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{{Short description|Economic system based on private ownership}}
{{Redirect2|Liberal market economy|Free enterprise|the ideology behind this economic system|Economic liberalism|the film|Free Enterprise (film)}}
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'''Capitalism''' is an [[economic system]] based on the [[private ownership]] of the [[means of production]] and their operation for [[Profit (economics)|profit]].<ref>{{cite book |last1=Zimbalist |last2=Sherman |last3=Brown |first1=Andrew |first2=Howard J. |first3=Stuart |title=Comparing Economic Systems: A Political-Economic Approach |publisher=[[Harcourt College Publishing]] |date=October 1988 |isbn=978-0-15-512403-5 |pages=[https://archive.org/details/comparingeconomi0000zimb_q8i6/page/6 6–7] |quote=Pure capitalism is defined as a system wherein all of the means of production (physical capital) are privately owned and run by the capitalist class for a profit, while most other people are workers who work for a salary or wage (and who do not own the capital or the product). |url=https://archive.org/details/comparingeconomi0000zimb_q8i6/page/6}}</ref><ref>{{cite book |last1=Rosser |first1=Mariana V. |last2=Rosser |first2=J Barkley |title=Comparative Economics in a Transforming World Economy |publisher=[[MIT Press]] |date=23 July 2003 |isbn=978-0-262-18234-8 |page=7 |quote=In capitalist economies, land and produced means of production (the capital stock) are owned by private individuals or groups of private individuals organized as firms.}}</ref><ref>{{cite book |first=Chris |last=Jenks |title=Core Sociological Dichotomies |quote=Capitalism, as a mode of production, is an economic system of manufacture and exchange which is geared toward the production and sale of commodities within a market for profit, where the manufacture of commodities consists of the use of the formally free labor of workers in exchange for a wage to create commodities in which the manufacturer extracts surplus value from the labor of the workers in terms of the difference between the wages paid to the worker and the value of the commodity produced by him/her to generate that profit. |location=London; Thousand Oaks, CA; New Delhi |publisher=[[SAGE Publishing]] |page=383}}</ref><ref>{{cite book |title=The Challenge of Global Capitalism : The World Economy in the 21st Century |last=Gilpin |first=Robert |author-link=Robert Gilpin |isbn=978-0-691-18647-4 |oclc=1076397003 |date=2018|publisher=Princeton University Press }}</ref><ref>{{cite journal |last1=Sternberg |first1=Elaine |title=Defining Capitalism |journal=[[Economic Affairs (journal)|Economic Affairs]] |date=2015 |volume=35 |issue=3 |pages=380–396 |doi=10.1111/ecaf.12141|s2cid=219373247 | issn = 0265-0665}}</ref> The defining characteristics of capitalism include private property, [[capital accumulation]], [[competitive market]]s, [[price system]]s, recognition of [[Property rights (economics)|property rights]], [[self-interest]], [[economic freedom]], [[meritocracy]], [[work ethic]], [[consumer sovereignty]], [[economic efficiency]], [[profit motive]], a [[Financial market infrastructure|financial infrastructure of money and investment]] that makes possible [[credit]] and [[debt]], [[entrepreneurship]], [[commodification]], [[voluntary exchange]], [[wage labor]], production of [[commodities]] and [[Service (economics)|service]]s, and a strong emphasis on [[innovation]] and [[economic growth]].<ref>{{cite journal |last1=Heilbroner |first1=Robert L. |title=Capitalism |journal=The New Palgrave Dictionary of Economics |date=2018 |pages=1378–1389 |doi=10.1057/978-1-349-95189-5_154|isbn=978-1-349-95188-8 }}</ref><ref>{{cite book |last1=Hodgson |first1=Geoffrey M. |title=Conceptualizing Capitalism: Institutions, Evolution, Future |date=2015 |publisher=[[University of Chicago Press]] |location=Chicago |isbn=9780226168142 |url=https://press.uchicago.edu/ucp/books/book/chicago/C/bo18523749.html}}</ref><ref name = "harris">{{cite journal |last1=Harris |first1=Neal |last2=Delanty |first2=Gerard |title=What is capitalism? Toward a working definition |journal=[[Social Science Information]] |date=2023 |volume=62 |issue=3 |pages=323–344 |doi=10.1177/05390184231203878 |doi-access=free}}</ref><ref>{{cite journal |last1=Berend |first1=Ivan T. |title=Capitalism |journal=[[International Encyclopedia of the Social & Behavioral Sciences|International Encyclopedia of the Social & Behavioral Sciences (Second Edition)]] |date=2015 |pages=94–98 |doi=10.1016/B978-0-08-097086-8.62003-2|isbn=978-0-08-097087-5 }}</ref><ref>{{cite journal |last1=Antonio |first1=Robert J. |last2=Bonanno |first2=Alessandro |title=Capitalism |journal=The Wiley-Blackwell Encyclopedia of Globalization |date=2012 |doi=10.1002/9780470670590.wbeog060|isbn=978-1-4051-8824-1 }}</ref><ref>{{cite journal |last1=Beamish |first1=Rob |title=Capitalism |journal=Core Concepts in Sociology |date=2018 |pages=17–22 |doi=10.1002/9781394260331.ch6|isbn=978-1-119-16861-4 }}</ref> In a [[market economy]], decision-making and investments are determined by owners of wealth, property, or ability to maneuver capital or production ability in [[Capital market|capital]] and [[financial market]]s—whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.<ref>{{cite book |last1=Gregory |first1=Paul |last2=Stuart |first2=Robert |year=2013 |title=The Global Economy and its Economic Systems |publisher=[[South-Western College Publishing]] |page=41 |isbn=978-1-285-05535-0 |quote=Capitalism is characterized by private ownership of the factors of production. Decision making is decentralized and rests with the owners of the factors of production. Their decision making is coordinated by the market, which provides the necessary information. Material incentives are used to motivate participants.}}</ref>
{{Capitalism}}
'''Capitalism''' is an [[economic system]] in which the [[means of production]] are [[Private property|privately owned]]; supply, demand and price are mostly set by market forces rather than [[economic planning]]; and [[Profit (economics)|profit]] it is distributed to owners who invest in [[business]]es. Capitalism also refers to the process of [[capital accumulation]].


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 capitalism|laissez-faire]]'' or [[free-market capitalism]], [[anarcho-capitalism]], [[state capitalism]], and [[welfare capitalism]]. Different [[forms of capitalism]] feature varying degrees of [[free market]]s, [[public ownership]],<ref name="gregorystuart">{{cite book|last1=Gregory |first1=Paul |last2=Stuart |first2=Robert |title=The Global Economy and its Economic Systems |publisher=[[South-Western College Publishing]] |date=2013 |isbn=978-1-285-05535-0 |page=107 |quote=Real-world capitalist systems are mixed, some having higher shares of public ownership than others. The mix changes when privatization or nationalization occurs. Privatization is when property that had been state-owned is transferred to private owners. [[Nationalization]] occurs when privately owned property becomes publicly owned.}}</ref> obstacles to free competition, and state-sanctioned [[social policies]]. The degree of [[Competition (economics)|competition]] in [[Market (economics)|markets]] and the role of [[Economic interventionism|intervention]] and [[Regulatory economics|regulation]], as well as the scope of state ownership, vary across different models of capitalism.<ref name="Modern Economics 1986, p. 54">{{cite book |title=Macmillan Dictionary of Modern Economics |edition=3rd |date=1986 |pages=54}}</ref><ref>{{cite magazine |last=Bronk |first=Richard |title=Which model of capitalism?|url=http://oecdobserver.org/news/archivestory.php/aid/345/Which_model_of_capitalism_.html |url-status=live |magazine=[[OECD Observer]] |publisher=[[OECD]] |date=Summer 2000 |volume=1999 |issue=221–222 |pages=12–15 |archive-url=https://web.archive.org/web/20180406200423/http://oecdobserver.org/news/archivestory.php/aid/345/Which_model_of_capitalism_.html |archive-date=6 April 2018 |access-date=6 April 2018}}</ref> The extent to which different markets are free and the rules defining private property are matters of politics and policy. Most of the existing capitalist economies are [[mixed economies]] that combine elements of free markets with state intervention and in some cases [[economic planning]].<ref name="Stilwell">{{cite book |last=Stilwell |first=Frank |author-link=Frank Stilwell (economist) |title=Political Economy: the Contest of Economic Ideas |edition=1st |publisher=[[Oxford University Press]] |location=Melbourne, Australia |date=2002}}</ref>
There is however no consensus on the definition of capitalism, nor how it should be used as an analytical category.<ref>The Idea of Capitalism before the Industrial Revolution. Critical Issues in History. Lanham, Md: Rowman and Littlefield, 1999, p.1</ref> There are a variety of historical cases over which it is applied, varying in time, geography, politics and culture.<ref name="Scott"/> Economists, [[political economy|political economists]] and [[history|historians]] have taken [[Capitalism#Perspectives|different perspectives]] on the analysis of capitalism. Scholars in the social sciences, including historians, economic sociologists, economists, anthropologists and philosophers have debated over how to define capitalism, however there is little controversy that private ownership of the means of production, creation of goods or services for profit in a market, and prices and wages are elements of capitalism<ref>Tormey, Simon. Anti-Capitalism. One World Publications, 2004. p. 10</ref>; although these fundamental elements, such as private property, often have various different meanings in different disciplines and in different theories.


Capitalism in its modern form emerged from [[agrarianism]] in [[England]], as well as [[Mercantilism|mercantilist]] practices by European countries between the 16th and 18th centuries. The Industrial Revolution of the 18th century established [[Capitalist mode of production (Marxist theory)|capitalism as a dominant mode of production]], characterized by [[factory|factory work]] and a complex [[Division of labour|division of labor]]. Through the process of [[globalization]], capitalism spread across the world in the 19th and 20th centuries, especially before World War I and after the end of the Cold War. During the 19th century, capitalism was largely unregulated by the state, but became more regulated in the post–[[World War II]] period through [[Keynesianism]], followed by a return of more unregulated capitalism starting in the 1980s through [[neoliberalism]].
Economists usually put emphasis on the degree that government does not have control over markets ([[laissez faire]]), and on [[property]] rights,<ref>{{cite book|author=Tucker, Irvin B.|title=Macroeconomics for Today|pages=553|year=1997}}</ref><ref>{{cite book|author=Case, Karl E.|title=Principles of Macroeconomics|publisher=Prentice Hall|year=2004}}</ref> while most political economists emphasize private property, [[Economic power|power]] relations, [[wage labor]] and [[Economic class|class]].<ref name="Stilwell"/> There is a general agreement that capitalism encourages [[economic growth]].<ref>''Economic systems''. (2009). Encyclopedia Britannica. ''Encyclopedia Britannica 2007 Ultimate Reference Suite''. Chicago: Encyclopædia Britannica.</ref> The extent to which different markets are "free", as well as the rules determining what may and may not be private property, is a matter of politics and [[policy]] and many states have what are termed "mixed economies."<ref name="Stilwell">Stilwell, Frank. “Political Economy: the Contest of Economic Ideas.” First Edition. Oxford University Press. Melbourne, Australia. 2002.</ref>


The existence of market economies has been observed under many [[forms of government]] and across a vast array of [[historical periods]], [[geographical location]]s, and cultural contexts. The modern industrial capitalist societies that exist today developed in Western Europe as a result of the Industrial Revolution. The accumulation of capital is the primary mechanism through which capitalist economies promote [[economic growth]]. However, it is a characteristic of such economies that they experience a [[business cycle]] of [[economic growth]] followed by recessions.<ref name = "HP">{{cite journal |last1=Hodrick |first1=R. |last2=Prescott|first2= E. |year=1997 |title=Postwar US business cycles: An empirical investigation |journal=Journal of Money, Credit and Banking|volume=29|issue=1 |pages=1–16|doi=10.2307/2953682 |jstor=2953682 |s2cid=154995815 | url = http://www.kellogg.northwestern.edu/research/math/papers/451.pdf}}</ref>
Capitalism as a system developed incrementally from the 16th century in Europe,<ref>"[http://www.britannica.com/EBchecked/topic/93927/capitalism Capitalism]". Encyclopædia Britannica.</ref> although capitalist-like organizations existed in the [[Ancient history|ancient world]], and early aspects of [[merchant capitalism]] flourished during the [[Late Middle Ages]].<ref name="Braudel on capitalism">{{cite book | last = Braudel | first = Fernand | title = The Wheels of Commerce, Vol. 2, Civilization & Capitalism 15th-18th Century | url = http://books.google.ca/books?id=WPDbSXQsvGIC&lpg=PP1&dq=capitalism%20and%20civilization%20wheels%20of%20commerce&pg=PP1#v=onepage&q=&f=false | publisher = University of California Press | location = Los Angeles | pages = 231–373 | chapter = Production, or Capitalism away from home | year = 1982}}</ref><ref name=Banaji>{{cite journal|author=Banaji, Jairus|year=2007|title=Islam, the Mediterranean and the rise of capitalism|journal=Journal Historical Materialism|volume=15|pages=47–74|publisher=Brill Publishers|doi=10.1163/156920607X171591}}</ref><ref name="britannica">{{cite book|title=Capitalism|publisher=Encyclopedia Britannica|year=2006}}</ref> Capitalism became dominant in the [[Western world]] following the [[History of capitalism|demise of feudalism]].<ref name="britannica" /> Capitalism gradually spread throughout Europe, and in the 19th and 20th centuries, it provided the main means of [[industrialization]] throughout much of the world.<ref name="Scott">{{cite book|title=Industrialism: A Dictionary of Sociology|author=Scott, John|publisher=Oxford University Press|year=2005}}</ref>


== Etymology ==
Variants on capitalism may include, depending on the theorist, such concepts as [[anarcho-capitalism]], [[corporate capitalism]], [[crony capitalism]], [[finance capitalism]], [[laissez-faire capitalism]], [[technocapitalism]], [[Neo-Capitalism]], [[late capitalism]], [[post-capitalism]], [[state capitalism]] and [[state monopoly capitalism]]. There are also anti-capitalist movements and ideologies including [[Anti-capitalism]] and negative associations with the system such as [[tragedy of the commons]], [[corporatism]] and [[wage slavery]].
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== Etymology and early usage==
|Other terms sometimes used for capitalism:
{| align="right" class="box" style="margin-left:1em;text-align: left; border: 3px solid #aaaaaa; padding: 2px; font-size: 80%; width: 25%;"
* [[Capitalist mode of production (Marxist theory)|Capitalist mode of production]]<ref>{{cite book |last=Mandel |first=Ernst |author-link=Ernst Mandel |title=An Introduction to Marxist Economic Theory |url=https://books.google.com/books?id=Pf9Jd1sIMJ0C&pg=PA24 |year=2002 |publisher=[[Resistance Books]] |isbn=978-1-876646-30-1 |page=24 |access-date=29 January 2017 |archive-date=15 February 2017 |archive-url=https://web.archive.org/web/20170215160137/https://books.google.com/books?id=Pf9Jd1sIMJ0C&pg=PA24 |url-status=live}}</ref>
|bgcolor="#dbeaff"|
* [[Economic liberalism]]<ref>{{cite journal |title=Adam Smith and His Legacy for Modern Capitalism |last=Werhane |first=P. H. |journal=The Review of Metaphysics |volume=47 |year=1994 |issue=3}}</ref>
Other terms sometimes used for capitalism:
* Free enterprise<ref name="rogetfreeenterprise">{{cite encyclopedia |title=Free enterprise |encyclopedia=Roget's 21st Century Thesaurus |edition=Third |publisher=Philip Lief Group |date=2008}}</ref>{{page needed|date=July 2021}}
* [[capitalist mode of production]]
* Free enterprise economy<ref name="britannica" />
* [[economic liberalism]]<ref>{{cite journal|title=Adam Smith and His Legacy for Modern Capitalism|author=Werhane, P.H.|journal=The Review of Metaphysics|volume=47|number=3|year=1994|publisher=Philosophy Education Society, Inc.}}</ref>
* [[Free market]]<ref name="rogetfreeenterprise" />{{page needed|date=July 2021}}
* free-enterprise economy<ref name="britannica"/><ref name="rogetfreeenterprise">"free enterprise." Roget's 21st Century Thesaurus, Third Edition. Philip Lief Group 2008.</ref>
* Free market economy<ref name="britannica" />
* [[free market]]<ref name="rogetfreeenterprise"/><ref name="mutualist">[http://www.mutualist.org/ Mutualist.org]. "...based on voluntary cooperation, free exchange, or mutual aid."</ref>
* laissez-faire capitalism<ref name=friedman>Friedman, Milton. 1962. ''Capitalism and Freedom.'' University of Chicago Press. p 38.</ref>
* ''[[Laissez-faire]]''<ref name=Barrons>{{cite book |title=Barrons Dictionary of Finance and Investment Terms |date=1995 |page=74}}</ref>
* [[market economy]]<ref>[http://unabridged.merriam-webster.com/cgi-bin/unabridged?va=market%20economy "market economy"], Merriam-Webster Unabridged Dictionary</ref>
* [[Market economy]]<ref>{{cite encyclopedia |url=https://www.merriam-webster.com/dictionary/market%20economy |title=Market economy |dictionary=Merriam-Webster Unabridged Dictionary}}</ref>
* Profits system<ref>{{cite book |last=Shutt |first=Harry |title=Beyond the Profits System: Possibilities for the Post-Capitalist Era |publisher=[[Zed Books]] |year=2010 |isbn=978-1-84813-417-1}}</ref>{{page needed|date=July 2021}}
* [[market liberalism]]<ref>{{cite web|url=http://www.cato.org/about.php |title=About Cato |publisher=Cato.org |date= |accessdate=6 November 2008}}</ref><ref>{{cite web|url=http://www.cato.org/university/module10.html |title=The Achievements of Nineteenth-Century Classical Liberalism }} <blockquote>Although the term "liberalism" retains its original meaning in most of the world, it has unfortunately come to have a very different meaning in late twentieth-century America. Hence terms such as "market liberalism," "classical liberalism," or "libertarianism" are often used in its place in America.</blockquote></ref>
* self-regulating market<ref name="rogetfreeenterprise"/>
* Self-regulating market<ref name="rogetfreeenterprise" />{{page needed|date=July 2021}}
|}
|}
{{Wiktionary}}
''Capital'' evolved from ''Capitale'', a late [[Latin]] word based on [[proto-Indo-European language|proto-Indo-European]] ''kaput'', meaning "head"—also the origin of ''[[chattel]]'' and ''[[cattle]]'' in the sense of movable property (only much later to refer only to livestock). Capitale emerged in the 12th to 13th centuries in the sense of funds, stock of merchandise, sum of money, or money carrying interest.<ref name="Braudel on capitalism">Braudel p.232</ref><ref>[http://www.etymonline.com/index.php?term=cattle Etymology of "Cattle"]</ref><ref name="OED">James Augustus Henry Murray. "Capital". [http://www.archive.org/details/oedvol02 A New English Dictionary on Historical Principles]. ''Oxford English Press''. Vol 2. page 93.</ref> By 1283 it was used in the sense of the capital assets of a trading firm. It was frequently interchanged with a number of other words—wealth, money, funds, goods, assets, property and so on.<ref name="Braudel on capitalism">Braudel p.233</ref>


The term "capitalist", meaning an owner of [[Capital (economics)|capital]], appears earlier than the term "capitalism" and dates to the mid-17th century. "Capitalism" is derived from ''capital'', which evolved from {{lang|la|capitale}}, a late [[Latin]] word based on {{lang|la|caput}}, meaning "head"—which is also the origin of "[[Personal property|chattel]]" and "[[cattle]]" in the sense of movable property (only much later to refer only to livestock). {{lang|la|Capitale}} emerged in the 12th to 13th centuries to refer to funds, stock of merchandise, sum of money or money carrying interest.<ref name="Braudel-1979">{{cite book |last=Braudel |first=Fernand |author-link=Fernand Braudel |title=The Wheels of Commerce: Civilization and Capitalism 15th–18th Century |publisher=[[Harper and Row]] |date=1979}}</ref>{{rp|232}}<ref name="OED-93">[[James Murray (lexicographer)|James Augustus Henry Murray]]. "Capital". [https://archive.org/details/oedvol02 A New English Dictionary on Historical Principles]. ''Oxford English Press''. {{abbr|Vol.|Volume}} 2. p. 93.</ref> By 1283, it was used in the sense of the capital assets of a trading firm and was often interchanged with other words—wealth, money, funds, goods, assets, property and so on.<ref name="Braudel-1979" />{{rp|233}}
The term ''capitalist'' refers to an owner of capital rather than an economic system, but shows earlier recorded use than the term ''capitalism'', dating back to the mid-seventeenth century. The ''Hollandische Mercurius'' uses it in 1633 and 1654 to refer to owners of capital.<ref name="Braudel on capitalism">Braudel p.234</ref> [[Arthur Young (writer)|Arthur Young]] used the term ''capitalist'' in his work ''Travels in France'' (1792).<ref name="OED"/><ref>Arthur Young. [http://books.google.com/books?id=l10JAAAAQAAJ&printsec=titlepage#PPA529,M1 Travels in France]</ref> [[David Ricardo]], in his ''[[Principles of Political Economy and Taxation]]'' (1817), referred to "the capitalist" many times.<ref>Ricardo, David. Principles of Political Economy and Taxation. 1821. John Murray Publisher, 3rd edition.</ref>


[[Samuel Taylor Coleridge]], an English poet, used ''capitalist'' in his work ''Table Talk'' (1823).<ref>Samuel Taylor Coleridge. [http://books.google.com/books?id=ma-4W-XiGkIC&printsec=titlepage&dq=%22capitalists+for+having+labor+at+demand Tabel The Complete Works of Samuel Taylor Coleridge]. page 267.</ref> [[Pierre-Joseph Proudhon]] used the term ''capitalist'' in his first work, ''[[What is Property?]]'' (1840) to refer to the owners of capital. [[Benjamin Disraeli]] used the term ''capitalist'' in his 1845 work ''[[Sybil (novel)|Sybil]]''.<ref name="OED"/> [[Karl Marx]] and [[Friedrich Engels]] used the term ''capitalist'' (''Kapitalist'') in ''[[The Communist Manifesto]]'' (1848) to refer to a private owner of capital.
The ''Hollantse ({{langx|de|holländische}}) Mercurius'' uses "capitalists" in 1633 and 1654 to refer to owners of capital.<ref name="Braudel-1979" />{{rp|234}} In French, [[Étienne Clavier]] referred to ''capitalistes'' in 1788,<ref>E.g., "L'Angleterre a-t-elle l'heureux privilège de n'avoir ni Agioteurs, ni Banquiers, ni Faiseurs de services, ni Capitalistes ?" in [Étienne Clavier] (1788) ''De la foi publique envers les créanciers de l'état : lettres à M. Linguet sur le n° CXVI de ses annales'' [https://books.google.com/books?id=ESMVAAAAQAAJ&pg=PA19 p. 19] {{Webarchive|url=https://web.archive.org/web/20150319071130/http://books.google.com/books?id=ESMVAAAAQAAJ&pg=PA19 |date=19 March 2015 }}</ref> four years before its first recorded English usage by [[Arthur Young (writer)|Arthur Young]] in his work ''Travels in France'' (1792).<ref name="OED-93" /><ref>Arthur Young. [https://archive.org/details/travelsduringye03youngoog ''Travels in France''].</ref> In his ''[[Principles of Political Economy and Taxation]]'' (1817), [[David Ricardo]] referred to "the capitalist" many times.<ref>Ricardo, David. Principles of Political Economy and Taxation. 1821. John Murray Publisher, 3rd edition.</ref> English poet [[Samuel Taylor Coleridge]] used "capitalist" in his work ''Table Talk'' (1823).<ref>Samuel Taylor Coleridge. [https://books.google.com/books?id=ma-4W-XiGkIC Tabel ''The Complete Works of Samuel Taylor Coleridge''] {{Webarchive|url=https://web.archive.org/web/20200223123202/https://books.google.com/books?id=ma-4W-XiGkIC |date=23 February 2020 }}. p. 267.</ref> [[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 (novel)|Sybil]]''.<ref name="OED-93" /> [[Alexander Hamilton]] used "capitalist" in his [[Report on Manufactures|Report of Manufactures]] presented to the United States Congress in 1791.


The initial use of the term "capitalism" in its modern sense is attributed to [[Louis Blanc]] in 1850 ("What I call 'capitalism' that is to say the appropriation of capital by some to the exclusion of others") and Pierre-Joseph Proudhon in 1861 ("Economic and social regime in which capital, the source of income, does not generally belong to those who make it work through their labor").<ref name="Braudel-1979" />{{rp|237}} [[Karl Marx]] frequently referred to the "[[Capital (Marxism)|capital]]" and to the "capitalist mode of production" in ''[[Capital: Critique of Political Economy|Das Kapital]]'' (1867).<ref>{{cite book |last=Saunders |first=Peter |date=1995 |title=Capitalism |publisher=[[University of Minnesota Press]] |page=1}}</ref><ref name=":0">MEW, 23, & Das Kapital. Kritik der politischen Oekonomie. Erster Band-Verlag von Otto Meissner (1867)</ref> Marx did not use the form ''capitalism'' but instead used [[Capital (Marxism)|capital]], ''capitalist'' and ''capitalist mode of production'', which appear frequently.<ref name=":0" /><ref>The use of the word "capitalism" appears in ''Theories of Surplus Value'', volume II. ToSV was edited by Kautsky.</ref> Due to the word being coined by socialist critics of capitalism, economist and historian [[Robert Hessen]] stated that the term "capitalism" itself is a term of disparagement and a misnomer for [[Individualism#Economic individualism|economic individualism]].<ref>Hessen, Robert (2008) "Capitalism", in Henderson, David R. (ed.) ''The Concise Encyclopedia of Economics'' p. 57</ref> [[Bernard Harcourt]] agrees with the statement that the term is a misnomer, adding that it misleadingly suggests that there is such a thing as "[[Capital (economics)|capital]]" that inherently functions in certain ways and is governed by stable economic laws of its own.<ref>Harcourt, Bernard E. (2020) ''For Coöperation and the Abolition of Capital, Or, How to Get Beyond Our Extractive Punitive Society and Achieve a Just Society'', Rochester, NY: Columbia Public Law Research Paper No. 14-672, p. 31</ref>
The term ''capitalism'' appeared in 1753 in the ''Encyclopédia'', with the narrow meaning of "The state of one who is rich".<ref name="Braudel on capitalism">Braudel p.237</ref> However, according to the ''[[Oxford English Dictionary]]'' (OED), the term ''capitalism'' was first used by novelist [[William Makepeace Thackeray]] in 1854 in ''[[The Newcomes]]'', where he meant "having ownership of capital".<ref name="OED">James Augustus Henry Murray. "Capitalism" page 94.</ref> Also according to the OED, [[Carl Adolph Douai]], a [[German-American]] [[Socialism|socialist]] and [[Abolitionism|abolitionist]], used the term ''private capitalism'' in 1863.


In the [[English language]], the term "capitalism" first appears, according to the ''[[Oxford English Dictionary]]'' (OED), in 1854, in the novel ''[[The Newcomes]]'' by novelist [[William Makepeace Thackeray]], where the word meant "having ownership of capital".<ref name="OED-94">[[James Murray (lexicographer)|James Augustus Henry Murray]]. "Capitalism" p. 94.</ref> Also according to the OED, [[Carl Adolph Douai]], a [[German Americans|German American]] [[Socialism|socialist]] and [[Abolitionism in the United States|abolitionist]], used the term "private capitalism" in 1863.
The initial usage of the term '''capitalism''' in its modern sense has been attributed to [[Louis Blanc]] in 1850 and [[Pierre-Joseph Proudhon]] in 1861.<ref>Braudel, Fernand. The Wheels of Commerce: Civilization and Capitalism 15-18 Century, Harper and Row, 1979, p.237</ref> Marx and Engels referred to the ''capitalistic system'' (''kapitalistisches System'')<ref>Karl Marx. Chapter 16: Absolute and Relative Surplus-Value. ''[[Das Kapital]]''.
<blockquote>''{{lang|de|Die Verlängrung des Arbeitstags über den Punkt hinaus, wo der Arbeiter nur ein Äquivalent für den Wert seiner Arbeitskraft produziert hätte, und die Aneignung dieser Mehrarbeit durch das Kapital - das ist die Produktion des absoluten Mehrwerts. Sie bildet die allgemeine Grundlage des '''kapitalistischen Systems''' und den Ausgangspunkt der Produktion des relativen Mehrwerts.}}''</blockquote>
<blockquote>The prolongation of the working-day beyond the point at which the labourer would have produced just an equivalent for the value of his labour-power, and the appropriation of that surplus-labour by capital, this is production of absolute surplus-value. It forms the general groundwork of the '''capitalist system''', and the starting-point for the production of relative surplus-value.</blockquote></ref><ref>Karl Marx. Chapter Twenty-Five: The General Law of Capitalist Accumulation. ''[[Das Kapital]]''.
* ''{{lang|de|Die Erhöhung des Arbeitspreises bleibt also eingebannt in Grenzen, die die Grundlagen des '''kapitalistischen Systems''' nicht nur unangetastet lassen, sondern auch seine Reproduktion auf wachsender Stufenleiter sichern.}}''
* ''{{lang|de|Die allgemeinen Grundlagen des '''kapitalistischen Systems''' einmal gegeben, tritt im Verlauf der Akkumulation jedesmal ein Punkt ein, wo die Entwicklung der Produktivität der gesellschaftlichen Arbeit der mächtigste Hebel der Akkumulation wird.}}''
* ''{{lang|de|Wir sahen im vierten Abschnitt bei Analyse der Produktion des relativen Mehrwerts: innerhalb des '''kapitalistischen Systems''' vollziehn sich alle Methoden zur Steigerung der gesellschaftlichen Produktivkraft der Arbeit auf Kosten des individuellen Arbeiters;}}''</ref> and to the [[capitalist mode of production]] (''kapitalistische Produktionsform'') in ''[[Das Kapital]]'' (1867).<ref>Saunders, Peter (1995). ''Capitalism''. University of Minnesota Press. p. 1</ref> The use of the word "capitalism" in reference to an economic system appears twice in Volume I of ''Das Kapital'', p.&nbsp;124 (German edition), and in ''Theories of Surplus Value'', tome II, p.&nbsp;493 (German edition). Marx did not extensively use the form ''capitalism'', but instead those of ''capitalist'' and ''capitalist mode of production'', which appear more than 2600 times in the trilogy ''Das Kapital''.


