini |first=Hamid S. |editor1-last=Biddle |editor1-first=Jeff E. |editor2-last=Davis |editor2-first=Jon B. |editor3-last=Samuels |editor3-first=Warren J. |year=2003 |publisher=Blackwell |location=Malden, Massachusetts |isbn=978-0-631-22573-7 |doi=10.1002/9780470999059.ch3 |pages=28–45 }} (citing Hamid S. Hosseini, 1995. "Understanding the Market Mechanism Before Adam Smith: Economic Thought in Medieval Islam," ''History of Political Economy'', Vol. 27, No. 3, 539–561).</ref>
]

]
]]]
]
]'s 1691 work ''Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money''<ref>John Locke (1691) {{Webarchive|url=https://web.archive.org/web/20150324135856/https://www.marxists.org/reference/subject/economics/locke/contents.htm |date=24 March 2015 }}</ref> includes an early and clear description{{primary source inline|date=February 2022}} of supply and demand and their relationship. In this description, demand is ]: "The price of any commodity rises or falls by the proportion of the number of buyer and sellers" and "that which regulates the price... is nothing else but their quantity in proportion to their rent".
]

]
] titled one chapter of his 1817 work '']'' "On the Influence of Demand and Supply on Price".<ref name=Humphrey>Thomas M. Humphrey, 1992. "Marshallian Cross Diagrams and Their Uses before Alfred Marshall", ''Economic Review'', Mar/Apr, Federal Reserve Bank of Richmond, pp. {{Webarchive|url=https://web.archive.org/web/20121019100824/http://www.richmondfed.org/publications/research/economic_review/1992/pdf/er780201.pdf |date=19 October 2012 }}.</ref>
]
In ''Principles of Political Economy and Taxation'', Ricardo more rigorously laid down the idea of the assumptions that were used to build his ideas of supply and demand.
]

]
In his 1870 essay "On the Graphical Representation of Supply and Demand", ] in the course of "introduc the diagrammatic method into the English economic literature" published the first drawing of supply and demand curves therein,<ref>A.D. Brownlie and M.F. Lloyd Prichard, 1963. "Professor Fleeming Jenkin, 1833–1885 Pioneer in Engineering and Political Economy", ''Oxford Economic Papers'', 15(3), p. 211.</ref> including ] from a shift of supply or demand and application to the labor market.<ref>Fleeming Jenkin, 1870. "The Graphical Representation of the Laws of Supply and Demand, and their Application to Labour", in Alexander Grant, ed., ''Recess Studies'', Edinburgh. Ch. VI, pp. 151–185. Edinburgh. Scroll to chapter {{Webarchive|url=https://web.archive.org/web/20200716052536/https://books.google.com/books?id=NC5BAAAAIAAJ |date=16 July 2020 }}.</ref> The model was further developed and popularized by ] in the 1890 textbook '']''.<ref name="Humphrey" />
]

]
== Types ==
]
{{more citations needed section|date=March 2020}}
]
There are many variants of capitalism in existence that differ according to country and region.<ref>{{cite book |last1=Hall |first1=Peter A. |last2=Soskice |first2=David |title=Varieties Of Capitalism: The Institutional Foundations of Comparative Advantage |date=20 September 2001 |publisher=Oxford University Press, U.S.A. |isbn=0-19-924775-7}}</ref> They vary in their institutional makeup and by their economic policies. The common features among all the different forms of capitalism are that they are predominantly based on the private ownership of the means of production and the production of goods and services for profit; the market-based allocation of resources; and the accumulation of capital.
]

]
They include advanced capitalism, corporate capitalism, finance capitalism, free-market capitalism, mercantilism, social capitalism, state capitalism and welfare capitalism. Other theoretical variants of capitalism include ], ], ], ], ], and ].
]

]
=== Advanced ===
]
{{Main|Advanced capitalism}}
]
Advanced capitalism is the situation that pertains to a society in which the capitalist model has been integrated and developed deeply and extensively for a prolonged period. Various writers identify ] as an influential early theorist of advanced capitalism, even if he did not use the term himself. In his writings, Gramsci sought to explain how capitalism had adapted to avoid the revolutionary overthrow that had seemed inevitable in the 19th century. At the heart of his explanation was the decline of raw coercion as a tool of class power, replaced by use of ] institutions to manipulate public ideology in the capitalists' favour.<ref>Lears, T.J. Jackson (1985) "The Concept of Cultural Hegemony"</ref><ref>Holub, Renate (2005) ''Antonio Gramsci: Beyond Marxism and Postmodernism''</ref><ref>] (2012) ''Ecology and Revolution: Global Crisis and the Political Challenge''</ref>
]

]
] has been a major contributor to the analysis of advanced-capitalistic societies. Habermas observed four general features that characterise advanced capitalism:
]
# Concentration of industrial activity in a few large firms.
]
# Constant reliance on the state to stabilise the economic system.
]
# A formally democratic government that legitimises the activities of the state and dissipates opposition to the system.
]
# The use of nominal wage increases to pacify the most restless segments of the work force.<ref>Habermas, 1988: 37, 75.</ref>
]

]
=== Corporate ===
]
{{Main|Corporate capitalism}}
]
{{See also|Crony capitalism|State monopoly capitalism}}
]
Corporate capitalism is a free or mixed-market capitalist economy characterized by the dominance of hierarchical, bureaucratic corporations.
]

=== Finance ===
{{Main|Finance capitalism}}
{{See also|Capitalist mode of production (Marxist theory)}}
Finance capitalism is the subordination of processes of ] to the accumulation of ] profits in a ]. In their critique of capitalism, ] and ] both emphasise the role of ] as the determining and ] interest in capitalist society, particularly in the ].<ref>] {{Webarchive|url=https://web.archive.org/web/20150402214909/https://www.marxists.org/archive/lenin/works/1916/imp-hsc/ch03.htm |date=2 April 2015 }}</ref><ref>{{cite magazine|url=http://monthlyreview.org/2009/10/01/monopoly-finance-capital-and-the-paradox-of-accumulation/|title= Monopoly-Finance Capital and the Paradox of Accumulation |first1=John Bellamy |last1=Foster |author1-link=John Bellamy Foster |first2=Robert W. |last2=McChesney |author2-link=Robert W. McChesney |date=1 October 2009 |magazine=] |access-date=27 August 2016 |archive-date=28 August 2016 |archive-url=https://web.archive.org/web/20160828081218/http://monthlyreview.org/2009/10/01/monopoly-finance-capital-and-the-paradox-of-accumulation/ |url-status=live}}</ref>

] is credited with first bringing the term finance capitalism into prominence through ''Finance Capital'', his 1910 study of the links between German trusts, banks and monopolies—a study subsumed by ] into '']'' (1917), his analysis of the imperialist relations of the great world powers.<ref>Frederic Jameson, 'Culture and Finance Capital', in ''The Jameson Reader'' (2005) p. 257</ref> Lenin concluded that the banks at that time operated as "the chief nerve centres of the whole capitalist system of national economy".<ref>Quoted in E.H. Carr, ''The Bolshevik Revolution 2'' (1971) p. 137</ref> For the ] (founded in 1919), the phrase "dictatorship of finance capitalism"<ref>Quoted in F.A Voight, ''Unto Caesar'' (1938) p. 22</ref> became a regular one.

] would later point to two earlier periods when finance capitalism had emerged in human history—with the Genoese in the 16th century and with the Dutch in the 17th and 18th centuries—although at those points it developed from commercial capitalism.<ref>C. J.Calhoun/G. Derluguian, ''Business as Usual'' (2011) p. 57</ref>{{request quotation|date=December 2016}} ] extended Braudel's analysis to suggest that a predominance of finance capitalism is a recurring, long-term phenomenon, whenever a previous phase of commercial/industrial capitalist expansion reaches a plateau.<ref>Jameson, pp. 259–260</ref>

=== Free market ===
{{Main|Free-market capitalism}}
{{See also|Laissez-faire}}
{{More citations needed|section|date=December 2021}}
A capitalist free-market economy is an economic system where prices for goods and services are set entirely by the forces of ] and are expected, by its adherents, to reach their point of ] without intervention by government policy. It typically entails support for highly ] and ] of the ]. ''Laissez-faire'' capitalism is a more extensive form of this free-market economy, but one in which the role of the state is limited to protecting ]. In ] theory, property rights are protected by private firms and market-generated law. According to anarcho-capitalists, this entails property rights without statutory law through market-generated tort, contract and property law, and self-sustaining private industry.

] argued that free market exchange and capitalism are to some degree opposed; free market exchange involves ] public transactions and a large number of ], while capitalism involves a small number of participants using their capital to control the market via private transactions, control of information, and limitation of competition.<ref name="Braudel Ranum Ranum Johns Hopkins University 1977 p. 47-63">{{cite book |last1=Braudel |first1=F. |author-link=Fernand Braudel |last2=Ranum |first2=P.M. |last3=Ranum |first3=P.P. |title=Afterthoughts on Material Civilization and Capitalism |publisher=] |series=Johns Hopkins symposia in comparative history |year=1977 |isbn=978-0-8018-1901-8 |url=https://books.google.com/books?id=1eVdAAAAIAAJ |access-date=6 April 2022 |pages=47–63}}</ref>

=== Mercantile ===
{{Main|Mercantilism}}
{{See also|Protectionism}}
] in the early 19th century]]
Mercantilism is a nationalist form of early capitalism that came into existence approximately in the late 16th century. It is characterized by the intertwining of national business interests with state-interest and imperialism. Consequently, the state apparatus is used to advance national business interests abroad. An example of this is colonists living in America who were only allowed to trade with and purchase goods from their respective mother countries (e.g., United Kingdom, France and Portugal). Mercantilism was driven by the belief that the wealth of a nation is increased through a positive balance of trade with other nations—it corresponds to the phase of capitalist development sometimes called the ].

=== Social ===
{{Main|Social market economy}}
{{See also|Nordic model}}
A social market economy is a free-market or mixed-market capitalist system, sometimes classified as a ], where government intervention in price formation is kept to a minimum, but the state provides significant services in areas such as social security, health care, unemployment benefits and the recognition of ] through national ] arrangements.

This model is prominent in Western and Northern European countries as well as Japan, albeit in slightly different configurations. The vast majority of enterprises are privately owned in this economic model.

] is the contemporary model of capitalism and adaptation of the social market model that exists in continental Western Europe today.

=== State ===
{{Main|State capitalism}}
State capitalism is a capitalist market economy dominated by state-owned enterprises, where the state enterprises are organized as commercial, profit-seeking businesses. The designation has been used broadly throughout the 20th century to designate a number of different economic forms, ranging from state-ownership in market economies to the command economies of the former ]. According to Aldo Musacchio, a professor at Harvard Business School, state capitalism is a system in which governments, whether democratic or autocratic, exercise a widespread influence on the economy either through direct ownership or various subsidies. Musacchio notes a number of differences between today's state capitalism and its predecessors. In his opinion, gone are the days when governments appointed bureaucrats to run companies: the world's largest state-owned enterprises are now traded on the public markets and kept in good health by large institutional investors. Contemporary state capitalism is associated with the ], ] and the economy of Norway.<ref>{{cite news |last=Musacchio |first=Aldo |url=http://www.economist.com/debate/days/view/802 |title=Economist Debates: State capitalism: Statements |newspaper=The Economist |access-date=20 June 2012 |archive-date=16 July 2012 |archive-url=https://web.archive.org/web/20120716050641/http://economist.com/debate/days/view/802 |url-status=live }}</ref> Alternatively, ] defines state capitalism as "an economic system in which private capitalism is modified by a varying degree of government ownership and control".<ref> {{Webarchive|url=https://web.archive.org/web/20150703131303/http://www.merriam-webster.com/dictionary/state%20capitalism |date=3 July 2015 }}. ]. Retrieved 7 July 2015.</ref>

In ''Socialism: Utopian and Scientific'', ] argued that state-owned enterprises would characterize the final stage of capitalism, consisting of ownership and management of large-scale production and communication by the ].<ref>{{cite web |first=Frederick |last=Engels |author-link=Friedrich Engels |url=http://www.marxists.org/archive/marx/works/1880/soc-utop/ch03.htm |title=Socialism: Utopian and Scientific (Chpt. 3) |publisher=] |access-date=8 January 2014 |archive-date=9 May 2020 |archive-url=https://web.archive.org/web/20200509191523/https://www.marxists.org/archive/marx/works/1880/soc-utop/ch03.htm |url-status=live}}</ref> In his writings, ] characterized the economy of Soviet Russia as state capitalist, believing state capitalism to be an early step toward the development of socialism.<ref>V.I. Lenin. {{Webarchive|url=https://web.archive.org/web/20150907043921/https://www.marxists.org/archive/lenin/works/1921/apr/21.htm |date=7 September 2015 }}. ''Lenin's Collected Works'', 1st English ed., Progress Publishers, Moscow, 1965, vol. 32, pp. 329–365.</ref><ref>V.I. Lenin. {{Webarchive|url=https://web.archive.org/web/20150618071802/https://www.marxists.org/archive/lenin/works/1922/nov/14b.htm |date=18 June 2015 }}. ''Lenin Collected Works'', Progress Publishers, 1971, Moscow, vol. 42, pp. 425c–427a.</ref>

