Capitalism

Definition

Capitalism is an economic system characterized by private ownership of the means of production and the operation of these means for profit. This system promotes competition and innovation, as individuals and businesses seek to maximize their wealth through market transactions. In this framework, the distribution of resources and goods is determined by supply and demand, influencing social hierarchies and economic opportunities across different groups.

5 Must Know Facts For Your Next Test

1. Capitalism encourages competition, which can lead to innovation and better products but may also result in inequality as some succeed while others struggle.
2. In a capitalist system, wealth accumulation can create significant disparities among different social classes, contributing to social stratification.
3. The role of government in capitalism can vary; some systems embrace free markets with minimal regulation, while others may implement policies to address inequality.
4. Capitalism is often contrasted with socialism, where the means of production are owned collectively or regulated by the state to promote equality.
5. Globalization has expanded capitalism beyond national borders, leading to interconnected economies where capital flows freely across countries.

Review Questions

• How does capitalism influence social stratification and the distribution of resources within a society?
  • Capitalism influences social stratification by creating a system where wealth is concentrated among those who own capital or means of production. This leads to a disparity in access to resources like education and health care. As individuals or families accumulate wealth, they gain more power and influence, further entrenching social hierarchies. Those at the bottom often face barriers to upward mobility, reinforcing existing inequalities.
• Discuss the relationship between capitalism and wage labor, including how this dynamic shapes workers' rights and conditions.
  • In capitalism, wage labor is fundamental as individuals sell their labor to employers for wages. This relationship shapes workers' rights by emphasizing profit maximization for employers, which can sometimes lead to exploitation. Workers may face pressures such as job insecurity and poor working conditions, prompting movements advocating for better labor rights. As a result, the capitalist framework can both empower workers through collective action and challenge their rights in pursuit of profit.
• Evaluate the impact of globalization on capitalism and how it affects economic inequality on a global scale.
  • Globalization has significantly impacted capitalism by increasing interconnectedness among economies worldwide. It allows capital to flow freely across borders, creating opportunities for investment and trade but also exacerbating economic inequality. Wealthier nations often benefit more from globalization due to their established markets and resources, while developing countries may struggle to compete. This disparity raises questions about fair trade practices and ethical considerations in a global capitalist framework.

Related terms

Social Mobility: The ability of individuals or families to move up or down the social ladder, often influenced by factors such as education, income, and occupation.

Market Economy: An economic system where decisions regarding investment, production, and distribution are guided by the interactions of citizens and businesses in the marketplace.

Wage Labor: A system where individuals sell their labor to employers in exchange for wages, forming a fundamental part of capitalist economies.