User:Titodutta/store/Capitalism: Difference between revisions

'''Capitalism''' is an [[economic system]] based on private ownership of the [[means of production]] and [[capital good]]s, and the production of goods and services for [[Profit (economics)|profit]] in a [[market economy]].<ref>Chris Jenks. ''Core Sociological Dichotomies''. "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 labour of workers in exchange for a wage to create commodities in which the manufacturer extracts surplus value from the labour 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." London, England, UK; Thousand Oaks, California, USA; New Delhi, India: SAGE. p. 383.</ref><ref>[http://oxforddictionaries.com/definition/english/capitalism "Capitalism"] ''Oxford Dictionaries''. "capitalism. an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state." Retrieved 4 January 2013.</ref> Central characteristics of capitalism include the process of [[capital accumulation]], [[Competition (economics)|competitive markets]], and [[wage labor]].<ref>Heilbroner, Robert L. [http://www.dictionaryofeconomics.com/article?id=pde2008_C000053 "capitalism."] ''The New Palgrave Dictionary of Economics''. Second Edition. Steven N. Durlauf and Lawrence E. Blume (Eds.).

Palgrave Macmillan, 2008. {{DOI|10.1057/9780230226203.0198}}</ref> In a capitalist economy, the parties to a transaction nominally determine the prices at which assets, goods, and services are [[Trade|exchanged]].<ref>http://www.merriam-webster.com/dictionary/capitalism "an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market"</ref>  

The degree of competition, role of [[Economic interventionism|intervention]] and regulation, and scope of public ownership varies across different models of capitalism.<ref>''Macmillan Dictionary of Modern Economics'', 3rd Ed., 1986, p. 54.</ref> Economists, [[political economy|political economists]], and [[history|historians]] have taken different perspectives in their analysis of capitalism and recognized various forms of it in practice. These include ''[[laissez-faire]]'' capitalism, [[welfare capitalism]] and [[state capitalism]]; each highlighting varying degrees of dependency on markets, public ownership, and inclusion of [[Social policy|social policies]]. The extent to which different markets are free, as well as the rules defining private property, is a matter of politics and [[policy]]. Many states have what are termed capitalist [[mixed economy|mixed economies]], referring to a mix between [[planned economy|planned]] and [[market economy|market-driven]] elements.<ref name="Stilwell">Stilwell, Frank. "Political Economy: the Contest of Economic Ideas." First Edition. Oxford University Press. Melbourne, Australia. 2002.</ref> A pejorative characterization, [[crony capitalism]], refers to a state of affairs in which insider corruption, nepotism and cartels dominate the system. This is considered to be the normal state of mature capitalism in [[Marxian economics]].  

Capitalism has existed under many [[form of government|forms of government]], in many different times, places, and cultures.<ref name="Scott"/> Following the demise of [[feudalism]], capitalism became the dominant economic system in the [[Western world]]. Later, in the 20th century, capitalism overcame a challenge by [[Planned economy|centrally-planned economies]] and is now the dominant system worldwide,<ref name="britannica">{{cite book |title=Capitalism|publisher=Encyclopædia Britannica|year=2006}}</ref><ref>James Fulcher, ''Capitalism, A Very Short Introduction'', "In one respect there can, however, be little doubt that capitalism has gone global and that is in the elimination of alternative systems." p. 99, Oxford University Press, 2004, ISBN 978-0-19-280218-7.</ref> with the [[mixed economy]] being its dominant form in the industrialized Western world.

Different economic perspectives emphasize specific elements of capitalism in their preferred definition. ''Laissez-faire'' and [[Economic liberalism|liberal]] economists emphasize the degree to which [[government]] does not have control over markets and the importance of [[Property rights (economics)|property rights]].<ref>{{cite book |author=Tucker, Irvin B.|title=Macroeconomics for Today|page=553|year=1997}}</ref><ref>{{cite book |author=Case, Karl E.|title=Principles of Macroeconomics|publisher=Prentice Hall|year=2004}}</ref> Neoclassical and Keynesian macro-economists emphasize the need for government regulation to prevent [[monopolies]] and to soften the effects of the [[boom and bust]] cycle.<ref>{{cite book|author=Fulcher, James|title=Capitalism A Very Short Introduction|page=41|publisher=Oxford University Press|year=2004}}</ref> Marxian economists emphasize the role of capital accumulation, exploitation and wage labour. Most political economists emphasize private property as well, in addition to [[Economic power|power]] relations, wage labor, [[Economic class|class]], and the uniqueness of capitalism as a historical formation.<ref name="Stilwell"/>  

