Some socialist called it an ordinary and simpler system representing natural liberty. Hessen defines capitalism as a form of socio-economic system that permits private investors to earn profits from the goods and services they offer to people (2008). The basic assumption made in capitalism is that there is an allowance for anyone to pursue self-interest. In addition, a person has the right to own private properties. The two are morally acceptable and legitimate according to the law. The essay written by https://freshessay.net/article-review will discuss the cornerstone, the origin, the types, and how capitalism works.
The Appearing of Capitalism
Though capitalism is subjected to some restrictions, one has the freedom to decide the sphere he/she would like to invest and what kind of goods to produce and sell. In addition, one has the freedom of determining the prices of the produced goods. In the system, there is a lack of natural limits on the range of efforts of individuals in terms of capital, assets, employees, investors, profits, and the region they would like to operate (Meiksins, 2002). Capitalism is more popular in nations that appreciate the freedom of individuals as compared to the stability of the society they live in.
The origin of capitalism is linked to Puritans and their work ethic. According to Pettinger, Max Weber, a German sociologist, Puritans were the actual catalysts of capitalism (2013). He further illustrates that under the stewardship of John Calvin, the Puritans concentrated their energies in reinvestment, hard work, and modest investment. The Puritans then carried their attitude to New England. Similar attitudes towards work and savings were practiced by the Jews and Japanese (Pettinger, 2013). This led to the spread of capitalism. Some people have argued that the birth of modern capitalism was brought about in the middle of the 18th century. During this time, factories came up to produce goods that had high demand (Socialist Party of Great Britain, 2013). This tendency resulted in streamlining labor. These two factors made it possible for owners to maximize on profits. This was the time the economists started advocating letting the “hand of invisible” take control over the economy. In the 19th century, the US reached a state of laissez-faire, but the system was put on halt by the depression (Goldman, 2012). This introduced a market that was largely controlled by the government.
How the Capitalism Society works
Capitalism is also referred as a free-market system. The market is not regulated by anybody whatsoever except the supply and demand factors (Goldman, 2012). Furthermore, the government does not interfere with trade matters. One has the freedom of producing what he/she desires and selling it at his/her own price so long as the price is accepted on the market. Prices, s it was mentioned, are regulated by the law of demand and supply.
In an ideal situation, each individual benefits from the system of capitalism (Pettinger, 2013). The reason for this is in that the producers produce only those products that consumers want, and the last only pay for the products if they consider them to be worth the price. Increased demand for the product will mean increased production of the commodity in question, and in ideally situation, the price reduces. In a capitalistic system, competition among the businesses is beneficial to the consumers since it results in a drop of price. In addition, increased competition among the producers will mean products of higher quality are supplied to the market.
The unregulated market, referred as laissez-faire capitalism, which is a French term meaning “let it be”, arises when there is no control over trading activities and economics by the government (Hessen, 2008). This paves the way for total freedom in the market. Currently, there are no known nations operating in such a way since rarely does the system work in the ideal way. Instead of increasing the supply and lowering the demand of the product, a given company may decide to keep the production as low as possible so as to keep on charging high prices and increase their profits. Almost all modern societies considered as modern are mixed economies in the real sense. The government in such economies always exercises some degree of control by formulating policies that regulate the competition in the market and labor in an attempt to protect consumers, workers, and businesses.
Labor and Capital in Capitalistic Economy
A capitalistic system works on the principle of wage labor (Brenner, 2009). People receive their payments in the form of money instead of goods/services. But this is not absolute as some companies supplement the income of their laborers by giving them either goods or services that are produced. The way labor force also follows the supply-demand law, i.e., the higher the availability of workers who can perform the same job in a similar manner, the less they will be paid for their labor. In the system, workers have got the freedom of selling their labor to employers they wish. This, therefore, means that in case they are not treated well in one company, they have an option of quitting the job and looking for better employment opportunities elsewhere.
In capitalism, since the workers ought to be paid for the services they provided, any business needs some money to start with for efficient running (Meiksins, 2002). This initial money is called capital. The sources of capital can be loans from the government, investment from private firms, or money from different firms belonging to the same person or corporation. With the lack of capital (anything that has value and has the potential of generating more wealth), the business has no chances of surviving in a capitalistic system (Goldman, 2012).
