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Capitalism is an based on the private ownership of the means of production and their operation for profit.

(1988). 9780155124035, Harcourt College Publishing. .
(2003). 9780262182348, .
(2024). 9780691186474, Princeton University Press.
Central characteristics of capitalism include capital accumulation, competitive markets, , , property rights recognition, voluntary exchange, and .Heilbroner, Robert L. "Capitalism" . and Lawrence E. Blume, eds. The New Palgrave Dictionary of Economics. 2nd (Palgrave Macmillan, 2008) .
(2024). 9781476784311, Simon & Schuster. .
In a , decision-making and investments are determined by owners of wealth, property, or ability to maneuver capital or production ability in and —whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.
(2024). 9781285055350, South-Western College Publishing.

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, , and welfare capitalism. Different forms of capitalism feature varying degrees of , ,

(2024). 9781285055350, South-Western College Publishing.
obstacles to free competition, and state-sanctioned . 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 that combine elements of free markets with state intervention and in some cases economic planning.

Capitalism in its modern form emerged from in 16th century and practices by European countries in the 16th to 18th centuries. The Industrial Revolution of the 18th century established capitalism as a dominant mode of production, characterized by and a complex division of labor. 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 . During the 19th century, capitalism was largely unregulated by the state, but became more regulated in the post–World War II period through , followed by a return of more unregulated capitalism starting in the 1980s through .

Market economies have existed under many forms of government and in many different times, places and cultures. Modern industrial capitalist societies developed in Western Europe in a process that led to the Industrial Revolution. Capitalist economies promote economic growth through accumulation of capital, however a of economic growth followed by recession is a common characteristic of such economies.


Etymology
Other terms sometimes used for capitalism:

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 word based on caput, meaning "head"—which is also the origin of "chattel" and "" 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.James Augustus Henry Murray. "Capital". A New English Dictionary on Historical Principles. Oxford English Press. 2. p. 93. 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 (holländische) Mercurius uses "capitalists" in 1633 and 1654 to refer to owners of capital. In French, Étienne Clavier referred to capitalistes in 1788,E.g., "L'Angleterre a-t-elle l'heureux privilège de n'avoir ni Agioteurs, ni Banquiers, ni Faiseurs de services, ni Capitalistes ?" in Étienne (1788) De la foi publique envers les créanciers de l'état : lettres à M. Linguet sur le n° CXVI de ses annales p. 19 four years before its first recorded English usage by Arthur Young in his work Travels in France (1792).Arthur Young. Travels in France. In his Principles of Political Economy and Taxation (1817), referred to "the capitalist" many times.Ricardo, David. Principles of Political Economy and Taxation. 1821. John Murray Publisher, 3rd edition. English poet Samuel Taylor Coleridge used "capitalist" in his work Table Talk (1823).Samuel Taylor Coleridge. Tabel The Complete Works of Samuel Taylor Coleridge . p. 267. 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.

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"). frequently referred to the "capital" and to the "capitalist mode of production" in (1867).MEW, 23, & Das Kapital. Kritik der politischen Oekonomie. Erster Band-Verlag von Otto Meissner (1867) Marx did not use the form capitalism but instead used capital, capitalist and capitalist mode of production, which appear frequently.The use of the word "capitalism" appears in Theories of Surplus Value, volume II. ToSV was edited by Kautsky. 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 economic individualism.Hessen, Robert (2008) "Capitalism", in Henderson, David R. (ed.) The Concise Encyclopedia of Economics p. 57 agrees with the statement that the term is a misnomer, adding that it misleadingly suggests that there is such as a thing as "capital" that inherently functions in certain ways and is governed by stable economic laws of its own.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

In the , the term "capitalism" first appears, according to the Oxford English Dictionary (OED), in 1854, in the novel by novelist William Makepeace Thackeray, where the word meant "having ownership of capital".James Augustus Henry Murray. "Capitalism" p. 94. Also according to the OED, Carl Adolph Douai, a and abolitionist, used the term "private capitalism" in 1863.


