Capitalism

Definition

Capitalism is an economic system characterized by private ownership of the means of production, where individuals or corporations operate businesses for profit. In this system, market forces largely determine the prices of goods and services, and competition drives innovation and efficiency. The relationship between capitalism and social structures is often a point of contention, particularly in discussions around inequality and class struggle.

5 Must Know Facts For Your Next Test

1. Capitalism promotes economic growth by encouraging entrepreneurship and innovation through competition among businesses.
2. Critics argue that capitalism can lead to significant wealth inequality, concentrating wealth in the hands of a few while leaving many in poverty.
3. In capitalist societies, government intervention is typically limited, with the belief that the market can self-regulate through supply and demand.
4. The historical development of capitalism has often been linked to the rise of industrialization, significantly altering social and economic structures.
5. Marxists believe that capitalism ultimately leads to its own downfall due to internal contradictions, particularly the conflict between the bourgeoisie and the proletariat.

Review Questions

• How does capitalism create a relationship between the bourgeoisie and the proletariat, and what implications does this have for social structures?
  • In capitalism, the bourgeoisie owns the means of production and profits from the labor of the proletariat, who sell their labor to survive. This creates a power imbalance where the bourgeoisie can exploit the proletariat, leading to social tensions. As profit motives drive business practices, this class divide often results in unequal access to resources, contributing to societal issues like poverty and class struggle.
• Discuss how capitalism influences innovation and economic growth while also contributing to social inequalities.
  • Capitalism fosters an environment where competition encourages businesses to innovate, which can lead to economic growth and improved living standards. However, this same competitive nature can exacerbate social inequalities as those with capital can invest in new ventures while others remain trapped in low-paying jobs. The resultant disparity can create societal divisions that challenge social cohesion and equity.
• Evaluate the arguments for and against capitalism in terms of its sustainability as an economic system in relation to Marxist critiques.
  • Proponents argue that capitalism is sustainable due to its ability to drive innovation, create jobs, and respond to consumer demands. However, Marxist critiques highlight inherent contradictions within capitalism, such as cyclical crises of overproduction and underconsumption, leading to economic instability. They suggest that these cycles can destabilize societies and ultimately push for alternative systems that address class disparities and promote equitable resource distribution.

Related terms

Bourgeoisie: The class of owners who possess capital and control the means of production in a capitalist system.

Proletariat: The working class in a capitalist society, who do not own means of production and must sell their labor to survive.

Free Market: An economic system where prices are determined by unrestricted competition between privately owned businesses.