Capitalism

Capitalism

Overview
Capitalism is an economic system
Economic system
An economic system is the combination of the various agencies, entities that provide the economic structure that defines the social community. These agencies are joined by lines of trade and exchange along which goods, money etc. are continuously flowing. An example of such a system for a closed...

 that became dominant in the Western world
Western world
The Western world, also known as the West and the Occident , is a term referring to the countries of Western Europe , the countries of the Americas, as well all countries of Northern and Central Europe, Australia and New Zealand...

 following the demise of feudalism
History of capitalism
The history of capitalism can be traced back to early forms of merchant capitalism practiced in Western Europe during the Middle Ages, though many economic historians consider the Netherlands as the first thoroughly capitalist country. In Early modern Europe it featured the wealthiest trading city ...

. There is no consensus on the precise definition nor on how the term should be used as a historical category. There is general agreement that elements of capitalism include private ownership
Private property
Private property is the right of persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other forms of property. Private property is distinguishable from public property, which refers to assets owned by a state, community or government rather than by...

 of the means of production
Means of production
Means of production refers to physical, non-human inputs used in production—the factories, machines, and tools used to produce wealth — along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital...

, creation of goods or services for profit
Profit (economics)
In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...

 or income
Income
Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings...

, Free markets, voluntary exchange
Voluntary Exchange
Voluntary exchange is the act of buyers and sellers freely and willingly engaging in market transactions. Moreover, transactions are made in such a way that both the buyer and the seller are better off after the exchange than before it occurred...

, and wage labor. The designation is applied to a variety of historical cases, varying in time, geography, politics and culture.

Karl Marx
Karl Marx
Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...

 provided a differentia specifica
Capitalist mode of production
In Marx's critique of political economy, the capitalist mode of production is the production system of capitalist societies, which began in Europe in the 16th century, grew rapidly in Western Europe from the end of the 18th century, and later extended to most of the world...

 for capitalism: People sell their labouring-power to a buyer, not to satisfy the personal needs of the buyer, but to augment the buyer's capital.

Theorizing in support of capitalism by Mises
Ludwig von Mises
Ludwig Heinrich Edler von Mises was an Austrian economist, philosopher, and classical liberal who had a significant influence on the modern Libertarian movement and the "Austrian School" of economic thought.-Biography:-Early life:...

, Friedman
Milton Friedman
Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...

, Rothbard
Murray Rothbard
Murray Newton Rothbard was an American author and economist of the Austrian School who helped define capitalist libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism." Rothbard wrote over twenty books and is considered a centrally important figure in the...

 and others have given various definitions of capitalism but generally emphasize the primacy of free market
Free market
A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...

 and lassez-faire policies.

Economists, political economists
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...

 and historians
History
History is the discovery, collection, organization, and presentation of information about past events. History can also mean the period of time after writing was invented. Scholars who write about history are called historians...

 have taken different perspectives on the analysis of capitalism.
Discussion
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Unanswered Questions
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Quotations

Underlying most arguments against the free market is a lack of belief in freedom itself.

Milton Friedman, Capitalism & Freedom, 1962

A major source of objection to a free economy is precisely that it [...] gives people what they want instead of what a particular group thinks they ought to want.

Milton Friedman, Capitalism & Freedom, 1962

If an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it. Most economic fallacies derive from the neglect of this simple insight, from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another.

Milton Friedman, Free to Choose (1980), Chapter 1

Capitalism is based on self-interest and self-esteem; it holds integrity and trustworthiness as cardinal virtues and makes them pay off in the marketplace, thus demanding that men survive by means of virtue, not vices. It is this superlatively moral system that the welfare statists propose to improve upon by means of preventative law, snooping bureaucrats, and the chronic goad of fear.

Alan Greenspan, The Assault on Integrity (1963)

All people, however fanatical they may be in their zeal to disparage and to fight capitalism, implicitly pay homage to it by passionately clamoring for the products it turns out.

Ludwig Von Mises, The Ultimate Foundation of Economic Science: An Essay on Method (1978)
Encyclopedia
Capitalism is an economic system
Economic system
An economic system is the combination of the various agencies, entities that provide the economic structure that defines the social community. These agencies are joined by lines of trade and exchange along which goods, money etc. are continuously flowing. An example of such a system for a closed...

 that became dominant in the Western world
Western world
The Western world, also known as the West and the Occident , is a term referring to the countries of Western Europe , the countries of the Americas, as well all countries of Northern and Central Europe, Australia and New Zealand...

 following the demise of feudalism
History of capitalism
The history of capitalism can be traced back to early forms of merchant capitalism practiced in Western Europe during the Middle Ages, though many economic historians consider the Netherlands as the first thoroughly capitalist country. In Early modern Europe it featured the wealthiest trading city ...

. There is no consensus on the precise definition nor on how the term should be used as a historical category. There is general agreement that elements of capitalism include private ownership
Private property
Private property is the right of persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other forms of property. Private property is distinguishable from public property, which refers to assets owned by a state, community or government rather than by...

 of the means of production
Means of production
Means of production refers to physical, non-human inputs used in production—the factories, machines, and tools used to produce wealth — along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital...

, creation of goods or services for profit
Profit (economics)
In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...

 or income
Income
Income is the consumption and savings opportunity gained by an entity within a specified time frame, which is generally expressed in monetary terms. However, for households and individuals, "income is the sum of all the wages, salaries, profits, interests payments, rents and other forms of earnings...

, Free markets, voluntary exchange
Voluntary Exchange
Voluntary exchange is the act of buyers and sellers freely and willingly engaging in market transactions. Moreover, transactions are made in such a way that both the buyer and the seller are better off after the exchange than before it occurred...

, and wage labor. The designation is applied to a variety of historical cases, varying in time, geography, politics and culture.

Karl Marx
Karl Marx
Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...

 provided a differentia specifica
Capitalist mode of production
In Marx's critique of political economy, the capitalist mode of production is the production system of capitalist societies, which began in Europe in the 16th century, grew rapidly in Western Europe from the end of the 18th century, and later extended to most of the world...

 for capitalism: People sell their labouring-power to a buyer, not to satisfy the personal needs of the buyer, but to augment the buyer's capital.

Theorizing in support of capitalism by Mises
Ludwig von Mises
Ludwig Heinrich Edler von Mises was an Austrian economist, philosopher, and classical liberal who had a significant influence on the modern Libertarian movement and the "Austrian School" of economic thought.-Biography:-Early life:...

, Friedman
Milton Friedman
Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...

, Rothbard
Murray Rothbard
Murray Newton Rothbard was an American author and economist of the Austrian School who helped define capitalist libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism." Rothbard wrote over twenty books and is considered a centrally important figure in the...

 and others have given various definitions of capitalism but generally emphasize the primacy of free market
Free market
A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...

 and lassez-faire policies.

Economists, political economists
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...

 and historians
History
History is the discovery, collection, organization, and presentation of information about past events. History can also mean the period of time after writing was invented. Scholars who write about history are called historians...

 have taken different perspectives on the analysis of capitalism. Economists usually emphasize the degree that government does not have control over markets (laissez faire), and on property
Property
Property is any physical or intangible entity that is owned by a person or jointly by a group of people or a legal entity like a corporation...

 rights. Most political economists emphasize private property, power
Economic power
There is no agreed-upon definition of power in economics. At least five definitions of power have been used:*Purchasing power, i.e., the ability of any amount of money to buy goods and services. Those with more assets, or, more correctly, net worth, have more power of this sort...

 relations, wage labour, class and emphasize capitalism as a unique historical formation. Capitalism is generally viewed as encouraging economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...

. The extent to which different markets are free, as well as the rules defining private property, is a matter of politics and policy
Policy
A policy is typically described as a principle or rule to guide decisions and achieve rational outcome. The term is not normally used to denote what is actually done, this is normally referred to as either procedure or protocol...

, and many states have what are termed mixed economies
Mixed economy
Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety...

.

Capitalism gradually spread throughout Europe, and in the 19th and 20th centuries, it provided the main means of industrialization throughout much of the world.

Etymology and early usage


Other terms sometimes used for capitalism:
  • Capitalist mode of production
    Capitalist mode of production
    In Marx's critique of political economy, the capitalist mode of production is the production system of capitalist societies, which began in Europe in the 16th century, grew rapidly in Western Europe from the end of the 18th century, and later extended to most of the world...

