Capitalism History Features Merits Deme

CAPITALISM
Capitalism is an economic system in which trade, industry, and the means of production are largely or entirely privately owned and operated for profit.

History
Economic trade for profit has existed since at least the second millennium BC.[125] Early Islam promulgated capitalist economic policies, which migrated to Europe through trade partners from cities such as Venice. However, capitalism in its modern form is usually tracedto the emergence of agrarian capitalism and mercantilism in the Early Modern era.
Agrarian capitalism[edit]
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. [127]
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.
Mercantilism[edit]
Main article: Mercantilism

A painting of a French seaport from 1638 at the height of mercantilism.
The economic doctrine that held sway between the sixteenth and eighteenth centuries is commonly described as mercantilism.[57] 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.[7] Most scholars consider the era of merchant capitalism and mercantilism as the origin of modern capitalism,[128][129] 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."[130]
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.[131]

Robert Clive after the Battle of Plassey. The battle began East India Company rule in India.
Among the major tenets of mercantilist theory was bullionism, a doctrine stressing the importance of accumulating precious metals. Mercantilists argued that a state should export more goods than it imported so that foreigners would have to pay the difference in precious metals. Mercantilists argued that only raw materials that could not be extracted at home should be imported; and promoted government subsidies, such as the granting of monopolies and protective tariffs, which mercantilists thought were necessary to encourage home production of manufactured goods.
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 ..."[132]
The British East India Company and the Dutch East India Company inaugurated an expansive era of commerce and trade.[133][134] These companies were characterized by their colonial and expansionary powers given to them by nation-states.[133] During this era, merchants, who had traded under the previous stage of mercantilism, invested capital in the East India Companies and other colonies, seeking areturn on investment.
Industrial capitalism[edit]

A Watt steam engine. The steam engine fuelled primarily by coalpropelled the Industrial Revolution inGreat Britain.[135]
A new group of economic theorists, led by David Hume[136] and Adam Smith, in the mid-18th century, challenged fundamental mercantilistdoctrines 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 factorysystem 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.[57]
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.[137] In the 1840s, Britain adopted a less protectionist policy, with the repeal of the Corn Laws and the Navigation Acts.[57] Britain reduced tariffs and quotas, in line with David Ricardo's advocacy for free trade.
Globalization[edit]
The gold standardformed the financial basis of the international economy from 1870–1914.
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.[138]
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 coaland 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.[139]
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, thetransatlantic cable, the Radiotelephone, the steamship and railway allowed goods and information to move around the world at an unprecedented degree.[140]
Keynesianism and monetarism[edit]
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 post war era was greatly influenced by Keynesian economic stabilization policies. The postwar boom ended in the late 1960s and early 1970s, and the situation was worsened by the rise of stagflation.[141]
Monetarism, a theoretical alternative to 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".[142]

Advocacy for capitalism[edit]

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Economic growth[edit]

World's GDP per capita shows exponential growth since the beginning of the Industrial Revolution.[77]

Capitalism and the economy of the People's Republic of China
Many theorists and policymakers in predominantly capitalist nations have emphasized 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.[78][79]
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.[80] 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.[80]
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.[81] 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.[82][83]
Proponents also believe that a capitalist economy offers far more opportunities for individuals to raise their income through new professions or business ventures than do other economic forms. To their thinking, this potential is much greater than in either traditionalfeudal or tribal societies or in socialist societies.
Political freedom[edit]
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 andRonald 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.[84][85]
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.[86][87] She has significantly influenced conservative and libertarian supporters of capitalism, especially in the American Tea Party movement.[88]
Self-organization[edit]
Austrian School economists have argued that capitalism can organize itself into a complex system without an external guidance or central planning mechanism. Friedrich Hayek considered the phenomenon of self-organization as underpinning capitalism. Prices serve as a signal as to the urgent and unfilled wants of people, and the opportunity to earn profits if successful, or absorb losses if resources are used poorly or left idle, gives entrepreneurs 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.[89]
Criticism[edit]
Main article: Criticism of capitalism