Some economists and left-wing academics including ] and ], as well as many Marxist philosophers and revolutionaries such as ] and ], argue that the economies of the former ] and Eastern Bloc represented a form of state capitalism because their internal organization within enterprises and the system of wage labor remained intact.<ref> {{Webarchive|url=https://web.archive.org/web/20190728140836/https://www.hetsa.org.au/pdf/34-A-08.pdf |archive-url=https://ghostarchive.org/archive/20221009/https://www.hetsa.org.au/pdf/34-A-08.pdf |archive-date=9 October 2022 |url-status=live |date=28 July 2019 }}, M.C. Howard and J.E. King</ref><ref>] (1986). {{Webarchive|url=https://web.archive.org/web/20150924051230/http://www.chomsky.info/articles/1986----.htm |date=24 September 2015 }}. ''Our Generation''. Retrieved 9 July 2015.</ref><ref>] (27 June 2015). {{Webarchive|url=https://web.archive.org/web/20180311070639/http://www.truth-out.org/news/item/31567-socialism-means-abolishing-the-distinction-between-bosses-and-employees |date=11 March 2018 }}. ''].'' Retrieved 9 July 2015.</ref><ref>{{cite web|first1=Raya |last1=Dunayevskaya |author-link1=Raya Dunayevskaya |date=1941 |url=https://www.marxists.org/archive/dunayevskaya/works/1941/ussr-capitalist.htm |title=The Union of Soviet Socialist Republics is a Capitalist Society |website=] |archive-url=https://web.archive.org/web/20191207212742/https://www.marxists.org/archive/dunayevskaya/works/1941/ussr-capitalist.htm |archive-date=7 December 2019}}</ref><ref>{{cite web|first1=C.L.R. |last1=James |author-link1=C.L.R. James |first2=Raya |last2=Dunayevskaya |author-link2=Raya Dunayevskaya |first3=Grace Lee |last3=Boggs |author-link3=Grace Lee Boggs |date=1950 |url=https://libcom.org/files/State%20capitalism%20and%20world%20revolution%20-%20CLR%20James.pdf |title=State Capitalism and World Revolution |archive-url=https://web.archive.org/web/20200619014753/https://libcom.org/files/State%20capitalism%20and%20world%20revolution%20-%20CLR%20James.pdf |archive-date=19 June 2020}}</ref>

The term is not used by ] economists to describe state ownership of the means of production. The economist ] argued that the designation of state capitalism was a new label for the old labels of state socialism and planned economy and differed only in non-essentials from these earlier designations.<ref>{{cite book|first=Ludwig |last=Von Mises |author-link=Ludwig Von Mises |title=Socialism: An Economic and Sociological Analysis |publisher=LibertyClassics |place=Indianapolis |year=1979 |isbn=978-0-913966-63-1 |url=https://archive.org/details/socialismeconomi00vonm |access-date=31 May 2007 |quote=The socialist movement takes great pains to circulate frequently new labels for its ideally constructed state. Each worn-out label is replaced by another which raises hopes of an ultimate solution of the insoluble basic problem of Socialism—until it becomes obvious that nothing has been changed but the name. The most recent slogan is 'State Capitalism.' It is not commonly realized that this covers nothing more than what used to be called Planned Economy and State Socialism, and that State Capitalism, Planned Economy, and State Socialism diverge only in non-essentials from the "classic" ideal of egalitarian Socialism. |url-access=registration}}</ref>

=== Welfare ===
{{Main|Welfare capitalism}}
{{See also|Economic interventionism|Mixed economy}}
Welfare capitalism is capitalism that includes social welfare policies. Today, welfare capitalism is most often associated with the models of capitalism found in Central Mainland and Northern Europe such as the ], ] and ]. In some cases, welfare capitalism exists within a mixed economy, but welfare states can and do exist independently of policies common to mixed economies such as ] and extensive regulation.

A mixed economy is a largely market-based capitalist economy consisting of both private and public ownership of the means of production and ] through macroeconomic policies intended to correct ]s, reduce unemployment and keep inflation low. The degree of intervention in markets varies among different countries. Some mixed economies such as France under ] also featured a degree of ] over a largely capitalist-based economy.

Most modern capitalist economies are defined as mixed economies to some degree<ins>,</ins> however French economist ] state that capitalist economies might shift to a much more ''laissez-faire'' approach in the near future.<ref>{{Cite book |last=Piketty |first=Thomas |title=Le capital au XXIe siècle |year=2013 |isbn=978-2-02-108228-9 |pages=799, 800 |language=fr |chapter=Repenser l'impôt progressif sur le revenu |publisher=Éditions du Seuil |trans-chapter=To rethink income tax progressivity |quote=Si cette régressivité fiscale au sommet de la hiérarchie sociale devait se confirmer et s'amplifier à l'avenir, il est bien évident qu'une telle sécession fiscale des plus riches est potentiellement extrêmement dommageable pour le consentement fiscal dans son ensemble s'en trouve amoindri . Il est vital pour l'État social moderne que le système fiscal qui le sous-tend conserve un minimum de progressivité. |trans-quote=If tax regressivity on top of the social hierarchy may settle in and escalate in the future, it is obvious that such a tax secession between the richest and the other classes will be highly harmful towards the agreement over the taxation system which will weaken. It is essential for the modern social system that the taxation system preserve a sort of tax progressivity.}}</ref>

=== Eco-capitalism ===
], also known as "environmental capitalism" or (sometimes<ref>{{cite news|url=https://www.theguardian.com/world/2019/nov/24/b-corps-captalism-for-an-environmentally-endangered-age |title=Green capitalism sometimes also referring to sustainable businesses |first=Oliver |last=Balch |date=24 November 2019 |work=]}}</ref>) "green capitalism", is the view that ] exists in nature as "]" (]s that have ]) on which all ] depends. Therefore, governments should use ] ] (such as a ]) to resolve ]s.<ref>{{cite web|title=Definition of Eco-Capitalism |url=https://www.collinsdictionary.com/dictionary/english/eco-capitalism |website=collinsdictionary.com |access-date= 27 November 2015}}</ref>

The term "Blue Greens" is often applied to those who espouse eco-capitalism. Eco-capitalism can be thought of as the right-wing equivalent to ].<ref>{{cite web|title=The rise of green capitalism |url=http://roadtoparis.info/top-list/rise-green-capitalism/ |website=roadtoparis.info |access-date=27 November 2015}}</ref>{{request quotation|date=August 2019}}

=== Sustainable capitalism ===
] is a conceptual form of capitalism based upon ] practices that seek to preserve humanity and the planet, while reducing ] and bearing a resemblance of capitalist ]. A capitalistic economy must expand to survive and find new markets to support this expansion.<ref>{{cite book |doi=10.1109/IPCC.2011.6087226 |chapter=The convergence of sustainable capitalism |title=2011 IEEE International Professional Communication Conference |pages=1–7 |year=2011 |last1=Mitra |first1=Basavadatta |last2=Gadhok |first2=Saagar |last3=Salhotra |first3=Shivam |last4=Agarwal |first4=Sakshi |isbn=978-1-61284-779-5 |s2cid=31292223 }}</ref> Capitalist systems are often destructive to the environment as well as certain individuals without access to proper representation. However, sustainability provides quite the opposite; it implies not only a continuation, but a ].<ref>{{cite journal |last1=Schweickart |first1=David |title=Is Sustainable Capitalism an Oxymoron? |journal=Perspectives on Global Development and Technology |date=1 January 2009 |volume=8 |issue=2–3 |pages=559–580 |doi=10.1163/156914909X424033 }}</ref> Sustainability is often thought of to be related to ], and sustainable capitalism applies sustainable principles to economic governance and social aspects of capitalism as well.

The importance of sustainable capitalism has been more recently recognized, but the concept is not new. Changes to the current economic model would have heavy social environmental and economic implications and require the efforts of individuals, as well as compliance of local, state and federal governments. Controversy surrounds the concept as it requires an increase in sustainable practices and a marked decrease in current consumptive behaviors.<ref name=":2">{{Cite book |title=Sustainable Capitalism and the Pursuit of Well-Being.|last=E.|first=Harrison, Neil|date=1 January 2013|publisher=Routledge|isbn=978-1-306-21804-7|oclc=866837827}}{{page needed|date=March 2019}}</ref>

This is a concept of capitalism described in ] and ]'s manifesto for the ] to describe a long-term political, economic and social structure which would mitigate current threats to the planet and society.<ref name="genfound">{{Cite web |last1=Gore |first1=Al |last2=Blood |first2=David |title=A Manifesto for Sustainable Capitalism |url=https://www.genfound.org/media/pdf-wsj-manifesto-sustainable-capitalism-14-12-11.pdf |url-status=dead |archive-url=https://web.archive.org/web/20140124005644/https://www.genfound.org/media/pdf-wsj-manifesto-sustainable-capitalism-14-12-11.pdf |archive-date=24 January 2014 |access-date=24 October 2022 |website=Generation Foundation}}</ref> According to their manifesto, sustainable capitalism would integrate the environmental, social and governance (]) aspects into risk assessment in attempt to limit externalities.<ref name=":0b">{{Cite web|url=https://www.generationim.com/media/pdf-generation-sustainable-capitalism-v1.pdf |archive-url=https://ghostarchive.org/archive/20221009/https://www.generationim.com/media/pdf-generation-sustainable-capitalism-v1.pdf |archive-date=9 October 2022 |url-status=live|title=Sustainable Capitalism|access-date=18 February 2017}}</ref> Most of the ideas they list are related to economic changes, and social aspects, but strikingly few are explicitly related to any environmental policy change.<ref name="genfound" />

== Capital accumulation ==
{{Main|Capital accumulation}}
The accumulation of capital is the process of "making money" or growing an initial sum of money through investment in production. Capitalism is based on the accumulation of capital, whereby ] is invested in order to make a profit and then reinvested into further production in a continuous process of accumulation. In Marxian economic theory, this dynamic is called the ]. Capital accumulation forms the basis of capitalism, where economic activity is structured around the accumulation of ], defined as investment in order to realize a financial profit.<ref name="Economist definition">{{cite news | title = Economics A–Z: ''Capital'' | url = http://www.economist.com/economics-a-to-z/c#node-21529870 | website = ] | access-date = 25 March 2015 | archive-date = 7 August 2017 | archive-url = https://web.archive.org/web/20170807235225/http://www.economist.com/economics-a-to-z/c#node-21529870 | url-status = live }}</ref> In this context, "capital" is defined as money or a financial asset invested for the purpose of making more money (whether in the form of profit, rent, interest, royalties, capital gain or some other kind of return).<ref name="MIA definition">{{cite web | title = Encyclopedia of Marxism – Glossary of terms: ''Capital'' | url = http://marxists.org/glossary/terms/c/a.htm#capital | website = ] | access-date = 25 March 2015 | archive-date = 18 June 2015 | archive-url = https://web.archive.org/web/20150618083941/https://www.marxists.org/glossary/terms/c/a.htm#capital | url-status = live }}</ref>

In mainstream ], ] and ], capital accumulation is often equated with ] of profit income or savings, especially in ] capital goods. The concentration and centralisation of capital are two of the results of such accumulation. In modern ] and ], the phrase "]" is often used in preference to "accumulation", though the ] (UNCTAD) refers nowadays to "accumulation". The term "accumulation" is occasionally used in ].

