Դիտել Մասնակից:Elen.Abrahamyan/Ավազարկղ Ա էջի աղբյուրը

{{about|economic policy}}{{redirect|Capitalist|other uses|Capitalist (disambiguation)}}{{pp-pc1|small=yes}} {{short description|Economic system based on private ownership}} {{use American English|date=January 2014}} {{Use dmy dates|date=June 2020}} {{capitalism}} {{economic systems sidebar|expanded=by ideology}} '''Capitalism''' is an [[economic system]] based on the [[Private property|private ownership]] of the [[means of production]] and their operation for [[Profit (economics)|profit]].<ref>{{cite book|url=https://archive.org/details/comparingeconomi0000zimb_q8i6/page/6|title=Comparing Economic Systems: A Political-Economic Approach|last=Zimbalist, Sherman and Brown|first=Andrew, Howard J. and Stuart|date=October 1988|publisher=Harcourt College Pub|isbn=978-0-15-512403-5|pages=[https://archive.org/details/comparingeconomi0000zimb_q8i6/page/6 6–7]|quote=Pure capitalism is defined as a system wherein all of the means of production (physical capital) are privately owned and run by the capitalist class for a profit, while most other people are workers who work for a salary or wage (and who do not own the capital or the product).}}</ref><ref>{{cite book|title=Comparative Economics in a Transforming World Economy|last1=Rosser|first1=Mariana V.|last2=Rosser|first2=J Barkley|date=23 July 2003|publisher=MIT Press|isbn=978-0-262-18234-8|page=7|quote=In capitalist economies, land and produced means of production (the capital stock) are owned by private individuals or groups of private individuals organized as firms.}}</ref><ref>Chris Jenks. ''Core Sociological Dichotomies''.  "Capitalism, as a mode of production, is an economic system of manufacture and exchange which is geared toward the production and sale of commodities within a market for profit, where the manufacture of commodities consists of the use of the formally free labor of workers in exchange for a wage to create commodities in which the manufacturer extracts surplus value from the labor of the workers in terms of the difference between the wages paid to the worker and the value of the commodity produced by him/her to generate that profit." London; Thousand Oaks, CA; New Delhi. Sage. p. 383.</ref><ref>{{cite book|title=The Challenge of Global Capitalism : The World Economy in the 21st Century|last=Gilpin|first=Robert|date=5 June 2018|isbn=9780691186474|oclc=1076397003}}</ref> Characteristics central to capitalism include private property, [[capital accumulation]], [[wage labor]], [[voluntary exchange]], a [[price system]] and [[Competitive market|competitive markets]].<ref>Heilbroner, Robert L. [http://www.dictionaryofeconomics.com/article?id=pde2008_C000053 "Capitalism"]. Steven N. Durlauf and Lawrence E. Blume, eds. ''The New Palgrave Dictionary of Economics''. 2nd {{abbr|ed.|edition}} (Palgrave Macmillan, 2008) {{DOI|10.1057/9780230226203.0198}}</ref><ref>Louis Hyman and Edward E. Baptist (2014). ''[http://books.simonandschuster.com/American-Capitalism/Louis-Hyman/9781476784311 American Capitalism: A Reader].'' [[Simon & Schuster]]. {{ISBN|978-1-4767-8431-1}}.</ref> In a capitalist [[market economy]], decision-making and investments are determined by every owner of wealth, property or production ability in [[Financial market|financial]] and [[Capital market|capital markets]] whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.<ref>{{cite book|title=The Global Economy and its Economic Systems|last=Gregory and Stuart|first=Paul and Robert|date=28 February 2013|publisher=South-Western College Pub|isbn=978-1-285-05535-0|page=41|quote=Capitalism is characterized by private ownership of the factors of production. Decision making is decentralized and rests with the owners of the factors of production. Their decision making is coordinated by the market, which provides the necessary information. Material incentives are used to motivate participants.}}</ref><ref>{{cite dictionary|url=http://www.merriam-webster.com/dictionary/capitalism|title=Definition of CAPITALISM|dictionary=Merriam-Webster|accessdate=23 March 2018}}</ref>

[[Economist|Economists]], [[Political economist|political economists]], [[Sociologist|sociologists]] and [[Historian|historians]] have adopted different perspectives in their analyses of capitalism and have recognized various forms of it in practice. These include ''[[Laissez-faire capitalism|laissez-faire]]'' or [[free-market capitalism]], [[welfare capitalism]] and [[state capitalism]]. Different forms of capitalism feature varying degrees of [[Free market|free markets]], [[public ownership]],<ref>{{cite book|title=The Global Economy and its Economic Systems|last=Gregory and Stuart|first=Paul and Robert|date=28 February 2013|publisher=South-Western College Pub|isbn=978-1-285-05535-0|page=107|quote=Real-world capitalist systems are mixed, some having higher shares of public ownership than others. The mix changes when privatization or nationalization occurs. Privatization is when property that had been state-owned is transferred to private owners. [[Nationalization]] occurs when privately owned property becomes publicly owned.}}</ref> obstacles to free competition and state-sanctioned [[social policies]]. The degree of competition in markets, the role of [[Economic interventionism|intervention]] and regulation, and the scope of state ownership vary across different models of capitalism.<ref name="Modern Economics 1986, p. 54">''Macmillan Dictionary of Modern Economics'', 3rd Ed., 1986, p. 54.</ref><ref>{{cite magazine|last=Bronk|first=Richard|title=Which model of capitalism?|url=http://oecdobserver.org/news/archivestory.php/aid/345/Which_model_of_capitalism_.html|url-status=live|magazine=[[OECD Observer]]|publisher=OECD|date=Summer 2000|volume=1999|issue=221–22|pages=12–15|archiveurl=https://web.archive.org/web/20180406200423/http://oecdobserver.org/news/archivestory.php/aid/345/Which_model_of_capitalism_.html|archivedate=6 April 2018|accessdate=6 April 2018}}</ref> The extent to which different markets are free as well as the rules defining private property are matters of politics and [[policy]]. Most existing capitalist economies are [[mixed economies]] which combine elements of free markets with state intervention and in some cases [[economic planning]].<ref name="Stilwell">Stilwell, Frank. "Political Economy: the Contest of Economic Ideas". First Edition. Oxford University Press. Melbourne, Australia. 2002.</ref>

[[Market economies]] have existed under many [[forms of government]] and in many different times, places and cultures. Modern capitalist societies—marked by a universalization of [[money]]-based social relations, a consistently large and system-wide [[Proletariat|class of workers who must work for wages]], and a [[capitalist class]] which owns the [[means of production]]—developed in [[Western Europe]] in a process that led to the [[Industrial Revolution]]. Capitalist systems with varying degrees of direct government intervention have since become dominant in the [[Western world]] and continue to spread. Over time, all capitalist countries have experienced consistent [[economic growth]] and an increase in the [[standard of living]].<ref>{{Cite journal|last=Sy|first=Wilson N.|date=2016-09-18|title=Capitalism and Economic Growth Across the World|language=en|location=Rochester, NY|ssrn=2840425|quote=For 40 largest countries in the International Monetary Fund (IMF) database, it is shown statistically that capitalism, between 2003 and 2012, is positively correlated significantly to economic growth.}}</ref>

[[Critics of capitalism]] argue that it establishes power in the hands of a minority capitalist class that exists through the exploitation of the majority working class and their labor; it prioritizes profit over social good, natural resources and the environment; and it is an engine of inequality, corruption and economic instabilities. Supporters argue that it provides better products and innovation through competition, promotes pluralism and decentralization of power, disperses wealth to all productive people who then invest in useful enterprises based on market demands, allows for a flexible incentive system where efficiency and sustainability are priorities to protect capital, creates strong economic growth and yields productivity and prosperity that greatly benefit society.

== Etymology ==
{| class="box" style="float: right; margin-left: 1em; text-align: left; border: 1px solid #aaa; padding: 2px; font-size: 100%; width: 30%;"
|Other terms sometimes used for capitalism:

* [[Capitalist mode of production (Marxist theory)|Capitalist mode of production]]<ref>{{cite book|url=https://books.google.com/books?id=Pf9Jd1sIMJ0C&pg=PA24|title=An Introduction to Marxist Economic Theory|last=Mandel|first=Ernst|publisher=Resistance Books|year=2002|isbn=978-1-876646-30-1|page=24|authorlink=Ernst Mandel}}</ref>
* [[Economic liberalism]]<ref>{{cite journal|author=Werhane, P.H.|year=1994|title=Adam Smith and His Legacy for Modern Capitalism|journal=The Review of Metaphysics|volume=47|issue=3}}</ref>
* Free enterprise<ref name="rogetfreeenterprise">"Free enterprise". Roget's 21st Century Thesaurus, Third Edition. Philip Lief Group 2008.</ref>
* Free enterprise economy<ref name="britannica">{{cite book|url=http://www.britannica.com/EBchecked/topic/93927/capitalism|title=Capitalism|date=10 November 2014|publisher=Encyclopædia Britannica}}</ref>
* [[Free market]]<ref name="rogetfreeenterprise" /><ref name="mutualist">[http://www.mutualist.org/ www.mutualist.org]. "...&nbsp;based on voluntary cooperation, free exchange, or mutual aid."</ref>
* Free market economy<ref name="britannica" />
* ''[[Laissez-faire]]''<ref name="Barrons">Barrons Dictionary of Finance and Investment Terms, 1995; p. 74.</ref>
* [[Market economy]]<ref>[http://unabridged.merriam-webster.com/cgi-bin/unabridged?va=market%20economy "Market economy"], Merriam-Webster Unabridged Dictionary</ref>
* [[Market liberalism]]<ref>{{cite web|url=http://www.cato.org/about.php|title=About Cato|publisher=Cato Institute • cato.org|accessdate=6 November 2008}}</ref><ref>{{cite web|url=http://www.cato.org/university/module10.html|title=The Achievements of Nineteenth-Century Classical Liberalism|archiveurl=https://web.archive.org/web/20090211160820/http://www.cato.org/university/module10.html|archivedate=11 February 2009|url-status=dead}}{{quote|Although the term "liberalism" retains its original meaning in most of the world, it has unfortunately come to have a very different meaning in late twentieth-century America. Hence terms such as "market liberalism," "classical liberalism," or "libertarianism" are often used in its place in America.}}</ref>
* [[Neoliberalism]]<ref name="Duménil">{{cite interview|last=Gérard|first=Duménil|subject-link=Gérard Duménil|interviewer=Paul Jay|type=Transcript|title=The crisis of neoliberalism|url=https://therealnews.com/stories/gdumenilneolib0216pt1|publisher=[[The Real News]]|date=30 March 2010|access-date=6 April 2018|archive-url=https://web.archive.org/web/20180406160817/https://therealnews.com/t2/index.php?Itemid=74&id=31&jumival=4962&option=com_content&task=view|archive-date=6 April 2018|url-status=live|quote=When we speak of neoliberalism, we speak of contemporary capitalism. Neoliberalism, it's a new stage of capitalism which began around 1980. It began in big countries like United Kingdom and the United States. Then it was implemented in Europe, and later in Japan, and later around the world in general. So this is a new phase of capitalism.}}</ref>
* Profits system<ref>{{cite book|title=Beyond the Profits System: Possibilities for the Post-Capitalist Era|last=Shutt|first=Harry|publisher=Zed Books|year=2010|isbn=978-1-84813-417-1}}</ref>
* Self-regulating market<ref name="rogetfreeenterprise" />
|}
The term "capitalist", meaning an owner of [[Capital (economics)|capital]], appears earlier than the term "capitalism" and dates to the mid-17th century. "Capitalism" is derived from ''capital'', which evolved from ''capitale'', a late [[Latin]] word based on ''caput'', meaning "head"—which is also the origin of "[[Personal property|chattel]]" and "[[cattle]]" in the sense of movable property (only much later to refer only to livestock). ''Capitale'' emerged in the 12th to 13th centuries to refer to funds, stock of merchandise, sum of money or money carrying interest.<ref name="Braudel-1979">Braudel, Fernand. The Wheels of Commerce: Civilization and Capitalism 15th–18th Century, Harper and Row, 1979</ref>{{rp|232}}<ref>{{OEtymD|cattle}}</ref><ref name="OED-93">James Augustus Henry Murray. "Capital". [[iarchive:oedvol02|A New English Dictionary on Historical Principles]]. ''Oxford English Press''. {{abbr|Vol.|Volume}} 2. p. 93.</ref> By 1283, it was used in the sense of the capital assets of a trading firm and was often interchanged with other words—wealth, money, funds, goods, assets, property and so on.<ref name="Braudel-1979" />{{rp|233}}

