Capitalism and the Economy

Study Notes

Capitalism

Capitalism is an economic and production system where trade, industries, and means of production are largely or entirely privately owned and operated for profit.
In a capitalist economy, money is invested to generate more money.
The economy is based on three things: profit for exchange, private ownership, and wage labor.

Classes in Capitalism

There are two main classes: the capitalist class and the working class.
The capitalist class owns the means of production and distribution of goods.
The working class sells their labor to the capitalist class in exchange for wages.

Types of Economic Systems

Capitalism: an economic system where private owners own the means of production.
Fascism: a nationalistic type of economic system where the government forces business to place the interest of the nation above their company's.
Communism: an economic system where the government owns the entire means of production and provides all citizens with a fixed standard of living.
Socialism: an economic system where both individuals and governments own the means of production.

Features of Capitalism

Private property: individuals own property and resources.
Large-scale production: capitalism arose as a result of the industrial revolution, making large-scale production possible.
Profit as a key motive: manufacturers aim to make a profit.
Competition: extreme competition between capitalists leads to artificially increased demand and decreased supply.
Price mechanism: the price of a commodity is determined by the law of demand and supply.
Wage institution: businesses pay workers as little as possible and take as much work as possible from them.
Money and credit: capitalists can get loans to develop their businesses.
Laissez-faire competition: the market should be completely free to be led by the natural laws of supply and demand.

Variations of Capitalism

Responsible capitalism: a free market economy with some government regulation to avoid excesses and inequalities.
Turbo capitalism: an unregulated form of capitalism with financial deregulation, privatization, and lower taxes on high earners.
Crony capitalism: a system where business success is related to strategic influences with civil servants, politicians, and those in authority.
State capitalism: a system where state-owned industries play a key role in the market economy.

Pros and Cons of Capitalism

Pros

People can accumulate and grow their wealth.
Competition is encouraged.
There is no restriction on how much wealth an individual can earn.
People have a reason to work hard to earn money and sustain their living.
Better products and innovation can be created.
Rewards are based on performance.
Companies have freedom to operate as they want.

Cons

Consumerism: the creation of monopolies.
Exploitation of workers.
Social unrest: the increasing divide between the rich and poor can lead to significant tensions.
Wealth gap: the wealthy become even wealthier, and the poor become even poorer.
Life can feel unfair due to the values inherent in a capitalist economy.

Description

This quiz covers the basics of capitalism, a free market economy where the means of production are owned by private interests. Learn about the characteristics and modes of production in a capitalist economy.