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{{Short description|Economic system based on private ownership}} | |||
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{{About|an economic system}} | |||
{{otheruses|Capitalism (disambiguation)}} | |||
{{Redirect|Capitalist|other uses|Capitalist (disambiguation)}} | |||
{{Capitalism}} | |||
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'''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> | |||
'''Capitalism''' is an ] in which land, ]s, and other resources, are owned, operated and traded chiefly by private individuals or ]s for the purpose of ]. In a capitalist system, private control of these productive enterprises is protected by the ]. A capitalist legal system protects the exchange and distribution of capital between legal or private ]s, which is driven by ] and ]-maximization,<ref name="Wood2002"/><ref>Obrinsky (1983) p.1</ref> and where ]s, ], ], ] and ] of ], ] and ] are determined by private decision in a ]<ref name = Bacher/> rather than through ] by the state. Human ] is for sale in the market as one of the many commodities.<ref name="Wood2002"/> ], conceived as a self-regulating and self-adjusting economy which does not have significant economic intervention by government<ref>McConnell, Campbell R. and Brue, Stanley L., Microeconomics: Principles, Problems, and Policies. McGraw-Hill, 1992. p 38</ref> has never existed in practice.<ref>McConnell, Campbell R. and Brue, Stanley L., Microeconomics: Principles, Problems, and Policies. McGraw-Hill, 1992. p 58</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> | |||
In capitalist systems, goods and services, including those regarding the most basic necessities of life, are produced for profitable exchange.<ref name="Wood2002">Wood 2002, p. 2</ref> Capitalism is originally defined as a ], where it is characterized by predominantly private ownership of the ], distribution and exchange in a mainly market economy.<ref>Wolf 1982</ref>{{Page number}} According to Marxist analysis, a core requirement of a capitalist society is that a large portion of the population must not possess sources of self-sustainment that would allow them to be independent, and must instead be compelled, in order to survive, to sell their labor for a living wage.<ref>Dobb, Maurice 1947 ''Studies in the Development of Capitalism.'' New York: International Publishers Co., Inc.</ref><ref>David Harvey 1989 ''The Condition of Postmodernity''</ref> Capitalism is usually considered to involve the right of individuals and businesses to ], ], and ], in goods, services (including ]), ] and ].<ref name=Bacher>Bacher (2007) p. 2; De George (1986) pp.104, 111; Lash (2000) p.36</ref> In modern "capitalist states", ] action is confined to defining and enforcing the basic rules of the market<ref>{{cite book|title=Government and the Economy: A Global Perspective|last=Lane|first=J.E.|coauthors=Ersson, S.O.|year=2002|publisher=Continuum International Publishing Group|pages=7–16}}</ref> though the state may provide some ] and ].<ref>Eric Aaron, ''What's Right?'' (Dural, Australia: Rosenberg Publishing, 2003), 75.</ref> | |||
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 ]. | |||
Capitalist economic practices became institutionalized in England between the 16th and 19th centuries, although some features of capitalist organization existed in the ], and early forms of ] flourished during the ].<ref name="britannica">{{cite book|title=Capitalism|publisher=Encyclopedia Britannica|year=2006}}</ref><ref name="Banaji" /> Capitalism has been dominant in the Western world since the ].<ref name="britannica" /> From Britain it gradually spread throughout Europe, across political and cultural frontiers. In the 19th and 20th centuries, capitalism provided the main, but not exclusive, means of ] throughout much of the world.<ref name="Scott">{{cite book|title=Industrialism: A Dictionary of Sociology|author=Scott, John|publisher=Oxford University Press|year=2005}}</ref> | |||
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> | |||
Because all large economies today have a mixture of private and public ownership and control, some feel that the term "]" more precisely describes most contemporary economies.<ref>{{cite book|author=Tucker, Irvin B.|title=Macroeconomics for Today|pages=553|year=1997}}</ref><ref>{{cite book|author=Case, Karl E.|title=Principles of Macroeconomics|publisher=Prentice Hall|year=2004}}</ref> In ], the state intervenes in market activity and provides many services.<ref>"all of the capitalistic societies of the West have mixed economies that temper capitalism" with interventionist government regulation and social programs. Shafritz, Jay M. (1992). The HarperCollins Dictionary of American Government and Politics. HarperPerennial. P. 93</ref> Other capitalist systems include ], in which the state plays a minimal role, and ] in which the the state is superceded by the market and private enterprise. During the last century capitalism has often been contrasted with ]. | |||
== |
== Etymology == | ||
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|bgcolor="#dbeaff"|], in 1867, coined the term capitalism to refer to the ].<ref>According to the '']'', capitalism was first used by novelist ] in 1854, by which he meant having ownership of capital. In 1867, Proudhon used the term "capitalist" to refer to owners of capital, and Marx and Engels refer ''capitalism'' to the ] (''kapitalistische Produktionsform'') and in ] to "Kapitalist", "capitalist" (meaning a private owner of capital). Saunders, Peter (1995). ''Capitalism''. University of Minnesota Press. p. 1</ref> Other terms sometimes used for capitalism, include: | |||
*economic liberalism<ref>{{cite journal|title=Adam Smith and His Legacy for Modern Capitalism|author=Werhane, P.H.|journal=The Review of Metaphysics|volume=47|number=3|year=1994|publisher=Philosophy Education Society, Inc.}}</ref> | |||
*laissez-faire<ref name = friedman/> | |||
*laissez-faire capitalism<ref name=friedman>Friedman, Milton. 1962. ''Capitalism and Freedom.'' University of Chicago Press. p 38.</ref> | |||
*market capitalism<ref name="britannica"/> | |||
*market liberalism | |||
*private enterprise<ref name="britannica"/> | |||
|} | |||
The concept of capitalism has evolved over time, with later thinkers often building on the analysis of earlier thinkers. Moreover, the component concepts used in defining capitalism — such as ], markets and investment — have evolved along with changes in theory, in law, and in practice. | |||
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}} | |||
===Classical political economy=== | |||
{{main|Economic liberalism}} | |||
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 economists. Contributions to this tradition are also found in the earlier work of ] and the ] like ]. | |||
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. | |||
] attack on ] and his reasoning for "the system of natural liberty" in '']'' (1776) are usually taken as the beginning of classical political economy. 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 self-interest unintentionally produces a collective good for society. It was necessary for Smith to be so forceful in his argument in favor of free markets because he had to overcome the popular mercantilist sentiment of the time period.<ref>Degen, Robert. ''The Triumph of Capitalism''. 1st ed. New Brunswick, NJ: Transaction Publishers, 2008.</ref> He criticized monopolies, tariffs, duties, and other state enforced restrictions of his time and believed that the market is the most fair and efficient arbitrator of resources. This view was shared by ], second most important of the classical political economists and one of the most influential economists of modern times.<ref>{{cite book|author=Hunt, E.K.|title=History of Economic Thought: A Critical Perspective|publisher=M.E. Sharpe|year=2002|pages=92}}</ref> In ''The Principles of Political Economy and Taxation'' (1817) he developed the law of ], which explains why it is profitable for two parties to trade, even if one of the trading partners is more efficient in every type of economic production. This principle supports the economic case for ]. Ricardo was a supporter of ] and held the view that full employment is the normal equilibrium for a competitive economy.<ref>{{cite book|title=Blackwell Encyclopedia of Political Thought|publisher=Blackwell Publishing|year=1991|pages=91}}</ref> He also argued that ] is closely related to changes in quantity of ] and ] and was a proponent of the law of ], which states that each additional unit of input yields less and less additional output.<ref>{{cite book|author=Skousen, Mark|title=The Making of Modern Economics: The Lives and Ideas of the Great Thinkers|publisher=M.E. Sharpe|year=2001|pages=98–102}}</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> | |||
The values of classical political economy are strongly associated with the ] doctrine of minimal government intervention in the economy, though it does not necessarily oppose the state's provision of a few basic ].<ref>Eric Aaron, ''What's Right?'' (Dural, Australia: Rosenberg Publishing, 2003), 75.</ref>. Classical liberal thought has generally assumed a clear division between the economy and other realms of social activity, such as the state.<ref>{{cite book|title=Capitalism: Dictionary of the Social Sciences|author=Calhoun, Craig|publisher=Oxford University Press|year=2002}}</ref> | |||
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. | |||
While economic liberalism favors markets unfettered by the government, it maintains that the state has a legitimate role in providing ]s.<ref name = "econlib"/> For instance, Adam Smith argued that the state has a role in providing roads, canals, schools and bridges that cannot be efficiently implemented by private entities. However, he preferred that these goods should be paid proportionally to their consumption (e.g. putting a ]). In addition, he advocated ]s to bring about free trade, and ]s and ]s to encourage innovation.<ref name=econlib>{{cite web|title=Adam Smith|publisher=econlib.org|url=http://www.econlib.org/library/Enc/bios/Smith.html}}</ref> | |||
Other terms sometimes used for capitalism are: | |||
===Marxian political economy=== | |||
* ]<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> | |||
{{main article|Marxian economics}} | |||
* ]<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> | |||