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 ) have sometimes been argued to actually exhibit characteristics of capitalism. 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 suggesting that the term "capitalism" should be abandoned entirely.
(2024). 9783319474571, Springer.
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
Capitalism, in its modern form, can be traced to the emergence of agrarian capitalism and mercantilism in the early , in city-states like . 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 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, promulgated capitalist economic policies such as free trade and banking. Their use of Indo-Arabic numerals 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.


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.


Mercantilism
The economic doctrine prevailing from the 16th to the 18th centuries is commonly called .
(2024). 9781876646301, . .
This period, the Age of Discovery, 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. Most scholars consider the era of merchant capitalism and mercantilism as the origin of modern capitalism, Encyclopædia Britannica (2006) 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".

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.

(2024). 9781409419143, Ashgate Publishing. .

European , 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...".Quoted in

After the period of the proto-industrialization, the British East India Company and the Dutch East India Company, after massive contributions from the ,Om Prakash, " Empire, Mughal", History of World Trade Since 1450, edited by John J. McCusker, vol. 1, Macmillan Reference USA, 2006, pp. 237–240, World History in Context. Retrieved 3 August 2017

(2024). 9781136825521, . .
inaugurated an expansive era of commerce and trade. These companies were characterized by their and 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
In the mid-18th century a group of economic theorists, led by (1711–1776) 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 Industrial Revolution, replaced merchants as a dominant factor in the capitalist system and effected the decline of the traditional handicraft skills of , guilds and . Industrial capitalism marked the development of the 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.

(1996). 9780191018275, Oxford University Press. .

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 Manchester School, initiated a movement to lower . In the 1840s Britain adopted a less protectionist policy, with the 1846 repeal of the and the 1849 repeal of the .

(1996). 9780191018275, Oxford University Press. .
Britain reduced tariffs and , in line with David Ricardo's advocacy of .


Modernity
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. Late in the 20th century, capitalism overcame a challenge by and is now the encompassing system worldwide,
(2024). 9780192802187, Oxford University Press.
with the 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 of the 18th-century decisively shaped globalization.

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

From the 1870s to the early 1920s, the global financial system was mainly tied to the .

(2019). 9780691194585, Princeton University Press.
(2024). 9781107159488, Cambridge University Press.
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 ( ) in 1873. New technologies, such as the , the transatlantic cable, the , the and 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

(2024). 9780674031012, Harvard University Press.
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, , 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 and the IMF), large institutional investors and a well-funded . A significant 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 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 .

(2024). 9780631235545, Blackwell Publishing.
, 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 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 , called "remarketized capitalism".

The end of the 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 global economy would have been impossible without the fall of .

(2024). 9780197519646, Oxford University Press. .
(2024). 9780674976788, Harvard University Press. .

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 and capitalism is a contentious area in theory and in popular political movements. The extension of adult-male 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 regimes, absolute monarchies and . 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 régimes have been able to manage economic growth using some of capitalism's competitive principles without making concessions to greater political freedom.

Political scientists and see democracy and capitalism as mutually supportive.

(2024). 9780691182735, Princeton University Press. .
argued in On Democracy that capitalism was beneficial for democracy because economic growth and a large middle class were good for democracy.
(2024). 9780300257991, Yale University Press. .
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), (1899–1992) asserted that the free-market understanding of 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. and 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 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.

(2024). 9780226320618, University of Chicago Press.
(2024). 9780521563543, Cambridge University Press.
, 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 as measured by Freedom House and economic freedom as measured by the Wall Street Journal/Heritage Foundation survey".
(2024). 9780765801012, Transaction Publishers.

In Capital in the Twenty-First Century (2013), 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.

(2024). 9780674430006, .

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. 's rule in Chile led to economic growth and high levels of inequality (2008). . Picador. p. 105 . by using authoritarian means to create a safe environment for investment and capitalism. Similarly, 's authoritarian reign and extirpation of the Communist Party of Indonesia allowed for the expansion of capitalism in .

(2024). 9781400888863, Princeton University Press. .

The term "capitalism" in its modern sense is often attributed to . In his , Marx analyzed the "capitalist mode of production" 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 rentier and in reaction to the negative connotations associated with capitalism.

(1983). 9780195204698, Oxford University Press.