== Wage labor ==
{{Main|Wage labour}}
], ], {{Circa|1995}}–2000)]]
Wage labor refers to the sale of ] under a formal or informal ] to an ].<ref name="Steinfeld 2009 3"/> These transactions usually occur in a ] where ]s are market determined.<ref>{{Harvnb|Deakin|Wilkinson|2005}}.<br />{{Harvnb|Marx|1990|p=1005}}, defines wage labour succinctly as "the labour of the worker who sells his own labour-power."</ref> In Marxist economics, these owners of the means of production and suppliers of capital are generally called capitalists. The description of the role of the capitalist has shifted, first referring to a useless intermediary between producers, then to an employer of producers, and finally to the owners of the means of production.<ref name="Williams 1983 51" /> ] includes all physical and mental human resources, including entrepreneurial capacity and management skills, which are required to produce products and services. ] is the act of making goods or services by applying ].<ref>Ragan, Christopher T.S.; Lipsey, Richard G. ''Microeconomics''. 12th Canadian ed. Toronto, Pearson Education, 2008. {{ISBN|978-0-321-31491-8}}</ref><ref>Robbins, Richard H. ''Global problems and the culture of capitalism''. Boston: Allyn & Bacon, 2007. {{ISBN|978-0-205-52487-7}}</ref>

== Criticism ==
{{Main|Criticism of capitalism}}
] poster "]" (1911)]]
Criticism of capitalism comes from various political and philosophical approaches, including ], ], ] and ] viewpoints.<ref>{{cite book|last=Tormey|first=Simon|title=Anticapitalism|publisher=One World Publications|year=2004|page=10|isbn=978-1-78074-250-2}}</ref> Of those who oppose it or want to modify it, some believe that capitalism should be removed through ] while others believe that it should be changed slowly through ].<ref>{{cite book|title=Book: Sociology (Boundless)|chapter=16.1C: The Marxist Critique of Capitalism|url=https://socialsci.libretexts.org/@go/page/8462|date=16 December 2020|publisher=LibreTexts|access-date=21 October 2021|quote=Revolutionary socialists believe that capitalism can only be overcome through revolution. Social democrats believe that structural change can come slowly through political reforms to capitalism.}}</ref><ref name="The Cambridge History of Communism p.">{{cite book | editor-last=Pons | editor-first=Silvio | editor-last2=Smith | editor-first2=Stephen A. | title=The Cambridge History of Communism | publisher=Cambridge University Press | date=21 September 2017 | isbn=978-1-316-13702-4 | doi=10.1017/9781316137024 | pages=49–73}}</ref>

Prominent critiques of capitalism allege that it is inherently ],<ref name="competition">{{cite web|url=http://www.marxists.org/archive/marx/works/1845/condition-working-class/ch05.htm|title=Competition – The Condition of the Working Class in England|last=Engels|first=Frederick|access-date=10 March 2008}}</ref><ref name="stanfordexploitation">{{Cite web|date=20 December 2001|title=Exploitation|url=https://plato.stanford.edu/entries/exploitation/|url-status=live|archive-url=https://web.archive.org/web/20201127091753/https://plato.stanford.edu/entries/exploitation/|archive-date=27 November 2020|access-date=26 December 2020|website=]}}</ref><ref>{{cite book |last=Mattei|first=Clara E.|date=2022 |title=The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism|pages=17–18|url=https://press.uchicago.edu/ucp/books/book/chicago/C/bo181707138.html|location= |publisher=]|isbn=978-0-226-81839-9}}</ref> ],<ref>"Alienation." Pp. 10. in ''A Dictionary of Philosophy'' (rev. 2nd ed.). 1984.</ref> ],<ref name="onfreetrade">{{cite web|url=http://www.marxists.org/archive/marx/works/1888/free-trade/index.htm|title=On the Question of Free Trade|last=Engels|first=Frederick|access-date=11 March 2008}}</ref><ref name="isrcrisis">{{cite web|url=http://www.isreview.org/issues/32/crisis_theory.shtml|title=Marx's Theory of Economic Crisis|last=Easterling|first=Earl|publisher=International Socialist Review|access-date=13 March 2008|archive-date=27 February 2021|archive-url=https://web.archive.org/web/20210227033442/https://isreview.org/issues/32/crisis_theory.shtml|url-status=dead}}</ref> ],<ref name="extinction">{{cite book|last=Dawson|first=Ashley|author-link=Ashley Dawson|title=Extinction: A Radical History|date=2016|publisher=]|url=http://www.orbooks.com/catalog/extinction-by-ashley-dawson/|page=41|isbn=978-1-944869-01-4|access-date=20 August 2016|archive-date=17 September 2016|archive-url=https://web.archive.org/web/20160917203814/http://www.orbooks.com/catalog/extinction-by-ashley-dawson/|url-status=live}}</ref><ref>{{Cite web |last=Nelson |first=Anitra |date=31 January 2024 |title=Degrowth as a Concept and Practice : Introduction |url=https://commonslibrary.org/degrowth-as-a-concept-and-practice-introduction/ |access-date=24 February 2024 |website=The Commons Social Change Library |language=en-AU}}</ref><ref>{{cite journal |title=Earth at risk: An urgent call to end the age of destruction and forge a just and sustainable future |journal=PNAS Nexus |date=4 April 2024 |volume=3 |issue=4 |doi=10.1093/pnasnexus/pgae106 |url=https://academic.oup.com/pnasnexus/article/3/4/pgae106/7638480?login=false |access-date=4 April 2024|pmc=10986754 |last1=Fletcher |first1=Charles |last2=Ripple |first2=William J. |last3=Newsome |first3=Thomas |last4=Barnard |first4=Phoebe |last5=Beamer |first5=Kamanamaikalani |last6=Behl |first6=Aishwarya |last7=Bowen |first7=Jay |last8=Cooney |first8=Michael |last9=Crist |first9=Eileen |last10=Field |first10=Christopher |last11=Hiser |first11=Krista |last12=Karl |first12=David M. |last13=King |first13=David A. |last14=Mann |first14=Michael E. |last15=McGregor |first15=Davianna P. |last16=Mora |first16=Camilo |last17=Oreskes |first17=Naomi |last18=Wilson |first18=Michael |pages=pgae106 |pmid=38566756 }}</ref> and ]<ref>{{cite book|url=https://books.google.com/books?id=BlEpAQAAMAAJ|title=Beyond the Profits System: Possibilities for a post-capitalist era|last=Shutt|first=Harry|date=March 2010|publisher=Zed Books|isbn=978-1-84813-417-1}}</ref><ref name="isrwaste">{{cite web|url=http://www.isreview.org/issues/53/garbage.shtml|title=The Conquest of Garbage|last=Rogers|first=Heather|website=isreview.org|publisher=International Socialist Review (1997)|access-date=13 March 2008|archive-date=10 May 2021|archive-url=https://web.archive.org/web/20210510142346/http://www.isreview.org/issues/53/garbage.shtml|url-status=dead}}</ref><ref name="part6">{{cite web|url=http://www.chass.utoronto.ca/~reak/eco100/100_6.htm|title=Monopoly, Imperfect Competition, and Oligopoly|last=Rea|first=K.J.|access-date=11 March 2008|archive-date=12 June 2010|archive-url=https://web.archive.org/web/20100612201706/http://www.chass.utoronto.ca/~reak/eco100/100_6.htm|url-status=dead}}</ref>—and that it creates massive ],<ref name="King 2021">{{cite web|last=King|first=Matthew Wilburn|title=Why the next stage of capitalism is coming|website=BBC Future|date=25 May 2021|url=https://www.bbc.com/future/article/20210525-why-the-next-stage-of-capitalism-is-coming|access-date=21 October 2021}}</ref><ref>{{cite book |last1=Ghodsee|first1=Kristen|last2=Orenstein|first2=Mitchell A.|author-link1=Kristen Ghodsee|date=2021|title=Taking Stock of Shock: Social Consequences of the 1989 Revolutions|publisher=]|page=192|doi=10.1093/oso/9780197549230.001.0001 |isbn=978-0-19-754924-7|quote=Without an accompanying welfare state in which social programs funded by a progressive income tax redistribute from the rich to the poor, capitalism can be a deeply unfair system where a small, well-connected elite captures a majority of the wealth and power, and not necessarily through meritocratic processes.}}</ref> ] people,<ref name="openDemocracy">{{cite web | title=Commodification: the essence of our time | website=openDemocracy | url=https://www.opendemocracy.net/en/opendemocracyuk/commodification-essence-of-our-time/ | access-date=21 October 2021 | author= Colin Leys | date = 2 April 2021}}</ref><ref name="Renegade Inc 2019">{{cite web | title=The Commodification of Everything | website=Renegade Inc | date=25 August 2019 | url=http://renegadeinc.com/the-commodification-of-everything/ | access-date=21 October 2021 | author=Daniel Margrain | archive-date=21 October 2021 | archive-url=https://web.archive.org/web/20211021224916/https://renegadeinc.com/the-commodification-of-everything/ | url-status=dead }}</ref> ],<ref name="extinction" /><ref>{{cite book|last=Hickel|first=Jason|author-link=Jason Hickel|title=Less is More: How Degrowth Will Save the World |year=2021|publisher=Windmill Books|pages=39–40|isbn=978-1-78609-121-5|quote=It was only with the rise of capitalism over the past few hundred years, and the breathtaking acceleration of industrialization from the 1950s, that on a planetary scale things began to tip out of balance.}}</ref> is ],<ref name="Merkel pp. 109–128">{{cite journal | last=Merkel | first=Wolfgang | title=Is capitalism compatible with democracy? | journal=Zeitschrift für Vergleichende Politikwissenschaft | publisher=Springer Science and Business Media LLC | volume=8 | issue=2 | date=26 July 2014 | issn=1865-2646 | doi=10.1007/s12286-014-0199-4 | pages=109–128| hdl=10419/270951 | s2cid=150776013 | hdl-access=free }}</ref><ref name="Reich 2009">{{cite web | last=Reich | first=Robert B. | title=How Capitalism Is Killing Democracy | website=Foreign Policy | date=12 October 2009 | url=https://foreignpolicy.com/2009/10/12/how-capitalism-is-killing-democracy/ | access-date=21 October 2021}}</ref><ref>{{cite book |last=Slobodian|first=Quinn |author-link=Quinn Slobodian|date=2023 |title=Crack-Up Capitalism: Market Radicals and the Dream of a World Without Democracy|url=https://books.google.com/books?id=tIlrEAAAQBAJ&pg=PT10|location= |publisher=]|page=10 |isbn=978-1-250-75389-2}}
</ref> embeds ] and ] between nation states,<ref>{{cite journal |last1=Patnaik |first1=Utsa |title='Neo-Marxian' Theories of Capitalism and Underdevelopment: Towards a Critique |journal=Social Scientist |date=1982 |volume=10 |issue=11 |pages=3–32 |doi=10.2307/3516858 |jstor=3516858 |url=https://www.jstor.org/stable/3516858 |issn=0970-0293}}</ref><ref>{{cite journal |last1=Warke |first1=Thomas W. |title=The Marxian Theory of Underdevelopment: A Review Article |journal=The Journal of Developing Areas |date=1973 |volume=7 |issue=4 |pages=699–710 |url=https://www.jstor.org/stable/4190085#:~:text=it%20is%20Lenin%20who%20laid,modern%20Marxian%20theory%20of%20underdevelopment.&text=and%20tends%20to%20perpetuate%20the,masses%20in%20the%20backward%20country.&text=world%20production%20and%20trade%20and,dualisms%20within%20under%2D%20developed%20economies. |issn=0022-037X}}</ref><ref>{{cite journal |last1=Martins |first1=Carlos Eduardo |title=The Longue Durée of the Marxist Theory of Dependency and the Twenty-First Century |journal=Latin American Perspectives |date=January 2022 |volume=49 |issue=1 |pages=18–35 |doi=10.1177/0094582X211052029 |url=https://journals.sagepub.com/doi/10.1177/0094582X211052029 |language=en |issn=0094-582X}}</ref><ref>{{cite journal |last1=Peck |first1=Jamie |last2=Varadarajan |first2=Latha |title=Uneven Regional Development |journal=International Encyclopedia of Geography: People, the Earth, Environment and Technology |date=6 March 2017 |pages=1–13 |doi=10.1002/9781118786352.wbieg0721 |url=https://onlinelibrary.wiley.com/doi/abs/10.1002/9781118786352.wbieg0721 |publisher=John Wiley & Sons, Ltd |isbn=9780470659632 |language=en}}</ref> and leads to an erosion of ]<ref>{{cite journal|last=Abeles|first=Marc|date=2006|title=Globalization, Power, and Survival: an Anthropological Perspective|url=https://halshs.archives-ouvertes.fr/halshs-00125880/file/M_Abeles_2006_AQ.pdf |archive-url=https://ghostarchive.org/archive/20221009/https://halshs.archives-ouvertes.fr/halshs-00125880/file/M_Abeles_2006_AQ.pdf |archive-date=9 October 2022 |url-status=live|journal=Anthropological Quarterly|volume=79|issue=3|pages=484–486|doi=10.1353/anq.2006.0030|s2cid=144220354}}</ref> because of its ] of ] expansion and ].<ref>{{cite journal|last=Farid|first=Hilmar|date=2005|title=Indonesia's original sin: mass killings and capitalist expansion, 1965–66|journal=]|volume=6|issue=1|pages=3–16|doi=10.1080/1462394042000326879|s2cid=145130614}}</ref><ref>{{cite book|last=Blakeley|first=Ruth|date=2009|title=State Terrorism and Neoliberalism: The North in the South|url=http://www.routledge.com/books/details/9780415462402/|publisher=]|pages=, , |isbn=978-0-415-68617-4}}</ref><ref>''Lenin's Selected Works'', Progress Publishers, 1963, Moscow, Volume 1, pp. 667–766</ref>

