Author: Mohammad Asem Esmailzahi
Capitalism (part 2)
Capitalism in Lexical and Technical Terms
Capitalism, or the capitalist system (Capitalism), also referred to as capital-centered economy, is an economic system in which the foundations of economic organization are based on the private ownership of the means of production, held by private owners and utilized to generate economic benefit (profit) within competitive markets. This principle is also described as freedom of private ownership, which entails the production and distribution of goods.
In contrast to the capitalist economic system, there exists the communist economic system, in which—unlike capitalism—private ownership of land, resources, and the means of production does not exist.
Among the main characteristics of capitalism are capital accumulation, competitive markets, the price system, private ownership and the recognition of property rights, voluntary exchange, and wage labor.
In a capitalist market economy, decision-making and investment are determined by individuals who possess wealth, assets, or productive capacity in capital and financial markets, while prices and the distribution of goods and services are largely determined through competition in goods and services markets.[1]
Lexically, the term capital refers to wealth, which includes land, factories, and similar assets. Income within this system generally takes at least two forms: profit and wages. Profit refers to the return granted to those who provide capital due to their ownership of the means of production. Within this system, land, labor, and capital are controlled by a particular segment of society, while other members of society engage in material and immaterial production through conditional access to these resources.
In 1776, Adam Smith laid the foundation of the classical school of economics through his book The Wealth of Nations. He was highly optimistic about the future of capitalism and believed that economic freedom would ensure the realization of public interests within the market.
Additionally, it is common within this system to consider rent as income derived from control over natural resources, which differs from the other two forms of income.
In the capitalist system, investment, production, distribution, income, pricing, and the supply of goods and services are determined through personal decision-making within a market economy. A defining feature of capitalism is that the production of goods is primarily carried out for the purpose of generating economic profit rather than necessarily meeting human needs; although, in some cases, profit generation coincides with fulfilling human needs.
In its broadest classification, capitalism can be divided into three economic models: Islamic economic systems, state capitalism (such as the Soviet Union after 1927 or contemporary China), and decentralized, non-state capitalism, such as that of the United States.
Economists, historians, political economists, and sociologists have adopted diverse perspectives in their analyses of capitalism and have identified various forms of it in practice. These include laissez-faire or free-market capitalism, state capitalism, and welfare capitalism.
Different forms of capitalism exhibit varying degrees of free markets, public ownership, barriers to free competition, and social policies enforced by governments. The level of market competition, the role of regulation and intervention, and the extent of state ownership differ across capitalist models. Most existing capitalist economies are mixed economies that combine elements of free markets with government intervention and, in some cases, economic planning.
Market economies have existed under various forms of government and across different times, locations, and cultures. Modern capitalist societies—characterized by the globalization of money-based social relations, a large and persistent working-class dependent on wage labor (the proletariat), and a capitalist class that owns the means of production—emerged in Western Europe through processes that culminated in the Industrial Revolution.
Since then, capitalist systems with varying degrees of direct state intervention have become dominant in the Western world and have continued to expand. Capitalism has been shown to be strongly associated with economic growth.
Critics of capitalism argue that it concentrates power in the hands of a minority capitalist class that exists through the exploitation of the labor of the majority working class, prioritizes profit over social welfare, natural resources, and the environment, and serves as a driving force behind inequality, corruption, and economic instability. Moreover, many individuals are unable to access the claimed benefits and freedoms of capitalism, such as free investment opportunities.[2]
The term capitalist, meaning an owner of capital, appeared earlier than the term capitalism and dates back to the mid-seventeenth century. The word capitalism is derived from capital, which itself originates from the late Latin word capitale, based on caput meaning “head,” and is also the root of terms such as chattel and cattle, referring to movable property (a usage that developed much later).
Between the twelfth and thirteenth centuries, the concept of capital emerged to refer to funds, inventories of goods, sums of money, or interest-bearing money, and was often used interchangeably with terms such as wealth, money, goods, and assets. The term capitalist was used by Hollantse Mercurius in 1633 and 1654 to refer to owners of capital. Arthur Young employed the term in his work Travels in France (1792). David Ricardo repeatedly referred to “capitalists” in his book Principles of Political Economy and Taxation (1817).
The English poet Samuel Taylor Coleridge used the term capitalist in his worktable Talk. Pierre-Joseph Proudhon employed the term in his first major work What Is Property? (1840), referring to owners of capital. Benjamin Disraeli used the term in his 1845 work Sybil. The earliest use of the term capitalism in its modern sense is attributed to Louis Blanc in 1850, who stated: “What I call capitalism is the appropriation of capital by some to the exclusion of others.” [3]
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References:
[1]. Barnes, Jack, Alice, Mary. Capitalism and Environmental Destruction: In Defense of the Earth and Labor, p. 62. Translated by Hamed Seddiqi. Published in 2011, Talaye Parsoo Publishing.
[2]. Alvey, James. A History of Economics as a Moral Science, p. 47. Translated by Ali Nemati. Autumn 2005, Tehran.
[3]. Lenin, Vladimir. Imperialism as the Highest Stage of Capitalism, p. 33. Translated by Marzieh Khosravi. Published in 2015, Rouzegar Publishing.
