Definition of Capitalism
Capitalism may be defined as an economic system in which private persons are permitted (subject to regulations by the state) to establish factories, open mills, create banks and other business firms.” It may be defined as, “It is a system in which all the means of production and sources of wealth are privatized or denationalized.”
Encarta defines it as, “Capitalism is an economic system based on the private ownership of the means of production and distribution of goods, characterized by a free competitive market and motivation by profit.”
Meaning of Capitalism
The only philosophy of capitalist economic system is “economic freedom of the making”. Under this doctrine the people are allowed freedom regarding activities of the four aspects of wealth “production, exchange, distribution and consumption”. Briefly saying, capitalist economy is one in which the government does not interfere with the economic activities of the people. As a result of this entrepreneurs misuse the economic freedom and labourers and exploited merely for the presentation of the entrepreneur self-interest. This is a major drawback of capitalism and criticized by the supporters of communist and socialist economic system. Mainly there are two kinds of capitalism
- Laissez Faire of Free Enterprise System
- Controlled Enterprise System
Laissez Faire or Free Enterprise System
Under the Laissez Faire capitalism, demand and supply forces are totally free to operate and entrepreneurs together with customers freely compete with each other in the private market to determine the prices.
The entrepreneurs hire the services of factors of production to produce goods and services to maximize their profit and serve the customers. In this regard, government does not interfere with the economic activities of the people at all the confines its role and duty of defence matters, foreign affairs and internal administration. This system was first introduced in Great Britain. This system provide opportunities for exfoliation.
Controlled Enterprise System
Under the umbrella of controlled empires system forces of demand and supply are free to operate in their respective spheres. Government control this system through monetary fiscal and commercial policies. Under this system private entrepreneurs have the service of factors of production under laws implemented by government.
Characteristics and Features of Capitalism
Following are main characteristics of captilsim
Right to Property. In capitalist political economy everyone is allowed to have transferable or un-transferable property. All citizens are constitutionally empowered to make, purchase, sell and even destroy personal property. State is to guard this right and these are inviolable. Personal property motivates individuals to work with interests and as a result, production increases. Zeal and enthusiasm of owners increase the quantity and quality of production plus motivation to work.
Privatization. In capitalist economy all the means of production are in private possession or de-nationalized. Capitalists establish industries, business and agricultural land etc within the relaxed state control. Government only prepares regulations to avoid differences and controversies for maintaining a safe and sound economic system. Capitalism is basically a system to advocate private ownership and sources of production are privatized to a maximum. State interferes to a minimum degree. People are allowed and even encouraged by the state to earn by adopting any way but within the legal limits. Denationalization convert state sources of income and production in private possession.
Class Life. Capitalism is based on two main classes (bourgeois and proletariats) that are a capitalist or the rich class and a working or the poor class. Capitalists acquire the means of production through wealth and working class provides labour in productive units. There are two main but opposite classes in the society. This class life ultimately converts into bitter relationship.
Exploitation Based. The working forces are exploited by the rich class. On the basis of their labour, the rich class exploits the poor and increases their wealth. The labourers are not given even suitable wages and they are considered as bonded men. So, exploitation is unique feature of capitalism and it is responsible for the appearance of socialism as a reaction.
Unjustified Distribution of Wealth. Wealth is improperly distributed and centralized in capitalists’ hands and the working class is deprived even of their basic necessities of life. The rich class goes to be richer and the poor class to be poorer. Centralization of wealth produces brutality in the capitalistic class.
Economic Competition. It is based on competition among the rich industrial owners and they improve their qualities and quantities of outputs. This competitive race at last reaches its higher point, which is destruction. Such an extreme competition become dangerous for the society, which produces corruption and evils. This material competition crushes moral and humanistic values and society is not more than a cogwheel.
Dictatorship of The Rich Class. Capitalism produces economic dictatorship of the rich class. They establish monopoly in economic aspect of life and then focus attention on political authority by mean of their wealth. Capitalism opportunities to special class to establish dictatorship in economic as well political aspects of life. Working class is subjugated in all aspects