== Definition ==
Marx's notion of the capitalist mode of production is characterised as a system of primarily private ownership of the [[means of production]] in a mainly [[market economy]], with a legal framework on [[commerce]] and a physical [[infrastructure]] provided by the state.<ref>Karl Marx. ''[[Das Kapital]]''.</ref>{{pn}} Engels made more frequent use of the term ''capitalism''; volumes II and III of ''Das Kapital'', both edited by Engels after Marx's death, contain the word "capitalism" four and three times, respectively. The three combined volumes of ''Das Kapital'' (1867, 1885, 1894) contain the word ''capitalist'' more than 2,600 times.
There is no universally agreed upon definition of capitalism; it is unclear whether or not capitalism characterizes an entire society, a specific type of social order, or crucial
components or elements of a society.<ref name="wolf">{{cite encyclopedia |last=Wolf |first=Harald |editor1-last=Ritzer |editor1-first=George|title=Capitalism |encyclopedia=Encyclopedia of Social Theory|pages=76–80|date=2004 |publisher=Sage Publications|isbn=978-1-4522-6546-9}}</ref> Societies officially founded in opposition to capitalism (such as the [[Soviet Union]]) have sometimes been argued to actually exhibit characteristics of capitalism.<ref>{{cite journal |last1=Howard |first1=M.C. |last2=King |first2=J.E. |title='State Capitalism' in the Soviet Union |journal=History of Economics Review |date=January 2001 |volume=34 |issue=1 |pages=110–126 |doi=10.1080/10370196.2001.11733360 |s2cid=42809979 |url=https://www.tandfonline.com/doi/pdf/10.1080/10370196.2001.11733360 |language=en |issn=1037-0196}}</ref> [[Nancy Fraser]] describes usage of the term "capitalism" by many authors as "mainly rhetorical, functioning less as an actual concept than as a gesture toward the
need for a concept".<ref name="harris"/> Scholars who are uncritical of capitalism rarely actually use the term "capitalism".<ref name="delacroix">{{cite encyclopedia |last=Delacroix |first=Jacques |editor1-last=Ritzer |editor1-first=George |title=Capitalism |encyclopedia=Encyclopedia of Social Theory|date=2007 |publisher=Wiley|doi=10.1002/9781405165518.wbeosc004 |isbn=978-1-4051-2433-1|url=https://onlinelibrary.wiley.com/doi/10.1002/9781405165518.wbeosc004}}</ref>
Some doubt that the term "capitalism" possesses valid scientific dignity,<ref name="wolf"/> and it is generally not discussed in [[mainstream economics]],<ref name="harris"/> with economist [[Daron Acemoglu]] suggesting that the term "capitalism" should be abandoned entirely.<ref>{{cite book |last=Acemoglu |first=Daron |date=2017 |editor1-last=Frey |editor1-first=Bruno S.|editor2-last = Iselin|editor2-first = David |title=Economic Ideas You Should Forget |publisher=Springer|pages=1–3 |chapter=Capitalism|doi=10.1007/978-3-319-47458-8_1 |isbn=978-3-319-47457-1|chapter-url=https://link.springer.com/chapter/10.1007/978-3-319-47458-8_1}}</ref> Consequently, understanding of the concept of capitalism tends to be heavily influenced by opponents of capitalism and by the followers and critics of Karl Marx.<ref name="delacroix"/>


== History ==
An 1877 work entitled ''Better Times'' by Hugh Gabutt and an 1884 article in the ''[[Pall Mall Gazette]]'' also used the term ''capitalism''.<ref name="OED"/> A later use of the term ''capitalism'' to describe the production system was by the German economist [[Werner Sombart]], in his 1902 book ''The Jews and Modern Capitalism'' (''Die Juden und das Wirtschaftsleben''). Sombart's close friend and colleague, [[Max Weber]], also used ''capitalism'' in his 1904 book ''[[The Protestant Ethic and the Spirit of Capitalism]]'' (''Die protestantische Ethik und der Geist des Kapitalismus'').
{{Main|History of capitalism}}
[[File:Jacopo Pontormo 055.jpg|thumb|upright=0.8|[[Cosimo de' Medici]] (pictured in a 16th-century portrait by [[Pontormo]]) built an international financial empire and was one of the first [[Medici bank]]ers.]]
[[File:Augsburg - Markt.jpg|thumb|upright=0.8|[[Augsburg]], the centre of early capitalism<ref>{{cite encyclopedia |last1=Behringer |first1=Wolfgang |contribution=Core and Periphery: The Holy Roman Empire as a Communication(s) Universe |title=The Holy Roman Empire, 1495–1806 |date=2011 |publisher=Oxford University Press |location=Oxford |isbn=978-0-19-960297-1 |pages=347–358|url=https://perspectivia.net/servlets/MCRFileNodeServlet/pnet_derivate_00004689/behringer_core.pdf |archive-url=https://ghostarchive.org/archive/20221009/https://perspectivia.net/servlets/MCRFileNodeServlet/pnet_derivate_00004689/behringer_core.pdf |archive-date=9 October 2022 |url-status=live |access-date=7 August 2022}}</ref>]]


Capitalism, in its modern form, can be traced to the emergence of agrarian capitalism and mercantilism in the early [[Renaissance]], in city-states like [[Florence]].<ref>{{cite news |url=http://www.economist.com/node/13484709 |title=Cradle of capitalism |newspaper=[[The Economist]] |date=16 April 2009 |access-date=9 March 2015 |archive-date=18 January 2018 |archive-url=https://web.archive.org/web/20180118055643/http://www.economist.com/node/13484709 |url-status=live}}</ref> [[Capital (economics)|Capital]] has existed incipiently on a small scale for centuries<ref name="WarburtonDavid">{{cite book |last=Warburton |first=David |title=Macroeconomics from the beginning: The General Theory, Ancient Markets, and the Rate of Interest |location=Paris |publisher=Recherches et Publications |date=2003 |pages=49}}</ref> in the form of merchant, renting and lending activities and occasionally as small-scale industry with some wage labor. Simple [[commodity]] exchange and consequently simple commodity production, which is the initial basis for the growth of capital from trade, have a very long history. During the [[Islamic Golden Age]], [[Arabs]] promulgated capitalist economic policies such as free trade and banking. Their use of [[Indo-Arabic numerals]] facilitated [[bookkeeping]]. These innovations migrated to Europe through trade partners in cities such as Venice and Pisa. Italian [[mathematicians]] traveled the Mediterranean talking to Arab traders and returned to popularize the use of Indo-Arabic numerals in Europe.<ref name="Koehler, Benedikt">{{cite book |last=Koehler |first=Benedikt |title=Early Islam and the Birth of Capitalism |quote=In Baghdad, by the early tenth century a fully-fledged banking sector had come into being... |pages=2 |publisher=[[Lexington Books]] |date=2014}}</ref>
== Economic elements ==
{{Refimprove|section date=May 2010}}
Capitalist economics developed out of the interactions of the following elements.


=== Agrarianism ===
A [[commodity]] is any good produced for exchange on a market. There are two types of commodities: [[capital good]]s and [[Final goods|consumer goods]]. Capital goods (i.e. land, raw materials, tools, industrial machines and factories) are used to produce consumer goods (i.e. televisions, cars, computers, houses) to be sold to others. Capitalism entails the private ownership of capital goods by a class of capital owners, either individually, collectively or through a state apparatus that operates for a profit or serves the interests of capital owners.
The economic foundations of the feudal agricultural system began to shift substantially in 16th-century England as the [[manorial system]] had broken down and land began to become concentrated in the hands of fewer landlords with increasingly large estates. Instead of a [[serf]]-based system of labor, workers were increasingly employed as part of a broader and expanding money-based economy. The system put pressure on both landlords and tenants to increase the productivity of agriculture to make profit; the weakened coercive power of the [[aristocracy]] to extract peasant [[Excess supply|surpluses]] encouraged them to try better methods, and the tenants also had incentive to improve their methods in order to flourish in a competitive [[labor economics|labor market]]. Terms of rent for land were becoming subject to economic market forces rather than to the previous stagnant system of custom and feudal obligation.<ref>{{cite journal |last1=Brenner |first1=Robert |title=The Agrarian Roots of European Capitalism |journal=[[Past & Present (journal)|Past & Present]] |date=1 January 1982 |issue=97 |pages=16–113 |doi=10.1093/past/97.1.16 |jstor=650630}}</ref><ref>{{cite web |url=http://monthlyreview.org/1998/07/01/the-agrarian-origins-of-capitalism |title=The Agrarian Origins of Capitalism |access-date=17 December 2012 |date=July 1998 |archive-date=11 December 2019 |archive-url=https://web.archive.org/web/20191211183143/https://monthlyreview.org/1998/07/01/the-agrarian-origins-of-capitalism/ |url-status=live}}</ref>

Money was primarily a standardized means of exchange that serves to reduce all goods and commodities to a standard value. It 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 other exchangeable assets and the accumulation of money through ownership, exchange, interest and various other financial instruments. However, besides serving as a medium of exchange for labour, goods and services, money is also a store of value, similar to precious metals.

[[Labour (economics)|Labour]] includes all physical and mental human resources, including entrepreneurial capacity and management skills, which are needed to transform one type of commodity into another. [[Manufacturing|Production]] is the act of making goods or services through the combination of [[labour power]] and means of production.<ref>Ragan, Christopher T.S., and Richard G. Lipsey. Microeconomics. Twelfth Canadian Edition ed. Toronto: Pearson Education Canada, 2008. Print.</ref><ref>Robbins, Richard H. Global problems and the culture of capitalism. Boston: Allyn & Bacon, 2007. Print.</ref>

== History ==
{{Main|History of capitalism}}


=== Mercantilism ===
=== Mercantilism ===
{{Main|Mercantilism}}
{{Main|Mercantilism}}
[[File:Lorrain.seaport.jpg|left|thumb|A painting of a French seaport from 1638 at the height of [[mercantilism]].]]
[[File:Lorrain.seaport.jpg|left|thumb|A painting of a French seaport from 1638 at the height of [[mercantilism]]]]
[[File:Clive.jpg|left|thumb|[[Robert Clive]] with the [[Nawabs of Bengal]] after the [[Battle of Plassey]] which began the British rule in [[Bengal Presidency|Bengal]]]]
The period between the sixteenth and eighteenth centuries is commonly described as [[mercantilism]].<ref name="Burnham" /> This period was associated with geographic exploration of the [[Age of Discovery]] being exploited by merchant overseas traders, especially from England and the [[Low Countries]]; the [[European colonization of the Americas]]; and the rapid growth in overseas trade. Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist production methods.<ref name="Scott" />
The economic doctrine prevailing from the 16th to the 18th centuries is commonly called [[mercantilism]].<ref name=GSGB>{{cite book |url=https://books.google.com/books?id=Pf9Jd1sIMJ0C |title=An Introduction to Marxist Economic Theory |date= 2002 |publisher=[[Resistance Books]] |via=[[Google Books]] |isbn=978-1-876646-30-1 |access-date=27 August 2016 |archive-date=11 December 2016 |archive-url=https://web.archive.org/web/20161211173733/https://books.google.com/books?id=Pf9Jd1sIMJ0C |url-status=live}}</ref><ref name="Burnham">{{cite book |last=Burnham |first=Peter |author-link=Peter Burnham |title=Capitalism: The Concise Oxford Dictionary of Politics |publisher=[[Oxford University Press]] |year=2003}}</ref> This period, the [[Age of Discovery]], was associated with the geographic exploration of foreign lands by merchant traders, especially from England and the [[Low Countries]]. Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist methods.<ref name="Scott" /> Most scholars consider the era of merchant capitalism and mercantilism as the origin of modern capitalism,<ref name="Burnham"/><ref name="Encyclopædia Britannica 2006">''Encyclopædia Britannica'' (2006)</ref> although [[Karl Polanyi]] argued that the hallmark of capitalism is the establishment of generalized markets for what he called the "fictitious commodities", i.e. land, labor and money. Accordingly, he argued that "not until 1834 was a competitive labor market established in England, hence industrial capitalism as a social system cannot be said to have existed before that date".<ref>{{cite book |last=Polanyi |first=Karl |author-link=Karl Polanyi |title=The Great Transformation |publisher=[[Beacon Press]] |location=Boston |date=1944 |pages=87}}</ref>


England began a large-scale and integrative approach to mercantilism during the [[Elizabethan Era]] (1558–1603). A systematic and coherent explanation of balance of trade was made public through [[Thomas Mun]]'s argument ''England's Treasure by Forraign Trade, or the Balance of our Forraign Trade is The Rule of Our Treasure.'' It was written in the 1620s and published in 1664.<ref>{{cite book |first1=David |last1=Onnekink |first2=Gijs |last2=Rommelse |title=Ideology and Foreign Policy in Early Modern Europe (1650–1750) |url=https://books.google.com/books?id=M1QdbzdTimsC&pg=PA257 |year=2011 |publisher=[[Ashgate Publishing]] |page=257 |isbn=978-1-4094-1914-3 |access-date=27 June 2015 |archive-date=19 March 2015 |archive-url=https://web.archive.org/web/20150319130220/http://books.google.com/books?id=M1QdbzdTimsC&pg=PA257 |url-status=live}}</ref>
While some scholars see mercantilism as the earliest stage of modern capitalism, others argue that modern capitalism did not emerge until later. For example, [[Karl Polanyi]], noted that "mercantilism, with all its tendency toward commercialization, never attacked the safeguards which protected [the] two basic elements of production—labor and land—from becoming the elements of commerce"; thus mercantilist attitudes towards economic regulation were closer to feudalist attitudes, "they disagreed only on the methods of regulation."


European [[merchant]]s, backed by state controls, subsidies and [[monopoly|monopolies]], made most of their profits by buying and selling goods. In the words of [[Francis Bacon]], the purpose of mercantilism was "the opening and well-balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation of prices...".<ref>Quoted in {{cite book |first=George |last=Clark |title=The Seventeenth Century |location=New York |publisher=[[Oxford University Press]] |date=1961 |page=24}}</ref>
Moreover Polanyi argued that the hallmark of capitalism is the establishment of generalized markets for what he referred to as the "fictitious commodities": land, labor, and money. Accordingly, "not until 1834 was a competitive labor market established in England, hence industrial capitalism as a social system cannot be said to have existed before that date."<ref>Polanyi, Karl. The Great Transformation. Beacon Press, Boston.1944.p87</ref>


After the period of the [[proto-industrialization]], the [[British East India Company]] and the [[Dutch East India Company]], after massive contributions from the [[Mughal Bengal]],<ref name="Prakash">[[Om Prakash (historian)|Om Prakash]], "[http://link.galegroup.com/apps/doc/CX3447600139/WHIC?u=seat24826&xid=6b597320 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</ref><ref name="ray">{{cite book |first=Indrajit |last=Ray |year=2011 |title=Bengal Industries and the British Industrial Revolution (1757–1857) |url=https://books.google.com/books?id=CHOrAgAAQBAJ&pg=PA57 |publisher=[[Routledge]] |pages=57, 90, 174 |isbn=978-1-136-82552-1 |access-date=20 June 2019 |archive-date=29 May 2016 |archive-url=https://web.archive.org/web/20160529021839/https://books.google.com/books?id=CHOrAgAAQBAJ |url-status=live}}</ref> inaugurated an expansive era of commerce and trade.<ref name=Banaji>{{cite journal |last=Banaji |first=Jairus |year=2007 |title=Islam, the Mediterranean and the rise of capitalism |journal=[[Journal Historical Materialism]] |volume=15 |pages=47–74 |doi=10.1163/156920607X171591 |url=http://eprints.soas.ac.uk/15983/1/Islam%20and%20capitalism.pdf |access-date=20 April 2018 |archive-date=29 March 2018 |archive-url=https://web.archive.org/web/20180329015002/http://eprints.soas.ac.uk/15983/1/Islam%20and%20capitalism.pdf |url-status=dead}}</ref><ref name="britannica2">{{cite book |title=Economic system:: Market systems |url=https://www.britannica.com/EBchecked/topic/178493/economic-system/61117/Market-systems#toc242146 |publisher=Encyclopædia Britannica |year=2006 |access-date=4 January 2009 |archive-date=24 May 2009 |archive-url=https://web.archive.org/web/20090524075921/https://www.britannica.com/EBchecked/topic/178493/economic-system/61117/Market-systems#toc242146 |url-status=live}}</ref> These companies were characterized by their [[colonialism|colonial]] and [[Expansionism|expansionary]] powers given to them by nation-states.<ref name="Banaji" /> During this era, merchants, who had traded under the previous stage of mercantilism, invested capital in the East India Companies and other colonies, seeking a [[return on investment]].
Evidence of long-distance merchant-driven trade motivated by profit has been found as early as the second millennium BC, with the Old Assyrian merchants.<ref>Warburton, David, Macroeconomics from the beginning: The General Theory, Ancient Markets, and the Rate of Interest. Paris: Recherches et Publications, 2003.p49</ref> The earliest forms of mercantilism date back to the [[Roman Empire]]. When the Roman Empire expanded, the mercantilist economy expanded throughout Europe. After the [[decline of the Roman Empire|collapse of the Roman Empire]], most of the European economy became controlled by local [[feudal]] powers, and mercantilism collapsed there. However, mercantilism persisted in [[Arabia]]. Due to its proximity to neighboring countries, the Arabs established trade routes to [[Egypt]], [[Persia]], and [[Byzantium]]. As [[Islam]] spread in the seventh century, mercantilism spread rapidly to Spain, Portugal, [[Northern Africa]], and Asia. Mercantilism finally revived in Europe in the fourteenth century, as mercantilism spread from Spain and Portugal.<ref>[http://history.howstuffworks.com/european-history/capitalism3.htm The Rise of Capitalism]</ref>


=== Industrial Revolution ===
Among the major tenets of mercantilist theory was [[bullionism]], a doctrine stressing the importance of accumulating [[precious metals]]. Mercantilists argued that a state should export more goods than it imported so that foreigners would have to pay the difference in precious metals. Mercantilists asserted that only raw materials that could not be extracted at home should be imported; and promoted government subsides, such as the granting of monopolies and protective [[tariff]]s, were necessary to encourage home production of manufactured goods.
{{Main|Industrial Revolution}}
[[File:Maquina vapor Watt ETSIIM.jpg|thumb|The [[Watt steam engine]], fuelled primarily by [[coal]], propelled the [[Industrial Revolution]] in [[United Kingdom|Britain]].<ref>Watt steam engine image located in the lobby of the Superior Technical School of Industrial Engineers of the [[Technical University of Madrid|UPM]]{{clarify|date=April 2016}} ([[Madrid]]).</ref>]]
In the mid-18th century a group of economic theorists, led by [[David Hume]] (1711–1776)<ref>{{cite book |last=Hume |first=David |author-link=David Hume |title=Political Discourses |url=https://archive.org/details/McGillLibrary-125702-2590 |location=Edinburgh |publisher=A. Kincaid & A. Donaldson |year=1752}}</ref> and [[Adam Smith]] (1723–1790), challenged fundamental mercantilist doctrines—such as the belief that the world's wealth remained constant and that a state could only increase its wealth at the expense of another state.


During the [[Industrial Revolution]], [[industrialists]] replaced merchants as a dominant factor in the capitalist system and effected the decline of the traditional handicraft skills of [[artisan]]s, guilds and [[journeyman|journeymen]]. Industrial capitalism marked the development of the [[factory system]] of manufacturing, characterized by a complex [[division of labor]] between and within work process and the routine of work tasks; and eventually established the domination of the [[Capitalist mode of production (Marxist theory)|capitalist mode of production]].<ref>{{cite book |last1=Burnham |first1=Peter |author1-link=Peter Burnham |year=1996 |chapter=Capitalism |editor1-last=McLean |editor1-first=Iain |editor2-last=McMillan |editor2-first=Alistair |title=The Concise Oxford Dictionary of Politics |url=https://books.google.com/books?id=8JkyAwAAQBAJ |series=Oxford Quick Reference |edition=3 |location=Oxford |publisher=[[Oxford University Press]] |publication-date=2009 |isbn=978-0-19-101827-5 |access-date=14 September 2019 |quote=Industrial capitalism, which Marx dates from the last third of the eighteenth century, finally establishes the domination of the capitalist mode of production. |archive-date=27 July 2020 |archive-url=https://web.archive.org/web/20200727163404/https://books.google.com/books?id=8JkyAwAAQBAJ |url-status=live}}</ref>
European [[merchant]]s, backed by state controls, [[subsidy|subsidies]], and [[monopoly|monopolies]], made most of their profits from the buying and selling of goods. In the words of [[Francis Bacon]], the purpose of mercantilism was "the opening and well-balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation of prices…"<ref>Quoted in Sir George Clark, ''The Seventeenth Century'' (New York: Oxford University Pres, 1961), p. 24.</ref>


Industrial Britain eventually abandoned the [[protectionist]] policy formerly prescribed by mercantilism. In the 19th century, [[Richard Cobden]] (1804–1865) and [[John Bright]] (1811–1889), who based their beliefs on the [[Manchester capitalism|Manchester School]], initiated a movement to lower [[tariffs]].<ref name="laissezf">{{cite web |title=Laissez-faire |url=http://www.bartleby.com/65/la/laissezf.html |url-status=dead |archive-url=https://web.archive.org/web/20081202050426/http://www.bartleby.com/65/la/laissezf.html |archive-date=2 December 2008}}</ref> In the 1840s Britain adopted a less protectionist policy, with the 1846 repeal of the [[Corn Laws]] and the 1849 repeal of the [[Navigation Acts]].<ref>{{cite book |last1=Burnham |first1=Peter |author1-link=Peter Burnham |year=1996 |chapter=Capitalism |editor1-last=McLean |editor1-first=Iain |editor2-last=McMillan |editor2-first=Alistair |title=The Concise Oxford Dictionary of Politics |url=https://books.google.com/books?id=8JkyAwAAQBAJ |series=Oxford Quick Reference |edition=3 |location=Oxford |publisher=[[Oxford University Press]] |publication-date=2009 |isbn=978-0-19-101827-5 |access-date=14 September 2019 |quote=For most analysts, mid- to late-nineteenth century Britain is seen as the apotheosis of the laissez-faire phase of capitalism. This phase took off in Britain in the 1840s with the repeal of the Corn Laws, and the Navigation Acts, and the passing of the Banking Act. |archive-date=27 July 2020|archive-url=https://web.archive.org/web/20200727163404/https://books.google.com/books?id=8JkyAwAAQBAJ |url-status=live}}</ref> Britain reduced tariffs and [[import quota|quotas]], in line with David Ricardo's advocacy of [[free trade]].
Similar practices of economic regimentation had begun earlier in the medieval towns. However, under mercantilism, given the contemporaneous rise of [[Absolute monarchy|absolutism]], the state superseded the local [[guild]]s as the regulator of the economy. During that time the guilds essentially functioned like [[cartels]] that monopolized the quantity of craftsmen to earn above-market wages.<ref>Mancur Olson, The rise and decline of nations: economic growth, staglaction, and social rigidities (New Haven & London 1982).</ref>


=== Modernity ===
At the period from the eighteenth century, the commercial stage of capitalism originated from the start of the British [[East India Company]] and the [[Dutch East India Company]].<ref name="Banaji" /><ref name="britannica2">{{cite book|title=Economic system :: Market systems|url=http://www.britannica.com/EBchecked/topic/178493/economic-system/61117/Market-systems#toc242146|publisher=Encyclopedia Britannica|year=2006}}</ref> These companies were characterized by their [[colonialism|colonial]] and [[expansionism|expansionary]] powers given to them by nation-states.<ref name="Banaji" /> During this era, merchants, who had traded under the previous stage of mercantilism, invested capital in the East India Companies and other colonies, seeking a [[return on investment]]. In his "History of Economic Analysis," Austrian economist [[Joseph Schumpeter]] reduced mercantilist propositions to three main concerns: exchange controls, export monopolism and balance of trade.<ref>Schumpeter, J.A. (1954) History of Economic Analysis</ref>
[[File:McKinley Prosperity.jpg|thumb|upright|The [[gold standard]] formed the financial basis of the international economy from 1870 to 1914.]]


Broader processes of [[globalization]] carried capitalism across the world. By the beginning of the nineteenth century, a series of loosely connected market systems had come together as a relatively integrated global system, in turn intensifying processes of economic and other globalization.<ref name="SAGE Publications">{{cite book |year=2007 |last1=James |first1=Paul |author-link=Paul James (academic) |last2=Gills |first2=Barry |title=Globalization and Economy, Vol. 1: Global Markets and Capitalism |url=https://www.academia.edu/4199690 |publisher=[[SAGE Publications]] |location=London |page=xxxiii}}</ref><ref>{{cite journal |title=Impact of Global Capitalism on the Environment of Developing Economies |url=http://s-space.snu.ac.kr/bitstream/10371/93716/1/04_Osariyekemwen%20Igiebor.pdf |journal=Impact of Global Capitalism on the Environment of Developing Economies: The Case of Nigeria |pages=84 |access-date=31 July 2020 |archive-date=20 March 2020 |archive-url=https://web.archive.org/web/20200320071239/http://s-space.snu.ac.kr/bitstream/10371/93716/1/04_Osariyekemwen%20Igiebor.pdf |url-status=live}}</ref> Late in the 20th century, capitalism overcame a challenge by [[Planned economy|centrally-planned economies]] and is now the encompassing system worldwide,<ref name="britannica">{{cite book |title=Capitalism |publisher=Encyclopædia Britannica |url=https://www.britannica.com/EBchecked/topic/93927/capitalism |date=10 November 2014 |access-date=24 March 2015 |archive-date=29 June 2011 |archive-url=https://web.archive.org/web/20110629021539/https://www.britannica.com/EBchecked/topic/93927/capitalism |url-status=live}}</ref><ref>{{cite book |last=James |first=Fulcher |title=Capitalism, A Very Short Introduction |quote=In one respect there can, however, be little doubt that capitalism has gone global and that is in the elimination of alternative systems |pages=99 |publisher=[[Oxford University Press]] |date=2004 |isbn=978-0-19-280218-7}}</ref> with the [[mixed economy]] as its dominant form in the industrialized Western world.
=== Industrialism ===
{{See also|Industrial Revolution}}
[[File:london.bankofengland.arp.jpg|thumb|The [[Bank of England]] is one of the oldest [[central bank]]s. It was founded in 1694 and [[nationalised]] in 1946.]]
A new group of economic theorists, led by [[David Hume]]<ref>{{cite book|author=Hume, David|title=Political Discourses|location=Edinburgh|publisher=A. Kincaid &amp; A. Donaldson|year=1752}}</ref> and [[Adam Smith]], in the mid 18th century, challenged fundamental [[mercantilist]] doctrines as the belief that the amount of the world’s wealth remained constant and that a state could only increase its wealth at the expense of another state.


[[Industrialization]] allowed cheap production of household items using [[economies of scale]], while rapid [[population growth]] created sustained demand for commodities. The [[imperialism]] of the 18th-century decisively shaped globalization.<ref name="SAGE Publications" /><ref>{{cite journal |last1=Thomas |first1=Martin |last2=Thompson |first2=Andrew |date=1 January 2014 |title=Empire and Globalisation: from 'High Imperialism' to Decolonisation |journal=The International History Review |volume=36 |issue=1 |pages=142–170 |doi=10.1080/07075332.2013.828643 |s2cid=153987517 |issn=0707-5332|doi-access=free }}</ref><ref>{{cite journal |title=Globalization and Empire |url=https://core.ac.uk/download/pdf/47230635.pdf |journal=Globalization and Empire |access-date=31 July 2020 |archive-date=23 September 2020 |archive-url=https://web.archive.org/web/20200923063531/https://core.ac.uk/download/pdf/47230635.pdf |url-status=live}}</ref><ref>{{cite journal |title=Europe and the causes of globalization |url=https://core.ac.uk/download/pdf/7045619.pdf |journal=Europe and the Causes of Globalization, 1790 to 2000 |access-date=31 July 2020 |archive-date=7 December 2017 |archive-url=https://web.archive.org/web/20171207091124/https://core.ac.uk/download/pdf/7045619.pdf |url-status=live}}</ref>
During the [[Industrial Revolution]], the industrialist replaced the merchant as a dominant actor in the capitalist system and effected the decline of the traditional handicraft skills of [[artisan]]s, [[guild]]s, and [[journeyman|journeymen]]. Also during this period, the surplus generated by the rise of commercial agriculture encouraged increased mechanization of agriculture. Industrial capitalism marked the development of the [[factory]] system of manufacturing, characterized by a complex [[division of labor]] between and within work process and the routinization of work tasks; and finally established the global domination of the capitalist mode of production.<ref name="Burnham" />


After the [[First Opium War|First]] and [[Second Opium War]]s (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 [[rubber]], [[diamonds]] and [[coal]] and helped fuel trade and investment between the European imperial powers, their colonies and the United States:
Britain also abandoned its [[protectionist]] policy, as embraced by mercantilism. In the 19th century, [[Richard Cobden]] and [[John Bright]], who based their beliefs on the [[Manchester capitalism|Manchester School]], initiated a movement to lower tariffs.<ref name="laissezf">{{cite web |title=laissez-faire|url=http://www.bartleby.com/65/la/laissezf.html}}</ref> In the 1840s, Britain adopted a less protectionist policy, with the repeal of the [[Corn Laws]] and the [[Navigation Acts]].<ref name="Burnham" /> Britain reduced [[tariffs]] and [[import quota|quotas]], in line with [[Adam Smith]] and [[David Ricardo]]'s advocacy for [[free trade]].


{{blockquote|The inhabitant of London could order by telephone, sipping his morning tea, the various products of the whole earth, and reasonably expect their early delivery upon his doorstep. Militarism and imperialism of racial and cultural rivalries were little more than the amusements of his daily newspaper. What an extraordinary episode in the economic progress of man was that age which came to an end in August 1914.<ref>{{cite web |url=https://www.pbs.org/wgbh/commandingheights/shared/minitext/tr_show01.html |title=Commanding Heights: Episode One: The Battle of Ideas |publisher=[[PBS]] |date=24 October 1929 |access-date=31 July 2010 |archive-date=30 March 2010 |archive-url=https://web.archive.org/web/20100330093746/http://www.pbs.org/wgbh/commandingheights/shared/minitext/tr_show01.html |url-status=live}}</ref>}}
[[Karl Polanyi]] argued that capitalism did not emerge until the progressive commodification of land, money, and labor culminating in the establishment of a generalized labor market in Britain in the 1830s. For Polanyi, "the extension of the market to the elements of industry - land, labor and money - was the inevitable consequence of the introduction of the factory system in a commercial society." <ref>Polanyi, Karl. The Great Transformation, Beacon Press. Boston. 1944. p.78</ref> Other sources argued that mercantilism fell after the repeal of the Navigation Acts in 1849.<ref name="laissezf"/><ref>{{cite web |title=Navigation Acts
|url=http://www.bartleby.com/65/na/NavigatA.html}}</ref><ref name="mercantilism">{{cite web|last=LaHaye|first=Laura|title=Mercantilism|url=http://www.econlib.org/library/Enc/Mercantilism.html|work=[[Concise Encyclepedia of Economics]]|publisher=Fortune Encyclopedia of Economics|year=1993}}</ref>.


From the 1870s to the early 1920s, the global financial system was mainly tied to the [[gold standard]].<ref>{{cite book|last=Eichengreen|first=Barry|author-link=Barry Eichengreen|date=6 August 2019|title=Globalizing Capital: A History of the International Monetary System|edition=3rd|publisher=[[Princeton University Press]]|doi=10.2307/j.ctvd58rxg|isbn=978-0-691-19458-5|s2cid=240840930 |lccn=2019018286}}{{page needed|date=December 2023}}</ref><ref>{{cite book|last1=Eichengreen|first1=Barry|author-link=Barry Eichengreen|last2=Esteves|first2=Rui Pedro|date=2021|editor1-last=Fukao|editor1-first=Kyoji|editor2-last=Broadberry|editor2-first=Stephen|editor2-link=Stephen Broadberry|section=International Finance|title=The Cambridge Economic History of the Modern World|publisher=[[Cambridge University Press]]|volume=2: ''1870 to the Present''|pages=501–525|isbn=978-1-107-15948-8}}</ref> The United Kingdom first formally adopted this standard in 1821. Soon to follow were [[United Province of Canada|Canada]] in 1853, [[History of Newfoundland and Labrador|Newfoundland]] in 1865, the United States and Germany (''[[de jure]]'') in 1873. New technologies, such as the [[telegraph]], the [[transatlantic telegraph cable|transatlantic cable]], the [[radiotelephone]], the [[steamship]] and [[railway]]s allowed goods and information to move around the world to an unprecedented degree.<ref>{{Cite web|url=https://www.nber.org/papers/w7195 |last1=Bordo |first1=Michael D. |author1-link=Michael D. Bordo |last2=Eichengreen |first2=Barry |author2-link=Barry Eichengreen |last3=Irwin |first3=Douglas A. |title=Is Globalization Today Really Different than Globalization a Hundred Years Ago? |series=NBER |number=Working Paper No. 7195 |date=June 1999|doi=10.3386/w7195 }}</ref>
=== Keynesianism and neoliberalism ===
{{Main|Keynesianism|Neoliberalism}}
In the period following the global depression of the 1930s, the state played an increasingly prominent role in the capitalistic system throughout much of the world.


