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Capitalism is an economic system based on the private ownership of the means of production and their operation for profit.[1][2][3][4][5] Central characteristics of capitalism include capital accumulation, competitive markets, price systems, private property, property rights recognition, voluntary exchange, and wage labor.[6][7][8] In a market economy, decision-making and investments are determined by owners of wealth, property, or ability to maneuver capital or production ability in capital and financial markets—whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.[9]
Economists, historians, political economists, and sociologists 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, anarcho-capitalism, state capitalism, and welfare capitalism. Different forms of capitalism feature varying degrees of free markets, public ownership,[10] obstacles to free competition, and state-sanctioned social policies. The degree of competition in markets and the role of intervention and regulation, as well as the scope of state ownership, vary across different models of capitalism.[11][12] The extent to which different markets are free and the rules defining private property are matters of politics and policy. Most of the existing capitalist economies are mixed economies that combine elements of free markets with state intervention and in some cases economic planning.[13]
Capitalism in its modern form emerged from agrarianism in England, as well as mercantilist practices by European countries between the 16th and 18th centuries. The Industrial Revolution of the 18th century established capitalism as a dominant mode of production, characterized by factory work and a complex division of labor. Through the process of globalization, capitalism spread across the world in the 19th and 20th centuries, especially before World War I and after the end of the Cold War. During the 19th century, capitalism was largely unregulated by the state, but became more regulated in the post–World War II period through Keynesianism, followed by a return of more unregulated capitalism starting in the 1980s through neoliberalism.
Market economies have existed under many forms of government and in many different times, places, and cultures. Modern industrial capitalist societies developed in Western Europe in a process that led to the Industrial Revolution. Capitalist economies promote economic growth through accumulation of capital, however a business cycle of economic growth followed by recession is a common characteristic of such economies.[14]
- ^ Zimbalist, Andrew; Sherman, Howard J.; Brown, Stuart (October 1988). Comparing Economic Systems: A Political-Economic Approach. Harcourt College Publishing. pp. 6–7. ISBN 978-0-15-512403-5.
Pure capitalism is defined as a system wherein all of the means of production (physical capital) are privately owned and run by the capitalist class for a profit, while most other people are workers who work for a salary or wage (and who do not own the capital or the product).
- ^ Rosser, Mariana V.; Rosser, J Barkley (23 July 2003). Comparative Economics in a Transforming World Economy. MIT Press. p. 7. ISBN 978-0-262-18234-8.
In capitalist economies, land and produced means of production (the capital stock) are owned by private individuals or groups of private individuals organized as firms.
- ^ Jenks, Chris. Core Sociological Dichotomies. London; Thousand Oaks, CA; New Delhi: SAGE Publishing. p. 383.
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.
- ^ Gilpin, Robert (2018). The Challenge of Global Capitalism : The World Economy in the 21st Century. Princeton University Press. ISBN 978-0-691-18647-4. OCLC 1076397003.
- ^ Sternberg, Elaine (2015). "Defining Capitalism". Economic Affairs. 35 (3): 380–396. doi:10.1111/ecaf.12141. S2CID 219373247.
- ^ Heilbroner, Robert L. "Capitalism" Archived 28 October 2017 at the Wayback Machine. Steven N. Durlauf and Lawrence E. Blume, eds. The New Palgrave Dictionary of Economics. 2nd ed. (Palgrave Macmillan, 2008) doi:10.1057/9780230226203.0198.
- ^ Hyman, Louis; Baptist, Edward E. (2014). American Capitalism: A Reader. Simon & Schuster. ISBN 978-1-4767-8431-1. Archived from the original on 22 May 2015.
- ^ Harris, Neal; Delanty, Gerard (2023). "What is capitalism? Toward a working definition". Social Science Information. 62 (3): 323–344. doi:10.1177/05390184231203878.
- ^ Gregory, Paul; Stuart, Robert (2013). The Global Economy and its Economic Systems. South-Western College Publishing. p. 41. ISBN 978-1-285-05535-0.
Capitalism is characterized by private ownership of the factors of production. Decision making is decentralized and rests with the owners of the factors of production. Their decision making is coordinated by the market, which provides the necessary information. Material incentives are used to motivate participants.
- ^ Gregory, Paul; Stuart, Robert (2013). The Global Economy and its Economic Systems. South-Western College Publishing. p. 107. ISBN 978-1-285-05535-0.
Real-world capitalist systems are mixed, some having higher shares of public ownership than others. The mix changes when privatization or nationalization occurs. Privatization is when property that had been state-owned is transferred to private owners. Nationalization occurs when privately owned property becomes publicly owned.
- ^ Macmillan Dictionary of Modern Economics (3rd ed.). 1986. p. 54.
- ^ Bronk, Richard (Summer 2000). "Which model of capitalism?". OECD Observer. Vol. 1999, no. 221–222. OECD. pp. 12–15. Archived from the original on 6 April 2018. Retrieved 6 April 2018.
- ^ Stilwell, Frank (2002). Political Economy: the Contest of Economic Ideas (1st ed.). Melbourne, Australia: Oxford University Press.
- ^ Hodrick, R.; Prescott, E. (1997). "Postwar US business cycles: An empirical investigation" (PDF). Journal of Money, Credit and Banking. 29 (1): 1–16. doi:10.2307/2953682. JSTOR 2953682. S2CID 154995815.