An Industrial Workers of the Worldposter (1911)
Critics of capitalism associate the economic system with social inequality; unfair distribution of wealth and power; a tendency toward market monopoly or oligopoly (and government by oligarchy); imperialism; counter-revolutionary wars; various forms of economic and cultural exploitation; materialism; repression of workers and trade unionists; social alienation; economic inequality; unemployment; and economic instability. Notable critics of capitalism have included: socialists, anarchists, communists, national socialists, social democrats,environmentalists, technocrats, some types of conservatives, Luddites, Narodniks, Shakers, and some types of nationalists.
Many socialists consider capitalism to be irrational, in that production and the direction of the economy are unplanned, creating many inconsistencies and internal contradictions.[90] 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.[91] Following the banking crisis of 2007, Alan Greenspan told the United States Congress on October 23, 2008, "The whole intellectual edifice collapsed. I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders. ... I was shocked."[92]
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.[93][94] 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."[95]
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."[96]
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 the Earth.[97][98] 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.[21][99]
Many religions have criticized or opposed specific elements of capitalism. Traditional Judaism, Christianity, and Islam forbid lending money at interest,[100][101] 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.[102] 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.[103][104] In his 84-page apostolic exhortation Evangelii Gaudium, Pope Francis described unfettered capitalism as "a new tyranny" and called upon world leaders to fight rising poverty and inequality:[105]
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.[106]
Proponents of capitalism argue that it creates more prosperity than any other economic system, and that its benefits are mainly to the ordinary person.[107] Critics of capitalism variously associate it with economic instability,[108] an inability to provide for the well-being of all people,[109] and an unsustainable danger to the natural environment.[97] Socialistsmaintain 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 social system of production and distribution in which all persons have an equal relationship to the means of production.[110]
The term capitalism, in its modern sense, is often attributed to Karl Marx.[7][111] 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 andprivate enterprise and replaced capitalist with rentier and investor in reaction to the negative connotations associated with capitalism.[39]