In the United States, the term "capitalist" primarily referred to powerful businessmen<ref>{{Cite book |last=Andrews |first=Thomas G. |title=Killing for Coal: America's Deadliest Labor War |publisher=[[Harvard University Press]] |year=2008 |isbn=978-0-674-03101-2 |location=Cambridge |page=64 |author-link=Thomas G. Andrews (historian)}}</ref> until the 1920s due to widespread societal skepticism and criticism of capitalism and its most ardent supporters.
[[File:NY stock exchange traders floor LC-U9-10548-6.jpg|thumb|The New York [[stock exchange]] [[trading room|traders' floor]] (1963)]]


[[File:NY stock exchange traders floor LC-U9-10548-6.jpg|thumb|left|The New York [[stock exchange]] [[trading room|traders' floor]] (1963)]]
After [[World War I]], a broad array of new analytical tools in the [[social sciences]] were developed to explain the social and economic trends of the period, including the concepts of [[post-industrial society]] and the [[welfare state]].<ref name="Burnham" /> This era was greatly influenced by [[Keynesian]] economic stabilization policies. The postwar boom ended in the late 1960s and early 1970s, and the situation was worsened by the rise of [[stagflation]].<ref>{{cite book|author=Barnes, Trevor J.|title=Reading economic geography|publisher=Blackwell Publishing|isbn=063123554X|pages=127|year=2004}}</ref>


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 in the 1950s|United States after the 1950s]], [[Trente Glorieuses|France after the 1960s]], [[Spanish miracle|Spain after the 1970s]], [[Economy of Poland|Poland after 2015]], and others. At this stage most capitalist markets are considered{{by whom|date=July 2021}} developed and characterized by developed private and public markets for equity and debt, a high [[standard of living]] (as characterized by the [[World Bank]] and the [[International Monetary Fund|IMF]]), large institutional investors and a well-funded [[banking system]]. A significant [[managerial class]] has emerged{{when|date=July 2021}} and decides on a significant proportion of investments and other decisions. A different future than that envisioned by Marx has started to emerge—explored and described by [[Anthony Crosland]] in the United Kingdom in his 1956 book ''[[The Future of Socialism]]''<ref>{{cite book |last=Crosland |first=Anthony |title=The Future of Socialism |publisher=Jonathan Cape |year=1956 |location=United Kingdom}}{{page needed|date=December 2023}}</ref> and by [[John Kenneth Galbraith]] in North America in his 1958 book ''[[The Affluent Society]]'',<ref>{{cite book |last=Galbraith |first=John Kenneth |title=The Affluent Society |publisher=[[Houghton Mifflin]] |year=1958 |location=United States}}{{page needed|date=December 2023}}</ref> 90 years after Marx's research on the state of capitalism in 1867.<ref>{{cite book |last=Shiller |first=Robert |title=Finance and The Good Society |publisher=[[Princeton University Press]] |year=2012 |location=United States}}{{page needed|date=December 2023}}</ref>
Exceptionally high [[inflation]] combined with slow output growth, rising unemployment, and eventually [[recession]] to cause a loss of credibility in the [[Keynesian]] welfare-statist mode of regulation. Under the influence of [[Friedrich Hayek]] and [[Milton Friedman]], [[Western world|Western]] states embraced policy prescriptions inspired by [[laissez-faire]] capitalism and [[classical liberalism]].


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. Finally, the general public's interest was shifted from the [[collectivist]] concerns of Keynes's managed capitalism to a focus on individual freedom and 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 communism.
The [[Post–World War II economic expansion|postwar boom]] ended in the late 1960s and early 1970s and the economic situation grew worse with the rise of [[stagflation]].<ref>{{cite book |last=Barnes |first=Trevor J. |title=Reading economic geography |publisher=[[Blackwell Publishing]] |isbn=978-0-631-23554-5 |page=127 |year=2004}}</ref> [[Monetarism]], a modification of [[Keynesian economics|Keynesianism]] that is more compatible with ''laissez-faire'' analyses, gained increasing prominence in the capitalist world, especially under the years in office of [[Ronald Reagan]] in the United States (1981–1989) and of [[Margaret Thatcher]] in the United Kingdom (1979–1990). Public and political interest began shifting away from the so-called [[Collectivism and individualism|collectivist]] concerns of Keynes's managed capitalism to a focus on individual [[choice]], called "remarketized capitalism".<ref name="Fulcher, James 2004">{{cite book |last=Fulcher |first=James |title=Capitalism |edition=1st |location=New York |publisher=[[Oxford University Press]] |date=2004}}{{page needed|date=December 2023}}</ref>


The end of the [[Cold War]] and the [[dissolution of the Soviet Union]] allowed for capitalism to become a truly global system in a way not seen since before [[World War I]]. The development of the [[neoliberal]] global economy would have been impossible without the fall of [[communism]].<ref>{{cite book |last=Gerstle |first=Gary |author-link=Gary Gerstle |date=2022 |title=The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era |url=https://global.oup.com/academic/product/the-rise-and-fall-of-the-neoliberal-order-9780197519646?cc=us&lang=en& |location= |publisher=[[Oxford University Press]] |pages=10–12 |isbn=978-0-19-751964-6}}</ref><ref>{{cite book |last=Bartel |first=Fritz |date=2022 |title=The Triumph of Broken Promises: The End of the Cold War and the Rise of Neoliberalism |url=https://www.hup.harvard.edu/catalog.php?isbn=978-0-674-97678-8 |location= |publisher=[[Harvard University Press]] |pages=5–6, 19 |isbn=978-0-674-97678-8}}</ref>
=== Globalization ===
{{Main|Globalization}}
Although [[international trade]] has been associated with the development of capitalism for over five hundred years, some thinkers argue that a number of trends associated with [[globalization]] have acted to increase the mobility of people and capital since the last quarter of the 20th century, combining to circumscribe the room to maneuver of states in choosing non-capitalist models of development. Today, these trends have bolstered the argument that capitalism should now be viewed as a truly [[world government|world system]].<ref name="Burnham" /> However, other thinkers argue that globalization, even in its quantitative degree, is no greater now than during earlier periods of capitalist trade.<ref>{{cite book |title=After the New Economy |last=Henwood |first=Doug |publisher=New Press |date=1 October 2003 |isbn=1-56584-770-9}}</ref>


Harvard Kennedy School economist Dani Rodrik distinguishes between three historical variants of capitalism:<ref>{{citation |last=Rodrik |first=Dani |title=Capitalism 3.0 |date=2009 |url=https://www.jstor.org/stable/j.ctt46mtqx.23 |work=Aftershocks |volume= |pages=185–193 |editor-last=Hemerijck |editor-first=Anton |publisher=[[Amsterdam University Press]] |jstor=j.ctt46mtqx.23 |isbn=978-90-8964-192-2 |access-date=14 January 2021 |editor2-last=Knapen |editor2-first=Ben |editor3-last=van Doorne |editor3-first=Ellen}}</ref>
== Perspectives ==
* 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);
=== Classical political economy ===
* 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;
{{Main|Classical economics|Classical liberalism}}
* Capitalism 2.1 entailed a combination of unregulated markets, globalization, and various national obligations by states.


==== Relationship to democracy ====
[[File:AdamSmith.jpg|thumb|right|[[Adam Smith]]]]
The relationship between [[democracy]] and capitalism is a contentious area in theory and in popular political movements.<ref>{{cite journal |last1=Milner |first1=Helen V |title=Is Global Capitalism Compatible with Democracy? Inequality, Insecurity, and Interdependence |journal=[[International Studies Quarterly]] |date=2021 |volume=65 |issue=4 |pages=1097–1110 |doi=10.1093/isq/sqab056 |doi-access=free}}</ref> The extension of adult-male [[suffrage]] in 19th-century Britain occurred along with the development of industrial capitalism and [[representative democracy]] became widespread at the same time as capitalism, leading capitalists to posit a causal or mutual relationship between them. However, according to some authors in the 20th-century, capitalism also accompanied a variety of political formations quite distinct from liberal democracies, including [[fascism|fascist]] regimes, [[Absolute monarchy|absolute monarchies]] and [[One-party state|single-party states]].<ref name="Burnham" /> [[Democratic peace theory]] asserts that democracies seldom fight other democracies, but others suggest this may be because of political similarity or stability, rather than because they are "democratic" or "capitalist". Critics argue that though economic growth under capitalism has led to democracy, it may not do so in the future as [[authoritarian]] régimes have been able to manage economic growth using some of capitalism's competitive principles<ref>{{cite magazine |first=Gady |last=Epstein |title=The Winners And Losers in Chinese Capitalism |url=https://www.forbes.com/sites/gadyepstein/2010/08/31/the-winners-and-losers-in-chinese-capitalism/ |magazine=[[Forbes]] |access-date=28 October 2015 |archive-date=5 November 2015 |archive-url=https://web.archive.org/web/20151105210914/http://www.forbes.com/sites/gadyepstein/2010/08/31/the-winners-and-losers-in-chinese-capitalism/ |url-status=live}}</ref><ref>{{cite news |title=The rise of state capitalism |url=http://www.economist.com/node/21543160 |newspaper=[[The Economist]] |access-date=24 October 2015 |issn=0013-0613 |archive-date=15 June 2020 |archive-url=https://web.archive.org/web/20200615124603/https://www.economist.com/leaders/2012/01/21/the-rise-of-state-capitalism |url-status=live}}</ref> without making concessions to greater [[political freedom]].<ref>{{cite web |last=Mesquita |first=Bruce Bueno de |url=http://www.foreignaffairs.org/20050901faessay84507/bruce-bueno-de-mesquita-george-w-downs/development-and-democracy.html |title=Development and Democracy |date=September 2005 |access-date=26 February 2008 |work=[[Foreign Affairs]] |url-status=dead |archive-url=https://web.archive.org/web/20080220154505/http://www.foreignaffairs.org/20050901faessay84507/bruce-bueno-de-mesquita-george-w-downs/development-and-democracy.html |archive-date=20 February 2008}}</ref><ref>{{cite journal |last1=Siegle |first1=Joseph |last2=Weinstein |first2=Michael |last3=Halperin |first3=Morton |date=1 September 2004 |title=Why Democracies Excel |url=http://www.mafhoum.com/press7/212S28.pdf |journal=[[Foreign Affairs]] |volume=83 |issue=5 |pages=57 |doi=10.2307/20034067 |jstor=20034067 |access-date=26 August 2018 |archive-date=12 April 2019 |archive-url=https://web.archive.org/web/20190412055541/http://www.mafhoum.com/press7/212S28.pdf |url-status=live}}</ref>
The [[classical economics|classical school economic thought]] emerged in Britain in the late 18th century. The classical political economists [[Adam Smith]], [[David Ricardo]], [[Jean-Baptiste Say]], and [[John Stuart Mill]] published analyses of the production, distribution and exchange of goods in a [[market]] that have since formed the basis of study for most contemporary economists.


Political scientists [[Torben Iversen]] and [[David Soskice]] see democracy and capitalism as mutually supportive.<ref>{{cite book |last1=Iversen |first1=Torben |url=https://www.jstor.org/stable/j.ctv4g1r3n |title=Democracy and Prosperity: Reinventing Capitalism through a Turbulent Century |last2=Soskice |first2=David |date=2019 |publisher=[[Princeton University Press]] |jstor=j.ctv4g1r3n |isbn=978-0-691-18273-5}}</ref> [[Robert Dahl]] argued in ''On Democracy'' that capitalism was beneficial for democracy because economic growth and a large middle class were good for democracy.<ref name=":0a">{{cite book |last=Dahl |first=Robert A. |url=https://books.google.com/books?id=ZG4JEAAAQBAJ |title=On Democracy |date=2020 |publisher=[[Yale University Press]] |isbn=978-0-300-25799-1 |language=en}}</ref> He also argued that a market economy provided a substitute for government control of the economy, which reduces the risks of tyranny and authoritarianism.<ref name=":0a" />
In France, 'Physiocrats' like [[François Quesnay]] promoted [[free trade]] based on a conception that wealth originated from land. Quesnay's ''Tableau Économique'' (1759), described the economy analytically and laid the foundation of the Physiocrats' economic theory, followed by [[Anne Robert Jacques Turgot]] who opposed tariffs and [[customs duties]] and advocated [[free trade]]. [[Richard Cantillon]] defined long-run equilibrium as the balance of flows of income, and argued that the [[supply and demand]] mechanism around land influenced short-term prices.


In his book ''[[The Road to Serfdom]]'' (1944), [[Friedrich Hayek]] (1899–1992) asserted that the free-market understanding of [[economic freedom]] as present in capitalism is a requisite of [[political freedom]]. He argued that the market mechanism is the only way of deciding what to produce and how to distribute the items without using coercion. [[Milton Friedman]] and [[Ronald Reagan]] also promoted this view.<ref>{{cite journal |last1=Pryor |first1=Frederic L. |title=Capitalism and freedom? |journal=Economic Systems |date=2010 |volume=34 |issue=1 |pages=91–104 |doi=10.1016/j.ecosys.2009.09.003}}</ref> Friedman claimed that centralized economic operations are always accompanied by [[political repression]]. In his view, transactions in a market economy are voluntary and the wide diversity that voluntary activity permits is a fundamental threat to repressive [[political leader]]s 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.<ref>{{cite journal |first=Friedrich |last=Hayek |author-link=Friedrich Hayek |title=The Road to Serfdom |journal=[[Nature (journal)|Nature]] |volume=154 |issue=3911 |pages=473–474 |publisher=[[University of Chicago Press]] |year=1944 |isbn=978-0-226-32061-8 |bibcode=1944Natur.154..473C |doi=10.1038/154473a0 |s2cid=4071358}}</ref><ref>{{cite book |last=Bellamy |first=Richard |title=The Cambridge History of Twentieth-Century Political Thought |publisher=[[Cambridge University Press]] |year=2003 |isbn=978-0-521-56354-3 |page=60}}</ref> [[Freedom House]], an American [[think-tank]] that conducts international research on, and advocates for, democracy, political freedom and [[human rights]], has argued that "there is a high and statistically significant correlation between the level of political freedom [[Freedom in the World|as measured by Freedom House]] and economic freedom [[Index of Economic Freedom|as measured by the Wall Street Journal/Heritage Foundation survey]]".<ref>{{cite book |first=Adrian |last=Karatnycky |title=Freedom in the World: The Annual Survey of Political Rights and Civil Liberties |publisher=[[Transaction Publishers]] |date=2001 |isbn=978-0-7658-0101-2 |page=11}}</ref>
Smith's attack on [[mercantilism]] and his reasoning for "the system of natural liberty" in ''[[The Wealth of Nations]]'' (1776) are usually taken as the beginning of classical political economy. Smith devised a set of concepts that remain strongly associated with capitalism today, particularly his theory of the "[[invisible hand]]" of the market, through which the pursuit of individual self-interest unintentionally produces a collective good for society. It was necessary for Smith to be so forceful in his argument in favor of free markets because he had to overcome the popular mercantilist sentiment of the time period.<ref>Degen, Robert. ''The Triumph of Capitalism''. 1st ed. New Brunswick, NJ: Transaction Publishers, 2008.</ref>


In ''[[Capital in the Twenty-First Century]]'' (2013), [[Thomas Piketty]] of the [[Paris School of Economics]] asserted that inequality is the inevitable consequence of economic growth in a capitalist economy and the resulting [[Wealth concentration|concentration of wealth]] can destabilize democratic societies and undermine the ideals of social justice upon which they are built.<ref>{{cite book |author-link=Thomas Piketty |last=Piketty |first=Thomas |date=2014 |title=Capital in the Twenty-First Century |publisher=[[Belknap Press]] |isbn=978-0-674-43000-6 |page=571}}</ref>
He criticized monopolies, tariffs, duties, and other state enforced restrictions of his time and believed that the market is the most fair and efficient arbitrator of resources. This view was shared by [[David Ricardo]], second most important of the classical political economists and one of the most influential economists of modern times.<ref>{{cite book|author=Hunt, E.K.|title=History of Economic Thought: A Critical Perspective|publisher=M.E. Sharpe|year=2002|pages=92}}</ref>


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,<ref>{{cite web |title=Transparency International Corruption Measure 2015 |url=https://www.transparency.org/country/#SGP |website=Transparency International Corruption Measure 2015 – By Country / Territory |publisher=Transparency International |access-date=20 September 2016 |archive-date=31 March 2016 |archive-url=https://web.archive.org/web/20160331114640/http://www.transparency.org/country/#SGP |url-status=dead}}</ref> operates largely under a one-party rule. Furthermore, it does not vigorously defend freedom of expression as evidenced by its government-regulated [[Censorship in Singapore|press]], and its penchant for upholding laws protecting ethnic and religious harmony, judicial dignity and personal reputation. The private (capitalist) sector in the People's Republic of China has grown exponentially and thrived since its inception, despite having an authoritarian government. [[Augusto Pinochet]]'s [[Military dictatorship of Chile (1973–1990)|rule in Chile]] led to economic growth and high levels of inequality<ref>[[Naomi Klein|Klein, Naomi]] (2008). ''[[The Shock Doctrine: The Rise of Disaster Capitalism]].'' [[Picador (imprint)|Picador]]. {{ISBN|0-312-42799-9}} [https://books.google.com/books?id=PwHUAq5LPOQC&pg=PA105 p. 105] {{Webarchive|url=https://web.archive.org/web/20150319071518/http://books.google.com/books?id=PwHUAq5LPOQC&lpg=PP1&pg=PA105 |date=19 March 2015 }}.</ref> by using authoritarian means to create a safe environment for investment and capitalism. Similarly, [[Suharto]]'s authoritarian reign and [[Indonesian mass killings of 1965–66|extirpation]] of the [[Communist Party of Indonesia]] allowed for the expansion of capitalism in [[Indonesia]].<ref>{{cite journal |last=Farid |first=Hilmar |date=2005 |title=Indonesia's original sin: mass killings and capitalist expansion, 1965–66 |journal=[[Inter-Asia Cultural Studies]] |volume=6 |issue=1 |pages=3–16 |doi=10.1080/1462394042000326879 |s2cid= 145130614}}</ref><ref>{{cite book |last=Robinson |first=Geoffrey B. |date=2018 |title=The Killing Season: A History of the Indonesian Massacres, 1965–66 |url=https://press.princeton.edu/titles/11135.html |publisher=[[Princeton University Press]] |page=177 |isbn=978-1-4008-8886-3 |access-date=1 August 2018 |archive-date=19 April 2019 |archive-url=https://web.archive.org/web/20190419011656/https://press.princeton.edu/titles/11135.html |url-status=live}}</ref>
In ''The Principles of Political Economy and Taxation'' (1817), he developed the law of [[comparative advantage]], which explains why it is profitable for two parties to trade, even if one of the trading partners is more efficient in every type of economic production. This principle supports the economic case for [[free trade]]. Ricardo was a supporter of [[Say's Law]] and held the view that full employment is the normal equilibrium for a competitive economy.<ref>{{cite book|title=Blackwell Encyclopedia of Political Thought|publisher=Blackwell Publishing|year=1991|pages=91}}</ref> He also argued that [[inflation]] is closely related to changes in quantity of money and [[Credit (finance)|credit]] and was a proponent of the law of [[diminishing returns]], which states that each additional unit of input yields less and less additional output.<ref name="Skousen2001">{{cite book|author=Skousen, Mark|title=The Making of Modern Economics: The Lives and Ideas of the Great Thinkers|publisher=M.E. Sharpe|year=2001|pages=98–102, 134}}</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 |last=Scott |first=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 |access-date=19 January 2013 |archive-date=23 September 2020 |archive-url=https://web.archive.org/web/20200923063611/https://www.oed.com/start;jsessionid=A9CBE07460C68ED291D7D6CDCE84A1B1?authRejection=true&url=%2Fview%2FEntry%2F27454%3Frskey%3DZVI1hr%26result%3D2%26isAdvanced%3Dfalse |url-status=live}}</ref> In his ''[[Das Kapital]]'', Marx analyzed the "[[Capitalist mode of production (Marxist theory)|capitalist mode of production]]" using a method of understanding today known as [[Marxism]]. However, Marx himself rarely used the term "capitalism" while it was used twice in the more political interpretations of his work, primarily authored by his collaborator [[Friedrich Engels]]. In the 20th century, defenders of the capitalist system often replaced the term "capitalism" with phrases such as free enterprise and private enterprise and replaced "capitalist" with [[Rentier capitalism|rentier]] and [[investor]] in reaction to the negative connotations associated with capitalism.<ref name="Williams 1983 51">{{cite book |last=Williams |first=Raymond |title=Keywords: A vocabulary of culture and society, revised edition |publisher=[[Oxford University Press]] |year=1983 |isbn=978-0-19-520469-8 |page=[https://archive.org/details/keywordsvocabula00willrich/page/51 51] |chapter=Capitalism |chapter-url=https://archive.org/details/keywordsvocabula00willrich/page/51}}</ref>
The values of classical political economy are strongly associated with the [[classical liberalism|classical liberal]] doctrine of minimal government intervention in the economy, though it does not necessarily oppose the state's provision of a few basic [[public goods]].<ref name="aaron2003">Eric Aaron, ''What's Right?'' (Dural, Australia: Rosenberg Publishing, 2003), 75.</ref> Classical liberal thought has generally assumed a clear division between the economy and other realms of social activity, such as the state.<ref>{{cite book|title=Capitalism: Dictionary of the Social Sciences|author=Calhoun, Craig|publisher=Oxford University Press|year=2002}}</ref>


== Characteristics ==
While economic liberalism favors markets unfettered by the government, it maintains that the state has a legitimate role in providing [[public good]]s.<ref name = "econlib"/> For instance, Adam Smith argued that the state has a role in providing roads, canals, schools and bridges that cannot be efficiently implemented by private entities. However, he preferred that these goods should be paid proportionally to their consumption (e.g. putting a [[Toll road|toll]]). In addition, he advocated [[Free trade area|retaliatory tariffs]] to bring about free trade, and [[copyright]]s and [[patent]]s to encourage innovation.<ref name=econlib>{{cite web|title=Adam Smith|publisher=econlib.org|url=http://www.econlib.org/library/Enc/bios/Smith.html}}</ref>
{{further|Academic perspectives on capitalism}}
In general, capitalism as an economic system and mode of production can be summarized by the following:<ref>{{cite web|url=http://publishing.cdlib.org/ucpressebooks/view?docId=ft3n39n8x3&chunk.id=d0e1212&toc.id=&brand=ucpress |title=Althusser and the Renewal of Marxist Social Theory |access-date=24 March 2015 |archive-date=2 April 2015 |archive-url=https://web.archive.org/web/20150402094835/http://publishing.cdlib.org/ucpressebooks/view?docId=ft3n39n8x3&chunk.id=d0e1212&toc.id=&brand=ucpress |url-status=live}}</ref>
* [[Capital accumulation]]:<ref name=ch32>{{cite book|url=https://www.marxists.org/archive/marx/works/1867-c1/ch32.htm |title=Economic Manuscripts: Capital Vol. I |chapter=Thirty Two |first=Karl |last=Marx |author-link=Karl Marx |access-date=24 March 2015 |via=[[Marxists Internet Archive]] |archive-date=21 February 2015 |archive-url=https://web.archive.org/web/20150221104326/https://www.marxists.org/archive/marx/works/1867-c1/ch32.htm |url-status=live}}</ref> production for profit and accumulation as the implicit purpose of all or most of production, constriction or elimination of production formerly carried out on a common social or private household basis.<ref name=xxx31 />
* [[Production (economics)|Commodity production]]: production for exchange on a market; to maximize [[exchange-value]] instead of [[use-value]].
* Exchange of goods or services, can be enabled by [[contract]]s.<ref name="y015">{{cite book | last=Goldberg | first=Victor P. | title=The Oxford Handbook of Capitalism | chapter=Contracts | publisher=Oxford University Press | date=21 November 2012 | isbn=978-0-19-539117-6 | doi=10.1093/oxfordhb/9780195391176.013.0010 | pages=250–274}}</ref> Exchange of services can be in form of [[wage labor]].<ref name="Steinfeld 2009 3"/>
* [[Private ownership]] of the means of production:<ref name="Modern Economics 1986, p. 54" />
* The [[investment]] of money to make a profit.<ref>James Fulcher, ''Capitalism A Very Short Introduction'', "the investment of money in order to make a profit, the essential feature of capitalism", p. 14, Oxford, 2004, {{ISBN|978-0-19-280218-7}}.</ref>
* The use of the [[price mechanism]] to allocate resources between competing uses.<ref name="Modern Economics 1986, p. 54" />
* Economically efficient use of the [[factors of production]] and raw materials due to maximization of value added in the production process.<ref>{{cite book|title=Capitalism: A complete understanding of the nature and value of human economic life |last=Reisman |first=George |year=1998 |isbn=0-915463-73-3 |publisher=Jameson Books}}</ref><ref>{{cite book|title=History of Economic Thought: A Critical Perspective |last1=Hunt |first1=E.K. |last2=Lautzenheiser |first2=Mark |year=2014 |publisher=PHI Learning |isbn=978-0-7656-2599-1}}</ref>
* Freedom of capitalists to act in their self-interest in managing their business and investments.<ref>{{cite book|title=Capitalism: A complete understanding of the nature and value of human economic life |last=Reisman |first=George |year=1998 |isbn=978-0-915463-73-2 |publisher=Jameson Books}}</ref>
* Capital suppliance by "the single owner of a firm, or by [[shareholder]]s in the case of a [[joint-stock company]]."<ref name=":1">{{Cite book |title=The Desk Encyclopedia of World History |publisher=[[Oxford University Press]] |year=2006 |isbn=978-0-7394-7809-7 |editor-last=Wright |editor-first=Edmund |location=New York |pages=111–112}}</ref>


=== Marxist political economy ===
=== Market ===
In [[free market]] and ''[[laissez-faire]]'' forms of capitalism, markets are used most extensively with minimal or no regulation over the pricing mechanism. In mixed economies, which are almost universal today,<ref>James Fulcher, ''Capitalism A Very Short Introduction'', "...in the wake of the 1970 crisis, the neoliberal model of capitalism became intellectually and ideologically dominant", p. 58, Oxford, 2004, {{ISBN|978-0-19-280218-7}}.</ref> markets continue to play a dominant role, but they are regulated to some extent by the state in order to correct [[market failure]]s, promote [[social welfare]], conserve [[natural resource]]s, fund [[military|defense]] and [[public safety]] or other rationale. In [[State capitalism|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.
{{Main|Marxian economics}}
[[Karl Marx]] considered capitalism to be a historically specific [[mode of production]] (the way in which the productive property is owned and controlled, combined with the corresponding [[social relations of production|social relations]] between individuals based on their connection with the process of production) in which capitalism has become the dominant mode of production.<ref name="Burnham">{{cite book|author=Burnham, Peter|title=Capitalism: The Concise Oxford Dictionary of Politics|publisher=Oxford University Press|year=2003}}</ref>


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. [[Monopoly|Monopolies]] or [[cartels]] can develop, especially if there is no competition. A monopoly occurs when a firm has exclusivity over a market. Hence, the firm can engage in [[rent seeking]] behaviors such as limiting output and raising prices because it has no fear of competition.
The capitalist stage of development or "[[bourgeois]] society," for Marx, represented the most advanced form of social organization to date, but he also thought that the working classes would come to power in a worldwide [[socialism|socialist]] or [[communism|communist]] transformation of human society as the end of the series of first aristocratic, then capitalist, and finally working class rule was reached.<ref>[[The Communist Manifesto]]</ref><ref>"To Marx, the problem of reconstituting society did not arise from some prescription, motivated by his personal predilections; it followed, as an iron-clad historical necessity – on the one hand, from the productive forces grown to powerful maturity; on the other, from the impossibility further to organize these forces according to the will of the [[law of value]]." - [[Leon Trotsky]], "Marxism in our Time", 1939 (Inevitability of Socialism) [http://wsws.org/articles/2008/nov2008/time-n01.shtml]</ref>
[[File:Karl Marx.jpg|left|thumb|upright|[[Karl Marx]]]]
Following [[Adam Smith]], Marx distinguished the [[use value]] of commodities from their [[exchange value]] in the market. [[capital (economics)|Capital]], according to Marx, is created with the purchase of commodities for the purpose of creating new commodities with an exchange value higher than the sum of the original purchases. For Marx, the use of [[labor power]] had itself become a commodity under capitalism; the exchange value of labor power, as reflected in the wage, is less than the value it produces for the capitalist.


Governments have implemented legislation for the purpose of preventing the creation of monopolies and cartels. In 1890, the [[Sherman Antitrust Act of 1890|Sherman Antitrust Act]] became the first legislation passed by the United States Congress to limit monopolies.<ref>{{Cite news|url=http://www.investopedia.com/terms/m/monopoly.asp|title=Monopoly|author=<!--Staff writer(s); no by-line.-->|date=24 November 2003|work=Investopedia|access-date=2 March 2017|language=en-US|archive-date=22 February 2017|archive-url=https://web.archive.org/web/20170222204011/http://www.investopedia.com/terms/m/monopoly.asp|url-status=live}}</ref>
This difference in values, he argues, constitutes [[surplus value]], which the capitalists extract and accumulate. In his book ''[[Das Kapital|Capital]]'', Marx argues that the [[capitalist mode of production]] is distinguished by how the owners of capital extract this surplus from workers—all prior class societies had extracted [[surplus labor]], but capitalism was new in doing so via the sale-value of produced commodities.<ref>{{cite web |url=http://www.marxists.org/archive/marx/works/1894-c3/ch47.htm|title=Capital. v. 3. Chapter 47: Genesis of capitalist ground rent|author=Karl Marx |accessdate=26 February 2008|publisher=Marxists }}</ref> He argues that a core requirement of a capitalist society is that a large portion of the population must not possess sources of self-sustenance that would allow them to be independent, and must instead be compelled, to survive, to sell their labor for a living wage.<ref>Karl Marx. Chapter Twenty-Five: The General Law of Capitalist Accumulation. ''[[Das Kapital]]''.</ref><ref>Dobb, Maurice 1947 ''Studies in the Development of Capitalism.'' New York: International Publishers Co., Inc.</ref><ref>David Harvey 1989 ''The Condition of Postmodernity''</ref>


=== Wage labor ===
In conjunction with his criticism of capitalism was Marx's belief that exploited labor would be the driving force behind a revolution to a socialist-style economy.<ref>Wheen, Francis ''Books That Shook the World: Marx's Das Kapital''1st ed. London: Atlantic Books, 2006</ref> For Marx, this cycle of the extraction of the surplus value by the owners of capital or the bourgeoisie becomes the basis of [[class struggle]]. This argument is intertwined with Marx's version of the [[labor theory of value]] asserting that labor is the source of all value, and thus of profit.
{{Main|Wage labor}}
Wage labor, usually referred to as paid work, paid employment, or paid labor, refers to the [[socioeconomics|socioeconomic]] relationship between a [[workforce|worker]] and an [[employment|employer]] in which the worker sells their labor power under a formal or informal [[employment contract]].<ref name="Steinfeld 2009 3">{{Harvnb|Steinfeld|2009|p=3}}: "All labor contracts were/are designed legally to bind a worker in one way or another to fulfill the labor obligations the worker has undertaken. That is one of the principal purposes of labor contracts."</ref> These transactions usually occur in a [[labour economics|labor market]] where [[wage]]s or [[salary|salaries]] are [[market economy|market-determined]].<ref>{{Harvnb|Deakin|Wilkinson|2005}}</ref>


In exchange for the money paid as wages (usual for short-term work-contracts) or salaries (in permanent employment contracts), the work product generally becomes the [[work for hire|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.<ref>{{cite book|page=278|title=Concise Dictionary of Economics|isbn=978-93-5057-032-6|publisher=V&S Publishers|year=2013|author=Editorial Board|chapter=W}}</ref>
[[Vladimir Lenin]], in ''[[Imperialism, the Highest Stage of Capitalism]]'' (1916), modified classic Marxist theory and argued that capitalism necessarily induced [[monopoly capitalism]]&mdash;which he also called "imperialism"&mdash;to find new markets and resources, representing the last and highest stage of capitalism.<ref>{{cite web|url=http://www.marxists.org/archive/lenin/works/1916/imp-hsc/index.htm|title=Imperialism, the Highest Stage of Capitalism|publisher=Marxists|accessdate=26 February 2008|year=1916}}</ref> Some 20th century [[Marxian economics|Marxian economists]] consider capitalism to be a social formation where capitalist class processes dominate, but are not exclusive.<ref>See, for example, the works of Stephen Resnick and Richard Wolff.</ref>


=== Profit motive ===
Capitalist class processes, to these thinkers, are simply those in which [[surplus labor]] takes the form of [[surplus value]], usable as capital; other tendencies for utilization of labor nonetheless exist simultaneously in existing societies where capitalist processes are predominant. However, other late Marxian thinkers argue that a social formation as a whole may be classed as capitalist if capitalism is the mode by which a surplus is ''extracted'', even if this surplus is not ''produced'' by capitalist activity, as when an absolute majority of the population is engaged in non-capitalist economic activity.<ref>{{cite book|author=Ste. Croix, G. E. M. de|title=The Class Struggle in the Ancient Greek World|year=1982|pages=52–3}}</ref>
{{Main|Profit motive}}
The [[profit motive]], in the theory of capitalism, is the desire to earn income in the form of profit. Stated differently, the reason for a business's existence is to turn a profit.<ref>
Compare:
{{cite book
| last1 = Duska
| first1 = Ronald F.
| year = 1997
| chapter = The Why's of Business Revisited
| title = Contemporary Reflections on Business Ethics
| url = https://books.google.com/books?id=dANmdJHsqu0C
| series = Issues in Business Ethics
| volume = 23
| location = Dordrecht
| publisher = Springer Science & Business Media
| publication-date = 2007
| page = 41
| isbn = 978-1-4020-4984-2
| access-date = 8 July 2019
| quote = In microeconomics courses, profit maximization is frequently given as the goal of the firm. ... In microeconomics, profit maximization functions largely as a theoretical goal, with economists using it to prove how firms behave rationally to increase profit. Unfortunately, it ignores many real-world complexities.
}}
</ref> The profit motive functions according to [[rational choice theory]], or the theory that individuals tend to pursue what is in their own best interests. Accordingly, businesses seek to benefit themselves and/or their shareholders by maximizing profit.