  • Economic liberalism
    Economic liberalism
    Economic liberalism is the ideological belief in giving all people economic freedom, and as such granting people with more basis to control their own lives and make their own mistakes. It is an economic philosophy that supports and promotes individual liberty and choice in economic matters and...

  • Free-enterprise economy
  • Free market
    Free market
    A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...

  • Laissez-faire economy
  • Market economy
    Market economy
    A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...

  • Market liberalism
    Market liberalism
    The term market liberalism is used in two distinct meanings.Especially in the United States, the term is often used as a synonym to classical liberalism...

  • Self-regulating market


Capital evolved from capitale, a late Latin
Latin
Latin is an Italic language originally spoken in Latium and Ancient Rome. It, along with most European languages, is a descendant of the ancient Proto-Indo-European language. Although it is considered a dead language, a number of scholars and members of the Christian clergy speak it fluently, and...

 word based on proto-Indo-European
Proto-Indo-European language
The Proto-Indo-European language is the reconstructed common ancestor of the Indo-European languages, spoken by the Proto-Indo-Europeans...

 caput, meaning "head" — also the origin of chattel and cattle
Cattle
Cattle are the most common type of large domesticated ungulates. They are a prominent modern member of the subfamily Bovinae, are the most widespread species of the genus Bos, and are most commonly classified collectively as Bos primigenius...

 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. 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.

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. In French, Étienne Clavier
Étienne Clavier
Étienne Clavier was a French Hellenist and magistrate.The son of a wealthy merchant of Lyon, he made early studies of the Classical languages, followed by studies of law in Paris. In 1788 he purchased a commission as conseiller au Châtelet of which he was soon deprived during the French Revolution...

 referred to capitalistes in 1788, six years before its first recorded English usage by Arthur Young in his work Travels in France (1792). David Ricardo
David Ricardo
David Ricardo was an English political economist, often credited with systematising economics, and was one of the most influential of the classical economists, along with Thomas Malthus, Adam Smith, and John Stuart Mill. He was also a member of Parliament, businessman, financier and speculator,...

, in his Principles of Political Economy and Taxation (1817), referred to "the capitalist" many times.

Samuel Taylor Coleridge
Samuel Taylor Coleridge
Samuel Taylor Coleridge was an English poet, Romantic, literary critic and philosopher who, with his friend William Wordsworth, was a founder of the Romantic Movement in England and a member of the Lake Poets. He is probably best known for his poems The Rime of the Ancient Mariner and Kubla...

, an English poet, used capitalist in his work Table Talk (1823). Pierre-Joseph Proudhon
Pierre-Joseph Proudhon
Pierre-Joseph Proudhon was a French politician, mutualist philosopher and socialist. He was a member of the French Parliament, and he was the first person to call himself an "anarchist". He is considered among the most influential theorists and organisers of anarchism...

 used the term capitalist in his first work, What is Property?
What Is Property?
What Is Property?: or, An Inquiry into the Principle of Right and of Government is an influential work of nonfiction on the concept of property and its relation to anarchist philosophy by the French anarchist and mutualist Pierre-Joseph Proudhon, first published in 1840.In the book, Proudhon most...

 (1840) to refer to the owners of capital. Benjamin Disraeli used the term capitalist in his 1845 work Sybil
Sybil (novel)
Sybil, or The Two Nations is an 1845 novel by Benjamin Disraeli. Published in the same year as Friedrich Engels's The Condition of the Working Class in England in 1844, Sybil traces the plight of the working classes of England...

. Karl Marx
Karl Marx
Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...

 and Friedrich Engels
Friedrich Engels
Friedrich Engels was a German industrialist, social scientist, author, political theorist, philosopher, and father of Marxist theory, alongside Karl Marx. In 1845 he published The Condition of the Working Class in England, based on personal observations and research...

 used the term capitalist (Kapitalist) in The Communist Manifesto
The Communist Manifesto
The Communist Manifesto, originally titled Manifesto of the Communist Party is a short 1848 publication written by the German Marxist political theorists Karl Marx and Friedrich Engels. It has since been recognized as one of the world's most influential political manuscripts. Commissioned by the...

 (1848) to refer to a private owner of capital.

According to the Oxford English Dictionary
Oxford English Dictionary
The Oxford English Dictionary , published by the Oxford University Press, is the self-styled premier dictionary of the English language. Two fully bound print editions of the OED have been published under its current name, in 1928 and 1989. The first edition was published in twelve volumes , and...

 (OED), the term capitalism was first used by novelist William Makepeace Thackeray
William Makepeace Thackeray
William Makepeace Thackeray was an English novelist of the 19th century. He was famous for his satirical works, particularly Vanity Fair, a panoramic portrait of English society.-Biography:...

 in 1854 in The Newcomes
The Newcomes
The Newcomes is an novel by William Makepeace Thackeray, first published in 1855.-Publication:The Newcomes was published serially over about two years, as Thackeray himself says in one of the novel's final chapters...

, where he meant "having ownership of capital". Also according to the OED, Carl Adolph Douai
Carl Adolph Douai
Karl Daniel Adolph Douai , known to his peers as "Adolph," was a German Texan teacher as well as a socialist and abolitionist newspaper editor...

, a German-American socialist
Socialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...

 and abolitionist
Abolitionism
Abolitionism is a movement to end slavery.In western Europe and the Americas abolitionism was a movement to end the slave trade and set slaves free. At the behest of Dominican priest Bartolomé de las Casas who was shocked at the treatment of natives in the New World, Spain enacted the first...

, used the term private capitalism in 1863.

The initial usage of the term capitalism in its modern sense has been attributed to Louis Blanc
Louis Blanc
Louis Jean Joseph Charles Blanc was a French politician and historian. A socialist who favored reforms, he called for the creation of cooperatives in order to guarantee employment for the urban poor....

 in 1850 and Pierre-Joseph Proudhon in 1861. Marx and Engels referred to the capitalistic system (kapitalistisches System) and to the capitalist mode of production (kapitalistische Produktionsform) in Das Kapital (1867). The use of the word "capitalism" in reference to an economic system appears twice in Volume I of Das Kapital, p. 124 (German edition), and in Theories of Surplus Value, tome II, p. 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.

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
Commerce
While business refers to the value-creating activities of an organization for profit, commerce means the whole system of an economy that constitutes an environment for business. The system includes legal, economic, political, social, cultural, and technological systems that are in operation in any...

 and a physical infrastructure
Infrastructure
Infrastructure is basic physical and organizational structures needed for the operation of a society or enterprise, or the services and facilities necessary for an economy to function...

 provided by the state. No legal framework was available to protect the labourers, so exploitation by the companies was rife. 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.

An 1877 work entitled Better Times by Hugh Gabutt and an 1884 article in the Pall Mall Gazette
Pall Mall Gazette
The Pall Mall Gazette was an evening newspaper founded in London on 7 February 1865 by George Murray Smith; its first editor was Frederick Greenwood...

 also used the term capitalism. A later use of the term capitalism to describe the production system was by the German economist Werner Sombart
Werner Sombart
Werner Sombart was a German economist and sociologist, the head of the “Youngest Historical School” and one of the leading Continental European social scientists during the first quarter of the 20th century....

, in his 1902 book The Jews and Modern Capitalism (Die Juden und das Wirtschaftsleben). Sombart's close friend and colleague, Max Weber
Max Weber
Karl Emil Maximilian "Max" Weber was a German sociologist and political economist who profoundly influenced social theory, social research, and the discipline of sociology itself...

, also used capitalism in his 1904 book The Protestant Ethic and the Spirit of Capitalism
The Protestant Ethic and the Spirit of Capitalism
The Protestant Ethic and the Spirit of Capitalism is a book written by Max Weber, a German sociologist, economist, and politician. Begun as a series of essays, the original German text was composed in 1904 and 1905, and was translated into English for the first time by Talcott Parsons in 1930...

 (Die protestantische Ethik und der Geist des Kapitalismus).

Economic elements



Capitalist economics developed out of the interactions of the following elements.

A product
Product (business)
In general, the product is defined as a "thing produced by labor or effort" or the "result of an act or a process", and stems from the verb produce, from the Latin prōdūce ' lead or bring forth'. Since 1575, the word "product" has referred to anything produced...

 is any good produced for exchange on a market. "Commodities" refers to standard products, especially raw materials such as grains and metals, that are not associated with particular producers or brands and trade on organized exchanges.

