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Capitalism is an economic system in which trade, industry, and the means of production are privately owned and operated via profit and loss calculation (price signals) through the price system.[1][2] Central characteristics of capitalism include private property, capital accumulation, wage labour and, in some situations, fully competitive markets.[3][4] In a capitalist economy, the parties to a transaction typically determine the prices at which they exchange assets, goods, and services.[5]
The degree of competition, the role of intervention and regulation, and the scope of state ownership vary across different .[6] Economists, political economists, and historians have adopted different perspectives in their analyses of capitalism and have recognized various forms of it in practice. These include laissez-faire or free market capitalism, welfare capitalism, crony capitalism, corporatism, "third way" social democracy and state capitalism. Each model has employed varying degrees of dependency on free markets, public ownership, obstacles to free competition, and inclusion of state-sanctioned social policies.
The extent to which different markets are free, as well as the rules defining private property, become matters of politics and of policy. Many states have a mixed economy, which combines elements of both capitalism and centrally planned economics.[7] Capitalism has existed under many forms of government, in many different times, places, and cultures.[8] Following the decline of mercantilism, mixed capitalist systems became dominant in the Western world and continue to spread.[9]
- Etymology 1
- Democracy 2
History 3
- Agrarian capitalism 3.1
- Mercantilism 3.2
- Industrial capitalism 3.3
- Modern 3.4
Characteristics 4
- Summary 4.1
- The market 4.2
- Profit motive 4.3
- Private property 4.4
- Market competition 4.5
Reserve army of labour 4.6
- Composition of the relative surplus population 4.6.1
As a mode of production 5
- Synopsis 5.1
- Defining structural criteria 5.2
Wage labour 6
- Types 6.1
- Comparison to slavery 6.2
Systemic weaknesses 7
- Externalities 7.1
- Anti-competitive practices 7.2
Capital accumulation 8
- Background 8.1
- Concentration and centralisation 8.2
- The rate of accumulation 8.3
- The circuit of capital accumulation from production 8.4
- Simple and expanded reproduction 8.5
- Capital accumulation as social relation 8.6
Supply and demand 9
Graphical representation of supply and demand 9.1
- Supply schedule 9.1.1
- Demand schedule 9.1.2
- Equilibrium 9.2
- Partial equilibrium 9.3
- Empirical estimation 9.4
- Macroeconomic uses of demand and supply 9.5
- History 9.6
- Graphical representation of supply and demand 9.1
- Capitalism and war 10
Types of capitalism 11
- Advanced capitalism 11.1
Finance capitalism 11.2
- Marxian and Leninist analysis 11.2.1
- Mercantilism 11.3
- Free-market economy 11.4
- Social-market economy 11.5
- State capitalism 11.6
- Corporate capitalism 11.7
- Mixed economy 11.8
- Other 11.9
Role of government 12
- Adverse characteristics of capitalist governments 12.1
Criticism 13
Profit motive 13.1
- Alternatives 13.1.1
- Marxian responses 13.2
- Supply and demand 13.3
Counter-criticisms 13.4
- Austrian School 13.4.1
- Ayn Rand 13.4.2
- Econometrics 13.5
- Profit motive 13.1
- Economic freedom 14
- See also 15
- References 16
- Further reading 17
- External links 18
Other terms sometimes used for capitalism:
The term capitalist, meaning an owner of capital, appears earlier than the term capitalism. It dates back to the mid-17th century. Capitalist is derived from capital, which evolved from capitale, a late Latin word based on caput, meaning "head" — also the origin of chattel and cattle in the sense of movable property (only much later to refer only to livestock). Capitale emerged in the 12th to 13th centuries in the sense of referring to funds, stock of merchandise, sum of money, or money carrying interest.[20][21][22] By 1283 it was used in the sense of the capital assets of a trading firm. It was frequently interchanged with a number of other words — wealth, money, funds, goods, assets, property, and so on.[20]
The Hollandische Mercurius uses capitalists in 1633 and 1654 to refer to owners of capital.[20] In French, Étienne Clavier referred to capitalistes in 1788,[23] six years before its first recorded English usage by Arthur Young in his work Travels in France (1792).[22][24] David Ricardo, in his Principles of Political Economy and Taxation (1817), referred to "the capitalist" many times.[25] Samuel Taylor Coleridge, an English poet, used capitalist in his work Table Talk (1823).[26] Pierre-Joseph Proudhon used the term capitalist in his first work, What is Property? (1840) to refer to the owners of capital. Benjamin Disraeli used the term capitalist in his 1845 work Sybil.[22]
The initial usage of the term capitalism in its modern sense has been attributed to Louis Blanc in 1850 ("..what i call 'capitalism' that is to say the appropriation of capital by some to the exclusion of others.") and Pierre-Joseph Proudhon in 1861 ("Economic and social regime in which capital, the source of income, does not generally belong to those who make it work through their labour.").[27] Karl Marx and Friedrich Engels referred to the capitalistic system.[28][29] and to the capitalist mode of production in Das Kapital (1867).[30] The use of the word "capitalism" in reference to an economic system appears twice in Volume I of Das Kapital, p. 124 (German edition), and in Theories of Surplus Value, tome II, p. 493 (German edition). Marx did not extensively use the form capitalism, but instead those of capitalist and capitalist mode of production, which appear more than 2600 times in the trilogy Das Kapital.
According to the Oxford English Dictionary (OED), the term capitalism first appeared in English in 1854 in the novel The Newcomes, by novelist William Makepeace Thackeray, where he meant "having ownership of capital".[22] Also according to the OED, Carl Adolph Douai, a German-American socialist and abolitionist, used the term private capitalism in 1863.
The relationship between democracy and capitalism is a contentious area in theory and in popular political movements. The extension of universal adult male suffrage in 19th century Britain occurred along with the development of industrial capitalism, and democracy became widespread at the same time as capitalism, leading capitalists to posit a causal or mutual relationship between them.[31] However, in the 20th century, according to some authors, capitalism also accompanied a variety of political formations quite distinct from liberal democracies, including fascist regimes, absolute monarchies, and single-party states.[32] Democratic peace theory asserts that democracies seldom fight other democracies, but critics of that theory suggest that this may be because of political similarity or stability rather than because they are democratic or capitalist.
Moderate critics argue that though economic growth under capitalism has led to democracy in the past, it may not do so in the future, as authoritarian regimes have been able to manage economic growth without making concessions to greater political freedom.[33][34]
States with capitalistic economic systems have thrived under authoritarian or oppressive political regimes. Singapore has an open market economy and attracts a great deal of foreign investment, but does not protect civil liberties such as freedom of speech and expression. The private (capitalist) sector in the People's Republic of China has grown exponentially and thrived since its inception, despite having an authoritarian government. Augusto Pinochet's rule in Chile led to economic growth and high levels of inequality[35] by using authoritarian means to create a safe environment for investment and capitalism. In Capital in the Twenty-First Century, Thomas Piketty of the Paris School of Economics asserts that inequality is the inevitable consequence of economic growth in a capitalist economy and the resulting concentration of wealth can destabilize democratic societies and undermine the ideals of social justice upon which they are built.[36] Marxists, anarchists (except for anarcho-capitalists), and other leftists argue that capitalism is incompatible with democracy since capitalism according to Marx entails "dictatorship of the bourgeoisie" (owners of the means of production) while democracy entails rule by the people.
Capital has existed incipiently on a small scale for centuries,[37] in the form of merchant, renting and lending activities, and occasionally also as small-scale industry with some wage labour (Marx was also well aware that wage labour existed for centuries on a modest scale before the advent of capitalist industry). Simple commodity exchange, and consequently simple commodity production, which form the initial basis for the growth of capital from trade, have a very long history. The "capitalistic era" according to Marx dates from the 16th century, i.e. it began with merchant capitalism and relatively small urban workshops.[38] Early Islam promulgated capitalist economic policies, which migrated to Europe through trade partners from cities such as Venice.[39] For the capitalist mode of production to emerge as a distinctive mode of production dominating the whole production process of society, many different social, economic, cultural, technical and legal-political conditions had to come together.
For most of human history, these did not come together. Capital existed, commercial trade existed, but it did not lead to industrialisation and large-scale capitalist industry. That required a whole series of new conditions, namely specific technologies of mass production, the ability to independently and privately own and trade in means of production, a class of workers willing to sell their labour power for a living, a legal framework promoting commerce, a physical infrastructure making the circulation of goods on a large scale possible, security for private accumulation, and so on. In many Third World countries, many of these conditions do not exist even today, even although there is plenty of capital and labour available; the obstacles for the development of capitalist markets are less a technical matter and more a social, cultural and political problem.
Capitalism in its modern form can be traced to the emergence of agrarian capitalism and mercantilism in the Renaissance.[40]
Agrarian capitalism
The economic foundations of the feudal agricultural system began to shift substantially in 16th century England; the manorial system had broken down by this time, and land began to be concentrated in the hands of fewer landlords with increasingly large estates. Instead of a serf-based system of labor, workers were increasingly being employed as part of a broader and expanding money economy. The system put pressure on both the landlords and the tenants to increase the productivity of the agriculture to make profit; the weakened coercive power of the aristocracy to extract peasant surpluses encouraged them to try out better methods, and the tenants also had incentive to improve their methods, in order to flourish in an increasingly competitive labor market. Terms of rent for the land were becoming subject to economic market forces rather than the previous stagnant system of custom and feudal obligation.[41][42]
By the early 17th-century, England was a centralized state, in which much of the feudal order of Medieval Europe had been swept away. This centralization was strengthened by a good system of roads and a disproportionately large capital city, London. The capital acted as a central market hub for the entire country, creating a very large internal market for goods, instead of the fragmented feudal holdings that prevailed in most parts of the Continent.
The economic doctrine that held sway between the sixteenth and eighteenth centuries is commonly described as mercantilism.[32][38] This period, the Age of Discovery, was associated with the geographic exploration of foreign lands by merchant traders, especially from England and the Low Countries. Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist production methods.[8] Most scholars consider the era of merchant capitalism and mercantilism as the origin of modern capitalism,[43][44] although Karl Polanyi argued that the hallmark of capitalism is the establishment of generalized markets for what he referred to as the "fictitious commodities": land, labor, and money. Accordingly, he argued that "not until 1834 was a competitive labor market established in England, hence industrial capitalism as a social system cannot be said to have existed before that date."[45]
England began a large-scale and integrative approach to mercantilism during the Elizabethan Era (1558–1603). A systematic and coherent explanation of balance of trade was made public through Thomas Mun's argument England's Treasure by Forraign Trade, or the Balance of our Forraign Trade is The Rule of Our Treasure. It was written in the 1620s and published in 1664.[46]
European merchants, backed by state controls, subsidies, and monopolies, made most of their profits from the buying and selling of goods. In the words of Francis Bacon, the purpose of mercantilism was "the opening and well-balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation of prices ..."[47]
The British East India Company and the Dutch East India Company inaugurated an expansive era of commerce and trade.[48][49] These companies were characterized by their colonial and expansionary powers given to them by nation-states.[48] During this era, merchants, who had traded under the previous stage of mercantilism, invested capital in the East India Companies and other colonies, seeking a return on investment.
Industrial capitalism
A new group of economic theorists, led by David Hume[51] and Adam Smith, in the mid-18th century, challenged fundamental mercantilist doctrines such as the belief that the amount of the world's wealth remained constant and that a state could only increase its wealth at the expense of another state.
During the Industrial Revolution, the industrialist replaced the merchant as a dominant factor in the capitalist system and affected the decline of the traditional handicraft skills of artisans, guilds, and journeymen. Also during this period, the surplus generated by the rise of commercial agriculture encouraged increased mechanization of agriculture. Industrial capitalism marked the development of the factory system of manufacturing, characterized by a complex division of labor between and within work process and the routine of work tasks; and finally established the global domination of the capitalist mode of production.[32]
Britain also abandoned its protectionist policy, as embraced by mercantilism. In the 19th century, Richard Cobden and John Bright, who based their beliefs on the Manchester School, initiated a movement to lower tariffs.[52] In the 1840s, Britain adopted a less protectionist policy, with the repeal of the Corn Laws and the Navigation Acts.[32] Britain reduced tariffs and quotas, in line with David Ricardo's advocacy for free trade.
Capitalism was carried across the world by broader processes of globalization such as imperialism and, by the end of the nineteenth century, became the dominant global economic system, in turn intensifying processes of economic and other globalization.[53] Later, in the 20th century, capitalism overcame a challenge by centrally-planned economies and is now the encompassing system worldwide,[12][54] with the mixed economy being its dominant form in the industrialized Western world.
Industrialization allowed cheap production of household items using economies of scale, while rapid population growth created sustained demand for commodities. Globalization in this period was decisively shaped by nineteenth-century imperialism.[55]
After the First and Second Opium Wars and the completion of British conquest of India, vast populations of these regions became ready consumers of European exports. It was in this period that areas of sub-Saharan Africa and the Pacific islands were incorporated into the world system. Meanwhile, the conquest of new parts of the globe, notably sub-Saharan Africa, by Europeans yielded valuable natural resources such as rubber, diamonds and coal and helped fuel trade and investment between the European imperial powers, their colonies, and the United States.