] considered capitalism to be a 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 capitalism has become the dominant mode of production.<ref name="Burnham">{{cite book|author=Burnham, Peter|title=Capitalism: The Concise Oxford Dictionary of Politics|publisher=Oxford University Press|year=2003}}</ref> The capitalist stage of development or "bourgeois society," for Marx, represented the most advanced form of social organization to date, but he also thought that the working classes would come to power in a worldwide ] or ] transformation of human society as the end of the series of first aristocratic, then capitalist, and finally working class rule was reached<ref>]</ref><ref>"To Marx, the problem of reconstituting society did not arise from some prescription, motivated by his personal predilections; it followed, as an iron-clad historical necessity – on the one hand, from the productive forces grown to powerful maturity; on the other, from the impossibility further to organize these forces according to the will of the ]." - ], "Marxism in our Time", 1939 (Inevitability of Socialism) </ref>. | |||
* 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" /> | |||
Following ], Marx distinguished the ] of commodities from their ] in the market. ], according to Marx, is created with the purchase of commodities for the purpose of creating new commodities with an exchange value higher than the sum of the original purchases. For Marx, the use of ] had itself become a commodity under capitalism; 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 extract and accumulate. In his book '']'', Marx argues that the ] is distinguished by how the owners of capital extract this surplus from workers — all prior class societies had extracted ], but capitalism was new in doing so via the sale-value of produced commodities.<ref>{{cite web |url=http://www.marxists.org/archive/marx/works/1894-c3/ch47.htm|title=Capital. v. 3. Chapter 47: Genesis of capitalist ground rent|author=Karl Marx |accessdate=2008-02-26|publisher=Marxists }}</ref> In conjuction with his criticism of capitalism was Marx's belief that exploited labor would be the driving force behind a revolution to a socialist-style economy.<ref>Wheen, Francis ''Books That Shook the World: Marx's Das Kapital''1st ed. London: Atlantic Books, 2006</ref> | |||
* ]<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 == | |||
For Marx, this cycle of 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 version of the ] asserting that labor is the source of all value, and thus of profit. This theory is contested by most current ]s, including some contemporary Marxian economists.<ref name="Scott" /> One line of subsequent Marxian thinking sees the centrally planned economic systems of existing "communist" societies that were still based on exploitation of labor as "]."<ref name="state capitalism">Early proponents of the term "state capitalism" include, for example, ], ], ] and ]. ] has been a particularly prominent advocate of the analysis of post-WWII conditions as ]. (See, for example, Mandel's ''The Theory of “State Capitalism”''.{{cite web |title=The Theory of “State Capitalism”|year=1951-06-01 |url=http://www.ernestmandel.org/en/works/txt/FI/theory_of_statecapitalism.htm |archiveurl=http://web.archive.org/web/20061002030657/http://www.ernestmandel.org/en/works/txt/FI/theory_of_statecapitalism.htm |archivedate=2006-10-02 |author=Ernest Mandel |accessdate=2008-02-26}}</ref> | |||
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 == | |||
], in '']'' (1916), modified classic Marxist theory and argued that capitalism necessarily induced ] - which he also called "imperialism" - in order to find new markets and resources, representing the last and highest stage of capitalism.<ref>{{cite web|url=http://www.marxists.org/archive/lenin/works/1916/imp-hsc/index.htm|title=Imperialism, the Highest Stage of Capitalism|publisher=Marxists|accessdate=2008-02-26|date=1916}}</ref> | |||
{{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> | |||
Some 20th century ] consider capitalism to be a social formation where capitalist class processes dominate, but are not exclusive.<ref>See, for example, the works of Stephen Resnick and Richard Wolff.</ref> Capitalist class processes, to these thinkers, are simply those 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. However, other late Marxian thinkers argue that a social formation as a whole may be classed as capitalist if capitalism is the mode by which a surplus is ''extracted'', even if this surplus is not ''produced'' by capitalist activity, as when an absolute majority of the population is engaged in non-capitalist economic activity.<ref>{{cite book|author=Ste. Croix, G. E. M. de|title=The Class Struggle in the Ancient Greek World|year=1982|pages=52–3}}</ref> | |||
=== |
=== 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 1917]] | |||
=== Mercantilism === | |||
In some ]s, the understanding of the defining characteristics of capitalism has been strongly influenced by 19th century German social theorist ]. Weber considered ] ], rather than production, as the defining feature of capitalism; 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 terms of a personal relationship between ] and ] in a ], or between ] and ] in a ].<ref>{{cite web|url=http://www.humanities.mq.edu.au/Ockham/y64l10.html|title=MAX WEBER: ON CAPITALISM|accessdate=2008-02-26|publisher=Macquarie University|author=Kilcullen, John|date=1996}}</ref> | |||
{{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> | |||
In his book '']'' (1904-1905), Weber sought to trace how capitalism transformed these traditional modes of economic activity. For Weber, the 'spirit of capitalism' began with the Puritan understanding of one’s ‘calling’ in life and their laboring for God rather than for men. This is pictured in Proverbs 22:29, “Seest thou a man diligent in his calling? He shall stand before kings” and in Colossians 3:23, "Whatever you do, do your work heartily, as for the Lord rather than for men." In the ''Protestant Ethic'' Weber further stated that “moneymaking – provided it is done legally – is, within the modern economic order, the result and the expression of diligence in one’s calling…” Thus in Weber's opinion, it was with a devotion to God in the workplace and seeking assurance of salvation described as the ] that the Puritans helped form the basis to the modern economic order. | |||
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> | |||
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 apparent 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.<ref>{{cite web|url=http://xroads.virginia.edu/~hyper/WEBER/WeberCH2.html|title=The Spirit of Capitalism|accessdate=2008-02-26|publisher=University of Virginia}}</ref> | |||
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 ]. | |||
Capitalism, for Weber, was 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.<ref>{{cite web|url=http://www.economyandsociety.com/events/Ethic&SpiritCapsm_Conf_Agenda2.pdf|title=Conference Agenda|publisher=Economy and Society|accessdate=2008-02-26}}</ref> This is further seen in his criticism of "specialists without spirit, hedonists without a heart" that were developing, in his opinion, with the fading of the original Puritan 'spirit' associated with capitalism. | |||
=== Industrial Revolution === | |||
===German Historical School and Austrian School=== | |||
{{Main|Industrial Revolution}} | |||
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.<ref name="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. | |||
], 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> | |||
]]] | |||
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 ]. | |||
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 many contemporary 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. | |||
=== Modernity === | |||
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 emphasize ]: "supply creates its own demand." Capitalism, to this school, is defined by lack of state restraint on the decisions of producers. | |||
] 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. | |||
Austrian economics has been a major influence on the ideology of ], which considers ] capitalism to be the ideal economic system. | |||
] 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> | |||
===Keynesian economics=== | |||
{{main|Keynesian economics}} | |||
]]] | |||
After the ] and ]s (1839–60) by ] and ] and the completion of the ] conquest of India by 1858 and the ] conquest of ], ] and ] by 1887, vast populations of Asia became consumers of European exports. Europeans colonized areas of Africa and the Pacific islands. Colonisation by Europeans, notably of Africa by the British and French, 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 his 1937 '']'', 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 ]. Essentially rejecting ], he argued that some people may have a ] which would see them rather hold money than buy new goods or services, which therefore raised the prospect that the ] would not end without what he termed in the ''General Theory'' "a somewhat comprehensive socialization of investment." | |||
{{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>}} | |||
Keynesian economics challenged the notion that laissez-faire capitalist economics could operate well on their own, without state intervention used to promote ], fighting high unemployment and ] of the sort seen during the 1930s. He and his followers recommended "]" the economy to avoid ]: cutting taxes, increasing government borrowing, and spending during an economic down-turn. This was to be accompanied by trying to control wages nationally partly through the use of ] to cut real wages and to deter people from holding money.<ref>{{cite web |url=http://www.marxists.org/archive/mattick-paul/1969/marx-keynes/ch01.htm |title=Marx and Keynes: the limits of the mixed economy |author=Paul Mattick |accessdate=2008-02-26|publisher=Marxists }}</ref> John Maynard Keynes provided solutions to many of Marx’s problems without completely abandoning the classical understanding of capitalism. His work showed that regulation can be effective, and that economic stabilizers can reign in the aggressive expansions and recessions that Marx disliked. This created more stability in the business cycle, and reduced the abuses of laborers. Keynesian economic policies were one of the primary reasons capitalism was able to recover following the Great Depression.<ref>Erhardt III, Erwin. "History of Economic Development." University of Cincinnati. Lindner Center Auditorium, Cincinnati. 07 Nov. 2008.</ref>The premises of Keynes’s work have, however, since been challenged by neoclassical and ] and the Austrian School. | |||
