CAPITALISM:
“A free market or capitalist economy may be characterized as an
automatic self-regulating system motivated by the self interest of
individuals and regulated by competition”. –MC CONNEL
Capitalism emerged during the 16th and 17th century and evolved
tremendously thereafter. Capitalism is defined as an economic system
where private actors own and control the use of property as per their
own interests within a market economy determined the principles of
demand and supply. The capitalist society encourages competition
and tries to achieve efficiency and productivity. Govt is often expected
to maintain peace and justice.
Capitalism as an economic system has few important characteristics.
There is PRIVATE OWNERSHIP of property, markets operate for profit
motive, wage labour, market competition, etc. Capitalism offers two
classes, the owners and the labourers, unlike the slave system. These
features in a nutshell entail the capitalist system.
ORIGIN AND EVOLUTION:
Feudalism to capitalism: a phase of transition-:
Spanning over the 9th and the 15th centuries according to most
historians, the feudal society was an agrarian based system in which
economic and political power were manipulated by the landowning
class. Feudalism declined for various reasons beginning in England and
giving way for the capitalist system of economic organization. By the
11th century, England saw the growth of productive forces and
advancement in agriculture sector.
Capitalism began to start around 13th century, substituting feudalism.
High growth rate in agriculture and increased productivity led to the
emergence of the Kulak class. Kulaks were the capitalist farmers in
Europe. There was substitution of labour renting to market renting,
which led to the emergence of ‘market feudalism’.
‘The enclosure programme’ converted common resources to
encroached areas. This caused rapid unemployment and displacement
of worker to urban areas. Simultaneously, technological
improvements in agriculture displaced the labour. Hence there was a
shift from rural to urban areas, which Karl Marx regarded as the
transition from feudalism to capitalism. There was a rise of capitalist
class in rural areas and towns, and a subsequent increase in
exploitation within feudalism.
Due to unbearable exploitation, the serfs revolted against the feudal
lords during the 13th and 14th century that led to subsequent collapse
of feudalism. There were several other reasons as well for the collapse
of feudalism in England. The ‘Hundred years war’ between France and
England (1337-1453); the plague epidemic (1348-49) which witnessed
the BLACK DEATH. Thus, the events leading to the decline of feudalism
coincided with the rise of capitalism in England in particular and
Europe in general.
EXPANSION OF CAPITALISM:
By the end of the 19th century, the making of a single capitalist world
economy had been completed. There were various stages of capitalist
expansion and development in the modern period.
Pre-competitive stage (1500-1800) or the Mercantile phase
expansion:
Capitalist economy ensured constant growth, and an inclination
towards profit made the European merchants explore the coasts of
Africa and Asian countries for gold spices and slaves. Paul Baran, in
THE POLITICAL ECONOMY OF GROWTH argued that European nations
transferred the economic surplus of these pre-industrial countries to
Europe to fund the industrial revolution. This led to regressive
economic advancement in these nations, which was highlighted by
Walter Roodney in HOW EUROPE UNDERDEVELOPED AFRICA.
Colonial phase of European expansion (1800-1880):
between 1800 and 1878, the European rule increased from 35% to
67%. In addition, the wave of invasion added 18% between 1875 and
1914. Colonialism i.e. direct political and administrative control over
other countries by the colonizers, also led to the expansion of
capitalism to the regions outside Europe. This phase was marked by
the internationalization of capital through which billions of dollars
were pumped into the colonial continents for building of railways,
ports, mines and factories. Moreover, ideological efforts were also
made to support the the process of colonialism.
Monopoly/imperialist stage (1880-1960):
Hobson argued that imperialism didn’t serve the smaller nations,
rather in the guise of development of the colonies, it was profit and
the monopoly of capital which were the actual imperial motives. Lenin
in his book IMPERIALISM, THE HIGHEST STAGE OF CAPITALISM, argued
that imperialism was a result of capitalists’ search for profits.
Immanuel Wallerstein and Gunder Frank point to the World system
theory to show the capitalist expansion at the expense of
underdevelopment of colonial countries. Unequal trade, monopoly
over resources etc helped in achieving the expansion of capitalism.
Late monopoly capitalist or Neo-colonization (1950-late 1980):
After 1945, with the end of Second World War, the Third World
countries of Asian and Africa gained independence from colonial rule.
However, their economic relationship with the colonizers didn’t break
immediately. These states were dependent of the European countries
they adopted a development model which was based on
modernization, borrowed from the west. This resulted in the transfer
of the surplus through DEVELOPMENTALISM and TECHNOLOGICAL
RENT.
Development was perceived as a lucrative idea and it was believed
that NORTH was developed and knew how SOUTH was to develop.
Moreover, the transfer of profits through sale of machines and
equipment of the west also led to neo-colonialism i.e. the practice of
exerting indirect influence by the erstwhile colonial powers over the
newly independent countries through economic and cultural means.
Globalization and neo-imperialism:
James Fulcher calls the period after 1970s as ‘remarketized
capitalism’. This period is characterized by the spread of globalization.
There was rise of neo-liberal beliefs in the free operation of market
forces. The state was rolling back and the welfare activities of the
state were diminishing. The neo-liberal capitalism growth, productivity
and competition were presented as the major goals. The states has to
pursue LPG policies and reduce labour legislation activities. Another
key character in understanding the link between capitalism and
globalism is the strong faith in open markets and trade liberalisation
encouraged by the creation of the World Trade Organisation in 1995.
These developments in international trade relations in the post 1970
period explain how capitalism was fed, strengthened and expanded by
the process of globalisation.
