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T HE J OU R N AL OF I N D I AN P HI L O SO P HE R
FSSR
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MARCH 2013
VOLUME I NO I
CAPITALISM IS DEFINED AS A SOCIAL AND ECONOMIC SYSTEM WHERE CAPITAL
OWNED AND CONTROLLED BY PRIVATE PERSONS
MR.CHANDRAJIT ARORA
RESEARCH SCHOLAR
RAJASTHAN UNIVERSITY
Capitalism is an economic system that is based on private ownership of the means of production
and the creation of goods or services for profit. Other elements central to capitalism include
competitive markets, wage labor and capital accumulation . There are multiple variants of
capitalism, including laisser-faire, welfare capitalism and state capitalism . Capitalism is
considered to have been applied in a variety of historical cases, varying in time, geography,
politics, and culture. There is general agrerment that capitalism became dominant in the Western
world following the demise of feudalism. Competitive markets may also be found in marketbased alternatives to capitalism such as market socialism and co-operative economics.
Economists, political economists and historians have taken different perspectives on the analysis
of capitalism. Economists usually emphasize the degree to which government does not have
control over markets (laissez faire), as well as the importance of property rights . Most political
economists emphasize private property as well, in addition to power relations, wage labor, class,
and the uniqueness of capitalism as a historical formation. 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 mixed economies , referring to the varying degree of planned and
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market-driven elements in a state’s economic system. A number of political ideologies have
emerged in support of various types of capitalism, the most prominent being economic
liberalism.
Capitalism is defined as a social and economic system where capital assets are mainly owned
and controlled by private persons, where labor is purchased for money wages, capital gains
accrue to private owners, and the price mechanism is utilized to allocate capital goods between
uses. The extent to which the price mechanism is used, the degree of competitiveness and
government intervention in markets distinguish exact forms of captialism.
There are different variations of capitalism which have different relationships to markets and the
state. In free-market and Lassiez-faire forms if capitalism , markets are utilized most extensively
with minimal or no regulation over the pricing mechanism. In interventionist and mixed
economies , markets continue to play a dominant role but are regulated to some extent by
government in order to correct market failures and to promote social welfare.
In state capitalist systems , markets are relied upon the least , with the state relying heavily on
state –owned enterprises or indirect econimic planning to accumulate capital.Capitalism and
capitalist economics is generally considered to be the opposite of socialism , which contrasts
with all forms of capitalism in the following ways: social ownership of the means of production,
where returns on the means of production accrue to society at large , and goods and services are
produced directly for their utility (as opposed to being produced by profit-seeking businesses).
MONEY, CAPITAL AND ACCUMULATION
Money was primarily a standardized medium of exchange , and final means of payment , that
serves to measure the value of all goods and commodities in a standard of value. It is an
abstraction of economic value and medium of exchange that eliminates the cumbersome system
of barter by separating the transactions involved in the exchange of products, thus greatly
facilitating specialization and trade through
encouraging the exchange of
commodities.Capitalism involves the further abstraction of money into exchangeable assets and
the accumulation of money through ownership, exchange, interest and various other financial
instruments.
Capital in this sense refers to money used to buy something only in order to sell it again to
realize a financial profit.The accumulation of capital refers to the process of “making money’’,or
growing an initial sum of money through investment in production.capitalism is based around the
accumulation of capital, whereby financial capital is invested in order to realize 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 AND FINANCIAL MARKETS
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The defining feature of capitalist markets, in contrast to markets and exchange in pre-capitalist
societies like feudalism, is the existence of a markets for capital goods (the means of
productions), meaning exchange –relations (business relationships) exist within the productions
process. Additionally, capitalism features a market for labor. This distinguishes the capitalist
market from pre-capitalist societies which generally only contained market exchange for final
goods and secondary goods . The “market” in capitalism refersto capital markets and financial
markets.
Capitalism is the system of raising, conserving and spending a set monetary value in a specified
market. There are three main markets in a basic capitalistic economy: labor, goods and services,
and financial. Labor markets(people) make products and get paid for work by the goods and
services market (companies, firms, or corporations, etc.) which then sells the products back to
the laborers. However, both of the first two markets pay into and receive benefits from the
financial market, which handles and regulates the actual money in the economic system. This
includes banks, credit-unions, stock exchanges, etc. From a monetary standpoint, governments
control just how much money is in circulation worldwide, which plays an immense role on how
money is spent in one’s own country.