Proponents of capitalism argue that it creates more prosperity than any other possible economic system, and that its benefits are mainly to the ordinary person.<ref>Friedman, Milton. ''Capitalism and Freedom''. [Chicago]: University of Chicago, 1962. Print.</ref> Critics of capitalism variously associate it with economic instability<ref>Krugman, Paul, Wells, Robin, ''Economics'', Worth Publishers, New York, (2006)</ref> and an inability to provide for the well-being of all people.<ref>[http://www.vatican.va/holy_father/benedict_xvi/encyclicals/documents/hf_ben-xvi_enc_20090629_caritas-in-veritate_en.html Caritas in veritate paragraph 36]</ref> In contrast to both perspectives, [[socialist]]s maintain that capitalism is superior to all previously existing economic systems (such as feudalism or slavery) but that a superior form of economic organization is possible or will emerge at some point in the future.<ref>''The Rise of Capitalism'', 2011. Socialist Standard, no. 1284, August 2011.</ref>

The term ''capitalism'', in its modern sense, is often attributed to [[Karl Marx]].<ref name="Scott">{{cite book |title=Industrialism: A Dictionary of Sociology|author=Scott, John|publisher=Oxford University Press|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}}</ref> However, Marx rarely used the term "capitalism", although it was used twice in the more political interpretations of Marx's work, which were primarily authored by [[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 capitalism|rentier]]'' and ''[[investor]]'' in reaction to the negative connotations sometimes 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= Oxford University Press|year= 1983|month= |isbn= 0-19-520469-7|page = 51|chapter= Capitalism}}</ref>

There are different variations of capitalism which have different relationships to markets and the state. In free-market and ''[[laissez-faire]]'' forms of capitalism, markets are utilized most extensively with minimal or no regulation over the pricing mechanism. In [[State intervention|interventionist]] and mixed economies, markets continue to play a dominant role but are regulated to some extent by government in order to correct [[market failure]]s, promote [[social welfare]], conserve natural resources, and fund [[military|defense]] and [[public safety]]. 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.

[[Capital (economics)|Capital]] in this sense refers to money used to buy something only in order to sell it again to realize a financial profit. {{cn|date=October 2013}}

Free-market capitalism refers to an economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy. It typically entails support for highly competitive markets, private ownership of productive enterprises. ''Laissez-faire'' is a more extensive form of free-market capitalism where the role of the state is limited to protecting [[Property rights (economics)|property rights]].

* ''[[Laissez-faire]]'' economy <ref name=Barrons>Barrons Dictionary of Finance and Investment Terms. 1995. p. 74</ref>

[[Joseph Schumpeter]] predicted that nations would move away from a capitalist model, and embrace lots of socialist ideologies similar to what is seen in many European countries.  He considered it to be the result of a compromise or truce between capitalism and communism, but in reality this topic is actually hotly debated and many people and nations disagree on both sides of the political spectrum.<ref>Yuichi Shionoya, ''Schumpeter and the Idea of Social Science: A Metatheoretical Study''.  Cambridge: Cambridge University Press.  2007.</ref> In his ''History of Economic Analysis'', Schumpeter reduced mercantilist propositions to three main concerns:<ref>Schumpeter, J. A. (1954) ''History of Economic Analysis''</ref>

After the [[Russian Revolution]] of 1917, but prior to the collapse of the [[Union of Soviet Socialist Republics]] and the [[COMECON]] trade bloc in the 1990s, and before China's shift to a more open [[state capitalism]] in the 1980s through 1990s, it was common to contrast [[communism]] with capitalism.  This is far less common in the 21st century.  Accordingly the understanding of the term has shifted markedly, as the alternatives to capitalism are no longer generally understood as [[authoritarianism|authoritarian]] or [[totalitarian]].  A great deal of 20th century literature on the topic would be almost incomprehensible to modern readers, even knowing this context and history.   