Other critics argue that such inequities are not due to the ethic-neutral construct of the economic system commonly known as capitalism, but to the ethics of those who shape and execute the system. For example, some contend that Milton Friedman's (human) ethic of 'maximizing shareholder value' creates a harmful form of capitalism,<ref>{{Cite book |last=Stout |first=Lynn |author-link=Lynn Stout |title=The Shareholder Value Myth |publisher=Berrett-Koehler Publishers, Inc. |year=2012 |isbn=978-1-60509-813-5 |location=San Francisco, CA |pages=15–23}}</ref><ref>{{Cite book |last=Gelles |first=David |author-link=David Gelles |title=The Man Who Broke Capitalism |publisher=Simon & Schuster |year=2022 |isbn=978-1-9821-7644-0 |location=New York |pages=1–13}}</ref> while a ] or John Bogle (human) ethic of 'enough' creates a sustainable form.<ref>{{Cite book |last=Fuller |first=Millard |author-link=Millard Fuller|title=The Theology of the Hammer |publisher=Smyth & Helwys Publishing |year=1994 |isbn=1-880837-92-7 |location=Macon, GA |pages=31–39}}</ref><ref>{{Cite book |last=Bogle |first=John |title=Enough |publisher=John Wiley & Sons |year=2009 |isbn=978-0-470-52423-7 |location=Hoboken, New Jersey |pages=229–248}}</ref> Equitable ethics and unified ethical decision-making is theorized to create a less damaging form of capitalism.<ref>{{Cite book |last=Knowlton & Hedges |title=Better Capitalism |publisher=Wipf & Stock Publishers |year=2021 |isbn=978-1-7252-8093-9 |location=Eugene, OR |pages=34–37, 235–242}}</ref>

] has been argued to not be a fundamental part of capitalism,<ref name="x107">{{cite journal | last=Haslett | first=D. W. | title=Is Inheritance Justified? | journal=Philosophy & Public Affairs | publisher=Wiley | volume=15 | issue=2 | year=1986 | issn=0048-3915 | jstor=2265382 | pages=122–155 | url=http://www.jstor.org/stable/2265382 | access-date=17 August 2024}}</ref> instead part of ].<ref name="e543">{{cite journal | last=Pérez-González | first=Francisco | title=Inherited Control and Firm Performance | journal=American Economic Review | volume=96 | issue=5 | date=1 November 2006 | issn=0002-8282 | doi=10.1257/aer.96.5.1559 | pages=1559–1588}}</ref>

== See also ==
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* '']''
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{{colend}}

== References ==
; Notes
{{reflist}}

; Bibliography
{{refbegin|30em}}
* {{cite book|url=https://books.google.com/books?id=w_6PqBp64y0C&pg=PA2|title=Capitalism, Ethics and the Paradoxon of Self-Exploitation|last=Bacher|first=Christian|publisher=GRIN Verlag|year=2007|isbn=978-3-638-63658-2|location=Munich|page=2|access-date=27 June 2015|archive-date=1 November 2015|archive-url=https://web.archive.org/web/20151101095357/https://books.google.com/books?id=w_6PqBp64y0C&lpg=PP1&pg=PA2|url-status=live}}
* {{cite book | last = Boldizzoni | first = Francesco | author-link = Francesco Boldizzoni | title = Foretelling the End of Capitalism: Intellectual Misadventures since Karl Marx | publisher= Cambridge, MA: Harvard University Press| year = 2020 | isbn = 978-0-674-91932-7}}
* {{cite journal|last= Carsel|first= Wilfred|year= 1940|title= The Slaveholders' Indictment of Northern Wage Slavery|journal= ]|volume= 6|issue= 4|pages= 504–520|jstor= 2192167|doi= 10.2307/2192167}}
* {{cite book|title= The Law of the Labour Market: Industrialization, Employment, and Legal Evolution|last2= Wilkinson|first2= Frank|publisher=Oxford University Press|year= 2005|isbn= 978-0-19-815281-1|location= Oxford|last1= Deakin|first1= Simon|author1-link= Simon Deakin|author2-link= Frank Wilkinson}}
* {{cite book|title=Business Ethics|url=https://archive.org/details/businessethics00dege|url-access=registration|last=De George|first=Richard T.|publisher=Macmillan|year=1986|isbn=978-0-02-328010-8|location=New York|page=}}
* {{cite book|title= Britain's Gulag: The Brutal End of Empire in Kenya|last= Elkins|first= Caroline|publisher= ]|year= 2005|isbn= 978-0-224-07363-9|location= London|author-link= Caroline Elkins}}
* {{cite book|url= https://books.google.com/books?id=ECdb7EjiBnEC|title= Cannibals All! or, Slaves Without Masters|last= Fitzhugh|first= George|publisher= A. Morris|year= 1857|isbn= 978-1-4290-1643-8|location= Richmond,&nbsp;VA|author-link= George Fitzhugh|access-date= 27 June 2015|archive-date= 18 October 2015|archive-url= https://web.archive.org/web/20151018025643/https://books.google.com/books?id=ECdb7EjiBnEC|url-status= live}}
* {{cite book|title=Capitalism A Very Short Introduction|last=Fulcher|first=James|publisher=Oxford University Press|year=2004|isbn=978-0-19-280218-7|location=Oxford|url=https://archive.org/details/capitalismverysh00fulc_0}}
* {{cite book|title= Fragments of an Anarchist Anthropology|last= Graeber|first= David|publisher= Prickly Paradigm Press|year= 2004|isbn= 978-0-9728196-4-0|title-link= Fragments of an Anarchist Anthropology}}
* {{cite book|title= Possibilities: Essays on Hierarchy, Rebellion and Desire|last= Graeber|first= David|publisher= AK Press|year= 2007|isbn= 978-1-904859-66-6}}
* {{cite journal|last2= Benoit|first2= Cecilia|year= 2007|title= From Wage Slaves to Wage Workers: Cultural Opportunity Structures and the Evolution of the Wage Demands of the Knights of Labor and the American Federation of Labor, 1880–1900|journal= ]|volume= 85|issue= 3|pages= 1393–411|doi=10.1353/sof.2007.0037|jstor= 4494978|last1= Hallgrimsdottir|first1= Helga Kristin|s2cid= 154551793}}
* {{cite book|url= https://www.academia.edu/4199690|title= Globalization and Economy, Vol. 1: Global Markets and Capitalism|last2= Gills|first2= Barry|publisher= SAGE Publications|year= 2007|location= London|last1= James|first1= Paul|author-link= Paul James (academic)|access-date= 17 May 2014|archive-date= 23 September 2020|archive-url= https://web.archive.org/web/20200923063538/https://www.academia.edu/4199690/Globalization_and_Economy_Vol_1_Global_Markets_and_Capitalism_2007_|url-status= live}}
* Krahn, Harvey J., and Graham S. Lowe (1993). ''Work, Industry, and Canadian Society''. 2nd ed. Scarborough, Ont.: Nelson Canada. xii, 430 p. {{ISBN|0-17-603540-0}}
* {{cite book|title= The Penguin Dictionary of Sociology|last2=Urry|first2= John|publisher= Penguin Books|year= 2000|isbn= 978-0-14-051380-6|edition= 4th|location= London|pages= 36–40|chapter=Capitalism|last1= Lash|first1=Scott|author-link1=Scott Lash|author-link2=John Urry (sociologist)|editor1-first= Nicholas|editor1-last=Abercrombie|editor2-first=Stephen|editor2-last=Hill|editor3-first= Bryan S|editor3-last=Turner|editor3-link=Bryan S. Turner}}
* {{cite journal|date= August 2011|title= The Current Crisis and the Essence of Capitalism|url= http://www.themontrealreview.com/2009/The-current-crisis-and-the-essence-of-capitalism.php|journal= The Montreal Review|issn= 0707-9656|last1= McCraw|first1= Thomas K.|author-link= Thomas K. McCraw|access-date= 14 August 2011|archive-date= 8 September 2011|archive-url= https://web.archive.org/web/20110908122337/http://www.themontrealreview.com/2009/The-current-crisis-and-the-essence-of-capitalism.php|url-status= live}}
* {{cite journal|last= Nelson|first= John O.|year= 1995|title= That a Worker's Labour Cannot Be a Commodity|journal= ]|volume= 70|issue= 272|pages= 157–165|doi=10.1017/s0031819100065359|jstor= 3751199|s2cid= 171054136}}
* {{cite book|url=https://archive.org/details/unset0000unse_o9p3/page/1|title=Profit Theory and Capitalism|publisher=University of Pennsylvania Press |year=1983|isbn=978-0-8122-7863-7|location=Philadelphia|page=|author=Obrinsky, Mark}}
* {{cite book|title= The Kaiser's Holocaust: Germany's Forgotten Genocide|last2= Erichsen|first2= Casper W.|publisher= ]|year= 2010|isbn= 978-0-571-23141-6|location= London|last1= Olusoga|first1= David}}
* {{cite book|url= http://www.marxists.org/archive/marx/works/1847/wage-labour/|title= Wage Labour and Capital|last= Marx|first= Karl|year= 1847|author-link= Karl Marx|access-date= 25 March 2015|archive-date= 6 September 2019|archive-url= https://web.archive.org/web/20190906075046/https://www.marxists.org/archive/marx/works/1847/wage-labour/|url-status= live}}
* {{cite book|title= Capital, Volume I|last= Marx|first= Karl|publisher= Penguin Classics|year= 1990|isbn= 978-0-14-044568-8|location= London|orig-year= 1867|title-link= Capital, Volume I}}
* {{cite book|title= The Wages of Whiteness: Race and the Making of the American Working Class|last= Roediger|first= David|publisher= ]|year= 2007a|isbn= 978-1-84467-145-8|edition= revised and expanded|location= London & New York|author-link= David Roediger|orig-year= 1991}}
* {{cite journal|last= Roediger|first= David|year= 2007b|title= An Outmoded Approach to Labour and Slavery|journal= ]|volume= 60|pages= 245–250|jstor= 25149808|author-link= David Roediger}}
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* {{cite book|title=Europe and the People Without History|last=Wolf|first=Eric R.|publisher=University of California Press|year=1982|isbn=978-0-520-04459-3|location=Berkeley|author-link=Eric Wolf|title-link=Europe and the People Without History}}
* {{cite book|url=https://books.google.com/books?id=FZPyKjVguVoC|title=The Origin of Capitalism: A Longer View|last=Wood|first=Ellen Meiksins|publisher=Verso|year=2002|isbn=978-1-85984-392-5|location=London|author-link=Ellen Meiksins Wood|access-date=27 June 2015|archive-date=28 November 2015|archive-url=https://web.archive.org/web/20151128060418/https://books.google.com/books?id=FZPyKjVguVoC|url-status=live}}
* {{cite book|title= Peasant Revolution in Ethiopia: The Tigray People's Liberation Front, 1975–1991|last= Young|first= John|publisher= Cambridge University Press|year= 1997|isbn= 978-0-521-02606-2|location= Cambridge}}
{{refend}}