In capitalist theoretics, the profit motive is said to ensure that resources are being allocated efficiently. For instance, [[Austrian economist]] [[Henry Hazlitt]] explains: "If there is no profit in making an article, it is a sign that the labor and capital devoted to its production are misdirected: the value of the resources that must be used up in making the article is greater than the value of the article itself".<ref>Hazlitt, Henry. "The Function of Profits". ''Economics in One Lesson''. Ludwig Von Mises Institute. Web. 22 April 2013.</ref>
[[David Harvey (geographer)|David Harvey]] extends Marxian thinking through which he theorizes the differential production of place, space and political activism under capitalism. He uses Marx’s theory of crisis to aid his argument that capitalism must have its “fixes” but that we cannot predetermine what fixes will be implemented, nor in what form they will be.


Socialist theorists note that, unlike mercantilists, capitalists accumulate their profits while expecting their profit rates to remain the same. This causes problems as earnings in the rest of society do not increase in the same proportion.<ref>"What is capitalism" ''Australian Socialist'' https://search.informit.org/doi/10.3316/informit.818838886883514</ref>
This idea of fix is suggestive and could mean fix as in stabilize, heal or solve, or as in a junky needing a fix – the idea of preventing feeling worse in order to feel better. In ''Limits to Capital'' (1982), Harvey outlines an overdetermined, spatially restless capitalism coupled with the spatiality of crisis formation and its resolution. Furthermore, his work has been central for understanding the contractions of capital accumulation and international movements of capitalist modes of production and money flows.<ref name="Lawson, Victoria 2007">Lawson, Victoria. Making Development Geography (Human Geography in the Making). New York: A Hodder Arnold Publication, 2007. Print.</ref>


=== Private property ===
In his essay, ''Notes towards a theory of uneven geographical development'', Harvey examines the causes of the extreme volatility in contemporary political economic fortunes across and between spaces of the world economy. He bases this uneven development on four conditionalities, being: The material embedding of capital accumulation processes in the web of socio-ecological life; accumulation by dispossession; the law-like character of capital accumulation in space and time; and, political, social and “class” struggles at a variety of geographical scales.<ref>Harvey, David. Notes towards a theory of uneven geographical development. Print.</ref>
{{Main|Private property}}
The relationship between the [[State (polity)|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 (economist)|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.<ref>{{cite web|url=http://www.imf.org/external/pubs/ft/fandd/2001/03/desoto.htm|title=The mystery of capital|author=Hernando de Soto|access-date=26 February 2008|archive-date=8 February 2008|archive-url=https://web.archive.org/web/20080208180121/http://www.imf.org/external/pubs/ft/fandd/2001/03/desoto.htm|url-status=live}}</ref>


According to de Soto, this is the process by which physical assets are transformed into capital, which in turn may be used in many more ways and much more efficiently in the market economy. A number of Marxian economists have argued that the [[inclosure act]]s 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.<ref>{{cite web|url=http://www.marxists.org/archive/marx/works/1867-c1/ch27.htm|title=Capital, v. 1. Part VIII: primitive accumulation|author=Karl Marx|access-date=26 February 2008|archive-date=3 March 2008|archive-url=https://web.archive.org/web/20080303162047/http://www.marxists.org/archive/marx/works/1867-c1/ch27.htm|url-status=live}}</ref><ref>{{cite journal |author=N.F.R. Crafts |title=Enclosure and labor supply revisited |journal=Explorations in Economic History |issue=2 |date=April 1978 |pages=172–183 |doi=10.1016/0014-4983(78)90019-0 |volume=15}}</ref>
=== Weberian political sociology ===
[[File:Max Weber 1917.jpg|thumb|250px|[[Max Weber]] in 1917]]
In some [[social science]]s, the understanding of the defining characteristics of capitalism has been strongly influenced by 19th century German social theorist [[Max Weber]]. Weber considered [[market]] [[trade|exchange]], rather than production, as the defining feature of capitalism; capitalist enterprises, in contrast to their counterparts in prior modes of economic activity, was their rationalization of production, directed toward maximizing [[Economic efficiency|efficiency]] and [[Productivity (economics)|productivity]]; a tendency leading to a sociological process of enveloping 'rationalization'. According to Weber, workers in pre-capitalist economic institutions understood work in terms of a personal relationship between [[Master craftsman|master]] and [[journeyman]] in a [[guild]], or between [[lord]] and [[peasant]] in a [[Manorialism|manor]].<ref>{{cite web|url=http://www.humanities.mq.edu.au/Ockham/y64l10.html|title=MAX WEBER: ON CAPITALISM|accessdate=26 February 2008|publisher=Macquarie University|author=Kilcullen, John|year=1996}}</ref>


Private property rights are not absolute, as in many countries the state has the power to seize private property, typically for public use, under the powers of [[eminent domain]].
In his book ''[[The Protestant Ethic and the Spirit of Capitalism]]'' (1904–1905), Weber sought to trace how a particular form of religious spirit, infused into traditional modes of economic activity, was a condition of possibility of modern western capitalism. For Weber, the 'spirit of capitalism' was, in general, that of ascetic Protestantism; this ideology was able to motivate extreme rationalization of daily life, a propensity to accumulate capital by a religious ethic to advance economically, and thus also the propensity to reinvest capital: this was sufficient, then, to create "self-mediating capital" as conceived by Marx.


=== Market competition ===
This is pictured in Proverbs 22:29, “Seest thou a man diligent in his calling? He shall stand before kings” and in Colossians 3:23, "Whatever you do, do your work heartily, as for the Lord rather than for men." In the ''Protestant Ethic'', Weber further stated that “moneymaking – provided it is done legally – is, within the modern economic order, the result and the expression of diligence in one’s calling…”
{{Main|Competition (economics)}}
In capitalist economics, market competition is the rivalry among sellers trying to achieve such goals as increasing profits, market share and sales volume by varying the elements of the [[marketing mix]]: price, product, distribution and promotion. Merriam-Webster defines competition in business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favourable terms".<ref>{{cite web |url=http://m-w.com/dictionary/competition |title=Definition of COMPETITION |access-date=24 March 2015 |archive-date=4 July 2008 |archive-url=https://web.archive.org/web/20080704114809/http://m-w.com/dictionary/competition |url-status=dead}}</ref> It was described by [[Adam Smith]] in ''[[The Wealth of Nations]]'' (1776) and later economists as allocating productive [[resource]]s to their most highly valued uses<ref>{{cite encyclopedia |first=George J. |last=Stigler |author-link=George J. Stigler |date=2008 |title=competition |dictionary=[[The New Palgrave Dictionary of Economics]] |edition=2nd |url=http://www.dictionaryofeconomics.com/article?id=pde2008_C000261&q=competition&topicid=&result_number=6 |archive-url=https://web.archive.org/web/20150215032134/http://www.dictionaryofeconomics.com/article?id=pde2008_C000261&q=competition&topicid=&result_number=6 |archive-date=15 February 2015}}</ref> and encouraging [[x-efficiency|efficiency]]. Smith and other [[classical economist]]s before [[Antoine Augustin Cournot|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 [[Economic equilibrium|equilibrium]].<ref>{{cite encyclopedia |first=Mark |last=Blaug |author-link=Mark Blaug |date=2008 |title=Invisible hand |dictionary=[[The New Palgrave Dictionary of Economics]] |edition=2nd |volume=4 |page=565 |url=http://www.dictionaryofeconomics.com/article?id=pde2008_I000220&edition=current&q=Invisible%20hand&topicid=&result_number=1 |archive-url=https://web.archive.org/web/20130605204024/http://www.dictionaryofeconomics.com/article?id=pde2008_I000220&edition=current&q=Invisible%20hand&topicid=&result_number=1 |archive-date=5 June 2013}}</ref> Competition is widespread throughout the [[market process]]. It is a condition where "buyers tend to compete with other buyers, and sellers tend to compete with other sellers".<ref name=ewot2014 /><!-- p. 102 --> In offering goods for exchange, buyers competitively bid to purchase specific quantities of specific goods which are available, or might be available if sellers were to choose to offer such goods. Similarly, sellers bid against other sellers in offering goods on the market, competing for the attention and exchange resources of buyers. Competition results from [[scarcity]], as it is not possible to satisfy all conceivable human wants, and occurs as people try to meet the criteria being used to determine allocation.<ref name=ewot2014>{{cite book |last1=Heyne |first1=Paul |last2=Boettke |first2=Peter J. |last3=Prychitko |first3=David L. |title=The Economic Way of Thinking |date=2014 |publisher=Pearson |isbn=978-0-13-299129-2 |pages=102–106 |edition=13th}}<!--|access-date=24 December 2014 --></ref>{{rp|105}}


In the works of Adam Smith, the idea of capitalism is made possible through competition which creates growth. Although capitalism had not entered mainstream economics at the time of Smith, it is vital to the construction of his ideal society. One of the foundational blocks of capitalism is competition. Smith believed that a prosperous society is one where "everyone should be free to enter and leave the market and change trades as often as he pleases."<ref name="W.W. Norton">{{cite book |last1=Warsh |first1=David |title=Knowledge and the Wealth of Nations |date=2007 |publisher=[[W.W. Norton]] |page=42}}</ref> He believed that the freedom to act in one's self-interest is essential for the success of a capitalist society. In response to the idea that if all participants focus on their own goals, society's well-being will be water under the bridge, Smith maintains that despite the concerns of intellectuals, "global trends will hardly be altered if they refrain from pursuing their personal ends."<ref>{{cite book |last1=Lippit |first1=Victor |title=Capitalism |date=2005 |publisher=[[Taylor & Francis]] |location=ProQuest |page=2}}</ref> He insisted that the actions of a few participants cannot alter the course of society. Instead, Smith maintained that they should focus on personal progress instead and that this will result in overall growth to the whole.
And, "If God show you a way in which you may lawfully get more than in another way (without wrong to your soul or to any other), if you refuse this, and choose the less gainful way, you cross one of the ends of your calling, and you refuse to be God's steward, and to accept His gifts and use them for him when He requierth it: you may labour to be rich for God, though not for the flesh and sin" (p.&nbsp;108).


Competition between participants, "who are all endeavoring to justle one another out of employment, obliges every man to endeavor to execute his work" through competition towards growth.<ref name="W.W. Norton"/>
Western Capitalism, was, most generally for Weber, the "rational organization of formally free labor." The idea of the "formally free" laborer, meant, in the double sense of Marx, that the laborer was both free to own property, and free of the ability to reproduce his labor power, i.e., was the victim of expropriation of his means of production. It is only on these conditions, still abundantly obvious in the modern world of Weber, that western capitalism is able to exist.


=== Economic growth ===
For Weber, modern western capitalism represented the order "now bound to the technical and economic conditions of machine production which to-day determine the lives of all the individuals who are born into this mechanism, not only those directly concerned with economic acquisition, with irresistible force. Perhaps it will so determine them until the last ton of fossilized coal is burnt" (p.&nbsp;123).<ref>{{cite web|url=http://www.economyandsociety.com/events/Ethic&SpiritCapsm_Conf_Agenda2.pdf|format=PDF|title=Conference Agenda|publisher=Economy and Society|accessdate=26 February 2008}}</ref> This is further seen in his criticism of "specialists without spirit, [[Hedonism|hedonists]] without a heart" that were developing, in his opinion, with the fading of the original [[Puritan]] "spirit" associated with capitalism.
{{further|Economic growth}}
{{expand section|date=January 2021}}


[[Economic growth]] is a characteristic tendency of capitalist economies.<ref name=joff>{{cite journal|title=The root cause of economic growth under capitalism |journal=[[Cambridge Journal of Economics]] |year=2011 |issue=5 |pages=873–896 |first=Michael |last=Joff |volume=35 |quote=The tendency for capitalist economies to grow is one of their most characteristic properties. |doi=10.1093/cje/beq054}}</ref> However, capitalist economies may experience fluctuations in growth that cannot be accounted for by demographic or technological changes. These fluctuations, which involve sustained periods of economic growth and recession, are referred to as business cycles in macroeconomics. Economic growth is measured as growth in investment, economic output, and economic consumption per capita. Changes in hours of employment on their own are not considered as a factor of economic growth.<ref name = "HP"/>
=== Institutional economics ===
{{Main|Institutional economics}}


=== As a mode of production ===
[[File:Veblen3a.jpg|thumb|right|[[Thorstein Veblen]]]]
{{further|Mode of production}}
The capitalist mode of production refers to the systems of organising production and distribution within capitalist [[society|societies]]. Private money-making in various forms (renting, banking, merchant trade, production for profit and so on) preceded the development of the capitalist mode of production as such.


The term capitalist mode of production is defined by [[Private property|private ownership]] of the [[means of production]], extraction of [[surplus value]] by the owning class for the purpose of [[capital accumulation]], [[Wage labour|wage-based labor]] and, at least as far as [[Commodity|commodities]] are concerned, being [[Market economy|market-based]].<ref>{{cite web |url=http://www.marxists.org/glossary/terms/c/a.htm#capitalism |title=Capitalism |publisher=[[Marxists Internet Archive]] |access-date=8 July 2011 |author=Encyclopedia of Marxism at marxism.org |archive-date=7 May 2019 |archive-url=https://web.archive.org/web/20190507154837/https://www.marxists.org/glossary/terms/c/a.htm#capitalism |url-status=live}}</ref>
Institutional economics, once the main school of economic thought in the United States, holds that capitalism cannot be separated from the political and social system within which it is embedded. It emphasizes the legal foundations of capitalism (see [[John R. Commons]]) and the evolutionary, habituated, and volitional processes by which institutions are erected like a penis and then changed (see [[John Dewey]], [[Thorstein Veblen]], and [[Daniel Bromley]].)


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.<ref name="Modern Economics 1986, p. 54" /> By contrast, in flourishing feudalism most or all of the factors of production, including labor, are owned by the feudal ruling class outright and the products may also be consumed without a market of any kind, it is production for use within the feudal social unit and for limited trade.<ref name=ch32 /> This has the important consequence that, under capitalism, the whole organisation of the production process is reshaped and re-organised to conform with economic [[bounded rationality|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.<ref name=xxx31>{{cite web|url=http://www.dsp.org.au/node/31 |title=The contradictions of capitalism – Democratic Socialist Perspective |publisher=dsp.org.au |url-status=dead |archive-url=https://web.archive.org/web/20150406094810/http://www.dsp.org.au/node/31 |archive-date=6 April 2015}}</ref>
One key figure in institutional economics was [[Thorstein Veblen]] who in his book [[The Theory of the Leisure Class]] (1899) analyzed the motivations of wealthy people in capitalism who [[Conspicuous consumption|conspicuously consumed]] their riches as a way of demonstrating success. The concept of [[conspicuous consumption]] was in direct contradiction to the neoclassical view that capitalism was efficient.


A society, region or [[nation]] is capitalist if the predominant source of incomes and products being distributed is capitalist activity, but even so this does not yet mean necessarily that the capitalist mode of production is dominant in that society.<ref>{{Cite web|title=Capitalism|url=https://www.investopedia.com/terms/c/capitalism.asp|access-date=14 February 2022|website=Investopedia|language=en}}</ref>
In [[The Theory of Business Enterprise]] (1904) Veblen distinguished the motivations of industrial production for people to use things from business motivations that used, or misused, industrial infrastructure for profit, arguing that the former is often hindered because businesses pursue the latter. Output and technological advance are restricted by business practices and the creation of monopolies. Businesses protect their existing capital investments and employ excessive credit, leading to depressions and increasing military expenditure and war through business control of political power.


[[Mixed economy|Mixed economies]] rely on the nation they are in to provide some goods or services, while the free market produces and maintains the rest.<ref name=":1" />
=== German Historical School and Austrian School ===
{{Main|Historical school of economics|Austrian School}}
From the perspective of the [[Historical school of economics|German Historical School]], capitalism is primarily identified in terms of the organization of production for [[market]]s. Although this perspective shares similar theoretical roots with that of Weber, its emphasis on markets and money lends it different focus.<ref name="Burnham"/> For followers of the German Historical School, the key shift from traditional modes of economic activity to capitalism involved the shift from medieval restrictions on credit and money to the modern [[monetary system|monetary economy]] combined with an emphasis on the profit motive.


=== Role of government ===
[[File:MisesLibrary.jpg|thumb|left|[[Ludwig von Mises]]]]
Government agencies regulate the standards of service in many industries, such as airlines and broadcasting, as well as financing a wide range of programs. In addition, the government regulates the flow of capital and uses financial tools such as the interest rate to control such factors as inflation and unemployment.<ref>"Capitalism." World Book Encyclopedia. 1988. p. 194.</ref>


== Supply and demand ==
In the late 19th century, the German Historical School of economics diverged, with the emerging [[Austrian School]] of economics, led at the time by [[Carl Menger]]. Later generations of followers of the Austrian School continued to be influential in Western economic thought through much of the 20th century. The Austrian economist [[Joseph Schumpeter]], a forerunner of the Austrian School of economics, emphasized the "[[creative destruction]]" of capitalism—the fact that market economies undergo constant change.
{{Main|Supply and demand}}
[[File:Supply-and-demand.svg|thumb|upright=1.15|The economic model of supply and demand states that the price P of a product is determined by a balance between production at each price (supply S) and the desires of those with [[purchasing power]] at each price (demand D): the diagram shows a positive shift in demand from D<sub>1</sub> to D<sub>2</sub>, resulting in an increase in price (P) and quantity sold (Q) of the product.]]
In capitalist economic structures, supply and demand is an [[economic model]] of [[price determination]] in a [[Market (economics)|market]]. It postulates that in a [[perfect competition|perfectly competitive market]], the [[unit price]] for a particular [[Good (economics)|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 [[Output (economics)|quantity]].


The "basic laws" of [[Supply (economics)|supply]] and [[demand]], as described by David Besanko and Ronald Braeutigam, are the following four:<ref name="besanko-and-braeutigam-2010">{{cite book |last1=Besanko |first1=David |last2=Braeutigam |first2=Ronald |year=2010 |title=Microeconomics |publisher=[[Wiley (publisher)|Wiley]] |edition=4th}}</ref>{{rp|37}}
At any moment of time, posits Schumpeter, there are rising industries and declining industries. Schumpeter, and many contemporary economists influenced by his work, argue that resources should flow from the declining to the expanding industries for an economy to grow, but they recognized that sometimes resources are slow to withdraw from the declining industries because of various forms of institutional resistance to change.
# If demand increases (demand curve shifts to the right) and supply remains unchanged, then a shortage occurs, leading to a higher equilibrium price.
# If demand decreases (demand curve shifts to the left) and supply remains unchanged, then a surplus occurs, leading to a lower equilibrium price.
# If demand remains unchanged and supply increases (supply curve shifts to the right), then a surplus occurs, leading to a lower equilibrium price.
# If demand remains unchanged and supply decreases (supply curve shifts to the left), then a shortage occurs, leading to a higher equilibrium price.


=== Supply schedule ===
The Austrian economists [[Ludwig von Mises]] and [[Friedrich Hayek]] were among the leading defenders of [[market capitalism]] against 20th century proponents of socialist [[planned economies]]. Mises and Hayek argued that only market capitalism could manage a complex, modern economy.
A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied.<ref name="Boundless Economics 2017">{{cite web |title=Supply |website=Boundless Economics |date=13 June 2017 |url=https://courses.lumenlearning.com/boundless-economics/chapter/supply/ |access-date=27 October 2021}}</ref>


=== Demand schedule ===
Since a modern economy produces such a large array of distinct goods and services, and consists of such a large array of consumers and enterprises, asserted Mises and Hayek, the information problems facing any other form of economic organization other than market capitalism would exceed its capacity to handle information. Thinkers within [[Supply-side economics]] built on the work of the Austrian School, and particularly emphasize [[Say's Law]]: "supply creates its own demand." Capitalism, to this school, is defined by lack of state restraint on the decisions of producers.
A demand schedule, depicted graphically as the [[demand curve]], represents the amount of some [[Good (economics)|goods]] that buyers are willing and able to purchase at various prices, assuming all determinants of demand other than the price of the good in question, such as income, tastes and preferences, the price of [[substitute good]]s and the price of [[complementary good]]s, 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.<ref name="axes">Unlike most [[Graph of a function|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.</ref>


Just like the supply curves reflect [[marginal cost]] curves, demand curves are determined by [[marginal utility]] curves.<ref>{{cite web|title=Marginal Utility and Demand |url=http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=marginal+utility+and+demand |access-date=9 February 2007 |archive-date=6 November 2006 |archive-url=https://web.archive.org/web/20061106121422/http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=marginal+utility+and+demand |url-status=live}}</ref>
Austrian economists claim that [[Karl Marx|Marx]] failed to make the distinction between ''capitalism'' and ''mercantilism''.<ref name="rothbard">{{cite journal|title=A Future of Peace and Capitalism |last=Rothbard |first=Murray N. |authorlink=Murray N. Rothbard |url=http://www.mises.org/story/1559 |journal=Modern Political Economy |pages=419–430 |location=Boston |publisher=Allyn and Bacon |year=1973|quote=In fact the mercantilist system is essentially what we’ve got right now. There is very little difference between state monopoly capitalism, or corporate state capitalism, whatever you want to call it, in the United States and Western Europe today, and the mercantilist system of the pre-Industrial Revolution era. There are only two differences; one is that their major activity was commerce and ours is industry. But the essential modus operandi of the two systems is exactly the same: monopoly privilege, a complete meshing in what is now called the "partnership of government and industry," a pervasive system of militarism and war contracts, a drive toward war and imperialism; the whole shebang characterized the seventeenth and eighteenth centuries.}}</ref><ref>{{cite journal |last=Osterfeld |first=David |title=Marxism, Capitalism and Mercantilism| journal=The Review of Austrian Eonomics |volume=5 |issue=1 |issn=0889-304 |year=1991|pages=107–114}}</ref> They argue that Marx conflated the [[imperialistic]], [[colonialistic]], [[protectionist]] and [[economic interventionism|interventionist]] doctrines of mercantilism with capitalism.


=== Equilibrium ===
Austrian economics has been a major influence on some forms of [[libertarianism]], in which [[laissez-faire]] capitalism is considered to be the ideal economic system.<ref>[http://mises.org/etexts/austrian.asp What is Austrian Economics?], [[Ludwig Von Mises Institute]].</ref> It influenced economists and [[political philosophers]] and theorists including [[Henry Hazlitt]], [[Hans-Hermann Hoppe]], [[Israel Kirzner]], [[Murray Rothbard]], [[Walter Block]] and [[Richard M. Ebeling]].<ref>DiLorenzo, Thomas. "Frederic Bastiat (1801-1850): Between the French and Marginalist Revolutions." Mises.org|http://www.mises.org/fredericbastiat.asp</ref><ref>http://www.mises.org/journals/scholar/BastiatAustrian.pdf|Thornton, Mark. "Frédéric Bastiat as an Austrian Economist." Mises.org.</ref>
{{further|Economic 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 ([[:wikt:equilibrium|equilibrium]]) values of economic variables will not change. For example, in the standard text-book model of [[perfect competition]] equilibrium occurs at the point at which quantity demanded and quantity supplied are equal.<ref>{{cite book |author-link=Hal Varian |first=Hal R. |last=Varian |title=Microeconomic Analysis |edition=Third |publisher=Norton |location=New York |year=1992 |isbn=978-0-393-95735-8 |url=https://archive.org/details/microeconomicana00vari_0}}</ref> Market equilibrium, in this case, refers to a condition where a market price is established through competition such that the amount of goods or services sought by [[Law of supply and demand|buyers]] is equal to the amount of goods or services produced by [[Law of supply and demand|sellers]]. This price is often called the competitive price or [[market clearing]] price and will tend not to change unless demand or supply changes.


=== Keynesian economics ===
=== Partial equilibrium ===
{{Main|Keynesian economics}}
{{Main|Partial equilibrium}}
Partial equilibrium, as the name suggests, takes into consideration only a part of the market to attain equilibrium. Jain proposes (attributed to [[George Stigler]]): "A partial equilibrium is one which is based on only a restricted range of data, a standard example is price of a single product, the prices of all other products being held fixed during the analysis".<ref>{{cite book |last=Jain |first=T.R. |title=Microeconomics and Basic Mathematics |year=2006 |publisher=VK Publications |location=New Delhi |isbn=978-81-87140-89-4 |page=28 |url=https://books.google.com/books?id=fUUoFwco2Z8C }}{{Dead link|date=January 2023 |bot=InternetArchiveBot |fix-attempted=yes }}</ref>
[[File:John Maynard Keynes.jpg|thumb|[[John Maynard Keynes]]]]


=== History ===
In his 1937 ''[[The General Theory of Employment, Interest, and Money]]'', the British economist [[John Maynard Keynes]] argued that capitalism suffered a basic problem in its ability to recover from periods of slowdowns in investment. Keynes argued that a capitalist economy could remain in an indefinite [[economic equilibrium|equilibrium]] despite high [[unemployment]].
According to Hamid S. Hosseini, the "power of supply and demand" was discussed to some extent by several early Muslim scholars, such as fourteenth century [[Mamluk]] scholar [[Ibn Taymiyyah]], who wrote: "If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down".<ref name=Hosseini>{{cite book |title=A Companion to the History of Economic Thought |chapter=Contributions of Medieval Muslim Scholars to the History of Economics and their Impact: A Refutation of the Schumpeterian Great Gap |last=Hosseini |first=Hamid S. |editor1-last=Biddle |editor1-first=Jeff E. |editor2-last=Davis |editor2-first=Jon B. |editor3-last=Samuels |editor3-first=Warren J. |year=2003 |publisher=Blackwell |location=Malden, Massachusetts |isbn=978-0-631-22573-7 |doi=10.1002/9780470999059.ch3 |pages=28–45 [28 & 38]}} (citing Hamid S. Hosseini, 1995. "Understanding the Market Mechanism Before Adam Smith: Economic Thought in Medieval Islam," ''History of Political Economy'', Vol. 27, No. 3, 539–561).</ref>


[[File:AdamSmith.jpg|thumb|upright=0.6|left|[[Adam Smith]]]]
Essentially rejecting [[Say's law]], he argued that some people may have a [[liquidity preference]] that would see them rather hold money than buy new goods or services, which therefore raised the prospect that the [[Great Depression]] would not end without what he termed in the ''General Theory'' "a somewhat comprehensive socialization of investment."
[[John Locke]]'s 1691 work ''Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money''<ref>John Locke (1691) [http://www.marxists.org/reference/subject/economics/locke/contents.htm ''Some Considerations on the consequences of the Lowering of Interest and the Raising of the Value of Money''] {{Webarchive|url=https://web.archive.org/web/20150324135856/https://www.marxists.org/reference/subject/economics/locke/contents.htm |date=24 March 2015 }}</ref> includes an early and clear description{{primary source inline|date=February 2022}} of supply and demand and their relationship. In this description, demand is [[Economic rent|rent]]: "The price of any commodity rises or falls by the proportion of the number of buyer and sellers" and "that which regulates the price... [of goods] is nothing else but their quantity in proportion to their rent".


[[David Ricardo]] titled one chapter of his 1817 work ''[[Principles of Political Economy and Taxation]]'' "On the Influence of Demand and Supply on Price".<ref name=Humphrey>Thomas M. Humphrey, 1992. "Marshallian Cross Diagrams and Their Uses before Alfred Marshall", ''Economic Review'', Mar/Apr, Federal Reserve Bank of Richmond, pp. [http://www.richmondfed.org/publications/research/economic_review/1992/pdf/er780201.pdf 3–23] {{Webarchive|url=https://web.archive.org/web/20121019100824/http://www.richmondfed.org/publications/research/economic_review/1992/pdf/er780201.pdf |date=19 October 2012 }}.</ref>
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>
In ''Principles of Political Economy and Taxation'', Ricardo more rigorously laid down the idea of the assumptions that were used to build his ideas of supply and demand.


In his 1870 essay "On the Graphical Representation of Supply and Demand", [[Fleeming Jenkin]] in the course of "introduc[ing] the diagrammatic method into the English economic literature" published the first drawing of supply and demand curves therein,<ref>A.D. Brownlie and M.F. Lloyd Prichard, 1963. "Professor Fleeming Jenkin, 1833–1885 Pioneer in Engineering and Political Economy", ''Oxford Economic Papers'', 15(3), p. 211.</ref> including [[comparative statics]] from a shift of supply or demand and application to the labor market.<ref>Fleeming Jenkin, 1870. "The Graphical Representation of the Laws of Supply and Demand, and their Application to Labour", in Alexander Grant, ed., ''Recess Studies'', Edinburgh. Ch. VI, pp. 151–185. Edinburgh. Scroll to chapter [https://books.google.com/books?id=NC5BAAAAIAAJ link] {{Webarchive|url=https://web.archive.org/web/20200716052536/https://books.google.com/books?id=NC5BAAAAIAAJ |date=16 July 2020 }}.</ref> The model was further developed and popularized by [[Alfred Marshall]] in the 1890 textbook ''[[Principles of Economics (Marshall)|Principles of Economics]]''.<ref name="Humphrey" />
John Maynard Keynes tried to provide solutions to many of Marx’s problems without completely abandoning the classical understanding of capitalism. His work attempted to show that regulation can be effective, and that economic stabilizers can reign in the aggressive expansions and recessions that Marx disliked. These changes sought to create more stability in the business cycle, and reduce the abuses of laborers. Keynesian economists argue that Keynesian policies were one of the primary reasons capitalism was able to recover following the Great Depression.<ref>Erhardt III, Erwin. "History of Economic Development." University of Cincinnati. Lindner Center Auditorium, Cincinnati. 7 Nov. 2008.</ref> The premises of Keynes’s work have, however, since been challenged by neoclassical and [[supply-side economics]] and the Austrian School.


== Types ==
Another challenge to Keynesian thinking came from his colleague [[Piero Sraffa]], and subsequently from the [[Neo-Ricardianism|Neo-Ricardian school]] that followed Sraffa. In Sraffa's highly technical analysis, capitalism is defined by an entire system of social relations among both producers and consumers, but with a primary emphasis on the demands of production. According to Sraffa, the tendency of capital to seek its highest [[rate of profit]] causes a dynamic instability in social and economic relations.
{{more citations needed section|date=March 2020}}
There are many variants of capitalism in existence that differ according to country and region.<ref>{{cite book |last1=Hall |first1=Peter A. |last2=Soskice |first2=David |title=Varieties Of Capitalism: The Institutional Foundations of Comparative Advantage |date=20 September 2001 |publisher=Oxford University Press, U.S.A. |isbn=0-19-924775-7}}</ref> They vary in their institutional makeup and by their economic policies. The common features among all the different forms of capitalism are that they are predominantly based on the private ownership of the means of production and the production of goods and services for profit; the market-based allocation of resources; and the accumulation of capital.