EXTRA INTRO:
Capitalism is an exploitative system but the exploitation is not by force
or coercion but it is primarily by economic means which is extraction
of surplus value of labour by the capitalist class. Capitalism caused
impersonal Social relation mediated by market. Invisible hand of
market determined both economic and social interactions. Hence,
capitalism is a very different production and resulting social order in
comparison to those of pre capitalist era.
CAPITALISM AND GLOBALIZATION:
“A free market or capitalist economy may be characterized as an
automatic self-regulating system motivated by the self interest of
individuals and regulated by competition”. –MC CONNEL
Capitalism emerged during the 16th and 17th century and evolved
tremendously thereafter. Capitalism is defined as an economic system
where private actors own and control the use of property as per their
own interests within a market economy determined the principles of
demand and supply. The capitalist society encourages competition
and tries to achieve efficiency and productivity. Govt is often expected
to maintain peace and justice.
Globalisation can be defined as world-wide interconnectedness and
interdependence of people, places, ideas, information, objects,
activities, and exchanges. Capitalism is by its very nature expansionist.
It requires new and bigger markets and more and more consumers to
sustain itself. The current phase of globalisation is propelled (pushed
or forced) by the engines of free market capitalism. In fact,
globalisation is manifestation of world-wide expansion of capitalism in
post-cold war era. Hence, globalisation can be understood as the face
of modern capitalism. In a way globalisation is nothing but globalised
capitalist system.
GLOBALIZATION AND CAPITALISM:
Capitalism is linked with globalization in the sense that globalization
led to the expansion of capitalism from Europe and America to the
third world countries and slowly, making it a global phenomena. The
capitalist expansion in the third world is owed largely to the process of
globalization. We need to see how during different phases, the
globalization of capital took place, starting from the classic phase, till
the expansion of neo-liberalism and economic globalization.
Classic phase: colonial era and golden period of capitalism:-
The colonies were the exporters of raw materials and importers of
finished goods. This phase also saw the destruction of old/pre-
capitalist mode of production in colonies. Later on, during 1940s to
1970s, MNCs evolved on a large scale globally which substantially
triggered the expansion of capitalism.
Globalization: the face of modern capitalism:-
Globalization is most evident in economic sphere. Economically the
world is increasingly becoming one unit and economic events in one
country affect other places. Globalisation, its economic aspect in
particular, is seen as the spread of neoliberalism which in turn
contains the crux of the capitalist order.
Liberal democracy and free-market capitalist economy are twin
engines of globalization. Current phase of globalization is propelled by
free-market capitalist economy. Economic liberalization, privatization,
free-trade, free exchange rates, etc are propelling globalization.
Capital as finance, circulation of hot money, interconnectedness of
global financial market- further fueling globalization. MNC and TNC
(trans-national corporation) representing capitalism are bearer of
globalizations. Globalisation induced intense international competition
for capital and markets forcing countries to deregulate their
economies and reduce tax levels to attract transnational investment.
Global commodity supply and demand chain which are part of global
capitalist system, are distinctive features of globalization.
Current phase of globalization denotes ideological victory of capitalism
and free market economy (neo-liberalism) in the post-cold war era.
Neo-liberal capitalism and its prescriptions for developing nations-
Liberalisation and privatisation- made ground for faster Globalisation.
Thus, Liberalisation, Privatisation, Globalisation (L.P.G.) became the
face of neo-liberal capitalism during current phase of globalisation.
The financial markets and the process of ‘financialization’ made
possible by the unparalleled expansion of the financial sector of the
economy. This process of economic globalisation transformed
capitalism into what came to be known as ‘turbo-capitalism’ fed by
expanded monetary flows, increased investment and higher
consumption worldwide. ‘Structural adjustment program’ for
developing countries under the guidance of IMF and World Bank
denotes integration of 3rd world countries into the global capitalist
system led by western capitalist powers.
[Link]
meaning-features-merits-and-de-merits/14124 ( FOR FEATURES OF
CAPITALISM)
Private Property and Freedom of ownership:
The most important feature of capitalism is the existence of
private property and the system of inheritance. An individual can
accumulate property and use it according to his will. Government
protects the right to [Link] has a right to acquire
private property to keep it and after his death, to pass it on to his
heirs.
Price Mechanism:
This type of economy has a freely working price mechanism to
guide consumers. Price mechanism means the free working of
the supply and demand forces without any intervention.
Producers are also helped by the price mechanism in-deciding
what to produce, how much to produce, when to produce and
where to produce.
This mechanism brings about the adjustment of supply to
demand. All economic processes of consumption, production,
exchange, distribution, saving and investment work according to
its directions. Therefore, Adam Smith has called price mechanism
as the “Invisible Hand” which operates the capitalist.
4. Profit Motive:
In this economy the desire to earn profit is the most important
inducement for economic activity. All entrepreneurs try to start
those industries or occupations in which they hope to earn the
highest profit. Profit is such an inducement that the entrepreneur
is prepared to undertake high risk. Therefore, it can be said that
Profit Motive is the SOUL of capitalist economy.
5. Competition and Co-operation Goes Side by Side:
A capitalist economy is characterized by free competition
because entrepreneurs compete for getting the highest profit. On
the other side buyers also compete for purchasing goods and
services. Workers compete among themselves. In this way
competition and co-operation go side by side.
6. Freedom of Enterprise, Occupation and Control:
Every person is free to start any enterprise of his choice. People
can follow occupations of their ability and taste. Moreover, there
is the freedom of entering into contract. Employers may contract
with trade unions, suppliers with a firm and one firm with
another.
7. Consumer’s Sovereignty:
In a capitalist economy a consumer is compared to a sovereign
king. The whole production frame works according to his
directions. Consumer’s tastes govern the whole production line
because entrepreneurs have to sell their production. If a
particular type of production is to the liking of consumers, the
producer gets high profits.