The ''Hollantse (German: holländische) Mercurius'' uses "capitalists" in 1633 and 1654 to refer to owners of capital.<ref name="Braudel-1979" />{{rp|234}} In French, [[Étienne Clavier]] referred to ''capitalistes'' in 1788,<ref>E.g., "L'Angleterre a-t-elle l'heureux privilège de n'avoir ni Agioteurs, ni Banquiers, ni Faiseurs de services, ni Capitalistes ?" in [Étienne Clavier] (1788) ''De la foi publique envers les créanciers de l'état : lettres à M. Linguet sur le n° CXVI de ses annales'' [https://books.google.com/books?id=ESMVAAAAQAAJ&pg=PA19 p. 19]</ref> six years before its first recorded English usage by [[Arthur Young (writer)|Arthur Young]] in his work ''Travels in France'' (1792).<ref name="OED-93" /><ref>Arthur Young. [[iarchive:travelsduringye03youngoog|''Travels in France'']].</ref> In his ''[[Principles of Political Economy and Taxation]]'' (1817), [[David Ricardo]] referred to "the capitalist" many times.<ref>Ricardo, David. Principles of Political Economy and Taxation. 1821. John Murray Publisher, 3rd edition.</ref> English poet [[Samuel Taylor Coleridge]] used "capitalist" in his work ''Table Talk'' (1823).<ref>Samuel Taylor Coleridge. [https://books.google.com/books?id=ma-4W-XiGkIC Tabel ''The Complete Works of Samuel Taylor Coleridge'']. p. 267.</ref> [[Pierre-Joseph Proudhon]] used the term in his first work, ''[[What is Property?]]'' (1840), to refer to the owners of capital. [[Benjamin Disraeli]] used the term in his 1845 work ''[[Sybil (novel)|Sybil]]''.<ref name="OED-93" />

The initial use of the term "capitalism" in its modern sense is attributed to [[Louis Blanc]] in 1850 ("What I call 'capitalism' that is to say the appropriation of capital by some to the exclusion of others") and Pierre-Joseph Proudhon in 1861 ("Economic and social regime in which capital, the source of income, does not generally belong to those who make it work through their labor").<ref name="Braudel-1979" />{{rp|237}} [[Karl Marx]] and [[Friedrich Engels]] referred to the "capitalistic system"<ref>Karl Marx. Chapter 16: "Absolute and Relative Surplus-Value." ''[[Das Kapital]]'': "The prolongation of the working-day beyond the point at which the laborer would have produced just an equivalent for the value of his labor-power, and the appropriation of that surplus-labor by capital, this is the production of absolute surplus-value. It forms the general groundwork of the ''capitalist system'', and the starting point for the production of relative surplus-value."</ref><ref>Karl Marx. Chapter Twenty-Five: "The General Law of Capitalist Accumulation". ''Das Kapital''.</ref> and to the "capitalist mode of production" in ''[[Capital: Critique of Political Economy|Capital]]'' (1867).<ref>Saunders, Peter (1995). ''Capitalism''. University of Minnesota Press. p. 1.</ref> The use of the word "capitalism" in reference to an economic system appears twice in Volume I of ''Capital'', p.&nbsp;124 (German Edition) and in ''Theories of Surplus Value'', volume II, p.&nbsp;493 (German Edition).  Marx did not extensively use the form ''capitalism'', but instead ''capitalist'' and ''capitalist mode of production'', which appear more than 2,600 times in the trilogy ''Capital'' (''Das Kapital'').  According to the ''[[Oxford English Dictionary]]'' (OED), the term "capitalism" first appeared in English in 1854 in the novel ''[[The Newcomes]]'' by novelist [[William Makepeace Thackeray]], where he meant "having ownership of capital".<ref name="OED-94">James Augustus Henry Murray. "Capitalism" p. 94.</ref> Also according to the OED, [[Carl Adolph Douai]], a [[German Americans|German American]] [[Socialism|socialist]] and [[Abolitionism in the United States|abolitionist]], used the phrase "private capitalism" in 1863.

== History ==
{{Main|History of capitalism}}
[[Պատկեր:Jacopo_Pontormo_055.jpg|մինի|[[Cosimo de' Medici]], who managed to build up the international financial empire and was one of the first [[Medici Bank|Medici bankers]]]]
Capitalism in its modern form can be traced to the emergence of agrarian capitalism and mercantilism in the early [[Renaissance]], in city-states like [[Florence]].<ref>{{cite journal|date=2009-04-16|title=Cradle of capitalism|url=http://www.economist.com/node/13484709|journal=The Economist}}</ref> [[Capital (economics)|Capital]] has existed incipiently on a small scale for centuries<ref name="WarburtonDavid">Warburton, David. ''Macroeconomics from the beginning: The General Theory, Ancient Markets, and the Rate of Interest''. Paris, Recherches et Publications, 2003. p. 49.</ref> in the form of merchant, renting and lending activities and occasionally as small-scale industry with some wage labour. Simple [[commodity]] exchange and consequently simple commodity production, which is the initial basis for the growth of capital from trade, have a very long history. [[Classical Islam|Arabs]] promulgated capitalist economic policies such as free trade and banking. Their use of [[Indo-Arabic numerals]] facilitated [[bookkeeping]].  These innovations migrated to Europe through trade partners in cities such as Venice and Pisa.  The Italian mathematician [[Fibonacci]] traveled the Mediterranean talking to Arab traders and returned to popularize the use of Indo-Arabic numerals in Europe.<ref name="Koehler, Benedikt">Koehler, Benedikt. ''Early Islam and the Birth of Capitalism'',  "In Baghdad, by the early tenth century a fully-fledged banking sector had come into being..." p. 2, (Lexington Books, 2014).</ref>

Capital and commercial trade thus existed for much of history, but it did not lead to industrialization or dominate the production process of society. That required a set of conditions, including specific technologies of mass production, the ability to independently and privately own and trade in means of production, a class of workers willing to sell their [[labor power]] for a living, a [[legal]] framework promoting commerce, a physical infrastructure allowing the circulation of goods on a large scale and security for private accumulation. Many of these conditions do not currently exist in many [[Third World]] countries, although there is plenty of capital and labor. The obstacles for the development of capitalist markets are therefore less technical and more social, cultural and political.

=== Agrarianism ===
The economic foundations of the feudal agricultural system began to shift substantially in 16th-century England as the [[manorial system]] had broken down and land began to become concentrated in the hands of fewer landlords with increasingly large estates. Instead of a [[serf]]-based system of labor, workers were increasingly employed as part of a broader and expanding money-based economy. The system put pressure on both landlords and tenants to increase the productivity of agriculture to make profit; the weakened coercive power of the [[aristocracy]] to extract peasant [[Excess supply|surpluses]] encouraged them to try better methods, and the tenants also had incentive to improve their methods in order to flourish in a competitive [[Labor economics|labor market]]. Terms of rent for land were becoming subject to economic market forces rather than to the previous stagnant system of custom and feudal obligation.<ref>{{cite journal|last1=Brenner|first1=Robert|date=1 January 1982|title=The Agrarian Roots of European Capitalism|journal=Past & Present|issue=97|pages=16–113|doi=10.1093/past/97.1.16|jstor=650630}}</ref><ref>{{cite web|url=http://monthlyreview.org/1998/07/01/the-agrarian-origins-of-capitalism|title=The Agrarian Origins of Capitalism|date=July 1998|accessdate=17 December 2012}}</ref>

By the early 17th century, England was a centralized state in which much of the feudal order of [[Medieval Europe]] had been swept away. This centralization was strengthened by a good system of roads and by a disproportionately large capital city, [[London]]. The capital acted as a central market hub for the entire country, creating a very large internal market for goods, contrasting with the fragmented feudal holdings that prevailed in most parts of the [[Continental Europe|Continent]].

=== Mercantilism ===
{{Main|Mercantilism}}
[[Պատկեր:Lorrain.seaport.jpg|ձախից|մինի|A painting of a French seaport from 1638 at the height of [[mercantilism]]]]
The economic doctrine prevailing from the 16th to the 18th centuries is commonly called [[mercantilism]].<ref name="GSGB">{{cite book|url=https://books.google.com/books?id=Pf9Jd1sIMJ0C|title=An Introduction to Marxist Economic Theory|date=1 January 2002|publisher=Resistance Books|isbn=9781876646301|via=Google Books}}</ref><ref name="Burnham">{{cite book|title=Capitalism: The Concise Oxford Dictionary of Politics|author=Burnham, Peter|publisher=Oxford University Press|year=2003}}</ref> This period, the [[Age of Discovery]], was associated with the geographic exploration of the foreign lands by merchant traders, especially from England and the [[Low Countries]]. Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist methods.<ref name="Scott">{{cite book|title=Industrialism: A Dictionary of Sociology|author=Scott, John|publisher=Oxford University Press|year=2005}}</ref> Most scholars consider the era of merchant capitalism and mercantilism as the origin of modern capitalism,<ref name="Burnham 2003">Burnham (2003)</ref><ref name="Encyclopædia Britannica 2006">''Encyclopædia Britannica'' (2006)</ref> although [[Karl Polanyi]] argued that the hallmark of capitalism is the establishment of generalized markets for what he called the "fictitious commodities", i.e. land, labor and money. Accordingly, he argued that "not until 1834 was a competitive labor market established in England, hence industrial capitalism as a social system cannot be said to have existed before that date".<ref>Polanyi, Karl. ''The Great Transformation''. Beacon Press, Boston. 1944. p. 87.</ref>
[[Պատկեր:Lord Clive meeting with Mir Jafar after the Battle of Plassey.jpg|մինի|[[Robert Clive]] with the [[Nawabs of Bengal]] after the [[Battle of Plassey]] which began the British rule in [[India]]]]
England began a large-scale and integrative approach to mercantilism during the [[Elizabethan Era]] (1558–1603). A systematic and coherent explanation of balance of trade was made public through [[Thomas Mun]]'s argument ''England's Treasure by Forraign Trade, or the Balance of our Forraign Trade is The Rule of Our Treasure.'' It was written in the 1620s and published in 1664.<ref>{{cite book|url=https://books.google.com/books?id=M1QdbzdTimsC&pg=PA257|title=Ideology and Foreign Policy in Early Modern Europe (1650–1750)|author1=David Onnekink|author2=Gijs Rommelse|publisher=Ashgate Publishing|year=2011|isbn=9781409419143|page=257}}</ref>

European [[Merchant|merchants]], backed by state controls, subsidies and [[Monopoly|monopolies]], made most of their profits by buying and selling goods. In the words of [[Francis Bacon]], the purpose of mercantilism was "the opening and well-balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation of prices...".<ref>Quoted in Sir George Clark, ''The Seventeenth Century'' (New York, Oxford University Press, 1961), p. 24.</ref>