Features of Capitalism:
The principal features of capitalism are discussed below.
(1) Private Property:
Capitalism thrives on the institution of private property. It means that the owner of a firm or factory or mine may use it in any manner he likes. He may hire it to anybody, sell it, or lease it at will in accordance with the prevalent laws of the country. The state’s role is confined to the protection of the institution of private property through laws.” The institution of private property induces its owner to work hard, to organise his business efficiently and to produce more, thereby benefiting not only himself but also the community at large. All this is actuated by the profit motive.
(2) Profit Motive:
The main motive behind the working of the capitalist system is the profit motive. The decisions of businessmen, farmers, producers, including that of wage-earners are based on the profit motive. The profit motive is synonymous with the desire for personal gain. It is this attitude of acquisitiveness which lies behind individual initiative and enterprise in a capitalist economy.
(3) Price Mechanism:
Under capitalism, the price mechanism operates automatically without any direction and control by the central authorities. It is the profit motive which determines production. Profit being the difference between outlay and receipt, the size of profit depends upon prices. The larger the difference between prices and costs, the higher is the profit. Again, the higher the prices, the greater are the efforts of the producers to produce the varied quantities and types of products. It is the consumers’ choices which determine what to produce, how much to produce, and how to produce. Thus capitalism is a system of mutual exchanges where the price-profit mechanism plays a crucial role.
(4) Role of the State:
During the 19th century, the role of the state was confined to the maintenance of law and order, protection from external aggression, and provision for educational and public health facilities. This policy of laissez-faire—of non-intervention in economic affairs by the state—has been abandoned in capitalist economies of the West after the Second World War. Now the state has important tasks to fulfil. They are monetary and fiscal measures to maintain aggregate demand; anti-monopoly measures and nationalised monopoly corporations; and measures for the satisfaction of communal wants such as public health, public parks, roads, bridges, museums, zoos, education, flood control, etc.
(5) Consumers’ Sovereignty:
Under capitalism, ‘the consumer is the king.’ It means freedom of choice by consumers. The consumers are free to buy any number of goods they want. Producers try to produce variety of goods to meet the tastes and preferences of consumers. This also implies freedom of production whereby producers are at liberty to produce a vast variety of commodities in order to satisfy the consumer who acts like a ‘king’ in making a choice out of them with his given money income. These twin freedoms of consumption and production are essential for the smooth functioning of the capitalist system.
(6) Freedom of Enterprise:
Freedom of enterprise means that there is free choice of occupation for an entrepreneur, a capitalist, and a labourer. But this freedom is subject to their ability and training, legal restrictions, and existing market conditions. Subject to these limitations, an entrepreneur is free to set up any industry, a capitalist can invest his capital in any industry or trade he likes, and a person is free to choose any occupation he prefers. It is on account of the presence of this important feature of freedom of enterprise that a capitalist economy is also called a free enterprise economy.
(7) Competition:
Competition is one of the most important features of a capitalist economy. It implies the existence of large number of buyers and sellers in the market who are motivated by self-interest but cannot influence market decisions by their individual actions. It is competition among buyers and sellers that determines the production, consumption and distribution of goods and services. There being sufficient price flexibility under capitalism, prices adjust themselves to changes in demand, in production techniques, and in the supply of factors of production. Changes in prices, in turn, bring adjustments in production, factor demand and individual incomes.
Merits of Capitalism:
The protagonists of capitalism advance the following arguments in favour of capitalism.
(1) Increase in Production:
Arthur Young wrote’ “The magic of property turns sand into gold.” This observation of Young holds good in a free enterprise economy where every farmer, trader or industrialist can hold property and use it in any way he likes. He brings improvement in production and increases productivity because the property belongs to him. This leads to increase in income, saving, and investment, and to progress.
(2) Quality Products at Low Costs:
The twin freedoms of consumers and producers lead to the production of quality products, and lowering of costs and prices. Thus the society as a whole stands to gain under capitalism.
(3) Progress and Prosperity:
The presence of competition under capitalism leads to increase in efficiency, encourages producers to innovate and thereby brings progress and prosperity in the country. As pointed out by Seligman.” If competition in biology leads only indirectly to progress, competition in economics is the very secret of progress.”
(4) Maximises Welfare:
The automatic working of the price mechanism under capitalism brings efficiency in the production and distribution of goods and services without any central plan, and promotes the maximum welfare of the community.
(5) Optimum use of Resources:
Under capitalism, producers undertake the production of only those goods which appear to yield maximum profits in anticipation of demand. This leads to optimum use of resources.
(6) Flexible System:
A capitalist economy operates automatically through the price mechanism. If there are shortages or surpluses in the economy, they are corrected automatically by the forces of demand and supply. As such, capitalism is a highly flexible system which can adapt itself to changing economic conditions. That is why it has survived many depressions, recessions and booms.
Demerits of Capitalism:
The following arguments are advanced against capitalism.
(1) Leads to Monopoly:
Competition which is regarded as the very basis of capitalism contains within itself the tendency to destroy competition, and leads to monopoly. It is the profit motive under capitalism which leads to cut-throat competition, and ultimately to the formation of trusts, cartels, and combinations. This brings about a reduction in the number of firms actually engaged in production. As a result, small firms are eliminated in this process.
(2) Inequalities:
The institution of private property creates inequalities of income and wealth under capitalism. The price mechanism through competition brings huge profits to big producers, the landlords, the entrepreneurs, and the traders who accumulate vast amount of wealth. While the rich roll in wealth and luxury, the poor live in poverty and squalor.
(3) Consumers’ Sovereignty a Myth:
Consumers’ sovereignty is a myth under capitalism. Consumers have to buy only those commodities which are manufactured and supplied by the producers in the market. The majorities of consumers are not rational buyers and are often ignorant about the utility and quality of the products available at the stores or shops. They are also misled by advertisement and propaganda about the usefulness of the products. Products which are produced by monopoly concerns are often of an inferior quality and are priced high. Thus there is no consumers’ sovereignty in a seller’s market.
(4) Depression and Unemployment:
Capitalism is characterised by business fluctuations and unemployment. Excessive competition and unplanned production lead to over production and glut of commodities in the market and ultimately depression and unemployment.
(5) Inefficient Production:
Capitalism fails to produce goods in keeping with the society’s requirements. Frivolous luxury goods and obnoxious articles are produced to satisfy the wants of the few rich at the expense of the necessities needed by the poor. Thus there is social wastage of economy’s resources.
(6) Non-utilisation of Resources:
The price mechanism under capitalism fails to employ the country’s resources fully. Free and unfettered competition, inequalities of income distribution, over production, and consequent depression lead to wastage of productive resources. Besides, there is mass unemployment and freedom of occupation has little meaning under capitalism.
(7) Class Conflict:
A capitalist society is characterised by class conflict. The poor are exploited by the rich. This leads to mutual distrust between the workers and the employers and to social unrest.
The above defects of capitalism have led the free enterprise economies of the West to modify this system by regulating and controlling the institutions of private property and freedom of enterprise to serve the best interests of the community at large.

CONCLUSION
1.capitalism a profit oriented system, need for welfare resulted in beginning of a new system called socialism.. capitalism underwent corruption stages,since it was based on competition.relationship between capitalist and capital less people worsened creating 2 social classes i.e. the rich and the poor according to marx the have’s and have nots the new sectarianism in the society …por started demanding.capitalists were in minority capitalism protected the interests of the minority