Pure capitalism rarely characterizes business relations. One of the reasons is the kind of relationship existing between labor (working class group) and those who own the production means (owners class) (Meiksins, 2002). More than often, the owner class becomes wealthier, and, at the same time, the working class depends on them for survival. This may easily result not only in distrust but also in unrest, mostly in cases where workers feel underpaid for their services or are mistreated. Despite of the fact that workers have the option of changing their jobs, they are only able to do that if those jobs are available, and they are sure the other company meets their expectations. Most of the countries have labor laws regulating minimum wage, safety standards, and child labor restriction. This helps in keeping the balance between the working class and the class of owners.
The Economy and Society in the Capitalistic System
Capitalism is deemed to be a socio-economic scheme in the sense that is beyond simply earning money (Brenner, 2009). In the social-economic organization, the fundamental issue is individuality, and individuals should be given the right to choose, whether it is a lifestyle or place of work. Moreover, individuals have the right to earn money regardless of the kind of job. They have the right to spend the money in the way they want. But this may lead to a center on consumerism where people will be identified by what they own instead of what they do.
To understand capitalism better, there is a need to obtain information about socialism which is opposite to it. In socialism, emphasis is given on what benefits the whole society receives unlike the capitalism where emphasis is made on individualism (Pettinger, 2013). Unlike in capitalism, in a socialistic state, most of the production means are owned by the government. The goods and services are produced with the aim of fulfilling people’s wants unlike the capitalism where it is for profit making. An ideal socialistic society means the distribution of wealth among the people uniformly and no unemployment cases. However, just like is the case with capitalism, on rare occasion does the socialistic economy work perfect.
Types of Capitalism
Almost all modern nations that have a capitalistic system have mixed economies. Such nations merge ideas of capitalistic and also of other systems. For instance, while some facets of the economy may not be interfered by the government, some sectors, like wage safety procedures, are closely monitored by the state authorities. Basing on the level of interference from the government, there exist four forms of capitalism:
Free-market capitalism is an economy where supply and demand forces determine the prices of goods and services (Goldman, 2010). The prices reach equilibrium with no interference from the government. The system entails supporting a highly competitive market and owning productive enterprises privately. Laissez-faire is a form of free market though more extensive since the state’s role is only limited to protecting property rights.
Corporate capitalism is a system where the economy is either free or fixed. The economy is dominated by hierarchical and bureaucratic corporations. State –monopoly capitalism initially was the Marxists’ idea. It referred to a kind of corporate capitalism where state policies are used in benefiting and promoting the interests of dominant corporations (Hessen, 2008). This can be achieved by guarding them against unnecessary and competitive pressures. The corporations are also provided with subsidies.
Social- market economy is a form of capitalism where the government intervenes in areas such as keeping prices to minimum levels, providing social security, creating employment, and setting labor rights. This system is more striking in countries from Western and Northern Europe though slightly differs from the configuration of the social market.
State capitalism system is the system where the government owns production means within a state and runs them with the aim of making a profit. The argument between states versus private capitalism revolves around production efficiency, wealth distribution, and managerial efficacy. In this system, the government, regardless of whether it is autocratic or democratic, influences the economy. It does it either through direct ownership of factors of production or by subsidies.
References
Brenner, R. (2009). The origins of capitalist development: A critique of Neo-Smithian Marxism. Retrieved March 28, 2013, from http://www.revalvaatio.org/wp/wp-content/uploads/brenner-the_origins_of_capitalist.pdf
Goldman, S. (2012). The good, bad and ugly of Capitalism. Retrieved, March 28, 2013, from www.nytimes.com/2012/03/17/opinion
Hessen, R. (2008). Capitalism. Library of Economics and Liberty. Retrieved March 28, 2013, from http://www.econlib.org/library/Enc/Capitalism.html
Meiksins, R. W. (2002). The origin of Capitalism: A longer view. Retrieved March 28, 2013, from http://books.google.com.ua/books?id=FZPyKjVguVoCprintsec=frontcoverhl=rusource=gbs_ge_summary_rcad=0#v=onepageqf=false
Pettinger, T. (2013). Pros and cons of Capitalism. Economics Help. Retrieved March 28, 2013, from www.economicshelp.org/blog/5002/eco
The Socialist Party of Great Britain. (2013). What is Capitalism? Retrieved March 28, 2013, from http://www.worldsocialism.org/spgb/what-capitalism
