The Meaning of Capitalism
- Capitalism is an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.
- Capitalism is an economic system characterized by or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a
- Capitalism is an economic system in which private individuals or businesses own capital goods.
- Capitalism is an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned means of wealth.
Capitalism began in England in 15th century
Characteristics of Capitalism
1. A Two-Class System
Historically, capitalist society was characterized by the split between two classes of individuals - the capitalist class, which owns the means for producing and distributing goods (the owners) and the working class, who sell their labor to the capitalist class in exchange for wages. The economy is run by the individuals (or corporations) who own and operate companies and make decisions as to the use of resources. But there exists a “division of labor” which allows for specialization, typically occurring through education and training, further breaking down the two-class system into sub-classes (e.g., the middle class).
2. Profit Motive
Companies exist to make a profit. The motive for all companies is to make and sell goods and services only for profits. Companies do not exist solely to satisfy people's needs. Even though some goods or services may satisfy needs, they will only be available if people have the resources to pay for them.
3. Minimal Government Intervention
Capitalist societies believe markets should be left alone to operate without government intervention. However, a completely government-free capitalist society exists in theory, only. Even in the United States, the poster child for capitalism, the government regulates certain industries, such as the Dodd-Frank Act for financial institutions. By contrast, a purely capitalist society would allow the markets to set prices based on demand and supply for the purpose of making profits.
True capitalism needs a competitive market. Without competition, monopolies exist, and instead of the market setting the prices, the seller is the price setter, which is against the conditions of capitalism.
5. Willingness to Change
The last characteristic of capitalism is the ability to adapt and change. Technology has been a game-changer in every society, and the willingness to allow change and adaptability of societies to improve inefficiencies within economic structures is a true characteristic of capitalism.
6. Property Rights
Land ownership and property ownership -- two key individual rights -- enable private businesses to operate freely without leasing land or property from the government. The government doesn't have the authority to seize control or manage business operations, unless the company engages in illegal activity. In the United States, tax laws require business owners to pay taxes on their real estate, equipment, inventory and profit after deducting a variety of operating expenses and depreciating the value of durable, long-lasting tools and equipment.
7. Technological Advancement
Capitalists support technological advancement because it increases productivity, encourages modernization and leads to increased revenue, according to "The Challenge of Global Capitalism" by Robert Gilpin. They also understand that there are growing pains associated with progress, such as initial implementation costs, learning curves, increased training demands and the need for more highly skilled and educated workers.
USA is now the leading capitalist nation
Stages of Capitalism
i) Mercantilism – This is the earliest stage of capitalism which involved overseas trade system. The era of mercantilism was featured by external movement of merchants to various parts of the World for accumulating gold and silver. Mercantilism existed from the 15th to the 18th century, specifically 1450 to 1750
ii) Competitive Capitalism – This is the second stage of capitalism in which Europe was stepping towards industrial expansion. The stage is also referred to as industrial capitalism because there was competition in industrial production among the capitalist nations. The stage existed from 1750 to 1850
iii) Monopoly Capitalism – This is the third stage in development of capitalism in which the capitalist powers move beyond their borders to weaker nations. During this period, the capitalist nations happened to divide the World into spheres of interests, the colonization of Asia and Africa took place during this stage of capitalism. The stage existed from 1870’s to 1940
The highest level of capitalism in England gave a room for the country to make colonization in various parts of World such as Africa and Asia
Thus, a feudal society is the one in which the basic social and political structure are determined by a practice of fief holding. In other words, feudalism is based on holding of land for renting.
3. Merchantilism led the destruction of African trade which was established among Africans for their own interests by merchantilism. Example, Long Distance Trade conducted from one region to another region, Trans-Saharan trade which was conducted between West Africa and North Africa. This was due to European merchants who changed the outlook of the trade from not benefiting Africans to benefiting Europeans.