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> | |||
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. | |||
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. | |||
===Neoclassical economics and the Chicago School=== | |||
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. | |||
] ] (1963)]] | |||
Milton Friedman effectively took many of the basic principles set forth by Adam Smith and the classical economists and modernized them, in a way. One example of this is his article in the September 1970 issue of The New York Times Magazine, where he claims that the social responsibility of business is “to use its resources and engage in activities designed to increase its profits…(through) open and free competition without deception or fraud.” This is tantamount to Smith’s argument that self interest in turn benefits the whole of society.<ref>Friedman, Milton. "The Social Responsibility of Business is to Increase its Profits." The New York Times Magazine 13 Sep. 1970.</ref> Work like this helped lay the foundations for the coming remarketization of capitalism and the supply-side economics of Ronald Reagan and Margaret Thatcher. | |||
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> | |||
]]] | |||
The ] is best known for its free market advocacy and ] ideas. According to ] and monetarists, market economies are inherently stable ] and depressions result only from government intervention.<ref>{{cite book|title=Macroeconomics and New Macroeconomics|author=Felderer, Bernhard}}</ref> Friedman, for example, argued that the Great Depression was result of a contraction of the money supply, controlled by the ], and not by the lack of investment as Keynes had argued. ], current Chairman of the Federal Reserve, is among the economists today generally accepting Friedman's analysis of the causes of the Great Depression.<ref name="fed">{{cite web|url=http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm|title=Remarks by Governor Ben S. Bernanke |publisher=The Federal Reserve Board|accessdate=2008-02-26|date=2002-11-08|author=Ben Bernanke}}</ref> | |||
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> | |||
Neoclassical economists, today the majority of economists,<ref>{{cite book|author=Yonary, Yuval P.|title=The Struggle Over the Soul of Economics|year=1998|publisher=Princeton University Press|isbn=0691034192|pages=29}}</ref> consider value to be subjective, varying from person to person and for the same person at different times, and thus reject the labor theory of value. ] is the theory that economic value results from marginal utility and ] (the ]). These economists see capitalists as earning profits by forgoing current consumption, by taking risks, and by organizing production. | |||
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> | |||
==History== | |||
{{Main|History of capitalism}} | |||
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> | |||
===Elements 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 ==== | |||
Elements of capitalism long predate the actual rise of capitalism itself. Private ownership of some means of production has existed at least in a small degree since the invention of agriculture. | |||
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> | |||
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" /> | |||
] have likewise existed since the rise of the first states over 5,000 years ago.<ref> Renfrew, Colin and Paul Bahn 2004 ''Archeology: Theories, Methods, and Practice.'' 4th edition. New York: Thames and Hudson. 361-365</ref> Some ] (like ]) argue that the economy of the Early ] was comparable to the most advanced economies of the world before the ], namely the economies of 18th century England and 17th century ]. There were markets for every type of good, for land, for cargo ships; there was even an insurance market.<ref></ref> | |||
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> | |||
Some writers trace back the earliest stages of ] even further to the ] during the 9th-12th centuries, where a vigorous ] ] was created on the basis of the expanding levels of circulation of a stable high-value ] (the ]) and the integration of ] areas that were previously independent. Innovative new ] techniques and forms of ] were introduced by ]s, ]s and traders during this time. Such innovations included ], ], ]s, long-distance ], ]es, the first forms of ] (''mufawada'' in ]) such as ]s (''mudaraba'') (''mufawada'' partnership possessed features similar to those of the ] family ''compagnia'' in Europe),<ref></ref> and the concepts of ], ], ] (''al-mal'') and ] (''nama al-mal''). Many of these early capitalist ideas were further advanced in ] from the 13th century onwards.<ref name=Banaji>{{cite journal|author=Banaji, Jairus|year=2007|title=Islam, the Mediterranean and the rise of capitalism|journal=Journal Historical Materialism|volume=15|pages=47–74|publisher=Brill Publishers|doi=10.1163/156920607X171591}}</ref><ref>{{cite book|author=Shatzmiller, Maya|year=1994|title=Labour in the Medieval Islamic World|pages=402–403|publisher=Brill Publishers|isbn=9004098968}}</ref><ref>{{cite journal|author=Labib, Subhi Y.|year=1969|title=Capitalism in Medieval Islam|journal=The Journal of Economic History|volume=29|pages=79–96}}</ref> | |||
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> | |||
Some writers see medieval ] as forerunners of the modern capitalist concern (especially through using ] as a kind of paid laborer); but economic activity was bound by customs and controls which, along with the rule of the ] which would expropriate wealth through arbitrary fines, taxes and enforced loans, meant that ]s were difficult to accumulate. By the 18th century, however, these barriers to profit were overcome and capitalism became the dominant economic system of the United Kingdom and by the 19th century Western Europe. | |||
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> | |||
In the period between the late 15th century and the late 18th century the institution of private property was brought into existence in the full, legal meaning of the term. Important contribution to the theory of property is found in the work of ], who argued that the right to private property is a ]. During the Industrial Revolution much of Europe underwent a thorough economic transformation associated with the rise of capitalism and levels of wealth and economic output in the Western world have risen dramatically since that period. | |||
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> | |||
=== The Crisis of the 14th Century and the "Pre-History of Capitalism" === | |||
According to some historians, the modern capitalist system has its origin in the "crisis of the fourteenth century," a conflict between the land-owning aristocracy and the agricultural producers, the serfs. Feudal arrangements inhibited the development of capitalism in a number of ways. Because serfs were forced to produce for lords, they had no interest in technological innovation; because serfs produced to sustain their own families, they had no interest in co-operating with one another. Because lords owned the land, they relied on force to guarantee that they were provided with sufficient food. Because lords were not producing to sell on the market, there was no competitive pressure for them to innovate. Finally, because lords expanded their power and wealth through military means, they spent their wealth on military equipment or on conspicuous consumption that helped foster alliances with other lords; they had no incentive to invest in developing new productive technologies.<ref>Brenner, Robert, 1977, “The Origins of Capitalist Development: a Critique of Neo-Smithian Marxism,” in ''New Left Review'' 104: 36-37, 46</ref> | |||
== Characteristics == | |||
This arrangement was shaken by the demographic crisis of the fourteenth century. This crisis had several causes: agricultural productivity reached its technological limitations and stopped growing; bad weather led to the Great Famine of 1315-1317; the Black Death in 1348-1350 led to a population crash. These factors led to a decline in agricultural production. In response feudal lords sought to expand agricultural production by expanding their domains through warfare; they therefore demanded more tribute from their serfs to pay for military expenses. In England, many serfs rebelled. Some moved to towns, some purchased land, and some entered into favorable contracts to rent lands, from lords desperate to repopulate their estates.<ref>Dobb, Maurice 1947 ''Studies in the Development of Capitalism.'' New York: International Publishers Co., Inc. 42-46, 48 ff.</ref> | |||
{{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 === | |||
The collapse of the manorial system in England created a class of tenant-farmers with more freedom to market their goods and thus more incentive to invest in new technologies. Lords who did not want to rely on rents could buy out or evict tenant farmers, but then had to hire free-labor to work their estates – giving them an incentive in investing in production.<ref>Brenner, Robert, 1977, “The Origins of Capitalist Development: a Critique of Neo-Smithian Marxism,” in ''New Left Review'' 104: 43, 60, 75-76</ref> This process was encouraged by the “enclosure movement,” which transferred public lands to large landowners, who used the land to graze sheep rather than produce food. As England’s wool exports grew in the fifteenth century, the process of enclosure accelerated, forcing many tenant-farmers to give up farming and seek wage-labor.<ref>Dobb, Maurice 1947 ''Studies in the Development of Capitalism.'' New York: International Publishers Co., Inc. 224-230</ref> According to Karl Marx, the rise of the contractual relationship is inextricably bound to the end of the obligatory relationship between serfs and lords. Marx characterizes this transformation as “the historical process of divorcing the producer from the means of production.”<ref>Marx, Karl 1976 ''Capital: A Critique of Political Economy Volume One'' trans. Ben Fowkes. Harmondsworth and London: Penguin Books and New Left Review. 875</ref> It was this “divorcing” that turned the serf’s land into the lord’s capital. According to Marx, this rearrangement led to a new division of classes: | |||