The inhabitant of London could order by telephone, sipping his morning tea, the various products of the whole earth, and reasonably expect their early delivery upon his doorstep. Militarism and imperialism of racial and cultural rivalries were little more than the amusements of his daily newspaper. What an extraordinary episode in the economic progress of man was that age which came to an end in August 1914.[56]
The global financial system was mainly tied to the gold standard in this period. The United Kingdom first formally adopted this standard in 1821. Soon to follow was Canada in 1853, Newfoundland in 1865, and the United States and Germany (de jure) in 1873. New technologies, such as the telegraph, the transatlantic cable, the Radiotelephone, the steamship and railway allowed goods and information to move around the world at an unprecedented degree.[57]
In the period following the global depression of the 1930s, the state played an increasingly prominent role in the capitalistic system throughout much of the world. The postwar boom ended in the late 1960s and early 1970s, and the situation was worsened by the rise of stagflation.[58] Monetarism, a modification of Keynesianism that is more compatible with laissez-faire, gained increasing prominence in the capitalist world, especially under the leadership of Ronald Reagan in the US and Margaret Thatcher in the UK in the 1980s. Public and political interest began shifting away from the so-called collectivist concerns of Keynes's managed capitalism to a focus on individual choice, called "remarketized capitalism".[59]
Capitalism is "production for exchange" driven by the desire for personal accumulation of money receipts in such exchanges, mediated by free markets. The markets themselves are driven by the needs and wants of consumers and those of society as a whole. If these wants and needs were (in the socialist or communist society envisioned by Marx, Engels and others) the driving force, it would be "production for use". Contemporary mainstream economics, particularly that associated with the right wing politics, holds that an "invisible hand",[60] through little more than the freedom of the market, is able to match social production to these needs and desires.[61]
In general, capitalism as an economic system and mode of production can be summarised by the following:[62]
- Capital accumulation:[63] Production for profit and accumulation as the implicit purpose of all or most of production, constriction or elimination of production formerly carried out on a common social or private household basis.[61]
- Commodity production: Production for exchange on a market; to maximise exchange-value instead of use-value.
- Private ownership of the means of production:[6] Ownership of the means of production by a class of capital owners,[64] either individually, collectively (see: Corporation) or through a state that serves the interests of the capitalist class.
- High levels of wage labour.[65]
- The investment of money to make a profit.[66]
- The use of the price mechanism to allocate resources between competing uses.[6]
The market
In free-market and laissez-faire forms of capitalism, markets are used most extensively with minimal or no regulation over the pricing mechanism. In mixed economies, which are almost universal today,[67] markets continue to play a dominant role but are regulated to some extent by government in order to correct market failures, promote social welfare, conserve natural resources, fund defense and public safety or for other reasons. In state capitalist systems, markets are relied upon the least, with the state relying heavily on state-owned enterprises or indirect economic planning to accumulate capital.
Supply is the amount of a good or service produced by a firm and which is available for sale. Demand is the amount that people are willing to buy at a specific price. Prices tend to rise when demand exceeds supply, and fall when supply exceeds demand. In theory, the market is able to coordinate itself when a new equilibrium price and quantity is reached.
Competition arises when more than one producer is trying to sell the same or similar products to the same buyers. In capitalist theory, competition leads to innovation and more affordable prices. Without competition, a monopoly or cartel may develop. A monopoly occurs when a firm supplies the total output in the market; the firm can therefore limit output and raise prices because it has no fear of competition. A cartel is a group of firms that act together in a monopolistic manner to control output and raise prices.
Profit motive
The profit motive is a theory in capitalism which posits that the ultimate goal of a business is to make money. Stated differently, the reason for a business's existence is to turn a profit. The profit motive functions on the rational choice theory, or the theory that individuals tend to pursue what is in their own best interests. Accordingly, businesses seek to benefit themselves and/or their shareholders by maximising profits.
In capitalist theoretics, the profit motive is said to ensure that resources are being allocated efficiently. For instance, Austrian economist Henry Hazlitt explains, "If there is no profit in making an article, it is a sign that the labor and capital devoted to its production are misdirected: the value of the resources that must be used up in making the article is greater than the value of the article itself."[68] In other words, profits let companies know whether an item is worth producing. Theoretically in free and competitive markets, maximising profits ensures that resources are not wasted.
Private property
The relationship between the state, its formal mechanisms, and capitalist societies has been debated in many fields of social and political theory, with active discussion since the 19th century. Hernando de Soto is a contemporary economist who has argued that an important characteristic of capitalism is the functioning state protection of property rights in a formal property system where ownership and transactions are clearly recorded.[69]
According to de Soto, this is the process by which physical assets are transformed into capital, which in turn may be used in many more ways and much more efficiently in the market economy. A number of Marxian economists have argued that the Enclosure Acts in England, and similar legislation elsewhere, were an integral part of capitalist primitive accumulation and that specific legal frameworks of private land ownership have been integral to the development of capitalism.[70][71]
Market competition
In capitalist economics, market competition is the rivalry among sellers trying to achieve such goals as increasing profits, market share, and sales volume by varying the elements of the marketing mix: price, product, distribution, and promotion. Merriam-Webster defines competition in business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favourable terms."[72] It was described by Adam Smith in The Wealth of Nations (1776) and later economists as allocating productive resources to their most highly valued uses[73] and encouraging efficiency. Smith and other classical economists before Cournot were referring to price and non-price rivalry among producers to sell their goods on best terms by bidding of buyers, not necessarily to a large number of sellers nor to a market in final equilibrium.[74] Competition is widespread throughout the market process. It is a condition where "buyers tend to compete with other buyers, and sellers tend to compete with other sellers."[75] In offering goods for exchange, buyers competitively bid to purchase specific quantities of specific goods which are available, or might be available if sellers were to choose to offer such goods. Similarly, sellers bid against other sellers in offering goods on the market, competing for the attention and exchange resources of buyers. Competition results from scarcity—there is never enough to satisfy all conceivable human wants—and occurs "when people strive to meet the criteria that are being used to determine who gets what."[75]
Reserve army of labour
In a Marxist analysis of the capitalist economy, the reserve army of labour refers to the unemployed and under-employed.[76] It is synonymous with "industrial reserve army" or "relative surplus population", except that the unemployed can be defined as those actually looking for work and that the relative surplus population also includes people unable to work. The use of the word "army" refers to the workers being conscripted and regimented in the workplace in a hierarchy, under the commanding heights of the economy.
Prior to the start of the capitalist era in human history (i.e. before the 1500s), structural unemployment on a mass scale rarely existed, other than that caused by natural disasters and wars.[77] In ancient societies, all people who could work necessarily had to work, otherwise they would starve; a slave or a serf by definition could not become "unemployed". There was normally very little possibility of "earning a crust" without working at all, and the usual attitude toward beggars and idlers was harsh.[78] Children began to work already at a very early age. Indeed, the word "employment" is linguistically a product of the capitalist era. A permanent level of unemployment presupposes a working population which is to a large extent dependent on a wage or salary for a living, without having other means of livelihood, as well as the right of enterprises to hire and fire employees in accordance with commercial or economic conditions. The expression "unemployed" in English, in the sense of "temporarily out of work", dates back to the 1660s; reference to "the unemployed" as a group was first made in 1782; and reference to "unemployment" as a general condition is first attested in 1888.[79]
The first recorded discussion of the reserve army of labour is in a manuscript written by Karl Marx:
Marx introduced the concept in chapter 25 of the first volume of Das Kapital,[81] which states:
His argument is that as capitalism develops, the constant capital grows faster than the mass of variable capital. Fewer workers can produce all that is necessary for society's requirements. In addition, capital will become more concentrated and centralised in fewer hands. This being the absolute historical tendency, part of the working population will tend to become surplus to the requirements of capital accumulation over time. Paradoxically, the larger the wealth of society, the larger the industrial reserve army will become. Marx called it "the antagonism of capital accumulation" and he cites his The Poverty of Philosophy, (Chapter 2, Section 1) to explain this phenomenon in relation with relations of production.[82] One could add that the larger the wealth of society, the more people it can support who do not work. However, as Marx develops the argument further, it also becomes clear that, depending on the state of the economy, the reserve army of labour will either expand or contract, alternately being absorbed or expelled from the employed workforce. Thus,
In recent years, there has been growing research on the concept of "the precariat," to describe a growing reliance on temporary, part-time workers with precarious status, who share aspects of the proletariat and the reserve army of labor.[83] Precarious workers do work part-time or full-time in temporary jobs, but they cannot really earn enough to live on, and depend partly on friends or family, or on state benefits, to survive. Typically they do not become truly "unemployed", but they don't have a decent job to go to either.[84] The rise of "the precariat" has been attributed to the emergence of global neoliberalism.[85]
Although non-employed people who are unable or uninterested in performing legal paid work are not considered among the "unemployed," the concept of "conjunctural unemployment" is used in economics nowadays.[86] Economists often distinguish between short-term "frictional" or "cyclical" unemployment, and longer-term "structural unemployment". Sometimes there is a short-term mismatch between the demand and supply of labour, at other times there is much less total demand for labour than supply for a long-time. If no possibility for getting a job at all in the foreseeable future exists, many younger people decide to migrate or emigrate to a place where they can find work.
Composition of the relative surplus population
Marx discusses the army of labor and the reserve army in Capital, Ch. 25, Section IV. The Army of Labor consists in those working-class people employed in average or better than average jobs. Not every one in the working class gets one of these jobs. There are then four other categories where members of the working class might find themselves: the "stagnant pool", the floating reserves, the latent reserve, and pauperdom. Finally, people may leave the army and the reserve army by turning to criminality, and Marx refers to such people as "lumpenproletariat."[87]
- The stagnant part consists of marginalised people with "extremely irregular employment". Stagnant pool jobs are characterized by below average pay, dangerous working conditions, they may be temporary. Those caught in the stagnant pool have jobs, so the modern definition of the employed would include both the army of labor plus the stagnant pool. However, they are constantly on the lookout for something better.
The modern unemployed would refer primarily to the floating reserve, people who used to have good jobs, but are now out of work. They certainly hope that their unemployment is temporary ("conjunctural unemployment"), but they are well aware that they could fall into the stagnant pool or the pauper class.
- The latent part consists of that segment of the population not yet fully integrated into capitalist production. In Marx's day, he was referring to people living off of subsistence agriculture who were looking for monetary employment in industry. In modern times, people coming from slums in developing countries where they survive largely by non-monetary means, to developed cities where they work for pay might form the latent. Housewives who move from unpaid to paid employment for a business could also form a part of the latent reserve. They are not unemployed, because they are not necessarily actively looking for a job; but if capital needs extra workers, it can pull them out of the latent reserve. In this sense, the latent forms a reservoir of potential workers for industries.
- Pauperdom is where one might end up. The homeless is the modern term for paupers. Marx calls them people who cannot adapt to capital's never ending change. For Marx, "the sphere of pauperism", including those still able to work, orphans and pauper children, and the "demoralised and ragged" or "unable to work".
As a mode of production
The capitalist mode of production refers to the systems of organising production and distribution within capitalist societies. Private money-making in various forms (renting, banking, merchant trade, production for profit, etc.) preceded the development of the capitalist mode of production as such. The capitalist mode of production proper, based on wage-labour and private ownership of the means of production, and on industrial technology, began to grow rapidly in Western Europe from the industrial revolution, later extending to most of the world.
The term capitalist mode of production is defined by private ownership of the means of production, extraction of surplus value by the owning class for the purpose of capital accumulation, wage-based labour, and, at least as far as commodities are concerned, being market-based.[88]
"Capitalism" in the form of money-making activity has existed in the shape of merchants and money-lenders who acted as intermediaries between consumers and producers engaging in
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Library resources about
- Capitalism on In Our Time at the BBC. (listen now)
- Center on Capitalism and Society at Columbia University
- FIXCapitalism.com via Philip Kotler, Northwestern University, Kellogg School of Management
- Center for the Study of Capitalism at Wake Forest University
- Commonwealth Club of California-Dr. Yaron Brook and Dr. David Callahan: Is Capitalism Moral? A Debate – October 22, 2012
- Basic Characteristics of Capitalism from textbooksfree.org
- Selected Titles on Capitalism and Its Discontents. Harvard University Press
- Growth, Accumulation, Crisis: With New Macroeconomic Data for Sweden 1800-2000 by Rodney Edvinsson
- David Harvey, Reading Marx's Capital, Reading Marx's Capital - Class 11, Chapter 25, The General Law of Capitalist Accumulation (video lecture)
- The Marxist System Charles Sackrey & Geoff Schneider Being an Introduction To Certain of The Ideas of Karl Marx Designed Especially For Those To Whom It Has Been Suggested That Marx Has Nothing To Say To Them About The World In Which They Live.
- LaborFair Resources - Link to Fair Labor Practices
External links
- Alperovitz, Gar (2011). America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy, 2nd Edition. Democracy Collaborative Press. ISBN 0984785701
- Baptist, Edward E. The Half Has Never Been Told: Slavery and the Making of American Capitalism. New York: Basic Books, 2014. ISBN 046500296X
- Braudel, Fernand. Civilization and Capitalism.
- Callinicos, Alex. "Wage Labour and State Capitalism - A reply to Peter Binns and Mike Haynes", International Socialism, second series, 12, Spring 1979.
- Farl, Erich. "The Genealogy of State Capitalism", in: International (London, IMG), Vol. 2, No. 1, 1973.
- Gough, Ian. State Expenditure in Advanced Capitalism New Left Review
- Habermas, J. [1973] Legitimation Crisis (eng. translation by T. McCarthy). Boston: Beacon. from google books; excerpt
- Hyman, Louis and Edward E. Baptist (2014). American Capitalism: A Reader. Simon & Schuster. ISBN 9781476784311
- Jameson, Fredric (1991). Postmodernism, or, the Cultural Logic of Late Capitalism
- Kotler, Philip Confronting Capitalism: Real Solutions for a Troubled Economic System. AMACOM, 2015.