After the period of the [[proto-industrialization]], the [[British East India Company]] and the [[Dutch East India Company]], after massive contributions from the [[Mughal Bengal]],<ref name="Prakash">[[Om Prakash (historian)|Om Prakash]], "[http://link.galegroup.com/apps/doc/CX3447600139/WHIC?u=seat24826&xid=6b597320 Empire, Mughal]", ''History of World Trade Since 1450'', edited by John J. McCusker, vol. 1, Macmillan Reference USA, 2006, pp. 237–240, ''World History in Context''. Retrieved 3 August 2017</ref><ref name="ray">{{cite book|url=https://books.google.com/books?id=CHOrAgAAQBAJ&pg=PA57|title=Bengal Industries and the British Industrial Revolution (1757-1857)|author=Indrajit Ray|publisher=Routledge|year=2011|isbn=978-1-136-82552-1|pages=57, 90, 174}}</ref> inaugurated an expansive era of commerce and trade.<ref name="Banaji">{{cite journal|author=Banaji, Jairus|year=2007|title=Islam, the Mediterranean and the rise of capitalism|url=http://eprints.soas.ac.uk/15983/1/Islam%20and%20capitalism.pdf|journal=Journal Historical Materialism|volume=15|pages=47–74|doi=10.1163/156920607X171591}}</ref><ref name="britannica2">{{cite book|url=http://www.britannica.com/EBchecked/topic/178493/economic-system/61117/Market-systems#toc242146|title=Economic system:: Market systems|publisher=Encyclopædia Britannica|year=2006}}</ref> These companies were characterized by their [[Colonialism|colonial]] and [[Expansionism|expansionary]] powers given to them by nation-states.<ref name="Banaji" /> During this era, merchants, who had traded under the previous stage of mercantilism, invested capital in the East India Companies and other colonies, seeking a [[return on investment]].

=== Industrial Revolution ===
[[Պատկեր:Maquina_vapor_Watt_ETSIIM.jpg|ձախից|մինի|The [[Watt steam engine]], a [[steam engine]] fuelled primarily by [[coal]] propelled the [[Industrial Revolution]] in [[United Kingdom|Great Britain]]<ref>Watt steam engine image located in the lobby of the Superior Technical School of Industrial Engineers of the [[Technical University of Madrid|UPM]]{{clarify|date=April 2016}} ([[Madrid]]).</ref>]]
In the mid-18th century a group of economic theorists, led by [[David Hume]] (1711–1776)<ref>{{cite book|url=https://archive.org/details/McGillLibrary-125702-2590|title=Political Discourses|author=Hume, David|publisher=A. Kincaid & A. Donaldson|year=1752|location=Edinburgh}}</ref> and [[Adam Smith]] (1723–1790), challenged fundamental mercantilist doctrines - such as the belief that the world's wealth remained constant and that a state could only increase its wealth at the expense of another state.

During the [[Industrial Revolution]], [[industrialists]] replaced merchants as a dominant factor in the capitalist system and effected the decline of the traditional handicraft skills of [[Artisan|artisans]], guilds and [[Journeyman|journeymen]]. Also during this period, the surplus generated by the rise of commercial agriculture encouraged increased mechanization of agriculture.{{citation needed|date=September 2019}} Industrial capitalism marked the development of the [[factory system]] of manufacturing, characterized by a complex [[division of labor]] between and within work process and the routine of work tasks; and eventually established the domination of the [[Capitalist mode of production (Marxist theory)|capitalist mode of production]].<ref>{{cite book|url=https://books.google.com/books?id=8JkyAwAAQBAJ|title=The Concise Oxford Dictionary of Politics|last1=Burnham|first1=Peter|publisher=Oxford University Press|year=1996|isbn=9780191018275|editor1-last=McLean|editor1-first=Iain|edition=3|series=Oxford Quick Reference|location=Oxford|publication-date=2009|chapter=Capitalism|quote=Industrial capitalism, which Marx dates from the last third of the eighteenth century, finally establishes the domination of the capitalist mode of production.|author-link1=Peter Burnham|access-date=14 September 2019|editor2-last=McMillan|editor2-first=Alistair}}</ref>

Industrial Britain eventually abandoned the [[protectionist]] policy formerly prescribed by mercantilism. In the 19th century, [[Richard Cobden]] (1804–1865) and [[John Bright]] (1811–1889), who based their beliefs on the [[Manchester capitalism|Manchester School]], initiated a movement to lower [[tariffs]].<ref name="laissezf">{{cite web|url=http://www.bartleby.com/65/la/laissezf.html|title=laissez-faire|archiveurl=https://web.archive.org/web/20081202050426/http://www.bartleby.com/65/la/laissezf.html|archivedate=2 December 2008|url-status=dead}}</ref> In the 1840s Britain adopted a less protectionist policy, with the 1846 repeal of the [[Corn Laws]] and the 1849 repeal of the [[Navigation Acts]].<ref>{{cite book|url=https://books.google.com/books?id=8JkyAwAAQBAJ|title=The Concise Oxford Dictionary of Politics|last1=Burnham|first1=Peter|publisher=Oxford University Press|year=1996|isbn=9780191018275|editor1-last=McLean|editor1-first=Iain|edition=3|series=Oxford Quick Reference|location=Oxford|publication-date=2009|chapter=Capitalism|quote=For most analysts, mid- to late-nineteenth century Britain is seen as the apotheosis of the laissez-faire phase of capitalism. This phase took off in Britain in the 1840s with the repeal of the Corn Laws, and the Navigation Acts, and the passing of the Banking Act.|author-link1=Peter Burnham|access-date=14 September 2019|editor2-last=McMillan|editor2-first=Alistair}}</ref> Britain reduced tariffs and [[Import quota|quotas]], in line with David Ricardo's advocacy of [[free trade]].

=== Modernity ===
{{Expand section|date=February 2017}}
[[Պատկեր:McKinley_Prosperity.jpg|մինի|The [[gold standard]] formed the financial basis of the international economy from 1870 to 1914]]
Capitalism was carried across the world by broader processes of [[globalization]] and by the beginning of the nineteenth century a series of loosely connected market systems had come together as a relatively integrated global system, in turn intensifying processes of economic and other globalization.<ref name="Sage Publications">{{Cite book|url=https://www.academia.edu/4199690|title=Globalization and Economy, Vol. 1: Global Markets and Capitalism|last1=James|first1=Paul|last2=Gills|first2=Barry|publisher=Sage Publications|year=2007|location=London|page=xxxiii|authorlink=Paul James (academic)}}</ref>{{page needed|reason=for a fairly generic assertion in the text about "intergrated global systems" with a citation to a 416-page book, you have to have a page number or this is essentially unverifiable.|date=September 2018}} Later in the 20th century, capitalism overcame a challenge by [[Planned economy|centrally-planned economies]] and is now the encompassing system worldwide,<ref name="britannica" /><ref>James Fulcher, ''Capitalism, A Very Short Introduction''. "In one respect there can, however, be little doubt that capitalism has gone global and that is in the elimination of alternative systems". p. 99. Oxford University Press, 2004. {{ISBN|978-0-19-280218-7}}.</ref> with the [[mixed economy]] being its dominant form in the industrialized Western world.

[[Industrialization]] allowed cheap production of household items using [[economies of scale]] while rapid population growth created sustained demand for commodities. Globalization in this period was decisively shaped by 18th-century [[imperialism]].<ref name="Sage Publications" />{{page needed|date=September 2018}}

After the [[First Opium War|First]] and [[Second Opium War|Second Opium Wars]] and the completion of the British conquest of India, vast populations of these regions became ready consumers of European exports. Also in this period, areas of sub-Saharan Africa and the Pacific islands were colonized. The conquest of new parts of the globe, notably sub-Saharan Africa, by Europeans yielded valuable natural resources such as [[rubber]], [[diamonds]] and [[coal]] and helped fuel trade and investment between the European imperial powers, their colonies and the United States:<blockquote>The inhabitant of London could order by telephone, sipping his morning tea, the various products of the whole earth, and reasonably expect their early delivery upon his doorstep. Militarism and imperialism of racial and cultural rivalries were little more than the amusements of his daily newspaper. What an extraordinary episode in the economic progress of man was that age which came to an end in August 1914.<ref>{{cite web|url=https://www.pbs.org/wgbh/commandingheights/shared/minitext/tr_show01.html|title=PBS.org|date=24 October 1929|publisher=PBS.org|accessdate=31 July 2010}}</ref></blockquote>In this period, the global financial system was mainly tied to the [[gold standard]]. The [[United Kingdom]] first formally adopted this standard in 1821. Soon to follow were [[United Province of Canada|Canada]] in 1853, [[History of Newfoundland and Labrador|Newfoundland]] in 1865, the [[United States]] and Germany (''[[de jure]]'') in 1873. New technologies, such as the [[telegraph]], the [[Transatlantic telegraph cable|transatlantic cable]], the [[radiotelephone]], the [[steamship]] and [[railway]] allowed goods and information to move around the world at an unprecedented degree.<ref>[[Michael D. Bordo]], [[Barry Eichengreen]], Douglas A. Irwin. ''Is Globalization Today Really Different than Globalization a Hundred Years Ago?'' NBER {{clarify|date=April 2016}} Working Paper No. 7195. June 1999.</ref>
[[Պատկեր:NY_stock_exchange_traders_floor_LC-U9-10548-6.jpg|ձախից|մինի|The New York [[stock exchange]] [[Trading room|traders' floor]] (1963)]]
In the period following the global depression of the 1930s, the state played an increasingly prominent role in the capitalistic system throughout much of the world. The postwar boom ended in the late 1960s and early 1970s and the situation was worsened by the rise of [[stagflation]].<ref>{{cite book|title=Reading economic geography|author=Barnes, Trevor J.|publisher=Blackwell Publishing|year=2004|isbn=978-0-631-23554-5|page=127}}</ref> [[Monetarism]], a modification of [[Keynesian economics|Keynesianism]] that is more compatible with ''laissez-faire'', gained increasing prominence in the capitalist world, especially under the leadership of [[Ronald Reagan]] in the United States and [[Margaret Thatcher]] in the United Kingdom in the 1980s. Public and political interest began shifting away from the so-called [[collectivist]] concerns of Keynes's managed capitalism to a focus on individual choice, called "remarketized capitalism".<ref name="Fulcher, James 2004">Fulcher, James. ''Capitalism''. 1st {{abbr|ed.|edition}} New York, Oxford University Press, 2004.</ref>