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. | |||
:two very different kinds of commodity owners; on the one hand, the owners of money, means of production, means of subsistence, who are eager to valorize the sum of value they have appropriated by buying the labour power of others; on the other hand, free workers, the sellers of their own labor-power, and therefore the sellers of labour. Free workers, in the double sense that they neither form part of the means of production themselves … nor do they own the means of production” that transformed land and even money into what we now call “capital.”<ref>Marx, Karl 1976 ''Capital: A Critique of Political Economy Volume One'' trans. Ben Fowkes. Harmondsworth and London: Penguin Books and New Left Review. 874</ref> | |||
Marx labeled this period the "pre-history of capitalism.<ref>Marx, Karl 1976 ''Capital: A Critique of Political Economy Volume One'' trans. Ben Fowkes. Harmondsworth and London: Penguin Books and New Left Review. 875</ref> | |||
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. | |||
It was, in effect, feudalism that began to lay some of the foundations necessary for the development of a capitalist system. Feudalism took place mostly in Europe and lasted from the medieval period up through the 16th century. Feudal manors were almost entirely self sufficient, and therefore limited the role of the market. This stifled the growth of capitalism. However, the relatively sudden emergence of new technologies and discoveries, particularly in the industries of agriculture <ref>James Fulcher, Capitalism (New York: Oxford University Press, 2004) 19</ref> and exploration, revitalized the growth of capitalism. The most important development at the end of Feudalism was the emergence of “the dichotomy between wage earners and capitalist merchants”.<ref>Degen, Robert. The Triumph of Capitalism. 1st ed. New Brunswick, NJ: Transaction Publishers, 2008. p. 12</ref> With capitalism, the competitive nature means there are always winners and losers, and this is clearly evident as feudalism transitions into mercantilism. | |||
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> | |||
===Mercantilism=== | |||
{{Main article|Mercantilism}} | |||
=== Wage labor === | |||
].]] | |||
{{Main|Wage labor}} | |||
The economic and political system of the ] (16th to 18th centuries) from which capitalism evolved is commonly described as ] or ]<ref name="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. The associated rise of a bourgeoisie class eclipsed the prior feudal system. It is mercantilism that Adam Smith argued against in his '']''. | |||
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> | |||
Mercantilism flourished during this time for a variety of reasons, and its existence was a necessary precursor to early capitalism. There are two historical events that contributed to this. First, the Renaissance gave several philosophical justifications for a market-oriented society from some of the foremost thinkers of the era. New ideas were flourishing, and there was a shift away from religious thinking, whose lofty ideals and stringent rules restricted the growth of markets. Second, the Protestant Reformation was instrumental in further refuting certain religious ideals. Calvinism preached the messages of disciplined investing and acceptance of business, which led to the development of a self-interested economy that could detach itself from religious beliefs.<ref>Degen, Robert. The Triumph of Capitalism. 1st ed. New Brunswick, NJ: Transaction Publishers, 2008. p. 15</ref> | |||
=== Profit motive === | |||
Voyages of discovery were taking place, leading to rampant colonization of lands outside of Europe and the finding of new resources and commodities. This is the peak of the Dutch Hegemony, with the Dutch East India Company serving as the epitome of a joint stock company that promoted trade. Trade developed, but there is an important distinction to be made between trade during mercantilism and trade as it exists in a capitalistic society. Trade during the mercantilist era took place between the Old World (Europe) and the New World (Americas) and was governed and funded by the states, not private firms. The trade taking place was a precursor to the Industrial Revolution and modern industrial capitalism. | |||
{{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> | |||
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> | |||
Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist production methods.<ref name="Scott" /> Noting the various pre-capitalist features of mercantilism, ] argued that capitalism did not emerge until the establishment of ] in Britain in the 1830s. | |||
=== Private property === | |||
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>{{cite book|author=Clark, Sir George|title=The Seventeenth Century|location=New York|publisher=Oxford University Press|year=1961|pages=24}}</ref> Similar practices of economic regimentation had begun earlier in the medieval towns. However, under mercantilism, given the contemporaneous rise of ], the state superseded the local ]s as the regulator of the economy. | |||
{{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> | |||
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 subsidies, such as the granting of monopolies and protective ]s, were necessary to encourage home production of manufactured goods. | |||
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 ]. | |||
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. | |||
=== Market competition === | |||
===Industrial capitalism and laissez-faire capitalism=== | |||
{{Main|Competition (economics)}} | |||
{{see also|Industrial Revolution|Laissez-faire}} | |||
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}} | |||
] 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 ]<ref>{{cite book|author=Hume, David|title=Political Discourses|location=Edinburgh|publisher=A. Kincaid & A. Donaldson|year=1752}}</ref> and ], 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. | |||
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 mid-18th century gave rise to industrial (bourgeois) 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.<ref name="Burnham" /> In the midst of this newly developing concept of division of labor came exploitation of labor on a much larger scale than was ever seen before.<ref>Fulcher, James. Capitalism. 1st ed. New York: Oxford University Press, 2004.</ref> | |||
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"/> | |||
During the resulting ], the industrialist replaced the merchant as a dominant actor in the capitalist system and effected 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 and the rise of the ]. | |||
=== Economic growth === | |||
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 ] ( bourgeois) capitalism.<ref name="Burnham" /> Laissez-faire capitalism 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 free competition for all classes, and eliminating barriers to the development of a ]. | |||
{{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"/> | |||
However, due to ], British laissez-faire was not exclusively unregulated.<ref name="walker">{{cite journal|title=Laissez-faire, Collectivism And Companies Legislation In Nineteenth-century Britain|last=Walker|first=S.P.|journal=The British Accounting Review|volume=28|number=4|pages=305--324|year=1996|publisher=Elsevier|doi=10.1006/bare.1996.0021}}</ref> The ] and the ] were examples. | |||
=== As a mode of production === | |||
Most of the early proponents of a ] in the United States subscribed to the ]. This school of thought was inspired by the ideas of ], who proposed the creation of the ] and the ] and increased tariffs (e.g. ]) to favor northern industrial interests. Following Hamilton's death, the more abiding protectionist influence in the antebellum period came from ] and his '']''. | |||
{{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> | |||
In the mid-19th century, the United States followed the ] tradition of economic liberalism, which included increased state control, regulation and ] development of ].<ref name=guelzo>{{citation|first=Allen C.|last=Guelzo|title=Abraham Lincoln: Redeemer President|isbn=0-8028-3872-3|year=1999|url=http://www.questia.com/PM.qst?a=o&d=99466893|publisher=W.B. Eerdmans Pub. Co|location=Grand Rapids, Mich.}}</ref> ] such as the provision and regulation ] such as railroads took effect. The ] provided the development of the ].<ref name=guelzo>{{citation|first=Allen C.|last=Guelzo|title=Abraham Lincoln: Redeemer President|isbn=0-8028-3872-3|year=1999|url=http://www.questia.com/PM.qst?a=o&d=99466893|publisher=W.B. Eerdmans Pub. Co|location=Grand Rapids, Mich.}}</ref> In order to help pay for its war effort in the ], the ] imposed its first personal ], on August 5, 1861, as part of the ] (3% of all incomes over US $800; rescinded in 1872). | |||
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> | |||
Following the ], the movement towards a mixed economy accelerated with even more ] and ]. In the 1880s and 1890s, significant tariff increases were enacted (see the ] and ]). Moreover, with the enactment of the ], the ], the federal government began to assume an increasing role in regulating and directing the country's economy. | |||
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> | |||
===Finance capitalism and state monopoly capitalism=== | |||
{{see also|Progressive Era}} | |||
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 processes of production to the accumulation of ] profits in a ].<ref name="Scott" /> Major characteristics of capitalism in this period included the establishment of large 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.<ref name="Scott" /> Increasingly, large industries and land became the subject of profit and loss by financial ]s. | |||
] 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" /> | |||