- Mandel, Ernest Late Capitalism.
- Korstanje Maximiliano (2015) A Difficult World: examining the roots of capitalism. New York, Nova Science Publishers.
- Marcel van der Linden, Western Marxism and the Soviet Union. New York: Brill Publishers, 2007.
- Marx, Karl. Grundrisse.
- Mayfield, Anthony. "Economics", in his On the Brink: Resource Depletion, Debt Collapse, and Super-technology ([Vancouver, B.C.]: On the Brink Publishing, 2013), pp. 50–104. N.B.: The author, as well, frequently discusses aspects of economics and capitalism elsewhere (passim.) in the book.
- Panitch, Leo, and Sam Gindin (2012). The Making of Global Capitalism: the Political Economy of American Empire. London: Verso. ISBN 978-1-84467-742-9
- Polanyi, Karl (2001). The Great Transformation: The Political and Economic Origins of Our Time. Beacon Press; 2 edition. ISBN 080705643X
- Roberts, Paul Craig (2013). The Failure of Laissez-faire Capitalism: towards a New Economics for a Full World. Atlanta, Ga.: Clarity Press. ISBN 978-0-9860362-5-5
- Robinson, William I. Global Capitalism and the Crisis of Humanity. Cambridge University Press, 2014. ISBN 1107691117
- Skoll, G. R., & Korstanje, M. E. (2012). Risks, totems, and fetishes in Marx and Freud. Sincronía, (2), 11-27.
- Shaikh, Anwar. "Capital as a Social Relation" (New Palgrave article)
- Sombart, Werner (1916) Der moderne Kapitalismus. Historisch-systematische Darstellung des gesamteuropäischen Wirtschaftslebens von seinen Anfängen bis zur Gegenwart. Final edn. 1916, repr. 1969, paperback edn. (3 vols. in 6): 1987 Munich: dtv. (Also in Spanish; no English translation yet.)
Further reading
- Krahn, Harvey J., and Graham S. Lowe (1993). Work, Industry, and Canadian Society. Second ed. Scarborough, Ont.: Nelson Canada. xii, 430 p. ISBN 0-17-603540-0
- Bibliography
- ^ "Capitalism" Oxford Dictionaries. "capitalism. 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." Retrieved 4 January 2013.
- ^ Chris Jenks. Core Sociological Dichotomies. "Capitalism, as a mode of production, is an economic system of manufacture and exchange which is geared toward the production and sale of commodities within a market for profit, where the manufacture of commodities consists of the use of the formally free labor of workers in exchange for a wage to create commodities in which the manufacturer extracts surplus value from the labor of the workers in terms of the difference between the wages paid to the worker and the value of the commodity produced by him/her to generate that profit." London, England, UK; Thousand Oaks, California, USA; New Delhi, India: SAGE. p. 383.
- ^ Heilbroner, Robert L. "capitalism." Durlauf, Steven N.and Lawrence E. Blume, eds., The New Palgrave Dictionary of Economics. 2nd ed. (Palgrave Macmillan, 2008) doi:10.1057/9780230226203.0198
- ^ Louis Hyman and Edward E. Baptist (2014). American Capitalism: A Reader. Simon & Schuster. ISBN 9781476784311.
- ^ "an economic system characterized by private 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 free market"
- ^ a b c d Macmillan Dictionary of Modern Economics, 3rd Ed., 1986, p. 54.
- ^ Stilwell, Frank. "Political Economy: the Contest of Economic Ideas." First Edition. Oxford University Press. Melbourne, Australia. 2002.
- ^ a b c
- ^
- ^
- ^ a b c "free enterprise." Roget's 21st Century Thesaurus, Third Edition. Philip Lief Group 2008.
- ^ a b c
- ^ Mutualist.org. "... based on voluntary cooperation, free exchange, or mutual aid."
- ^ Barrons Dictionary of Finance and Investment Terms. 1995. p. 74
- ^ "Market economy", Merriam-Webster Unabridged Dictionary
- ^
Although the term "liberalism" retains its original meaning in most of the world, it has unfortunately come to have a very different meaning in late twentieth-century America. Hence terms such as "market liberalism," "classical liberalism," or "libertarianism" are often used in its place in America.
^ a b The crisis of neoliberalism. The Real News. 30 March 2010. Retrieved 3 January 2014.
- "When we speak of neoliberalism, we speak of contemporary capitalism." - Gérard Duménil, economist at the University of Paris.
- ^
- ^ a b c Braudel p. 232
- ^
- ^ a b c d James Augustus Henry Murray. "Capital". A New English Dictionary on Historical Principles. Oxford English Press. Vol 2. p. 93.
- ^ e.g., "L'Angleterre a-t-elle l'heureux privilège de n'avoir ni Agioteurs, ni Banquiers, ni Faiseurs de services, ni Capitalistes?" in [Etienne Clavier] (1788) De la foi publique envers les créanciers de l'état: lettres à M. Linguet sur le n °CXVI de ses annales p. 19
- ^ Arthur Young. Travels in France
- ^ Ricardo, David. Principles of Political Economy and Taxation. 1821. John Murray Publisher, 3rd edition.
- ^ Samuel Taylor Coleridge. The Complete Works of Samuel Taylor ColeridgeTabel . p. 267.
- ^ Braudel, Fernand. The Wheels of Commerce: Civilization and Capitalism 15th–18th Century, Harper and Row, 1979, p. 237
- ^ Karl Marx. Chapter 16: "Absolute and Relative Surplus-Value". Das Kapital: "The prolongation of the working-day beyond the point at which the laborer would have produced just an equivalent for the value of his labor-power, and the appropriation of that surplus-labor by capital, this is production of absolute surplus-value. It forms the general groundwork of the capitalist system, and the starting-point for the production of relative surplus-value."
- ^ Karl Marx. Chapter Twenty-Five: "The General Law of Capitalist Accumulation". Das Kapital.
- ^ Saunders, Peter (1995). Capitalism. University of Minnesota Press. p. 1
- ^
- ^ a b c d e
- ^
- ^
- ^ Klein, Naomi (2008). The Shock Doctrine: The Rise of Disaster Capitalism. Picador. ISBN 0312427999 p. 105
- ^ Piketty, Thomas (2014). Capital in the Twenty-First Century. Belknap Press. ISBN 067443000X p. 571
- ^ Warburton, David, Macroeconomics from the beginning: The General Theory, Ancient Markets, and the Rate of Interest. Paris: Recherches et Publications, 2003.p49
- ^ a b [1]
- ^ Koehler, Benedikt. Early Islam and the Birth of Capitalism (Lexington Books, 2014)
- ^ Renaissance Florence:Cradle of Capitalism
- ^
- ^
- ^ Burnham (2003)
- ^ Encyclopædia Britannica (2006)
- ^ Polanyi, Karl. The Great Transformation. Beacon Press, Boston. 1944. p. 87
- ^
- ^ Quoted in Sir George Clark, The Seventeenth Century (New York: Oxford University Press, 1961), p. 24.
- ^ a b
- ^
- ^ Watt steam engine image: located in the lobby of into the Superior Technical School of Industrial Engineers of the UPM (Madrid)
- ^
- ^
- ^
- ^ James Fulcher, Capitalism, A Very Short Introduction, "In one respect there can, however, be little doubt that capitalism has gone global and that is in the elimination of alternative systems." p. 99, Oxford University Press, 2004, ISBN 978-0-19-280218-7.
- ^
- ^
- ^ Michael D. Bordo, Barry Eichengreen, Douglas A. Irwin. Is Globalization Today Really Different than Globalization a Hundred Years Ago?. NBER Working Paper No.7195. June 1999.
- ^
- ^ Fulcher, James. Capitalism. 1st ed. New York: Oxford University Press, 2004.
- ^ Adam Smith, often mis-attributed in this sense. See the Wealth of Nations section for what Smith actually said.
- ^ a b c [2]
- ^ [3]
- ^ a b [4]
- ^ [5]
- ^ http://www.ons.gov.uk/ons/rel/lmac/self-employed-workers-in-the-uk/2014/rep-self-employed-workers-in-the-uk-2014.html#tab-Self-employed-workers-in-the-UK---2014
- ^ James Fulcher, Capitalism A Very Short Introduction, "the investment of money in order to make a profit, the essential feature of capitalism." p. 14, Oxford, 2004, ISBN 9780192802187.
- ^ James Fulcher, Capitalism A Very Short Introduction, "...in the wake of the 1970 crisis, the neo-liberal model of capitalism became intellectually and ideologically dominant", p. 58, Oxford, 2004, ISBN 9780192802187.
- ^ Hazlitt, Henry. "The Function of Profits." Economics in One Lesson. Ludwig Von Mises Institute. Web. 22 Apr. 2013.
- ^
- ^
- ^
- ^ Merriam-Webster Online
- ^ [1987] 2008,. "competition," The New Palgrave Dictionary of Economics. Abstract.
- ^ Mark Blaug, 2008. "invisible hand," The New Palgrave Dictionary of Economics, 2nd Edition, v. 4, p. 565. Abstract.
- ^ a b
- ^ Francis Green, "The Reserve Army Hypothesis: A Survey of Empirical Applications," in Paul Dunne (ed.), Quantitative Marxism, Cambridge: Polity Press, 1991, pp. 123-140.
- ^ , chapter 2.
- ^ Garraty, p. 14.
- ^ Online Etymological Dictionary, entry "unemployed".
- ^ "Wages," Works of Karl Marx 1847; Source: MECW Volume 6, p. 415; Written: at the end of December 1847; First published: in Russian in the journal Sotsialisticheskoye khozyaistvo, 1924 and in German in the journal Unter dem Banner des Marxismus, 1925.
- ^ , chapter 25Das KapitalKarl Marx,
- ^ Capital, Volume I, Chapter 25
- ^
- ^ Jan Breman, "A bogus concept?", New Left Review 84, November–December 2013, pp. 130-138.
- ^ Lorna Fox O'Mahony, David O'Mahony and Robin Hickey (eds), Moral Rhetoric and the Criminalisation of Squatting: Vulnerable Demons? (London: Routledge, 2014), ISBN 0415740614 p. 25.
- ^
- ^ Duggan, Marie Christine (2013) "Reserve Army of Labor and Migration" in the Encyclopedia of Global Human Migration, edited by E. Ness, Wiley Publishers.http://onlinelibrary.wiley.com/doi/10.1002/9781444351071.wbeghm451/abstract
- ^
- ^ [6]
- ^ [7]
- ^ The Laws of Motion of the Capitalist Mode of Production Ernst Mandel
- ^ [8]
- ^ a b c
- ^ Ragan, Christopher T.S., and Richard G. Lipsey. Microeconomics. Twelfth Canadian Edition ed. Toronto: Pearson Education Canada, 2008. Print.
- ^ Robbins, Richard H. Global problems and the culture of capitalism. Boston: Allyn & Bacon, 2007. Print.
- ^ Steinfeld 2009, p. 3: "All labour contracts were/are designed legally to bind a worker in one way or another to fulfil the labour obligations the worker has undertaken. That is one of the principal purposes of labour contracts."
^ Deakin & Wilkinson 2005.
Marx 1990, p. 1005, defines wage labour succinctly as "the labour of the worker who sells his own labour-power."
- ^ Thompson 1966, p. 599.
- ^ Thompson 1966, p. 912.
- ^ Ostergaard 1997, p. 133.
- ^ Lazonick 1990, p. 37.
^ Hallgrimsdottir & Benoit 2007; Roediger 2007a.
The term is not without its critics, as Roediger 2007b, p. 247, notes: "[T]he challenge to loose connections of wage (or white) slavery to chattel slavery was led by Frederick Douglass and other Black, often fugitive, abolitionists. Their challenge was mercilessly concrete. Douglass, who tried out speeches in work places before giving them in halls, was far from unable to speak to or hear white workers, but he and William Wells Brown did challenge metaphors regarding white slavery sharply. They noted, for example, that their escapes from slavery had left job openings and wondered if any white workers wanted to take the jobs."
- ^ a b Fitzhugh 1857, p. xvi.
- ^ Carsel 1940.
- ^ "...vulgar are the means of livelihood of all hired workmen whom we pay for mere manual labour, not for artistic skill; for in their case the very wage they receive is a pledge of their slavery." – De Officiis [9]
- ^ Proudhon 1890.
- ^ Marx 1969, Chapter VII.
- ^ Foner 1995, p. xix.
- ^ Jensen 2002.
- ^
- ^ Marx 1847, Chapter 2.
- ^ Chomsky 1993, p. 19.
- ^ Thye & Lawler 2006.
- ^ Graeber 2004, p. 71.
- ^ Graeber 2007, p. 106.
- ^ Testimony Gathered by Ashley's Mines Commission Laura Del Col, West Virginia University
- ^
- ^
- ^
- ^ Adam Smith – An Inquiry into the Nature and Causes of the Wealth of Nations – The Adam Smith Institute
- ^ Aristotle, Politics 1328b–1329a, H. Rackham trans.
- ^ http://www.quotationspage.com/quote/1097.html
- ^ De Officiis Liber I XI.II
- ^ George 1981, Chapter 15.
- ^ Conversation with Noam Chomsky, p. 2 of 5
- ^ Social Security Online History Pages
- ^ Marx 1990, p. 1006: "[L]abour-power, a commodity sold by the worker himself."
- ^ Another one, of course, being the capitalists' theft from workers via surplus-value.
- ^ Nelson 1995, p. 158. This Marxist objection is what motivated Nelson's essay, which argues that labour is not, in fact, a commodity.
