Capitalism Explained

Capitalism

Capitalism is a particular way of organizing the economic activities of a society. It can be defined in two dimension:

1)      Nature of its class relation

                                                                                                          Controlled and owned

                    Producer of means production

2)     Central Mechanism of the economic Coordination

It is a provide free market

It is a mode of production in which capital in its various forms is the principal means of production

Characteristics of Capitalism:

·         Production for market rather own use

·         The separation of the producer from his means of production

·         The concentration of the means of production in the hands of one class, the bourgeoisie

·         Labour power is too commodity, it is sold or brought and mode of exchange is money in form of the wage

·         Limited barter system

·         Capitalist is controller of everything such as means of production process, choose of technique, quality of output and input, working condition, deciding wage, the arrangement for selling and buying of the output.

·         Capitalism- increase competition-forced to capitalist to adopt new technique and improved machinery-reduce cost of production and accumulation of wealth in one hand

·         Technical progress is most essential feature of the capitalism

·         Capitalism- The division of labour-specialization of the task of productivity- unprecedented growth of output and productivity- development and growth

·         Incentive of profit-main driving force

·         With increasing desire for profit, the demand for labour was rising tremendously with the result that the merchant capitalists were hiring more and more workers.

·         The final product as well as the entire profit was appropriated by the capitalist.

Capital:

Capital is an asset which can generate an income flow for its owner.

It could be Merchandise, sum of money any other money carrying interest

Capitalist Society:

The production of capital predominates, and dominates every other sort of production

Feudal Framework

Work was generally done in the homes of the producers and not under the factory shades of modern industries

Not full-scale machines, but simple tools were used for manufacturing. And many a times these factors of production were owned by the workers themselves.

factors of production were limited, manufacturing was also on a much smaller scale as compared to goods produced in factories

One man, i.e., the merchant entrepreneur, controlled the whole process from start to finish

Transition from feudalism to Capitalism

Exchange relation or external trade demolished the feudal mode of production

Inner contradiction like exploitation of the peasants by nobles

Unproductive use of the economic surplus like expenditure on war and labour were responsible for breakdown of the feudalism

Demographic Factors

Commerce and capital accumulated to be crucial link between risk of capitalism and decline of feudalism.

Mercantilism

In the 17^th century, Europe was under the influence of a set of economic ideas and practice known as Mercantilism.

State controlled economy policy with aim to regulating trade and commerce as well as its factories and manufacturer with the primary purpose of ultimately to concentrate and wield political power by building fleets, equipping army etc.

Characteristics:

ü  The state policy should be formulated in such manner that the state should get maximum share of trade

ü  Precious metals (Gold and Silver) Desirable form of the national wealth, if nation did not possess it, the chief way to get them was trade.

ü  In order to accumulate precious metals, the government should ensure favorable balance of trade (Export> Import)

ü  To preserve and increase this balance, higher tariff should be imposed on the manufactured good, low tariff should be imposed on cheap raw material and bounties should be given on export.

ü  The state should take all possible efforts to promote export such as state run workshop, regulating guild etc.

ü  Colonies could prove to be useful for export market of manufacturing good and as source of supply of raw materials and if possible precious metals. If necessary, war must be waged against economic rivalry for acquisition and protection of the colonies.

Negative Impact of Capitalism in our Society

1)     Human Suffering

Exploitation

Negative social externalities of technologies

Profit maximizing competition

While capitalism is an engine of growth, it is also inherent generate poverty, deprivation and marginalization.

Recommendation:

Capitalist economy-Material growth in one hand. So we need creation of the some sort of counter capitalism institution capable of neutralizing the destructive impact of capitalism

2)    Inequality 

Material Inequality and flourishing

Inequalities in access to interesting and challenging work

Destructive competition

3)    Curtailment of Individual freedom and autonomy

The relations of domination within capitalist workplaces constitute pervasive restrictions on individual autonomy and self-direction.  At the core of the institution of private property is the power of owners to decide how their property is to be used.

4) 

6)    Environmentally destructive

Capitalist firms face competitive pressures to reduce costs, and externalizing those costs on the environment is a good strategy of doing this. This pressure cannot be countered by the market itself; it requires some form of non-capitalist intervention either by the state or by organized social forces

Natural resources are systematically underpriced in the market since their value to people in the future is not registered in the dynamics of supply and demand in the present

7)     Capitalist commodification threatens important values

Commodification of the certain things are seen by most people as monstrous violation of moral value of Human being

For instances:

8)    Corrode community

Community is a social unit within which people are concerned for the well-being of other people and feel solidarity and obligations towards others.

Capitalism, as a system of organizing economic activity, has an intensely contradictory relation to community as a way of organizing social cooperation.

9)    Capitalism limit democracy

Exclusion of democratic bodies from control over the allocation of investments

The inability of democratic bodies to control the movement of capital undermines the ability of democracy to set collective priorities over even those activities which capitalist firms themselves do not directly organize

Positive impact of Capitalism

1)     Economic effects:

Increase production

Increase export

Become prominent industrial power in the world

Growth of urbanization

Capital formation

2)    Social Effect:

The renaissance strengthened the middle class values; but the middle class could not exhibit its power in the society for long time. The industrial revolution unfolded the power of the middle class

3)    Political Effect:

Various laws were enacted in order to protect the interest of both worker and manufacturer. E.g. Factory act-decided working hour minimum wage and other things

by Dipak Patel