There are two types of products: capital good
Capital good
A capital good, or simply capital in economics, is a manufactured means of production. Capital goods are acquired by a society by saving wealth which can be invested in the means of production....

s and consumer goods. Capital goods (i.e., raw materials, tools, industrial machines, vehicles and factories) are used to produce consumer goods (e.g., televisions, cars, computers, houses) to be sold to others. The three inputs required for production are labour, land (i.e., natural resources, which exist prior to human beings) and capital goods. Capitalism entails the private ownership of the latter two — natural resources and capital goods — by a class of owners called capitalists, either individually, collectively or through a state apparatus that operates for a profit or serves the interests of capital owners.

Money was primarily a standardized medium of exchange, and final means of payment, that serves to measure the value all goods and commodities in a standard of value. It eliminates the cumbersome system of barter
Barter
Barter is a method of exchange by which goods or services are directly exchanged for other goods or services without using a medium of exchange, such as money. It is usually bilateral, but may be multilateral, and usually exists parallel to monetary systems in most developed countries, though to a...

 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 includes all physical and mental human resources, including entrepreneurial capacity and management skills, which are needed to produce products and services. Production
Manufacturing
Manufacturing is the use of machines, tools and labor to produce goods for use or sale. The term may refer to a range of human activity, from handicraft to high tech, but is most commonly applied to industrial production, in which raw materials are transformed into finished goods on a large scale...

 is the act of making products or services by applying labour power to the means of production.

Types of capitalism



There are many variants of capitalism in existence. All these forms of capitalism are based on production for profit, at least a moderate degree of market allocation and capital accumulation. The dominant forms of capitalism are listed here.

Mercantilism


A nationalist form of early capitalism where national business interests are tied to state interests, and consequently, the state apparatus is utilized to advance national business interests abroad. Mercantilism holds that the wealth of a nation is increased through a positive balance of trade with other nations.

Free-market capitalism


Free market capitalism consists of a free-price system where supply and demand are allowed to reach their point of equilibrium without intervention by the government. Productive enterprises are privately owned, and the role of the state is limited to protecting property rights.

Social market economy



A social market economy is a nominally free-market system where government intervention in price formation is kept to a minimum but the state provides significant social security, unemployment benefits and recognition of labour rights through national collective bargaining laws. The social market is based on private ownership of businesses.

State capitalism


State capitalism consists of state ownership of profit-seeking enterprises that operate in a capitalist manner in a market economy. Examples include corporatized
Corporatization
Corporatization refers to the transformation of state assets or agencies into state-owned corporations in order to introduce corporate management techniques to their administration...

 government agencies or partial state ownership of shares in publicly listed firms. The term state capitalism has also been used to refer to an economy consisting of mainly private enterprises that are subjected to comprehensive national economic planning
Indicative planning
Indicative planning is a form of central economic planning implemented by a state in an effort to solve the problem of imperfect information in economies and thus increase economic performance...

 by the government, wherein the state intervenes in the economy to protect specific capitalist businesses (although this is usually referred to as state monopoly capitalism
State monopoly capitalism
The theory of state monopoly capitalism was initially a Marxist doctrine popularised after World War II. Lenin had claimed in 1916 that World War I had transformed laissez-faire capitalism into monopoly capitalism, but he did not publish any extensive theory about the topic...

 or corporate capitalism
Corporate capitalism
Corporate capitalism is a term used in social science and economics to describe a capitalist marketplace characterized by the dominance of hierarchical, bureaucratic corporations, which are legally required to pursue profit....

). Many socialists and anti-Stalinist leftists
Anti-Stalinist left
The anti-Stalinist left is an element of left-wing politics that is critical of Joseph Stalin's policies and the political system that developed in the Soviet Union under his rule...

 argue that the Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....

 was state capitalist instead of socialist, since the state owned all the means of production, functioned as an enormous corporation, and exploited the working class
Working class
Working class is a term used in the social sciences and in ordinary conversation to describe those employed in lower tier jobs , often extending to those in unemployment or otherwise possessing below-average incomes...

.

Corporate capitalism


Corporate capitalism is a free or mixed market characterized by the dominance of hierarchical, bureaucratic corporations, which are legally required to pursue profit. State monopoly capitalism refers to a form of corporate capitalism where the state is used to benefit, protect from competition and promote the interests of dominant or established corporations.

Mixed economy



A largely market-based economy consisting of both public ownership and private ownership of the means of production. In practice, a mixed economy will be heavily slanted toward one extreme; most capitalist economies are defined as "mixed economies" to some degree and are characterized by the dominance of private ownership.

Other


Other variants of capitalism include:

  • Crony capitalism
    Crony capitalism
    Crony capitalism is a term describing a capitalist economy in which success in business depends on close relationships between business people and government officials...

  • Finance capitalism
    Finance capitalism
    Finance capitalism is a term in Marxian political economics defined as the subordination of processes of production to the accumulation of money profits in a financial system. It is characterized by the pursuit of profit from the purchase and sale of, or investment in, currencies and financial...

  • Financial capitalism
    Financial capitalism
    Financial capitalism is a form of capitalism where the intermediation of savings to investment becomes a dominant function in the economy, with implications for the political process and social evolution...


  • Late capitalism
    Late capitalism
    "Late capitalism" is a term used by neo-Marxists to refer to capitalism from about 1945 onwards, with the implication that it is a historically limited stage rather than an eternal feature of all future human society. Postwar German sociologists needed a term to describe contemporary society...

  • Market economy
    Market economy
    A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...

  • Neo-Capitalism
    Neo-Capitalism
    Neo-Capitalism, literally means "New Capitalism". This economic theory fuses some elements of capitalism. The new capitalism was new compared to the capitalism in the era before World War II....


  • Post-capitalism
    Post-capitalism
    Post-capitalism refers to any hypothetical future economic system that is to supersede capitalism as the dominant form of economic organization.-Post-capitalist systems:There have been a number of proposals for a new economic system to replace capitalism...

  • Technocapitalism
    Technocapitalism
    Technocapitalism is a term used to describe the changes in capitalism brought about by the emergence of high technology sectors in the economy.-New organizations:Luis Suarez-Villa, in his 2009 book Technocapitalism: A Critical Perspective on Technological...



History


Economic trade for profit has existed since the second millennium BC. However, capitalism in its modern form is usually traced to the Mercantilism of the 16th-18th Centuries.

Mercantilism




The period between the sixteenth and eighteenth centuries is commonly described as mercantilism
Mercantilism
Mercantilism is the economic doctrine in which government control of foreign trade is of paramount importance for ensuring the prosperity and security of the state. In particular, it demands a positive balance of trade. Mercantilism dominated Western European economic policy and discourse from...

. This period, the Age of Discovery
Age of Discovery
The Age of Discovery, also known as the Age of Exploration and the Great Navigations , was a period in history starting in the early 15th century and continuing into the early 17th century during which Europeans engaged in intensive exploration of the world, establishing direct contacts with...

, was associated with geographic exploration being exploited by merchant overseas traders, especially from England and the Low Countries
Low Countries
The Low Countries are the historical lands around the low-lying delta of the Rhine, Scheldt, and Meuse rivers, including the modern countries of Belgium, the Netherlands, Luxembourg and parts of northern France and western Germany....

; the European colonization of the Americas
European colonization of the Americas
The start of the European colonization of the Americas is typically dated to 1492. The first Europeans to reach the Americas were the Vikings during the 11th century, who established several colonies in Greenland and one short-lived settlement in present day Newfoundland...

; 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.

While some scholars see mercantilism as the earliest stage of capitalism, others argue that capitalism did not emerge until later. For example, Karl Polanyi
Karl Polanyi
Karl Paul Polanyi was a Hungarian philosopher, political economist and economic anthropologist known for his opposition to traditional economic thought and his book The Great Transformation...

, noted that "mercantilism, with all its tendency toward commercialization, never attacked the safeguards which protected [the] two basic elements of production—labour 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."

Moreover Polanyi argued that the hallmark of capitalism is the establishment of generalized markets for what he referred to as the "fictitious commodities": land, labour, and money. Accordingly, "not until 1834 was a competitive labour market established in England, hence industrial capitalism as a social system cannot be said to have existed before that date."

