Capitalism and the Economy

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.

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.