Characteristics
In general, capitalism as an economic system and mode of production can be summarized by the following:
  • Capital accumulation: production for profit and accumulation as the implicit purpose of all or most of production, constriction or elimination of production formerly carried out on a common social or private household basis.
  • Commodity production: production for exchange on a market; to maximize instead of .
  • Private ownership of the means of production:
  • Primacy of .
  • The of money to make a profit.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, .
  • The use of the 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.
    (1998). 9780915463732, Jameson Books.
    (2024). 9780765625991, PHI Learning.
  • Freedom of capitalists to act in their self-interest in managing their business and investments.
    (1998). 9780915463732, Jameson Books.
  • Capital suppliance by "the single owner of a firm, or by in the case of a joint-stock company."
    (2024). 9780739478097, Oxford University Press.


Market
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,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, . markets continue to play a dominant role, but they are regulated to some extent by the state in order to correct , promote , conserve , fund and or other rationale. In 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. 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.

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
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 employment contract.: "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." These transactions usually occur in a where or are .

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.

(2024). 9789350570326, V&S Publishers.


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. Compare:
(1997). 9781402049842, Springer Science & Business Media. .
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 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".Hazlitt, Henry. "The Function of Profits". Economics in One Lesson. Ludwig Von Mises Institute. Web. 22 April 2013.

Socialist theorists note that, unlike merchantilists, 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. "What is capitalism" Australian Socialist Https://search.informit.org/doi/10.3316/informit.818838886883514


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

According to de Soto, this is the process by which physical assets are transformed into capital, which in turn may be used in many more ways and much more efficiently in the market economy. A number of Marxian economists have argued that the 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 .


Market competition
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". It was described by in The Wealth of Nations (1776) and later economists as allocating productive to their most highly valued uses and encouraging . 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 . 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 , 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.
(2024). 9780132991292, Pearson.

In the works of Adam Smith, the idea of capitalism is made possible through competition which creates growth. Although capitalism has 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. The fear arises 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
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
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 means of production, extraction of by the owning class for the purpose of capital accumulation, and, at least as far as are concerned, being .

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 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.

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."Capitalism." World Book Encyclopedia. 1988. p. 194.


Supply and demand
In capitalist economic structures, supply and demand is an of price determination in a market. It postulates that in a perfectly competitive market, the 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 , as described by David Besanko and Ronald Braeutigam, are the following four:

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


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


Demand schedule
A demand schedule, depicted graphically as the , 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 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.Unlike most graphs, 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.

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


Equilibrium
In the context of supply and demand, economic equilibrium refers to a state where economic forces such as supply and demand are balanced and in the absence of external influences the () 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.
(1992). 9780393957358, Norton. .
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 price and will tend not to change unless demand or supply changes.


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".
(2024). 9788187140894, VK Publications. .


History
According to Hamid S. Hosseini, the "power of supply and demand" was discussed to some extent by several early Muslim scholars, such as fourteenth century scholar , who wrote: "If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down".
(2024). 9780631225737, Blackwell.
(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).

's 1691 work Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of MoneyJohn Locke (1691) 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 : "The price of any commodity rises or falls by the proportion of the number of buyer and sellers" and "that which regulates the price... of is nothing else but their quantity in proportion to their rent".

titled one chapter of his 1817 work Principles of Political Economy and Taxation "On the Influence of Demand and Supply on Price".Thomas M. Humphrey, 1992. "Marshallian Cross Diagrams and Their Uses before Alfred Marshall", Economic Review, Mar/Apr, Federal Reserve Bank of Richmond, pp. 3–23 . 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 "introducing the diagrammatic method into the English economic literature" published the first drawing of supply and demand curves therein,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. including comparative statics from a shift of supply or demand and application to the labor market.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 link . The model was further developed and popularized by in the 1890 textbook Principles of Economics.


Types
There are many variants of capitalism in existence that differ according to country and region.
(2001). 9780199247752, Oxford University Press, U.S.A..
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, , state monopoly capitalism, and .


