Difference between revisions of "Capitalism"

Revision as of 23:08, May 25, 2008

A corrupt economic system, in which the bottom line is greed and profit. God does not approve.

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-[[Image:Tokyo Stock Exchange.jpg|thumb|Tokyo Stock Exchange]]
+A corrupt economic system, in which the bottom line is greed and profit. God does not approve.
-'''Capitalism''', also called '''free market economy''' is an economic system where the investment of capital, and production, distribution, income, and prices are determined not by government (as in a [[planned economy]]) but through the operation of a competitive market where decisions regarding transfer of money, goods (including capital goods), and services are voluntary and private rather than regulated and mandated by government (see [[law of supply and demand]]).
-One self-regulating feature of capitalism is competition, which helps maintain fair market value for goods and services.  However, ''unrestrained'' or ''pure'' capitalism may sometimes create a positive feedback loop in which a small number of individual accumulations of capital grow ever larger, eventually becoming so few as to limit effective competition, thus ceasing to strictly be free-market capitalism.  In this regard, pure capitalism is unstable.  Modern political systems have developed regulation mechanisms in an attempt to render capitalism more stable, including anti-trust regulation, trade tariffs, etc.
-Since the fall of [[communism]], and the advent of information technology, capitalism is becoming increasingly widespread.
-[[Adam Smith]] described the operation of capital accumulation through the productive powers of labor as such,
-{{Cquote|Whatever a person saves from his [[revenue]] he adds to his [[capital]], and either employs it himself in maintaining an additional number of productive hands, or enables some other person to do so, by lending it to him for an interest, that is, for a share of the profits. As the capital of an individual can be increased only by what he saves from his annual revenue or his annual gains, so the capital of a society, which is the same with that of all the individuals who compose it, can be increased only in the same manner. <ref>Adam Smith, ''An Inquiry into the Nature and Causes of the Wealth of Nations'', [http://www.econlib.org/library/Smith/smWN.html Book II, Chapter 3, Paragraph 15,] ''Of the Accumulation of Capital, or of Productive and Unproductive Labour'', First Edition 1776.</ref>}}
-Smith goes on to describe how the productive powers of labor employed by the owner of a capital allow laborers to reproduce with a profit the value of their maintenance, over and above their own consumption, which then allows for an additional set of hands to be employed. <ref>Adam Smith, ''Wealth of Nations'', Book II, Chapter 3, Paragraph 22.</ref>  Smith observes labor is the original purchase price for all the wealth of the world,
-{{Cquote|The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What every thing is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it can impose upon other people. What is bought with money or with goods is purchased by labour, <sup>2</sup><ref>'Everything in the world is purchased by labour.'—Hume, 'Of Commerce,' in Political Discourses, 1752, p. 12</ref> as much as what we acquire by the toil of our own body. That money or those goods indeed save us this toil. They contain the value of a certain quantity of labour which we exchange for what is supposed at the time to contain the value of an equal quantity. Labour was the first price, the original purchase-money that was paid for all things. It was not by gold or by silver, but by labour, that all the wealth of the world was originally purchased; and its value, to those who possess it, and who want to exchange it for some new productions, is precisely equal to the quantity of labour which it can enable them to purchase or command. <ref>Adam Smith, ''An Inquiry into the Nature and Causes of the Wealth of Nations'', [http://www.econlib.org/library/Smith/smWN.html Book I, Chapter 5, Paragraph 2,] ''Of the Real and Nominal Price of Commodities'', First Edition 1776.</ref>}}
-Real wealth consists not in money, but in the things money will exchange for,
-{{Cquote|In order to put industry into motion, three things are requisite; materials to work upon, tools to work with, and the wages or recompense for the sake of which the work is done. Money is neither a material to work upon, nor a tool to work with; and though the wages of the workman are commonly paid to him in money, his real revenue, like that of all other men, consists, not in money, but in the money's worth; not in the metal pieces, but in what can be got for them. <ref>Adam Smith, ''An Inquiry into the Nature and Causes of the Wealth of Nations'', [http://www.econlib.org/library/Smith/smWN7.html Book II, Chapter 2, Paragraph 37,] ''Of Money Considered as a particular Branch of the General Stock of the Society, or of the Expence of Maintaining the National Capital '', First Edition 1776.</ref>}}