According to Harvard academic [[Shoshana Zuboff]], a new genus of capitalism, [[surveillance capitalism]] monetizes data acquired through [[surveillance]].<ref>{{cite news|last1=Powles|first1=Julia|title=Google and Microsoft have made a pact to protect surveillance capitalism|url=https://www.theguardian.com/technology/2016/may/02/google-microsoft-pact-antitrust-surveillance-capitalism|newspaper=The Guardian|accessdate=9 February 2017|date=2 May 2016}}</ref><ref name="faz1">{{cite news|last1=Zuboff|first1=Shoshana|title=Google as a Fortune Teller: The Secrets of Surveillance Capitalism|url=https://www.faz.net/aktuell/feuilleton/debatten/the-digital-debate/shoshana-zuboff-secrets-of-surveillance-capitalism-14103616.html?printPagedArticle=true|publisher=Frankfurter Allgemeine Zeitung|accessdate=9 February 2017|date=5 March 2016|newspaper=Faz.net}}</ref><ref>{{cite journal|last1=Sterling|first1=Bruce|date=2016-03-08|title=Shoshanna Zuboff condemning Google "surveillance capitalism"|url=https://www.wired.com/beyond-the-beyond/2016/03/shoshanna-zuboff-condemning-google-surveillance-capitalism/|journal=Wired|accessdate=9 February 2017}}</ref> She states it was first discovered and consolidated at [[Google]], emerged due to the "coupling of the vast powers of the [[Digital technology|digital]] with the radical indifference and intrinsic narcissism of the [[financial capitalism]] and its [[neoliberal]] vision that have dominated commerce for at least three decades, especially in the Anglo economies"<ref name="faz1" /> and depends on the global architecture of computer mediation which produces a distributed and largely uncontested new expression of power she calls "Big Other".<ref name="ssrn">{{cite journal|last1=Zuboff|first1=Shoshana|date=9 April 2015|title=Big other: surveillance capitalism and the prospects of an information civilization|journal=Journal of Information Technology|volume=30|issue=1|pages=75–89|doi=10.1057/jit.2015.5|ssrn=2594754}}</ref>

==== Relationship to democracy ====
[[Պատկեր:20041120-1_bushchinamtg-1-515h.jpg|մինի|Many analysts{{who|date=September 2016}} assert that [[China]] is one of the main examples of [[state capitalism]] in the 21st century]]
The relationship between [[democracy]] and capitalism is a contentious area in theory and in popular political movements. The extension of adult male [[suffrage]] in 19th-century Britain occurred along with the development of industrial capitalism and democracy became widespread at the same time as capitalism, leading capitalists to posit a causal or mutual relationship between them.<ref>{{cite web|url=http://josephkaminski.net/2013/10/30/capitalism-and-industrial-revolution/|title=Capitalism and the Industrial Revolution|last1=Kaminski|first1=Joseph|archive-url=https://web.archive.org/web/20150128024314/http://josephkaminski.net/2013/10/30/capitalism-and-industrial-revolution/|archive-date=28 January 2015|url-status=dead}}</ref> However, according to some authors in the 20th-century, capitalism also accompanied a variety of political formations quite distinct from liberal democracies, including [[Fascism|fascist]] regimes, [[Absolute monarchy|absolute monarchies]] and [[One-party state|single-party states]].<ref name="Burnham" /> [[Democratic peace theory]] asserts that democracies seldom fight other democracies, but critics{{Who|date=March 2020}} of that theory suggest that this may be because of political similarity or stability rather than because they are democratic or capitalist.  Moderate critics argue that though economic growth under capitalism has led to democracy in the past, it may not do so in the future as [[authoritarian]] regimes have been able to manage economic growth using some of capitalism's competitive principles<ref>{{cite web|url=https://www.forbes.com/sites/gadyepstein/2010/08/31/the-winners-and-losers-in-chinese-capitalism/|title=The Winners And Losers in Chinese Capitalism|work=Forbes|accessdate=28 October 2015}}</ref><ref>{{cite news|title=The rise of state capitalism|url=http://www.economist.com/node/21543160|newspaper=The Economist|accessdate=24 October 2015|issn=0013-0613}}</ref> without making concessions to greater political freedom.<ref>{{cite web|url=http://www.foreignaffairs.org/20050901faessay84507/bruce-bueno-de-mesquita-george-w-downs/development-and-democracy.html|title=Development and Democracy|date=September 2005|work=Foreign Affairs|archiveurl=https://web.archive.org/web/20080220154505/http://www.foreignaffairs.org/20050901faessay84507/bruce-bueno-de-mesquita-george-w-downs/development-and-democracy.html|archivedate=20 February 2008|accessdate=26 February 2008|author=Mesquita, Bruce Bueno de|url-status=dead}}</ref><ref>{{Cite journal|last1=Siegle|first1=Joseph|last2=M. Weinstein|first2=Michael|last3=Halperin|first3=Morton|date=2004-09-01|title=Why Democracies Excel|url=http://www.mafhoum.com/press7/212S28.pdf|journal=Foreign Affairs|volume=83|issue=5|pages=57|doi=10.2307/20034067|jstor=20034067}}</ref>

[[Milton Friedman]], one of the biggest supporters of the idea that capitalism promotes [[political freedom]], argued that competitive capitalism allows economic and political power to be separate, ensuring that they do not clash with one another. Moderate critics have recently challenged this, stating that the current influence lobbying groups have had on policy in the United States is a contradiction, given the approval of [[Citizens United (organization)|Citizens United]]. This has led people to question the idea that competitive capitalism promotes political freedom. The ruling on Citizens United allows corporations to spend undisclosed and unregulated amounts of money on political campaigns, shifting outcomes in favor of special interests and undermining true democracy. As explained in [[Robin Hahnel]]'s writings, the centerpiece of the ideological defense of the free market system is the concept of economic freedom and that supporters equate economic democracy with economic freedom and claim that only the free market system can provide economic freedom. According to Hahnel, there are a few objections to the premise that capitalism offers freedom through economic freedom. These objections are guided by critical questions about who or what decides whose freedoms are more protected. Often, the question of inequality is brought up when discussing how well capitalism promotes democracy. An argument that could stand is that economic growth can lead to inequality given that capital can be acquired at different rates by different people. In ''[[Capital in the Twenty-First Century]]'' (2013), [[Thomas Piketty]] of the [[Paris School of Economics]] asserted that inequality is the inevitable consequence of economic growth in a capitalist economy and the resulting [[Wealth concentration|concentration of wealth]] can destabilize democratic societies and undermine the ideals of social justice upon which they are built.<ref>[[Thomas Piketty|Piketty, Thomas]] (2014). ''Capital in the Twenty-First Century.'' [[Belknap Press]]. {{ISBN|0-674-43000-X}} p. 571.</ref>

States with capitalistic economic systems have thrived under political regimes deemed to be authoritarian or oppressive. Singapore has a successful open market economy as a result of its competitive, business-friendly climate and robust rule of law. Nonetheless, it often comes under fire for its brand of government which, though democratic and consistently one of the least corrupt,<ref>{{cite web|url=https://www.transparency.org/country/#SGP|title=Transparency International Corruption Measure 2015|website=Transparency International Corruption Measure 2015 – By Country / Territory|publisher=Transparency International|accessdate=20 September 2016}}</ref> operates largely under a one-party rule, does not vigorously defend freedom of expression (given its government-regulated press), and has a penchant for upholding laws protecting ethnic and religious harmony, judicial dignity and personal reputation. The private (capitalist) sector in the People's Republic of China has grown exponentially and thrived since its inception, despite having an authoritarian government. [[Military dictatorship of Chile (1973–1990)|Augusto Pinochet's rule in Chile]] led to economic growth and high levels of inequality<ref>[[Naomi Klein|Klein, Naomi]] (2008). ''[[The Shock Doctrine: The Rise of Disaster Capitalism]].'' [[Picador (imprint)|Picador]]. {{ISBN|0-312-42799-9}} [https://books.google.com/books?id=PwHUAq5LPOQC&lpg=PP1&pg=PA105#v=onepage p. 105].</ref> by using authoritarian means to create a safe environment for investment and capitalism. Similarly, [[Suharto]]'s authoritarian reign and [[Indonesian mass killings of 1965–66|extirpation]] of the [[Communist Party of Indonesia]] allowed for the expansion of capitalism in [[Indonesia]].<ref>{{cite journal|last=Farid|first=Hilmar|date=2005|title=Indonesia's original sin: mass killings and capitalist expansion, 1965–66|journal=[[Inter-Asia Cultural Studies]]|volume=6|issue=1|pages=3–16|doi=10.1080/1462394042000326879}}</ref><ref>{{cite book|url=https://press.princeton.edu/titles/11135.html|title=The Killing Season: A History of the Indonesian Massacres, 1965-66|last=Robinson|first=Geoffrey B.|date=2018|publisher=Princeton University Press|isbn=9781400888863|page=177}}</ref>

== Characteristics ==
{{Further|Academic perspectives on capitalism}}In general, capitalism as an economic system and mode of production can be summarised by the following:<ref>{{cite web|url=http://publishing.cdlib.org/ucpressebooks/view?docId=ft3n39n8x3&chunk.id=d0e1212&toc.id=&brand=ucpress|title=Althusser and the Renewal of Marxist Social Theory}}</ref>

* [[Capital accumulation]]:<ref name="ch32">{{cite web|url=https://www.marxists.org/archive/marx/works/1867-c1/ch32.htm|title=Economic Manuscripts: Capital Vol. I – Chapter Thirty Two|last=Marx|first=Karl}}</ref> production for profit and accumulation as the implicit purpose of all or most of production, constriction or elimination of production formerly carried out on a common social or private household basis.<ref name="xxx31">{{cite web|url=http://www.dsp.org.au/node/31|title=The contradictions of capitalism – Democratic Socialist Perspective|publisher=dsp.org.au|archiveurl=https://web.archive.org/web/20150406094810/http://www.dsp.org.au/node/31|archivedate=6 April 2015|url-status=dead}}</ref>
* [[Production (economics)|Commodity production]]: production for exchange on a market; to maximize [[exchange-value]] instead of [[use-value]].
* [[Private ownership]] of the means of production:<ref name="Modern Economics 1986, p. 54" />
* High levels of [[wage labour]].<ref>{{cite web|url=http://www.ons.gov.uk/ons/rel/lmac/self-employed-workers-in-the-uk/2014/rep-self-employed-workers-in-the-uk-2014.html#tab-Self-employed-workers-in-the-UK---2014|title=[ARCHIVED CONTENT] UK Government Web Archive – The National Archives|last=Foundation|first=Internet Memory|date=2014-08-20}}</ref>
* The [[investment]] of money to make a profit.<ref>James Fulcher, ''Capitalism A Very Short Introduction'', "the investment of money in order to make a profit, the essential feature of capitalism", p. 14, Oxford, 2004, {{ISBN|978-0-19-280218-7}}.</ref>
* The use of the [[price mechanism]] to allocate resources between competing uses.<ref name="Modern Economics 1986, p. 54" />
* Economically efficient use of the [[factors of production]] and raw materials due to maximization of value added in the production process.<ref>{{cite book|title=Capitalism: A complete understanding of the nature and value of human economic life|last=Reisman|first=George|publisher=Jameson Books|year=1998|isbn=0-915463-73-3}}</ref><ref>{{cite book|title=History of Economic Thought: A Critical Perspective|last1=Hunt|first1=E.K.|last2=Lautzenheiser|first2=Mark|publisher=PHI Learning|year=2014|isbn=978-0765625991}}</ref>
* Freedom of capitalists to act in their self-interest in managing their business and investments.<ref>{{cite book|title=Capitalism: A complete understanding of the nature and value of human economic life|last=Reisman|first=George|publisher=Jameson Books|year=1998|isbn=978-0-915463-73-2}}</ref>

=== Market ===
In [[free market]] and ''[[laissez-faire]]'' forms of capitalism, markets are used most extensively with minimal or no regulation over the pricing mechanism. In mixed economies, which are almost universal today,<ref>James Fulcher, ''Capitalism A Very Short Introduction'', "...in the wake of the 1970 crisis, the neoliberal model of capitalism became intellectually and ideologically dominant", p. 58, Oxford, 2004, {{ISBN|978-0-19-280218-7}}.</ref> markets continue to play a dominant role, but they are regulated to some extent by the state in order to correct [[Market failure|market failures]], promote [[social welfare]], conserve [[Natural resource|natural resources]], fund [[Military|defense]] and [[public safety]] or other rationale. In [[State capitalism|state capitalist]] systems, markets are relied upon the least, with the state relying heavily on [[state-owned enterprises]] or indirect economic planning to accumulate capital.

