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T HE J OU R N AL OF S OC I A L S C I E N C E SC H OL AR
FSSR
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APRIL 2013
VOLUME I NO I
ECONOMIC DEVELOPMENT THROUGH CAPITALISM, EXAMPLES FROM FIRST
WORLD COUNTRIES IN ASIA
MR.SWAPAN DATTA
RESEARCH SCHOLAR
KALYANI UNIVERSITY
KALYANI
WEST BENGAL
ABSTRACT
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 agreement 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.
KEY-WORDS: Capitalism, Economic, Classification, Development.
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
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states have what are termed mixed economies, referring to the varying degree of planned and
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 capitalism.
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 economic 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 profitseeking 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
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further production in a continuous process of accumulation . In Marxian economic theory, this
dynamic is called the law of value.
CAPITAL AND FINANCIAL MARKETS
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 refers to 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.
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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
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:
1. 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.
2. 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.
3. 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 on 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.
4. 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.
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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 anti commons.
Notable critics of capitalism have included: socialists, anarchists, communists, national
socialists, social democrats, technocrats, and 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
irrational, in that production and the direction of the economy are unplanned, creating many
inconsistencies and internal contradictions. Labor historians and scholars such as Immanuel
Wallerstein have argued that free labor- by slaves, indentured servants, prisoners, and other
coerced persons-is compatible with capitalist relations.
Many aspects 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.
REFERENCES
1. Joseph E. Stiglitz (2000) : Economics of the Public Sector, 3rd edition, Chapter 4.
2. Laffont, J.J. (1987):" The New Palgrave: A Dictionary of Economics, externalities"
3. pp. 263–65.
4. Blaug, Mark (2007): The New Encyclopedia Britannica "The Social
Sciences:Economics", pp. 347, Chicago.
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5. Kneese, Allen K., and Clifford S. Russell (1987): The New Palgrave: A Dictionary of
Economics "environmental economics,Volume- 2, pp. 159–64
6. Groenewegen, Peter (2008): The New Palgrave Dictionary of Economics "division of
labour".
7.Cameron, Rondo (1993): A Concise Economic History of the World: From Paleolithic
Times to the Present, Oxford, pp. 25, 32, 276–80.
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