Late 19th and early 20th century capitalism has also been described as an era of "]," marked by movement from ] ideology and government policies 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, managers, and actual laborers.<ref>{{cite book|author=Scott, John|title=A Dictionary of Sociology|publisher=Oxford University Press|year=2005}}</ref> Although the concept of monopoly capitalism originated among Marxist theorists,<ref>{{cite journal|author=Charlene Gannage|title=E.S. Varga and the Theory of State Monopoly Capitalism|year=1980|journal=Review of Radical Political Economics|volume=12|issue=3|pages=36–49|doi=10.1177/048661348001200304}}</ref> non-Marxist economic historians have also commented on the rise of monopolies and trusts in the period. ], asserting that the large cartels of the late 19th century could not arise on the free market, argued that the "state monopoly capitalism" of the period was the result of interventionist policies adopted by governments, such as tariffs, quotas, licenses, and partnership between state and big business.<ref>{{cite journal|author=Stromberg, Joseph R.|title=The Role of State Monopoly Capitalism in the American Empire|journal=Journal of Libertarian Studies|volume=15|issue=3|year=2001|pages=74–75}}</ref> | |||
=== Role of government === | |||
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. However, contemporary, non-bourgeois economic historians believe these new laws were in fact designed to aid large corporations at the expense of smaller competitors.<ref>{{cite book|title=A History of Money and Banking in the United States: The Colonial Era to World War II|pages=185–186|author=Rothbard, Murray}}</ref> By the end of the 19th century, ] and ] ]s had become a recurring problem, although such problems were most likely caused by government intervention (according to the bourgeoisie of the time), not failures in free markets (Rand 1967, Friedman 1962, Bernstein 2005). 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. In the early 20th century, a succession of U.S. Presidents, beginning with Warren Harding's "Return to Normalcy," advocated laissez-faire capitalism. This allowed for the prosperity of "The Roaring Twenties," but later was said to be largely responsible for the Great Depression.<ref>Degen, Robert. The Triumph of Capitalism. 1st ed. New Brunswick, NJ: Transaction Publishers, 2008.</ref> During the 1930s, Marxist commentators often posited the possibility of capitalism's decline or demise, often in alleged contrast to the ability of the ] to avoid suffering the effects of the global depression, despite the fact that the Soviet Union represented a nationalist dictatorship rather than a Marxist state.<ref>{{cite book|author=Engerman, Stanley L.|title=The Oxford Companion to United States History|publisher=Oxford University Press|year=2001}}</ref> | |||
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> | |||
== Supply and demand == | |||
===After the Great Depression=== | |||
{{Main|Supply and demand}} | |||
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). | |||
] 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}} | |||
In the period following the global depression of the 1930s, the state played an increasingly prominent role 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 bourgeois 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 "]." | |||
# If demand increases (demand curve shifts to the right) and supply remains unchanged, then a shortage occurs, leading to a higher equilibrium price. | |||
# If demand decreases (demand curve shifts to the left) and supply remains unchanged, then a surplus occurs, leading to a lower equilibrium price. | |||
# 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 === | |||
] ] (1963)]] | |||
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> | |||
=== Demand schedule === | |||
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 the ].<ref name="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 name="state capitalism"/> This era was greatly influenced by Keynesian economic stabilization policies. | |||
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> | |||
The long postwar boom ended in the late 1960s and early 1970s, and the situation was worsened by the rise of ].<ref>{{cite book|author=Barnes, Trevor J.|title=Reading economic geography|publisher=Blackwell Publishing|isbn=063123554X|pages=127|year=2004}}</ref> Exceptionally high ] combined with slow output growth, rising unemployment, and eventually ] caused loss of credibility of ] welfare-statist mode of regulation. Under the influence of ] and ], Western states embraced policy prescriptions inspired by the laissez-faire capitalism and ]. In particular, ], a theoretical alternative to Keynesianism that is more compatible with laissez-faire, gained increasing prominence in the capitalist world, especially under the leadership of ] in the U.S. and ] in the UK in the 1980s. Finally, the general public's interest shifted from the collectivist concerns of Keynes's managed capitalism to a focus on individual freedom and choice, called "remarketized capitalism." <ref>Fulcher, James. Capitalism. 1st ed. New York: Oxford University Press, 2004.</ref> In the eyes of many economic and political commentators, collapse of the ] supposedly brought further evidence of superiority of market capitalism over communism. | |||
=== |
=== Equilibrium === | ||
{{further|Economic equilibrium}} | |||
:{{main article|Globalization}} | |||
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. | |||
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 ].<ref name="Burnham" /> However, other thinkers argue that globalization, even in its quantitative degree, is no greater now than during earlier periods of capitalist trade.<ref>{{cite book |title=After the New Economy |last=Henwood |first=Doug |publisher=New Press |date=2003-10-01 |isbn=1-56584-770-9}}</ref> The roots of globalized capitalism can be traced back to the imperialism of the early 20th century. Imperialistic policies promoted the spread of capitalistic principles, and the doors of trade stayed open in foreign countries even after imperialism had come to an end.<ref>Fulcher, James. Capitalism. 1st ed. New York: Oxford University Press, 2004.</ref> | |||
=== Partial equilibrium === | |||
After the abandonment of the ] and the strict state control of foreign 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>{{cite journal|author=Evans, Peter|title=The Eclipse of the State? Reflections on Stateness in an Era of Globalization|journal=World Politics|volume=50|issue=1|date=1997-10-01|pages=62–87}}</ref> | |||
{{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 === | |||
Economic growth in the last half-century has been consistently 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, thanks to the work of a handful of charitable bourgeoisie, but the destitute continue to suffer and die while the bourgeoisie increase their profits.<ref>{{cite web|url=http://www.theglobalist.com/DBWeb/StoryId.aspx?StoryId=2429|author=Pfefferman, Guy|title=The Eight Losers of Globalization|accessdate=2008-02-26|date=2002-04-19}}</ref> While scientists generally agree about the size of global ], there is a general disagreement about the recent direction of change of it.<ref>{{cite journal|author=Milanovic, Branko|title=Global Income Inequality: What It Is And Why It Matters?|journal=DESA Working Paper|volume=26|date=2006-08-01|pages=9}}</ref> However, it is growing within particular nations such as China.<ref>{{cite web|url=http://www.columbia.edu/~xs23/papers/worldistribution/NYT_november_27.htm|author=Brooks, David|title=Good News about Poverty|accessdate=2008-02-26|date=2004-11-27}}</ref> The book '']'' argues that economic growth since the industrial revolution has been very strong and that factors such as adequate ], ], ], ], prevalence of ], ], and available free time have improved greatly. | |||
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> | |||
]]] | |||
The biggest reason for the increasingly global capitalist economy is the telecommunications revolution that has taken place over the last twenty years. Fax machines, cell phones, and the internet have made it possible for work to be done and transactions to take place from almost anywhere in the world.<ref>Fulcher, James. Capitalism. 1st ed. New York: Oxford University Press, 2004.</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 2008, state intervention in global capital markets by the American and other governments was seen by many as signaling a crisis for free-market capitalism. Serious turmoil in the banking system and financial markets due to the ] reached a critical stage during September 2008, characterized by severely contracted ] in the global credit markets and going-concern threats to investment banks and other institutions. <ref>, ], September 25, 2008.</ref><ref>[http://news.bbc.co.uk/1/hi/business/7641733.stm House Votes Down Bail-Out Package</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" /> | |||
==Political advocacy== | |||
===Support=== | |||
] per capita shows exponential acceleration since the beginning of the industrial revolution.<ref>{{cite book |title=The World Economy: A Millennial Perspective |author=Angus Maddison |publisher=] |location=Paris |date=2001 |isbn=92-64-18998-X}}</ref>]] | |||
Many theorists and policymakers in predominantly capitalist nations have emphasized capitalism's ability to promote economic growth, as measured by ] (GDP), ] or ]. This argument was central, for example, to ]'s advocacy of letting a free market control production and price, and allocate resources. Many theorists have noted that this increase in global GDP over time coincides with the emergence of the modern world capitalist system.<ref>{{cite web |url=http://www.minneapolisfed.org/pubs/region/04-05/essay.cfm |title=The Industrial Revolution: Past and Future |author=Robert E. Lucas Jr. |work=Federal Reserve Bank of Minneapolis 2003 Annual Report |accessdate=2008-02-26}}</ref><ref>{{cite web |url=http://www.j-bradford-delong.net/TCEH/1998_Draft/World_GDP/Estimating_World_GDP.html |title=Estimating World GDP, One Million B.C. – Present |author=J. Bradford DeLong |accessdate=2008-02-26 }}</ref> While the measurements are not identical, proponents argue that increasing GDP (per capita) is empirically shown to bring about improved standards of living, such as better availability of food, housing, clothing, and health care.<ref>{{cite web |url=http://www.econlib.org/library/Enc/IndustrialRevolutionandtheStandardofLiving.html |title=Industrial Revolution and the Standard of Living |author=Clark Nardinelli |accessdate=2008-02-26 }}</ref> The decrease in the number of hours worked per week and the decreased participation of children and the elderly in the workforce have been attributed to capitalism.<ref>{{cite book|author=Barro, Robert J.|title=Macroeconomics|publisher=MIT Press|year=1997|isbn=0262024365}}</ref><ref>{{cite web|url=http://www.capitalism.org/faq/labor.htm|title=Labor and Minimum Wages|publisher=Capitalism.org|accessdate=2008-02-26}}</ref><ref>{{cite web|url=http://www.mises.org/article.aspx?Id=1481|title=Morality and Economic Law: Toward a Reconciliation|publisher=Ludwig von Mises Institute|accessdate=2008-02-26|author=Woods, Thomas E.|date=2004-04-05}}</ref><ref>{{cite web|url=http://www.taemag.com/issues/articleid.18013/article_detail.asp|title=Three Cheers for Global Capitalism |publisher=The American Enterprise|accessdate=2008-02-26|author=Norberg, Johan}}</ref> Proponents also believe that a capitalist economy offers far more opportunities for individuals to raise their income through new professions or business ventures than do other economic forms. To their thinking, this potential is much greater than in either traditional ] or ] societies or in socialist societies. | |||
