Capitalism is an economic system that is based on property deprived of the means of production and its main objectives are the profit and the accumulation of wealth. This is the most adopted system in the world today.
In the capitalist system, the means of production and distribution are owned by the capitalists, who employ the workers, the proletariat. The proletarians earn a wage in exchange for the work performed.
The means of production can be machines, land and industries, for example. The function of the means of production is to generate income, which will be used to pay the workers' wages and the costs of the activity and, finally, the capitalist's profit.
Main characteristics of capitalism
- Private control of the means of production (goods necessary for production, such as manufacturing facilities, machines and tools).
- Private propriety, whether of tangible assets, such as real estate, or intangible assets, such as the shares of a company.
- society divided into Social classes, which are groups mainly determined by the property factor (or lack of property).
- Market economy, which works through the principle of supply and demand ("law of the market"). The idea is for the market to regulate itself, with little State intervention.
- Definition of prices through the market itself, formed by the interactions between buyers and sellers of goods.
- Free competition between individual economic agents, who act from their own interests.
- Production with a view to obtaining the profit.
- Freedom of choice production, investment and consumption.
How does capitalism work?
Capitalism is divided into two classes, formed by the capitalists and hair proletarians. Capitalists are the holders of the means of production and employ the proletarians in order to obtain profits and accumulate wealth. The proletarians, or workers, only own their labor power and need to sell it to the capitalists in exchange for a wage
The products produced in the capitalist system are traded on the market and the price of these goods is determined by the Supply and Demand Law. Capitalism proposes a free market, that is, without State interference.
In capitalism, the State has as one of its main functions the guarantee of private property. In this way, capitalists can use their means of production - land, machinery, etc. - for making profits.
In a capitalist system there is a search for profit maximization and wealth accumulation. To do this, it is common for capitalists to raise prices and reduce their costs as much as possible.
know more about proletariat, capitalist and Supply and Demand Law.
Origin and development of capitalism
Capitalism begins in Europe, in the 15th century, with the end of feudalism - the production system in force during the Middle Ages in Western Europe. Since then, this economic system has undergone profound changes and the different characteristics it has adopted to the over time determine its division into different phases: commercial, industrial and financial capitalism.
Understand what the feudalism.
Commercial capitalism (15th - 18th century)
Also called the pre-capitalist phase, it is characterized by the mercantile production system (mercantilism). In this system, the State had control of the economy and adopted protectionist measures. Countries sought wealth from the accumulation of precious metals, and for this they sought to make their exports greater than their imports.
Industrial capitalism (18th - 19th century)
It begins with the Industrial Revolution in England, which caused a change from a manufacturing mode of production to industrial production. From this stage onwards, a liberal conception of the economy is adopted - with little State intervention.
Financial capitalism (from the 20th century)
Started after World War II, it corresponds to the period of the capitalist economy in which commerce and industry are controlled by large business groups and financial institutions. It is the stage of capitalism we are in today.
Read more about commercial capitalism, industrial capitalism and financial capitalism.
informational capitalism
Informational capitalism is related to changes resulting from the advances in information and communication technologies. These advances allowed instant communication between agents on opposite sides of the planet, which had impacts not only on our social and cultural relations, but especially on economic ones.
The term informational capitalism was coined by Manuel Castells in your book "Network Society", published in 1996. Although the author has not used it that way, it is common that this term is used to refer to a fourth phase of the capitalist system.
However, the current economy presents predominant characteristics of financial capitalism. Thus, it is concluded that informational capitalism cannot yet be considered a phase of this system, but a set of characteristics of the current moment of capitalism.
Learn more about informational capitalism.
Advantages of Disadvantages of Capitalism
Capitalism is a mode of production that has advantages and disadvantages. If, on the one hand, it allowed for technological advances and innovations, greater efficiency in production and wide diversification of products and services, it also had some negative consequences.
One of the negative consequences of capitalism is the social inequality between workers and capitalists, produced by the constant search for the accumulation of profits and wealth. This inequality can be observed both within countries and between countries worldwide.
Another disadvantage of capitalism is the consequences for the environment, resulting from the high consumption provided by this model. Among these consequences are the pollution of the air, rivers and seas and the global warming, for example.
know more about social inequality, pollution and global warming.
Capitalism and Socialism
Socialism is a production system quite different from capitalism. While under capitalism ownership of the means of production is private, socialism argues that private property is collective and that the control of the means of production must be done by the State.
Socialism advocates a more equal society, without the division of classes between workers and capitalists. In the socialist conception, the needs of individuals must be met and fundamental services such as health and education must be offered free of charge by the State.
While in capitalism decisions about production, distribution and investments in the economy are based on the market and suffer little or no state intervention, in socialism, investments and all production of goods and services is planned by the State.
Learn more about socialism, at characteristics of capitalism and the characteristics of socialism.
Capitalism and Globalization
Globalization is the result of the great interaction between countries and economic agents worldwide. Made possible by technological and communication advances, globalization unified markets and created an interdependence between countries, with deep interconnectedness of markets.
If, on the one hand, globalization in the capitalist system allows the diffusion of knowledge, cultural exchanges and technological evolutions, on the other, it provoked inequalities worldwide.
This inequality is reflected in the division between developed and underdeveloped countries and also in the concentration of economic power of commercial groups and financial institutions.
See also the meaning of globalization.