^ Marx 1990, p. 1005. Emphasis in the original.
See also p. 716: "[T]he capitalist produces [and reproduces] the worker as a wage-labourer. This incessant reproduction, this perpetuation of the worker, is the absolutely necessary condition for capitalist production."
- ^ a b [10]
- ^
- ^
- ^ , vol. 1, ch. 25Das Kapital
- ^
- ^ Note that unlike most graphs, supply & demand curves are plotted with the independent variable (price) on the vertical axis and the dependent variable (quantity supplied or demanded) on the horizontal axis.
- ^
- ^
- ^
- ^ a b (citing Hamid S. Hosseini, 1995. "Understanding the Market Mechanism Before Adam Smith: Economic Thought in Medieval Islam," History of Political Economy, Vol. 27, No. 3, 539–61).
- ^ John Locke (1691) Some Considerations on the consequences of the Lowering of Interest and the Raising of the Value of Money
- ^ a b Thomas M. Humphrey, 1992. "Marshallian Cross Diagrams and Their Uses before Alfred Marshall," Economic Review, Mar/Apr, Federal Reserve Bank of Richmond, pp. 3–23.
- ^ A.D. Brownlie and M. F. Lloyd Prichard, 1963. "Professor Fleeming Jenkin, 1833–1885 Pioneer in Engineering and Political Economy," Oxford Economic Papers, NS, 15(3), p. 211.
- ^ Fleeming Jenkin, 1870. "The Graphical Representation of the Laws of Supply and Demand, and their Application to Labour," in Alexander Grant, ed., Recess Studies, Edinburgh. ch. VI, pp. 151–85. Edinburgh. Scroll to chapter link.
- ^
- ^ Armstrong, Glyn & Harrison, Capitalism since world war 2. Fontana, 1984. See also Karl Hardach, "Germany 1914-1917", in: Carlo M. Cipolla, The Fontana History of Europe, Part One. Fontana, 1976, p. 224.
- ^
- ^ Ginsborg (1990), chapter 3.
- ^ Ginsborg (1990), p. 214.
- ^ Lears, T. J. Jackson (1985) "The Concept of Cultural Hegemony"
- ^ Holub, Renate (2005) Antonio Gramsci: Beyond Marxism and Postmodernism
- ^ Boggs, Carl (2012) Ecology and Revolution: Global Crisis and the Political Challenge
- ^ Habermas, 1988: 37, 75.
- ^ "Capitalism" by John Scott and Gordon Marshall in A Dictionary of Sociology Oxford University Press 2005. Oxford Reference Online. Oxford University Press
- ^ Dimitri B. Papadimitriou & L. Randall Wray, "Minsky's Analysis of Financial Capitalism, 1999
- ^ Simon Johnson, "The Quiet Coup", May 2009, The Atlantic.
- ^ R. Munck, Globalization and Labour (2011) p. 77-8
- ^ Charles R. Morris, The Trillion Dollar Meltdown (2008) p. 156
- ^ Thomas Palley, From Financial Crisis to Stagnation (2012) p. 218
- ^ "The Contradiction of Capitalism in the Search for Democracy", Latin American Perspectives, Vol. 24, No. 3, Ecuador, Part 1: Politics and Rural Issues (May, 1997), pp. 116-122
- ^ F. Boldizzoni, Means and Ends: The Idea of Capital in the West 1500-1970, Palgrave Macmillan 2008, pp. 128-32
- ^ C. H. Sisson, English Poetry 1900-1950 (1981) p. 124. He himself added that "it could not be said that Pound's targets were wholly illusory. The detail of his analysis is more doubtful and less creditable", p. 101
- ^ Imperialism, the Highest Stage of Capitalism ibid. Finance Capital and the Finance Oligarchy
- ^ John Bellamy Foster and Robert W. McChesneyMonopoly-Finance Capital and the Paradox of Accumulation Monthly Review Sept-Oct 2009
- ^ Frederic Jameson, 'Culture and Finance Capital', in The Jameson Reader (2005) p. 257
- ^ Quoted in E. H. Carr, The Bolshevik Revolution 2 (1971) p. 137
- ^ Quoted in F. A Voight, Unto Caesar (1938) p. 22
- ^ C. J. Calhoun/G. Derluguian, Business as Usual (2011) p. 57
- ^ Jameson, p. 259-60
- ^
- ^ state capitalism. Merriam-Webster. Retrieved July 7, 2015.
- ^
- ^ V. I. Lenin. The Tax in Kind. Lenin's Collected Works, 1st English Edition, Progress Publishers, Moscow, 1965, Volume 32, pages 329-365
- ^ V. I. Lenin. To the Russian Colony in North America. Lenin Collected Works, Progress Publishers, 1971, Moscow, Volume 42, pages 425c-427a.
- ^ "State capitalism" in the Soviet Union, M.C. Howard and J.E. King
- ^ Noam Chomsky (1986). The Soviet Union Versus Socialism. Our Generation. Retrieved 9 July 2015.
- ^ Richard D. Wolff (27 June 2015). Socialism Means Abolishing the Distinction Between Bosses and Employees. Truthout. Retrieved 9 July 2015.
- ^
- ^ "Capitalism." World Book Encyclopedia. 1988. p. 194.
- ^ [12]
- ^ [13]
- ^ [14]
- ^ [15]
- ^ [16]
- ^ Korstanje, M (2015) Review: Why Nations fail. The origins of Power, Prosperity and Poverty. Journal of International and Global Studies. Volume 6, Issue 2. May 2015. (pp 97-100).
- ^ Korstanje, M (2015) A Difficult World, examining the roots of Capitalism. New York, Nova Science
- ^ Brander, James A. Government policy toward business. 4th ed. Mississauga, Ontario: John Wiley & Sons Canada, Ltd., 2006. Print.
- ^ Frances Goldin, Debby Smith, Michael Smith (2014). Imagine: Living in a Socialist USA. Harper Perennial. ISBN 0062305573 pp. 49-50.
- ^ Cass, Towards a Comparative Political Economy of Unfree Labor (1999)
- ^
- ^ Gourevitch, Alex, "Capitalism and Slavery: An Interview with Greg Grandin", Jacobin (August 2014) Retrieved 4 August 2014.
- ^ Edward E. Baptist. The Half Has Never Been Told: Slavery And The Making Of American Capitalism. Basic Books, September 2014. ISBN 046500296X
- ^
- ^ a b
- ^ George Monbiot (1 October 2014). It's time to shout stop on this war on the living world. The Guardian. Retrieved 31 October 2014.
- ^ Jones, Campbell, Martin Parker and Rene Ten Bos, For Business Ethics. (Routledge, 2005) ISBN 0415311357, p. 101
- ^
- ^ Susan Braedley and Meg Luxton, Neoliberalism and Everyday Life, (McGill-Queen's University Press, 2010), ISBN 0773536922, p. 3
- ^ Manfred B. Steger and Ravi K. Roy, Neoliberalism: A Very Short Introduction, (Oxford University Press, 2010), ISBN 019956051X, p. 123
- ^ Gérard Duménil and Dominique Lévy, The Crisis of Neoliberalism, (Harvard University Press, 2013), ISBN 0674072243
- ^ David M Kotz, The Rise and Fall of Neoliberal Capitalism, (Harvard University Press, 2015), ISBN 0674725654
- ^ New York Times, Oct. 23, 2007.
- ^ Baba Metzia 61b
- ^ Moehlman, 1934, pp.6–7.
- ^
- ^
- ^ Thomas Gubleton, archbishop of Detroit speaking in Capitalism: A Love Story
- ^ O'Leary, Naomi, "Pope Attacks 'Tyranny' of Markets in Manifesto for Papacy". Reuters (November 2013) Retrieved 30 December 2013.
- ^ Zachary A. Goldfarb and Michelle Boorstein (26 November 2013). Pope Francis denounces 'trickle-down' economic theories in critique of inequality. The Washington Post. Retrieved 26 November 2013.
- ^ Friedman, Milton. Capitalism and Freedom. [Chicago]: University of Chicago, 1962.
- ^ Krugman, Paul, Wells, Robin, Economics, Worth Publishers, New York, (2006)
- ^
- ^ The Rise of Capitalism, 2011. Socialist Standard, no. 1284, August 2011.
- ^
- ^ "Press Room." Michaelmoore.com. Michael Moore. Web. 22 Apr. 2013.
- ^ Ballasy, Nicholas. "Michael Moore: 'It's Absolutely a Good Thing' for Government to Drive Private Health Insurance Out of Business." Michael Moore: 'It's Absolutely a Good Thing' for Government to Drive Private Health Insurance Out of Business. CNS News, 02 Oct. 2009. Web. 22 Apr. 2013.
- ^ "'Occupy Wall Street' Protests Give Voice to Anger Over Greed, Corporate Culture." PBS.com. PBS, 5 Oct. 2011. Web. 22 Apr. 2013.
- ^ Sowell, Thomas. "Profit Motive Underrated By Intelligentsia." Sun-sentinel.com. Sun-Sentinel, 26 Dec. 2003. Web. 22 Apr. 2013.
- ^ Pantin, Travis. "Milton Friedman Answers Phil Donahue's Charges." Nysun.com. The New York Sun, 12 Nov. 2007. Web. 22 Apr. 2013.
- ^ https://hiram7.wordpress.com/2009/03/12/there-is-no-better-alternative-than-capitalism/
- ^ The Communist Manifesto
- ^ "To Marx, the problem of reconstituting society did not arise from some prescription, motivated by his personal predilections; it followed, as an iron-clad historical necessity – on the one hand, from the productive forces grown to powerful maturity; on the other, from the impossibility further to organize these forces according to the will of the law of value." – Leon Trotsky, "Marxism in our Time", 1939 (Inevitability of Socialism), WSWS.org
- ^
- ^ Karl Marx. Chapter Twenty-Five: The General Law of Capitalist Accumulation. Das Kapital.
- ^ Dobb, Maurice 1947 Studies in the Development of Capitalism. New York: International Publishers Co., Inc.
- ^ David Harvey 1989 The Condition of Postmodernity
- ^ Wheen, Francis Books That Shook the World: Marx's Das Kapital1st ed. London: Atlantic Books, 2006
- ^
- ^ See, for example, the works of Stephen Resnick and Richard Wolff.
- ^
- ^ David Harvey. The Limits to Capital. Verso, 17 January 2007. ISBN 1844670953
- ^ Lawson, Victoria. Making Development Geography (Human Geography in the Making). New York: A Hodder Arnold Publication, 2007. Print.
- ^ Harvey, David. Notes towards a theory of uneven geographical development. Print.
- ^ Avi J. Cohen, "'The Laws of Returns Under Competitive Conditions': Progress in Microeconomics Since Sraffa (1926)?", Eastern Economic Journal, V. 9, N. 3 (Jul.-Sep.): 1983)
- ^ Paul A. Samuelson, "Reply" in Critical Essays on Piero Sraffa's Legacy in Economics (edited by H. D. Kurz) Cambridge University Press, 2000
- ^ Alan Kirman, "The Intrinsic Limits of Modern Economic Theory: The Emperor has No Clothes", The Economic Journal, V. 99, N. 395, Supplement: Conference Papers (1989): pp. 126–139
- ^ Alan P. Kirman, "Whom or What Does the Representative Individual Represent?" Journal of Economic Perspectives, V. 6, N. 2 (Spring 1992): pp. 117–136
- ^ Goodwin, N, Nelson, J; Ackerman, F & Weissskopf, T: Microeconomics in Context 2d ed. Sharpe 2009 ISBN 978-0-7656-2301-0
- ^
- ^
- ^
- ^
- ^ Ayn Rand , "What Is Capitalism?" Capitalism: The Unknown Ideal, 19
- ^ Ayn Rand,"Nature of Government", Virtue of selfishness.