WAGE LABOR AND CLASS STRUCTURE
Wage labor refers to the class-structure of capitalism, whereby workers receive either a wage or
a salary, and owners who supply financial capital receive the profits generated by the factors of
production employed in the production of economic value. Capitalists are individuals who
possess and supply financial capital to productive ventures and thus become the owners of the
means of producing economic value, either jointly (as shareholders) or individually.”Capitalists”
refers to the class who own the factors of production and derive an income based on capital gains
(profit, interest or rent, also called surplus value), which is created by workers using the factors
of production. Capitalists may take the form of investors, shareholders or venture capitalists.
“Workers” includes those who expend both manual and mental (or creative) labor in production,
where production does not simply mean physical production but refers to the production of both
tangible and intangible economic value. A capitalist is an individual who supplies capital to a
business venture and derives his or her income on the return on his or her investment.
Labor includes all physical and mental human resources, including entrepreneurial capacity and
management skills, which are needed to produce products and services. Production is the act of
making products or services by applying labor power to the means of production.
TYPES OF CAPITALISM
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 is that they are based on the production of goods and
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services for profit, predominately market-based allocation of resources, and they are structured
upon the accumulation of capital. The major forms of capitalism are listed below:
Mercantilism-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 to state-interest and imperialism, and consequently, the state apparatus is utilized 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
(Britain, France, etc.). Mercantilism holds that the wealth of a nation is increased through a
positive balance of trade with other nations, and corresponds to the phase of capitalist
development called the Primitive accumulation of capital.
Free-market capitalism-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.
State capitalism-State capitalism consists of state ownership of the production within a state
.The debate between proponents if private versus state capitalism is centered around questions of
managerial efficacy, productive efficiency, and fair distribution of wealth.
According to Aldo Musacchio, a professor at Harvard Business School, it is a system in which
governments, whether democratic or autocratic, exercise a widespread influence on the economy,
through either direct ownership or various subsidies. Musacchio also emphasizes the difference
between today’s state capitalism and its predecessors. Gone are the days when governments
appointed bureaucrats to run companies. The world’s largest state-owned enterprises are traded
on the public markets and kept in good health by large institutional investors.
Corporate capitalism-Corporate capitalism is a free or mixed-market economy characterized by
the dominance of hierarchical, bureaucratic corporations,which are legally required to pursue
profit.State-monopoly capitalism was originally a Marxist concept referring to a form of
corporate capitalism in which state policy is utilized to benefit and promote the interests of
dominant or established corporations by shielding them from competitive pressures or by
providing them with subsidies.
Critics of capitalism associate it with: social inequality and unfair distribution of wealth and
power; a tendency toward market monopoly or oligopoly (and government by oligarchy);
imperialism, counter-revolutionary wars and various forms of economic and cultural
exploitation; materialism;repression of workers and trade unionists;social alienation; economic
inequality; unemployment;and economic instability.Individual property rights have also been
associated with the tragedy of the anticommons.
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Notable critics of capitalism have included: socialists, anarchists, communists, national
socialists, social democrats, technocrats, some types of conservatives, Luddites, Narodniks,
Shakers and some types of nationalists.
Conclusion
Marxists have advocated a revolutionary overthrow of capitalism that would lead to socialism,
before eventually transforming into communism.Many socialists consider capitalism to be
iorrational, in that production and the direction of the economy are unplanned, creating many
inconcistencies and internal contradictions. Labor historians and scholars such as Immanuel
Wallerstein have argued that unfree labor- by slaves, indentured servants, prisoners, and other
coerced persons-is compatible with capitalist relations. Many asdpects of capitalism have come
under attack from the anti-globalization movement,which is primarily opposed to corporate
capitalism,Environmentalists have argued that capitalism requires continual economic growth,
and that it will inevitable deplete the finite natural resources of the Earth.Many religions have
criticized or opposed specific elements of capitalism.Traditional Judaism,Christianity,and Islam
forbid lending money at interest, although alternative methods of banking have been developed.
Some Christians have criticized capitalism for its materialist aspects and its inability to account
for the wellbeing of all people. Many of Jesus’s parables deal with clearly economic concerns:
farming , shepherding, being in debt, doing hard labor, being excluded from banquets and the
houses of the rich, and have implications for wealth and power distribution.
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