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. The earliest forms of mercantilism date back to the Roman Empire
Roman Empire
The Roman Empire was the post-Republican period of the ancient Roman civilization, characterised by an autocratic form of government and large territorial holdings in Europe and around the Mediterranean....

. When the Roman Empire expanded, the mercantilist economy expanded throughout Europe. After the collapse of the Roman Empire
Decline of the Roman Empire
The decline of the Roman Empire refers to the gradual societal collapse of the Western Roman Empire. Many theories of causality prevail, but most concern the disintegration of political, economic, military, and other social institutions, in tandem with foreign invasions and usurpers from within the...

, 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
Egypt
Egypt , officially the Arab Republic of Egypt, Arabic: , is a country mainly in North Africa, with the Sinai Peninsula forming a land bridge in Southwest Asia. Egypt is thus a transcontinental country, and a major power in Africa, the Mediterranean Basin, the Middle East and the Muslim world...

, Persia, and Byzantium
Byzantium
Byzantium was an ancient Greek city, founded by Greek colonists from Megara in 667 BC and named after their king Byzas . The name Byzantium is a Latinization of the original name Byzantion...

. As Islam
Islam
Islam . The most common are and .   : Arabic pronunciation varies regionally. The first vowel ranges from ~~. The second vowel ranges from ~~~...

 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.

Among the major tenets of mercantilist theory was bullionism
Bullionism
Bullionism is an economic theory that defines wealth by the amount of precious metals owned. Bullionism is an early or primitive form of mercantilism...

, 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 subsidies
Subsidy
A subsidy is an assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry or an increase in the prices of its products or simply to encourage it to hire more labor A subsidy (also...

, such as the granting of monopolies and protective tariff
Tariff
A tariff may be either tax on imports or exports , or a list or schedule of prices for such things as rail service, bus routes, and electrical usage ....

s, were necessary to encourage home production of manufactured goods.


European merchant
Merchant
A merchant is a businessperson who trades in commodities that were produced by others, in order to earn a profit.Merchants can be one of two types:# A wholesale merchant operates in the chain between producer and retail merchant...

s, backed by state controls, subsidies, and monopolies
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...

, made most of their profits from the buying and selling of goods. In the words of Francis Bacon
Francis Bacon
Francis Bacon, 1st Viscount St Albans, KC was an English philosopher, statesman, scientist, lawyer, jurist, author and pioneer of the scientific method. He served both as Attorney General and Lord Chancellor of England...

, 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…"

Similar practices of economic regimentation had begun earlier in the medieval towns. However, under mercantilism, given the contemporaneous rise of absolutism
Absolute monarchy
Absolute monarchy is a monarchical form of government in which the monarch exercises ultimate governing authority as head of state and head of government, his or her power not being limited by a constitution or by the law. An absolute monarch thus wields unrestricted political power over the...

, the state superseded the local guild
Guild
A guild is an association of craftsmen in a particular trade. The earliest types of guild were formed as confraternities of workers. They were organized in a manner something between a trade union, a cartel, and a secret society...

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.

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
Dutch East India Company
The Dutch East India Company was a chartered company established in 1602, when the States-General of the Netherlands granted it a 21-year monopoly to carry out colonial activities in Asia...

. These companies were characterized by their colonial
Colonialism
Colonialism is the establishment, maintenance, acquisition and expansion of colonies in one territory by people from another territory. It is a process whereby the metropole claims sovereignty over the colony and the social structure, government, and economics of the colony are changed by...

 and expansionary
Expansionism
In general, expansionism consists of expansionist policies of governments and states. While some have linked the term to promoting economic growth , more commonly expansionism refers to the doctrine of a state expanding its territorial base usually, though not necessarily, by means of military...

 powers given to them by nation-states. During this era, merchants, who had traded under the previous stage of mercantilism, invested capital in the East India Companies and other colonies, seeking a return on investment
Return on investment
Return on investment is one way of considering profits in relation to capital invested. Return on assets , return on net assets , return on capital and return on invested capital are similar measures with variations on how “investment” is defined.Marketing not only influences net profits but also...

. In his "History of Economic Analysis," Austrian economist Joseph Schumpeter
Joseph Schumpeter
Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...

 reduced mercantilist propositions to three main concerns: exchange controls, export monopolism and balance of trade.

Industrialism




A new group of economic theorists, led by David Hume
David Hume
David Hume was a Scottish philosopher, historian, economist, and essayist, known especially for his philosophical empiricism and skepticism. He was one of the most important figures in the history of Western philosophy and the Scottish Enlightenment...

 and Adam Smith
Adam Smith
Adam Smith was a Scottish social philosopher and a pioneer of political economy. One of the key figures of the Scottish Enlightenment, Smith is the author of The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations...

, 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.

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
Artisan
An artisan is a skilled manual worker who makes items that may be functional or strictly decorative, including furniture, clothing, jewellery, household items, and tools...

s, guilds, and journeymen
Journeyman
A journeyman is someone who completed an apprenticeship and was fully educated in a trade or craft, but not yet a master. To become a master, a journeyman had to submit a master work piece to a guild for evaluation and be admitted to the guild as a master....

. 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
Factory
A factory or manufacturing plant is an industrial building where laborers manufacture goods or supervise machines processing one product into another. Most modern factories have large warehouses or warehouse-like facilities that contain heavy equipment used for assembly line production...

 system of manufacturing, characterized by a complex division of labor between and within work process and the routine of work tasks; and finally established the global domination of the capitalist mode of production.

Britain also abandoned its protectionist policy, as embraced by mercantilism. In the 19th century, Richard Cobden
Richard Cobden
Richard Cobden was a British manufacturer and Radical and Liberal statesman, associated with John Bright in the formation of the Anti-Corn Law League as well as with the Cobden-Chevalier Treaty...

 and John Bright
John Bright
John Bright , Quaker, was a British Radical and Liberal statesman, associated with Richard Cobden in the formation of the Anti-Corn Law League. He was one of the greatest orators of his generation, and a strong critic of British foreign policy...

, who based their beliefs on the Manchester School
Manchester capitalism
Manchester Capitalism, Manchester School, Manchester Liberalism, and Manchesterism are terms for the political, economic, and social movements of the 19th century that originated in Manchester, England....

, initiated a movement to lower tariffs. In the 1840s, Britain adopted a less protectionist policy, with the repeal of the Corn Laws
Corn Laws
The Corn Laws were trade barriers designed to protect cereal producers in the United Kingdom of Great Britain and Ireland against competition from less expensive foreign imports between 1815 and 1846. The barriers were introduced by the Importation Act 1815 and repealed by the Importation Act 1846...

 and the Navigation Acts
Navigation Acts
The English Navigation Acts were a series of laws that restricted the use of foreign shipping for trade between England and its colonies, a process which had started in 1651. Their goal was to force colonial development into lines favorable to England, and stop direct colonial trade with the...

. Britain reduced tariffs and quotas
Import quota
An import quota is a type of protectionist trade restriction that sets a physical limit on the quantity of a good that can be imported into a country in a given period of time....

, in line with Adam Smith and David Ricardo's advocacy for free trade
Free trade
Under a free trade policy, prices emerge from supply and demand, and are the sole determinant of resource allocation. 'Free' trade differs from other forms of trade policy where the allocation of goods and services among trading countries are determined by price strategies that may differ from...

.

Karl Polanyi argued that capitalism did not emerge until the progressive commodification of land, money, and labour culminating in the establishment of a generalized labour market in Britain in the 1830s. For Polanyi, "the extension of the market to the elements of industry – land, labour and money – was the inevitable consequence of the introduction of the factory system in a commercial society." Other sources argued that mercantilism fell after the repeal of the Navigation Acts in 1849.

Keynesianism and 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.

After World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

, a broad array of new analytical tools in the social sciences
Social sciences
Social science is the field of study concerned with society. "Social science" is commonly used as an umbrella term to refer to a plurality of fields outside of the natural sciences usually exclusive of the administrative or managerial sciences...

 were developed to explain the social and economic trends of the period, including the concepts of post-industrial society
Post-industrial society
If a nation becomes "post-industrial" it passes through, or dodges, a phase of society predominated by a manufacturing-based economy and moves on to a structure of society based on the provision of information, innovation, finance, and services.-Characteristics:...

 and the welfare state
Welfare state
A welfare state is a "concept of government in which the state plays a key role in the protection and promotion of the economic and social well-being of its citizens. It is based on the principles of equality of opportunity, equitable distribution of wealth, and public responsibility for those...