== Further reading ==
{{refbegin|colwidth=30em}}
* ] (2011). ''America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy, 2nd Edition.'' Democracy Collaborative Press. {{ISBN|0-9847857-0-1}}.
* {{cite book|last1=Altvater |first1=Elmar |last2=Crist|first2=Eileen|last3=Haraway|first3=Donna|author3-link=Donna Haraway|last4=Hartley|first4=Daniel|last5=Parenti|first5=Christian|last6=McBrien|first6=Justin|last7=Moore|first7=Jason|title=Anthropocene or Capitalocene? Nature, History, and the Crisis of Capitalism|date=2016|publisher=PM Press|isbn=978-1-62963-148-6}}
* Ascher, Ivan. ''Portfolio Society: On the Capitalist Mode of Prediction.'' Zone Books, 2016. {{ISBN|978-1935408741}}
* ] ''The Half Has Never Been Told: Slavery and the Making of American Capitalism.'' New York, ], 2014. {{ISBN|0-465-00296-X}}.
* {{cite book | first = Richard | last = Barbrook | year = 2006 | title = The Class of the New | edition = paperback | publisher = OpenMute | location = London | isbn = 978-0-9550664-7-4 | url = http://www.theclassofthenew.net | access-date = 11 June 2019 | archive-url = https://web.archive.org/web/20180801045453/http://www.theclassofthenew.net/ | archive-date = 1 August 2018 | url-status = dead }}
* {{cite book|last1= Block |first1= Fred |author1-link= Fred L. Block |last2= Somers |first2= Margaret R. |year= 2014|title= The Power of Market Fundamentalism: Karl Polyani's Critique|location= Cambridge, MA |publisher= Harvard University Press|isbn= 978-0-674-05071-6}}
* {{cite book | last = Boldizzoni | first = Francesco | author-link = Francesco Boldizzoni | title = Foretelling the End of Capitalism: Intellectual Misadventures since Karl Marx | publisher= Harvard University Press| year = 2020 | isbn = 978-0-674-91932-7}}
* ]. ''Civilization and Capitalism, 15th-18th Century'', 3 volumes.
* Callinicos, Alex. "Wage Labour and State Capitalism – A reply to Peter Binns and Mike Haynes", ''International Socialism'', 2nd series, 12, Spring 1979.
* {{cite book |last1=Case |first1=Anne |last2=Deaton |first2=Angus |author-link1=Anne Case |author-link2=Angus Deaton |date=2020 |title=Deaths of Despair and the Future of Capitalism |url=https://press.princeton.edu/books/hardcover/9780691190785/deaths-of-despair-and-the-future-of-capitalism |publisher=] |isbn=978-0-691-19078-5 |access-date=6 March 2020 |archive-date=7 March 2020 |archive-url=https://web.archive.org/web/20200307062358/https://press.princeton.edu/books/hardcover/9780691190785/deaths-of-despair-and-the-future-of-capitalism |url-status=live }}
* Farl, Erich. "The Genealogy of State Capitalism". In: ''International'' London, vol. 2, no. 1, 1973.
* {{cite book |last=Fisher|first=Mark |author-link=Mark Fisher|date=2009 |title=]|location= |publisher= ]|isbn=978-1-84694-317-1}}
* Gough, Ian. '' {{Webarchive|url=https://web.archive.org/web/20120207145856/http://www.newleftreview.org/?view=558 |date=7 February 2012 }}'' New Left Review.
* ] '']'' (eng. translation by T. McCarthy). Boston, Beacon. {{Webarchive|url=https://web.archive.org/web/20151120102451/https://books.google.com/books?id=3WFy6vsyLNEC |date=20 November 2015 }}; .
* {{cite book | last = Harvey | first = David | author-link = David Harvey | title = Seventeen Contradictions and the End of Capitalism | publisher= Oxford University Press| year = 2014 | isbn = 978-0-19-936026-0}}
* ] and ] (2014). ''American Capitalism: A Reader.'' Simon & Schuster. {{ISBN|978-1-4767-8431-1}}.
* {{cite book |last1=Ingham |first1=Geoffrey |title=Capitalism: With a New Postscript on the Financial Crisis and Its Aftermath |date=2008 |publisher=] |location=Cambridge |isbn=9780745636481}}
* {{cite book | year= 2007 | last1= James | first1= Paul | author-link= Paul James (academic) | last2= Patomäki | first2= Heikki | title= Globalization and Economy, Vol. 2: Global Finance and the New Global Economy | url= https://www.academia.edu/4211923 | publisher= SAGE Publications | location= London | access-date= 28 January 2018 | archive-date= 23 September 2020 | archive-url= https://web.archive.org/web/20200923063542/https://www.academia.edu/4211923/Globalization_and_Economy_Vol_2_Global_Finance_and_the_New_Global_Economy_2007_ | url-status= live }}
* {{cite book | year= 2007 | last1= James | first1= Paul | author-link= Paul James (academic) | last2= Palen | first2= Ronen | title= Globalization and Economy, Vol. 3: Global Economic Regimes and Institutions | url= https://www.academia.edu/4251331 | publisher= Sage Publications | location= London | access-date= 28 January 2018 | archive-date= 23 September 2020 | archive-url= https://web.archive.org/web/20200923063542/https://www.academia.edu/4251331/Globalization_and_Economy_Vol_3_Global_Economic_Regimes_and_Institutions_2007_ | url-status= live }}
* {{cite book | year= 2007 | last1= James | first1= Paul | author-link= Paul James (academic) | last2= O'Brien | first2= Robert | title= Globalization and Economy, Vol. 4: Globalizing Labour | url= https://www.academia.edu/4303461 | publisher= Sage Publications | location= London | access-date= 28 January 2018 | archive-date= 23 September 2020 | archive-url= https://web.archive.org/web/20200923063543/https://www.academia.edu/4303461/Globalization_and_Economy_Vol_4_Globalizing_Labour_2007_ | url-status= live }}
* Jameson, Fredric (1991). '']''.
* {{cite book |last1=Kocka |first1=Jürgen |title=Capitalism: A Short History |date=2016 |publisher=] |location=Princeton |isbn=978-0691165226}}
* Kotler, Philip (2015). ''Confronting Capitalism: Real Solutions for a Troubled Economic System.'' AMACOM. {{ISBN|978-0814436455}}
* Mandel, Ernest (1999). ''Late Capitalism.'' {{ISBN|978-1859842027}}
* {{cite book | last = Mander | first = Jerry | author-link = Jerry Mander | title = The Capitalism Papers: Fatal Flaws of an Obsolete System | publisher= Counterpoint | year = 2012 | isbn = 978-1-61902-158-7}}
* Marcel van der Linden, ''Western Marxism and the Soviet Union''. New York, Brill Publishers, 2007.
* Mayfield, Anthony. "Economics", in his ''On the Brink: Resource Depletion, Debt Collapse, and Super-technology'' (: On the Brink Publishing, 2013), pp.&nbsp;50–104.
* {{cite book|last1= Musacchio |first1= Aldo |last2= Lazzarini |first2= Sergio G. |year= 2014|title= Reinventing State Capitalism: Leviathan in Business, Brazil and Beyond|location= Cambridge, MA |publisher= Harvard University Press|isbn= 978-0-674-72968-1}}
* {{cite book|last=Newitz|first=Annalee|title=Pretend We're Dead: Capitalist Monsters in American Pop Culture|date=2006|publisher=Duke University Press|location=Durham, NC|isbn=978-0-8223-3745-4|url=https://www.dukeupress.edu/Pretend-Were-Dead/|access-date=26 October 2016|archive-date=26 October 2016|archive-url=https://web.archive.org/web/20161026234517/https://www.dukeupress.edu/Pretend-Were-Dead/|url-status=live}}
* {{cite book |last1=Nitzan|first1=Jonathan |author-link1=Jonathan Nitzan|last2=Bichler|first2=Shimshon |author-link2=Shimshon Bichler|date=2009 |title=Capital as Power: A Study of Order and Creorder|url= |location= |publisher=]|page= |isbn=978-0-415-49680-3}}
* Panitch, Leo, and Sam Gindin (2012). ''The Making of Global Capitalism: the Political Economy of American Empire''. London, Verso. {{ISBN|978-1-84467-742-9}}.
* {{cite book|last= Piketty |first= Thomas |author-link= Thomas Piketty |year= 2014|title= Capital in the Twenty-First Century|location= Cambridge, MA |publisher= ]|isbn= 978-0-674-43000-6 |title-link= Capital in the Twenty-First Century}}
* {{cite book|last= Piketty |first= Thomas |year= 2020|title=Capital and Ideology|location= Cambridge, MA |publisher= Belknap Press|isbn=978-0-674-98082-2|title-link= Capital and Ideology }}
* ] (2001). '']: The Political and Economic Origins of Our Time.'' ]; 2nd ed. {{ISBN|0-8070-5643-X}}
* {{cite book|title= Capitalism: A complete understanding of the nature and value of human economic life|last=Reisman|first= George|year= 1998|isbn= 978-0-915463-73-2
|publisher =Jameson Books}}
* ] (2009). ''Money, Greed, and God: Why Capitalism is the Solution and Not the Problem''. New York: ]. {{ISBN|978-0-06-137561-3}}
* ] (2013). ''The Failure of Laissez-faire Capitalism: towards a New Economics for a Full World''. Atlanta, Ga.: Clarity Press. {{ISBN|978-0-9860362-5-5}}
* ] ''Global Capitalism and the Crisis of Humanity.'' Cambridge University Press, 2014. {{ISBN|1-107-69111-7}}
* {{cite book |last=Schram |first=Sanford F. |title=The Return of Ordinary Capitalism: Neoliberalism, Precarity, Occupy |year=2015 |publisher=Oxford University Press |url=https://global.oup.com/academic/product/the-return-of-ordinary-capitalism-9780190253011?cc=us& |isbn=978-0-19-025302-8 |access-date=12 February 2017 |archive-date=23 September 2020 |archive-url=https://web.archive.org/web/20200923063546/https://global.oup.com/academic/product/the-return-of-ordinary-capitalism-9780190253011?cc=us&lang=en& |url-status=live }}
* Hoevet, Ocean. (New Palgrave article)
* ] (1916) ''Der moderne Kapitalismus. Historisch-systematische Darstellung des gesamteuropäischen Wirtschaftslebens von seinen Anfängen bis zur Gegenwart.'' Final edn. 1916, repr. 1969, paperback edn. (3 vols. in 6): 1987 Munich: dtv. (Also in Spanish; no English translation yet.)
* {{cite book |last1=Sonenscher |first1=Michael |title=Capitalism: The Story behind the Word |date=2022 |publisher=] |location=Princeton |isbn=9780691237206}}
* ], "Better, Faster, Stronger" (review of ], ''The Philosopher of Palo Alto: Mark Weisner, Xerox PARC, and the Original Internet of Things'', University of Chicago Press, 347 pp.; and ], ''Palo Alto: A History of California, Capitalism, and the World'', Little, Brown, 708 pp.), '']'', vol. LXX, no. 14 (21 September 2023), pp.&nbsp;38–40. " a place where the contradictions are sharpened to their finest points, above all the defining and enduring contradictions between ] and antidemocratic practice. There is nothing as American as celebrating ] while subverting it. Or as ]n." (p.&nbsp;40.)
* {{cite book | last = Wallerstein| first = Immanuel | author-link = Immanuel Wallerstein | title = Historical Capitalism | publisher= ] | year = 1983 | isbn = 978-0-86091-761-8}}
* {{cite book | last = Wolff | first = Richard D. | author-link = Richard D. Wolff | title = Democracy at Work: A Cure for Capitalism | publisher= ] | year = 2012 | isbn = 978-1-60846-247-6}}
* {{cite book | last = Wood | first = Ellen Meiksins | author-link = Ellen Meiksins Wood | title = The Origin of Capitalism: A Longer View | publisher= ] | year = 2002 | isbn = 978-1-85984-392-5}}
{{refend}}

== External links ==
{{Commons category|Capitalism}}
{{EB1922 Poster}}
{{Wikiquote}}
{{Wiktionary}}
* {{In Our Time|Capitalism|p00545kv|Capitalism}}
* at '']'' Online.
* {{Webarchive|url=https://web.archive.org/web/20180123134446/http://www.hup.harvard.edu/features/capitalism-and-its-discontents.html |date=23 January 2018 }}. ].
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Economic system based on private ownership This article is about an economic system. For other uses, see Capitalism (disambiguation). "Capitalist" redirects here. For other uses, see Capitalist (disambiguation).

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Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. The defining characteristics of capitalism include private property, capital accumulation, competitive markets, price systems, recognition of property rights, self-interest, economic freedom, meritocracy, work ethic, consumer sovereignty, economic efficiency, decentralized decision-making, profit motive, a financial infrastructure of money and investment that makes possible credit and debt, entrepreneurship, commodification, voluntary exchange, wage labor, production of commodities and services, and a strong emphasis on innovation and economic growth. In a market economy, decision-making and investments are determined by owners of wealth, property, or ability to maneuver capital or production ability in capital and financial markets—whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.

Economists, historians, political economists, and sociologists have adopted different perspectives in their analyses of capitalism and have recognized various forms of it in practice. These include laissez-faire or free-market capitalism, anarcho-capitalism, state capitalism, and welfare capitalism. Different forms of capitalism feature varying degrees of free markets, public ownership, obstacles to free competition, and state-sanctioned social policies. The degree of competition in markets and the role of intervention and regulation, as well as the scope of state ownership, vary across different models of capitalism. The extent to which different markets are free and the rules defining private property are matters of politics and policy. Most of the existing capitalist economies are mixed economies that combine elements of free markets with state intervention and in some cases economic planning.

Capitalism in its modern form emerged from agrarianism in England, as well as mercantilist practices by European countries between the 16th and 18th centuries. The Industrial Revolution of the 18th century established capitalism as a dominant mode of production, characterized by factory work and a complex division of labor. Through the process of globalization, capitalism spread across the world in the 19th and 20th centuries, especially before World War I and after the end of the Cold War. During the 19th century, capitalism was largely unregulated by the state, but became more regulated in the post–World War II period through Keynesianism, followed by a return of more unregulated capitalism starting in the 1980s through neoliberalism.

The existence of market economies has been observed under many forms of government and across a vast array of historical periods, geographical locations, and cultural contexts. The modern industrial capitalist societies that exist today developed in Western Europe as a result of the Industrial Revolution. The accumulation of capital is the primary mechanism through which capitalist economies promote economic growth. However, it is a characteristic of such economies that they experience a business cycle of economic growth followed by recessions.

Etymology

The term "capitalist", meaning an owner of capital, appears earlier than the term "capitalism" and dates to the mid-17th century. "Capitalism" is derived from capital, which evolved from capitale, a late Latin word based on caput, meaning "head"—which is also the origin of "chattel" and "cattle" in the sense of movable property (only much later to refer only to livestock). Capitale emerged in the 12th to 13th centuries to refer to funds, stock of merchandise, sum of money or money carrying interest. By 1283, it was used in the sense of the capital assets of a trading firm and was often interchanged with other words—wealth, money, funds, goods, assets, property and so on.