Advanced
Advanced capitalism is the situation that pertains to a society in which the 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.Lears, T.J. Jackson (1985) "The Concept of Cultural Hegemony"Holub, Renate (2005) Antonio Gramsci: Beyond Marxism and Postmodernism (2012) Ecology and Revolution: Global Crisis and the Political Challenge

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

  1. Concentration of industrial activity in a few large firms.
  2. Constant reliance on the state to stabilise the economic system.
  3. A formally democratic government that legitimises the activities of the state and dissipates opposition to the system.
  4. The use of nominal wage increases to pacify the most restless segments of the work force.Habermas, 1988: 37, 75.


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


Finance
Finance capitalism is the subordination of processes of production to the accumulation of profits in a . In their critique of capitalism, and both emphasise the role of finance capital as the determining and interest in capitalist society, particularly in the latter stages.Imperialism, the Highest Stage of Capitalism ibid. Finance Capital and the Finance Oligarchy

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 into Imperialism, the Highest Stage of Capitalism (1917), his analysis of the imperialist relations of the great world powers.Frederic Jameson, 'Culture and Finance Capital', in The Jameson Reader (2005) p. 257 Lenin concluded that the banks at that time operated as "the chief nerve centres of the whole capitalist system of national economy".Quoted in E.H. Carr, The Bolshevik Revolution 2 (1971) p. 137 For the (founded in 1919), the phrase "dictatorship of finance capitalism"Quoted in F.A Voight, Unto Caesar (1938) p. 22 became a regular one.

would later point to two earlier periods when finance capitalism had emerged in human history—with the Genoese in the 16th century and with the Dutch in the 17th and 18th centuries—although at those points it developed from commercial capitalism.C. J.Calhoun/G. Derluguian, Business as Usual (2011) p. 57 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.Jameson, pp. 259–260


Free market
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.

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.

(1977). 9780801819018, Johns Hopkins University Press. .


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

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


State
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 East Asian model of capitalism, and the economy of Norway. Alternatively, defines state capitalism as "an economic system in which private capitalism is modified by a varying degree of government ownership and control". State capitalism . . Retrieved 7 July 2015.

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 . 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.V.I. Lenin. The Tax in Kind . Lenin's Collected Works, 1st English ed., Progress Publishers, Moscow, 1965, vol. 32, pp. 329–365.V.I. Lenin. To the Russian Colony in North America . Lenin Collected Works, Progress Publishers, 1971, Moscow, vol. 42, pp. 425c–427a.

Some economists and left-wing academics including Richard D. Wolff and , as well as many Marxist philosophers and revolutionaries such as Raya Dunayevskaya and C.L.R. James, 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. "State capitalism" in the Soviet Union , M.C. Howard and J.E. King (1986). The Soviet Union Versus Socialism . Our Generation. Retrieved 9 July 2015.Richard D. Wolff (27 June 2015). Socialism Means Abolishing the Distinction Between Bosses and Employees . . Retrieved 9 July 2015.

The term is not used by 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.

(1979). 9780913966631, LibertyClassics. .


Welfare
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 , social market economy 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 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 , 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 indirect economic planning over a largely capitalist-based economy.

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

(2024). 9782021082289, Éditions du Seuil.


Eco-capitalism
, also known as "environmental capitalism" or (sometimes) "green capitalism", is the view that capital exists in nature as "" ( that have ) on which all depends. Therefore, governments should use market-based policy-instruments (such as a ) 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 .


Sustainable capitalism
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.
(2024). 9781612847795
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 , 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.

(2013). 9781306218047, Routledge.

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

In mainstream , 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 and , 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
Wage labor refers to the sale of under a formal or informal employment contract to an . These transactions usually occur in a where are market determined..
, defines wage labour succinctly as "the labour of the worker who sells his own labour-power."
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 .Christopher T.S. Ragan and Richard G. Lipsey. Microeconomics. 12th Canadian ed. Toronto, Pearson Education, 2008.Robbins, Richard H. Global problems and the culture of capitalism. Boston: Allyn & Bacon, 2007.


Criticism
Criticism of capitalism comes from various political and philosophical approaches, including , , and viewpoints.
(2024). 9781780742502, One World Publications.
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 .
(2017). 9781316137024, Cambridge University Press.