. 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
Stagflation
In economics, stagflation is a situation in which the inflation rate is high and the economic growth rate slows down and unemployment remains steadily high...

.

Exceptionally high inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

 combined with slow output growth, rising unemployment, and eventually recession
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...

 to cause a loss of credibility in the Keynesian welfare-statist mode of regulation. Under the influence of Friedrich Hayek
Friedrich Hayek
Friedrich August Hayek CH , born in Austria-Hungary as Friedrich August von Hayek, was an economist and philosopher best known for his defense of classical liberalism and free-market capitalism against socialist and collectivist thought...

 and Milton Friedman
Milton Friedman
Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...

, Western states embraced policy prescriptions inspired by laissez-faire
Laissez-faire
In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....

 capitalism and classical liberalism
Classical liberalism
Classical liberalism is the philosophy committed to the ideal of limited government, constitutionalism, rule of law, due process, and liberty of individuals including freedom of religion, speech, press, assembly, and free markets....

.

In particular, monetarism
Monetarism
Monetarism is a tendency in economic thought that emphasizes the role of governments in controlling the amount of money in circulation. It is the view within monetary economics that variation in the money supply has major influences on national output in the short run and the price level over...

, 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
Ronald Reagan
Ronald Wilson Reagan was the 40th President of the United States , the 33rd Governor of California and, prior to that, a radio, film and television actor....

 in the US and Margaret Thatcher
Margaret Thatcher
Margaret Hilda Thatcher, Baroness Thatcher, was Prime Minister of the United Kingdom from 1979 to 1990...

 in the UK in the 1980s. 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." In the eyes of many economic and political commentators, the collapse of the Soviet Union
Soviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....

 brought further evidence of the superiority of market capitalism over communism.

Globalization



Although international trade
International trade
International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product...

 has been associated with the development of capitalism for over five hundred years, some thinkers argue that a number of trends associated with globalization
Globalization
Globalization refers to the increasingly global relationships of culture, people and economic activity. Most often, it refers to economics: the global distribution of the production of goods and services, through reduction of barriers to international trade such as tariffs, export fees, and import...

 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 system
World government
World government is the notion of a single common political authority for all of humanity. Its modern conception is rooted in European history, particularly in the philosophy of ancient Greece, in the political formation of the Roman Empire, and in the subsequent struggle between secular authority,...

. However, other thinkers argue that globalization, even in its quantitative degree, is no greater now than during earlier periods of capitalist trade.

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
Consumer
Consumer is a broad label for any individuals or households that use goods generated within the economy. The concept of a consumer occurs in different contexts, so that the usage and significance of the term may vary.-Economics and marketing:...

s, labourers
Laborer
A Laborer or labourer - see variation in english spelling - is one of the construction trades, traditionally considered unskilled manual labor, as opposed to skilled labor. In the division of labor, laborers have all blasting, hand tools, power tools, air tools, and small heavy equipment, and act...

, and investor
Investor
An investor is a party that makes an investment into one or more categories of assets --- equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc...

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.

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.
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.

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.

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
Trade union
A trade union, trades union or labor union is an organization of workers that have banded together to achieve common goals such as better working conditions. The trade union, through its leadership, bargains with the employer on behalf of union members and negotiates labour contracts with...

 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.

The market


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.

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
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...

 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



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.

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
Competition law
Competition law, known in the United States as antitrust law, is law that promotes or maintains market competition by regulating anti-competitive conduct by companies....

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.

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.

Private property


The relationship between the state
State (polity)
A state is an organized political community, living under a government. States may be sovereign and may enjoy a monopoly on the legal initiation of force and are not dependent on, or subject to any other power or state. Many states are federated states which participate in a federal union...

, 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
Hernando de Soto (economist)
Hernando de Soto is a Peruvian economist known for his work on the informal economy and on the importance of business and property rights. He is the president of the Institute for Liberty and Democracy , located in Lima, Peru.-Childhood and education:Hernando de Soto was born in 1941 in Arequipa,...

 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.

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.

Institutions


New institutional economics
New institutional economics
New institutional economics is an economic perspective that attempts to extend economics by focusing on the social and legal norms and rules that underlie economic activity.-Overview:...

, a field pioneered by Douglass North
Douglass North
Douglass Cecil North is an American economist known for his work in economic history. He is the co-recipient of the 1993 Nobel Memorial Prize in Economic Sciences...

, 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. In new institutional economics and other fields focusing on public policy, economists seek to judge when and whether governmental intervention (such as tax
Tax
To tax is to impose a financial charge or other levy upon a taxpayer by a state or the functional equivalent of a state such that failure to pay is punishable by law. Taxes are also imposed by many subnational entities...

es, welfare, and government regulation
Regulatory economics
Regulatory economics is the economics of regulation, in the sense of the application of law by government that is used for various purposes, such as centrally-planning an economy, remedying market failure, enriching well-connected firms, or benefiting politicians...

) can result in potential gains in efficiency. According to Gregory Mankiw, a New Keynesian economist
New Keynesian economics
New Keynesian economics is a school of contemporary macroeconomics that strives to provide microeconomic foundations for Keynesian economics. It developed partly as a response to criticisms of Keynesian macroeconomics by adherents of New Classical macroeconomics.Two main assumptions define the New...

, governmental intervention can improve on market outcomes under conditions of "market failure
Market failure
Market failure is a concept within economic theory wherein the allocation of goods and services by a free market is not efficient. That is, there exists another conceivable outcome where a market participant may be made better-off without making someone else worse-off...

", or situations in which the market on its own does not allocate resources efficiently.

Market failure occurs when an externality
Externality
In economics, an externality is a cost or benefit, not transmitted through prices, incurred by a party who did not agree to the action causing the cost or benefit...

 is present and a market will either under-produce a product with a positive externalization or overproduce a product that generates a negative externalization. Air pollution, for instance, is a negative externalization 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
Ronald Coase
Ronald Harry Coase is a British-born, American-based economist and the Clifton R. Musser Professor Emeritus of Economics at the University of Chicago Law School. After studying with the University of London External Programme in 1927–29, Coase entered the London School of Economics, where he took...

, Harold Demsetz
Harold Demsetz
Harold Demsetz is a professor emeritus of economics at the University of California at Los Angeles .-Career:Demsetz includes a short intellectual autobiography....

, and James M. Buchanan
James M. Buchanan
James McGill Buchanan, Jr. is an American economist known for his work on public choice theory, for which he received the 1986 Nobel Memorial Prize in Economic Sciences. Buchanan's work initiated research on how politicians' self-interest and non-economic forces affect government economic policy...

 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.

Democracy


The relationship between democracy
Democracy
Democracy is generally defined as a form of government in which all adult citizens have an equal say in the decisions that affect their lives. Ideally, this includes equal participation in the proposal, development and passage of legislation into law...

 and capitalism is a contentious area in theory and popular political movements. The extension of universal adult male suffrage
Suffrage
Suffrage, political franchise, or simply the franchise, distinct from mere voting rights, is the civil right to vote gained through the democratic process...

 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 fascist
Fascism
Fascism is a radical authoritarian nationalist political ideology. Fascists seek to rejuvenate their nation based on commitment to the national community as an organic entity, in which individuals are bound together in national identity by suprapersonal connections of ancestry, culture, and blood...

 regimes, absolute monarchies, and single-party states,.

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
Democratic peace theory
Democratic peace theory is the theory that democracies don't go to war with each other. How well the theory matches reality depends a great deal on one's definition of "democracy" and "war"...

 indicates that capitalist democracies rarely make war with one another 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.
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. Augusto Pinochet
Augusto Pinochet
Augusto José Ramón Pinochet Ugarte, more commonly known as Augusto Pinochet , was a Chilean army general and dictator who assumed power in a coup d'état on 11 September 1973...

'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. Indices of Economic Freedom
Indices of Economic Freedom
The annual survey Economic Freedom of the World is an indicator produced by the Fraser Institute, a Canadian think tank which attempts to measure the degree of economic freedom in the world's nations. This indicator has been used in peer-reviewed studies some of which have found a range of...

 show a 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.