They include advanced capitalism, corporate capitalism, finance capitalism, free-market capitalism, mercantilism, social capitalism, state capitalism and welfare capitalism. Other theoretical variants of capitalism include [[anarcho-capitalism]], [[community capitalism]], [[humanistic capitalism]], [[neo-capitalism]], [[state monopoly capitalism]], and [[technocapitalism]].
=== Neoclassical economics and the Chicago School ===
{{Main|Neoclassical economics}}
Today, the majority academic research on capitalism in the [[English-speaking world]] draws on [[neoclassical economics|neoclassical economic thought]]. It favors extensive market coordination and relatively neutral patterns of governmental market regulation aimed at maintaining property rights; deregulated [[labor market]]s; corporate governance dominated by financial owners of firms; and financial systems depending chiefly on [[capital market]]-based financing rather than state financing.


=== Advanced ===
[[File:MiltonFriedman.jpg|thumb|left|[[Milton Friedman]]]]
{{Main|Advanced capitalism}}
Advanced capitalism is the situation that pertains to a society in which the capitalist model has been integrated and developed deeply and extensively for a prolonged period. Various writers identify [[Antonio Gramsci]] as an influential early theorist of advanced capitalism, even if he did not use the term himself. In his writings, Gramsci sought to explain how capitalism had adapted to avoid the revolutionary overthrow that had seemed inevitable in the 19th century. At the heart of his explanation was the decline of raw coercion as a tool of class power, replaced by use of [[civil society]] institutions to manipulate public ideology in the capitalists' favour.<ref>Lears, T.J. Jackson (1985) "The Concept of Cultural Hegemony"</ref><ref>Holub, Renate (2005) ''Antonio Gramsci: Beyond Marxism and Postmodernism''</ref><ref>[[Carl Boggs|Boggs, Carl]] (2012) ''Ecology and Revolution: Global Crisis and the Political Challenge''</ref>


[[Jürgen Habermas]] has been a major contributor to the analysis of advanced-capitalistic societies. Habermas observed four general features that characterise advanced capitalism:
[[Milton Friedman]] took many of the basic principles set forth by Adam Smith and the classical economists and gave them a new twist. One example of this is his article in the September 1970 issue of ''The New York Times'' Magazine, where he claims that the social responsibility of business is “to use its resources and engage in activities designed to increase its profits…(through) open and free competition without deception or fraud.” This is similar to Smith’s argument that self-interest in turn benefits the whole of society.<ref>Friedman, Milton. "The Social Responsibility of Business is to Increase its Profits." The New York Times Magazine 13 Sep. 1970.</ref> Work like this helped lay the foundations for the coming [[marketization]] (or [[privatization]]) of state enterprises and the [[supply-side economics]] of [[Ronald Reagan]] and [[Margaret Thatcher]].
# Concentration of industrial activity in a few large firms.
# Constant reliance on the state to stabilise the economic system.
# A formally democratic government that legitimises the activities of the state and dissipates opposition to the system.
# The use of nominal wage increases to pacify the most restless segments of the work force.<ref>Habermas, 1988: 37, 75.</ref>


=== Corporate ===
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 [[laissez-faire|if left to themselves]] and depressions result only from government intervention.<ref>{{cite book|title=Macroeconomics and New Macroeconomics|author=Felderer, Bernhard}}</ref>
{{Main|Corporate capitalism}}
{{See also|Crony capitalism|State monopoly capitalism}}
Corporate capitalism is a free or mixed-market capitalist economy characterized by the dominance of hierarchical, bureaucratic corporations.


=== Finance ===
Friedman, for example, argued that the [[Great Depression]] was result of a contraction of the money supply, controlled by the [[Federal Reserve System|Federal Reserve]], and not by the lack of investment as [[John Maynard Keynes]] had argued. [[Ben Bernanke]], current Chairman of the [[Federal Reserve]], is among the economists today generally accepting Friedman's analysis of the causes of the Great Depression.<ref name="fed">{{cite web|url=http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm|title=Remarks by Governor Ben S. Bernanke |publisher=The Federal Reserve Board|accessdate=26 February 2008|date=8 November 2002|author=Ben Bernanke}}</ref>
{{Main|Finance capitalism}}
{{See also|Capitalist mode of production (Marxist theory)}}
Finance capitalism is the subordination of processes of [[Production (economics)|production]] to the accumulation of [[money]] profits in a [[financial system]]. In their critique of capitalism, [[Marxism]] and [[Leninism]] both emphasise the role of [[Financial capital|finance capital]] as the determining and [[ruling-class]] interest in capitalist society, particularly in the [[Crisis of capitalism|latter stages]].<ref>[[Imperialism, the Highest Stage of Capitalism]] [http://www.marxists.org/archive/lenin/works/1916/imp-hsc/ch03.htm ibid. Finance Capital and the Finance Oligarchy] {{Webarchive|url=https://web.archive.org/web/20150402214909/https://www.marxists.org/archive/lenin/works/1916/imp-hsc/ch03.htm |date=2 April 2015 }}</ref><ref>{{cite magazine|url=http://monthlyreview.org/2009/10/01/monopoly-finance-capital-and-the-paradox-of-accumulation/|title= Monopoly-Finance Capital and the Paradox of Accumulation |first1=John Bellamy |last1=Foster |author1-link=John Bellamy Foster |first2=Robert W. |last2=McChesney |author2-link=Robert W. McChesney |date=1 October 2009 |magazine=[[Monthly Review]] |access-date=27 August 2016 |archive-date=28 August 2016 |archive-url=https://web.archive.org/web/20160828081218/http://monthlyreview.org/2009/10/01/monopoly-finance-capital-and-the-paradox-of-accumulation/ |url-status=live}}</ref>


[[Rudolf Hilferding]] is credited with first bringing the term finance capitalism into prominence through ''Finance Capital'', his 1910 study of the links between German trusts, banks and monopolies—a study subsumed by [[Vladimir Lenin]] into ''[[Imperialism, the Highest Stage of Capitalism]]'' (1917), his analysis of the imperialist relations of the great world powers.<ref>Frederic Jameson, 'Culture and Finance Capital', in ''The Jameson Reader'' (2005) p. 257</ref> Lenin concluded that the banks at that time operated as "the chief nerve centres of the whole capitalist system of national economy".<ref>Quoted in E.H. Carr, ''The Bolshevik Revolution 2'' (1971) p. 137</ref> For the [[Comintern]] (founded in 1919), the phrase "dictatorship of finance capitalism"<ref>Quoted in F.A Voight, ''Unto Caesar'' (1938) p. 22</ref> became a regular one.
Neoclassical economists, today the majority of economists,<ref>{{cite book|author=Yonary, Yuval P.|title=The Struggle Over the Soul of Economics|year=1998|publisher=Princeton University Press|isbn=0691034192|pages=29}}</ref> consider value to be subjective, varying from person to person and for the same person at different times, and thus reject the labor theory of value. [[Marginalism]] is the theory that economic value results from marginal utility and [[marginal cost]] (the [[marginal concepts]]). These economists see capitalists as earning profits by forgoing current consumption, by taking risks, and by organizing production.


[[Fernand Braudel]] would later point to two earlier periods when finance capitalism had emerged in human history—with the Genoese in the 16th century and with the Dutch in the 17th and 18th centuries—although at those points it developed from commercial capitalism.<ref>C. J.Calhoun/G. Derluguian, ''Business as Usual'' (2011) p. 57</ref>{{request quotation|date=December 2016}} [[Giovanni Arrighi]] extended Braudel's analysis to suggest that a predominance of finance capitalism is a recurring, long-term phenomenon, whenever a previous phase of commercial/industrial capitalist expansion reaches a plateau.<ref>Jameson, pp. 259–260</ref>
== Neoclassical economic theory ==
Neoclassical economics explain capitalism as made up of individuals, enterprises, markets and government. According to their theories, individuals engage in a capitalist economy as [[consumer]]s, [[laborer|labourers]], and [[investor]]s. As labourers, individuals may decide which jobs to prepare for, and in which markets to look for work. As investors they decide how much of their income to save and how to invest their savings. These savings, which become investments, provide much of the money that businesses need to grow.


=== Free market ===
Business firms decide what to produce and where this production should occur. They also purchase inputs (materials, labour, and capital). Businesses try to influence consumer purchase decisions through marketing and advertisement, as well as the creation of new and improved products.
{{Main|Free-market capitalism}}
Driving the capitalist economy is the search for profits (revenues minus expenses). This is known as the [[profit motive]], and it helps ensure that companies produce the goods and services that consumers desire and are able to buy. To be profitable, firms must sell a quantity of their product at a certain price to yield a profit. A business may lose money if sales fall too low or if its costs become too high. The profit motive encourages firms to operate more efficiently. By using less materials, labour or capital, a firm can cut its production costs, which can lead to increased profits.
{{See also|Laissez-faire}}
{{More citations needed|section|date=December 2021}}
A capitalist free-market economy is an economic system where prices for goods and services are set entirely by the forces of [[supply and demand]] and are expected, by its adherents, to reach their point of [[Economic equilibrium|equilibrium]] without intervention by government policy. It typically entails support for highly [[Competition (economics)|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 (economics)|property rights]]. In [[Anarcho-capitalism|anarcho-capitalist]] theory, property rights are protected by private firms and market-generated law. According to anarcho-capitalists, this entails property rights without statutory law through market-generated tort, contract and property law, and self-sustaining private industry.


[[Fernand Braudel]] argued that free market exchange and capitalism are to some degree opposed; free market exchange involves [[Perfect information|transparent]] public transactions and a large number of [[Perfect competition|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.<ref name="Braudel Ranum Ranum Johns Hopkins University 1977 p. 47-63">{{cite book |last1=Braudel |first1=F. |author-link=Fernand Braudel |last2=Ranum |first2=P.M. |last3=Ranum |first3=P.P. |title=Afterthoughts on Material Civilization and Capitalism |publisher=[[Johns Hopkins University Press]] |series=Johns Hopkins symposia in comparative history |year=1977 |isbn=978-0-8018-1901-8 |url=https://books.google.com/books?id=1eVdAAAAIAAJ |access-date=6 April 2022 |pages=47–63}}</ref>
An economy grows when the total value of goods and services produced rises. This growth requires investment in infrastructure, capital and other resources necessary in production. In a capitalist system, businesses decide when and how much they want to invest.


=== Mercantile ===
Income in a capitalist economy depends primarily on what skills are in demand and what skills are being supplied. Skills that are in scarce supply are worth more in the market and can attract higher incomes. Competition among workers for jobs — and among employers for skilled workers — help determine wage rates. Firms need to pay high enough wages to attract the appropriate workers; when jobs are scarce, workers may accept lower wages than they would when jobs are plentiful. [[Trade union]] and governments influence wages in capitalist systems. Unions act to represent their members in negotiations with employers over such things as wage rates and acceptable working conditions.
{{Main|Mercantilism}}
{{See also|Protectionism}}
[[File:Microcosm of London Plate 049 - Lloyd's Subscription Room edited.jpg|thumb|The subscription room at [[Lloyd's of London]] in the early 19th century]]
Mercantilism is a nationalist form of early capitalism that came into existence approximately in the late 16th century. It is characterized by the intertwining of national business interests with state-interest and imperialism. Consequently, the state apparatus is used to advance national business interests abroad. An example of this is colonists living in America who were only allowed to trade with and purchase goods from their respective mother countries (e.g., United Kingdom, France and Portugal). Mercantilism was driven by the belief that the wealth of a nation is increased through a positive balance of trade with other nations—it corresponds to the phase of capitalist development sometimes called the [[primitive accumulation of capital]].


=== The market ===
=== Social ===
{{Main|Social market economy}}
[[File:Supply-and-demand.svg|thumb|right|240px|The price (P) of a product is determined by a balance between production at each price (supply, S) and the desires of those with [[purchasing power]] at each price (demand, D). This results in a market equilibrium, with a given quantity (Q) sold of the product. A rise in demand from D1 to D2 would result in an increase in price from P1 to P2 and an increase in output from Q1 to Q2.]]
{{See also|Nordic model}}
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 [[labor rights]] through national [[collective bargaining]] arrangements.


This model is prominent in Western and Northern European countries as well as Japan, albeit in slightly different configurations. The vast majority of enterprises are privately owned in this economic model.
In a capitalist economy, the prices of goods and services are controlled mainly through [[supply and demand]] and [[competition]]. Supply is the amount of a good or service produced by a firm and which is available for sale. Demand is the amount that people are willing to buy at a specific price. Prices tend to rise when demand exceeds supply, and fall when supply exceeds demand. In theory, the market is able to coordinate itself when a new equilibrium price and quantity is reached.


[[Rhine capitalism]] is the contemporary model of capitalism and adaptation of the social market model that exists in continental Western Europe today.
Competition arises when more than one producer is trying to sell the same or similar products to the same buyers. In capitalist theory, competition leads to innovation and more affordable prices. Without competition, a [[monopoly]] or [[cartel]] may develop. A monopoly occurs when a firm supplies the total output in the market; the firm can therefore limit output and raise prices because it has no fear of competition. A cartel is a group of firms that act together in a monopolistic manner to control output and raise prices.


===Role of government===
=== State ===
{{Main|State capitalism}}
{{See|Competition regulator|Consumer protection|Competition law}}
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 [[Eastern Bloc]]. According to Aldo Musacchio, a professor at Harvard Business School, state capitalism is a system in which governments, whether democratic or autocratic, exercise a widespread influence on the economy either through direct ownership or various subsidies. Musacchio notes a number of differences between today's state capitalism and its predecessors. In his opinion, gone are the days when governments appointed bureaucrats to run companies: the world's largest state-owned enterprises are now traded on the public markets and kept in good health by large institutional investors. Contemporary state capitalism is associated with the [[East Asian model of capitalism]], [[dirigisme]] and the economy of Norway.<ref>{{cite news |last=Musacchio |first=Aldo |url=http://www.economist.com/debate/days/view/802 |title=Economist Debates: State capitalism: Statements |newspaper=The Economist |access-date=20 June 2012 |archive-date=16 July 2012 |archive-url=https://web.archive.org/web/20120716050641/http://economist.com/debate/days/view/802 |url-status=live }}</ref> Alternatively, [[Merriam-Webster]] defines state capitalism as "an economic system in which private capitalism is modified by a varying degree of government ownership and control".<ref>[http://www.merriam-webster.com/dictionary/state%20capitalism State capitalism] {{Webarchive|url=https://web.archive.org/web/20150703131303/http://www.merriam-webster.com/dictionary/state%20capitalism |date=3 July 2015 }}. [[Merriam-Webster]]. Retrieved 7 July 2015.</ref>
In a capitalist system, the government does not prohibit [[private property]] or prevent individuals from working where they please. The government does not prevent firms from determining what wages they will pay and what prices they will charge for their products. Many countries, however, have minimum wage laws and minimum safety standards.


In ''Socialism: Utopian and Scientific'', [[Friedrich Engels]] argued that state-owned enterprises would characterize the final stage of capitalism, consisting of ownership and management of large-scale production and communication by the [[Capitalist state|bourgeois state]].<ref>{{cite web |first=Frederick |last=Engels |author-link=Friedrich Engels |url=http://www.marxists.org/archive/marx/works/1880/soc-utop/ch03.htm |title=Socialism: Utopian and Scientific (Chpt. 3) |publisher=[[Marxists Internet Archive]] |access-date=8 January 2014 |archive-date=9 May 2020 |archive-url=https://web.archive.org/web/20200509191523/https://www.marxists.org/archive/marx/works/1880/soc-utop/ch03.htm |url-status=live}}</ref> In his writings, [[Vladimir Lenin]] characterized the economy of Soviet Russia as state capitalist, believing state capitalism to be an early step toward the development of socialism.<ref>V.I. Lenin. [https://www.marxists.org/archive/lenin/works/1921/apr/21.htm The Tax in Kind] {{Webarchive|url=https://web.archive.org/web/20150907043921/https://www.marxists.org/archive/lenin/works/1921/apr/21.htm |date=7 September 2015 }}. ''Lenin's Collected Works'', 1st English ed., Progress Publishers, Moscow, 1965, vol. 32, pp. 329–365.</ref><ref>V.I. Lenin. [https://www.marxists.org/archive/lenin/works/1922/nov/14b.htm To the Russian Colony in North America] {{Webarchive|url=https://web.archive.org/web/20150618071802/https://www.marxists.org/archive/lenin/works/1922/nov/14b.htm |date=18 June 2015 }}. ''Lenin Collected Works'', Progress Publishers, 1971, Moscow, vol. 42, pp. 425c–427a.</ref>
Under some versions of capitalism, the government carries out a number of economic functions, such as issuing money, supervising public utilities and enforcing private contracts. Many countries have [[competition law]]s that prohibit monopolies and cartels from forming. Despite anti-monopoly laws, large corporations can form near-monopolies in some industries. Such firms can temporarily drop prices and accept losses to prevent competition from entering the market, and then raise them again once the threat of entry is reduced. In many countries, public utilities (e.g. electricity, heating fuel, communications) are able to operate as a monopoly under government regulation, due to high economies of scale.


Some economists and left-wing academics including [[Richard D. Wolff]] and [[Noam Chomsky]], as well as many Marxist philosophers and revolutionaries such as [[Raya Dunayevskaya]] and [[C.L.R. James]], argue that the economies of the former [[Soviet Union]] and Eastern Bloc represented a form of state capitalism because their internal organization within enterprises and the system of wage labor remained intact.<ref>[http://www.hetsa.org.au/pdf/34-A-08.pdf "State capitalism" in the Soviet Union] {{Webarchive|url=https://web.archive.org/web/20190728140836/https://www.hetsa.org.au/pdf/34-A-08.pdf |archive-url=https://ghostarchive.org/archive/20221009/https://www.hetsa.org.au/pdf/34-A-08.pdf |archive-date=9 October 2022 |url-status=live |date=28 July 2019 }}, M.C. Howard and J.E. King</ref><ref>[[Noam Chomsky]] (1986). [http://www.chomsky.info/articles/1986----.htm The Soviet Union Versus Socialism] {{Webarchive|url=https://web.archive.org/web/20150924051230/http://www.chomsky.info/articles/1986----.htm |date=24 September 2015 }}. ''Our Generation''. Retrieved 9 July 2015.</ref><ref>[[Richard D. Wolff]] (27 June 2015). [http://www.truth-out.org/news/item/31567-socialism-means-abolishing-the-distinction-between-bosses-and-employees Socialism Means Abolishing the Distinction Between Bosses and Employees] {{Webarchive|url=https://web.archive.org/web/20180311070639/http://www.truth-out.org/news/item/31567-socialism-means-abolishing-the-distinction-between-bosses-and-employees |date=11 March 2018 }}. ''[[Truthout]].'' Retrieved 9 July 2015.</ref><ref>{{cite web|first1=Raya |last1=Dunayevskaya |author-link1=Raya Dunayevskaya |date=1941 |url=https://www.marxists.org/archive/dunayevskaya/works/1941/ussr-capitalist.htm |title=The Union of Soviet Socialist Republics is a Capitalist Society |website=[[Marxists Internet Archive]] |archive-url=https://web.archive.org/web/20191207212742/https://www.marxists.org/archive/dunayevskaya/works/1941/ussr-capitalist.htm |archive-date=7 December 2019}}</ref><ref>{{cite web|first1=C.L.R. |last1=James |author-link1=C.L.R. James |first2=Raya |last2=Dunayevskaya |author-link2=Raya Dunayevskaya |first3=Grace Lee |last3=Boggs |author-link3=Grace Lee Boggs |date=1950 |url=https://libcom.org/files/State%20capitalism%20and%20world%20revolution%20-%20CLR%20James.pdf |title=State Capitalism and World Revolution |archive-url=https://web.archive.org/web/20200619014753/https://libcom.org/files/State%20capitalism%20and%20world%20revolution%20-%20CLR%20James.pdf |archive-date=19 June 2020}}</ref>
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 factors such as inflation and unemployment.<ref>"Capitalism." World Book Encyclopedia. 1988. 194. Print.</ref>


The term is not used by [[Austrian School]] economists to describe state ownership of the means of production. The economist [[Ludwig von Mises]] argued that the designation of state capitalism was a new label for the old labels of state socialism and planned economy and differed only in non-essentials from these earlier designations.<ref>{{cite book|first=Ludwig |last=Von Mises |author-link=Ludwig Von Mises |title=Socialism: An Economic and Sociological Analysis |publisher=LibertyClassics |place=Indianapolis |year=1979 |isbn=978-0-913966-63-1 |url=https://archive.org/details/socialismeconomi00vonm |access-date=31 May 2007 |quote=The socialist movement takes great pains to circulate frequently new labels for its ideally constructed state. Each worn-out label is replaced by another which raises hopes of an ultimate solution of the insoluble basic problem of Socialism—until it becomes obvious that nothing has been changed but the name. The most recent slogan is 'State Capitalism.' It is not commonly realized that this covers nothing more than what used to be called Planned Economy and State Socialism, and that State Capitalism, Planned Economy, and State Socialism diverge only in non-essentials from the "classic" ideal of egalitarian Socialism. |url-access=registration}}</ref>
== Political advocacy ==
=== Support ===
====Economic growth====
[[File:Gdp chart.png|thumb|300px|World's [[GDP]] per capita shows exponential acceleration since the beginning of the Industrial Revolution.<ref>{{cite book |title=The World Economy: A Millennial Perspective |author=Angus Maddison |publisher=[[OECD]] |location=Paris |year=2001 |isbn=92-64-18998-X}}</ref>]]
Many theorists and policymakers in predominantly capitalist nations have emphasized capitalism's ability to promote economic growth, as measured by [[Gross Domestic Product]] (GDP), [[capacity utilization]] or [[standard of living]]. This argument was central, for example, to [[Adam Smith]]'s advocacy of letting a free market control production and price, and allocate resources. Many theorists have noted that this increase in global GDP over time coincides with the emergence of the modern world capitalist system.<ref>{{cite web |url=http://www.minneapolisfed.org/pubs/region/04-05/essay.cfm |title=The Industrial Revolution: Past and Future |author=Robert E. Lucas Jr. |work=Federal Reserve Bank of Minneapolis 2003 Annual Report |accessdate=26 February 2008}}</ref><ref>{{cite web |url=http://www.j-bradford-delong.net/TCEH/1998_Draft/World_GDP/Estimating_World_GDP.html |title=Estimating World GDP, One Million B.C. – Present |author=J. Bradford DeLong |accessdate=26 February 2008 }}</ref>


=== Welfare ===
Proponents argue that increasing GDP (per capita) is empirically shown to bring about improved standards of living, such as better availability of food, housing, clothing, and health care.<ref>{{cite web |url=http://www.econlib.org/library/Enc/IndustrialRevolutionandtheStandardofLiving.html |title=Industrial Revolution and the Standard of Living |author=Clark Nardinelli |accessdate=26 February 2008 }}</ref> The decrease in the number of hours worked per week and the decreased participation of children and the elderly in the workforce have been attributed to capitalism.<ref>{{cite book|author=Barro, Robert J.|title=Macroeconomics|publisher=MIT Press|year=1997|isbn=0262024365}}</ref><ref>{{cite web|url=http://www.capitalism.org/faq/labor.htm|title=Labor and Minimum Wages|publisher=Capitalism.org|accessdate=26 February 2008}}</ref><ref>{{cite web|url=http://www.mises.org/article.aspx?Id=1481|title=Morality and Economic Law: Toward a Reconciliation|publisher=Ludwig von Mises Institute|accessdate=26 February 2008|author=Woods, Thomas E.|date=5 April 2004}}</ref><ref>{{cite web|url=http://www.taemag.com/issues/articleid.18013/article_detail.asp|title=Three Cheers for Global Capitalism |publisher=The American Enterprise|accessdate=26 February 2008|author=Norberg, Johan}}</ref>
{{Main|Welfare capitalism}}
{{See also|Economic interventionism|Mixed economy}}
Welfare capitalism is capitalism that includes social welfare policies. Today, welfare capitalism is most often associated with the models of capitalism found in Central Mainland and Northern Europe such as the [[Nordic model]], [[social market economy]] and [[Rhine capitalism]]. In some cases, welfare capitalism exists within a mixed economy, but welfare states can and do exist independently of policies common to mixed economies such as [[state interventionism]] and extensive regulation.


A mixed economy is a largely market-based capitalist economy consisting of both private and public ownership of the means of production and [[economic interventionism]] through macroeconomic policies intended to correct [[market failure]]s, reduce unemployment and keep inflation low. The degree of intervention in markets varies among different countries. Some mixed economies such as France under [[dirigisme]] also featured a degree of [[Indicative planning|indirect economic planning]] over a largely capitalist-based economy.
Proponents also believe that a capitalist economy offers far more opportunities for individuals to raise their income through new professions or business ventures than do other economic forms. To their thinking, this potential is much greater than in either traditional [[feudal]] or [[tribe|tribal]] societies or in socialist societies.


Most modern capitalist economies are defined as mixed economies to some degree<ins>,</ins> however French economist [[Thomas Piketty]] state that capitalist economies might shift to a much more ''laissez-faire'' approach in the near future.<ref>{{Cite book |last=Piketty |first=Thomas |title=Le capital au XXIe siècle |year=2013 |isbn=978-2-02-108228-9 |pages=799, 800 |language=fr |chapter=Repenser l'impôt progressif sur le revenu |publisher=Éditions du Seuil |trans-chapter=To rethink income tax progressivity |quote=Si cette régressivité fiscale au sommet de la hiérarchie sociale devait se confirmer et s'amplifier à l'avenir, [...] il est bien évident qu'une telle sécession fiscale des plus riches [avec les autres classes] est potentiellement extrêmement dommageable pour le consentement fiscal dans son ensemble [qui] s'en trouve amoindri [...]. Il est vital pour l'État social moderne que le système fiscal qui le sous-tend conserve un minimum de progressivité. |trans-quote=If tax regressivity on top of the social hierarchy may settle in and escalate in the future, it is obvious that such a tax secession between the richest and the other classes will be highly harmful towards the agreement over the taxation system which will weaken. It is essential for the modern social system that the taxation system preserve a sort of tax progressivity.}}</ref>
====Political freedom====
[[Milton Friedman]] argued that the [[economic freedom]] of competitive capitalism is a requisite of [[political freedom]]. Friedman argued that centralized control of economic activity is always accompanied by [[political repression]]. In his view, transactions in a market economy are voluntary, and the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminish power to coerce. Friedman's view was also shared by [[Friedrich Hayek]] and John Maynard Keynes, both of whom believed that capitalism is vital for freedom to survive and thrive.<ref>{{cite book|author=Friedrich Hayek|title=The Road to Serfdom|publisher=University Of Chicago Press|year=1944|isbn=0-226-32061-8}}</ref><ref>{{cite book|author=Bellamy, Richard|title=The Cambridge History of Twentieth-Century Political Thought|publisher=Cambridge University Press|year=2003|isbn=0-521-56354-2|pages=60}}</ref>


====Self-organization====
=== Eco-capitalism ===
[[Eco-capitalism]], also known as "environmental capitalism" or (sometimes<ref>{{cite news|url=https://www.theguardian.com/world/2019/nov/24/b-corps-captalism-for-an-environmentally-endangered-age |title=Green capitalism sometimes also referring to sustainable businesses |first=Oliver |last=Balch |date=24 November 2019 |work=[[The Guardian]]}}</ref>) "green capitalism", is the view that [[capital (economics)|capital]] exists in nature as "[[natural capital]]" ([[ecosystem]]s that have [[ecological yield]]) on which all [[wealth]] depends. Therefore, governments should use [[Market (economics)|market-based]] [[policy instruments|policy-instruments]] (such as a [[carbon tax]]) to resolve [[environmental problem]]s.<ref>{{cite web|title=Definition of Eco-Capitalism |url=https://www.collinsdictionary.com/dictionary/english/eco-capitalism |website=collinsdictionary.com |access-date= 27 November 2015}}</ref>
Austrian School economists have argued that capitalism can organize itself into a complex system without an external guidance or planning mechanism. Friedrich Hayek coined the term "[[catallaxy]]" to describe what he considered the phenomenon of [[self-organization]] underpinning capitalism. From this perspective, in process of self-organization, the [[profit (economics)|profit]] motive has an important role. From transactions between buyers and sellers price systems emerge, and prices serve as a signal as to the urgent and unfilled wants of people. The promise of profits gives entrepreneurs [[incentive]] to use their knowledge and resources to satisfy those wants. Thus the activities of millions of people, each seeking his own interest, are coordinated.<ref>{{cite book|author=Walberg, Herbert|title=Education and Capitalism|publisher=Hoover Institution Press|year=2001|pages=87–89|isbn=0-8179-3972-5}}</ref>


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 [[Eco-socialism|Red Greens]].<ref>{{cite web|title=The rise of green capitalism |url=http://roadtoparis.info/top-list/rise-green-capitalism/ |website=roadtoparis.info |access-date=27 November 2015}}</ref>{{request quotation|date=August 2019}}
This decentralized system of coordination is viewed by some supporters of capitalism as one of its greatest strengths. They argue that it permits many solutions to be tried, and that real-world competition generally finds a good solution to emerging challenges. In contrast, they argue, [[central planning]] often selects inappropriate solutions as a result of faulty forecasting. However, in all existing modern economies, the state conducts some degree of [[planned economy|centralized economic planning]] (using such tools as allowing the country's [[central bank]] to set base [[interest rates]]), ostensibly as an attempt to improve efficiency, attenuate cyclical volatility, and further particular social goals. Proponents who follow the Austrian School argue that even this limited control creates inefficiencies because we cannot predict the long-term activity of the economy. Milton Friedman, for example, has argued that the [[Great Depression]] was caused by the erroneous policy of the [[Federal Reserve System|Federal Reserve]].<ref name="fed"/>


=== Sustainable capitalism ===
====Moral imperative====
[[Sustainable capitalism]] is a conceptual form of capitalism based upon [[Sustainability|sustainable]] practices that seek to preserve humanity and the planet, while reducing [[Externality|externalities]] and bearing a resemblance of capitalist [[economic policy]]. A capitalistic economy must expand to survive and find new markets to support this expansion.<ref>{{cite book |doi=10.1109/IPCC.2011.6087226 |chapter=The convergence of sustainable capitalism |title=2011 IEEE International Professional Communication Conference |pages=1–7 |year=2011 |last1=Mitra |first1=Basavadatta |last2=Gadhok |first2=Saagar |last3=Salhotra |first3=Shivam |last4=Agarwal |first4=Sakshi |isbn=978-1-61284-779-5 |s2cid=31292223 }}</ref> Capitalist systems are often destructive to the environment as well as certain individuals without access to proper representation. However, sustainability provides quite the opposite; it implies not only a continuation, but a [[resource depletion|replenishing of resources]].<ref>{{cite journal |last1=Schweickart |first1=David |title=Is Sustainable Capitalism an Oxymoron? |journal=Perspectives on Global Development and Technology |date=1 January 2009 |volume=8 |issue=2–3 |pages=559–580 |doi=10.1163/156914909X424033 }}</ref> Sustainability is often thought of to be related to [[environmentalism]], and sustainable capitalism applies sustainable principles to economic governance and social aspects of capitalism as well.
[[Ayn Rand]] was a notable advocate of extremist, [[laissez-faire]] capitalism, and her best-selling novel ''[[Atlas Shrugged]]'' has been an influential publication on business.<ref>[http://www.nytimes.com/2007/09/15/business/15atlas.html?_r=1&oref=slogin ''Ayn Rand's Literature of Capitalism'', The New York Times]</ref> Rand was the first person to endow capitalism with a new code of morality (rational [[selfishness]]),<ref>Rand, Ayn, The Virtue of Selfishness: A New Concept of Egoism (1964)</ref> arguing that capitalism is the only morally valid [[Political sociology|socio-political]] system because it allows people to be free to act in their rational self-interest.<ref>[[Capitalism: The Unknown Ideal]]</ref><ref>[http://aynrandlexicon.com/lexicon/capitalism.html Capitalism - Theory] The Ayn Rand Lexicon.</ref> Rand wrote: "Capitalism is a ''social system'' based on the recognition of individual rights, including property rights, in which all property is privately owned."<ref>[http://aynrandlexicon.com/lexicon/capitalism.html Capitalism - The Unknown Ideal] The Ayn Rand Lexicon.</ref>


The importance of sustainable capitalism has been more recently recognized, but the concept is not new. Changes to the current economic model would have heavy social environmental and economic implications and require the efforts of individuals, as well as compliance of local, state and federal governments. Controversy surrounds the concept as it requires an increase in sustainable practices and a marked decrease in current consumptive behaviors.<ref name=":2">{{Cite book |title=Sustainable Capitalism and the Pursuit of Well-Being.|last=E.|first=Harrison, Neil|date=1 January 2013|publisher=Routledge|isbn=978-1-306-21804-7|oclc=866837827}}{{page needed|date=March 2019}}</ref>
=== Criticism ===
{{Main|Criticism of capitalism|Anti-capitalism}}
[[File:Anti-capitalism color.jpg|right|thumb|250px|An [[Industrial Workers of the World]] poster (1911)]]
Notable critics of capitalism have included: [[socialism|socialists]], [[Anarchism|anarchists]], [[communism|communists]], [[Technocracy|technocrats]], some types of [[conservatism|conservatives]], [[Luddite]]s, [[Narodnik]]s, [[Shakers]] and some types of [[nationalism|nationalists]]. [[Marxism|Marxists]] advocated a revolutionary overthrow of capitalism that would lead to socialism, before eventually transforming into communism. Marxism influenced [[Social democracy|social democratic]] and labour parties, as well as some moderate [[democratic socialism|democratic socialists]]. Many aspects of capitalism have come under attack from the [[anti-globalization]] movement, which is primarily opposed to [[corporate capitalism]].