== Types == | |||
] has argued that the ] of competitive capitalism is a requisite of ]. Friedman argued that centralized control of economic activity is 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 diminish power to coerce. Friedman's view was also shared by ] and ], both of whom believed that capitalism is vital for freedom to survive and thrive.<ref>{{cite book|author=Friedrich Hayek|title=The Road to Serfdom|publisher=University Of Chicago Press|year=1944|isbn=0-226-32061-8}}</ref><ref>{{cite book|author=Bellamy, Richard|title=The Cambridge History of Twentieth-Century Political Thought|publisher=Cambridge University Press|year=2003|isbn=0-521-56354-2|pages=60}}</ref> | |||
{{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 ]. | |||
Austrian School economists have argued that capitalism can organize itself into a complex system without an external guidance or planning mechanism. Friedrich Hayek coined the term "]" to describe what he considered the phenomenon of ] underpinning capitalism. From this perspective, in process of self-organization, the ] motive has an important role. From transactions between buyers and sellers price systems emerge, and prices serve as a signal as to the urgent and unfilled wants of people. The promise of profits gives entrepreneurs incentive to use their knowledge and resources to satisfy those wants. Thus the activities of millions of people, each seeking his own interest, are coordinated.<ref>{{cite book|author=Walberg, Herbert|title=Education and Capitalism|publisher=Hoover Institution Press|year=2001|pages=87–89|isbn=0-8179-3972-5}}</ref> | |||
=== Advanced === | |||
This decentralized system of coordination is viewed by some supporters of capitalism as one of its greatest strengths. They argue that it permits many solutions to be tried, and that real-world competition generally finds a good solution to emerging challenges. In contrast, they argue, ] often selects inappropriate solutions as a result of faulty forecasting. However, in all existing modern economies, the state conducts some degree of ] (using such tools as allowing the country's ] to set base ]), ostensibly as an attempt to improve efficiency, attenuate cyclical volatility, and further particular social goals. Proponents who follow the Austrian School argue that even this limited control creates inefficiencies because we cannot predict the long-term activity of the economy. Milton Friedman, for example, has argued that the ] was caused by the erroneous policy of the ].<ref name="fed"/> | |||
{{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: | |||
] was a prominent philosophical supporter of ]; her novel ] was one of the most influential publications ever written on the subject of business.<ref></ref> The first person to endow capitalism with a new code of morality (Rational ]),<ref>]</ref> she did not justify capitalism on the grounds of pure "practicality" (that it is the best wealth-creating system), or the ] (that ] or ] supports ]), or because it benefits the most people, but maintained that it is the only morally valid ] system because it allows people to be free to act in their rational self-interest.<ref>]</ref> | |||
# 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 === | |||
These thinkers have had a substantial influence on the ], which is the political party that is most closely allied with ] and ] economics in the ]. The Libertarian Party strongly advocates the elimination of most, if not all, ] involvement in the marketplace. The ] is the ] branch of the ]. | |||
{{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. | |||
Capitalism has met with strong opposition throughout its history. Most of the criticism came from the left, but some from the right, and some from religious elements. Many 19th century conservatives were among the most strident critics of capitalism, seeing market exchange and commodity production as threats to cultural and religious traditions. Some critics of capitalism consider economic regulation necessary in order to reduce corruption, negligence, and numerous other problems. | |||
] 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> | |||
Prominent leftist critics have included ] like ], ], ], ], ], ], ], and ] including ], ], ], ], ], ], ], ], ], and others. Movements like the ]s, ]s, ], ] and others have opposed capitalism for various reasons. Marxism advocated a revolutionary overthrow of capitalism that would lead eventually to ]. Marxism also influenced ] and ], which seek change through existing democratic channels instead of revolution, and believe that capitalism should be heavily regulated rather than abolished. Many aspects of capitalism have come under attack from the relatively recent ] movement. | |||
=== Free market === | |||
Some religions criticize or outright oppose specific elements of capitalism. Some traditions of ], ], and ] forbid ], although methods of ] have been developed. Christianity has been a source of both praise and criticism for capitalism, particularly its ] aspects.<ref>{{cite web|url=http://www.vatican.va/archive/ENG0015/__P8C.HTM#-2FX|title=III. The Social Doctrine of the Church|publisher=The Vatican|accessdate=2008-02-26}}</ref> The first socialists drew many of their principles from Christian values (see ]), against "bourgeois" values of profiteering, greed, selfishness, and hoarding. Christian critics of capitalism may not oppose capitalism entirely, but support a mixed economy in order to ensure adequate labor standards and relations, as well as economic justice. There are many ] denominations (particularly in the United States) who have reconciled with — or are ardently in favor of — capitalism, particularly in opposition to secular socialism. However, in the U.S. and around the world there are many Protestant Christian traditions which are critical of, or even oppose, capitalism. Another critic is the Indian philosopher ], founder of the ] movement, who developed the ] and proposed a solution called the ] (PROUT).<ref>{{cite web |url=http://www.prout.org/aftercapitalism/ |title=After Capitalism |author=Dada Maheshvarananda |accessdate=2008-02-26}}</ref><ref>{{cite web |url=http://www.proutworld.org/|title=proutworld|accessdate=2008-02-26|publisher=ProutWorld}}</ref> | |||
{{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> | |||
Some problems said to be associated with capitalism include: unfair and inefficient ] and power; a tendency toward market ] or ] (and government by ]); ] and various forms of economic and cultural ]; and phenomena such as ], ], ], and economic instability. Critics have maintained that there is an inherent tendency towards oligolopolistic structures when laissez-faire is combined with capitalist private property. Because of this tendency either laissez-faire, or private property, or both, have drawn fire from critics who believe an essential aspect of economic freedom is the extension of the freedom to have meaningful decision-making control over productive resources to everyone. Economist Branko Horvat asserts, "it is now well known that capitalist development leads to the concentration of capital, employment and power. It is somewhat less known that it leads to the almost complete destruction of economic freedom."<ref>{{cite book|author=Horvat, B.|title=The Political Economy of Socialism|location=Armonk, NY|publisher=M.E.Sharpe Inc.|pages=11}}</ref> | |||
=== Mercantile === | |||
Near the start of the 20th century, Vladimir Lenin claimed that state use of military power to defend capitalist interests abroad was an inevitable corollary 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=2008-02-26}}</ref> This concept of ] concerning the relationship between economic and political power among and within states includes critics of capitalism who assign to it responsibility for not only economic ], but ], ] and ] wars, repressions of workers and trade unionists, ]s, ], and so on. | |||
{{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 === | |||
Some environmentalists claim that capitalism requires continual economic growth, and will inevitably deplete the finite natural resources of the earth, and other broadly utilized resources. Such thinkers, including ], have argued that capitalist production passes on environmental costs to all of society, and is unable to adequately mitigate its impact upon ecosystems and the biosphere at large. | |||
{{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. | |||
Some ] and scholars, such as ], Tom Brass and, latterly ], have also argued that ] — the use of a labor force comprised of ], ]s, criminal convicts, political prisoners, and/or other coerced persons — is compatible with capitalist relations.<ref>That unfree labor is acceptable to capital was argued during the 1980s by Tom Brass. See ''Towards a Comparative Political Economy of Unfree Labor'' (Cass, 1999). {{cite web |url=http://www.historycooperative.org/journals/llt/52/linden.html |title="Labour History as the History of Multitudes", ''Labour/Le Travail'', 52, Fall 2003, p. 235-244 |author=Marcel van der Linden |accessdate=2008-02-26}}</ref> | |||
] is the contemporary model of capitalism and adaptation of the social market model that exists in continental Western Europe today. | |||
===Democracy, the state, and legal frameworks=== | |||
{{Main|History of capitalist theory}} | |||
=== State === | |||