- ^
- ^
- ^
- ^ a b Martin Wolf, Why Globalization works, pp. 43–45
- ^
- ^
- ^
- ^
- ^
- ^ Adrian Karatnycky. Freedom in the World: The Annual Survey of Political Rights and Civil Liberties. Transaction Publishers. 2001. ISBN 978-0-7658-0101-2. p. 11
- Notes
- Anti-capitalism
- Le Livre noir du capitalisme – 1998 French book (The Black Book of Capitalism)
- Corporatocracy
- Distributism
- Market socialism
- Economic sociology
- Perspectives on capitalism
- Varieties of Capitalism – 2001 book
- Post-Fordism
- Late capitalism
- State monopoly capitalism
See also
In his book The Road to Serfdom, Freidrich Hayek asserts that the economic freedom of capitalism is a requisite of political freedom. He argues that the market mechanism is the only way of deciding what to produce and how to distribute the items without using coercion. Milton Friedman, Andrew Brennan and Ronald Reagan also promoted this view. Friedman claimed that centralized economic operations are always accompanied by political repression. In his view, transactions in a market economy are voluntary, and that the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminish their power to coerce. Some of Friedman's views were shared by John Maynard Keynes, who believed that capitalism is vital for freedom to survive and thrive.[253][254] Freedom House, an American think tank that conducts international research on, and advocates for, democracy, political freedom, and human rights, has argued "there is a high and statistically significant correlation between the level of political freedom as measured by Freedom House and economic freedom as measured by the Wall Street Journal/Heritage Foundation survey."[255]
Economic freedom
Proponents argue that increasing GDP (per capita) is empirically shown to bring about improved standards of living, such as better availability of food, housing, clothing, and health care.[250] The decrease in the number of hours worked per week and the decreased participation of children and the elderly in the workforce have been attributed to capitalism.[251][252]
Between 1000 and 1820, the world economy grew sixfold, a faster rate than the population growth, so each individual enjoyed, on the average, a 50% increase in wealth. Between 1820 and 1998, world economy grew 50-fold, a much faster rate than the population growth, so each individual enjoyed, on the average, a 9-fold increase in wealth.[249] In most capitalist economic regions such as Europe, the United States, Canada, Australia and New Zealand, the economy grew 19-fold per person, even though these countries already had a higher starting level, and in Japan, which was poor in 1820, the increase per person was 31-fold. In the third world there was an increase, but only 5-fold per person.[249]
Many theorists and policymakers in predominantly capitalist nations have emphasised capitalism's ability to promote economic growth, as measured by Gross Domestic Product (GDP), capacity utilization or standard of living. This argument was central, for example, to Adam Smith's advocacy of letting a free market control production and price, and allocate resources. Many theorists have noted that this increase in global GDP over time coincides with the emergence of the modern world capitalist system.[247][248]
The novelist and philosopher Ayn Rand made positive moral defences of laissez-faire capitalism, most notably in her 1957 novel Atlas Shrugged, and in her 1966 collection of essays Capitalism: The Unknown Ideal. She argued that capitalism should be supported on moral grounds, not just on the basis of practical benefits.[241][242] She has significantly influenced conservative and libertarian supporters of capitalism, especially in the American Tea Party movement.[243] Ayn Rand defines capitalism as "a social system based on the recognition of individual rights, including property rights, in which all property is privately owned."[244] According to Rand, the role of government in a capitalist state has three broad categories of proper functions: First, the police "to protect men from criminals." Second, the armed services "to protect men from foreign invaders." Third, the law courts "to settle disputes among men according to objective laws."[245]
Ayn Rand
Austrian School economists have argued that capitalism can organise itself into a complex system without an external guidance or central planning mechanism. Friedrich Hayek considered the phenomenon of incentive to use their knowledge and resources to satisfy those wants. Thus the activities of millions of people, each seeking his own interest, are coordinated.[240]
Austrian School
- "If we mistakenly confuse precision with accuracy, then we might be misled into thinking that an explanation expressed in precise mathematical or graphical terms is somehow more rigorous or useful than one that takes into account particulars of history, institutions or business strategy. This is not the case. Therefore, it is important not to put too much confidence in the apparent precision of supply and demand graphs. Supply and demand analysis is a useful precisely formulated conceptual tool that clever people have devised to help us gain an abstract understanding of a complex world. It does not—nor should it be expected to—give us in addition an accurate and complete description of any particular real world market."[239]
Goodwin, Nelson, Ackerman, and Weisskopf write:
- "economists have no adequate model of how individuals and firms adjust prices in a competitive model. If all participants are price-takers by definition, then the actor who adjusts prices to eliminate excess demand is not specified".[238]
The model of prices being determined by supply and demand assumes perfect competition. But:
Aggregate excess demand in a market is the difference between the quantity demanded and the quantity supplied as a function of price. In the model with an upward-sloping supply curve and downward-sloping demand curve, the aggregate excess demand function only intersects the axis at one point, namely, at the point where the supply and demand curves intersect. The Sonnenschein–Mantel–Debreu theorem shows that the standard model cannot be rigorously derived in general from general equilibrium theory.[237]
- "What a cleaned-up version of Sraffa (1926) establishes is how nearly empty are all of Marshall's partial equilibrium boxes. To a logical purist of Wittgenstein and Sraffa class, the Marshallian partial equilibrium box of constant cost is even more empty than the box of increasing cost.".[236]
At least two assumptions are necessary for the validity of the standard model: first, that supply and demand are independent; second, that supply is "constrained by a fixed resource". If these conditions do not hold, then the Marshallian model cannot be sustained. Sraffa's critique focused on the inconsistency (except in implausible circumstances) of partial equilibrium analysis and the rationale for the upward slope of the supply curve in a market for a produced consumption good.[235] The notability of Sraffa's critique is also demonstrated by Paul A. Samuelson's comments and engagements with it over many years, for example:
Supply and demand
In Limits to Capital (1982), David Harvey outlines an overdetermined, "spatially restless" capitalism coupled with the spatiality of crisis formation and resolution.[232] Harvey used Marx's theory of crisis to aid his argument that capitalism must have its "fixes" but that we cannot predetermine what fixes will be implemented, nor in what form they will be. His work on contractions of capital accumulation and international movements of capitalist modes of production and money flows has been influential.[233] According to Harvey, capitalism creates the conditions for volatile and geographically uneven development [234]
Capitalist class processes, to these thinkers, are simply those in which surplus labor takes the form of surplus value, usable as capital; other tendencies for utilization of labor nonetheless exist simultaneously in existing societies where capitalist processes predominate. However, other late Marxian thinkers argue that a social formation as a whole may be classed as capitalist if capitalism is the mode by which a surplus is extracted, even if this surplus is not produced by capitalist activity, as when an absolute majority of the population is engaged in non-capitalist economic activity.[231]
Vladimir Lenin, in Imperialism, the Highest Stage of Capitalism (1916), further developed Marxist theory and argued that capitalism necessarily led to monopoly capitalism and the export of capital—which he also called "imperialism"—to find new markets and resources, representing the last and highest stage of capitalism.[229] Some 20th-century Marxian economists consider capitalism to be a social formation where capitalist class processes dominate, but are not exclusive.[230]
In conjunction with his criticism of capitalism was Marx's belief that the working class, due to its relationship to the means of production and numerical superiority under capitalism, would be the driving force behind the socialist revolution.[228] This argument is intertwined with Marx's version of the labor theory of value arguing that labor is the source of all value, and thus of profit.
This difference in values, he argues, constitutes surplus value, which the capitalists extract and accumulate. In his book Capital, Marx argues that the capitalist mode of production is distinguished by how the owners of capital extract this surplus from workers—all prior class societies had extracted surplus labor, but capitalism was new in doing so via the sale-value of produced commodities.[224] He argues that a core requirement of a capitalist society is that a large portion of the population must not possess sources of self-sustenance that would allow them to be independent, and are instead forced to sell their labor for a wage.[225][226][227]
Following Adam Smith, Marx distinguished the use value of commodities from their exchange value in the market. Capital, according to Marx, is created with the purchase of commodities for the purpose of creating new commodities with an exchange value higher than the sum of the original purchases. For Marx, the use of labor power had itself become a commodity under capitalism; the exchange value of labor power, as reflected in the wage, is less than the value it produces for the capitalist.
The capitalist stage of development or "socialist or communist transformation of human society as the end of the series of first aristocratic, then capitalist, and finally working class rule was reached.[222][223]
Marx considered capitalism to be a historically specific mode of production (the way in which the productive property is owned and controlled, combined with the corresponding social relations between individuals based on their connection with the process of production).[32]
Marxian responses
Some other political theories advocate a middle level of government involvement in the ability of individuals to realize their profit motive:
- Corporatism
- National socialism (Nazism), implemented in Nazi Germany
- Fascism, implemented in Fascist Italy
- Interventionist capitalism
Some political theories advocate extensive government regulation over the ability for businesses to pursue profit, without abolishing the profit system, namely:
Examples of economic models without the profit motive include:
Many economic and political theories advocate for an economy without the profit system and thus the profit motive. Economist Allan H. Meltzer has argued that all of these on anything more than a small scale have ended in authoritarianism.[221] These include:
Economist Milton Friedman has argued that greed and self-interest are universal human traits. On a 1979 episode of The Phil Donahue Show, Friedman states, "The world runs on individuals pursuing their separate interests." He continues by explaining that only in capitalist countries, where individuals can pursue their own self-interest, people have been able to escape from "grinding poverty."[220]
Free-market economists counter that the profit motive, coupled with competition, actually reduces the final price of an item for consumption, rather than raising it. They argue that businesses profit by selling a good at a lower price and at a greater volume than the competition. Economist Thomas Sowell uses supermarkets as an example to illustrate this point: "It has been estimated that a supermarket makes a clear profit of about a penny on a dollar of sales. If that sounds pretty skimpy, remember that it is collecting that penny on every dollar at several cash registers simultaneously and, in many cases, around the clock."[219]
Another common criticism of the profit motive is that it is believed to encourage selfishness and greed. Critics of the profit motive contend that companies disregard morals or public safety in the pursuit of profits.[218]
- We should have no talk of profit when it comes to helping people who are sick. The profit motive should be nowhere involved in this. And you know what? It's not fair to the insurance companies either because they have a fiduciary responsibility to make as much money as they can for their shareholders. Well, the way they make more money is to deny claims or to kick people off the rolls or to not even let people on the rolls because they have a pre-existing condition. You know, all of that is wrong.[217]
The majority of criticisms against the profit motive centre on the idea that profits should not supersede the needs of people. Michael Moore's film Sicko, for example, attacks the healthcare industry for its alleged emphasis on profits at the expense of patients.[216] Moore explains:
Profit motive
The term capitalism, in its modern sense, is often attributed to Karl Marx.[8][215] In his magnum opus Capital, Marx analysed the "capitalist mode of production" using a method of understanding today known as Marxism. However, Marx himself rarely used the term "capitalism", while it was used twice in the more political interpretations of his work, primarily authored by his collaborator Friedrich Engels. In the 20th century, defenders of the capitalist system often replaced the term capitalism with phrases such as free enterprise and private enterprise and replaced capitalist with rentier and investor in reaction to the negative connotations associated with capitalism.[93]
Proponents of capitalism argue that it creates more prosperity than any other economic system, and that its benefits are mainly to the ordinary person.[211] Critics of capitalism variously associate it with economic instability,[212] an inability to provide for the well-being of all people,[213] and an unsustainable danger to the natural environment.[195] Socialists maintain that, although capitalism is superior to all previously existing economic systems (such as feudalism or slavery), the contradiction between class interests will only be resolved by advancing into a completely new social system of production and distribution in which all persons have an equal relationship to the means of production.[214]
Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.[210]
Many religions have criticized or opposed specific elements of capitalism. Traditional Judaism, Christianity, and Islam forbid lending money at interest,[204][205] although alternative methods of banking have been developed. Some Christians have criticized capitalism for its materialist aspects and its inability to account for the wellbeing of all people.[206] Many of Jesus' parables deal with economic concerns: farming, shepherding, being in debt, doing hard labor, being excluded from banquets and the houses of the rich, and have implications for wealth and power distribution.[207][208] Catholic scholars and clergy have often criticized capitalism because of its disenfranchisement of the poor often promoting distributism as an alternative. In his 84-page apostolic exhortation Evangelii gaudium, Pope Francis described unfettered capitalism as "a new tyranny" and called on world leaders to fight rising poverty and inequality:[209]
Some scholars blame the [203]
Many aspects of capitalism have come under attack from the anti-globalization movement, which is primarily opposed to corporate capitalism. Environmentalists have argued that capitalism requires continual economic growth, and that it will inevitably deplete the finite natural resources of Earth.[195][196] Such critics argue that while this neoliberalism or contemporary capitalism has indeed increased global trade, it has also destroyed traditional ways of life, exacerbated inequality and increased global poverty - with more living today in abject poverty than before neoliberalism, and that environmental indicators indicate massive environmental degradation since the late 1970s.[18][197]
According to Immanuel Wallerstein, institutional racism has been "one of the most significant pillars" of the capitalist system and serves as "the ideological justification for the hierarchization of the work-force and its highly unequal distributions of reward."[194]
Some labor historians and scholars have argued that unfree labor — by slaves, indentured servants, prisoners or other coerced persons — is compatible with capitalist relations. Tom Brass argued that unfree labor is acceptable to capital.[190][191] Historian Greg Grandin argues that capitalism has its origins in slavery: "when historians talk about the Atlantic market revolution, they are talking about capitalism. And when they are talking about capitalism, they are talking about slavery."[192] Historian Edward E. Baptist claims that slavery was an integral component in the violent development of American and global capitalism.[193]
Critics of capitalism associate the economic system with social inequality; unfair distribution of wealth and power; materialism; repression of workers and trade unionists; social alienation; economic inequality; unemployment; and economic instability.[186] Many socialists consider capitalism to be irrational, in that production and the direction of the economy are unplanned, creating many inconsistencies and internal contradictions.[187][188] Capitalism and individual property rights have been associated with the tragedy of the anticommons. Marxian economist Richard D. Wolff postulates that capitalist economies prioritize profits and capital accumulation over the social needs of communities, and capitalist enterprises rarely include the workers in the basic decisions of the enterprise.[189]
Democratic socialists argue that the role of the state in a capitalist society is to defend the interests of the bourgeoisie.[180] These governments take actions to implement such things as unified national markets, national currencies, and customs system.[180] Capitalist governments have also been criticised as oligarchic in nature[181] due to the inevitable inequality[182][183] characteristic of economic progress.[184][185]
Adverse characteristics of capitalist governments
Government agencies regulate the standards of service in many industries, such as airlines and broadcasting, as well as financing a wide range of programs. In addition, the government regulates the flow of capital and uses financial tools such as the interest rate to control factors such as inflation and unemployment.[179]
Under some versions of capitalism, the government carries out a number of economic functions, such as issuing money, supervising public utilities and enforcing private contracts. Many countries have competition laws that prohibit monopolies and cartels from forming. Despite anti-monopoly laws, large corporations can form near-monopolies in some industries. Such firms can temporarily drop prices and accept losses to prevent competition from entering the market, and then raise them again once the threat of entry is reduced. In many countries, public utilities (e.g. electricity, heating fuel, communications) are able to operate as a monopoly under government regulation, due to high economies of scale.