This is a concept of capitalism described in [[Al Gore]] and [[David Blood]]'s manifesto for the [[Generation Investment Management]] to describe a long-term political, economic and social structure which would mitigate current threats to the planet and society.<ref name="genfound">{{Cite web |last1=Gore |first1=Al |last2=Blood |first2=David |title=A Manifesto for Sustainable Capitalism |url=https://www.genfound.org/media/pdf-wsj-manifesto-sustainable-capitalism-14-12-11.pdf |url-status=dead |archive-url=https://web.archive.org/web/20140124005644/https://www.genfound.org/media/pdf-wsj-manifesto-sustainable-capitalism-14-12-11.pdf |archive-date=24 January 2014 |access-date=24 October 2022 |website=Generation Foundation}}</ref> According to their manifesto, sustainable capitalism would integrate the environmental, social and governance ([[Environmental, social and corporate governance|ESG]]) aspects into risk assessment in attempt to limit externalities.<ref name=":0b">{{Cite web|url=https://www.generationim.com/media/pdf-generation-sustainable-capitalism-v1.pdf |archive-url=https://ghostarchive.org/archive/20221009/https://www.generationim.com/media/pdf-generation-sustainable-capitalism-v1.pdf |archive-date=9 October 2022 |url-status=live|title=Sustainable Capitalism|access-date=18 February 2017}}</ref> Most of the ideas they list are related to economic changes, and social aspects, but strikingly few are explicitly related to any environmental policy change.<ref name="genfound" />
Many religions have criticized or opposed specific elements of capitalism. Traditional Judaism, [[Christianity]], and [[Islam]] forbid [[Usury|lending money at interest]], although methods of [[Islamic banking]] have been developed. Christianity has been a source of both praise and criticism for capitalism, particularly its [[Economic materialism|materialist]] aspects.<ref>{{cite web|url=http://www.vatican.va/archive/ENG0015/__P8C.HTM#-2FX|title=III. The Social Doctrine of the Church|publisher=The Vatican|accessdate=26 February 2008}}</ref> Indian philosopher [[P.R. Sarkar]], founder of the [[Ananda Marga]] movement, developed the [[Law of Social Cycle]] to identify the [[Economic collapse|problems of capitalism]].<ref>{{cite web |url=http://www.prout.org/aftercapitalism/ |title=After Capitalism |author=Dada Maheshvarananda |accessdate=26 February 2008}}</ref><ref>{{cite web |url=http://www.proutworld.org/|title=proutworld|accessdate=26 February 2008|publisher=ProutWorld}}</ref>


== Capital accumulation ==
Critics argue that capitalism is associated with the 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]]; [[Political repression|repression]] of workers and [[trade union]]ists, and phenomena such as [[social alienation]], [[economic inequality]], [[unemployment]], and economic instability. Capitalism is regarded by many socialists to be irrational in that production and the direction of the economy are unplanned, creating many inconsistencies and internal contradictions.<ref>Brander, James A. Government policy toward business. 4th ed. Mississauga, Ontario: John Wiley & Sons Canada, Ltd., 2006. Print.</ref>
{{Main|Capital accumulation}}
The accumulation of capital is the process of "making money" or growing an initial sum of money through investment in production. Capitalism is based on the accumulation of capital, whereby [[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 (economics)|capital]], defined as investment in order to realize a financial profit.<ref name="Economist definition">{{cite news | title = Economics A–Z: ''Capital'' | url = http://www.economist.com/economics-a-to-z/c#node-21529870 | website = [[economist.com|The Economist]] | access-date = 25 March 2015 | archive-date = 7 August 2017 | archive-url = https://web.archive.org/web/20170807235225/http://www.economist.com/economics-a-to-z/c#node-21529870 | url-status = live }}</ref> In this context, "capital" is defined as money or a financial asset invested for the purpose of making more money (whether in the form of profit, rent, interest, royalties, capital gain or some other kind of return).<ref name="MIA definition">{{cite web | title = Encyclopedia of Marxism – Glossary of terms: ''Capital'' | url = http://marxists.org/glossary/terms/c/a.htm#capital | website = [[Marxists Internet Archive]] | access-date = 25 March 2015 | archive-date = 18 June 2015 | archive-url = https://web.archive.org/web/20150618083941/https://www.marxists.org/glossary/terms/c/a.htm#capital | url-status = live }}</ref>


In mainstream [[economics]], [[accounting]] and [[Marxian economics]], capital accumulation is often equated with [[investment (macroeconomics)|investment]] of profit income or savings, especially in [[real vs. nominal in economics|real]] capital goods. The concentration and centralisation of capital are two of the results of such accumulation. In modern [[macroeconomics]] and [[econometrics]], the phrase "[[capital formation]]" is often used in preference to "accumulation", though the [[United Nations Conference on Trade and Development]] (UNCTAD) refers nowadays to "accumulation". The term "accumulation" is occasionally used in [[national accounts]].
[[Environmentalist]]s have argued that capitalism requires continual economic growth, and will inevitably deplete the finite natural resources of the earth, and other broadly utilized resources. [[Labor history (discipline)|Labor historians]] and scholars, such as [[Immanuel Wallerstein]] have argued that [[Unfree labour|unfree labor]]—by [[Slavery|slaves]], [[indentured servant]]s, prisoners, and other coerced persons—is compatible with capitalist relations.<ref>That unfree labor is acceptable to capital was argued during the 1980s by Tom Brass. See ''Towards a Comparative Political Economy of Unfree Labor'' (Cass, 1999). {{cite web |url=http://www.historycooperative.org/journals/llt/52/linden.html |title="Labour History as the History of Multitudes", ''Labour/Le Travail'', 52, Fall 2003, p. 235-244 |author=Marcel van der Linden |accessdate=26 February 2008}}</ref>


== Wage labor ==
=== Democracy, the state, and legal frameworks ===
{{Main|History of capitalist theory}}
{{Main|Wage labour}}
[[File:Worker 9.JPG|thumb|An industrial worker among heavy steel machine parts (Kinex Bearings, [[Bytča]], [[Slovakia]], {{Circa|1995}}–2000)]]
====Private property====
Wage labor refers to the sale of [[Labour economics|labor]] under a formal or informal [[employment contract]] to an [[employer]].<ref name="Steinfeld 2009 3"/> These transactions usually occur in a [[labour market|labor market]] where [[wage]]s are market determined.<ref>{{Harvnb|Deakin|Wilkinson|2005}}.<br />{{Harvnb|Marx|1990|p=1005}}, defines wage labour succinctly as "the labour of the worker who sells his own labour-power."</ref> In Marxist economics, these owners of the means of production and suppliers of capital are generally called capitalists. The description of the role of the capitalist has shifted, first referring to a useless intermediary between producers, then to an employer of producers, and finally to the owners of the means of production.<ref name="Williams 1983 51" /> [[Labor (economics)|Labor]] includes all physical and mental human resources, including entrepreneurial capacity and management skills, which are required to produce products and services. [[Production (economics)|Production]] is the act of making goods or services by applying [[labor power]].<ref>Ragan, Christopher T.S.; Lipsey, Richard G. ''Microeconomics''. 12th Canadian ed. Toronto, Pearson Education, 2008. {{ISBN|978-0-321-31491-8}}</ref><ref>Robbins, Richard H. ''Global problems and the culture of capitalism''. Boston: Allyn & Bacon, 2007. {{ISBN|978-0-205-52487-7}}</ref>
The relationship between the [[Sovereign state|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 (economist)|Hernando de Soto]] is a contemporary economist who has argued that an important characteristic of capitalism is the functioning state protection of property rights in a formal property system where ownership and transactions are clearly recorded.<ref>{{cite web |url=http://www.imf.org/external/pubs/ft/fandd/2001/03/desoto.htm |title=The mystery of capital|author=Hernando de Soto|accessdate=26 February 2008}}</ref>


== Criticism ==
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 [[Enclosure Acts]] in England, and similar legislation elsewhere, were an integral part of capitalist [[primitive accumulation]] and that specific legal frameworks of private land ownership have been integral to the development of capitalism.<ref>{{cite web |url=http://www.marxists.org/archive/marx/works/1867-c1/ch27.htm |title=Capital, v. 1. Part VIII: primitive accumulation|author=Karl Marx|accessdate=26 February 2008}}</ref><ref>{{cite journal |author=N. F. R. Crafts |title=Enclosure and labor supply revisited |journal=Explorations in economic history |issue=15 |month=April |year=1978 |pages=172–183 |doi=10.1016/0014-4983(78)90019-0 |volume=15}}.we the say yes</ref>
{{Main|Criticism of capitalism}}
[[File:Anti-capitalism color— Restored.png|thumb|The [[Industrial Workers of the World]] poster "[[Pyramid of Capitalist System]]" (1911)]]
Criticism of capitalism comes from various political and philosophical approaches, including [[anarchist]], [[socialist]], [[religious]] and [[nationalist]] viewpoints.<ref>{{cite book|last=Tormey|first=Simon|title=Anticapitalism|publisher=One World Publications|year=2004|page=10|isbn=978-1-78074-250-2}}</ref> Of those who oppose it or want to modify it, some believe that capitalism should be removed through [[revolution]] while others believe that it should be changed slowly through [[Reformism|political reforms]].<ref>{{cite book|title=Book: Sociology (Boundless)|chapter=16.1C: The Marxist Critique of Capitalism|url=https://socialsci.libretexts.org/@go/page/8462|date=16 December 2020|publisher=LibreTexts|access-date=21 October 2021|quote=Revolutionary socialists believe that capitalism can only be overcome through revolution. Social democrats believe that structural change can come slowly through political reforms to capitalism.}}</ref><ref name="The Cambridge History of Communism p.">{{cite book | editor-last=Pons | editor-first=Silvio | editor-last2=Smith | editor-first2=Stephen A. | title=The Cambridge History of Communism | publisher=Cambridge University Press | date=21 September 2017 | isbn=978-1-316-13702-4 | doi=10.1017/9781316137024 | pages=49–73}}</ref>


Prominent critiques of capitalism allege that it is inherently [[Exploitation of labour|exploitative]],<ref name="competition">{{cite web|url=http://www.marxists.org/archive/marx/works/1845/condition-working-class/ch05.htm|title=Competition – The Condition of the Working Class in England|last=Engels|first=Frederick|access-date=10 March 2008}}</ref><ref name="stanfordexploitation">{{Cite web|date=20 December 2001|title=Exploitation|url=https://plato.stanford.edu/entries/exploitation/|url-status=live|archive-url=https://web.archive.org/web/20201127091753/https://plato.stanford.edu/entries/exploitation/|archive-date=27 November 2020|access-date=26 December 2020|website=[[Stanford Encyclopedia of Philosophy]]}}</ref><ref>{{cite book |last=Mattei|first=Clara E.|date=2022 |title=The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism|pages=17–18|url=https://press.uchicago.edu/ucp/books/book/chicago/C/bo181707138.html|location= |publisher=[[University of Chicago Press]]|isbn=978-0-226-81839-9}}</ref> [[Marx's theory of alienation|alienating]],<ref>"Alienation." Pp. 10. in ''A Dictionary of Philosophy'' (rev. 2nd ed.). 1984.</ref> [[unstable]],<ref name="onfreetrade">{{cite web|url=http://www.marxists.org/archive/marx/works/1888/free-trade/index.htm|title=On the Question of Free Trade|last=Engels|first=Frederick|access-date=11 March 2008}}</ref><ref name="isrcrisis">{{cite web|url=http://www.isreview.org/issues/32/crisis_theory.shtml|title=Marx's Theory of Economic Crisis|last=Easterling|first=Earl|publisher=International Socialist Review|access-date=13 March 2008|archive-date=27 February 2021|archive-url=https://web.archive.org/web/20210227033442/https://isreview.org/issues/32/crisis_theory.shtml|url-status=dead}}</ref> [[unsustainable]],<ref name="extinction">{{cite book|last=Dawson|first=Ashley|author-link=Ashley Dawson|title=Extinction: A Radical History|date=2016|publisher=[[OR Books]]|url=http://www.orbooks.com/catalog/extinction-by-ashley-dawson/|page=41|isbn=978-1-944869-01-4|access-date=20 August 2016|archive-date=17 September 2016|archive-url=https://web.archive.org/web/20160917203814/http://www.orbooks.com/catalog/extinction-by-ashley-dawson/|url-status=live}}</ref><ref>{{Cite web |last=Nelson |first=Anitra |date=31 January 2024 |title=Degrowth as a Concept and Practice : Introduction |url=https://commonslibrary.org/degrowth-as-a-concept-and-practice-introduction/ |access-date=24 February 2024 |website=The Commons Social Change Library |language=en-AU}}</ref><ref>{{cite journal |title=Earth at risk: An urgent call to end the age of destruction and forge a just and sustainable future |journal=PNAS Nexus |date=4 April 2024 |volume=3 |issue=4 |doi=10.1093/pnasnexus/pgae106 |url=https://academic.oup.com/pnasnexus/article/3/4/pgae106/7638480?login=false |access-date=4 April 2024|pmc=10986754 |last1=Fletcher |first1=Charles |last2=Ripple |first2=William J. |last3=Newsome |first3=Thomas |last4=Barnard |first4=Phoebe |last5=Beamer |first5=Kamanamaikalani |last6=Behl |first6=Aishwarya |last7=Bowen |first7=Jay |last8=Cooney |first8=Michael |last9=Crist |first9=Eileen |last10=Field |first10=Christopher |last11=Hiser |first11=Krista |last12=Karl |first12=David M. |last13=King |first13=David A. |last14=Mann |first14=Michael E. |last15=McGregor |first15=Davianna P. |last16=Mora |first16=Camilo |last17=Oreskes |first17=Naomi |last18=Wilson |first18=Michael |pages=pgae106 |pmid=38566756 }}</ref> and [[Economic efficiency|economically inefficient]]<ref>{{cite book|url=https://books.google.com/books?id=BlEpAQAAMAAJ|title=Beyond the Profits System: Possibilities for a post-capitalist era|last=Shutt|first=Harry|date=March 2010|publisher=Zed Books|isbn=978-1-84813-417-1}}</ref><ref name="isrwaste">{{cite web|url=http://www.isreview.org/issues/53/garbage.shtml|title=The Conquest of Garbage|last=Rogers|first=Heather|website=isreview.org|publisher=International Socialist Review (1997)|access-date=13 March 2008|archive-date=10 May 2021|archive-url=https://web.archive.org/web/20210510142346/http://www.isreview.org/issues/53/garbage.shtml|url-status=dead}}</ref><ref name="part6">{{cite web|url=http://www.chass.utoronto.ca/~reak/eco100/100_6.htm|title=Monopoly, Imperfect Competition, and Oligopoly|last=Rea|first=K.J.|access-date=11 March 2008|archive-date=12 June 2010|archive-url=https://web.archive.org/web/20100612201706/http://www.chass.utoronto.ca/~reak/eco100/100_6.htm|url-status=dead}}</ref>—and that it creates massive [[economic inequality]],<ref name="King 2021">{{cite web|last=King|first=Matthew Wilburn|title=Why the next stage of capitalism is coming|website=BBC Future|date=25 May 2021|url=https://www.bbc.com/future/article/20210525-why-the-next-stage-of-capitalism-is-coming|access-date=21 October 2021}}</ref><ref>{{cite book |last1=Ghodsee|first1=Kristen|last2=Orenstein|first2=Mitchell A.|author-link1=Kristen Ghodsee|date=2021|title=Taking Stock of Shock: Social Consequences of the 1989 Revolutions|publisher=[[Oxford University Press]]|page=192|doi=10.1093/oso/9780197549230.001.0001 |isbn=978-0-19-754924-7|quote=Without an accompanying welfare state in which social programs funded by a progressive income tax redistribute from the rich to the poor, capitalism can be a deeply unfair system where a small, well-connected elite captures a majority of the wealth and power, and not necessarily through meritocratic processes.}}</ref> [[commodity|commodifies]] people,<ref name="openDemocracy">{{cite web | title=Commodification: the essence of our time | website=openDemocracy | url=https://www.opendemocracy.net/en/opendemocracyuk/commodification-essence-of-our-time/ | access-date=21 October 2021 | author= Colin Leys | date = 2 April 2021}}</ref><ref name="Renegade Inc 2019">{{cite web | title=The Commodification of Everything | website=Renegade Inc | date=25 August 2019 | url=http://renegadeinc.com/the-commodification-of-everything/ | access-date=21 October 2021 | author = Daniel Margrain}}</ref> [[environmental degradation|degrades the environment]],<ref name="extinction" /><ref>{{cite book|last=Hickel|first=Jason|author-link=Jason Hickel|title=Less is More: How Degrowth Will Save the World |year=2021|publisher=Windmill Books|pages=39–40|isbn=978-1-78609-121-5|quote=It was only with the rise of capitalism over the past few hundred years, and the breathtaking acceleration of industrialization from the 1950s, that on a planetary scale things began to tip out of balance.}}</ref> is [[undemocratic]],<ref name="Merkel pp. 109–128">{{cite journal | last=Merkel | first=Wolfgang | title=Is capitalism compatible with democracy? | journal=Zeitschrift für Vergleichende Politikwissenschaft | publisher=Springer Science and Business Media LLC | volume=8 | issue=2 | date=26 July 2014 | issn=1865-2646 | doi=10.1007/s12286-014-0199-4 | pages=109–128| hdl=10419/270951 | s2cid=150776013 | hdl-access=free }}</ref><ref name="Reich 2009">{{cite web | last=Reich | first=Robert B. | title=How Capitalism Is Killing Democracy | website=Foreign Policy | date=12 October 2009 | url=https://foreignpolicy.com/2009/10/12/how-capitalism-is-killing-democracy/ | access-date=21 October 2021}}</ref><ref>{{cite book |last=Slobodian|first=Quinn |author-link=Quinn Slobodian|date=2023 |title=Crack-Up Capitalism: Market Radicals and the Dream of a World Without Democracy|url=https://books.google.com/books?id=tIlrEAAAQBAJ&pg=PT10|location= |publisher=[[Henry Holt and Company|Metropolitan Books]]|page=10 |isbn=978-1-250-75389-2}}
====Institutions====
</ref> embeds [[uneven and combined development|uneven]] and [[underdevelopment]] between nation states,<ref>{{cite journal |last1=Patnaik |first1=Utsa |title='Neo-Marxian' Theories of Capitalism and Underdevelopment: Towards a Critique |journal=Social Scientist |date=1982 |volume=10 |issue=11 |pages=3–32 |doi=10.2307/3516858 |jstor=3516858 |url=https://www.jstor.org/stable/3516858 |issn=0970-0293}}</ref><ref>{{cite journal |last1=Warke |first1=Thomas W. |title=The Marxian Theory of Underdevelopment: A Review Article |journal=The Journal of Developing Areas |date=1973 |volume=7 |issue=4 |pages=699–710 |url=https://www.jstor.org/stable/4190085#:~:text=it%20is%20Lenin%20who%20laid,modern%20Marxian%20theory%20of%20underdevelopment.&text=and%20tends%20to%20perpetuate%20the,masses%20in%20the%20backward%20country.&text=world%20production%20and%20trade%20and,dualisms%20within%20under%2D%20developed%20economies. |issn=0022-037X}}</ref><ref>{{cite journal |last1=Martins |first1=Carlos Eduardo |title=The Longue Durée of the Marxist Theory of Dependency and the Twenty-First Century |journal=Latin American Perspectives |date=January 2022 |volume=49 |issue=1 |pages=18–35 |doi=10.1177/0094582X211052029 |url=https://journals.sagepub.com/doi/10.1177/0094582X211052029 |language=en |issn=0094-582X}}</ref><ref>{{cite journal |last1=Peck |first1=Jamie |last2=Varadarajan |first2=Latha |title=Uneven Regional Development |journal=International Encyclopedia of Geography: People, the Earth, Environment and Technology |date=6 March 2017 |pages=1–13 |doi=10.1002/9781118786352.wbieg0721 |url=https://onlinelibrary.wiley.com/doi/abs/10.1002/9781118786352.wbieg0721 |publisher=John Wiley & Sons, Ltd |isbn=9780470659632 |language=en}}</ref> and leads to an erosion of [[human rights]]<ref>{{cite journal|last=Abeles|first=Marc|date=2006|title=Globalization, Power, and Survival: an Anthropological Perspective|url=https://halshs.archives-ouvertes.fr/halshs-00125880/file/M_Abeles_2006_AQ.pdf |archive-url=https://ghostarchive.org/archive/20221009/https://halshs.archives-ouvertes.fr/halshs-00125880/file/M_Abeles_2006_AQ.pdf |archive-date=9 October 2022 |url-status=live|journal=Anthropological Quarterly|volume=79|issue=3|pages=484–486|doi=10.1353/anq.2006.0030|s2cid=144220354}}</ref> because of its [[wikt:incentivize|incentivization]] of [[imperialist]] expansion and [[military–industrial complex|war]].<ref>{{cite journal|last=Farid|first=Hilmar|date=2005|title=Indonesia's original sin: mass killings and capitalist expansion, 1965–66|journal=[[Inter-Asia Cultural Studies]]|volume=6|issue=1|pages=3–16|doi=10.1080/1462394042000326879|s2cid=145130614}}</ref><ref>{{cite book|last=Blakeley|first=Ruth|date=2009|title=State Terrorism and Neoliberalism: The North in the South|url=http://www.routledge.com/books/details/9780415462402/|publisher=[[Routledge]]|pages=[https://books.google.com/books?id=rft8AgAAQBAJ&pg=PA4 4], [https://books.google.com/books?id=rft8AgAAQBAJ&pg=PA20 20–23], [https://books.google.com/books?id=rft8AgAAQBAJ&pg=PA88 88]|isbn=978-0-415-68617-4}}</ref><ref>''Lenin's Selected Works'', Progress Publishers, 1963, Moscow, Volume 1, pp. 667–766</ref>
[[New institutional economics]], a field pioneered by [[Douglass North]], stresses the need of a legal framework in order for capitalism to function optimally, and focuses on the relationship between the historical development of capitalism and the creation and maintenance of political and economic institutions.<ref>{{cite book|author=North, Douglass C.|title=Institutions, Institutional Change and Economic Performance|publisher=Cambridge University Press|year=1990}}</ref> In new institutional economics and other fields focusing on public policy, economists seek to judge when and whether governmental intervention (such as [[tax]]es, [[Welfare (financial aid)|welfare]], and [[Regulatory economics|government regulation]]) can result in potential gains in efficiency. According to [[Gregory Mankiw]], a [[New Keynesian economics|New Keynesian economist]], governmental intervention can improve on market outcomes under conditions of "[[market failure]]," or situations in which the market on its own does not allocate resources efficiently.<ref>{{cite book|title=Principles of Economics|publisher=Harvard University|year=1997|pages=10|unused_data=Mankiw, N. Gregory}}</ref>


Other critics argue that such inequities are not due to the ethic-neutral construct of the economic system commonly known as capitalism, but to the ethics of those who shape and execute the system. For example, some contend that Milton Friedman's (human) ethic of 'maximizing shareholder value' creates a harmful form of capitalism,<ref>{{Cite book |last=Stout |first=Lynn |author-link=Lynn Stout |title=The Shareholder Value Myth |publisher=Berrett-Koehler Publishers, Inc. |year=2012 |isbn=978-1-60509-813-5 |location=San Francisco, CA |pages=15–23}}</ref><ref>{{Cite book |last=Gelles |first=David |author-link=David Gelles |title=The Man Who Broke Capitalism |publisher=Simon & Schuster |year=2022 |isbn=978-1-9821-7644-0 |location=New York |pages=1–13}}</ref> while a [[Millard Fuller]] or John Bogle (human) ethic of 'enough' creates a sustainable form.<ref>{{Cite book |last=Fuller |first=Millard |author-link=Millard Fuller|title=The Theology of the Hammer |publisher=Smyth & Helwys Publishing |year=1994 |isbn=1-880837-92-7 |location=Macon, GA |pages=31–39}}</ref><ref>{{Cite book |last=Bogle |first=John |title=Enough |publisher=John Wiley & Sons |year=2009 |isbn=978-0-470-52423-7 |location=Hoboken, New Jersey |pages=229–248}}</ref> Equitable ethics and unified ethical decision-making is theorized to create a less damaging form of capitalism.<ref>{{Cite book |last=Knowlton & Hedges |title=Better Capitalism |publisher=Wipf & Stock Publishers |year=2021 |isbn=978-1-7252-8093-9 |location=Eugene, OR |pages=34–37, 235–242}}</ref>
Market failure occurs when an [[externality]] is present and a market will either underproduce a product with a positive externality or overproduce a product that generates a negative externality. Air pollution, for instance, is a negative externality that cannot be incorporated into markets as the world’s air is not owned and then sold for use to polluters. So, too much pollution could be emitted and people not involved in the production pay the cost of the pollution instead of the firm that initially emitted the air pollution. Critics of market failure theory, like [[Ronald Coase]], [[Harold Demsetz]], and [[James M. Buchanan]] argue that government programs and policies also fall short of absolute perfection. Market failures are often small, and government failures are sometimes large. It is therefore the case that imperfect markets are often better than imperfect governmental alternatives. While all nations currently have some kind of market regulations, the desirable degree of regulation is disputed.


[[Inheritance]] has been argued to not be a fundamental part of capitalism,<ref name="x107">{{cite journal | last=Haslett | first=D. W. | title=Is Inheritance Justified? | journal=Philosophy & Public Affairs | publisher=Wiley | volume=15 | issue=2 | year=1986 | issn=0048-3915 | jstor=2265382 | pages=122–155 | url=http://www.jstor.org/stable/2265382 | access-date=17 August 2024}}</ref> instead part of [[nepotism]].<ref name="e543">{{cite journal | last=Pérez-González | first=Francisco | title=Inherited Control and Firm Performance | journal=American Economic Review | volume=96 | issue=5 | date=1 November 2006 | issn=0002-8282 | doi=10.1257/aer.96.5.1559 | pages=1559–1588}}</ref>
====Democracy====
The relationship between [[democracy]] and capitalism is a contentious area in theory and popular political movements. The extension of universal adult male [[suffrage]] in 19th century Britain occurred along with the development of industrial capitalism, and democracy became widespread at the same time as capitalism, leading many theorists to posit a causal relationship between them, or that each affects the other. However, in the 20th century, according to some authors, capitalism also accompanied a variety of political formations quite distinct from liberal democracies, including [[fascism|fascist]] regimes, monarchies, and single-party states,<ref name="Burnham" /> while some democratic societies such as the [[Bolivarian Republic of Venezuela]] and [[Anarchist Catalonia]] have been expressly anti-capitalist.<ref>On the democratic nature of the Venezuelan state, see [http://www.gobiernoenlinea.ve/estructura_edo/estructura_edo4.html]. On the current government's rejection of capitalism in favor of socialism, see [http://www.gobiernoenlinea.ve/misc-view/sharedfiles/Metas_Milenio.pdf] and [http://www.minci.gob.ve/motores/62/11852]</ref>

While some thinkers argue that capitalist development more-or-less inevitably eventually leads to the emergence of democracy, others dispute this claim. Research on the [[democratic peace theory]] indicates that capitalist democracies rarely make war with one another<ref>For the influence of capitalism on peace, see Mousseau, M. (2009) "The Social Market Roots of Democratic Peace", ''International Security'' 33 (4)</ref> and have little internal violence. However critics of the democratic peace theory note that democratic capitalist states may fight infrequently and or never with other democratic capitalist states because of political similarity or stability rather than because they are democratic or capitalist.

Some commentators argue that though economic growth under capitalism has led to democratization in the past, it may not do so in the future, as [[authoritarian]] regimes have been able to manage economic growth without making concessions to greater political freedom.<ref>{{cite web|author=Mesquita, Bruce Bueno de|url=http://www.foreignaffairs.org/20050901faessay84507/bruce-bueno-de-mesquita-george-w-downs/development-and-democracy.html|title=Development and Democracy|date=2005-09|accessdate=26 February 2008|publisher=Foreign Affairs}}</ref><ref>{{cite web|author=Single, Joseph T.|url=http://www10.nytimes.com/cfr/international/20040901facomment_v83n4_siegle-weinstein-halperin.html?_r=5&oref=slogin&oref=slogin&oref=slogin&oref=slogin|title=Why Democracies Excel|date=2004-09|accessdate=26 February 2008|publisher=New York Times}}</ref>
States that have highly capitalistic economic systems have thrived under authoritarian or oppressive political systems. Singapore, which maintains a highly open market economy and attracts lots of foreign investment, does not protect civil liberties such as freedom of speech and expression. The private (capitalist) sector in the People's Republic of China has grown exponentially and thrived since its inception, despite having an authoritarian government. Private investment in Fascist states, such as Nazi Germany, greatly increased {{Citation needed|date=February 2010}}, and [[Augusto Pinochet]]'s rule in Chile led to economic growth by using authoritarian means to create a safe environment for investment and capitalism.

In response to criticism of the system, some proponents of capitalism have argued that its advantages are supported by empirical research. For example, advocates of different [[Indices of Economic Freedom]] point to a statistical correlation between nations with more economic freedom (as defined by the indices) and higher scores on variables such as income and life expectancy, including the poor, in these nations.