Supply is the amount of a good or service that is available for purchase or sale. Demand is the measure of value for a good that people are willing to buy at a given time. Prices tend to rise when demand for an available resource increases or its supply diminishes and fall with demand or when supply increases.{{According to whom|date=March 2020}}{{Citation needed|date=March 2020}}

Competition arises when more than one producer is trying to sell the same or similar products to the same buyers. Adherents of the capitalist theory believe that competition leads to innovation and more affordable prices. [[Monopoly|Monopolies]] or [[cartels]] can develop, especially if there is no competition. A monopoly occurs when a firm is granted exclusivity over a market. Hence, the firm can engage in [[rent seeking]] behaviors such as limiting output and raising prices because it has no fear of competition. A cartel is a group of firms that act together in a monopolistic manner to control output and prices.

Governments have implemented legislation for the purpose of preventing the creation of monopolies and cartels. In 1890, the Sherman Antitrust Act became the first legislation passed by the United States Congress to limit monopolies.<ref>{{Cite news|url=http://www.investopedia.com/terms/m/monopoly.asp|title=Monopoly|last=Staff|first=Investopedia|date=24 November 2003|work=Investopedia|access-date=2 March 2017|language=en-US}}</ref>

=== Profit motive ===
{{Main|Profit motive}}The [[profit motive]], in the theory in capitalism, is the desire to earn income in the form of profit. Stated differently, the reason for a business's existence is to turn a profit. The profit motive functions according to [[rational choice theory]], or the theory that individuals tend to pursue what is in their own best interests. Accordingly, businesses seek to benefit themselves and/or their shareholders by maximizing profit.

In capitalist theoretics, the profit motive is said to ensure that resources are being allocated efficiently. For instance, [[Austrian economist]] [[Henry Hazlitt]] explains: "If there is no profit in making an article, it is a sign that the labor and capital devoted to its production are misdirected: the value of the resources that must be used up in making the article is greater than the value of the article itself".<ref>Hazlitt, Henry. "The Function of Profits". ''Economics in One Lesson''. Ludwig Von Mises Institute. Web. 22 April 2013.</ref> In other words, profits let companies know whether an item is worth producing. Theoretically{{according to whom|date=March 2020}}, in free and competitive markets maximising profit ensures that resources are not wasted.

=== Private property ===
{{Main|Private property}}The relationship between the [[State (polity)|state]], its formal mechanisms, and capitalist societies has been debated in many fields of social and political theory, with active discussion since the 19th century. [[Hernando de Soto (economist)|Hernando de Soto]] is a contemporary Peruvian economist who has argued that an important characteristic of capitalism is the functioning state protection of property rights in a formal property system where ownership and transactions are clearly recorded.<ref>{{cite web|url=http://www.imf.org/external/pubs/ft/fandd/2001/03/desoto.htm|title=The mystery of capital|accessdate=26 February 2008|author=Hernando de Soto}}</ref>

According to de Soto, this is the process by which physical assets are transformed into capital, which in turn may be used in many more ways and much more efficiently in the market economy. A number of Marxian economists have argued that the [[Enclosure Acts]] in England and similar legislation elsewhere were an integral part of capitalist [[primitive accumulation]] and that specific legal frameworks of private land ownership have been integral to the development of capitalism.<ref>{{cite web|url=http://www.marxists.org/archive/marx/works/1867-c1/ch27.htm|title=Capital, v. 1. Part VIII: primitive accumulation|accessdate=26 February 2008|author=Karl Marx}}</ref><ref>{{cite journal|author=N.F.R. Crafts|date=April 1978|title=Enclosure and labor supply revisited|journal=Explorations in Economic History|volume=15|issue=2|pages=172–83|doi=10.1016/0014-4983(78)90019-0}}</ref>

=== Market competition ===
{{Main|Competition (economics)}}In capitalist economics, market competition is the rivalry among sellers trying to achieve such goals as increasing profits, market share and sales volume by varying the elements of the [[marketing mix]]: price, product, distribution and promotion. Merriam-Webster defines competition in business as "the effort of two or more parties acting independently to secure the business of a third party by offering the most favourable terms".<ref>{{cite web|url=http://m-w.com/dictionary/competition|title=Definition of COMPETITION}}</ref> It was described by [[Adam Smith]] in ''[[The Wealth of Nations]]'' (1776) and later economists as allocating productive [[Resource|resources]] to their most highly valued uses<ref>[[George J. Stigler]], 2008.  ([[The New Palgrave: A Dictionary of Economics|[1987]]] {{clarify|date=April 2016}} 2008 {{clarify|date=April 2016}}. "competition", ''[[The New Palgrave Dictionary of Economics]]''. [http://www.dictionaryofeconomics.com/article?id=pde2008_C000261&q=competition&topicid=&result_number=6 Abstract.]</ref> and encouraging [[X-efficiency|efficiency]]. Smith and other [[Classical economist|classical economists]] before [[Antoine Augustin Cournot|Antoine Augustine Cournot]] were referring to price and non-price rivalry among producers to sell their goods on best terms by bidding of buyers, not necessarily to a large number of sellers nor to a market in final [[Economic equilibrium|equilibrium]].<ref>[[Mark Blaug]], 2008. "Invisible hand", ''The New Palgrave Dictionary of Economics'', 2nd Edition, v. 4, p. 565. [http://www.dictionaryofeconomics.com/article?id=pde2008_I000220&edition=current&q=Invisible%20hand&topicid=&result_number=1 Abstract].</ref> Competition is widespread throughout the [[market process]]. It is a condition where "buyers tend to compete with other buyers, and sellers tend to compete with other sellers".<ref name="ewot2014">{{cite book|title=The Economic Way of Thinking|last1=Heyne|first1=Paul|last2=Boettke|first2=Peter J.|last3=Prychitko|first3=David L.|date=2014|publisher=Pearson|isbn=978-0-13-299129-2|edition=13th|pages=102–06}}<!--|accessdate=24 December 2014 --></ref><!-- p. 102 -->  In offering goods for exchange, buyers competitively bid to purchase specific quantities of specific goods which are available, or might be available if sellers were to choose to offer such goods. Similarly, sellers bid against other sellers in offering goods on the market, competing for the attention and exchange resources of buyers. Competition results from [[scarcity]]—there is never enough to satisfy all conceivable human wants—and occurs "when people strive to meet the criteria that are being used to determine who gets what".<!-- p. 105 --><ref name="ewot2014" />

=== Economic growth ===
[[Պատկեր:GDP_Chart.svg|alt=|մինի|World's [[GDP]] per capita shows exponential growth since the beginning of the Industrial Revolution<ref>{{cite book|title=The World Economy: A Millennial Perspective|author=Angus Maddison|publisher=OECD|year=2001|isbn=978-92-64-18998-0|location=Paris}}</ref>]]
[[Պատկեր:Prc1952-2005gdp.gif|մինի|Capitalism and the economy of the People's Republic of China]]
Historically, capitalism has an ability to promote economic growth as measured by [[gross domestic product]] (GDP), [[capacity utilization]] or [[standard of living]]. This argument was central, for example, to Adam Smith's advocacy of letting a free market control production and price and allocate resources. Many theorists have noted that this increase in global GDP over time coincides with the emergence of the modern world capitalist system.<ref>{{cite web|url=https://www.minneapolisfed.org/pubs/region/04-05/essay.cfm|title=The Industrial Revolution: Past and Future|work=Federal Reserve Bank of Minneapolis 2003 Annual Report|archiveurl=https://web.archive.org/web/20071127032512/http://minneapolisfed.org/pubs/region/04-05/essay.cfm|archivedate=27 November 2007|accessdate=26 February 2008|author=Robert E. Lucas Jr.|url-status=dead}}</ref><ref>{{cite web|url=http://www.j-bradford-delong.net/TCEH/1998_Draft/World_GDP/Estimating_World_GDP.html|title=Estimating World GDP, One Million B.C. – Present|archiveurl=https://web.archive.org/web/20091207043125/http://www.j-bradford-delong.net/TCEH/1998_Draft/World_GDP/Estimating_World_GDP.html|archivedate=7 December 2009|accessdate=26 February 2008|author=J. Bradford DeLong|url-status=dead}}</ref>

Between 1000 and 1820, the world economy grew sixfold, a faster rate than the population growth, so individuals enjoyed, on average, a 50% increase in income. Between 1820 and 1998, world economy grew 50-fold, a much faster rate than the population growth, so individuals enjoyed on average a 9-fold increase in income.<ref name="wolf44">[[Martin Wolf]], ''Why Globalization works'', pp.&nbsp;43–45</ref> Over this period, in Europe, North America and Australasia the economy grew 19-fold per person, even though these regions already had a higher starting level; and in Japan, which was poor in 1820, the increase per person was 31-fold. In the [[Third World]], there was an increase, but only 5-fold per person.<ref name="wolf44" />

=== As a mode of production ===
{{Further|Mode of production}}The capitalist mode of production refers to the systems of organising production and distribution within capitalist [[Society|societies]]. Private money-making in various forms (renting, banking, merchant trade, production for profit and so on) preceded the development of the capitalist mode of production as such. The capitalist mode of production proper based on wage-labour and private ownership of the means of production and on industrial technology began to grow rapidly in Western Europe from the [[Industrial Revolution]], later extending to most of the world.{{citation needed|date=June 2015}}

The term capitalist mode of production is defined by [[Private property|private ownership]] of the [[means of production]], extraction of [[surplus value]] by the owning class for the purpose of [[capital accumulation]], [[Wage labour|wage-based labour]] and, at least as far as [[Commodity|commodities]] are concerned, being [[Market economy|market-based]].<ref>{{cite web|url=http://www.marxists.org/glossary/terms/c/a.htm#capitalism|title=Capitalism.|publisher=marxists.org|accessdate=8 July 2011|author=Encyclopedia of Marxism at marxism.org}}</ref>

Capitalism in the form of money-making activity has existed in the shape of merchants and money-lenders who acted as intermediaries between consumers and producers engaging in [[simple commodity production]] (hence the reference to "[[merchant capitalism]]") since the beginnings of civilisation. What is specific about the "capitalist mode of production" is that most of the inputs and outputs of production are supplied through the market (i.e. they are commodities) and essentially all production is in this mode.<ref name="Modern Economics 1986, p. 54" /> By contrast, in flourishing feudalism most or all of the factors of production, including labour, are owned by the feudal ruling class outright and the products may also be consumed without a market of any kind, it is production for use within the feudal social unit and for limited trade.<ref name="ch32" /> This has the important consequence that, under capitalism, the whole organisation of the production process is reshaped and re-organised to conform with economic [[Bounded rationality|rationality as bounded]] by capitalism, which is expressed in price relationships between inputs and outputs (wages, non-labour factor costs, sales and profits) rather than the larger rational context faced by society overall—that is, the whole process is organised and re-shaped in order to conform to "commercial logic". Essentially, capital accumulation comes to define economic rationality in capitalist production.<ref name="xxx31" />

A society, region or [[nation]] is capitalist if the predominant source of incomes and products being distributed is capitalist activity, but even so this does not yet mean necessarily that the capitalist mode of production is dominant in that society.

== Supply and demand ==
{{More citations needed section|date=March 2020}}{{Main|Supply and demand}}
[[Պատկեր:Supply-and-demand.svg|մինի|The price P of a product is determined by a balance between production at each price (supply S) and the desires of those with [[purchasing power]] at each price (demand D): the diagram shows a positive shift in demand from D<sub>1</sub> to D<sub>2</sub>, resulting in an increase in price (P) and quantity sold (Q) of the product]]
In capitalist economic structures, supply and demand is an [[economic model]] of [[price determination]] in a [[Market (economics)|market]]. It postulates that in a [[Perfect competition|perfectly competitive market]], the [[unit price]] for a particular [[Good (economics)|good]] will vary until it settles at a point where the quantity demanded by consumers (at the current price) will equal the quantity supplied by producers (at the current price), resulting in an [[economic equilibrium]] for price and [[Output (economics)|quantity]].