The Hollantse (German: holländische) Mercurius uses "capitalists" in 1633 and 1654 to refer to owners of capital. In French, Étienne Clavier referred to capitalistes in 1788, four years before its first recorded English usage by Arthur Young in his work Travels in France (1792). In his Principles of Political Economy and Taxation (1817), David Ricardo referred to "the capitalist" many times. English poet Samuel Taylor Coleridge used "capitalist" in his work Table Talk (1823). Pierre-Joseph Proudhon used the term in his first work, What is Property? (1840), to refer to the owners of capital. Benjamin Disraeli used the term in his 1845 work Sybil. Alexander Hamilton used "capitalist" in his Report of Manufactures presented to the United States Congress in 1791.

The initial use of the term "capitalism" in its modern sense is attributed to Louis Blanc in 1850 ("What I call 'capitalism' that is to say the appropriation of capital by some to the exclusion of others") and Pierre-Joseph Proudhon in 1861 ("Economic and social regime in which capital, the source of income, does not generally belong to those who make it work through their labor"). Karl Marx frequently referred to the "capital" and to the "capitalist mode of production" in Das Kapital (1867). Marx did not use the form capitalism but instead used capital, capitalist and capitalist mode of production, which appear frequently. Due to the word being coined by socialist critics of capitalism, economist and historian Robert Hessen stated that the term "capitalism" itself is a term of disparagement and a misnomer for economic individualism. Bernard Harcourt agrees with the statement that the term is a misnomer, adding that it misleadingly suggests that there is such a thing as "capital" that inherently functions in certain ways and is governed by stable economic laws of its own.

In the English language, the term "capitalism" first appears, according to the Oxford English Dictionary (OED), in 1854, in the novel The Newcomes by novelist William Makepeace Thackeray, where the word meant "having ownership of capital". Also according to the OED, Carl Adolph Douai, a German American socialist and abolitionist, used the term "private capitalism" in 1863.

Other terms sometimes used for capitalism are:

Definition

There is no universally agreed upon definition of capitalism; it is unclear whether or not capitalism characterizes an entire society, a specific type of social order, or crucial components or elements of a society. Societies officially founded in opposition to capitalism (such as the Soviet Union) have sometimes been argued to actually exhibit characteristics of capitalism. Nancy Fraser describes usage of the term "capitalism" by many authors as "mainly rhetorical, functioning less as an actual concept than as a gesture toward the need for a concept". Scholars who are uncritical of capitalism rarely actually use the term "capitalism". Some doubt that the term "capitalism" possesses valid scientific dignity, and it is generally not discussed in mainstream economics, with economist Daron Acemoglu suggesting that the term "capitalism" should be abandoned entirely. Consequently, understanding of the concept of capitalism tends to be heavily influenced by opponents of capitalism and by the followers and critics of Karl Marx.

History

Main article: History of capitalism
Cosimo de' Medici (pictured in a 16th-century portrait by Pontormo) built an international financial empire and was one of the first Medici bankers.
Augsburg, the centre of early capitalism

Capitalism, in its modern form, can be traced to the emergence of agrarian capitalism and mercantilism in the early Renaissance, in city-states like Florence. Capital has existed incipiently on a small scale for centuries in the form of merchant, renting and lending activities and occasionally as small-scale industry with some wage labor. Simple commodity exchange and consequently simple commodity production, which is the initial basis for the growth of capital from trade, have a very long history. During the Islamic Golden Age, Arabs promulgated capitalist economic policies such as free trade and banking. Their use of Indo-Arabic numerals facilitated bookkeeping. These innovations migrated to Europe through trade partners in cities such as Venice and Pisa. Italian mathematicians traveled the Mediterranean talking to Arab traders and returned to popularize the use of Indo-Arabic numerals in Europe.

Agrarianism

The economic foundations of the feudal agricultural system began to shift substantially in 16th-century England as the manorial system had broken down and land began to become concentrated in the hands of fewer landlords with increasingly large estates. Instead of a serf-based system of labor, workers were increasingly employed as part of a broader and expanding money-based economy. The system put pressure on both landlords and tenants to increase the productivity of agriculture to make profit; the weakened coercive power of the aristocracy to extract peasant surpluses encouraged them to try better methods, and the tenants also had incentive to improve their methods in order to flourish in a competitive labor market. Terms of rent for land were becoming subject to economic market forces rather than to the previous stagnant system of custom and feudal obligation.

Mercantilism

Main article: Mercantilism
A painting of a French seaport from 1638 at the height of mercantilism
Robert Clive with the Nawabs of Bengal after the Battle of Plassey which began the British rule in Bengal

The economic doctrine prevailing from the 16th to the 18th centuries is commonly called mercantilism. This period, the Age of Discovery, was associated with the geographic exploration of foreign lands by merchant traders, especially from England and the Low Countries. Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist methods. Most scholars consider the era of merchant capitalism and mercantilism as the origin of modern capitalism, although Karl Polanyi argued that the hallmark of capitalism is the establishment of generalized markets for what he called the "fictitious commodities", i.e. land, labor and money. Accordingly, he argued that "not until 1834 was a competitive labor market established in England, hence industrial capitalism as a social system cannot be said to have existed before that date".

England began a large-scale and integrative approach to mercantilism during the Elizabethan Era (1558–1603). A systematic and coherent explanation of balance of trade was made public through Thomas Mun's argument England's Treasure by Forraign Trade, or the Balance of our Forraign Trade is The Rule of Our Treasure. It was written in the 1620s and published in 1664.

European merchants, backed by state controls, subsidies and monopolies, made most of their profits by buying and selling goods. In the words of Francis Bacon, the purpose of mercantilism was "the opening and well-balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation of prices...".

After the period of the proto-industrialization, the British East India Company and the Dutch East India Company, after massive contributions from the Mughal Bengal, inaugurated an expansive era of commerce and trade. These companies were characterized by their colonial and expansionary powers given to them by nation-states. During this era, merchants, who had traded under the previous stage of mercantilism, invested capital in the East India Companies and other colonies, seeking a return on investment.

Industrial Revolution

Main article: Industrial Revolution
The Watt steam engine, fuelled primarily by coal, propelled the Industrial Revolution in Britain.

In the mid-18th century a group of economic theorists, led by David Hume (1711–1776) and Adam Smith (1723–1790), challenged fundamental mercantilist doctrines—such as the belief that the world's wealth remained constant and that a state could only increase its wealth at the expense of another state.

During the Industrial Revolution, industrialists replaced merchants as a dominant factor in the capitalist system and effected the decline of the traditional handicraft skills of artisans, guilds and journeymen. Industrial capitalism marked the development of the factory system of manufacturing, characterized by a complex division of labor between and within work process and the routine of work tasks; and eventually established the domination of the capitalist mode of production.

Industrial Britain eventually abandoned the protectionist policy formerly prescribed by mercantilism. In the 19th century, Richard Cobden (1804–1865) and John Bright (1811–1889), who based their beliefs on the Manchester School, initiated a movement to lower tariffs. In the 1840s Britain adopted a less protectionist policy, with the 1846 repeal of the Corn Laws and the 1849 repeal of the Navigation Acts. Britain reduced tariffs and quotas, in line with David Ricardo's advocacy of free trade.

Modernity

The gold standard formed the financial basis of the international economy from 1870 to 1914.

Broader processes of globalization carried capitalism across the world. By the beginning of the nineteenth century, a series of loosely connected market systems had come together as a relatively integrated global system, in turn intensifying processes of economic and other globalization. Late in the 20th century, capitalism overcame a challenge by centrally-planned economies and is now the encompassing system worldwide, with the mixed economy as its dominant form in the industrialized Western world.

Industrialization allowed cheap production of household items using economies of scale, while rapid population growth created sustained demand for commodities. The imperialism of the 18th-century decisively shaped globalization.

After the First and Second Opium Wars (1839–60) and the completion of the British conquest of India by 1858, vast populations of Asia became consumers of European exports. Europeans colonized areas of sub-Saharan Africa and the Pacific islands. Colonisation by Europeans, notably of sub-Saharan Africa, yielded valuable natural resources such as rubber, diamonds and coal and helped fuel trade and investment between the European imperial powers, their colonies and the United States:

The inhabitant of London could order by telephone, sipping his morning tea, the various products of the whole earth, and reasonably expect their early delivery upon his doorstep. Militarism and imperialism of racial and cultural rivalries were little more than the amusements of his daily newspaper. What an extraordinary episode in the economic progress of man was that age which came to an end in August 1914.

From the 1870s to the early 1920s, the global financial system was mainly tied to the gold standard. The United Kingdom first formally adopted this standard in 1821. Soon to follow were Canada in 1853, Newfoundland in 1865, the United States and Germany (de jure) in 1873. New technologies, such as the telegraph, the transatlantic cable, the radiotelephone, the steamship and railways allowed goods and information to move around the world to an unprecedented degree.

In the United States, the term "capitalist" primarily referred to powerful businessmen until the 1920s due to widespread societal skepticism and criticism of capitalism and its most ardent supporters.

The New York stock exchange traders' floor (1963)

Contemporary capitalist societies developed in the West from 1950 to the present and this type of system continues throughout the world—relevant examples started in the United States after the 1950s, France after the 1960s, Spain after the 1970s, Poland after 2015, and others. At this stage most capitalist markets are considered developed and characterized by developed private and public markets for equity and debt, a high standard of living (as characterized by the World Bank and the IMF), large institutional investors and a well-funded banking system. A significant managerial class has emerged and decides on a significant proportion of investments and other decisions. A different future than that envisioned by Marx has started to emerge—explored and described by Anthony Crosland in the United Kingdom in his 1956 book The Future of Socialism and by John Kenneth Galbraith in North America in his 1958 book The Affluent Society, 90 years after Marx's research on the state of capitalism in 1867.

The postwar boom ended in the late 1960s and early 1970s and the economic situation grew worse with the rise of stagflation. Monetarism, a modification of Keynesianism that is more compatible with laissez-faire analyses, gained increasing prominence in the capitalist world, especially under the years in office of Ronald Reagan in the United States (1981–1989) and of Margaret Thatcher in the United Kingdom (1979–1990). Public and political interest began shifting away from the so-called collectivist concerns of Keynes's managed capitalism to a focus on individual choice, called "remarketized capitalism".

The end of the Cold War and the dissolution of the Soviet Union allowed for capitalism to become a truly global system in a way not seen since before World War I. The development of the neoliberal global economy would have been impossible without the fall of communism.

Harvard Kennedy School economist Dani Rodrik distinguishes between three historical variants of capitalism:

  • Capitalism 1.0 during the 19th century entailed largely unregulated markets with a minimal role for the state (aside from national defense, and protecting property rights);
  • Capitalism 2.0 during the post-World War II years entailed Keynesianism, a substantial role for the state in regulating markets, and strong welfare states;
  • Capitalism 2.1 entailed a combination of unregulated markets, globalization, and various national obligations by states.

Relationship to democracy

The relationship between democracy and capitalism is a contentious area in theory and in popular political movements. The extension of adult-male suffrage in 19th-century Britain occurred along with the development of industrial capitalism and representative democracy became widespread at the same time as capitalism, leading capitalists to posit a causal or mutual relationship between them. However, according to some authors in the 20th-century, capitalism also accompanied a variety of political formations quite distinct from liberal democracies, including fascist regimes, absolute monarchies and single-party states. Democratic peace theory asserts that democracies seldom fight other democracies, but others suggest this may be because of political similarity or stability, rather than because they are "democratic" or "capitalist". Critics argue that though economic growth under capitalism has led to democracy, it may not do so in the future as authoritarian régimes have been able to manage economic growth using some of capitalism's competitive principles without making concessions to greater political freedom.

Political scientists Torben Iversen and David Soskice see democracy and capitalism as mutually supportive. Robert Dahl argued in On Democracy that capitalism was beneficial for democracy because economic growth and a large middle class were good for democracy. He also argued that a market economy provided a substitute for government control of the economy, which reduces the risks of tyranny and authoritarianism.

In his book The Road to Serfdom (1944), Friedrich Hayek (1899–1992) asserted that the free-market understanding of economic freedom as present in capitalism is a requisite of political freedom. He argued that the market mechanism is the only way of deciding what to produce and how to distribute the items without using coercion. Milton Friedman and Ronald Reagan also promoted this view. Friedman claimed that centralized economic operations are always accompanied by political repression. In his view, transactions in a market economy are voluntary and the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminishes their power to coerce. Some of Friedman's views were shared by John Maynard Keynes, who believed that capitalism was vital for freedom to survive and thrive. Freedom House, an American think-tank that conducts international research on, and advocates for, democracy, political freedom and human rights, has argued that "there is a high and statistically significant correlation between the level of political freedom as measured by Freedom House and economic freedom as measured by the Wall Street Journal/Heritage Foundation survey".

In Capital in the Twenty-First Century (2013), Thomas Piketty of the Paris School of Economics asserted that inequality is the inevitable consequence of economic growth in a capitalist economy and the resulting concentration of wealth can destabilize democratic societies and undermine the ideals of social justice upon which they are built.