Prominent critiques of capitalism allege that it is inherently exploitative,

(2024). 9780226818399, University of Chicago Press. .
alienating,"Alienation." Pp. 10. in A Dictionary of Philosophy (rev. 2nd ed.). 1984. , ,
(2024). 9781944869014, . .
and economically inefficient
(2010). 9781848134171, Zed Books. .
—and that it creates massive economic inequality,
(2024). 9780197549247, Oxford University Press.
people, degrades the environment,
(2024). 9781786091215, Windmill Books.
is , and leads to an erosion of because of its of expansion and war.
(2024). 9780415686174, . .
Lenin's Selected Works, Progress Publishers, 1963, Moscow, Volume 1, pp. 667–766

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,

(2024). 9781605098135, Berrett-Koehler Publishers, Inc..
(2024). 9781982176440, Simon & Schuster.
while a or John Bogle (human) ethic of 'enough' creates a sustainable form.
(1994). 9781880837924, Smyth & Helwys Publishing.
(2024). 9780470524237, John Wiley & Sons.
Equitable ethics and unified ethical decision-making is theorized to create a less damaging form of capitalism.
(2024). 9781725280939, Wipf & Stock Publishers.


See also

Notes

Bibliography


Further reading
  • (2011). America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy, 2nd Edition. Democracy Collaborative Press. .
  • (2024). 9781629631486, PM Press.
  • Ascher, Ivan. Portfolio Society: On the Capitalist Mode of Prediction. Zone Books, 2016.
  • Baptist, Edward E. The Half Has Never Been Told: Slavery and the Making of American Capitalism. New York, , 2014. .
  • (2024). 9780955066474, OpenMute. .
  • (2024). 9780674050716, Harvard University Press.
  • (2024). 9780674919327, Harvard University Press.
  • . 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.
  • (2024). 9780691190785, Princeton University Press. .
  • Farl, Erich. "The Genealogy of State Capitalism". In: International London, vol. 2, no. 1, 1973.
  • (2024). 9781846943171, John Hunt Publishing.
  • Gough, Ian. State Expenditure in Advanced Capitalism New Left Review.
  • Habermas, J. 1973 Legitimation Crisis (eng. translation by T. McCarthy). Boston, Beacon. From Google books ; excerpt.
  • (2024). 9780199360260, Oxford University Press.
  • and Edward E. Baptist (2014). American Capitalism: A Reader. Simon & Schuster. .
  • Jameson, Fredric (1991). Postmodernism, or, the Cultural Logic of Late Capitalism.
  • Kotler, Philip (2015). Confronting Capitalism: Real Solutions for a Troubled Economic System. AMACOM.
  • Mandel, Ernest (1999). Late Capitalism.
  • (2024). 9781619021587, Counterpoint.
  • 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 (Vancouver,: On the Brink Publishing, 2013), pp. 50–104.
  • (2024). 9780674729681, Harvard University Press.
  • (2024). 9780822337454, Duke University Press. .
  • (2024). 9780415496803, .
  • Panitch, Leo, and Sam Gindin (2012). The Making of Global Capitalism: the Political Economy of American Empire. London, Verso. .
  • (2024). 9780674430006, .
  • (2024). 9780674980822, Belknap Press.
  • (2001). The Great Transformation: The Political and Economic Origins of Our Time. ; 2nd ed.
  • (1998). 9780915463732, Jameson Books.
  • Richards, Jay W. (2009). Money, Greed, and God: Why Capitalism is the Solution and Not the Problem. New York: .
  • Roberts, Paul Craig (2013). The Failure of Laissez-faire Capitalism: towards a New Economics for a Full World. Atlanta, Ga.: Clarity Press.
  • Robinson, William I. Global Capitalism and the Crisis of Humanity. Cambridge University Press, 2014.
  • (2024). 9780190253028, Oxford University Press. .
  • Hoevet, Ocean. "Capital as a Social Relation" (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.)
  • , "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.), The New York Review of Books, vol. LXX, no. 14 (21 September 2023), pp. 38–40. "Palo a place where the United 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 ." (p. 40.)
  • (1983). 9780860917618, .
  • (2024). 9781608462476, .
  • (2024). 9781859843925, .


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