The four basic "laws" of [[Supply (economics)|supply]] and [[demand]], as described by [[David Besanko]] and [[Ronald Braeutigam]], are:<ref name="besanko-and-braeutigam-2010">{{Cite book|title=Microeconomics|last1=Besanko|first1=David|last2=Braeutigam|first2=Ronald|publisher=Wiley|year=2010|edition=4th}}</ref>{{rp|37}}

# If demand increases (demand curve shifts to the right) and supply remains unchanged, then a shortage occurs, leading to a higher equilibrium price.
# If demand decreases (demand curve shifts to the left) and supply remains unchanged, then a surplus occurs, leading to a lower equilibrium price.
# If demand remains unchanged and supply increases (supply curve shifts to the right), then a surplus occurs, leading to a lower equilibrium price.
# If demand remains unchanged and supply decreases (supply curve shifts to the left), then a shortage occurs, leading to a higher equilibrium price.

=== Graphical representation ===
Although it is normal to regard the quantity demanded and the quantity supplied as [[Function (mathematics)|functions]] of the price of the goods, the standard graphical representation, usually attributed to [[Alfred Marshall]], has price on the vertical axis and quantity on the horizontal axis, the opposite of the standard convention for the representation of a mathematical function.

Since determinants of supply and demand other than the price of the goods in question are not explicitly represented in the supply-demand diagram, changes in the values of these variables are represented by moving the supply and demand curves (often described as "shifts" in the curves). By contrast, responses to changes in the price of the good are represented as movements along unchanged supply and demand curves.

==== Supply schedule ====
A supply schedule is a table that shows the relationship between the price of a good and the quantity supplied. Under the assumption of [[perfect competition]], supply is determined by [[marginal cost]]. That is: firms will produce additional output while the cost of producing an extra unit of output is less than the price they would receive.

A hike in the cost of raw goods would decrease supply and shift costs up, while a discount would increase supply and shift costs down, hurting producers as producer surplus decreases.

By its very nature, conceptualising a supply curve requires the firm to be a perfect competitor (i.e. to have no influence over the market price). This is true because each point on the supply curve is the answer to the question "If this firm is ''faced with'' this potential price, how much output will it be able to and willing to sell?". If a firm has market power, its decision of how much output to provide to the market influences the market price, therefore the firm is not "faced with" any price and the question becomes less relevant.

Economists distinguish between the supply curve of an individual firm and the market supply curve. The market supply curve is obtained by summing the quantities supplied by all suppliers at each potential price, thus in the graph of the supply curve individual firms' supply curves are added horizontally to obtain the market supply curve.

Economists also distinguish the short-run market supply curve from the long-run market supply curve. In this context, two things are assumed constant by definition of the short run: the availability of one or more fixed inputs (typically [[physical capital]]) and the number of firms in the industry. In the long-run, firms can adjust their holdings of physical capital, enabling them to better adjust their quantity supplied at any given price. Furthermore, in the long-run potential competitors can [[Market entry strategy|enter]] or exit the industry in response to market conditions. For both of these reasons, long-run market supply curves are generally flatter than their short-run counterparts.

The determinants of supply are:

# Production costs: how much a good costs to be produced. Production costs are the cost of the inputs; primarily labor, capital, energy and materials. They depend on the technology used in production and/or technological advances. See [[productivity]].
# Firms' expectations about future prices.
# Number of suppliers.

==== Demand schedule ====
A demand schedule, depicted graphically as the [[demand curve]], represents the amount of some [[Good (economics)|goods]] that buyers are willing and able to purchase at various prices, assuming all determinants of demand other than the price of the good in question, such as income, tastes and preferences, the price of [[Substitute good|substitute goods]] and the price of [[Complementary good|complementary goods]], remain the same. According to the [[law of demand]], the demand curve is almost always represented as downward-sloping, meaning that as price decreases, consumers will buy more of the good.<ref name="axes">Note that unlike most [[Graph of a function|graphs]], supply & demand curves are plotted with the independent variable (price) on the vertical axis and the dependent variable (quantity supplied or demanded) on the horizontal axis.</ref>

Just like the supply curves reflect [[marginal cost]] curves, demand curves are determined by [[marginal utility]] curves.<ref>{{cite web|url=http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=marginal+utility+and+demand|title=Marginal Utility and Demand|accessdate=9 February 2007}}</ref> Consumers will be willing to buy a given quantity of a good at a given price, if the marginal utility of additional consumption is equal to the [[opportunity cost]] determined by the price—that is, the marginal utility of alternative consumption choices. The demand schedule is defined as the willingness and ability of a consumer to purchase a given product in a given frame of time.

While the aforementioned demand curve is generally downward-sloping, there may be rare examples of goods that have upward-sloping demand curves. Two different hypothetical types of goods with upward-sloping demand curves are [[Giffen good|Giffen goods]] (an inferior, but [[Staple food|staple]] good) and [[Veblen good|Veblen goods]] (goods made more fashionable by a higher price).

By its very nature, conceptualising a demand curve requires that the purchaser be a perfect competitor—that is, that the purchaser has no influence over the market price. This is true because each point on the demand curve is the answer to the question "If this buyer is faced with this potential price, how much of the product will it purchase?". If a buyer has market power, so its decision of how much to buy influences the market price, then the buyer is not "faced with" any price and the question is meaningless.

Like with supply curves, economists distinguish between the demand curve of an individual and the market demand curve. The market demand curve is obtained by summing the quantities demanded by all consumers at each potential price, thus in the graph of the demand curve individuals' demand curves are added horizontally to obtain the market demand curve.

The determinants of demand are:

# Income.
# Tastes and preferences.
# Prices of related goods and services.
# Consumers' expectations about future prices and incomes that can be checked.
# Number of potential consumers.

=== Equilibrium ===
{{Further|Economic equilibrium}}In the context of supply and demand, economic equilibrium refers to a state where economic forces such as [[supply and demand]] are balanced and in the absence of external influences the ([[wikt:equilibrium|equilibrium]]) values of economic variables will not change. For example, in the standard text-book model of [[perfect competition]] equilibrium occurs at the point at which quantity demanded and quantity supplied are equal.<ref>{{cite book|url=https://archive.org/details/microeconomicana00vari_0|title=Microeconomic Analysis|last=Varian|first=Hal R.|publisher=Norton|year=1992|isbn=978-0-393-95735-8|edition=Third|location=New York|authorlink=Hal Varian}}</ref> Market equilibrium in this case refers to a condition where a market price is established through competition such that the amount of goods or services sought by [[Law of supply and demand|buyers]] is equal to the amount of goods or services produced by [[Law of supply and demand|sellers]]. This price is often called the competitive price or [[market clearing]] price, and will tend not to change unless demand or supply changes. The quantity is called "competitive quantity" or market clearing quantity.

=== Partial equilibrium ===
{{Main|Partial equilibrium}}Partial equilibrium, as the name suggests, takes into consideration only a part of the market to attain equilibrium.

Jain proposes (attributed to [[George Stigler]]): "A partial equilibrium is one which is based on only a restricted range of data, a standard example is price of a single product, the prices of all other products being held fixed during the analysis".<ref>{{cite book|url=https://books.google.com/books?id=fUUoFwco2Z8C|title=Microeconomics and Basic Mathematics|last=Jain|first=T.R.|publisher=VK Publications|year=2006|isbn=978-81-87140-89-4|location=New Delhi|page=28}}</ref>

The supply and demand model is a partial equilibrium model of [[economic equilibrium]], where the clearance on the [[Market (economics)|market]] of some specific [[Good (economics)|goods]] is obtained independently from prices and quantities in other markets. In other words, the prices of all [[Substitute good|substitutes]] and [[Complement good|complements]] as well as [[income]] levels of [[Consumer|consumers]] are constant. This makes analysis much simpler than in a [[general equilibrium]] model which includes an entire economy.

Here the dynamic process is that prices adjust until supply equals demand. It is a powerfully simple technique that allows one to study [[Economic equilibrium|equilibrium]], [[Pareto Efficiency|efficiency]] and [[comparative statics]]. The stringency of the simplifying assumptions inherent in this approach make the model considerably more tractable, but it may produce results which while seemingly precise do not effectively model real world economic phenomena.

Partial equilibrium analysis examines the effects of policy action in creating equilibrium only in that particular sector or market which is directly affected, ignoring its effect in any other market or industry assuming that they being small will have little impact if any.

Hence this analysis is considered to be useful in constricted markets.

[[Léon Walras]] first formalised the idea of a one-period economic equilibrium of the general economic system, but it was French economist [[Antoine Augustin Cournot]] and English political economist [[Alfred Marshall]] who developed tractable models to analyse an economic system.

=== Empirical estimation ===
Demand and supply relations in a market can be statistically estimated from price, quantity and other [[data]] with sufficient information in the model. This can be done with [[System of linear equations|simultaneous-equation]] methods of estimation in [[econometrics]]. Such methods allow solving for the model-relevant "structural coefficients", the estimated algebraic counterparts of the theory. The [[Identification (parameter)|parameter identification problem]] is a common issue in "structural estimation". Typically, data on [[Exogenous variable|exogenous variables]] (that is, variables other than price and quantity, both of which are [[Endogenous variable|endogenous variables]]) are needed to perform such an estimation. An alternative to "structural estimation" is [[Reduced form|reduced-form]] estimation, which regresses each of the endogenous variables on the respective exogenous variables.

=== Macroeconomic uses of demand and supply ===
Demand and supply have also been generalised to explain [[macroeconomic]] variables in a [[market economy]], including the [[Real GDP|quantity of total output]] and the general [[price level]]. The [[AD-AS model|Aggregate Demand–Aggregate Supply model]] may be the most direct application of supply and demand to macroeconomics, but other macroeconomic models also use supply and demand. Compared to [[microeconomic]] uses of demand and supply, different (and more controversial) theoretical considerations apply to such [[macroeconomic]] counterparts as [[aggregate demand]] and [[aggregate supply]]. Demand and supply are also used in macroeconomic theory to relate [[money supply]] and money demand to [[Interest rate|interest rates]] and to relate labor supply and labor demand to wage rates.

=== History ===
According to Hamid S. Hosseini, the "power of supply and demand" was discussed to some extent by several early Muslim scholars, such as fourteenth-century [[Mamluk]] scholar [[Ibn Taymiyyah]], who wrote: "If desire for goods increases while its availability decreases, its price rises. On the other hand, if availability of the good increases and the desire for it decreases, the price comes down".<ref name="Hosseini">{{cite book|title=A Companion to the History of Economic Thought|last=Hosseini|first=Hamid S.|publisher=Blackwell|year=2003|isbn=978-0-631-22573-7|editor=Biddle, Jeff E.|location=Malden, Massachusetts|pages=28–45 [28 & 38]|chapter=Contributions of Medieval Muslim Scholars to the History of Economics and their Impact: A Refutation of the Schumpeterian Great Gap|doi=10.1002/9780470999059.ch3|editor2=Davis, Jon B.|editor3=Samuels, Warren J.}} (citing Hamid S. Hosseini, 1995. "Understanding the Market Mechanism Before Adam Smith: Economic Thought in Medieval Islam," ''History of Political Economy'', Vol. 27, No. 3, 539–61).</ref>
[[Պատկեր:AdamSmith.jpg|մինի|[[Adam Smith]]]]
[[John Locke]]'s 1691 work ''Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money''<ref>John Locke (1691) [http://www.marxists.org/reference/subject/economics/locke/contents.htm ''Some Considerations on the consequences of the Lowering of Interest and the Raising of the Value of Money'']</ref> includes an early and clear description of supply and demand and their relationship. In this description, demand is [[Economic rent|rent]]: "The price of any commodity rises or falls by the proportion of the number of buyer and sellers" and "that which regulates the price... [of goods] is nothing else but their quantity in proportion to their rent".