== See also ==
== See also ==
{{Portal|Capitalism}}
{{cols|colwidth=16em}}
* [[Economic liberalism]]
* [[Anti-capitalism]]
* [[Advanced capitalism]]
* [[Capitalist mode of production]]
* [[Objectivism (Ayn Rand)]]
* [[Ancient economic thought]]
* ''[[Capitalism: The Unknown Ideal]]'' by [[Ayn Rand]]
* [[Bailout Capitalism]]
* [[Capitalism (disambiguation)]]
* ''[[Das Kapital]]'' by [[Karl Heinrich Marx]]
* [[Christian views on poverty and wealth]]
* ''[[The Theory of Business Enterprise]]'' by [[Thorstein Veblen]]
* [[Communism]]
* [[Positive non-interventionism]]
* [[Corporatocracy]]

* [[Crony capitalism]]
== Notes ==
* [[Economic sociology]]
{{Reflist|2}}
* [[Free market]]
* [[Global financial crisis in September 2008]]
* [[Humanistic economics]]
* [[Invisible hand]]
* [[Late capitalism]]
* ''[[Le Livre noir du capitalisme]]''
* [[Market socialism]]
* [[Peak capitalism]]
* [[Perspectives on capitalism by school of thought]]
* [[Post-capitalism]]
* [[Post-Fordism]]
* [[Racial capitalism]]
* [[Rent-seeking]]
* [[Socialism]]
* [[State monopoly capitalism]]
* [[Surveillance capitalism]]
* [[Perestroika]]
{{colend}}


== References ==
== References ==
; Notes
* [[Christian Bacher|Bacher, Christian]] (2007) ''[http://books.google.co.uk/books?id=w_6PqBp64y0C Capitalism, Ethics and the Paradoxon of Self-exploitation]'' Grin Verlag. p.&nbsp;2
{{reflist}}
* [[Richard T. De George|De George, Richard T.]] (1986) ''Business ethics'' p.&nbsp;104
* [[Scott Lash|Lash, Scott]] and [[John Urry (sociologist)|Urry, John]] (2000). ''Capitalism''. In [[Nicholas Abercrombie]], S. Hill & BS Turner (Eds.), ''The Penguin dictionary of sociology'' (4th ed.) (pp.&nbsp;36–40).
* {{cite book|title=Profit Theory and Capitalism|author=Obrinsky, Mark|authorlink=Mark Obrinsky|publisher=University of Pennsylvania Press|url=http://www.questia.com/PM.qst?a=o&d=4995059|year=1983|pages=1}}
* [[Eric Wolf|Wolf, Eric]] (1982) ''[[Europe and the People Without History]]''
* [[Ellen Meiksins Wood|Wood, Ellen Meiksins]] (2002) ''[http://books.google.co.uk/books?id=FZPyKjVguVoC The Origins of Capitalism: A Longer View]'' London: Verso


; Bibliography
==Further reading==
{{refbegin|30em}}
* Abu-Lughod, Janet L. ''Before European Hegemony The World System A.D. 1250-1350''. New York: Oxford UP, USA, 1991.
* {{cite book|url=https://books.google.com/books?id=w_6PqBp64y0C&pg=PA2|title=Capitalism, Ethics and the Paradoxon of Self-Exploitation|last=Bacher|first=Christian|publisher=GRIN Verlag|year=2007|isbn=978-3-638-63658-2|location=Munich|page=2|access-date=27 June 2015|archive-date=1 November 2015|archive-url=https://web.archive.org/web/20151101095357/https://books.google.com/books?id=w_6PqBp64y0C&lpg=PP1&pg=PA2|url-status=live}}
*{{cite book |last=Ackerman |first=Frank |authorlink= |coauthors=Lisa Heinzerling |title=Priceless: On Knowing the Price of Everything and the Value of Nothing |publisher=New Press |date=24 August 2005 |location= |pages=277 |url= |doi= |id= |isbn=1565849817}}
* {{cite book | last = Boldizzoni | first = Francesco | author-link = Francesco Boldizzoni | title = Foretelling the End of Capitalism: Intellectual Misadventures since Karl Marx | publisher= Cambridge, MA: Harvard University Press| year = 2020 | isbn = 978-0-674-91932-7}}
* {{cite book|title=Politics Without Romance|author=Buchanan, James M.}}
* {{cite journal|last= Carsel|first= Wilfred|year= 1940|title= The Slaveholders' Indictment of Northern Wage Slavery|journal= [[Journal of Southern History]]|volume= 6|issue= 4|pages= 504–520|jstor= 2192167|doi= 10.2307/2192167}}
* {{cite book|title=Civilization and Capitalism: 15th - 18 Century|author=[[Fernand Braudel|Braudel, Fernand]]}}
* {{cite book|title= The Law of the Labour Market: Industrialization, Employment, and Legal Evolution|last2= Wilkinson|first2= Frank|publisher=Oxford University Press|year= 2005|isbn= 978-0-19-815281-1|location= Oxford|last1= Deakin|first1= Simon|author1-link= Simon Deakin|author2-link= Frank Wilkinson}}
* {{cite book|title=Theories of Modern Capitalism|author=Bottomore, Tom|year=1985}}
* {{cite book|title=Business Ethics|url=https://archive.org/details/businessethics00dege|url-access=registration|last=De George|first=Richard T.|publisher=Macmillan|year=1986|isbn=978-0-02-328010-8|location=New York|page=[https://archive.org/details/businessethics00dege/page/104 104]}}
* {{cite journal |author=H. Doucouliagos and M. Ulubasoglu |title=Democracy and Economic Growth: A meta-analysis |journal=School of Accounting, Economics and Finance Deakin University Australia |year=2006 }}
* {{cite book|title= Britain's Gulag: The Brutal End of Empire in Kenya|last= Elkins|first= Caroline|publisher= [[Jonathan Cape]]|year= 2005|isbn= 978-0-224-07363-9|location= London|author-link= Caroline Elkins}}
* {{cite book|author=Coase, Ronald|year=1974|title=The Lighthouse in Economics}}
* {{cite book|url= https://books.google.com/books?id=ECdb7EjiBnEC|title= Cannibals All! or, Slaves Without Masters|last= Fitzhugh|first= George|publisher= A. Morris|year= 1857|isbn= 978-1-4290-1643-8|location= Richmond,&nbsp;VA|author-link= George Fitzhugh|access-date= 27 June 2015|archive-date= 18 October 2015|archive-url= https://web.archive.org/web/20151018025643/https://books.google.com/books?id=ECdb7EjiBnEC|url-status= live}}
* {{cite book|author=Demsetz, Harold|year=1969|title=Information and Efficiency}}
* {{cite book|title=Capitalism A Very Short Introduction|last=Fulcher|first=James|publisher=Oxford University Press|year=2004|isbn=978-0-19-280218-7|location=Oxford|url=https://archive.org/details/capitalismverysh00fulc_0}}
* {{cite book|author=Fulcher, James|title=Capitalism|year=2004}}
* {{cite book|title= Fragments of an Anarchist Anthropology|last= Graeber|first= David|publisher= Prickly Paradigm Press|year= 2004|isbn= 978-0-9728196-4-0|title-link= Fragments of an Anarchist Anthropology}}
* {{cite book|author=Friedman, Milton|title=Capitalism and Freedom|year=1952}}
* {{cite book|title= Possibilities: Essays on Hierarchy, Rebellion and Desire|last= Graeber|first= David|publisher= AK Press|year= 2007|isbn= 978-1-904859-66-6}}
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* {{cite journal|last2= Benoit|first2= Cecilia|year= 2007|title= From Wage Slaves to Wage Workers: Cultural Opportunity Structures and the Evolution of the Wage Demands of the Knights of Labor and the American Federation of Labor, 1880–1900|journal= [[Social Forces]]|volume= 85|issue= 3|pages= 1393–411|doi=10.1353/sof.2007.0037|jstor= 4494978|last1= Hallgrimsdottir|first1= Helga Kristin|s2cid= 154551793}}
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* {{cite book|author=Harvey, David|title=The Political-Economic Transformation of Late Twentieth Century Capitalism.|location=Cambridge, MA|publisher=Blackwell Publishers|year=1990|isbn=0-631-16294-1}}
* Krahn, Harvey J., and Graham S. Lowe (1993). ''Work, Industry, and Canadian Society''. 2nd ed. Scarborough, Ont.: Nelson Canada. xii, 430 p. {{ISBN|0-17-603540-0}}
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* {{cite book|title= The Penguin Dictionary of Sociology|last2=Urry|first2= John|publisher= Penguin Books|year= 2000|isbn= 978-0-14-051380-6|edition= 4th|location= London|pages= 36–40|chapter=Capitalism|last1= Lash|first1=Scott|author-link1=Scott Lash|author-link2=John Urry (sociologist)|editor1-first= Nicholas|editor1-last=Abercrombie|editor2-first=Stephen|editor2-last=Hill|editor3-first= Bryan S|editor3-last=Turner|editor3-link=Bryan S. Turner}}
* {{cite book|author=Hayek, Friedrich A.|title=Capitalism and the Historians|location=Chicago|publisher=University of Chicago Press|year=1963}}
* {{cite journal|date= August 2011|title= The Current Crisis and the Essence of Capitalism|url= http://www.themontrealreview.com/2009/The-current-crisis-and-the-essence-of-capitalism.php|journal= The Montreal Review|issn= 0707-9656|last1= McCraw|first1= Thomas K.|author-link= Thomas K. McCraw|access-date= 14 August 2011|archive-date= 8 September 2011|archive-url= https://web.archive.org/web/20110908122337/http://www.themontrealreview.com/2009/The-current-crisis-and-the-essence-of-capitalism.php|url-status= live}}
* {{cite book|author=Heilbroner, Robert L.|title=The Limits of American Capitalism|year=1966}}
* {{cite journal|last= Nelson|first= John O.|year= 1995|title= That a Worker's Labour Cannot Be a Commodity|journal= [[Philosophy (journal)|Philosophy]]|volume= 70|issue= 272|pages= 157–165|doi=10.1017/s0031819100065359|jstor= 3751199|s2cid= 171054136}}
* {{cite book|author=Heilbroner, Robert L.|title=The Nature and Logic of Capitalism|year=1985}}
* {{cite book|url=https://archive.org/details/unset0000unse_o9p3/page/1|title=Profit Theory and Capitalism|publisher=University of Pennsylvania Press |year=1983|isbn=978-0-8122-7863-7|location=Philadelphia|page=[https://archive.org/details/unset0000unse_o9p3/page/1 1]|author=Obrinsky, Mark}}
* {{cite book|author=Heilbroner, Robert L.|title=Economics Explained|year=1987}}
* {{cite book|title= The Kaiser's Holocaust: Germany's Forgotten Genocide|last2= Erichsen|first2= Casper W.|publisher= [[Faber and Faber]]|year= 2010|isbn= 978-0-571-23141-6|location= London|last1= Olusoga|first1= David}}
* {{cite book|author=Cryan, Dan|title=Capitalism: A Graphic Guide|year=2009}}
* {{cite book|url= http://www.marxists.org/archive/marx/works/1847/wage-labour/|title= Wage Labour and Capital|last= Marx|first= Karl|year= 1847|author-link= Karl Marx|access-date= 25 March 2015|archive-date= 6 September 2019|archive-url= https://web.archive.org/web/20190906075046/https://www.marxists.org/archive/marx/works/1847/wage-labour/|url-status= live}}
* [[Matthew Josephson|Josephson, Matthew]], ''The Money Lords; the great finance capitalists, 1925-1950'', New York, Weybright and Talley, 1972.
* {{cite book|title= Capital, Volume I|last= Marx|first= Karl|publisher= Penguin Classics|year= 1990|isbn= 978-0-14-044568-8|location= London|orig-year= 1867|title-link= Capital, Volume I}}
* {{cite book|author=[[Rosa Luxemburg|Luxemburg, Rosa]]|title=The Accumulation of Capital|year=1913}}
* {{cite book|title= The Wages of Whiteness: Race and the Making of the American Working Class|last= Roediger|first= David|publisher= [[Verso Books|Verso]]|year= 2007a|isbn= 978-1-84467-145-8|edition= revised and expanded|location= London & New York|author-link= David Roediger|orig-year= 1991}}
* {{cite book|author=[[Karl Marx|Marx, Karl]]|title=Capital: A Critical Analysis of Capitalist Production|year=1886}}
* {{cite journal|last= Roediger|first= David|year= 2007b|title= An Outmoded Approach to Labour and Slavery|journal= [[Labour/Le Travail]]|volume= 60|pages= 245–250|jstor= 25149808|author-link= David Roediger}}
* {{cite book|author=Mises, Ludwig von|title=Human Action: A Treatise on Economics|publisher=Scholars Edition|year=1998}}
* {{cite journal|last= Steinfeld|first= Robert|year= 2009|title= Coercion/Consent in Labor|url= http://www.compas.ox.ac.uk/fileadmin/files/Publications/working_papers/WP_2009/WP0966%20Steinfeld.pdf|series= COMPAS Working Paper No. 66|location= Oxford|publisher= University of Oxford|access-date= 3 March 2013|url-status= dead|archive-url= https://web.archive.org/web/20140301173031/http://www.compas.ox.ac.uk/fileadmin/files/Publications/working_papers/WP_2009/WP0966%20Steinfeld.pdf|archive-date= 1 March 2014}}
* {{cite book|author=Rand, Ayn|title=[[Capitalism: The Unknown Ideal]]|publisher=Signet|year=1986}}
* {{cite book|title=Europe and the People Without History|last=Wolf|first=Eric R.|publisher=University of California Press|year=1982|isbn=978-0-520-04459-3|location=Berkeley|author-link=Eric Wolf|title-link=Europe and the People Without History}}
* {{cite book|author=Reisman, George|year=1996|title=Capitalism: A Treatise on Economics|location=Ottawa, Illinois|publisher=Jameson Books|isbn=0-915463-73-3}}
* {{cite book|url=https://books.google.com/books?id=FZPyKjVguVoC|title=The Origin of Capitalism: A Longer View|last=Wood|first=Ellen Meiksins|publisher=Verso|year=2002|isbn=978-1-85984-392-5|location=London|author-link=Ellen Meiksins Wood|access-date=27 June 2015|archive-date=28 November 2015|archive-url=https://web.archive.org/web/20151128060418/https://books.google.com/books?id=FZPyKjVguVoC|url-status=live}}
* {{cite book|author=Resnick, Stephen|year=1987|title=Knowledge & Class: a Marxian critique of political economy|location=Chicago|publisher=University of Chicago Press}}
* {{cite book|author=Rostow, W. W.|title=The Stages of Economic Growth: A Non-Communist Manifesto|location=Cambridge|publisher=Cambridge University Press|year=1960}}
* {{cite book|title= Peasant Revolution in Ethiopia: The Tigray People's Liberation Front, 1975–1991|last= Young|first= John|publisher= Cambridge University Press|year= 1997|isbn= 978-0-521-02606-2|location= Cambridge}}
{{refend}}
* {{cite book|author=[[Joseph Schumpeter|Schumpeter, J. A.]]|title=Capitalism, Socialism, and Democracy|year=1983}}
* {{cite book | last = Scott | first = Bruce | authorlink = | coauthors = | title = The Concept of Capitalism | publisher = Springer | year = 2009 | location = | pages = 76 | url = | doi = | id = | isbn = 3642031099 | oclc = }}
* {{cite book|author=Scott, John|title=Corporate Business and Capitalist Classes|year=1997}}
* {{cite book|author=Seldon, Arthur|year=2007|title=Capitalism: A Condensed Version|location=London|publisher=Institute of Economic Affairs}}
* {{cite book|author=Sennett, Richard|title=The Culture of the New Capitalism|year=2006}}
* {{cite book|author=Smith, Adam|title=An Inquiry into the Nature and Causes of the Wealth of Nations|year=1776}}
* {{cite book|author=De Soto, Hernando|year=2000|title=The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else|location=New York|publisher=Basic Books|isbn=0-465-01614-6}}
* {{cite book|author=Strange, Susan|title=Casino Capitalism|year=1986}}
* {{cite book|author=[[Immanuel Wallerstein|Wallerstein, Immanuel]]|title=The Modern World System}}
* {{cite book|author=[[Max Weber|Weber, Max]]|title=The Protestant Ethic and the Spirit of Capitalism|year=1926}}


== Further reading ==
==External links==
{{refbegin|colwidth=30em}}
* [http://capitalism.columbia.edu/ Center on Capitalism and Society] directed by [[Edmund Phelps]]
* [[Gar Alperovitz|Alperovitz, Gar]] (2011). ''America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy, 2nd Edition.'' Democracy Collaborative Press. {{ISBN|0-9847857-0-1}}.
* {{cite book|last1=Altvater |first1=Elmar |last2=Crist|first2=Eileen|last3=Haraway|first3=Donna|author3-link=Donna Haraway|last4=Hartley|first4=Daniel|last5=Parenti|first5=Christian|last6=McBrien|first6=Justin|last7=Moore|first7=Jason|title=Anthropocene or Capitalocene? Nature, History, and the Crisis of Capitalism|date=2016|publisher=PM Press|isbn=978-1-62963-148-6}}
* Ascher, Ivan. ''Portfolio Society: On the Capitalist Mode of Prediction.'' Zone Books, 2016. {{ISBN|978-1935408741}}
* [[Edward E. Baptist|Baptist, Edward E.]] ''The Half Has Never Been Told: Slavery and the Making of American Capitalism.'' New York, [[Basic Books]], 2014. {{ISBN|0-465-00296-X}}.
* {{cite book | first = Richard | last = Barbrook | year = 2006 | title = The Class of the New | edition = paperback | publisher = OpenMute | location = London | isbn = 978-0-9550664-7-4 | url = http://www.theclassofthenew.net | access-date = 11 June 2019 | archive-url = https://web.archive.org/web/20180801045453/http://www.theclassofthenew.net/ | archive-date = 1 August 2018 | url-status = dead }}
* {{cite book|last1= Block |first1= Fred |author1-link= Fred L. Block |last2= Somers |first2= Margaret R. |year= 2014|title= The Power of Market Fundamentalism: Karl Polyani's Critique|location= Cambridge, MA |publisher= Harvard University Press|isbn= 978-0-674-05071-6}}
* {{cite book | last = Boldizzoni | first = Francesco | author-link = Francesco Boldizzoni | title = Foretelling the End of Capitalism: Intellectual Misadventures since Karl Marx | publisher= Harvard University Press| year = 2020 | isbn = 978-0-674-91932-7}}
* [[Fernand Braudel|Braudel, Fernand]]. ''Civilization and Capitalism, 15th-18th Century'', 3 volumes.
* Callinicos, Alex. "Wage Labour and State Capitalism – A reply to Peter Binns and Mike Haynes", ''International Socialism'', 2nd series, 12, Spring 1979.
* {{cite book |last1=Case |first1=Anne |last2=Deaton |first2=Angus |author-link1=Anne Case |author-link2=Angus Deaton |date=2020 |title=Deaths of Despair and the Future of Capitalism |url=https://press.princeton.edu/books/hardcover/9780691190785/deaths-of-despair-and-the-future-of-capitalism |publisher=[[Princeton University Press]] |isbn=978-0-691-19078-5 |access-date=6 March 2020 |archive-date=7 March 2020 |archive-url=https://web.archive.org/web/20200307062358/https://press.princeton.edu/books/hardcover/9780691190785/deaths-of-despair-and-the-future-of-capitalism |url-status=live }}
* Farl, Erich. "The Genealogy of State Capitalism". In: ''International'' London, vol. 2, no. 1, 1973.
* {{cite book |last=Fisher|first=Mark |author-link=Mark Fisher|date=2009 |title=[[Capitalist Realism|Capitalist Realism: Is There No Alternative?]]|location= |publisher= [[John Hunt Publishing]]|isbn=978-1-84694-317-1}}
* Gough, Ian. ''[http://www.newleftreview.org/?view=558 State Expenditure in Advanced Capitalism] {{Webarchive|url=https://web.archive.org/web/20120207145856/http://www.newleftreview.org/?view=558 |date=7 February 2012 }}'' New Left Review.
* [[Jürgen Habermas|Habermas, J.]] [1973] ''[[Legitimation Crisis]]'' (eng. translation by T. McCarthy). Boston, Beacon. [https://books.google.com/books?id=3WFy6vsyLNEC From Google books] {{Webarchive|url=https://web.archive.org/web/20151120102451/https://books.google.com/books?id=3WFy6vsyLNEC |date=20 November 2015 }}; [https://web.archive.org/web/20090714123532/http://www.cf.ac.uk/socsi/undergraduate/introsoc/legitcri.html excerpt].
* {{cite book | last = Harvey | first = David | author-link = David Harvey | title = Seventeen Contradictions and the End of Capitalism | publisher= Oxford University Press| year = 2014 | isbn = 978-0-19-936026-0}}
* [[Louis Hyman|Hyman, Louis]] and [[Edward E. Baptist]] (2014). ''American Capitalism: A Reader.'' Simon & Schuster. {{ISBN|978-1-4767-8431-1}}.
* {{cite book |last1=Ingham |first1=Geoffrey |title=Capitalism: With a New Postscript on the Financial Crisis and Its Aftermath |date=2008 |publisher=[[Polity Press]] |location=Cambridge |isbn=9780745636481}}
* {{cite book | year= 2007 | last1= James | first1= Paul | author-link= Paul James (academic) | last2= Patomäki | first2= Heikki | title= Globalization and Economy, Vol. 2: Global Finance and the New Global Economy | url= https://www.academia.edu/4211923 | publisher= SAGE Publications | location= London | access-date= 28 January 2018 | archive-date= 23 September 2020 | archive-url= https://web.archive.org/web/20200923063542/https://www.academia.edu/4211923/Globalization_and_Economy_Vol_2_Global_Finance_and_the_New_Global_Economy_2007_ | url-status= live }}
* {{cite book | year= 2007 | last1= James | first1= Paul | author-link= Paul James (academic) | last2= Palen | first2= Ronen | title= Globalization and Economy, Vol. 3: Global Economic Regimes and Institutions | url= https://www.academia.edu/4251331 | publisher= Sage Publications | location= London | access-date= 28 January 2018 | archive-date= 23 September 2020 | archive-url= https://web.archive.org/web/20200923063542/https://www.academia.edu/4251331/Globalization_and_Economy_Vol_3_Global_Economic_Regimes_and_Institutions_2007_ | url-status= live }}
* {{cite book | year= 2007 | last1= James | first1= Paul | author-link= Paul James (academic) | last2= O'Brien | first2= Robert | title= Globalization and Economy, Vol. 4: Globalizing Labour | url= https://www.academia.edu/4303461 | publisher= Sage Publications | location= London | access-date= 28 January 2018 | archive-date= 23 September 2020 | archive-url= https://web.archive.org/web/20200923063543/https://www.academia.edu/4303461/Globalization_and_Economy_Vol_4_Globalizing_Labour_2007_ | url-status= live }}
* Jameson, Fredric (1991). ''[[Postmodernism, or, the Cultural Logic of Late Capitalism]]''.
* {{cite book |last1=Kocka |first1=Jürgen |title=Capitalism: A Short History |date=2016 |publisher=[[Princeton University Press]] |location=Princeton |isbn=978-0691165226}}
* Kotler, Philip (2015). ''Confronting Capitalism: Real Solutions for a Troubled Economic System.'' AMACOM. {{ISBN|978-0814436455}}
* Mandel, Ernest (1999). ''Late Capitalism.'' {{ISBN|978-1859842027}}
* {{cite book | last = Mander | first = Jerry | author-link = Jerry Mander | title = The Capitalism Papers: Fatal Flaws of an Obsolete System | publisher= Counterpoint | year = 2012 | isbn = 978-1-61902-158-7}}
* Marcel van der Linden, ''Western Marxism and the Soviet Union''. New York, Brill Publishers, 2007.
* Mayfield, Anthony. "Economics", in his ''On the Brink: Resource Depletion, Debt Collapse, and Super-technology'' ([Vancouver, B.C., Canada]: On the Brink Publishing, 2013), pp.&nbsp;50–104.
* {{cite book|last1= Musacchio |first1= Aldo |last2= Lazzarini |first2= Sergio G. |year= 2014|title= Reinventing State Capitalism: Leviathan in Business, Brazil and Beyond|location= Cambridge, MA |publisher= Harvard University Press|isbn= 978-0-674-72968-1}}
* {{cite book|last=Newitz|first=Annalee|title=Pretend We're Dead: Capitalist Monsters in American Pop Culture|date=2006|publisher=Duke University Press|location=Durham, NC|isbn=978-0-8223-3745-4|url=https://www.dukeupress.edu/Pretend-Were-Dead/|access-date=26 October 2016|archive-date=26 October 2016|archive-url=https://web.archive.org/web/20161026234517/https://www.dukeupress.edu/Pretend-Were-Dead/|url-status=live}}
* {{cite book |last1=Nitzan|first1=Jonathan |author-link1=Jonathan Nitzan|last2=Bichler|first2=Shimshon |author-link2=Shimshon Bichler|date=2009 |title=Capital as Power: A Study of Order and Creorder|url= |location= |publisher=[[Routledge]]|page= |isbn=978-0-415-49680-3}}
* Panitch, Leo, and Sam Gindin (2012). ''The Making of Global Capitalism: the Political Economy of American Empire''. London, Verso. {{ISBN|978-1-84467-742-9}}.
* {{cite book|last= Piketty |first= Thomas |author-link= Thomas Piketty |year= 2014|title= Capital in the Twenty-First Century|location= Cambridge, MA |publisher= [[Belknap Press]]|isbn= 978-0-674-43000-6 |title-link= Capital in the Twenty-First Century}}
* {{cite book|last= Piketty |first= Thomas |year= 2020|title=Capital and Ideology|location= Cambridge, MA |publisher= Belknap Press|isbn=978-0-674-98082-2|title-link= Capital and Ideology }}
* [[Karl Polanyi|Polanyi, Karl]] (2001). ''[[The Great Transformation (book)|The Great Transformation]]: The Political and Economic Origins of Our Time.'' [[Beacon Press]]; 2nd ed. {{ISBN|0-8070-5643-X}}
* {{cite book|title= Capitalism: A complete understanding of the nature and value of human economic life|last=Reisman|first= George|year= 1998|isbn= 978-0-915463-73-2
|publisher =Jameson Books}}
* [[Jay W. Richards|Richards, Jay W.]] (2009). ''Money, Greed, and God: Why Capitalism is the Solution and Not the Problem''. New York: [[HarperOne]]. {{ISBN|978-0-06-137561-3}}
* [[Paul Craig Roberts|Roberts, Paul Craig]] (2013). ''The Failure of Laissez-faire Capitalism: towards a New Economics for a Full World''. Atlanta, Ga.: Clarity Press. {{ISBN|978-0-9860362-5-5}}
* [[William I. Robinson|Robinson, William I.]] ''Global Capitalism and the Crisis of Humanity.'' Cambridge University Press, 2014. {{ISBN|1-107-69111-7}}
* {{cite book |last=Schram |first=Sanford F. |title=The Return of Ordinary Capitalism: Neoliberalism, Precarity, Occupy |year=2015 |publisher=Oxford University Press |url=https://global.oup.com/academic/product/the-return-of-ordinary-capitalism-9780190253011?cc=us& |isbn=978-0-19-025302-8 |access-date=12 February 2017 |archive-date=23 September 2020 |archive-url=https://web.archive.org/web/20200923063546/https://global.oup.com/academic/product/the-return-of-ordinary-capitalism-9780190253011?cc=us&lang=en& |url-status=live }}
* Hoevet, Ocean. [https://web.archive.org/web/20120603131601/http://homepage.newschool.edu/~AShaikh/pal2.pdf "Capital as a Social Relation"] (New Palgrave article)
* [[Werner Sombart|Sombart, Werner]] (1916) ''Der moderne Kapitalismus. Historisch-systematische Darstellung des gesamteuropäischen Wirtschaftslebens von seinen Anfängen bis zur Gegenwart.'' Final edn. 1916, repr. 1969, paperback edn. (3 vols. in 6): 1987 Munich: dtv. (Also in Spanish; no English translation yet.)
* {{cite book |last1=Sonenscher |first1=Michael |title=Capitalism: The Story behind the Word |date=2022 |publisher=[[Princeton University Press]] |location=Princeton |isbn=9780691237206}}
* [[Ben Tarnoff|Tarnoff, Ben]], "Better, Faster, Stronger" (review of [[John Tinnell]], ''The Philosopher of Palo Alto: Mark Weisner, Xerox PARC, and the Original Internet of Things'', University of Chicago Press, 347 pp.; and [[Malcolm Harris]], ''Palo Alto: A History of California, Capitalism, and the World'', Little, Brown, 708 pp.), ''[[The New York Review of Books]]'', vol. LXX, no. 14 (21 September 2023), pp.&nbsp;38–40. "[Palo Alto is] a place where the [United States'] contradictions are sharpened to their finest points, above all the defining and enduring contradictions between [[democracy|democratic principle]] and antidemocratic practice. There is nothing as American as celebrating [[social equality|equality]] while subverting it. Or as [[California]]n." (p.&nbsp;40.)
* {{cite book | last = Wallerstein| first = Immanuel | author-link = Immanuel Wallerstein | title = Historical Capitalism | publisher= [[Verso Books]] | year = 1983 | isbn = 978-0-86091-761-8}}
* {{cite book | last = Wolff | first = Richard D. | author-link = Richard D. Wolff | title = Democracy at Work: A Cure for Capitalism | publisher= [[Haymarket Books]] | year = 2012 | isbn = 978-1-60846-247-6}}
* {{cite book | last = Wood | first = Ellen Meiksins | author-link = Ellen Meiksins Wood | title = The Origin of Capitalism: A Longer View | publisher= [[Verso]] | year = 2002 | isbn = 978-1-85984-392-5}}
{{refend}}


== External links ==
{{Commons category|Capitalism}}
{{Commons category|Capitalism}}
{{wikiquote}}
{{EB1922 Poster}}
{{Wikiquote}}

{{Wiktionary}}
[[nan:Chu-pún-chú-gī]]
* {{In Our Time|Capitalism|p00545kv|Capitalism}}

* [https://www.britannica.com/topic/capitalism Capitalism] at ''[[Encyclopædia Britannica]]'' Online.
{{use dmy dates}}
* [http://www.hup.harvard.edu/features/capitalism-and-its-discontents.html Selected Titles on Capitalism and Its Discontents] {{Webarchive|url=https://web.archive.org/web/20180123134446/http://www.hup.harvard.edu/features/capitalism-and-its-discontents.html |date=23 January 2018 }}. [[Harvard University Press]].
{{library resources box|by=no|onlinebooks=no|others=no|about=yes|label=Capitalism}}


{{Aspects of capitalism}}
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Latest revision as of 21:05, 6 November 2024

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit.[1][2][3][4][5] The defining characteristics of capitalism include private property, capital accumulation, competitive markets, price systems, recognition of property rights, self-interest, economic freedom, meritocracy, work ethic, consumer sovereignty, economic efficiency, profit motive, a financial infrastructure of money and investment that makes possible credit and debt, entrepreneurship, commodification, voluntary exchange, wage labor, production of commodities and services, and a strong emphasis on innovation and economic growth.[6][7][8][9][10][11] In a market economy, decision-making and investments are determined by owners of wealth, property, or ability to maneuver capital or production ability in capital and financial markets—whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.[12]

Economists, historians, political economists, and sociologists have adopted different perspectives in their analyses of capitalism and have recognized various forms of it in practice. These include laissez-faire or free-market capitalism, anarcho-capitalism, state capitalism, and welfare capitalism. Different forms of capitalism feature varying degrees of free markets, public ownership,[13] obstacles to free competition, and state-sanctioned social policies. The degree of competition in markets and the role of intervention and regulation, as well as the scope of state ownership, vary across different models of capitalism.[14][15] The extent to which different markets are free and the rules defining private property are matters of politics and policy. Most of the existing capitalist economies are mixed economies that combine elements of free markets with state intervention and in some cases economic planning.[16]

Capitalism in its modern form emerged from agrarianism in England, as well as mercantilist practices by European countries between the 16th and 18th centuries. The Industrial Revolution of the 18th century established capitalism as a dominant mode of production, characterized by factory work and a complex division of labor. Through the process of globalization, capitalism spread across the world in the 19th and 20th centuries, especially before World War I and after the end of the Cold War. During the 19th century, capitalism was largely unregulated by the state, but became more regulated in the post–World War II period through Keynesianism, followed by a return of more unregulated capitalism starting in the 1980s through neoliberalism.

The existence of market economies has been observed under many forms of government and across a vast array of historical periods, geographical locations, and cultural contexts. The modern industrial capitalist societies that exist today developed in Western Europe as a result of the Industrial Revolution. The accumulation of capital is the primary mechanism through which capitalist economies promote economic growth. However, it is a characteristic of such economies that they experience a business cycle of economic growth followed by recessions.[17]

Etymology

[edit]
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 Latin word based on caput, meaning "head"—which is also the origin of "chattel" and "cattle" in the sense of movable property (only much later to refer only to livestock). Capitale emerged in the 12th to 13th centuries to refer to funds, stock of merchandise, sum of money or money carrying interest.[25]: 232 [26] 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.[25]: 233 

The Hollantse (German: holländische) Mercurius uses "capitalists" in 1633 and 1654 to refer to owners of capital.[25]: 234  In French, Étienne Clavier referred to capitalistes in 1788,[27] four years before its first recorded English usage by Arthur Young in his work Travels in France (1792).[26][28] In his Principles of Political Economy and Taxation (1817), David Ricardo referred to "the capitalist" many times.[29] English poet Samuel Taylor Coleridge used "capitalist" in his work Table Talk (1823).[30] 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.[26] Alexander Hamilton used "capitalist" in his Report of Manufactures presented to the United States Congress in 1791.