States with capitalistic economic systems have thrived under political regimes deemed to be authoritarian or oppressive. Singapore has a successful open market economy as a result of its competitive, business-friendly climate and robust rule of law. Nonetheless, it often comes under fire for its style of government which, though democratic and consistently one of the least corrupt, operates largely under a one-party rule. Furthermore, it does not vigorously defend freedom of expression as evidenced by its government-regulated press, and its penchant for upholding laws protecting ethnic and religious harmony, judicial dignity and personal reputation. The private (capitalist) sector in the People's Republic of China has grown exponentially and thrived since its inception, despite having an authoritarian government. Augusto Pinochet's rule in Chile led to economic growth and high levels of inequality by using authoritarian means to create a safe environment for investment and capitalism. Similarly, Suharto's authoritarian reign and extirpation of the Communist Party of Indonesia allowed for the expansion of capitalism in Indonesia.

The term "capitalism" in its modern sense is often attributed to Karl Marx. In his Das Kapital, Marx analyzed the "capitalist mode of production" using a method of understanding today known as Marxism. However, Marx himself rarely used the term "capitalism" while it was used twice in the more political interpretations of his work, primarily authored by his collaborator Friedrich Engels. In the 20th century, defenders of the capitalist system often replaced the term "capitalism" with phrases such as free enterprise and private enterprise and replaced "capitalist" with rentier and investor in reaction to the negative connotations associated with capitalism.

Characteristics

Further information: Academic perspectives on capitalism

In general, capitalism as an economic system and mode of production can be summarized by the following:

  • Capital accumulation: production for profit and accumulation as the implicit purpose of all or most of production, constriction or elimination of production formerly carried out on a common social or private household basis.
  • Commodity production: production for exchange on a market; to maximize exchange-value instead of use-value.
  • Exchange of goods or services, can be enabled by contracts. Exchange of services can be in form of wage labor.
  • Private ownership of the means of production:
  • The investment of money to make a profit.
  • The use of the price mechanism to allocate resources between competing uses.
  • Economically efficient use of the factors of production and raw materials due to maximization of value added in the production process.
  • Freedom of capitalists to act in their self-interest in managing their business and investments.
  • Capital suppliance by "the single owner of a firm, or by shareholders in the case of a joint-stock company."

Market

In free market and laissez-faire forms of capitalism, markets are used most extensively with minimal or no regulation over the pricing mechanism. In mixed economies, which are almost universal today, markets continue to play a dominant role, but they are regulated to some extent by the state in order to correct market failures, promote social welfare, conserve natural resources, fund defense and public safety or other rationale. In state capitalist systems, markets are relied upon the least, with the state relying heavily on state-owned enterprises or indirect economic planning to accumulate capital.

Competition arises when more than one producer is trying to sell the same or similar products to the same buyers. Adherents of the capitalist theory believe that competition leads to innovation and more affordable prices. Monopolies or cartels can develop, especially if there is no competition. A monopoly occurs when a firm has exclusivity over a market. Hence, the firm can engage in rent seeking behaviors such as limiting output and raising prices because it has no fear of competition.

Governments have implemented legislation for the purpose of preventing the creation of monopolies and cartels. In 1890, the Sherman Antitrust Act became the first legislation passed by the United States Congress to limit monopolies.

Wage labor

Main article: Wage labor

Wage labor, usually referred to as paid work, paid employment, or paid labor, refers to the socioeconomic relationship between a worker and an employer in which the worker sells their labor power under a formal or informal employment contract. These transactions usually occur in a labor market where wages or salaries are market-determined.

In exchange for the money paid as wages (usual for short-term work-contracts) or salaries (in permanent employment contracts), the work product generally becomes the undifferentiated property of the employer. A wage laborer is a person whose primary means of income is from the selling of their labor in this way.

Profit motive

Main article: Profit motive

The profit motive, in the theory of capitalism, is the desire to earn income in the form of profit. Stated differently, the reason for a business's existence is to turn a profit. The profit motive functions according to rational choice theory, or the theory that individuals tend to pursue what is in their own best interests. Accordingly, businesses seek to benefit themselves and/or their shareholders by maximizing profit.

In capitalist theoretics, the profit motive is said to ensure that resources are being allocated efficiently. For instance, Austrian economist Henry Hazlitt explains: "If there is no profit in making an article, it is a sign that the labor and capital devoted to its production are misdirected: the value of the resources that must be used up in making the article is greater than the value of the article itself".

Socialist theorists note that, unlike mercantilists, capitalists accumulate their profits while expecting their profit rates to remain the same. This causes problems as earnings in the rest of society do not increase in the same proportion.

Private property

Main article: Private property

The relationship between the state, its formal mechanisms, and capitalist societies has been debated in many fields of social and political theory, with active discussion since the 19th century. Hernando de Soto is a contemporary Peruvian economist who has argued that an important characteristic of capitalism is the functioning state protection of property rights in a formal property system where ownership and transactions are clearly recorded.

According to de Soto, this is the process by which physical assets are transformed into capital, which in turn may be used in many more ways and much more efficiently in the market economy. A number of Marxian economists have argued that the inclosure acts in England and similar legislation elsewhere were an integral part of capitalist primitive accumulation and that specific legal frameworks of private land ownership have been integral to the development of capitalism.

Private property rights are not absolute, as in many countries the state has the power to seize private property, typically for public use, under the powers of eminent domain.

Market competition

Main article: Competition (economics)

In capitalist economics, market competition is the rivalry among sellers trying to achieve such goals as increasing profits, market share and sales volume by varying the elements of the marketing mix: price, product, distribution and promotion. Merriam-Webster defines competition in business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favourable terms". It was described by Adam Smith in The Wealth of Nations (1776) and later economists as allocating productive resources to their most highly valued uses and encouraging efficiency. Smith and other classical economists before Antoine Augustine Cournot were referring to price and non-price rivalry among producers to sell their goods on best terms by bidding of buyers, not necessarily to a large number of sellers nor to a market in final equilibrium. Competition is widespread throughout the market process. It is a condition where "buyers tend to compete with other buyers, and sellers tend to compete with other sellers". In offering goods for exchange, buyers competitively bid to purchase specific quantities of specific goods which are available, or might be available if sellers were to choose to offer such goods. Similarly, sellers bid against other sellers in offering goods on the market, competing for the attention and exchange resources of buyers. Competition results from scarcity, as it is not possible to satisfy all conceivable human wants, and occurs as people try to meet the criteria being used to determine allocation.

In the works of Adam Smith, the idea of capitalism is made possible through competition which creates growth. Although capitalism had not entered mainstream economics at the time of Smith, it is vital to the construction of his ideal society. One of the foundational blocks of capitalism is competition. Smith believed that a prosperous society is one where "everyone should be free to enter and leave the market and change trades as often as he pleases." He believed that the freedom to act in one's self-interest is essential for the success of a capitalist society. In response to the idea that if all participants focus on their own goals, society's well-being will be water under the bridge, Smith maintains that despite the concerns of intellectuals, "global trends will hardly be altered if they refrain from pursuing their personal ends." He insisted that the actions of a few participants cannot alter the course of society. Instead, Smith maintained that they should focus on personal progress instead and that this will result in overall growth to the whole.

Competition between participants, "who are all endeavoring to justle one another out of employment, obliges every man to endeavor to execute his work" through competition towards growth.

Economic growth

Further information: Economic growth
This section needs expansion. You can help by adding to it. (January 2021)

Economic growth is a characteristic tendency of capitalist economies. However, capitalist economies may experience fluctuations in growth that cannot be accounted for by demographic or technological changes. These fluctuations, which involve sustained periods of economic growth and recession, are referred to as business cycles in macroeconomics. Economic growth is measured as growth in investment, economic output, and economic consumption per capita. Changes in hours of employment on their own are not considered as a factor of economic growth.

As a mode of production

Further information: Mode of production

The capitalist mode of production refers to the systems of organising production and distribution within capitalist societies. Private money-making in various forms (renting, banking, merchant trade, production for profit and so on) preceded the development of the capitalist mode of production as such.

The term capitalist mode of production is defined by private ownership of the means of production, extraction of surplus value by the owning class for the purpose of capital accumulation, wage-based labor and, at least as far as commodities are concerned, being market-based.

Capitalism in the form of money-making activity has existed in the shape of merchants and money-lenders who acted as intermediaries between consumers and producers engaging in simple commodity production (hence the reference to "merchant capitalism") since the beginnings of civilisation. What is specific about the "capitalist mode of production" is that most of the inputs and outputs of production are supplied through the market (i.e. they are commodities) and essentially all production is in this mode. By contrast, in flourishing feudalism most or all of the factors of production, including labor, are owned by the feudal ruling class outright and the products may also be consumed without a market of any kind, it is production for use within the feudal social unit and for limited trade. This has the important consequence that, under capitalism, the whole organisation of the production process is reshaped and re-organised to conform with economic rationality as bounded by capitalism, which is expressed in price relationships between inputs and outputs (wages, non-labor factor costs, sales and profits) rather than the larger rational context faced by society overall—that is, the whole process is organised and re-shaped in order to conform to "commercial logic". Essentially, capital accumulation comes to define economic rationality in capitalist production.

A society, region or nation is capitalist if the predominant source of incomes and products being distributed is capitalist activity, but even so this does not yet mean necessarily that the capitalist mode of production is dominant in that society.

Mixed economies rely on the nation they are in to provide some goods or services, while the free market produces and maintains the rest.

Role of government

Government agencies regulate the standards of service in many industries, such as airlines and broadcasting, as well as financing a wide range of programs. In addition, the government regulates the flow of capital and uses financial tools such as the interest rate to control such factors as inflation and unemployment.

Supply and demand

Main article: Supply and demand
The economic model of supply and demand states that the price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D): the diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product.

In capitalist economic structures, supply and demand is an economic model of price determination in a market. It postulates that in a perfectly competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at the current price) will equal the quantity supplied by producers (at the current price), resulting in an economic equilibrium for price and quantity.

The "basic laws" of supply and demand, as described by David Besanko and Ronald Braeutigam, are the following four:

  1. If demand increases (demand curve shifts to the right) and supply remains unchanged, then a shortage occurs, leading to a higher equilibrium price.
  2. If demand decreases (demand curve shifts to the left) and supply remains unchanged, then a surplus occurs, leading to a lower equilibrium price.
  3. If demand remains unchanged and supply increases (supply curve shifts to the right), then a surplus occurs, leading to a lower equilibrium price.
  4. If demand remains unchanged and supply decreases (supply curve shifts to the left), then a shortage occurs, leading to a higher equilibrium price.

Supply schedule

A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied.

Demand schedule

A demand schedule, depicted graphically as the demand curve, represents the amount of some goods that buyers are willing and able to purchase at various prices, assuming all determinants of demand other than the price of the good in question, such as income, tastes and preferences, the price of substitute goods and the price of complementary goods, remain the same. According to the law of demand, the demand curve is almost always represented as downward sloping, meaning that as price decreases, consumers will buy more of the good.

Just like the supply curves reflect marginal cost curves, demand curves are determined by marginal utility curves.

Equilibrium

Further information: Economic equilibrium

In the context of supply and demand, economic equilibrium refers to a state where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change. For example, in the standard text-book model of perfect competition equilibrium occurs at the point at which quantity demanded and quantity supplied are equal. Market equilibrium, in this case, refers to a condition where a market price is established through competition such that the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers. This price is often called the competitive price or market clearing price and will tend not to change unless demand or supply changes.

Partial equilibrium

Main article: Partial equilibrium

Partial equilibrium, as the name suggests, takes into consideration only a part of the market to attain equilibrium. Jain proposes (attributed to George Stigler): "A partial equilibrium is one which is based on only a restricted range of data, a standard example is price of a single product, the prices of all other products being held fixed during the analysis".

History

According to Hamid S. Hosseini, the "power of supply and demand" was discussed to some extent by several early Muslim scholars, such as fourteenth century Mamluk scholar Ibn Taymiyyah, who wrote: "If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down".

Adam Smith

John Locke's 1691 work Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money includes an early and clear description of supply and demand and their relationship. In this description, demand is rent: "The price of any commodity rises or falls by the proportion of the number of buyer and sellers" and "that which regulates the price... is nothing else but their quantity in proportion to their rent".

David Ricardo titled one chapter of his 1817 work Principles of Political Economy and Taxation "On the Influence of Demand and Supply on Price". In Principles of Political Economy and Taxation, Ricardo more rigorously laid down the idea of the assumptions that were used to build his ideas of supply and demand.

In his 1870 essay "On the Graphical Representation of Supply and Demand", Fleeming Jenkin in the course of "introduc the diagrammatic method into the English economic literature" published the first drawing of supply and demand curves therein, including comparative statics from a shift of supply or demand and application to the labor market. The model was further developed and popularized by Alfred Marshall in the 1890 textbook Principles of Economics.