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 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|accessdate=2008-02-26}}</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 ] 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|accessdate=2008-02-26}}</ref><ref>{{cite journal |author=N. F. R. Crafts |title=Enclosure and labor supply revisited |journal=Explorations in economic history |issue=15 |month=April |year=1978 |pages=172–183 |doi=10.1016/0014-4983(78)90019-0 |volume=15}}.</ref> | |||
{{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> | |||
], a field pioneered by ], stresses the need of capitalism for a legal framework to function optimally, and focuses on the relationship between the historical development of capitalism and the creation and maintenance of political and economic institutions.<ref>{{cite book|author=North, Douglass C.|title=Institutions, Institutional Change and Economic Performance|publisher=Cambridge University Press|date=1990}}</ref> In new institutional economics and other fields focusing on public policy, economists seek to judge when and whether governmental intervention (such as ]es, ], and ]) can result in potential gains in efficiency. According to ], a ], governmental intervention can improve on market outcomes under conditions of "]," or situations in which the market on its own does not allocate resources efficiently.<ref>{{cite book|title=Principles of Economics|publisher=Harvard University|year=1997|pages=10|unused_data=Mankiw, N. Gregory}}</ref> The idea of market failure is that markets fail to realize all potential gains from trade. This means that markets fail to deliver perfect economic results. Critics of market failure theory, like ], ], and ] argue that government programs and policies also fall short of absolute perfection. Market failures are often small, and government failures are sometimes large. It is therefore the case that imperfect markets are often better than imperfect governmental alternatives. While all nations currently have some kind of market regulations, the desirable degree of regulation is disputed. | |||
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 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 became 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,<ref name="Burnham" /> while it has been observed{{Who|date=March 2008}} that many democratic societies such as the ] and ] have been expressly anti-capitalist.<ref>On the democratic nature of the Venezuelan state, see . On the current government's rejection of capitalism in favor of socialism, see and</ref> While some thinkers argue that capitalist development more-or-less inevitably eventually leads to the emergence of democracy, others dispute this claim. Research on the ] further indicates that capitalist democracies rarely make war with one another and have little internal violence.<ref>{{cite web |url=http://www.mtholyoke.edu/acad/intrel/ray.htm |title=Does democracy cause peace|author=James Lee Ray|accessdate=2008-02-26}}</ref><ref>{{cite web |url=http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTENERGY/0,,contentMDK:20708340~pagePK:210058~piPK:210062~theSitePK:336806,00.html |title=Towards a democratic civil peace? : opportunity, grievance, and civil war 1816-1992|author=Hegre, Håvard|accessdate=2008-02-26}}</ref> However critics of the democratic peace theory note that democratic capitalist states may fight infrequently or never with other democratic capitalist states because of Political similarity or political stability rather than because they are democratic (or capitalist). | |||
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> | |||
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>{{cite web|author=Mesquita, 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=2005-09|accessdate=2008-02-26|publisher=Foreign Affairs}}</ref><ref>{{cite web|author=Single, Joseph T.|url=http://www10.nytimes.com/cfr/international/20040901facomment_v83n4_siegle-weinstein-halperin.html?_r=5&oref=slogin&oref=slogin&oref=slogin&oref=slogin|title=Why Democracies Excel|date=2004-09|accessdate=2008-02-26|publisher=New York Times}}</ref> | |||
=== Welfare === | |||
In response to criticism of the system, some proponents of capitalism have argued that its advantages are supported by empirical research. For example, advocates of different ] point to a statistical correlation between nations with more economic freedom (as defined by the Indices) and higher scores on variables such as income and life expectancy, including the poor in these nations. Some peer-reviewed studies find evidence for causation. | |||
{{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. | |||
==See also== | |||
{{Portal|Capitalism}} | |||
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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== |
== References == | ||
; Notes | |||
{{reflist}} | |||
; Bibliography | |||
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* {{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}} | |||
* {{cite book|author=Rostow, W. W.|title=The Stages of Economic Growth: A Non-Communist Manifesto|location=Cambridge|publisher=Cambridge University Press|year=1960}} | |||
* {{cite journal|last= Steinfeld|first= Robert|year= 2009|title= Coercion/Consent in Labor|url= http://www.compas.ox.ac.uk/fileadmin/files/Publications/working_papers/WP_2009/WP0966%20Steinfeld.pdf|series= COMPAS Working Paper No. 66|location= Oxford|publisher= University of Oxford|access-date= 3 March 2013|url-status= dead|archive-url= https://web.archive.org/web/20140301173031/http://www.compas.ox.ac.uk/fileadmin/files/Publications/working_papers/WP_2009/WP0966%20Steinfeld.pdf|archive-date= 1 March 2014}} | |||
* {{cite book|author=Schumpeter, J. A.|title=Capitalism, Socialism, and Democracy|year=1983}} | |||
* {{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|author=Scott, John|title=Corporate Business and Capitalist Classes|year=1997}} | |||
* {{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|author=seldon, Arthur|year=2007|title=Capitalism: A Condensed Version|location=London|publisher=Institute of Economic Affairs}} | |||
* {{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}} | |||
* {{cite book|author=Sennett, Richard|title=The Culture of the New Capitalism|year=2006}} | |||
{{refend}} | |||
* {{cite book|author=Smith, Adam|title=An Inquiry into the Nature and Causes of the Wealth of Nations|year=1776}} | |||
* {{cite book|author=De Soto, Hernando|year=2000|title=The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else|location=New York|publisher=Basic Books|isbn=0-465-01614-6}} | |||
* {{cite book|author=Strange, Susan|title=Casino Capitalism|year=1986}} | |||
* {{cite book|author=Wallerstein, Immanuel|title=The Modern World System}} | |||
* {{cite book|author=Weber, Max|title=The Protestant Ethic and the Spirit of Capitalism|year=1926}} | |||
* {{cite book|author=Norberg, Johan|title=In Defense of Global Capitalism|year=2001|isbn=978-1-93-086547-1|publisher=Cato Institute|location=Washington, DC}} | |||
== Further reading == | |||
==References== | |||
{{refbegin|colwidth=30em}} | |||
*] (2007) '''' Grin Verlag. p.2 | |||
* ] (2011). ''America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy, 2nd Edition.'' Democracy Collaborative Press. {{ISBN|0-9847857-0-1}}. | |||
*] (1986) ''Business ethics'' p. 104 | |||
* {{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}} | |||
*] and ] (2000). ''Capitalism''. In ], S. Hill & BS Turner (Eds.), '']'' (4th ed.) (pp. 36-40). | |||
* Ascher, Ivan. ''Portfolio Society: On the Capitalist Mode of Prediction.'' Zone Books, 2016. {{ISBN|978-1935408741}} | |||
*{{cite book|title=Profit Theory and Capitalism|author=Obrinsky, Mark|authorlink=Mark Obrinsky|publisher=University of Pennsylvania Press|url=http://www.questia.com/PM.qst?a=o&d=4995059|year=1983|pages=p.1}} | |||
* ] ''The Half Has Never Been Told: Slavery and the Making of American Capitalism.'' New York, ], 2014. {{ISBN|0-465-00296-X}}. | |||
*] (1982) '']'' | |||
* {{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 }} | |||
*] (2002) '''' London: Verso | |||
* {{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}} | |||
==External links== | |||
* {{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}} | |||
{{wikiquote}} | |||
* ]. ''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. 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. 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. 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 == | |||
==Notes== | |||
{{Commons category|Capitalism}} | |||
{{reflist|2}} | |||
{{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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Revision as of 12:56, 24 December 2024
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).
Part of a series on |
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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:
- Capitalist mode of production
- Economic liberalism
- Free enterprise
- Free enterprise economy
- Free market
- Free market economy
- Laissez-faire
- Market economy
- Profits system
- Self-regulating market
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 capitalismCapitalism, 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: MercantilismThe 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 RevolutionIn 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
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) by Britain and France and the completion of the British conquest of India by 1858 and the French conquest of Africa, Polynesia and Indochina by 1887, vast populations of Asia became consumers of European exports. Europeans colonized areas of Africa and the Pacific islands. Colonisation by Europeans, notably of Africa by the British and French, 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.
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 capitalismIn 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 laborWage 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 motiveThe 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 propertyThe 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
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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 productionThe 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 demandIn 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:
- If demand increases (demand curve shifts to the right) and supply remains unchanged, then a shortage occurs, leading to a higher equilibrium price.