In a capitalist system, the government does not prohibit private property or prevent individuals from working where they please. The government does not prevent firms from determining what wages they will pay and what prices they will charge for their products. Many countries, however, have minimum wage laws and minimum safety standards.
Role of government
Most modern capitalist economies are defined as "mixed economies" to some degree.
A mixed economy is a largely market-based economy consisting of both private and public ownership of the means of production and economic interventionism through macroeconomic policies intended to correct market failures, reduce unemployment and keep inflation low. The degree of intervention in markets varies among different countries. Some mixed economies, such as France under dirigisme, also featured a degree of indirect economic planning over a largely capitalist-based economy.
Mixed economy
Corporate capitalism is a free or mixed-market economy characterized by the dominance of hierarchical, bureaucratic corporations.
Corporate capitalism
The debate between proponents of private versus state capitalism is centered around questions of managerial efficacy, productive efficiency, and fair distribution of wealth.
The term is not used by Austrian school economists to describe state ownership of the means of production. The economist Ludwig von Mises argued that the designation of "state capitalism" was simply a new label for the old labels of "state socialism" and "planned economy", and differed only in non-essentials from these earlier designations.[178]
[177][176][175] Some economists and left-wing academics including
Friedrich Engels, in Socialism: Utopian and Scientific, argued that state-owned enterprises would characterize the final stage of capitalism, consisting of ownership and management of large-scale production and communication by the bourgeois state.[172] In his writings, Vladimir Lenin characterized the economy of Soviet Russia as state capitalist, believing state capitalism to be an early step toward the development of socialism.[173][174]
Eastern Bloc. According to Aldo Musacchio, a professor at Harvard Business School, state capitalism is a system in which governments, whether democratic or autocratic, exercise a widespread influence on the economy either through direct ownership or various subsidies. Musacchio notes a number of differences between today's state capitalism and its predecessors. In his opinion, gone are the days when governments appointed bureaucrats to run companies: the world's largest state-owned enterprises are now traded on the public markets and kept in good health by large institutional investors. Contemporary state capitalism is associated with the East Asian model of capitalism, dirigisme and the economy of Norway.[170] Alternatively, Merriam-Webster defines state capitalism as "an economic system in which private capitalism is modified by a varying degree of government ownership and control."[171]
State capitalism
Rhine capitalism refers to the contemporary model of capitalism and adaptation of the social market model that exists in continental Western Europe today.
A social-market economy is a nominally free-market system where government intervention in price formation is kept to a minimum but the state provides significant services in the area of social security, unemployment benefits and recognition of labor rights through national collective bargaining arrangements. This model is prominent in Western and Northern European countries, and Japan, albeit in slightly different configurations. The vast majority of enterprises are privately owned in this economic model.
Social-market economy
Free-market economy refers to a capitalist economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy. It typically entails support for highly competitive markets and private ownership of productive enterprises. Laissez-faire is a more extensive form of free-market economy where the role of the state is limited to protecting property rights.
Free-market economy
Mercantilism is a nationalist form of early capitalism that came into existence approximately in the late 16th century. It is characterized by the intertwining of national business interests to state-interest and imperialism, and consequently, the state apparatus is utilized to advance national business interests abroad. An example of this is colonists living in America who were only allowed to trade with and purchase goods from their respective mother countries (e. g. Britain, Portugal, France). Mercantilism was driven by the belief that the wealth of a nation is increased through a positive balance of trade with other nations; it corresponds to the phase of capitalist development sometimes called the Primitive accumulation of capital.
Braudel would later point to two earlier periods when finance capitalism had emerged in human history – with the Genoese in the 16th century and the Dutch in the 17th and 18th centuries – although at those points it was from commercial capitalism that it developed.[168] Giovanni Arrighi extended Braudel's analysis to suggest that a predominance of finance capitalism is a recurring, long-term phenomenon, whenever a previous phase of commercial/industrial capitalist expansion reaches a plateau.[169]
Rudolf Hilferding is credited with first bringing the term finance capitalism into prominence, with his 1910 study of the links between German trusts, banks, and monopolies before World War I – a study subsumed by Lenin into his wartime analysis of the imperialist relations of the great world powers.[165] Lenin concluded of the banks at that time that they were "the chief nerve centres of the whole capitalist system of national economy":[166] for the Comintern, the phrase "dictatorship of finance capitalism"[167] became a regular one.
In their critique of capitalism, Marxism and Leninism both emphasise the role of "Finance Capital" as the determining and ruling class interest in capitalist society, particularly in the latter stages.[163][164]
Marxian and Leninist analysis
C. H. Sisson saw the underlying theme of The Cantos of Ezra Pound as the depredations of finance capital: "the monstrous aberration of a world in which reality is distorted, down to a detail never so comprehensively implicated before, by the pull of a fictitious money".[162]
Financial capitalism is thus a form of capitalism where the intermediation of saving to investment becomes a dominant function in the economy, with wider implications for the political process and social evolution:[156] since the late 20th century it has become the predominant force in the global economy,[157] whether in neoliberal or other form.[158] Essentially, finance capitalism is a noticeable aspect of modern capitalism,[159] characterised by a predominance of the pursuit of profit from the purchase and sale of, or investment in, currencies and financial products such as bonds, stocks, futures and other derivatives. It also includes the lending of money at interest; and is seen by Marxist analysts (from whom the term finance capitalism originally derived) as being exploitative by supplying income to non-labourers.[160] Academic defenders of the economic concept of capitalism, such as Eugen von Böhm-Bawerk, see such profits as part of the roundabout process by which it grows and hedges against inevitable risks.[161]
Finance capitalism is the subordination of processes of production to the accumulation of money profits in a financial system.[154] The meaning of the term financial capitalism goes beyond the importance of financial intermediation in the modern capitalist economy. It also encompasses the significant influence of the wealth holders on the political process and the aims of economic policy.[155]
Finance capitalism
- Concentration of industrial activity in a few large firms
- Constant reliance on the state to stabilise the economic system
- A formally democratic government that legitimises the activities of the state and dissipates opposition to the system
- The use of nominal wage increases to pacify the most restless segments of the work force[153]
Jürgen Habermas has been a major contributor to the analysis of advanced-capitalistic societies. Habermas observed four general features that characterise advanced capitalism:
Advanced capitalism is the situation that pertains to a society in which the capitalist model has been integrated and developed deeply and extensively for a prolonged period. Various writers identify Antonio Gramsci as an influential early theorist of advanced capitalism, even if he did not use the term himself. In his writings Gramsci sought to explain how capitalism had adapted to avoid the revolutionary overthrow that had seemed inevitable in the 19th century. At the heart of his explanation was the decline of raw coercion as a tool of class power, replaced by use of civil society institutions to manipulate public ideology in the capitalists' favour.[150][151][152]
Advanced capitalism
There are many variants of capitalism in existence that differ according to country and region. They vary in their institutional makeup and by their economic policies. The common features among all the different forms of capitalism is that they are based on the production of goods and services for profit, predominantly market-based allocation of resources, and they are structured upon the accumulation of capital. The major forms of capitalism are listed below:
Types of capitalism
In modern times, it has often been possible to rebuild physical capital assets destroyed in wars completely within the space of about 10 years, except in cases of severe pollution by chemical warfare or other kinds of irreparable devastation. However, damage to human capital has been much more devastating, in terms of fatalities (in the case of World War II, about 55 million deaths), permanent physical disability, enduring ethnic hostility and psychological injuries which have effects for at least several generations.
In Italy, the victorious Allies did three things in 1945: they imposed their absolute military authority; they quickly disarmed the Italian partisans from a very large stock of weapons; and they agreed to a state guarantee of wage payments, as well as a veto on all sackings of workers from their jobs.[147] Although the Italian Communist Party grew very large immediately after the war ended—it achieved a membership of 1.7 million people in a population of 45 million—it was outmaneouvred through a complicated political battle by the Christian Democrats, after three years.[148] In the 1950s, an economic boom began in Italy, at first fuelled by internal demand, and then also by exports.[149]
The first big strike-wave in the Ruhr occurred in early 1947—it was about food rations and housing, but soon there were demands for nationalisation. The U.S. appointed military Governor (Newman) however stated at the time that he had the power to break strikes by withholding food rations. The clear message was: "no work, no eat". As the military controls in Western Germany were nearly all relinquished and the Germans were allowed to rebuild their own economy with Marshal Plan aid things rapidly improved. By 1951, German industrial production had overtaken the prewar level. The Marshall Aid funds were important, but, after the currency reform (which permitted German capitalists to revalue their assets) and the establishment of a new political system, much more important was the commitment of the USA to rebuilding German capitalism and establishing a free market economy and government, rather than keeping Germany in a weak position. Initially, average real wages remained low, lower even than in 1938, until the early 1950s, while profitability was unusually high. So the total investment fund, aided by credits, was also high, resulting in a high rate of capital accumulation which was nearly all reinvested in new construction or new tools. This was called the German economic miracle or "Wirtschaftswunder".[146]
Initially, in May 1945, newly installed U.S. President Harry S. Truman's directive had been that no steps would be taken towards economic rehabilitation of Germany. In fact, the initial industry plan of 1946 prohibited production in excess of half of the 1938 level; the iron and steel industry was allowed to produce only less than a third of pre-war output. These plans were rapidly revised and better plans were instituted. In 1946, over 10% of Germany's physical capital stock (plant & equipment) was also dismantled and confiscated, most of it going to the USSR. By 1947, industrial production in Germany was at 1/3 of the 1938 level, and industrial investment at about 1/2 the 1938 level.
However, by the first quarter of 1946 European rail traffic, which was given assistance and preferences (by western appointed military governors) for resources and material as an essential asset, regained its prewar operational level. At the end of the year, 90% of Germany's railway lines were operating again. In retrospect, the rapidity of infrastructure reconstruction appears astonishing.
Germany's total war damage was estimated at about 17.5% of the pre-war total capital stock by value, i.e., about 1/6. In the Berlin area alone, there were 8 million refugees lacking basic necessities. In 1945, less than 10% of the railways were still operating. 2395 rail bridges were destroyed and a total of 7500 bridges, 10,000 locomotives and more than 100,000 goods wagons were destroyed. Less than 40% of the remaining locomotives were operational.
War destruction can be illustrated by looking at World War II. Industrial war damage was heaviest in Japan, where 1/4 of factory buildings and 1/3 of plant & equipment were destroyed; 1/7 of electric power-generating capacity was destroyed and 6/7 of oil refining capacity. The Japanese merchant fleet lost 80% of their ships. In Germany in 1944, when air attacks were heaviest, 6.5% of machine tools were damaged or destroyed, but around 90% were later repaired. About 10% of steel production capacity was lost. In Europe, the United States and the Soviet Union enormous resources were accumulated and ultimately dissipated as planes, ships, tanks, etc. were built and then lost or destroyed.
War typically causes the diversion, destruction and creation of capital assets as capital assets are both destroyed or consumed and diverted to types of production needed to fight the war. Many assets are wasted and in some few cases created specifically to fight a war. War driven demands may be a powerful stimulus for the accumulation of capital and production capability in limited areas and market expansion outside the immediate theatre of war. Often this has induced laws against perceived and real war profiteering. The total hours worked in the United States rose by 34 percent during World War II, even although the military draft reduced the civilian labor force by 11 percent.[145]
Capitalism and war
In his 1870 essay "On the Graphical Representation of Supply and Demand", Fleeming Jenkin in the course of "introduc[ing] the diagrammatic method into the English economic literature" published the first drawing of supply and demand curves therein,[143] including comparative statics from a shift of supply or demand and application to the labor market.[144] The model was further developed and popularized by Alfred Marshall in the 1890 textbook Principles of Economics.[142]
During the late 19th century the marginalist school of thought emerged. This field mainly was started by Stanley Jevons, Carl Menger, and Léon Walras. The key idea was that the price was set by the most expensive price, that is, the price at the margin. This was a substantial change from Adam Smith's thoughts on determining the supply price.
In The Wealth of Nations, Smith generally assumed that the supply price was fixed but that its "merit" (value) would decrease as its "scarcity" increased, in effect what was later called the law of demand also. Ricardo, in Principles of Political Economy and Taxation, more rigorously laid down the idea of the assumptions that were used to build his ideas of supply and demand. Antoine Augustin Cournot first developed a mathematical model of supply and demand in his 1838 Researches into the Mathematical Principles of Wealth, including diagrams.
The phrase "supply and demand" was first used by James Denham-Steuart in his Inquiry into the Principles of Political Economy, published in 1767. Adam Smith used the phrase in his 1776 book The Wealth of Nations, and David Ricardo titled one chapter of his 1817 work Principles of Political Economy and Taxation "On the Influence of Demand and Supply on Price".[142]
John Locke's 1691 work Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money.[141] includes an early and clear description of supply and demand and their relationship. In this description demand is rent: "The price of any commodity rises or falls by the proportion of the number of buyer and sellers" and "that which regulates the price... [of goods] is nothing else but their quantity in proportion to their rent."
|If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down.
— Ibn Taymiyyah, [140]
Demand and supply have also been generalised to explain macroeconomic variables in a market economy, including the quantity of total output and the general price level. The Aggregate Demand-Aggregate Supply model may be the most direct application of supply and demand to macroeconomics, but other macroeconomic models also use supply and demand. Compared to microeconomic uses of demand and supply, different (and more controversial) theoretical considerations apply to such macroeconomic counterparts as aggregate demand and aggregate supply. Demand and supply are also used in macroeconomic theory to relate money supply and money demand to interest rates, and to relate labor supply and labor demand to wage rates.