Economic growth



Many theorists and policymakers in predominantly capitalist nations have emphasized capitalism's ability to promote economic growth, as measured by Gross Domestic Product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....

 (GDP), capacity utilization
Capacity utilization
Capacity utilization is a concept in economics and managerial accounting which refers to the extent to which an enterprise or a nation actually uses its installed productive capacity...

 or standard of living
Standard of living
Standard of living is generally measured by standards such as real income per person and poverty rate. Other measures such as access and quality of health care, income growth inequality and educational standards are also used. Examples are access to certain goods , or measures of health such as...

. 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.

In years 1000–1820 world economy grew sixfold, 50 % per person. After capitalism had started to spread more widely, in years 1820–1998 world economy grew 50-fold, i.e., 9-fold per person. In most capitalist economic regions such as Europe, the United States, Canada, Australia and New Zealand, the economy grew 19-fold per person even though these countries already had a higher starting level, and in Japan, which was poor in 1820, to 31-fold, whereas in the rest of the world the growth was only 5-fold per person.

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. 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.

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 tribal societies or in socialist societies.

Political freedom


Milton Friedman stated that the economic freedom
Economic freedom
Economic freedom is a term used in economic and policy debates. As with freedom generally, there are various definitions, but no universally accepted concept of economic freedom...

 of capitalism is a requisite of political freedom. Friedman stated that centralized operations of economic activity is always accompanied by political repression
Political repression
Political repression is the persecution of an individual or group for political reasons, particularly for the purpose of restricting or preventing their ability to take political life of society....

. 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
Friedrich Hayek
Friedrich August Hayek CH , born in Austria-Hungary as Friedrich August von Hayek, was an economist and philosopher best known for his defense of classical liberalism and free-market capitalism against socialist and collectivist thought...

 and John Maynard Keynes, both of whom believed that capitalism is vital for freedom to survive and thrive.

Self-organization


Austrian School economists have argued that capitalism can organize itself into a complex system without an external guidance or central planning mechanism. Friedrich Hayek considered the phenomenon of self-organization
Self-organization
Self-organization is the process where a structure or pattern appears in a system without a central authority or external element imposing it through planning...

 as underpinning capitalism. Prices serve as a signal as to the urgent and unfilled wants of people, and the promise of profits gives entrepreneurs incentive
Incentive
In economics and sociology, an incentive is any factor that enables or motivates a particular course of action, or counts as a reason for preferring one choice to the alternatives. It is an expectation that encourages people to behave in a certain way...

 to use their knowledge and resources to satisfy those wants. Thus the activities of millions of people, each seeking his own interest, are coordinated.

Criticisms of capitalism



Critics of capitalism associate it with: unfair distribution of wealth
Distribution of wealth
The distribution of wealth is a comparison of the wealth of various members or groups in a society. It differs from the distribution of income in that it looks at the distribution of ownership of the assets in a society, rather than the current income of members of that society.-Definition of...

 and power; a tendency toward market monopoly or oligopoly
Oligopoly
An oligopoly is a market form in which a market or industry is dominated by a small number of sellers . The word is derived, by analogy with "monopoly", from the Greek ὀλίγοι "few" + πόλειν "to sell". Because there are few sellers, each oligopolist is likely to be aware of the actions of the others...

 (and government by oligarchy
Oligarchy
Oligarchy is a form of power structure in which power effectively rests with an elite class distinguished by royalty, wealth, family ties, commercial, and/or military legitimacy...

); imperialism
Imperialism
Imperialism, as defined by Dictionary of Human Geography, is "the creation and/or maintenance of an unequal economic, cultural, and territorial relationships, usually between states and often in the form of an empire, based on domination and subordination." The imperialism of the last 500 years,...

, counter-revolutionary wars and various forms of economic and cultural exploitation
Exploitation
This article discusses the term exploitation in the meaning of using something in an unjust or cruel manner.- As unjust benefit :In political economy, economics, and sociology, exploitation involves a persistent social relationship in which certain persons are being mistreated or unfairly used for...

; repression of workers and trade unionists; social alienation
Social alienation
The term social alienation has many discipline-specific uses; Roberts notes how even within the social sciences, it “is used to refer both to a personal psychological state and to a type of social relationship”...

; economic inequality
Economic inequality
Economic inequality comprises all disparities in the distribution of economic assets and income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. The issue of economic inequality is related to the ideas of...

; unemployment
Unemployment
Unemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...

; and economic instability.

Notable critics of capitalism have included: socialists
Socialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...

, anarchists
Anarchism
Anarchism is generally defined as the political philosophy which holds the state to be undesirable, unnecessary, and harmful, or alternatively as opposing authority in the conduct of human relations...

, communists
Communism
Communism is a social, political and economic ideology that aims at the establishment of a classless, moneyless, revolutionary and stateless socialist society structured upon common ownership of the means of production...

, national socialists
Nazism
Nazism, the common short form name of National Socialism was the ideology and practice of the Nazi Party and of Nazi Germany...

, social democrats
Social democracy
Social democracy is a political ideology of the center-left on the political spectrum. Social democracy is officially a form of evolutionary reformist socialism. It supports class collaboration as the course to achieve socialism...

, technocrats, some types of conservatives
Conservatism
Conservatism is a political and social philosophy that promotes the maintenance of traditional institutions and supports, at the most, minimal and gradual change in society. Some conservatives seek to preserve things as they are, emphasizing stability and continuity, while others oppose modernism...

, Luddite
Luddite
The Luddites were a social movement of 19th-century English textile artisans who protested – often by destroying mechanised looms – against the changes produced by the Industrial Revolution, which they felt were leaving them without work and changing their way of life...

s, Narodnik
Narodnik
Narodniks was the name for Russian socially conscious members of the middle class in the 1860s and 1870s. Their ideas and actions were known as Narodnichestvo which can be translated as "Peopleism", though is more commonly rendered "populism"...

s, Shakers
Shakers
The United Society of Believers in Christ’s Second Appearing, known as the Shakers, is a religious sect originally thought to be a development of the Religious Society of Friends...

 and some types of nationalists
Nationalism
Nationalism is a political ideology that involves a strong identification of a group of individuals with a political entity defined in national terms, i.e. a nation. In the 'modernist' image of the nation, it is nationalism that creates national identity. There are various definitions for what...

.

Marxists
Marxism
Marxism is an economic and sociopolitical worldview and method of socioeconomic inquiry that centers upon a materialist interpretation of history, a dialectical view of social change, and an analysis and critique of the development of capitalism. Marxism was pioneered in the early to mid 19th...

 have advocated a revolutionary overthrow of capitalism that would lead to socialism, before eventually transforming into communism. Many socialists consider capitalism to be irrational, in that production and the direction of the economy are unplanned, creating many inconsistencies and internal contradictions. Labor historians
Labor history (discipline)
Labor history is a broad field of study concerned with the development of the labor movement and the working class. The central concerns of labor historians include the development of labor unions, strikes, lockouts and protest movements, industrial relations, and the progress of working class and...

 and scholars such as Immanuel Wallerstein
Immanuel Wallerstein
Immanuel Maurice Wallerstein is a US sociologist, historical social scientist, and world-systems analyst...

 have argued that unfree labor
Unfree labour
Unfree labour includes all forms of slavery as well as all other related institutions .-Payment for unfree labour:If payment occurs, it may be in one or more of the following forms:...

 — by slaves
Slavery
Slavery is a system under which people are treated as property to be bought and sold, and are forced to work. Slaves can be held against their will from the time of their capture, purchase or birth, and deprived of the right to leave, to refuse to work, or to demand compensation...

, indentured servant
Indentured servant
Indentured servitude refers to the historical practice of contracting to work for a fixed period of time, typically three to seven years, in exchange for transportation, food, clothing, lodging and other necessities during the term of indenture. Usually the father made the arrangements and signed...

s, prisoners, and other coerced persons — is compatible with capitalist relations.

Many aspects of capitalism have come under attack from the anti-globalization movement
Anti-globalization movement
The anti-globalization movement, or counter-globalisation movement, is critical of the globalization of corporate capitalism. The movement is also commonly referred to as the global justice movement, alter-globalization movement, anti-globalist movement, anti-corporate globalization movement, or...