The phrase "supply and demand" was first used by [[James Denham-Steuart]] in his ''Inquiry into the Principles of Political Economy'', published in 1767.

[[Adam Smith]] used the phrase in his 1776 book ''[[The Wealth of Nations]]''. In ''The Wealth of Nations'', Smith generally assumed that the supply price was fixed, but that its "merit" (value) would decrease as its "scarcity" increased, in effect what was later called the law of demand also.

[[David Ricardo]] titled one chapter of his 1817 work ''[[Principles of Political Economy and Taxation]]'' "On the Influence of Demand and Supply on Price".<ref name="Humphrey">Thomas M. Humphrey, 1992. "Marshallian Cross Diagrams and Their Uses before Alfred Marshall", ''Economic Review'', Mar/Apr, Federal Reserve Bank of Richmond, pp. [http://www.richmondfed.org/publications/research/economic_review/1992/pdf/er780201.pdf 3–23].</ref> In ''Principles of Political Economy and Taxation'', Ricardo more rigorously laid down the idea of the assumptions that were used to build his ideas of supply and demand.

[[Antoine Augustin Cournot]] first developed a mathematical model of supply and demand in his 1838 ''Researches into the Mathematical Principles of Wealth'', including diagrams.

During the late 19th century, the marginalist school of thought emerged. This field mainly was started by [[William Stanley Jevons|Stanley Jevons]], [[Carl Menger]] and [[Léon Walras]]. The key idea was that the price was set by the most expensive price—that is, the price at the margin. This was a substantial change from Adam Smith's thoughts on determining the supply price.

In his 1870 essay "On the Graphical Representation of Supply and Demand", [[Fleeming Jenkin]] in the course of "introduc[ing] the diagrammatic method into the English economic literature" published the first drawing of supply and demand curves therein,<ref>A.D. Brownlie and M.F. Lloyd Prichard, 1963. "Professor Fleeming Jenkin, 1833–1885 Pioneer in Engineering and Political Economy", ''Oxford Economic Papers'', 15(3), p. 211.</ref> including [[comparative statics]] from a shift of supply or demand and application to the labor market.<ref>Fleeming Jenkin, 1870. "The Graphical Representation of the Laws of Supply and Demand, and their Application to Labour", in Alexander Grant, ed., ''Recess Studies'', Edinburgh. Ch. VI, pp. 151–85. Edinburgh. Scroll to chapter [https://books.google.com/books?id=NC5BAAAAIAAJ link].</ref> The model was further developed and popularized by [[Alfred Marshall]] in the 1890 textbook ''[[Principles of Economics (Marshall)|Principles of Economics]]''.<ref name="Humphrey" />

== Role of government ==
{{Further|Competition regulator|Consumer protection|Competition law}}In a capitalist system, the government protects private property and guarantees the right of citizens to choose their job. In most cases, the government does not prevent firms from determining what wages they will pay and what prices they will charge for their products. However, many countries have [[minimum wage]] laws and minimum safety standards.

Under some versions of capitalism, the government carries out a number of economic functions, such as issuing money, supervising public utilities, and enforcing private contracts. Many countries have [[Competition law|competition laws]] that prohibit monopolies and cartels. Despite anti-monopoly laws, large corporations can form near-monopolies in some industries. Such firms can temporarily drop prices and accept losses to prevent competition from entering the market and then raise them again once the threat of competition is reduced. In many countries, public utilities such as electricity, heating fuel and communications are able to operate as a monopoly under government regulation due to high economies of scale.

Government agencies regulate the standards of service in many industries, such as airlines and broadcasting, as well as financing a wide range of programs. In addition, the government regulates the flow of capital and uses financial tools such as the interest rate to control such factors as inflation and unemployment.<ref>"Capitalism." World Book Encyclopedia. 1988. p. 194.</ref>

=== Relationship to political freedom ===
In his book ''[[The Road to Serfdom]]'' (1944), [[Friedrich Hayek]] (1899–1992) asserted that the free market understanding of [[economic freedom]] as present in capitalism is a requisite of [[political freedom]]. He argued that the market mechanism is the only way of deciding what to produce and how to distribute the items without using coercion. [[Milton Friedman]], [[Andrew Brennan (economist)|Andrew Brennan]] and [[Ronald Reagan]] also promoted this view. Friedman claimed that centralized economic operations are always accompanied by [[political repression]]. In his view, transactions in a market economy are voluntary and that the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminishes their power to coerce. Some of Friedman's views were shared by [[John Maynard Keynes]], who believed that capitalism is vital for freedom to survive and thrive.<ref>{{cite book|title=The Road to Serfdom|author=Friedrich Hayek|journal=Nature|publisher=University of Chicago Press|year=1944|isbn=978-0-226-32061-8|volume=154|pages=473–74|bibcode=1944Natur.154..473C|doi=10.1038/154473a0|issue=3911}}</ref><ref>{{cite book|title=The Cambridge History of Twentieth-Century Political Thought|author=Bellamy, Richard|publisher=Cambridge University Press|year=2003|isbn=978-0-521-56354-3|page=60}}</ref> [[Freedom House]], an American think tank that conducts international research on, and advocates for, democracy, political freedom and human rights, has argued "there is a high and statistically significant correlation between the level of political freedom [[Freedom in the World|as measured by Freedom House]] and economic freedom [[Index of Economic Freedom|as measured by the Wall Street Journal/Heritage Foundation survey]]".<ref>Adrian Karatnycky. ''Freedom in the World: The Annual Survey of Political Rights and Civil Liberties''. Transaction Publishers. 2001. {{ISBN|978-0-7658-0101-2}}. p. 11.</ref>

== Types ==
There are many variants of capitalism in existence that differ according to country and region.{{citation needed|date=April 2020}} They vary in their institutional makeup and by their economic policies. The common features among all the different forms of capitalism is that they are predominantly based on:

* the production of goods and services for profit,{{contradict-inline|article=Capitalism|reason=Capitalism defined: 'private ownership of the means of production and their operation for profit.' Here, it only states:  'production of goods and services for profit'.|date=April 2020}}
* the market-based allocation of resources, and
* the accumulation of capital.

They include advanced capitalism, corporate capitalism, finance capitalism, free-market capitalism, mercantilism, social capitalism, state capitalism and welfare capitalism. Other variants of capitalism include [[anarcho-capitalism]], [[community capitalism]], [[humanistic capitalism]], [[neo-capitalism]], [[state monopoly capitalism]], [[Supercapitalism (modern)|supercapitalism]] and [[technocapitalism]].{{citation needed|date=April 2020}}

=== Advanced ===
{{Main|Advanced capitalism}}Advanced capitalism is the situation that pertains to a society in which the [[capitalist model]] has been integrated and developed deeply and extensively for a prolonged period. Various writers identify [[Antonio Gramsci]] as an influential early theorist of advanced capitalism, even if he did not use the term himself. In his writings, Gramsci sought to explain how capitalism had adapted to avoid the revolutionary overthrow that had seemed inevitable in the 19th century. At the heart of his explanation was the decline of raw coercion as a tool of class power, replaced by use of [[civil society]] institutions to manipulate public ideology in the capitalists' favour.<ref>Lears, T.J. Jackson (1985) "The Concept of Cultural Hegemony"</ref><ref>Holub, Renate (2005) ''Antonio Gramsci: Beyond Marxism and Postmodernism''</ref><ref>Boggs, Carl (2012) ''Ecology and Revolution: Global Crisis and the Political Challenge''</ref>

[[Jürgen Habermas]] has been a major contributor to the analysis of advanced-capitalistic societies. Habermas observed four general features that characterise advanced capitalism:

# Concentration of industrial activity in a few large firms.
# Constant reliance on the state to stabilise the economic system.
# A formally democratic government that legitimises the activities of the state and dissipates opposition to the system.
# The use of nominal wage increases to pacify the most restless segments of the work force.<ref>Habermas, 1988: 37, 75.</ref>

=== Corporate ===
{{Main|Corporate capitalism}}{{See also|Crony capitalism|State monopoly capitalism}}Corporate capitalism is a free or mixed-market capitalist economy characterized by the dominance of hierarchical, bureaucratic corporations.

=== Finance ===
{{Main|Finance capitalism}}{{See also|Capitalist mode of production (Marxist theory)}}Finance capitalism is the subordination of processes of [[Production (economics)|production]] to the accumulation of [[money]] profits in a [[financial system]]. In their critique of capitalism, [[Marxism]] and [[Leninism]] both emphasise the role of [[Financial capital|finance capital]] as the determining and [[ruling-class]] interest in capitalist society, particularly in the [[Crisis of capitalism|latter stages]].<ref>[[Imperialism, the Highest Stage of Capitalism]] [http://www.marxists.org/archive/lenin/works/1916/imp-hsc/ch03.htm ibid. Finance Capital and the Finance Oligarchy]</ref><ref>{{cite magazine|url=http://monthlyreview.org/2009/10/01/monopoly-finance-capital-and-the-paradox-of-accumulation/|title=Monopoly-Finance Capital and the Paradox of Accumulation|first1=John Bellamy|last1=Foster|first2=Robert W. McChesney Topics|last2=Financialization|first3=Global Economic|last3=Crisis|first4=Political|last4=Economy|date=1 October 2009|magazine=[[Monthly Review]]}}</ref>

[[Rudolf Hilferding]] is credited{{by whom|date=December 2016}} with first bringing the term finance capitalism into prominence through ''Finance Capital'', his 1910 study of the links between German trusts, banks and monopolies—a study subsumed by [[Vladimir Lenin]] into ''[[Imperialism, the Highest Stage of Capitalism]]'' (1917), his analysis of the imperialist relations of the great world powers.<ref>Frederic Jameson, 'Culture and Finance Capital', in ''The Jameson Reader'' (2005) p. 257</ref> Lenin concluded that the banks at that time operated as "the chief nerve centres of the whole capitalist system of national economy".<ref>Quoted in E.H. Carr, ''The Bolshevik Revolution 2'' (1971) p. 137</ref> For the [[Comintern]] (founded in 1919), the phrase "dictatorship of finance capitalism"<ref>Quoted in F.A Voight, ''Unto Caesar'' (1938) p. 22</ref> became a regular one.

[[Fernand Braudel]] would later point to two earlier periods when finance capitalism had emerged in human history—with the Genoese in the 16th century and with the Dutch in the 17th and 18th centuries—although at those points it developed from commercial capitalism.<ref>C. J.Calhoun/G. Derluguian, ''Business as Usual'' (2011) p. 57</ref>{{qn|date=December 2016}} [[Giovanni Arrighi]] extended Braudel's analysis to suggest that a predominance of finance capitalism is a recurring, long-term phenomenon, whenever a previous phase of commercial/industrial capitalist expansion reaches a plateau.<ref>Jameson, pp. 259–60</ref>

=== Free-market ===
{{Main|Free-market capitalism}}{{See also|Laissez-faire}}A capitalist free-market economy is an economic system where prices for goods and services are set entirely by the forces of [[supply and demand]] and are expected, by its adherents, to reach their point of [[Economic equilibrium|equilibrium]] without intervention by government policy. It typically entails support for highly [[Competition (economics)|competitive markets]] and [[private ownership]] of the [[means of production]]. ''Laissez-faire'' capitalism is a more extensive form of this free-market economy, but one in which the role of the state is limited to protecting [[Property rights (economics)|property rights]]. In [[Anarcho-capitalism|anarcho-capitalist]] theory, property rights are protected by private firms and market-generated law. According to anarcho-capitalists, this entails property rights without statutory law through market-generated tort, contract and property law, and self-sustaining private industry.