Types

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There are many variants of capitalism in existence that differ according to country and region. They vary in their institutional makeup and by their economic policies. The common features among all the different forms of capitalism are that they are predominantly based on the private ownership of the means of production and the production of goods and services for profit; the market-based allocation of resources; and the accumulation of capital.

They include advanced capitalism, corporate capitalism, finance capitalism, free-market capitalism, mercantilism, social capitalism, state capitalism and welfare capitalism. Other theoretical variants of capitalism include anarcho-capitalism, community capitalism, humanistic capitalism, neo-capitalism, state monopoly capitalism, and technocapitalism.

Advanced

Main article: Advanced capitalism

Advanced capitalism is the situation that pertains to a society in which the capitalist model has been integrated and developed deeply and extensively for a prolonged period. Various writers identify Antonio Gramsci as an influential early theorist of advanced capitalism, even if he did not use the term himself. In his writings, Gramsci sought to explain how capitalism had adapted to avoid the revolutionary overthrow that had seemed inevitable in the 19th century. At the heart of his explanation was the decline of raw coercion as a tool of class power, replaced by use of civil society institutions to manipulate public ideology in the capitalists' favour.

Jürgen Habermas has been a major contributor to the analysis of advanced-capitalistic societies. Habermas observed four general features that characterise advanced capitalism:

  1. Concentration of industrial activity in a few large firms.
  2. Constant reliance on the state to stabilise the economic system.
  3. A formally democratic government that legitimises the activities of the state and dissipates opposition to the system.
  4. The use of nominal wage increases to pacify the most restless segments of the work force.

Corporate

Main article: Corporate capitalism See also: Crony capitalism and State monopoly capitalism

Corporate capitalism is a free or mixed-market capitalist economy characterized by the dominance of hierarchical, bureaucratic corporations.

Finance

Main article: Finance capitalism See also: Capitalist mode of production (Marxist theory)

Finance capitalism is the subordination of processes of production to the accumulation of money profits in a financial system. In their critique of capitalism, Marxism and Leninism both emphasise the role of finance capital as the determining and ruling-class interest in capitalist society, particularly in the latter stages.

Rudolf Hilferding is credited with first bringing the term finance capitalism into prominence through Finance Capital, his 1910 study of the links between German trusts, banks and monopolies—a study subsumed by Vladimir Lenin into Imperialism, the Highest Stage of Capitalism (1917), his analysis of the imperialist relations of the great world powers. Lenin concluded that the banks at that time operated as "the chief nerve centres of the whole capitalist system of national economy". For the Comintern (founded in 1919), the phrase "dictatorship of finance capitalism" became a regular one.

Fernand Braudel would later point to two earlier periods when finance capitalism had emerged in human history—with the Genoese in the 16th century and with the Dutch in the 17th and 18th centuries—although at those points it developed from commercial capitalism. Giovanni Arrighi extended Braudel's analysis to suggest that a predominance of finance capitalism is a recurring, long-term phenomenon, whenever a previous phase of commercial/industrial capitalist expansion reaches a plateau.

Free market

Main article: Free-market capitalism See also: Laissez-faire
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A capitalist free-market economy is an economic system where prices for goods and services are set entirely by the forces of supply and demand and are expected, by its adherents, to reach their point of equilibrium without intervention by government policy. It typically entails support for highly competitive markets and private ownership of the means of production. Laissez-faire capitalism is a more extensive form of this free-market economy, but one in which the role of the state is limited to protecting property rights. In anarcho-capitalist theory, property rights are protected by private firms and market-generated law. According to anarcho-capitalists, this entails property rights without statutory law through market-generated tort, contract and property law, and self-sustaining private industry.

Fernand Braudel argued that free market exchange and capitalism are to some degree opposed; free market exchange involves transparent public transactions and a large number of equal competitors, while capitalism involves a small number of participants using their capital to control the market via private transactions, control of information, and limitation of competition.

Mercantile

Main article: Mercantilism See also: Protectionism
The subscription room at Lloyd's of London in the early 19th century

Mercantilism is a nationalist form of early capitalism that came into existence approximately in the late 16th century. It is characterized by the intertwining of national business interests with state-interest and imperialism. Consequently, the state apparatus is used to advance national business interests abroad. An example of this is colonists living in America who were only allowed to trade with and purchase goods from their respective mother countries (e.g., United Kingdom, France and Portugal). Mercantilism was driven by the belief that the wealth of a nation is increased through a positive balance of trade with other nations—it corresponds to the phase of capitalist development sometimes called the primitive accumulation of capital.

Social

Main article: Social market economy See also: Nordic model

A social market economy is a free-market or mixed-market capitalist system, sometimes classified as a coordinated market economy, where government intervention in price formation is kept to a minimum, but the state provides significant services in areas such as social security, health care, unemployment benefits and the recognition of labor rights through national collective bargaining arrangements.

This model is prominent in Western and Northern European countries as well as Japan, albeit in slightly different configurations. The vast majority of enterprises are privately owned in this economic model.

Rhine capitalism is the contemporary model of capitalism and adaptation of the social market model that exists in continental Western Europe today.

State

Main article: State capitalism

State capitalism is a capitalist market economy dominated by state-owned enterprises, where the state enterprises are organized as commercial, profit-seeking businesses. The designation has been used broadly throughout the 20th century to designate a number of different economic forms, ranging from state-ownership in market economies to the command economies of the former Eastern Bloc. According to Aldo Musacchio, a professor at Harvard Business School, state capitalism is a system in which governments, whether democratic or autocratic, exercise a widespread influence on the economy either through direct ownership or various subsidies. Musacchio notes a number of differences between today's state capitalism and its predecessors. In his opinion, gone are the days when governments appointed bureaucrats to run companies: the world's largest state-owned enterprises are now traded on the public markets and kept in good health by large institutional investors. Contemporary state capitalism is associated with the East Asian model of capitalism, dirigisme and the economy of Norway. Alternatively, Merriam-Webster defines state capitalism as "an economic system in which private capitalism is modified by a varying degree of government ownership and control".

In Socialism: Utopian and Scientific, Friedrich Engels argued that state-owned enterprises would characterize the final stage of capitalism, consisting of ownership and management of large-scale production and communication by the bourgeois state. In his writings, Vladimir Lenin characterized the economy of Soviet Russia as state capitalist, believing state capitalism to be an early step toward the development of socialism.

Some economists and left-wing academics including Richard D. Wolff and Noam Chomsky, as well as many Marxist philosophers and revolutionaries such as Raya Dunayevskaya and C.L.R. James, argue that the economies of the former Soviet Union and Eastern Bloc represented a form of state capitalism because their internal organization within enterprises and the system of wage labor remained intact.

The term is not used by Austrian School economists to describe state ownership of the means of production. The economist Ludwig von Mises argued that the designation of state capitalism was a new label for the old labels of state socialism and planned economy and differed only in non-essentials from these earlier designations.

Welfare

Main article: Welfare capitalism See also: Economic interventionism and Mixed economy

Welfare capitalism is capitalism that includes social welfare policies. Today, welfare capitalism is most often associated with the models of capitalism found in Central Mainland and Northern Europe such as the Nordic model, social market economy and Rhine capitalism. In some cases, welfare capitalism exists within a mixed economy, but welfare states can and do exist independently of policies common to mixed economies such as state interventionism and extensive regulation.

A mixed economy is a largely market-based capitalist economy consisting of both private and public ownership of the means of production and economic interventionism through macroeconomic policies intended to correct market failures, reduce unemployment and keep inflation low. The degree of intervention in markets varies among different countries. Some mixed economies such as France under dirigisme also featured a degree of indirect economic planning over a largely capitalist-based economy.

Most modern capitalist economies are defined as mixed economies to some degree, however French economist Thomas Piketty state that capitalist economies might shift to a much more laissez-faire approach in the near future.

Eco-capitalism

Eco-capitalism, also known as "environmental capitalism" or (sometimes) "green capitalism", is the view that capital exists in nature as "natural capital" (ecosystems that have ecological yield) on which all wealth depends. Therefore, governments should use market-based policy-instruments (such as a carbon tax) to resolve environmental problems.

The term "Blue Greens" is often applied to those who espouse eco-capitalism. Eco-capitalism can be thought of as the right-wing equivalent to Red Greens.

Sustainable capitalism

Sustainable capitalism is a conceptual form of capitalism based upon sustainable practices that seek to preserve humanity and the planet, while reducing externalities and bearing a resemblance of capitalist economic policy. A capitalistic economy must expand to survive and find new markets to support this expansion. Capitalist systems are often destructive to the environment as well as certain individuals without access to proper representation. However, sustainability provides quite the opposite; it implies not only a continuation, but a replenishing of resources. Sustainability is often thought of to be related to environmentalism, and sustainable capitalism applies sustainable principles to economic governance and social aspects of capitalism as well.

The importance of sustainable capitalism has been more recently recognized, but the concept is not new. Changes to the current economic model would have heavy social environmental and economic implications and require the efforts of individuals, as well as compliance of local, state and federal governments. Controversy surrounds the concept as it requires an increase in sustainable practices and a marked decrease in current consumptive behaviors.

This is a concept of capitalism described in Al Gore and David Blood's manifesto for the Generation Investment Management to describe a long-term political, economic and social structure which would mitigate current threats to the planet and society. According to their manifesto, sustainable capitalism would integrate the environmental, social and governance (ESG) aspects into risk assessment in attempt to limit externalities. Most of the ideas they list are related to economic changes, and social aspects, but strikingly few are explicitly related to any environmental policy change.

Capital accumulation

Main article: Capital accumulation

The accumulation of capital is the process of "making money" or growing an initial sum of money through investment in production. Capitalism is based on the accumulation of capital, whereby financial capital is invested in order to make a profit and then reinvested into further production in a continuous process of accumulation. In Marxian economic theory, this dynamic is called the law of value. Capital accumulation forms the basis of capitalism, where economic activity is structured around the accumulation of capital, defined as investment in order to realize a financial profit. In this context, "capital" is defined as money or a financial asset invested for the purpose of making more money (whether in the form of profit, rent, interest, royalties, capital gain or some other kind of return).

In mainstream economics, accounting and Marxian economics, capital accumulation is often equated with investment of profit income or savings, especially in real capital goods. The concentration and centralisation of capital are two of the results of such accumulation. In modern macroeconomics and econometrics, the phrase "capital formation" is often used in preference to "accumulation", though the United Nations Conference on Trade and Development (UNCTAD) refers nowadays to "accumulation". The term "accumulation" is occasionally used in national accounts.

Wage labor

Main article: Wage labour
An industrial worker among heavy steel machine parts (Kinex Bearings, Bytča, Slovakia, c. 1995–2000)

Wage labor refers to the sale of labor under a formal or informal employment contract to an employer. These transactions usually occur in a labor market where wages are market determined. In Marxist economics, these owners of the means of production and suppliers of capital are generally called capitalists. The description of the role of the capitalist has shifted, first referring to a useless intermediary between producers, then to an employer of producers, and finally to the owners of the means of production. Labor includes all physical and mental human resources, including entrepreneurial capacity and management skills, which are required to produce products and services. Production is the act of making goods or services by applying labor power.

Criticism

Main article: Criticism of capitalism
The Industrial Workers of the World poster "Pyramid of Capitalist System" (1911)

Criticism of capitalism comes from various political and philosophical approaches, including anarchist, socialist, religious and nationalist viewpoints. Of those who oppose it or want to modify it, some believe that capitalism should be removed through revolution while others believe that it should be changed slowly through political reforms.

Prominent critiques of capitalism allege that it is inherently exploitative, alienating, unstable, unsustainable, and economically inefficient—and that it creates massive economic inequality, commodifies people, degrades the environment, is undemocratic, embeds uneven and underdevelopment between nation states, and leads to an erosion of human rights because of its incentivization of imperialist expansion and war.

Other critics argue that such inequities are not due to the ethic-neutral construct of the economic system commonly known as capitalism, but to the ethics of those who shape and execute the system. For example, some contend that Milton Friedman's (human) ethic of 'maximizing shareholder value' creates a harmful form of capitalism, while a Millard Fuller or John Bogle (human) ethic of 'enough' creates a sustainable form. Equitable ethics and unified ethical decision-making is theorized to create a less damaging form of capitalism.

Inheritance has been argued to not be a fundamental part of capitalism, instead part of nepotism.

See also

References

Notes
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  3. Jenks, Chris. Core Sociological Dichotomies. London; Thousand Oaks, CA; New Delhi: SAGE Publishing. p. 383. Capitalism, as a mode of production, is an economic system of manufacture and exchange which is geared toward the production and sale of commodities within a market for profit, where the manufacture of commodities consists of the use of the formally free labor of workers in exchange for a wage to create commodities in which the manufacturer extracts surplus value from the labor of the workers in terms of the difference between the wages paid to the worker and the value of the commodity produced by him/her to generate that profit.
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