, which is primarily opposed to corporate capitalism
Corporate capitalism
Corporate capitalism is a term used in social science and economics to describe a capitalist marketplace characterized by the dominance of hierarchical, bureaucratic corporations, which are legally required to pursue profit....

. Environmentalists
Environmentalism
Environmentalism is a broad philosophy, ideology and social movement regarding concerns for environmental conservation and improvement of the health of the environment, particularly as the measure for this health seeks to incorporate the concerns of non-human elements...

 have argued that capitalism requires continual economic growth, and that it will inevitably deplete the finite natural resources of the Earth.

Many religions have criticized or opposed specific elements of capitalism. Traditional Judaism
Judaism
Judaism ) is the "religion, philosophy, and way of life" of the Jewish people...

, Christianity
Christianity
Christianity is a monotheistic religion based on the life and teachings of Jesus as presented in canonical gospels and other New Testament writings...

, and Islam forbid lending money at interest
Usury
Usury Originally, when the charging of interest was still banned by Christian churches, usury simply meant the charging of interest at any rate . In countries where the charging of interest became acceptable, the term came to be used for interest above the rate allowed by law...

, although alternative methods of banking have been developed. Some Christians have criticized capitalism for its materialist
Economic materialism
Materialism is a mindset that views the consumption and acquisition of material goods as positive and desirable. It is often bound up with a value system which regards social status as being intrinsically linked to affluence as well as the perception that happiness can be increased through...

 aspects and its inability to account for the wellbeing of all people.

See also



People
  • Andrew Carnegie
    Andrew Carnegie
    Andrew Carnegie was a Scottish-American industrialist, businessman, and entrepreneur who led the enormous expansion of the American steel industry in the late 19th century...

  • Ayn Rand
    Ayn Rand
    Ayn Rand was a Russian-American novelist, philosopher, playwright, and screenwriter. She is known for her two best-selling novels The Fountainhead and Atlas Shrugged and for developing a philosophical system she called Objectivism....

  • Eugen von Böhm-Bawerk
    Eugen von Böhm-Bawerk
    Eugen Ritter von Böhm-Bawerk was an Austrian economist who made important contributions to the development of the Austrian School of economics.-Biography:...

  • Frederic Batista
  • Friedrich Engels
    Friedrich Engels
    Friedrich Engels was a German industrialist, social scientist, author, political theorist, philosopher, and father of Marxist theory, alongside Karl Marx. In 1845 he published The Condition of the Working Class in England, based on personal observations and research...

  • Friedrich Hayek
    Friedrich Hayek
    Friedrich August Hayek CH , born in Austria-Hungary as Friedrich August von Hayek, was an economist and philosopher best known for his defense of classical liberalism and free-market capitalism against socialist and collectivist thought...

  • John D. Rockefeller
    John D. Rockefeller
    John Davison Rockefeller was an American oil industrialist, investor, and philanthropist. He was the founder of the Standard Oil Company, which dominated the oil industry and was the first great U.S. business trust. Rockefeller revolutionized the petroleum industry and defined the structure of...

  • John Maynard Keynes
    John Maynard Keynes
    John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

  • John Locke
    John Locke
    John Locke FRS , widely known as the Father of Liberalism, was an English philosopher and physician regarded as one of the most influential of Enlightenment thinkers. Considered one of the first of the British empiricists, following the tradition of Francis Bacon, he is equally important to social...

  • John Stuart Mill
    John Stuart Mill
    John Stuart Mill was a British philosopher, economist and civil servant. An influential contributor to social theory, political theory, and political economy, his conception of liberty justified the freedom of the individual in opposition to unlimited state control. He was a proponent of...

  • Joseph Schumpeter
    Joseph Schumpeter
    Joseph Alois Schumpeter was an Austrian-Hungarian-American economist and political scientist. He popularized the term "creative destruction" in economics.-Life:...

  • Joseph Stiglitz
  • J. P. Morgan
    J. P. Morgan
    John Pierpont Morgan was an American financier, banker and art collector who dominated corporate finance and industrial consolidation during his time. In 1892 Morgan arranged the merger of Edison General Electric and Thomson-Houston Electric Company to form General Electric...

  • Karl Marx
    Karl Marx
    Karl Heinrich Marx was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement...

  • Ludwig Von Mises
    Ludwig von Mises
    Ludwig Heinrich Edler von Mises was an Austrian economist, philosopher, and classical liberal who had a significant influence on the modern Libertarian movement and the "Austrian School" of economic thought.-Biography:-Early life:...

  • Milton Friedman
    Milton Friedman
    Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...

  • Murray Rothbard
    Murray Rothbard
    Murray Newton Rothbard was an American author and economist of the Austrian School who helped define capitalist libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism." Rothbard wrote over twenty books and is considered a centrally important figure in the...

  • Thorstein Veblen
    Thorstein Veblen
    Thorstein Bunde Veblen, born Torsten Bunde Veblen was an American economist and sociologist, and a leader of the so-called institutional economics movement...


Concepts
  • Accumulation of capital
  • Business
    Business
    A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...

  • Capital (economics)
    Capital (economics)
    In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...

  • Chicago school
    Chicago school
    Chicago school may refer to:* Chicago school * Chicago school * Chicago school * Chicago school * Chicago school * Chicago School of Professional Psychology...

  • Classical Economics
    Classical economics
    Classical economics is widely regarded as the first modern school of economic thought. Its major developers include Adam Smith, Jean-Baptiste Say, David Ricardo, Thomas Malthus and John Stuart Mill....

  • Consumption (economics)
    Consumption (economics)
    Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt. Generally, consumption is defined in part by comparison to production. But the precise definition can vary because different schools of economists define production quite differently...

  • Economics
    Economics
    Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

  • Calculation Problem
    Economic calculation problem
    The economic calculation problem is a criticism of central economic planning. It was first proposed by Ludwig von Mises in 1920 and later expounded by Friedrich Hayek. The problem referred to is that of how to distribute resources rationally in an economy...

  • Economic equilibrium
    Economic equilibrium
    In economics, economic equilibrium is a state of the world where economic forces are balanced and in the absence of external influences the values of economic variables will not change. It is the point at which quantity demanded and quantity supplied are equal...

  • Economic liberalism
    Economic liberalism
    Economic liberalism is the ideological belief in giving all people economic freedom, and as such granting people with more basis to control their own lives and make their own mistakes. It is an economic philosophy that supports and promotes individual liberty and choice in economic matters and...

  • Economic interventionism
    Economic interventionism
    Economic interventionism is an action taken by a government in a market economy or market-oriented mixed economy, beyond the basic regulation of fraud and enforcement of contracts, in an effort to affect its own economy...

  • Entrepreneurship
    Entrepreneurship
    Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response...

  • Factors of production
    Factors of production
    In economics, factors of production means inputs and finished goods means output. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function...

  • Family in advertising
    Family in advertising
    The image of the Family in advertising has become a prominent symbol in advertising since the industrial revolution and is often used in marketing campaigns to increase profits. Sociologists have viewed such advertisements as both marketing messages, as well as ways in which behavior and attitudes...

  • Financial market
    Financial market
    In economics, a financial market is a mechanism that allows people and entities to buy and sell financial securities , commodities , and other fungible items of value at low transaction costs and at prices that reflect supply and demand.Both general markets and...

  • Free price system
    Free price system
    A free price system or free price mechanism is an economic system where prices are set by the interchange of supply and demand, with the resulting prices being understood as signals that are communicated between producers and consumers which serve to guide the production and distribution of...

  • Gains from trade
    Gains from trade
    Gains from trade in economics refers to net benefits to agents from allowing an increase in voluntary trading with each other. In technical terms, it is the increase of consumer surplus plus producer surplus from lower tariffs or otherwise liberalizing trade...

  • History of Economic Thought
    History of economic thought
    The history of economic thought deals with different thinkers and theories in the subject that became political economy and economics from the ancient world to the present day...

  • Industrial Revolution
    Industrial Revolution
    The Industrial Revolution was a period from the 18th to the 19th century where major changes in agriculture, manufacturing, mining, transportation, and technology had a profound effect on the social, economic and cultural conditions of the times...

  • Invisible hand
    Invisible hand
    In economics, invisible hand or invisible hand of the market is the term economists use to describe the self-regulating nature of the marketplace. This is a metaphor first coined by the economist Adam Smith...

