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Capitalism: History and Basics

Table of Contents

Introduction
History
Advantages and Dangers
Conclusion
References

Introduction

Capitalism represents the dominant economic concept in modern reality, based on private property, the competence of actors, and the principle of supply and demand. The role of the state in the capitalist economy is reduced to protecting the rights of citizens and creating a safe and comfortable environment in the country. There are several subspecies of capitalism, but they are united by the idea that a person, regardless of political preferences, acts for their own good, and for this, they pursue certain goals.

History

Historically, capitalism is the heir to the previous economic system feudalism, which implied a centralized distribution of wealth in a pyramidal hierarchy. In a capitalist economy, finances are distributed according to the operation of markets, which must be thought of as abstract systems in which finances and goods are exchanged. It should be noted that there is a significant connection between the rise of capitalism and the change in the historical and cultural paradigm. The foundations of this principle of trade turnover were already evident in Ancient Greece, but were more clearly formulated in Europe during the Protestant Reformation of the 16th century. The feudal system was closely linked to a deeply religious worldview, in which the church interpreted the economic discord between feudal lords and vassals to mean that the wealthy were inherently nobler. The crisis of such a worldview caused a significant ethical conflict, which was reflected in the result in the economic picture of the world.

Capitalism was also stimulated by price inflation in the 16th century, in sync with low wage growth, necessitating the installation of a system with a wider rotation of goods and the freedom of a private rather than a public market. The main postulates of the economy of capitalism were laid down by Adam Smith, a Scottish philosopher who established a separate, distinctive role of markets, under which people must adapt in order to enrich themselves (Fraser & Jaeggi, 2018). By the 19th century, the free market had already dominated with the development of the manufacturing industry in Europe.

Advantages and Dangers

The obvious disadvantage of industrial capitalism was the formation of a working class serving enterprises, living on a minimum wage in unbearable conditions. Throughout the 20th century, the ideas of the German philosopher Karl Marx, who foreshadowed the class struggle of workers against the ruling ones, were an echo of the slavish conditions in which the working class existed. Marxist and socialist ideologies emerged as an attempt to supplant capitalism and its inherent injustice behind the declared legal equality of all people. Thus, capitalist ideology often ends up as an instrument of unfair distribution of income despite providing at least minimum conditions for the poor. The distribution of income can be tragically unequal even if the amount of finance itself grows exponentially. However, industrial capitalism also testifies to the undeniable advantages brought to the world, in particular, the desire and ability to progress to increase the general level of the quality of life.

Another critical reproach to capitalism is its internal unreliability due to dependence on the state of the market. All economic decisions are based on the calculation of financial profit, presenting a balance between technical possibilities and financial risks. The market can be overwhelmed with demand or vice versa with supply, which inevitably leads to a market or production shake-up and subsequent recession. The danger of this shake-up lies in the reformatting of market segments. The weakest players drop out of the capitalist competition and either disappear or join more powerful and wealthy companies. Thus the free market turns out to be extremely limited but with infinitely large dominant national or multinational corporations. However, even such a system may turn out to be insufficiently reliable due to its dependence on economic conditions, due to which its inevitable collapse can be potentially very dangerous.

No less ethically disturbing is the current situation which can be described as surveillance capitalism. This is the most modern form of economic relations, in which the collection of private data with the mindless consent of consumers of information becomes the principle of guessing demand (Zuboff, 2019). Such a scheme is ethically repulsive and violates the basic human right to privacy, which calls into question the fact of real human freedom in the conditions of modern capitalism.

Conclusion

Core capitalist values are the willingness to take calculated risks and strive for innovation. New technologies are perceived in the context of industrial capitalism as a way to increase the productivity of goods sold with a market value. Thus, innovation is a way to faster and more multiplied profits. However, along with this, technological innovations come and remain in the world that develops according to the principles of capitalism. Throughout history, technological advances have regularly led to mass layoffs or the depreciation of individual human labor, in some ways violating human rights and dignity. However, the desire for the acquisition of economic benefits is sufficient motivation for job vacancies to appear and employment to increase.

References

Fraser, N., & Jaeggi, R. (2018). Capitalism: A conversation in critical theory. Wiley.

Zuboff, S. (2019). The age of surveillance capitalism: The fight for a human future at the new frontier of power. Profile Books.

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