- If demand decreases (demand curve shifts to the left) and supply remains unchanged, then a surplus occurs, leading to a lower equilibrium price.
- 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
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 equilibriumIn 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 equilibriumPartial 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".
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 capitalismAdvanced 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:
- 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.
Corporate
Main article: Corporate capitalism See also: Crony capitalism and State monopoly capitalismCorporate 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
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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: ProtectionismMercantilism 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 modelA 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 capitalismState 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 economyWelfare 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 accumulationThe 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 labourWage 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 capitalismCriticism 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
- Anti-capitalism
- Advanced capitalism
- Ancient economic thought
- Bailout Capitalism
- Capitalism (disambiguation)
- Christian views on poverty and wealth
- Communism
- Corporatocracy
- Crony capitalism
- Economic sociology
- Free market
- Global financial crisis in September 2008
- Humanistic economics
- Invisible hand
- Late capitalism
- Le Livre noir du capitalisme
- Market socialism
- Peak capitalism
- Perspectives on capitalism by school of thought
- Post-capitalism
- Post-Fordism
- Racial capitalism
- Rent-seeking
- Socialism
- State monopoly capitalism
- Surveillance capitalism
- Perestroika
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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.
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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.
[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.] - Balch, Oliver (24 November 2019). "Green capitalism sometimes also referring to sustainable businesses". The Guardian.
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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.
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(help) - Wolf, Eric R. (1982). Europe and the People Without History. Berkeley: University of California Press. ISBN 978-0-520-04459-3.
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- Young, John (1997). Peasant Revolution in Ethiopia: The Tigray People's Liberation Front, 1975–1991. Cambridge: Cambridge University Press. ISBN 978-0-521-02606-2.
Further reading
- Alperovitz, Gar (2011). America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy, 2nd Edition. Democracy Collaborative Press. ISBN 0-9847857-0-1.
- Altvater, Elmar; Crist, Eileen; Haraway, Donna; Hartley, Daniel; Parenti, Christian; McBrien, Justin; Moore, Jason (2016). Anthropocene or Capitalocene? Nature, History, and the Crisis of Capitalism. PM Press. ISBN 978-1-62963-148-6.
- Ascher, Ivan. Portfolio Society: On the Capitalist Mode of Prediction. Zone Books, 2016. ISBN 978-1935408741
- Baptist, Edward E. The Half Has Never Been Told: Slavery and the Making of American Capitalism. New York, Basic Books, 2014. ISBN 0-465-00296-X.
- Barbrook, Richard (2006). The Class of the New (paperback ed.). London: OpenMute. ISBN 978-0-9550664-7-4. Archived from the original on 1 August 2018. Retrieved 11 June 2019.
- Block, Fred; Somers, Margaret R. (2014). The Power of Market Fundamentalism: Karl Polyani's Critique. Cambridge, MA: Harvard University Press. ISBN 978-0-674-05071-6.
- Boldizzoni, Francesco (2020). Foretelling the End of Capitalism: Intellectual Misadventures since Karl Marx. Harvard University Press. ISBN 978-0-674-91932-7.
- Braudel, Fernand. 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.
- Case, Anne; Deaton, Angus (2020). Deaths of Despair and the Future of Capitalism. Princeton University Press. ISBN 978-0-691-19078-5. Archived from the original on 7 March 2020. Retrieved 6 March 2020.
- Farl, Erich. "The Genealogy of State Capitalism". In: International London, vol. 2, no. 1, 1973.
- Fisher, Mark (2009). Capitalist Realism: Is There No Alternative?. John Hunt Publishing. ISBN 978-1-84694-317-1.
- Gough, Ian. State Expenditure in Advanced Capitalism Archived 7 February 2012 at the Wayback Machine New Left Review.
- Habermas, J. Legitimation Crisis (eng. translation by T. McCarthy). Boston, Beacon. From Google books Archived 20 November 2015 at the Wayback Machine; excerpt.
- Harvey, David (2014). Seventeen Contradictions and the End of Capitalism. Oxford University Press. ISBN 978-0-19-936026-0.
- Hyman, Louis and Edward E. Baptist (2014). American Capitalism: A Reader. Simon & Schuster. ISBN 978-1-4767-8431-1.
- Ingham, Geoffrey (2008). Capitalism: With a New Postscript on the Financial Crisis and Its Aftermath. Cambridge: Polity Press. ISBN 9780745636481.
- James, Paul; Patomäki, Heikki (2007). Globalization and Economy, Vol. 2: Global Finance and the New Global Economy. London: SAGE Publications. Archived from the original on 23 September 2020. Retrieved 28 January 2018.
- James, Paul; Palen, Ronen (2007). Globalization and Economy, Vol. 3: Global Economic Regimes and Institutions. London: Sage Publications. Archived from the original on 23 September 2020. Retrieved 28 January 2018.
- James, Paul; O'Brien, Robert (2007). Globalization and Economy, Vol. 4: Globalizing Labour. London: Sage Publications. Archived from the original on 23 September 2020. Retrieved 28 January 2018.
- Jameson, Fredric (1991). Postmodernism, or, the Cultural Logic of Late Capitalism.
- Kocka, Jürgen (2016). Capitalism: A Short History. Princeton: Princeton University Press. 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
- Mander, Jerry (2012). The Capitalism Papers: Fatal Flaws of an Obsolete System. Counterpoint. 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. 50–104.
- Musacchio, Aldo; Lazzarini, Sergio G. (2014). Reinventing State Capitalism: Leviathan in Business, Brazil and Beyond. Cambridge, MA: Harvard University Press. ISBN 978-0-674-72968-1.
- Newitz, Annalee (2006). Pretend We're Dead: Capitalist Monsters in American Pop Culture. Durham, NC: Duke University Press. ISBN 978-0-8223-3745-4. Archived from the original on 26 October 2016. Retrieved 26 October 2016.
- Nitzan, Jonathan; Bichler, Shimshon (2009). Capital as Power: A Study of Order and Creorder. Routledge. 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.
- Piketty, Thomas (2014). Capital in the Twenty-First Century. Cambridge, MA: Belknap Press. ISBN 978-0-674-43000-6.
- Piketty, Thomas (2020). Capital and Ideology. Cambridge, MA: Belknap Press. ISBN 978-0-674-98082-2.
- Polanyi, Karl (2001). The Great Transformation: The Political and Economic Origins of Our Time. Beacon Press; 2nd ed. ISBN 0-8070-5643-X
- Reisman, George (1998). Capitalism: A complete understanding of the nature and value of human economic life. Jameson Books. ISBN 978-0-915463-73-2.
- Richards, Jay W. (2009). Money, Greed, and God: Why Capitalism is the Solution and Not the Problem. New York: HarperOne. ISBN 978-0-06-137561-3
- Roberts, Paul Craig (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
- Robinson, William I. Global Capitalism and the Crisis of Humanity. Cambridge University Press, 2014. ISBN 1-107-69111-7
- Schram, Sanford F. (2015). The Return of Ordinary Capitalism: Neoliberalism, Precarity, Occupy. Oxford University Press. ISBN 978-0-19-025302-8. Archived from the original on 23 September 2020. Retrieved 12 February 2017.
- Hoevet, Ocean. "Capital as a Social Relation" (New Palgrave article)
- Sombart, Werner (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.)
- Sonenscher, Michael (2022). Capitalism: The Story behind the Word. Princeton: Princeton University Press. ISBN 9780691237206.
- Tarnoff, Ben, "Better, Faster, Stronger" (review of John Tinnell, The Philosopher of Palo Alto: Mark Weisner, Xerox PARC, and the Original Internet of Things, University of Chicago Press, 347 pp.; and Malcolm Harris, Palo Alto: A History of California, Capitalism, and the World, Little, Brown, 708 pp.), The New York Review of Books, vol. LXX, no. 14 (21 September 2023), pp. 38–40. " a place where the contradictions are sharpened to their finest points, above all the defining and enduring contradictions between democratic principle and antidemocratic practice. There is nothing as American as celebrating equality while subverting it. Or as Californian." (p. 40.)
- Wallerstein, Immanuel (1983). Historical Capitalism. Verso Books. ISBN 978-0-86091-761-8.
- Wolff, Richard D. (2012). Democracy at Work: A Cure for Capitalism. Haymarket Books. ISBN 978-1-60846-247-6.
- Wood, Ellen Meiksins (2002). The Origin of Capitalism: A Longer View. Verso. ISBN 978-1-85984-392-5.
External links
- Capitalism on In Our Time at the BBC
- Capitalism at Encyclopædia Britannica Online.
- Selected Titles on Capitalism and Its Discontents Archived 23 January 2018 at the Wayback Machine. Harvard University Press.
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