  • Institutional economics
    Institutional economics
    Institutional economics focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behaviour. Its original focus lay in Thorstein Veblen's instinct-oriented dichotomy between technology on the one side and the "ceremonial" sphere of society on the...



  • Keynesianism
  • Laissez-faire
    Laissez-faire
    In economics, laissez-faire describes an environment in which transactions between private parties are free from state intervention, including restrictive regulations, taxes, tariffs and enforced monopolies....

  • Macroeconomics
    Macroeconomics
    Macroeconomics is a branch of economics dealing with the performance, structure, behavior, and decision-making of the whole economy. This includes a national, regional, or global economy...

  • Marginalism
    Marginalism
    Marginalism refers to the use of marginal concepts in economic theory. Marginalism is associated with arguments concerning changes in the quantity used of a good or service, as opposed to some notion of the over-all significance of that class of good or service, or of some total quantity...

  • Market
    Market
    A market is one of many varieties of systems, institutions, procedures, social relations and infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services in exchange for money from buyers...

  • Market Economy
    Market economy
    A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...

  • Mass production
    Mass production
    Mass production is the production of large amounts of standardized products, including and especially on assembly lines...

  • Means of production
    Means of production
    Means of production refers to physical, non-human inputs used in production—the factories, machines, and tools used to produce wealth — along with both infrastructural capital and natural capital. This includes the classical factors of production minus financial capital and minus human capital...

  • Microeconomics
    Microeconomics
    Microeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...

  • Monetarism
    Monetarism
    Monetarism is a tendency in economic thought that emphasizes the role of governments in controlling the amount of money in circulation. It is the view within monetary economics that variation in the money supply has major influences on national output in the short run and the price level over...

  • Neoclassical economics
    Neoclassical economics
    Neoclassical economics is a term variously used for approaches to economics focusing on the determination of prices, outputs, and income distributions in markets through supply and demand, often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits...

  • Perspectives on Capitalism
    Perspectives on capitalism
    Throughout modern history, a variety of influential perspectives on capitalism have shaped modern economic thought. Adam Smith was one of the first influential writers on the topic, with his book The Wealth of Nations, which is generally considered to be the start of classical economics which...

  • Private property
    Private property
    Private property is the right of persons and firms to obtain, own, control, employ, dispose of, and bequeath land, capital, and other forms of property. Private property is distinguishable from public property, which refers to assets owned by a state, community or government rather than by...

  • Privatization
    Privatization
    Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...

  • Positive non-interventionism
    Positive non-interventionism
    Positive non-interventionism was the economic policy of Hong Kong; this policy can be traced back to the time when Hong Kong was under British rule...

  • Profit (economics)
    Profit (economics)
    In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs of a venture to an entrepreneur or investor, whilst economic profit In economics, the term profit has two related but distinct meanings. Normal profit represents the total...

  • Social market economy
    Social market economy
    The social market economy is the main economic model used in West Germany after World War II. It is based on the economic philosophy of Ordoliberalism from the Freiburg School...

  • Spontaneous order
    Spontaneous order
    Spontaneous order, also known as "self-organization", is the spontaneous emergence of order out of seeming chaos. It is a process found in physical, biological, and social networks, as well as economics, though the term "self-organization" is more often used for physical and biological processes,...

  • State capitalism
    State capitalism
    The term State capitalism has various meanings, but is usually described as commercial economic activity undertaken by the state with management of the productive forces in a capitalist manner, even if the state is nominally socialist. State capitalism is usually characterized by the dominance or...

  • Supply and demand
    Supply and demand
    Supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers will equal the quantity supplied by producers , resulting in an...

  • Supply-side economics
    Supply-side economics
    Supply-side economics is a school of macroeconomic thought that argues that economic growth can be most effectively created by lowering barriers for people to produce goods and services, such as lowering income tax and capital gains tax rates, and by allowing greater flexibility by reducing...

  • Trickle down economics
  • True-cost economics

Works
  • Capitalism and Freedom
    Capitalism and Freedom
    Capitalism and Freedom is a book by Milton Friedman originally published in 1962 by the University of Chicago Press which discusses the role of economic capitalism in liberal society. It sold over 400,000 copies in the first 18 years and more than half a million since 1962. It has been translated...

  • Capitalism, Socialism and Democracy
    Capitalism, Socialism and Democracy
    Capitalism, Socialism and Democracy is the most famous book by Joseph Schumpeter in which he deals with capitalism, socialism and creative destruction...

  • Das Kapital
    Das Kapital
    Das Kapital, Kritik der politischen Ökonomie , by Karl Marx, is a critical analysis of capitalism as political economy, meant to reveal the economic laws of the capitalist mode of production, and how it was the precursor of the socialist mode of production.- Themes :In Capital: Critique of...

  • Free to Choose
    Free to Choose
    Free to Choose is a book and a ten-part television series broadcast on public television by economists Milton and Rose D...

  • Grundrisse
    Grundrisse
    The Grundrisse der Kritik der Politischen Ökonomie is a lengthy manuscript by the German philosopher Karl Marx, completed in 1858. However, as it existed primarily as a collection of unedited notes, the work remained unpublished until 1939...

  • Individualism and Economic Order
    Individualism and Economic Order
    Individualism and Economic Order is a book written by Friedrich Hayek . It is a collection of essays originally published between the 1930s and 40s, discussing topics ranging from moral philosophy to the methods of the social sciences and economic theory to contrast free markets with planned...

  • Man, Economy, and State
    Man, Economy, and State
    Man, Economy, and State: A Treatise on Economic Principles, first published in 1962, is a book on economics by Murray Rothbard, and is one of the most important books in the Austrian School of economics...

  • The Accumulation of Capital
    The Accumulation of Capital
    The Accumulation of Capital is the principal book length work of Rosa Luxemburg first published in 1913.It is in three sections as described below :# The Problem of Reproduction#...

  • The Anti-Capitalistic Mentality
    The Anti-Capitalistic Mentality
    The Anti-Capitalistic Mentality is a book written by Austrian School economist and libertarian thinker Ludwig von Mises. It is an investigation into the psychological roots of the anti-capitalistic stance that is widespread in the general populations of the capitalist world...

  • The Communist Manifesto
    The Communist Manifesto
    The Communist Manifesto, originally titled Manifesto of the Communist Party is a short 1848 publication written by the German Marxist political theorists Karl Marx and Friedrich Engels. It has since been recognized as one of the world's most influential political manuscripts. Commissioned by the...

  • The Law
  • The Road to Serfdom
    The Road to Serfdom
    The Road to Serfdom is a book written by the Austrian-born economist and philosopher Friedrich von Hayek between 1940–1943, in which he "warned of the danger of tyranny that inevitably results from government control of economic decision-making through central planning," and in which he argues...

  • The Theory of Business Enterprise
    The Theory of Business Enterprise
    The Theory of Business Enterprise is an economics book by Thorstein Veblen published in 1904 that looks at the growing corporate domination of culture and the economy....

  • The Wealth of Nations
    The Wealth of Nations
    An Inquiry into the Nature and Causes of the Wealth of Nations, generally referred to by its shortened title The Wealth of Nations, is the magnum opus of the Scottish economist and moral philosopher Adam Smith...



Further reading

  • Abu-Lughod, Janet L. Before European Hegemony The World System A.D. 1250–1350. New York: Oxford UP, USA, 1991.
  • Josephson, Matthew
    Matthew Josephson
    Matthew Josephson was an American journalist and author of works on nineteenth-century French literature and twentieth-century American economic history.-Biography:...

    , The Money Lords; the great finance capitalists, 1925–1950, New York, Weybright and Talley, 1972.
  • China GDP
    Historical GDP of the People's Republic of China
    This article includes a list of China's historical gross domestic product values, the market value of all final goods and services produced by a nation in a given year. The GDP dollar estimates presented here are calculated at market or government official exchange rates and derived from...

     – Dr. Fengbo Zhang introduced the Western economics, GDP and SNA system to China, replaced Soviet Union's MPS system.

External links


  • Center on Capitalism and Society at Columbia University
    Columbia University
    Columbia University in the City of New York is a private, Ivy League university in Manhattan, New York City. Columbia is the oldest institution of higher learning in the state of New York, the fifth oldest in the United States, and one of the country's nine Colonial Colleges founded before the...