The initial use of the term "capitalism" in its modern sense is attributed to Louis Blanc in 1850 ("What I call 'capitalism' that is to say the appropriation of capital by some to the exclusion of others") and Pierre-Joseph Proudhon in 1861 ("Economic and social regime in which capital, the source of income, does not generally belong to those who make it work through their labor").[25]: 237  Karl Marx frequently referred to the "capital" and to the "capitalist mode of production" in Das Kapital (1867).[31][32] Marx did not use the form capitalism but instead used capital, capitalist and capitalist mode of production, which appear frequently.[32][33] Due to the word being coined by socialist critics of capitalism, economist and historian Robert Hessen stated that the term "capitalism" itself is a term of disparagement and a misnomer for economic individualism.[34] Bernard Harcourt agrees with the statement that the term is a misnomer, adding that it misleadingly suggests that there is such a thing as "capital" that inherently functions in certain ways and is governed by stable economic laws of its own.[35]

In the English language, the term "capitalism" first appears, according to the Oxford English Dictionary (OED), in 1854, in the novel The Newcomes by novelist William Makepeace Thackeray, where the word meant "having ownership of capital".[36] Also according to the OED, Carl Adolph Douai, a German American socialist and abolitionist, used the term "private capitalism" in 1863.

Definition

[edit]

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.[37] Societies officially founded in opposition to capitalism (such as the Soviet Union) have sometimes been argued to actually exhibit characteristics of capitalism.[38] Nancy Fraser describes usage of the term "capitalism" by many authors as "mainly rhetorical, functioning less as an actual concept than as a gesture toward the need for a concept".[8] Scholars who are uncritical of capitalism rarely actually use the term "capitalism".[39] Some doubt that the term "capitalism" possesses valid scientific dignity,[37] and it is generally not discussed in mainstream economics,[8] with economist Daron Acemoglu suggesting that the term "capitalism" should be abandoned entirely.[40] 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.[39]

History

[edit]
Cosimo de' Medici (pictured in a 16th-century portrait by Pontormo) built an international financial empire and was one of the first Medici bankers.
Augsburg, the centre of early capitalism[41]

Capitalism, in its modern form, can be traced to the emergence of agrarian capitalism and mercantilism in the early Renaissance, in city-states like Florence.[42] Capital has existed incipiently on a small scale for centuries[43] in the form of merchant, renting and lending activities and occasionally as small-scale industry with some wage labor. Simple commodity exchange and consequently simple commodity production, which is the initial basis for the growth of capital from trade, have a very long history. During the Islamic Golden Age, Arabs promulgated capitalist economic policies such as free trade and banking. Their use of Indo-Arabic numerals facilitated bookkeeping. These innovations migrated to Europe through trade partners in cities such as Venice and Pisa. Italian mathematicians traveled the Mediterranean talking to Arab traders and returned to popularize the use of Indo-Arabic numerals in Europe.[44]

Agrarianism

[edit]

The economic foundations of the feudal agricultural system began to shift substantially in 16th-century England as the manorial system had broken down and land began to become concentrated in the hands of fewer landlords with increasingly large estates. Instead of a serf-based system of labor, workers were increasingly employed as part of a broader and expanding money-based economy. The system put pressure on both landlords and tenants to increase the productivity of agriculture to make profit; the weakened coercive power of the aristocracy to extract peasant surpluses encouraged them to try better methods, and the tenants also had incentive to improve their methods in order to flourish in a competitive labor market. Terms of rent for land were becoming subject to economic market forces rather than to the previous stagnant system of custom and feudal obligation.[45][46]

Mercantilism

[edit]
A painting of a French seaport from 1638 at the height of mercantilism
Robert Clive with the Nawabs of Bengal after the Battle of Plassey which began the British rule in Bengal

The economic doctrine prevailing from the 16th to the 18th centuries is commonly called mercantilism.[47][48] This period, the Age of Discovery, was associated with the geographic exploration of foreign lands by merchant traders, especially from England and the Low Countries. Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist methods.[49] Most scholars consider the era of merchant capitalism and mercantilism as the origin of modern capitalism,[48][50] although Karl Polanyi argued that the hallmark of capitalism is the establishment of generalized markets for what he called the "fictitious commodities", i.e. land, labor and money. Accordingly, he argued that "not until 1834 was a competitive labor market established in England, hence industrial capitalism as a social system cannot be said to have existed before that date".[51]

England began a large-scale and integrative approach to mercantilism during the Elizabethan Era (1558–1603). A systematic and coherent explanation of balance of trade was made public through Thomas Mun's argument England's Treasure by Forraign Trade, or the Balance of our Forraign Trade is The Rule of Our Treasure. It was written in the 1620s and published in 1664.[52]

European merchants, backed by state controls, subsidies and monopolies, made most of their profits by buying and selling goods. In the words of Francis Bacon, the purpose of mercantilism was "the opening and well-balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation of prices...".[53]

After the period of the proto-industrialization, the British East India Company and the Dutch East India Company, after massive contributions from the Mughal Bengal,[54][55] inaugurated an expansive era of commerce and trade.[56][57] These companies were characterized by their colonial and expansionary powers given to them by nation-states.[56] 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

[edit]
The Watt steam engine, fuelled primarily by coal, propelled the Industrial Revolution in Britain.[58]

In the mid-18th century a group of economic theorists, led by David Hume (1711–1776)[59] and Adam Smith (1723–1790), challenged fundamental mercantilist doctrines—such as the belief that the world's wealth remained constant and that a state could only increase its wealth at the expense of another state.

During the Industrial Revolution, industrialists replaced merchants as a dominant factor in the capitalist system and effected the decline of the traditional handicraft skills of artisans, guilds and journeymen. Industrial capitalism marked the development of the factory system of manufacturing, characterized by a complex division of labor between and within work process and the routine of work tasks; and eventually established the domination of the capitalist mode of production.[60]

Industrial Britain eventually abandoned the protectionist policy formerly prescribed by mercantilism. In the 19th century, Richard Cobden (1804–1865) and John Bright (1811–1889), who based their beliefs on the Manchester School, initiated a movement to lower tariffs.[61] In the 1840s Britain adopted a less protectionist policy, with the 1846 repeal of the Corn Laws and the 1849 repeal of the Navigation Acts.[62] Britain reduced tariffs and quotas, in line with David Ricardo's advocacy of free trade.

Modernity

[edit]
The gold standard formed the financial basis of the international economy from 1870 to 1914.

Broader processes of globalization carried capitalism across the world. By the beginning of the nineteenth century, a series of loosely connected market systems had come together as a relatively integrated global system, in turn intensifying processes of economic and other globalization.[63][64] Late in the 20th century, capitalism overcame a challenge by centrally-planned economies and is now the encompassing system worldwide,[21][65] with the mixed economy as its dominant form in the industrialized Western world.

Industrialization allowed cheap production of household items using economies of scale, while rapid population growth created sustained demand for commodities. The imperialism of the 18th-century decisively shaped globalization.[63][66][67][68]

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 rubber, diamonds and coal and helped fuel trade and investment between the European imperial powers, their colonies and the United States:

The inhabitant of London could order by telephone, sipping his morning tea, the various products of the whole earth, and reasonably expect their early delivery upon his doorstep. Militarism and imperialism of racial and cultural rivalries were little more than the amusements of his daily newspaper. What an extraordinary episode in the economic progress of man was that age which came to an end in August 1914.[69]

From the 1870s to the early 1920s, the global financial system was mainly tied to the gold standard.[70][71] The United Kingdom first formally adopted this standard in 1821. Soon to follow were Canada in 1853, Newfoundland in 1865, the United States and Germany (de jure) in 1873. New technologies, such as the telegraph, the transatlantic cable, the radiotelephone, the steamship and railways allowed goods and information to move around the world to an unprecedented degree.[72]

In the United States, the term "capitalist" primarily referred to powerful businessmen[73] until the 1920s due to widespread societal skepticism and criticism of capitalism and its most ardent supporters.

The New York stock exchange traders' floor (1963)

Contemporary capitalist societies developed in the West from 1950 to the present and this type of system continues throughout the world—relevant examples started in the United States after the 1950s, France after the 1960s, Spain after the 1970s, Poland after 2015, and others. At this stage most capitalist markets are considered[by whom?] developed and characterized by developed private and public markets for equity and debt, a high standard of living (as characterized by the World Bank and the IMF), large institutional investors and a well-funded banking system. A significant managerial class has emerged[when?] and decides on a significant proportion of investments and other decisions. A different future than that envisioned by Marx has started to emerge—explored and described by Anthony Crosland in the United Kingdom in his 1956 book The Future of Socialism[74] and by John Kenneth Galbraith in North America in his 1958 book The Affluent Society,[75] 90 years after Marx's research on the state of capitalism in 1867.[76]

The postwar boom ended in the late 1960s and early 1970s and the economic situation grew worse with the rise of stagflation.[77] Monetarism, a modification of Keynesianism that is more compatible with laissez-faire analyses, gained increasing prominence in the capitalist world, especially under the years in office of Ronald Reagan in the United States (1981–1989) and of Margaret Thatcher in the United Kingdom (1979–1990). Public and political interest began shifting away from the so-called collectivist concerns of Keynes's managed capitalism to a focus on individual choice, called "remarketized capitalism".[78]

The end of the Cold War and the dissolution of the Soviet Union allowed for capitalism to become a truly global system in a way not seen since before World War I. The development of the neoliberal global economy would have been impossible without the fall of communism.[79][80]

Harvard Kennedy School economist Dani Rodrik distinguishes between three historical variants of capitalism:[81]

  • 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

[edit]

The relationship between democracy and capitalism is a contentious area in theory and in popular political movements.[82] The extension of adult-male suffrage in 19th-century Britain occurred along with the development of industrial capitalism and representative democracy became widespread at the same time as capitalism, leading capitalists to posit a causal or mutual relationship between them. However, according to some authors in the 20th-century, capitalism also accompanied a variety of political formations quite distinct from liberal democracies, including fascist regimes, absolute monarchies and single-party states.[48] Democratic peace theory asserts that democracies seldom fight other democracies, but others suggest this may be because of political similarity or stability, rather than because they are "democratic" or "capitalist". Critics argue that though economic growth under capitalism has led to democracy, it may not do so in the future as authoritarian régimes have been able to manage economic growth using some of capitalism's competitive principles[83][84] without making concessions to greater political freedom.[85][86]

Political scientists Torben Iversen and David Soskice see democracy and capitalism as mutually supportive.[87] Robert Dahl argued in On Democracy that capitalism was beneficial for democracy because economic growth and a large middle class were good for democracy.[88] He also argued that a market economy provided a substitute for government control of the economy, which reduces the risks of tyranny and authoritarianism.[88]

In his book The Road to Serfdom (1944), Friedrich Hayek (1899–1992) asserted that the free-market understanding of economic freedom as present in capitalism is a requisite of political freedom. He argued that the market mechanism is the only way of deciding what to produce and how to distribute the items without using coercion. Milton Friedman and Ronald Reagan also promoted this view.[89] Friedman claimed that centralized economic operations are always accompanied by political repression. In his view, transactions in a market economy are voluntary and the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminishes their power to coerce. Some of Friedman's views were shared by John Maynard Keynes, who believed that capitalism was vital for freedom to survive and thrive.[90][91] Freedom House, an American think-tank that conducts international research on, and advocates for, democracy, political freedom and human rights, has argued that "there is a high and statistically significant correlation between the level of political freedom as measured by Freedom House and economic freedom as measured by the Wall Street Journal/Heritage Foundation survey".[92]

In Capital in the Twenty-First Century (2013), Thomas Piketty of the Paris School of Economics asserted that inequality is the inevitable consequence of economic growth in a capitalist economy and the resulting concentration of wealth can destabilize democratic societies and undermine the ideals of social justice upon which they are built.[93]

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,[94] operates largely under a one-party rule. Furthermore, it does not vigorously defend freedom of expression as evidenced by its government-regulated press, and its penchant for upholding laws protecting ethnic and religious harmony, judicial dignity and personal reputation. The private (capitalist) sector in the People's Republic of China has grown exponentially and thrived since its inception, despite having an authoritarian government. Augusto Pinochet's rule in Chile led to economic growth and high levels of inequality[95] by using authoritarian means to create a safe environment for investment and capitalism. Similarly, Suharto's authoritarian reign and extirpation of the Communist Party of Indonesia allowed for the expansion of capitalism in Indonesia.[96][97]

The term "capitalism" in its modern sense is often attributed to Karl Marx.[49][98] In his Das Kapital, Marx analyzed the "capitalist mode of production" using a method of understanding today known as Marxism. However, Marx himself rarely used the term "capitalism" while it was used twice in the more political interpretations of his work, primarily authored by his collaborator Friedrich Engels. In the 20th century, defenders of the capitalist system often replaced the term "capitalism" with phrases such as free enterprise and private enterprise and replaced "capitalist" with rentier and investor in reaction to the negative connotations associated with capitalism.[99]

Characteristics

[edit]

In general, capitalism as an economic system and mode of production can be summarized by the following:[100]

Market

[edit]

In free market and laissez-faire forms of capitalism, markets are used most extensively with minimal or no regulation over the pricing mechanism. In mixed economies, which are almost universal today,[110] markets continue to play a dominant role, but they are regulated to some extent by the state in order to correct market failures, promote social welfare, conserve natural resources, fund defense and public safety or other rationale. In state capitalist systems, markets are relied upon the least, with the state relying heavily on state-owned enterprises or indirect economic planning to accumulate capital.

Competition arises when more than one producer is trying to sell the same or similar products to the same buyers. Adherents of the capitalist theory believe that competition leads to innovation and more affordable prices. Monopolies or cartels can develop, especially if there is no competition. A monopoly occurs when a firm has exclusivity over a market. Hence, the firm can engage in rent seeking behaviors such as limiting output and raising prices because it has no fear of competition.

Governments have implemented legislation for the purpose of preventing the creation of monopolies and cartels. In 1890, the Sherman Antitrust Act became the first legislation passed by the United States Congress to limit monopolies.[111]

Wage labor

[edit]

Wage labor, usually referred to as paid work, paid employment, or paid labor, refers to the socioeconomic relationship between a worker and an employer in which the worker sells their labor power under a formal or informal employment contract.[104] These transactions usually occur in a labor market where wages or salaries are market-determined.[112]

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.[113]

Profit motive

[edit]

The profit motive, in the theory of capitalism, is the desire to earn income in the form of profit. Stated differently, the reason for a business's existence is to turn a profit.[114] The profit motive functions according to rational choice theory, or the theory that individuals tend to pursue what is in their own best interests. Accordingly, businesses seek to benefit themselves and/or their shareholders by maximizing profit.

In capitalist theoretics, the profit motive is said to ensure that resources are being allocated efficiently. For instance, Austrian economist Henry Hazlitt explains: "If there is no profit in making an article, it is a sign that the labor and capital devoted to its production are misdirected: the value of the resources that must be used up in making the article is greater than the value of the article itself".[115]

Socialist theorists note that, unlike mercantilists, capitalists accumulate their profits while expecting their profit rates to remain the same. This causes problems as earnings in the rest of society do not increase in the same proportion.[116]

Private property

[edit]

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.[117]

According to de Soto, this is the process by which physical assets are transformed into capital, which in turn may be used in many more ways and much more efficiently in the market economy. A number of Marxian economists have argued that the inclosure acts in England and similar legislation elsewhere were an integral part of capitalist primitive accumulation and that specific legal frameworks of private land ownership have been integral to the development of capitalism.[118][119]

Private property rights are not absolute, as in many countries the state has the power to seize private property, typically for public use, under the powers of eminent domain.

Market competition

[edit]

In capitalist economics, market competition is the rivalry among sellers trying to achieve such goals as increasing profits, market share and sales volume by varying the elements of the marketing mix: price, product, distribution and promotion. Merriam-Webster defines competition in business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favourable terms".[120] It was described by Adam Smith in The Wealth of Nations (1776) and later economists as allocating productive resources to their most highly valued uses[121] and encouraging efficiency. Smith and other classical economists before Antoine Augustine Cournot were referring to price and non-price rivalry among producers to sell their goods on best terms by bidding of buyers, not necessarily to a large number of sellers nor to a market in final equilibrium.[122] Competition is widespread throughout the market process. It is a condition where "buyers tend to compete with other buyers, and sellers tend to compete with other sellers".[123] In offering goods for exchange, buyers competitively bid to purchase specific quantities of specific goods which are available, or might be available if sellers were to choose to offer such goods. Similarly, sellers bid against other sellers in offering goods on the market, competing for the attention and exchange resources of buyers. Competition results from scarcity, as it is not possible to satisfy all conceivable human wants, and occurs as people try to meet the criteria being used to determine allocation.[123]: 105 

In the works of Adam Smith, the idea of capitalism is made possible through competition which creates growth. Although capitalism had not entered mainstream economics at the time of Smith, it is vital to the construction of his ideal society. One of the foundational blocks of capitalism is competition. Smith believed that a prosperous society is one where "everyone should be free to enter and leave the market and change trades as often as he pleases."[124] He believed that the freedom to act in one's self-interest is essential for the success of a capitalist society. In response to the idea that if all participants focus on their own goals, society's well-being will be water under the bridge, Smith maintains that despite the concerns of intellectuals, "global trends will hardly be altered if they refrain from pursuing their personal ends."[125] 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.[124]

Economic growth

[edit]

Economic growth is a characteristic tendency of capitalist economies.[126] 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.[17]

As a mode of production

[edit]

The capitalist mode of production refers to the systems of organising production and distribution within capitalist societies. Private money-making in various forms (renting, banking, merchant trade, production for profit and so on) preceded the development of the capitalist mode of production as such.

The term capitalist mode of production is defined by private ownership of the means of production, extraction of surplus value by the owning class for the purpose of capital accumulation, wage-based labor and, at least as far as commodities are concerned, being market-based.[127]

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.[14] 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.[101] 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.[102]

A society, region or nation is capitalist if the predominant source of incomes and products being distributed is capitalist activity, but even so this does not yet mean necessarily that the capitalist mode of production is dominant in that society.[128]

Mixed economies rely on the nation they are in to provide some goods or services, while the free market produces and maintains the rest.[109]

Role of government

[edit]

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.[129]

Supply and demand

[edit]
The economic model of supply and demand states that the price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D): the diagram shows a positive shift in demand from D1 to D2, resulting in an increase in price (P) and quantity sold (Q) of the product.

In capitalist economic structures, supply and demand is an economic model of price determination in a market. It postulates that in a perfectly competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at the current price) will equal the quantity supplied by producers (at the current price), resulting in an economic equilibrium for price and quantity.

The "basic laws" of supply and demand, as described by David Besanko and Ronald Braeutigam, are the following four:[130]: 37 

  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

[edit]

A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied.[131]

Demand schedule

[edit]

A demand schedule, depicted graphically as the demand curve, represents the amount of some goods that buyers are willing and able to purchase at various prices, assuming all determinants of demand other than the price of the good in question, such as income, tastes and preferences, the price of substitute goods and the price of complementary goods, remain the same. According to the law of demand, the demand curve is almost always represented as downward sloping, meaning that as price decreases, consumers will buy more of the good.[132]

Just like the supply curves reflect marginal cost curves, demand curves are determined by marginal utility curves.[133]

Equilibrium

[edit]

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 (equilibrium) values of economic variables will not change. For example, in the standard text-book model of perfect competition equilibrium occurs at the point at which quantity demanded and quantity supplied are equal.[134] Market equilibrium, in this case, refers to a condition where a market price is established through competition such that the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers. This price is often called the competitive price or market clearing price and will tend not to change unless demand or supply changes.

Partial equilibrium

[edit]

Partial equilibrium, as the name suggests, takes into consideration only a part of the market to attain equilibrium. Jain proposes (attributed to George Stigler): "A partial equilibrium is one which is based on only a restricted range of data, a standard example is price of a single product, the prices of all other products being held fixed during the analysis".[135]

History

[edit]

According to Hamid S. Hosseini, the "power of supply and demand" was discussed to some extent by several early Muslim scholars, such as fourteenth century Mamluk scholar Ibn Taymiyyah, who wrote: "If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down".[136]

Adam Smith

John Locke's 1691 work Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money[137] includes an early and clear description[non-primary source needed] of supply and demand and their relationship. In this description, demand is rent: "The price of any commodity rises or falls by the proportion of the number of buyer and sellers" and "that which regulates the price... [of goods] is nothing else but their quantity in proportion to their rent".

David Ricardo titled one chapter of his 1817 work Principles of Political Economy and Taxation "On the Influence of Demand and Supply on Price".[138] In Principles of Political Economy and Taxation, Ricardo more rigorously laid down the idea of the assumptions that were used to build his ideas of supply and demand.

In his 1870 essay "On the Graphical Representation of Supply and Demand", Fleeming Jenkin in the course of "introduc[ing] the diagrammatic method into the English economic literature" published the first drawing of supply and demand curves therein,[139] including comparative statics from a shift of supply or demand and application to the labor market.[140] The model was further developed and popularized by Alfred Marshall in the 1890 textbook Principles of Economics.[138]

Types

[edit]

There are many variants of capitalism in existence that differ according to country and region.[141] They vary in their institutional makeup and by their economic policies. The common features among all the different forms of capitalism are that they are predominantly based on the private ownership of the means of production and the production of goods and services for profit; the market-based allocation of resources; and the accumulation of capital.

They include advanced capitalism, corporate capitalism, finance capitalism, free-market capitalism, mercantilism, social capitalism, state capitalism and welfare capitalism. Other theoretical variants of capitalism include anarcho-capitalism, community capitalism, humanistic capitalism, neo-capitalism, state monopoly capitalism, and technocapitalism.

Advanced

[edit]

Advanced capitalism is the situation that pertains to a society in which the capitalist model has been integrated and developed deeply and extensively for a prolonged period. Various writers identify Antonio Gramsci as an influential early theorist of advanced capitalism, even if he did not use the term himself. In his writings, Gramsci sought to explain how capitalism had adapted to avoid the revolutionary overthrow that had seemed inevitable in the 19th century. At the heart of his explanation was the decline of raw coercion as a tool of class power, replaced by use of civil society institutions to manipulate public ideology in the capitalists' favour.[142][143][144]

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.[145]

Corporate

[edit]

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

Finance

[edit]

Finance capitalism is the subordination of processes of production to the accumulation of money profits in a financial system. In their critique of capitalism, Marxism and Leninism both emphasise the role of finance capital as the determining and ruling-class interest in capitalist society, particularly in the latter stages.[146][147]

Rudolf Hilferding is credited with first bringing the term finance capitalism into prominence through Finance Capital, his 1910 study of the links between German trusts, banks and monopolies—a study subsumed by Vladimir Lenin into Imperialism, the Highest Stage of Capitalism (1917), his analysis of the imperialist relations of the great world powers.[148] Lenin concluded that the banks at that time operated as "the chief nerve centres of the whole capitalist system of national economy".[149] For the Comintern (founded in 1919), the phrase "dictatorship of finance capitalism"[150] became a regular one.

Fernand Braudel would later point to two earlier periods when finance capitalism had emerged in human history—with the Genoese in the 16th century and with the Dutch in the 17th and 18th centuries—although at those points it developed from commercial capitalism.[151][need quotation to verify] Giovanni Arrighi extended Braudel's analysis to suggest that a predominance of finance capitalism is a recurring, long-term phenomenon, whenever a previous phase of commercial/industrial capitalist expansion reaches a plateau.[152]

Free market

[edit]

A capitalist free-market economy is an economic system where prices for goods and services are set entirely by the forces of supply and demand and are expected, by its adherents, to reach their point of equilibrium without intervention by government policy. It typically entails support for highly competitive markets and private ownership of the means of production. Laissez-faire capitalism is a more extensive form of this free-market economy, but one in which the role of the state is limited to protecting property rights. In anarcho-capitalist theory, property rights are protected by private firms and market-generated law. According to anarcho-capitalists, this entails property rights without statutory law through market-generated tort, contract and property law, and self-sustaining private industry.

Fernand Braudel argued that free market exchange and capitalism are to some degree opposed; free market exchange involves transparent public transactions and a large number of equal competitors, while capitalism involves a small number of participants using their capital to control the market via private transactions, control of information, and limitation of competition.[153]

Mercantile

[edit]
The subscription room at Lloyd's of London in the early 19th century

Mercantilism is a nationalist form of early capitalism that came into existence approximately in the late 16th century. It is characterized by the intertwining of national business interests with state-interest and imperialism. Consequently, the state apparatus is used to advance national business interests abroad. An example of this is colonists living in America who were only allowed to trade with and purchase goods from their respective mother countries (e.g., United Kingdom, France and Portugal). Mercantilism was driven by the belief that the wealth of a nation is increased through a positive balance of trade with other nations—it corresponds to the phase of capitalist development sometimes called the primitive accumulation of capital.

Social

[edit]

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 labor rights through national collective bargaining arrangements.

This model is prominent in Western and Northern European countries as well as Japan, albeit in slightly different configurations. The vast majority of enterprises are privately owned in this economic model.

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

State

[edit]

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 Eastern Bloc. According to Aldo Musacchio, a professor at Harvard Business School, state capitalism is a system in which governments, whether democratic or autocratic, exercise a widespread influence on the economy either through direct ownership or various subsidies. Musacchio notes a number of differences between today's state capitalism and its predecessors. In his opinion, gone are the days when governments appointed bureaucrats to run companies: the world's largest state-owned enterprises are now traded on the public markets and kept in good health by large institutional investors. Contemporary state capitalism is associated with the East Asian model of capitalism, dirigisme and the economy of Norway.[154] Alternatively, Merriam-Webster defines state capitalism as "an economic system in which private capitalism is modified by a varying degree of government ownership and control".[155]

In Socialism: Utopian and Scientific, Friedrich Engels argued that state-owned enterprises would characterize the final stage of capitalism, consisting of ownership and management of large-scale production and communication by the bourgeois state.[156] In his writings, Vladimir Lenin characterized the economy of Soviet Russia as state capitalist, believing state capitalism to be an early step toward the development of socialism.[157][158]

Some economists and left-wing academics including Richard D. Wolff and Noam Chomsky, as well as many Marxist philosophers and revolutionaries such as Raya Dunayevskaya and C.L.R. James, argue that the economies of the former Soviet Union and Eastern Bloc represented a form of state capitalism because their internal organization within enterprises and the system of wage labor remained intact.[159][160][161][162][163]

The term is not used by Austrian School economists to describe state ownership of the means of production. The economist Ludwig von Mises argued that the designation of state capitalism was a new label for the old labels of state socialism and planned economy and differed only in non-essentials from these earlier designations.[164]

Welfare

[edit]

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 Nordic model, social market economy and Rhine capitalism. In some cases, welfare capitalism exists within a mixed economy, but welfare states can and do exist independently of policies common to mixed economies such as state interventionism and extensive regulation.

A mixed economy is a largely market-based capitalist economy consisting of both private and public ownership of the means of production and economic interventionism through macroeconomic policies intended to correct market failures, reduce unemployment and keep inflation low. The degree of intervention in markets varies among different countries. Some mixed economies such as France under dirigisme also featured a degree of indirect economic planning over a largely capitalist-based economy.

Most modern capitalist economies are defined as mixed economies to some degree, however French economist Thomas Piketty state that capitalist economies might shift to a much more laissez-faire approach in the near future.[165]

Eco-capitalism

[edit]

Eco-capitalism, also known as "environmental capitalism" or (sometimes[166]) "green capitalism", is the view that capital exists in nature as "natural capital" (ecosystems that have ecological yield) on which all wealth depends. Therefore, governments should use market-based policy-instruments (such as a carbon tax) to resolve environmental problems.[167]

The term "Blue Greens" is often applied to those who espouse eco-capitalism. Eco-capitalism can be thought of as the right-wing equivalent to Red Greens.[168][need quotation to verify]

Sustainable capitalism

[edit]

Sustainable capitalism is a conceptual form of capitalism based upon sustainable practices that seek to preserve humanity and the planet, while reducing externalities and bearing a resemblance of capitalist economic policy. A capitalistic economy must expand to survive and find new markets to support this expansion.[169] 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.[170] Sustainability is often thought of to be related to environmentalism, and sustainable capitalism applies sustainable principles to economic governance and social aspects of capitalism as well.

The importance of sustainable capitalism has been more recently recognized, but the concept is not new. Changes to the current economic model would have heavy social environmental and economic implications and require the efforts of individuals, as well as compliance of local, state and federal governments. Controversy surrounds the concept as it requires an increase in sustainable practices and a marked decrease in current consumptive behaviors.[171]

This is a concept of capitalism described in Al Gore and David Blood's manifesto for the Generation Investment Management to describe a long-term political, economic and social structure which would mitigate current threats to the planet and society.[172] According to their manifesto, sustainable capitalism would integrate the environmental, social and governance (ESG) aspects into risk assessment in attempt to limit externalities.[173] 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.[172]

Capital accumulation

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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.[174] 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).[175]

In mainstream economics, accounting and Marxian economics, capital accumulation is often equated with investment of profit income or savings, especially in real capital goods. The concentration and centralisation of capital are two of the results of such accumulation. In modern macroeconomics and econometrics, the phrase "capital formation" is often used in preference to "accumulation", though the United Nations Conference on Trade and Development (UNCTAD) refers nowadays to "accumulation". The term "accumulation" is occasionally used in national accounts.

Wage labor

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An industrial worker among heavy steel machine parts (Kinex Bearings, Bytča, Slovakia, c. 1995–2000)

Wage labor refers to the sale of labor under a formal or informal employment contract to an employer.[104] These transactions usually occur in a labor market where wages are market determined.[176] 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.[99] Labor includes all physical and mental human resources, including entrepreneurial capacity and management skills, which are required to produce products and services. Production is the act of making goods or services by applying labor power.[177][178]

Criticism

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The Industrial Workers of the World poster "Pyramid of Capitalist System" (1911)

Criticism of capitalism comes from various political and philosophical approaches, including anarchist, socialist, religious and nationalist viewpoints.[179] Of those who oppose it or want to modify it, some believe that capitalism should be removed through revolution while others believe that it should be changed slowly through political reforms.[180][181]

Prominent critiques of capitalism allege that it is inherently exploitative,[182][183][184] alienating,[185] unstable,[186][187] unsustainable,[188][189][190] and economically inefficient[191][192][193]—and that it creates massive economic inequality,[194][195] commodifies people,[196][197] degrades the environment,[188][198] is undemocratic,[199][200][201] embeds uneven and underdevelopment between nation states,[202][203][204][205] and leads to an erosion of human rights[206] because of its incentivization of imperialist expansion and war.[207][208][209]

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,[210][211] while a Millard Fuller or John Bogle (human) ethic of 'enough' creates a sustainable form.[212][213] Equitable ethics and unified ethical decision-making is theorized to create a less damaging form of capitalism.[214]

Inheritance has been argued to not be a fundamental part of capitalism,[215] instead part of nepotism.[216]

See also

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References

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Notes
  1. ^ Zimbalist, Andrew; Sherman, Howard J.; Brown, Stuart (October 1988). Comparing Economic Systems: A Political-Economic Approach. Harcourt College Publishing. pp. 6–7. ISBN 978-0-15-512403-5. Pure capitalism is defined as a system wherein all of the means of production (physical capital) are privately owned and run by the capitalist class for a profit, while most other people are workers who work for a salary or wage (and who do not own the capital or the product).
  2. ^ Rosser, Mariana V.; Rosser, J Barkley (23 July 2003). Comparative Economics in a Transforming World Economy. MIT Press. p. 7. ISBN 978-0-262-18234-8. In capitalist economies, land and produced means of production (the capital stock) are owned by private individuals or groups of private individuals organized as firms.
  3. ^ Jenks, Chris. Core Sociological Dichotomies. London; Thousand Oaks, CA; New Delhi: SAGE Publishing. p. 383. Capitalism, as a mode of production, is an economic system of manufacture and exchange which is geared toward the production and sale of commodities within a market for profit, where the manufacture of commodities consists of the use of the formally free labor of workers in exchange for a wage to create commodities in which the manufacturer extracts surplus value from the labor of the workers in terms of the difference between the wages paid to the worker and the value of the commodity produced by him/her to generate that profit.
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Bibliography

Further reading

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