-Since wealth does not consist in money, gold, or silver, and labor is the original purchase price, Smith explains how the capitalist system is then put into motion, complete with natural incentives, only Smith does not use the word "capital" here to describe what is needed.  Smith explains how a "store of goods", or "stock sufficient to maintain" the original capitalist entrepreneur is necessary;
-{{Cquote|When the stock which a man possesses is no more than sufficient to maintain him for a few days or a few weeks, he seldom thinks of deriving any revenue from it. He consumes it as sparingly as he can, and endeavours by his labour to acquire something which may supply its place before it be consumed altogether. His revenue is, in this case, derived from his labour only. This is the state of the greater part of the labouring poor in all countries.
-But when he possesses stock sufficient to maintain him for months or years, he naturally endeavours to derive a revenue from the greater part of it; reserving only so much for his immediate consumption as may maintain him till this revenue begins to come in. His whole stock, therefore, is distinguished into two parts. That part which, he expects, is to afford him this revenue, is called his capital. The other is that which supplies his immediate consumption  <ref>Adam Smith, ''An Inquiry into the Nature and Causes of the Wealth of Nations'', [http://www.econlib.org/library/Smith/smWN7.html Book II, Chapter 1, Paragraphs 1 & 2,] ''Of the Division of Stock  '', First Edition 1776.</ref>}}
-The [[division of labor]] is the necessary condition that gives rise to the productive powers of labor that allows for large scale economic growth.  By "division of labor", Smith is referring to "specialization of labor", where each worker acquires specific knowledge to apply to a specific task.
-{{Cquote|In that rude state of society in which there is no division of labour, in which exchanges are seldom made, and in which every man provides everything for himself, it is not necessary that any stock should be accumulated or stored up beforehand in order to carry on the business of the society. Every man endeavours to supply by his own industry his own occasional wants as they occur. When he is hungry, he goes to the forest to hunt; when his coat is worn out, he clothes himself with the skin of the first large animal he kills: and when his hut begins to go to ruin, he repairs it, as well as he can, with the trees and the turf that are nearest it.
-But when the division of labour has once been thoroughly introduced, the produce of a man's own labour can supply but a very small part of his occasional wants. The far greater part of them are supplied by the produce of other men's labour, which he purchases with the produce, or, what is the same thing, with the price of the produce of his own. But this purchase cannot be made till such time as the produce of his own labour has not only been completed, but sold. A stock of goods of different kinds, therefore, must be stored up somewhere sufficient to maintain him, and to supply him with the materials and tools of his work till such time, at least, as both these events can be brought about.
-As the accumulation of stock must, in the nature of things, be previous to the division of labour, ...in order to give constant employment to an equal number of workmen, an equal stock of provisions, and a greater stock of materials and tools than what would have been necessary in a ruder state of things, must be accumulated beforehand. <ref>Adam Smith, ''An Inquiry into the Nature and Causes of the Wealth of Nations'', [http://www.econlib.org/library/Smith/smWN7.html Book II, Introduction, Paragraphs 1, 2, & 3] ''Of the Nature, Accumulation, and Employment of Stock,'', First Edition 1776.</ref>}}
-{{Cquote|When the division of labour has been once thoroughly established, it is but a very small part of a man's wants which the produce of his own labour can supply. He supplies the far greater part of them by exchanging that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men's labour as he has occasion for. Every man thus lives by exchanging, or becomes in some measure a merchant, and the society itself grows to be what is properly a commercial society. <ref>Adam Smith, ''An Inquiry into the Nature and Causes of the Wealth of Nations'', [http://www.econlib.org/library/Smith/smWN7.html Book I, Chapter 4, Paragraphs 1] ''Of the Origin and Use of Money'', First Edition 1776.</ref>}}
-==Capitalism and Society==
-Historically, capitalism has fostered freedom, and vice versa.  Societies that have tried non-capitalist systems inevitably fall into tyranny.
-For example, Venezuela, while not a perfect country before Hugo Chavez, had freedom and wealth unprecedented in its history.  As Chavez has nationalized industries, he has also centralized power, and become a virtual dictator.
-Non-captialist societies also tend to be [[atheism|atheistic]] (Russia) or Intolerent religious societies (Iran).
-== See also ==
-*[[Capital]]
-==References==
-<references/>
-==External links==
-*[http://www.capmag.com Capitalism Magazine]
-[[Category:Economics]]

Difference between revisions of "Capitalism"

Revision as of 23:08, May 25, 2008

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