capitalism (redirected from capitalizm)

capitalism, economic system based on private ownership of the means of production, in which personal profit can be acquired through investment of capital and employment of labor. Capitalism is grounded in the concept of free enterprise, which argues that government intervention in the economy should be restricted and that a free market, based on supply and demand, will ultimately maximize consumer welfare. These principles were most notably articulated in Adam Smith's treatise, The Wealth of Nations (1776), in which he opposed the prevailing theory of mercantilism. Capitalism has existed in a limited form in the economies of all civilizations, but its modern importance dates at least from the Industrial Revolution that began in the 18th cent., when bankers, merchants, and industrialists—the bourgeoisie—began to displace landowners in political, economic, and social importance, particularly in Great Britain. Capitalism stresses freedom of individual economic enterprise; however, government action has been and is required to curb its abuses, which have ranged from slavery (particularly in Britain and the United States) and apartheid (in South Africa) to monopoly cartels and financial fraud. Capitalism does not presuppose a specific form of social or political organization: the democratic socialism of the Scandinavian states, the consensus politics of Japan, and the state-sponsored rapid industrial growth of South Korea while under military dictatorship all coexist with capitalism. Yet despite the capitalist ideal of "hands–off" government, significant government intervention has existed in most capitalist nations at least since the Great Depression in the 1930s. In the United States, it exists in the form of subsidies, tax credits, incentives, and other types of exemptions. Though private production plays a major role in the economies of Germany and Japan, both nations have centrally planned industrial policies in which bankers, industrialists, and labor unions meet and seek to agree to wage policies and interest rates; these countries reject the idea of letting the market wholly determine the economy. The collapse of the Soviet Union and its satellite states in Eastern Europe (1989–91) left those countries with a heavy burden and an uncertain future, and represented a substantial retreat in the power of capitalism's traditional economic opponent, socialism. Also uncertain is the future course of China's economy, in which small-scale capitalism is increasingly allowed within a strictly Communist political framework.

Bibliography

See M. Friedman, Capitalism and Freedom (1952, rev. ed. 1981); J. K. Galbraith, American Capitalism (1952, repr. 1982); J. A. Schumpeter, Capitalism, Socialism, and Democracy (1983); R. L. Heilbroner and L. C. Thurow, Economics Explained (1987); C. R Sunstein, Free Markets and Social Justice (1997).

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capitalism

 or free-market economy or free-enterprise system

Economic system in which most of the means of production are privately owned, and production is guided and income distributed largely through the operation of markets. Capitalism has been dominant in the Western world since the end of mercantilism. It was fostered by the Reformation, which sanctioned hard work and frugality, and by the rise of industry during the Industrial Revolution, especially the English textile industry (16th–18th centuries). Unlike earlier systems, capitalism used the excess of production over consumption to enlarge productive capacity rather than investing it in economically unproductive enterprises such as palaces or cathedrals. The strong national states of the mercantilist era provided the social conditions, such as uniform monetary systems and legal codes, necessary for the rise of capitalism. The ideology of classical capitalism was expressed in Adam Smith's Wealth of Nations (1776), and Smith's free-market theories were widely adopted in the 19th century. In the 20th century the Great Depression effectively ended laissez-faire economics in most countries, but the demise of the state-run command economies of eastern Europe and the former Soviet Union (see communism) and the adoption of some free-market principles in China left capitalism unrivaled (if not untroubled) by the beginning of the 21st century.