In particular, [[monetarism]], a theoretical alternative to Keynesianism that is more compatible with ''laissez-faire'', gained increasing prominence in the capitalist world, especially under the leadership of [[Ronald Reagan]] in the US and [[Margaret Thatcher]] in the UK in the 1980s. 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." <ref name="Fulcher, James 2004">Fulcher, James. Capitalism. 1st ed. New York: Oxford University Press, 2004.</ref>  In the eyes of many economic and political commentators, the collapse of the [[Soviet Union]] brought further evidence of the superiority of market capitalism over planned economy.

 

Modern [[welfare economics]] has produced a number of detailed defenses of the mixed capitalist economy based on public ownership of infrastructure and defense of positive human rights such as housing or education. [[Amartya Sen]] in particular, in ''[[Development as Freedom]]'', his Nobel Prize winning work, argued that the optimal economic system is a democratic [[mixed economy]] with a [[welfare state]].<ref>Amartya Sen, ''Development as Freedom''. Oxford: Oxford University Press. 1999.</ref>{{page needed|date=October 2013}}.

Keynesian economics challenged the notion that ''laissez-faire'' capitalist economics could operate well on their own, without state intervention used to promote [[aggregate demand]], fighting high unemployment and [[Deflation (economics)|deflation]] of the sort seen during the 1930s. He and his followers recommended "[[Deficit spending|pump-priming]]" the economy to avoid [[recession]]: 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 [[inflation]] 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=26 February 2008|publisher=Marxists }}</ref>

The [[Chicago school (economics)|Chicago School of economics]] is best known for its free market advocacy and [[monetarist]] ideas. According to Friedman and other monetarists, market economies are inherently stable if left to themselves and depressions result only from government intervention.<ref>{{cite book |title=Macroeconomics and New Macroeconomics|author=Felderer, Bernhard}}</ref>

In his book ''[[The Road to Serfdom]]'', [[Freidrich Hayek]] reasons that the [[economic freedom]] of capitalism is a requisite of [[political freedom]]. He argues that the market mechanism is the only way of deciding what to produce and how to distribute the items without using coercion. [[Milton Friedman]], [[Andrew Brennan]] 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 that the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminish their power to coerce. Some of Friedman's views were shared by [[John Maynard Keynes]], who 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|page=60}}</ref>

 

[[Ayn Rand]] attempted a positive moral defense of ''laissez-faire'' capitalism, most notably in her 1957 novel ''[[Atlas Shrugged]]''. She insisted that capitalism should be supported on moral grounds, not just on the basis of practical benefits.<ref>{{cite book |first=Jennifer |last=Burns |chapter=Godless Capitalism: Ayn Rand and the Conservative Movement |title=American Capitalism: Social Thought and Political Economy in the Twentieth Century |editor-first=Nelson (ed.) |editor-last=Lichtenstein |location=Philadelphia |publisher=University of Pennsylvania Press |year=2006 |isbn=978-0-8122-3923-2 |pages=282-283}}</ref><ref>{{cite book |first1=Douglas |last1=Den Uyl |first2=Douglas |last2=Rasmussen |first2=Douglas |chapter=Capitalism |title=[[The Philosophic Thought of Ayn Rand]] |editor1-last=Den Uyl |editor1-first=Douglas |editor2-last=Rasmussen |editor2-first=Douglas (eds.) |authorlink2=Douglas B. Rasmussen |location=Chicago |publisher=University of Illinois Press |year=1984 |isbn=0-252-01033-7 |oclc=9392804 |lastauthoramp=y |pages=173-174}}</ref> Her views have been ignored or rejected by many critics, but she has significantly influenced conservative and [[libertarianism|libertarian]] defenders of capitalism, especially in the American [[Tea Party movement]].<ref>{{cite book |title=Ayn Rand Nation: The Hidden Struggle for America's Soul |last=Weiss |first=Gary |authorlink=Gary Weiss |location=New York |publisher=St. Martin's Press |year=2012 |isbn=978-0-312-59073-4 |oclc=740628885 |pages=14-16}}</ref>