Macroeconomic uses of demand and supply
Demand and supply relations in a market can be statistically estimated from price, quantity, and other data with sufficient information in the model. This can be done with simultaneous-equation methods of estimation in econometrics. Such methods allow solving for the model-relevant "structural coefficients," the estimated algebraic counterparts of the theory. The Parameter identification problem is a common issue in "structural estimation." Typically, data on exogenous variables (that is, variables other than price and quantity, both of which are endogenous variables) are needed to perform such an estimation. An alternative to "structural estimation" is reduced-form estimation, which regresses each of the endogenous variables on the respective exogenous variables.
Empirical estimation
Léon Walras first formalised the idea of a one-period economic equilibrium of the general economic system, but it was French economist Antoine Augustin Cournot and English political economist Alfred Marshall who developed tractable models to analyse an economic system.
Hence this analysis is considered to be useful in constricted markets.
Partial equilibrium analysis examines the effects of policy action in creating equilibrium only in that particular sector or market which is directly affected, ignoring its effect in any other market or industry assuming that they being small will have little impact if any.
Here the dynamic process is that prices adjust until supply equals demand. It is a powerfully simple technique that allows one to study equilibrium, efficiency and comparative statics. The stringency of the simplifying assumptions inherent in this approach make the model considerably more tractable, but may produce results which, while seemingly precise, do not effectively model real world economic phenomena.
The supply-and-demand model is a partial equilibrium model of economic equilibrium, where the clearance on the market of some specific goods is obtained independently from prices and quantities in other markets. In other words, the prices of all substitutes and complements, as well as income levels of consumers are constant. This makes analysis much simpler than in a general equilibrium model which includes an entire economy.
Jain proposes (attributed to [139]
Partial equilibrium, as the name suggests, takes into consideration only a part of the market to attain equilibrium.
Partial equilibrium
In the context of supply and demand, economic equilibrium refers to a state where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change. For example, in the standard text-book model of perfect competition, equilibrium occurs at the point at which quantity demanded and quantity supplied are equal.[138] Market equilibrium in this case refers to a condition where a market price is established through competition such that the amount of goods or services sought by buyers is equal to the amount of goods or services produced by sellers. This price is often called the competitive price or market clearing price and will tend not to change unless demand or supply changes and the quantity is called "competitive quantity" or market clearing quantity.
- Income.
- Tastes & preferences.
- Prices of related goods and services.
- Consumers' expectations about future prices and incomes that can be checked.
- Number of potential consumers
The determinants of demand are:
Like with supply curves, economists distinguish between the demand curve of an individual and the market demand curve. The market demand curve is obtained by summing the quantities demanded by all consumers at each potential price. Thus, in the graph of the demand curve, individuals' demand curves are added horizontally to obtain the market demand curve.
By its very nature, conceptualising a demand curve requires that the purchaser be a perfect competitor—that is, that the purchaser has no influence over the market price. This is true because each point on the demand curve is the answer to the question "If this buyer is faced with this potential price, how much of the product will it purchase?" If a buyer has market power, so its decision of how much to buy influences the market price, then the buyer is not "faced with" any price, and the question is meaningless.
While the aforementioned demand curve is generally downward-sloping, there may be rare examples of goods that have upward-sloping demand curves. Two different hypothetical types of goods with upward-sloping demand curves are Giffen goods (an inferior but staple good) and Veblen goods (goods made more fashionable by a higher price).
Just like the supply curves reflect marginal cost curves, demand curves are determined by marginal utility curves.[137] Consumers will be willing to buy a given quantity of a good, at a given price, if the marginal utility of additional consumption is equal to the opportunity cost determined by the price, that is, the marginal utility of alternative consumption choices. The demand schedule is defined as the willingness and ability of a consumer to purchase a given product in a given frame of time.
A demand schedule, depicted graphically as the demand curve, represents the amount of some goods that buyers are willing and able to purchase at various prices, assuming all determinants of demand other than the price of the good in question, such as income, tastes and preferences, the price of substitute goods, and the price of complementary goods, remain the same. Following the law of demand, the demand curve is almost always represented as downward-sloping, meaning that as price decreases, consumers will buy more of the good.[136]
Demand schedule
- Production costs: how much a goods costs to be produced. Production costs are the cost of the inputs; primarily labor, capital, energy and materials. They depend on the technology used in production, and/or technological advances. See: Productivity
- Firms' expectations about future prices
- Number of suppliers
The determinants of supply are:
Economists also distinguish the short-run market supply curve from the long-run market supply curve. In this context, two things are assumed constant by definition of the short run: the availability of one or more fixed inputs (typically physical capital), and the number of firms in the industry. In the long-run, firms can adjust their holdings of physical capital, enabling them to better adjust their quantity supplied at any given price. Furthermore, in the long-run potential competitors can enter or exit the industry in response to market conditions. For both of these reasons, long-run market supply curves are generally flatter than their short-run counterparts.
Economists distinguish between the supply curve of an individual firm and between the market supply curve. The market supply curve is obtained by summing the quantities supplied by all suppliers at each potential price. Thus, in the graph of the supply curve, individual firms' supply curves are added horizontally to obtain the market supply curve.
By its very nature, conceptualising a supply curve requires the firm to be a perfect competitor (i.e. to have no influence over the market price). This is true because each point on the supply curve is the answer to the question "If this firm is faced with this potential price, how much output will it be able to and willing to sell?" If a firm has market power, its decision of how much output to provide to the market influences the market price, therefore the firm is not "faced with" any price, and the question becomes less relevant.
A hike in the cost of raw goods would decrease supply, shifting costs up, while a discount would increase supply, shifting costs down and hurting producers as producer surplus decreases.
A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied. Under the assumption of perfect competition, supply is determined by marginal cost. That is, firms will produce additional output while the cost of producing an extra unit of output is less than the price they would receive.
Supply schedule
Since determinants of supply and demand other than the price of the goods in question are not explicitly represented in the supply-demand diagram, changes in the values of these variables are represented by moving the supply and demand curves (often described as "shifts" in the curves). By contrast, responses to changes in the price of the good are represented as movements along unchanged supply and demand curves.
Although it is normal to regard the quantity demanded and the quantity supplied as functions of the price of the goods, the standard graphical representation, usually attributed to Alfred Marshall, has price on the vertical axis and quantity on the horizontal axis, the opposite of the standard convention for the representation of a mathematical function.
Graphical representation of supply and demand
- If demand increases (demand curve shifts to the right) and supply remains unchanged, a shortage occurs, leading to a higher equilibrium price.
- If demand decreases (demand curve shifts to the left) and supply remains unchanged, a surplus occurs, leading to a lower equilibrium price.
- If demand remains unchanged and supply increases (supply curve shifts to the right), a surplus occurs, leading to a lower equilibrium price.
- If demand remains unchanged and supply decreases (supply curve shifts to the left), a shortage occurs, leading to a higher equilibrium price.
The four basic laws of supply and demand are:[135]:37
In capitalist economic structures, supply and demand is an economic model of price determination in a market. It concludes that in a competitive market, the unit price for a particular good will vary until it settles at a point where the quantity demanded by consumers (at current price) will equal the quantity supplied by producers (at current price), resulting in an economic equilibrium for price and quantity.
Supply and demand
In the third volume of Das Kapital, Marx refers to the "fetishism of capital" reaching its highest point with interest-bearing capital, because now capital seems to grow of its own accord without anybody doing anything. In this case,
This interpretation emphasises that capital ownership, predicated on command over labor, is a social relation: the growth of capital implies the growth of the working class (a "law of accumulation"). In the first volume of Das Kapital Marx had illustrated this idea with reference to Edward Gibbon Wakefield's theory of colonisation:
"Accumulation of capital" sometimes also refers in Marxist writings to the reproduction of capitalist social relations (institutions) on a larger scale over time, i.e., the expansion of the size of the proletariat and of the wealth owned by the bourgeoisie.
Balanced economic growth requires that different factors in the accumulation process expand in appropriate proportions. But markets themselves cannot spontaneously create that balance, in fact what drives business activity is precisely the imbalances between supply and demand: inequality is the motor of growth. This partly explains why the worldwide pattern of economic growth is very uneven and unequal, even although markets have existed almost everywhere for a very long-time. Some people argue that it also explains government regulation of market trade and protectionism.
Ernest Mandel introduced the additional concept of contracted economic reproduction, i.e. reduced accumulation where business operating at a loss outnumbers growing business, or economic reproduction on a decreasing scale, for example due to wars, natural disasters or devalorisation.
The bourgeois claim there is no economic law according to which capital is necessarily re-invested in the expansion of production, that such depends on anticipated profitability, market expectations and perceptions of investment risk. Such statements only explain the subjective experiences of investors and ignore the objective realities which would influence such opinions. As Marx states in Vol.2, simple reproduction only exists if the variable and surplus capital realised by Dept. 1—producers of means of production—exactly equals that of the constant capital of Dept. 2, producers of articles of consumption (pg 524). Such equilibrium rests on various assumptions, such as a constant labor supply (no population growth). Accumulation does not imply a necessary change in total magnitude of value produced but can simply refer to a change in the composition of an industry (pg. 514).
His discussion of the simple and expanded reproduction of the conditions of production offers a more sophisticated model of the parameters of the accumulation process as a whole. At simple reproduction, a sufficient amount is produced to sustain society at the given living standard; the stock of capital stays constant. At expanded reproduction, more product-value is produced than is necessary to sustain society at a given living standard (a surplus product); the additional product-value is available for investments which enlarge the scale and variety of production.
In volume 2 of Das Kapital, Marx continues the story and shows that, with the aid of bank credit, capital in search of growth can more or less smoothly mutate from one form to another, alternately taking the form of money capital (liquid deposits, securities, etc.), commodity capital (tradable products, real estate etc.), or production capital (means of production and labor power).
Simple and expanded reproduction
All of these moments do not refer simply to an "economic" or commercial process. Rather, they assume the existence of legal, social, cultural and economic power conditions, without which creation, distribution and circulation of the new wealth could not occur. This becomes especially clear when the attempt is made to create a market where none exists, or where people refuse to trade.
- The initial investment of capital (which could be borrowed capital) in means of production and labor power.
- The command over surplus-labour and its appropriation.
- The valorisation (increase in value) of capital through production of new outputs.
- The appropriation of the new output produced by employees, containing the added value.
- The realisation of surplus-value through output sales.
- The appropriation of realised surplus-value as (profit) income after deduction of costs.
- The reinvestment of profit income in production.
Strictly speaking, capital has accumulated only when realised profit income has been reinvested in capital assets. But the process of capital accumulation in production has, as suggested in the first volume of Marx's Das Kapital, at least 7 distinct but linked moments:
The circuit of capital accumulation from production
Ernest Mandel emphasised that the rhythm of capital accumulation and growth depended critically on (1) the division of a society's social product between "necessary product" and "surplus product", and (2) the division of the surplus product between investment and consumption. In turn, this allocation pattern reflected the outcome of competition among capitalists, competition between capitalists and workers, and competition between workers. The pattern of capital accumulation can therefore never be simply explained by commercial factors, it also involved social factors and power relationships.
As a rule, the larger the total sum of capital invested, the higher the return on investment will be. The more capital one owns, the more capital one can also borrow and reinvest at a higher rate of profit or interest. The inverse is also true, and this is one factor in the widening gap between the rich and the poor.
In a stagnating, decadent capitalism, the accumulation process is increasingly oriented towards investment on military and security forces, real estate, financial speculation, and luxury consumption. In that case, income from value-adding production will decline in favour of interest, rent and tax income, with as a corollary an increase in the level of permanent unemployment.
In a boom period of capitalism, the growth of investments is cumulative, i.e. one investment leads to another, leading to a constantly expanding market, an expanding labor force, and an increase in the standard of living for the majority of the people.
Other things being equal, the greater the amount of profit-income that is disbursed as personal earnings and used for consumptive purposes, the lower the savings rate and the lower the rate of accumulation is likely to be. However, earnings spent on consumption can also stimulate market demand and higher investment. This is the cause of endless controversies in economic theory about "how much to spend, and how much to save".
In Marxian economics, the rate of accumulation is defined as (1) the value of the real net increase in the stock of capital in an accounting period, (2) the proportion of realised surplus-value or profit-income which is reinvested, rather than consumed. This rate can be expressed by means of various ratios between the original capital outlay, the realised turnover, surplus-value or profit and reinvestments (see, e.g., the writings of the economist Michał Kalecki).
The rate of accumulation
"It is concentration of capitals already formed, destruction of their individual independence, expropriation of capitalist by capitalist, transformation of many small into few large capitals.... Capital grows in one place to a huge mass in a single hand, because it has in another place been lost by many.... The battle of competition is fought by cheapening of commodities. The cheapness of commodities demands, caeteris paribus, on the productiveness of labour, and this again on the scale of production. Therefore, the larger capitals beat the smaller. It will further be remembered that, with the development of the capitalist mode of production, there is an increase in the minimum amount of individual capital necessary to carry on a business under its normal conditions. The smaller capitals, therefore, crowd into spheres of production which Modern Industry has only sporadically or incompletely got hold of. Here competition rages.... It always ends in the ruin of many small capitalists, whose capitals partly pass into the hands of their conquerors, partly vanish."[134]
According to Marx, capital has the tendency for concentration and centralisation in the hands of the wealthy. Marx explains:
Concentration and centralisation
The continuation and progress of capital accumulation depends on the removal of obstacles to the expansion of trade, and this has historically often been a violent process. As markets expand, more and more new opportunities develop for accumulating capital, because more and more types of goods and services can be traded in. But capital accumulation may also confront resistance, when people refuse to sell, or refuse to buy (for example a strike by investors or workers, or consumer resistance). What spurs accumulation is competition; in business, if you don't go forward, you go backward, and unless the law prevents it, the strong will exploit the weak. The basis of capital accumulation is essentially capitalising on the labour effort of others. When the "economic cake" expands, this may be obscured because all can gain from trade. But when the "economic cake" shrinks, then capital accumulation can only occur by taking income or assets from other people, other social classes, or other nations. The point is that to exist, capital must always grow, and to ensure that it will grow, people are prepared to do almost anything.
