Definition of Capitalism
The type of economy known as capitalism is one in which the mode of production and the capital are privately funded and privately operated. In this economic system, capital owners, or capitalists, pay wages and receive benefits regarding product sales and profits. Profit-making via selling goods on a free market amid competition is the aim of manufacturing. It is the guiding concept of any system that encourages capitalism to work consistently through private parties and market forces rather than through public agencies or government action. Instead of being driven by the urgent needs of the producers, it is a system of wage-labor and commodity production for profit, trade, and sale.
In a capitalist system, private property predominates. Individuals own the producing components, not the government. Land, labor, and capital are examples of the factors of production that people leverage to create commodities and services.
The concept that there is at least a free market in labor freely traded like any other commodity sets capitalism apart from earlier economic systems like feudalism. Instead of being the possession of a feudal lord or enslaver, workers in a capitalist system can sell their labor to the highest bidder. The means of production in a capitalist economy are privately funded and often held by a small class of capitalists.
The capitalist mode of production is an idealized notion for Marx and Weber.
Pillars of Capitalism
- It provides individuals with private property, which enables them to possess physical assets like homes and buildings and intangible assets like stocks and bonds.
- It works in self-interest or acting in one’s best interests without considering social or political pressure. Nevertheless, these haphazard people end up helping society as if, in Adam Smith’s Wealth of Nations from 1776; they were led by an invisible hand.
- Competition promotes social welfare, or the combined welfare of producers and consumers, via enterprises’ ability to enter and leave markets;
- It is a market system in which interactions between buyers and sellers set prices in a decentralized way; prices, in turn, allocate resources, which naturally seek the maximum reward, not only for goods and services but also for the salaries of employees.
- Freedom of choice is available to individuals in terms of investment, production, and consumption. Unhappy consumers may switch to other products, investors can go after more profitable opportunities, and employees can quit their positions for better wages.
- The government’s only job is to safeguard individual liberties and preserve the peace so markets can operate effectively. The government is expected to make minimal to nill intervention in the market.
Marx’s views on capitalism
Marx argues that exploitation is a fundamental feature of the economic and social relationships between capitalists and the working class. Marx argued that the economic ties of feudalism had intrinsic elements that led to the rise of capitalism. Production relations are considered to be the most crucial aspect of capitalism by Marx.
Karl Marx believed that capitalism would eventually fail. He thought the proletariat would topple the bourgeois and end exploitation and hierarchy.
Karl Marx believed that the capitalist system would ultimately cause the working class to become impoverished and provide the groundwork for a revolution. Private ownership of the means of production and distribution is seen as limiting human freedom since it makes the non-owning classes dependent on the ruling elite.
Marxists believe that conflict is a necessary component of capitalist economies because business owners exploit workers by paying them less than the value of the goods and services they create. Marxists believe that the very foundation of capitalism is unstable. Karl Marx made the error of thinking that because of manufacturer rivalry, capitalists would have to gradually raise the degree of worker exploitation before workers would rebel. As a result of the ” conflicts of capitalism,” it would ultimately be replaced by communism, a type of economic system in which the production methods are collectively owned.
Capitalism and Max Weber
An examination of the roots of contemporary capitalism can be found in The Protestant Ethic and the Spirit of Capitalism. Max Weber, a German sociologist, regarded as the “father of sociology,” wrote it in the 19th century. According to Weber, the Protestant Reformation produced capitalism, especially the Calvinists, a branch of Protestantism whose adherents believed that God predestined everything. Predetermined implies that God has previously determined who would and would not enter paradise.
According to Weber, the Calvinists focused much on finding proof of predetermination and finally saw their economic success as such proof. Given this, Weber thought that the Calvinists used their skills in the secular markets and considered their contributions to capitalism as constructive. Weber used Benjamin Franklin’s writings, which he claimed promoted capitalism as morally virtuous, as one of the prominent examples to support his thesis.
The religious elements of capitalism disappeared as cultures grew less secular, but the framework persisted, leaving what Weber calls the “spirit of capitalism.” From his vantage point, Weber believes that capitalism changed from being a beneficial force in society to a detrimental one via the waning connection between religion and capitalism.
The United States is an example of the full-fledged functioning of a modernized economic system. A small capitalist class like Tesla, Amazon, Microsoft, and Walmart produces all the goods and services required for the nation.