In Karl Marx's economic theory, capital accumulation refers to the operation whereby profits are reinvested increasing the total quantity of capital. Capital is viewed by Marx as expanding value, that is, in other terms, as a sum of capital, usually expressed in money, that is transformed through human labor into a larger value, extracted as profits and expressed as money. Here, capital is defined essentially as economic or commercial asset value in search of additional value or surplus-value. This requires property relations which enable objects of value to be appropriated and owned, and trading rights to be established. Capital accumulation has a double origin, namely in trade and in expropriation, both of a legal or illegal kind. The reason is that a stock of capital can be increased through a process of exchange or "trading up" but also through directly taking an asset or resource from someone else, without compensation. David Harvey calls this accumulation by dispossession.
Organisations such as the
Accumulation can be measured as the monetary value of investments, the amount of income that is reinvested, or as the change in the value of assets owned (the increase in the value of the capital stock). Using company balance sheets, tax data and direct surveys as a basis, government statisticians estimate total investments and assets for the purpose of national accounts, national balance of payments and flow of funds statistics. Usually the Reserve Banks and the Treasury provide interpretations and analysis of this data. Standard indicators include Capital formation, Gross fixed capital formation, fixed capital, household asset wealth, and foreign direct investment.
In economics, accounting and Marxian economics, capital accumulation is often equated with investment of profit income or savings, especially in real capital goods. The concentration and centralisation of capital are two of the results of such accumulation. In modern macroeconomics and econometrics the term capital formation is often used in preference to "accumulation", though the United Nations Conference on Trade and Development (UNCTAD) refers nowadays to "accumulation". The term is occasionally used in national accounts.
The accumulation of capital refers to the process of "making money", or growing an initial sum of money through investment in production. Capitalism is based around the accumulation of capital, whereby financial capital is invested in order to make a profit and then reinvested into further production in a continuous process of accumulation. In Marxian economic theory, this dynamic is called the law of value. Capital accumulation forms the basis of capitalism, where economic activity is structured around the accumulation of capital, defined as investment in order to realize a financial profit.[132] In this context, "capital" is defined as money or a financial asset invested for the purpose of making more money (whether in the form of profit, rent, interest, royalties, capital gain or some other kind of return).[133]
Capital accumulation
From the end of the 19th century onwards, Capitalist societies began to experience a transition from free competition to monopolistic takes on the capitalist economic system,[131] characterised by the advent of large firms taking control of specific industries.[131] A prime example in the United States at the time was Standard Oil.
The doctrine of free competition is essential to the functioning of a capitalist economy, and as such, anti-competitive behaviour in the market poses a crucial weakness in capitalist economics. Issues such as monopolistic behaviour on the part of corporations, and aspects of intellectual property laws pose problems to capitalist economies.
Anti-competitive practices
Market failure occurs when an externality is present and a market will either under-produce a product with a positive externalisation or overproduce a product that generates a negative externalisation. Air pollution, for instance, is a negative externalisation that cannot be incorporated into markets as the world's air is not owned and then sold for use to polluters. So, too much pollution could be emitted and people not involved in the production pay the cost of the pollution instead of the firm that initially emitted the air pollution. Critics of market failure theory, like Ronald Coase, Harold Demsetz, and James M. Buchanan argue that government programs and policies also fall short of absolute perfection. Market failures are often small, and government failures are sometimes large. It is therefore the case that imperfect markets are often better than imperfect governmental alternatives. While all nations currently have some kind of market regulations, the desirable degree of regulation is disputed.
Systemic weaknesses
For Marxists, labour-as-commodity, which is how they regard wage labour,[127] provides a fundamental point of attack against capitalism.[128] "It can be persuasively argued," noted one concerned philosopher, "that the conception of the worker's labour as a commodity confirms Marx's stigmatization of the wage system of private capitalism as 'wage-slavery;' that is, as an instrument of the capitalist's for reducing the worker's condition to that of a slave, if not below it."[129] That this objection is fundamental follows immediately from Marx's conclusion that wage labour is the very foundation of capitalism: "Without a class dependent on wages, the moment individuals confront each other as free persons, there can be no production of surplus value; without the production of surplus-value there can be no capitalist production, and hence no capital and no capitalist!"[130]
- the existence of property not intended for active use,
- the concentration of ownership in few hands,
- the lack of direct access by workers to the means of production and consumption goods
- the perpetuation of a reserve army of unemployed workers.
To marxian and anarchist thinkers like Bakunin and Kropotkin, wage slavery was a class condition in place due to the existence of private property and the state. This class situation rested primarily on:
. Roman Catholic Church school of thought within the Distributist as well as the [126],Thomas Paine and Silvio Gesell [125][124]
The interest of the dealers... in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public… [They] have generally an interest to deceive and even to oppress the public… We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labor above their actual rate… It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms.
Adam Smith noted that employers often conspire together to keep wages low:[120]
Some anti-capitalist thinkers claim that the elite maintain wage slavery and a divided working class through their influence over the media and entertainment industry,[117][118] educational institutions, unjust laws, nationalist and corporate propaganda, pressures and incentives to internalise values serviceable to the power structure, state violence, fear of unemployment[119] and a historical legacy of exploitation and profit accumulation/transfer under prior systems, which shaped the development of economic theory:
[115] According to
The slave, together with his labour-power, was sold to his owner once for all.... The [wage] labourer, on the other hand, sells his very self, and that by fractions.... He [belongs] to the capitalist class; and it is for him ... to find a buyer in this capitalist class.[111]
Similarities between wage labour and slavery were noted as early as Cicero in Ancient Rome.[105] With the advent of the industrial revolution, thinkers such as Proudhon and Marx elaborated the comparison between wage labour and slavery in the context of a critique of societal property not intended for active personal use,[106][107] while Luddites emphasised the dehumanisation brought about by machines. Before the American Civil War, Southern defenders of African American slavery invoked the concept of wage slavery to favorably compare the condition of their slaves to workers in the North.[108][109] The United States abolished slavery during the Civil War, but labor union activists found the metaphor useful. According to Lawrence Glickman, in the Gilded Age, "References abounded in the labor press, and it is hard to find a speech by a labour leader without the phrase."[110]
Wage labour has long been compared to slavery.[98][99][100][101] As a result, the term [103]
Comparison to slavery
- employment status: a worker could be employed full-time, part-time, or on a casual basis. He or she could be employed for example temporarily for a specific project only, or on a permanent basis. Part-time wage labour could combine with part-time self-employment. The worker could be employed also as an apprentice.
- civil (legal) status: the worker could for example be a free citizen, an indentured labourer, the subject of forced labour (including some prison or army labour); a worker could be assigned by the political authorities to a task, they could be a semi-slave or a serf bound to the land who is hired out part of the time. So the labour might be performed on a more or less voluntary basis, or on a more or less involuntary basis, in which there are many gradations.
- method of payment (remuneration or compensation). The work done could be paid "in cash" (a money-wage) or "in kind" (through receiving goods and/or services), or in the form of "piece rates" where the wage is directly dependent on how much the worker produces. In some cases, the worker might be paid in the form of credit used to buy goods and services, or in the form of stock options or shares in an enterprise.
- method of hiring: the worker might engage in a labour-contract on his or her own initiative, or he or she might hire out their labour as part of a group. But he or she may also hire out their labour via an intermediary (such as an employment agency) to a third party. In this case, he or she is paid by the intermediary, but works for a third party which pays the intermediary. In some cases, labour is subcontracted several times, with several intermediaries. Another possibility is that the worker is assigned or posted to a job by a political authority, or that an agency hires out a worker to an enterprise together with means of production.
The most common form of wage labour currently is ordinary direct, or "full-time", employment in which a free worker sells his or her labour for an indeterminate time (from a few years to the entire career of the worker), in return for a money-wage or salary and a continuing relationship with the employer which it does not in general offer contractors or other irregular staff. However, wage labour takes many other forms, and explicit as opposed to implicit (i.e. conditioned by local labour and tax law) contracts are not uncommon. Economic history shows a great variety of ways in which labour is traded and exchanged. The differences show up in the form of:
A point of criticism is that after people have been compelled by economic necessity to no feasible alternative than that of wage labour, Exploitation occurs; thus the claim that wage labour is "voluntary" on the part of the labourer is considered a red herring as the relationship is only entered into due to systemic coercion brought about by the inequality of bargaining power between labour and capital as classes.
Critics of the capitalist mode of production see wage labour as a major, if not defining, aspect of hierarchical industrial systems. Most opponents of the institution support worker self-management and economic democracy as alternatives to both wage labour and to capitalism. While most opponents of wage labour blame the capitalist owners of the means of production for its existence, most anarchists and other libertarian socialists also hold the state as equally responsible as it exists as a tool utilised by capitalists to subsidise themselves and protect the institution of private ownership of the means of production. As some opponents of wage labour take influence from Marxist propositions, many are opposed to private property, but maintain respect for personal property.
Under the system of wage labour, the workers sell their labour power under a formal or informal employment contract to a member of the capitalist class.[93][96] These transactions usually occur in a labour market where wages are market determined.[97] In exchange for the wages paid, the work product generally becomes the undifferentiated property of the employer, except for special cases such as the vesting of intellectual property patents in the United States where patent rights are usually vested in the employee personally responsible for the invention. A wage labourer is a person whose primary means of income is from the selling of his or her labour in this way.
Wage labour refers to the class-structure of capitalism, whereby workers receive either a wage or a salary, and owners receive the profits generated by the factors of production employed in the production of economic value. Individuals who possess and supply financial capital to productive ventures become owners, either jointly (as shareholders) or individually. In Marxian economics these owners of the means of production and suppliers of capital are generally called capitalists. The description of the role of the capitalist has shifted, first referring to a useless intermediary between producers to an employer of producers, and eventually came to refer to owners of the means of production.[93] Labor includes all physical and mental human resources, including entrepreneurial capacity and management skills, which are needed to produce products and services. Production is the act of making goods or services by applying labor power.[94][95]
Wage labour
- The means of production (or capital goods) and the means of consumption (or consumer goods) are mainly produced for market sale; output is produced with the intention of sale in an open market; only through sale of output, can the owner of capital claim part of the surplus-product of human labour, and make profits. Equally, the inputs of production are supplied through the market, as commodities. The prices of both inputs and outputs are mainly governed by the market laws of supply and demand (and ultimately by the law of value). In short, a capitalist must use money to fuel both the means of production and labor in order to make commodities. These commodities are then sold to the market for a profit. The profit once again becomes part of a larger amount of capital which the capitalist reinvests to make more commodities and ultimately more and more capital.[92]
- Private ownership of the means of production ("private enterprise") as effective private control and/or legally enforced ownership, with the consequence that investment and management decisions are made by private owners of capital who act autonomously from each other and, because of business secrecy and the constraints of competition, do not coordinate their activities according to collective, conscious planning. Enterprises are able to set their own output prices within the framework of the forces of supply and demand manifested through the market, and the development of production technology is guided by profitability criteria.
- The overall aim of capitalist production, under competitive pressure, is (a) to maximise net profit income (or realise a net superprofit) as much as possible, through cutting production costs, increasing sales, and monopolisation of markets and supply, (b) capital accumulation, to acquire productive and non-productive assets, and (c) to privatise both the supply of goods and services and their consumption. The larger portion of the surplus product of labor must usually be reinvested in production, since output growth and accumulation of capital mutually depend on each other.
- Out of preceding characteristics of the capitalist mode of production, the basic class structure of this mode of production society emerges: a class of owners and managers of private capital assets in industries and on the land, a class of wage and salary earners, a permanent reserve army of labour consisting of unemployed people, and various intermediate classes such as the self-employed (small business and farmers) and the "new middle classes" (educated or skilled professionals on higher salaries).
- The finance of the capitalist state is heavily dependent on levying taxes from the population and on credit; that is, the capitalist state normally lacks any autonomous economic basis (such as state-owned industries or landholdings) that would guarantee sufficient income to sustain state activities. The capitalist state defines a legal framework for commerce, civil society and politics, which specifies public and private rights and duties, as well as legitimate property relations.
There are varying definitions on what constitutes a capitalist mode of production. In a sense, Das Kapital provides a "definition", which it is possible to summarise the essential defining characteristics of the capitalist mode of production as follows:
Defining structural criteria
[91] The capitalist mode of production may exist within societies with differing political systems (e.g.
- both the inputs and outputs of production are mainly privately owned, priced goods and services purchased in the market.
- production is carried out for exchange and circulation in the market, aiming to obtain a net profit income from it.
- the owners of the means of production (capitalists) are the dominant class (bourgeoisie) who derive their income from the surplus product produced by the workers and appropriated freely by the capitalists.
- A defining feature of capitalism is the dependency on wage-labor for a large segment of the population; specifically, the working class (proletariat) do not own capital and must live by selling their labour power in exchange for a wage.
Under the capitalist mode of production: [90][89] A "
A society, region or nation is "capitalist" if the predominant source of incomes and products being distributed is capitalist activity; even so, this does not yet mean necessarily that the capitalist mode of production is dominant in that society.