=== Mercantile ===
{{Main|Mercantilism}}{{See also|Protectionism}}
[[Պատկեր:Microcosm of London Plate 049 - Lloyd's Subscription Room edited.jpg|մինի|The subscription room at [[Lloyd's of London]] in the early 19th century]]
Mercantilism is a nationalist form of early capitalism that came into existence approximately in the late 16th century. It is characterized by the intertwining of national business interests with state-interest and imperialism. Consequently, the state apparatus is utilized to advance national business interests abroad. An example of this is colonists living in America who were only allowed to trade with and purchase goods from their respective mother countries (e.g. Britain, France and Portugal). Mercantilism was driven by the belief that the wealth of a nation is increased through a positive balance of trade with other nations—it corresponds to the phase of capitalist development sometimes called the [[primitive accumulation of capital]].

=== Social ===
{{Main|Social market economy}}{{See also|Nordic model}}A social market economy is a free-market or mixed-market capitalist system, sometimes classified as a [[coordinated market economy]], where government intervention in price formation is kept to a minimum, but the state provides significant services in areas such as:

* social security,
* health care,
* unemployment benefits, and
* the recognition of [[labor rights]] through national [[collective bargaining]] arrangements.

This model is prominent in Western and Northern European countries as well as Japan, albeit in slightly different configurations. The vast majority of enterprises are privately owned in this economic model.

[[Rhine capitalism]] is the contemporary model of capitalism and adaptation of the social market model that exists in continental Western Europe today.

=== State ===
{{Main|State capitalism}}State capitalism is a capitalist market economy dominated by state-owned enterprises, where the state enterprises are organized as commercial, profit-seeking businesses. The designation has been used broadly throughout the 20th century to designate a number of different economic forms, ranging from state-ownership in market economies to the command economies of the former [[Eastern Bloc]]. According to Aldo Musacchio, a professor at Harvard Business School, state capitalism is a system in which governments, whether democratic or autocratic, exercise a widespread influence on the economy either through direct ownership or various subsidies. Musacchio notes a number of differences between today's state capitalism and its predecessors. In his opinion, gone are the days when governments appointed bureaucrats to run companies: the world's largest state-owned enterprises are now traded on the public markets and kept in good health by large institutional investors. Contemporary state capitalism is associated with the [[East Asian model of capitalism]], [[dirigisme]] and the economy of Norway.<ref>{{cite news|last=Musacchio|first=Aldo|url=http://www.economist.com/debate/days/view/802|title=Economist Debates: State capitalism: Statements|work=The Economist}}</ref> Alternatively, [[Merriam-Webster]] defines state capitalism as "an economic system in which private capitalism is modified by a varying degree of government ownership and control".<ref>[http://www.merriam-webster.com/dictionary/state%20capitalism State capitalism]. [[Merriam-Webster]]. Retrieved 7 July 2015.</ref>

In ''Socialism: Utopian and Scientific'', [[Friedrich Engels]] argued that state-owned enterprises would characterize the final stage of capitalism, consisting of ownership and management of large-scale production and communication by the [[Capitalist state|bourgeois state]].<ref>{{cite web|url=http://www.marxists.org/archive/marx/works/1880/soc-utop/ch03.htm|title=Socialism: Utopian and Scientific (Chpt. 3)|publisher=[[Marxists.org]]|accessdate=8 January 2014|author=Frederick Engels}}</ref> In his writings, [[Vladimir Lenin]] characterized the economy of Soviet Russia as state capitalist, believing state capitalism to be an early step toward the development of socialism.<ref>V.I. Lenin. [https://www.marxists.org/archive/lenin/works/1921/apr/21.htm The Tax in Kind]. ''Lenin’s Collected Works'', 1st English Edition, Progress Publishers, Moscow, 1965, vol. 32, pp. 329–65.</ref><ref>V.I. Lenin. [https://www.marxists.org/archive/lenin/works/1922/nov/14b.htm To the Russian Colony in North America]. ''Lenin Collected Works'', Progress Publishers, 1971, Moscow, vol. 42, pp. 425c–27a.</ref>

Some economists and left-wing academics including [[Richard D. Wolff]] and [[Noam Chomsky]], as well as many Marxist philosophers and revolutionaries such as [[Raya Dunayevskaya]] and [[C.L.R. James]], argue that the economies of the former [[Soviet Union]] and [[Eastern Bloc]] represented a form of state capitalism because their internal organization within enterprises and the system of wage labor remained intact.<ref>[http://www.hetsa.org.au/pdf/34-A-08.pdf "State capitalism" in the Soviet Union], M.C. Howard and J.E. King</ref><ref>[[Noam Chomsky]] (1986). [http://www.chomsky.info/articles/1986----.htm The Soviet Union Versus Socialism]. ''Our Generation''. Retrieved 9 July 2015.</ref><ref>[[Richard D. Wolff]] (27 June 2015). [http://www.truth-out.org/news/item/31567-socialism-means-abolishing-the-distinction-between-bosses-and-employees Socialism Means Abolishing the Distinction Between Bosses and Employees]. ''[[Truthout]].'' Retrieved 9 July 2015.</ref><ref>[[Raya Dunayevskaya]] (1941) [https://www.marxists.org/archive/dunayevskaya/works/1941/ussr-capitalist.htm The Union of Soviet Socialist Republics is a Capitalist Society]</ref><ref>[[C.L.R. James]], [[Raya Dunayevskaya]], and [[Grace Lee Boggs]] (1950) [https://libcom.org/files/State%20capitalism%20and%20world%20revolution%20-%20CLR%20James.pdf State Capitalism and World Revolution]</ref>

The term is not used by [[Austrian School]] economists to describe state ownership of the means of production. The economist [[Ludwig von Mises]] argued that the designation of state capitalism was simply a new label for the old labels of state socialism and planned economy and differed only in non-essentials from these earlier designations.<ref>{{cite book|url=https://archive.org/details/socialismeconomi00vonm|title=Socialism: An Economic and Sociological Analysis|last=Von Mises|first=Ludwig|publisher=LibertyClassics|year=1979|isbn=978-0-913966-63-1|place=Indianapolis|quote=The socialist movement takes great pains to circulate frequently new labels for its ideally constructed state. Each worn-out label is replaced by another which raises hopes of an ultimate solution of the insoluble basic problem of Socialism—until it becomes obvious that nothing has been changed but the name. The most recent slogan is 'State Capitalism.' It is not commonly realized that this covers nothing more than what used to be called Planned Economy and State Socialism, and that State Capitalism, Planned Economy, and State Socialism diverge only in non-essentials from the "classic" ideal of egalitarian Socialism.|authorlink=Ludwig Von Mises|accessdate=31 May 2007|url-access=registration}}</ref>

The debate between proponents of private versus state capitalism is centered around questions of managerial efficacy, productive efficiency and fair distribution of wealth.

=== Welfare ===
{{More citations needed section|date=March 2020}}{{Main|Welfare capitalism}}{{See also|Economic interventionism|Mixed economy}}Welfare capitalism is capitalism that includes social welfare policies. Today, welfare capitalism is most often associated with the models of capitalism found in Central Mainland and Northern Europe such as the [[Nordic model]], [[social market economy]] and [[Rhine capitalism]]. In some cases, welfare capitalism exists within a mixed economy, but welfare states can and do exist independently of policies common to mixed economies such as [[state interventionism]] and extensive regulation.

A mixed economy is a largely market-based capitalist economy consisting of both private and public ownership of the means of production and [[economic interventionism]] through macroeconomic policies intended to correct [[Market failure|market failures]], reduce unemployment and keep inflation low. The degree of intervention in markets varies among different countries. Some mixed economies such as France under [[dirigisme]] also featured a degree of [[Indicative planning|indirect economic planning]] over a largely capitalist-based economy.

Most modern capitalist economies are defined as mixed economies to some degree.

== Capital accumulation ==
{{Main|Capital accumulation}}{{Further|Money}}The [[accumulation of capital]] is the process of "making money", or growing an initial sum of money through investment in production. Capitalism is based on the accumulation of capital, whereby [[financial capital]] is invested in order to make a profit and then reinvested into further production in a continuous process of accumulation. In Marxian economic theory, this dynamic is called the [[law of value]]. Capital accumulation forms the basis of capitalism, where economic activity is structured around the accumulation of [[Capital (economics)|capital]], defined as investment in order to realize a financial profit.<ref name="Economist definition">{{cite news|title=Economics A–Z: ''Capital''|url=http://www.economist.com/economics-a-to-z/c#node-21529870|website=[[economist.com|The Economist]]|accessdate=25 March 2015}}</ref> In this context, "capital" is defined as money or a financial asset invested for the purpose of making more money (whether in the form of profit, rent, interest, royalties, capital gain or some other kind of return).<ref name="MIA definition">{{cite web|url=http://marxists.org/glossary/terms/c/a.htm#capital|title=Encyclopedia of Marxism – Glossary of terms: ''Capital''|website=[[Marxists Internet Archive]]|accessdate=25 March 2015}}</ref>

In mainstream [[economics]], [[accounting]] and [[Marxian economics]], capital accumulation is often equated with [[Investment (macroeconomics)|investment]] of profit income or savings, especially in [[Real vs. nominal in economics|real]] capital goods. The concentration and centralisation of capital are two of the results of such accumulation. In modern [[macroeconomics]] and [[econometrics]], the phrase "[[capital formation]]" is often used in preference to "accumulation", though the [[United Nations Conference on Trade and Development]] (UNCTAD) refers nowadays to "accumulation". The term "accumulation" is occasionally used in [[national accounts]].

=== Background ===
Accumulation can be measured as:

* the monetary value of investments,
* the amount of income that is reinvested, or
* the change in the value of assets owned (the increase in the value of the capital stock).

Using company [[Balance sheet|balance sheets]], [[tax]] data and direct [[Statistical survey|surveys]] as a basis, government statisticians estimate total investments and assets for the purpose of [[national accounts]], national [[balance of payments]] and [[flow of funds]] statistics. The [[Federal Reserve|Reserve Banks]] and the [[Treasury]] usually provide interpretations and analysis of this data. Standard indicators include [[capital formation]], [[gross fixed capital formation]], [[fixed capital]], household asset wealth and [[foreign direct investment]].

Organisations such as the [[International Monetary Fund]], the UNCTAD, the [[World Bank Group]], the [[OECD]] and the [[Bank for International Settlements]] use national investment data to estimate world trends. The [[Bureau of Economic Analysis]], [[Eurostat]] and the Japan Statistical Office provide data on the United States, Europe and Japan respectively. Other useful sources of investment information are business magazines such as ''[[Fortune (magazine)|Fortune]], [[Forbes]], [[The Economist]], [[Business Week]]'' and so on as well as various corporate "[[Watchdog journalism|watchdog]]" organisations and [[non-governmental organisation]] publications. A reputable scientific journal is the ''Review of Income & Wealth''. In the case of the United States, the "Analytical Perspectives" document (an annex to the yearly budget) provides useful wealth and capital estimates applying to the whole country.

In [[Karl Marx]]' economic theory, capital accumulation refers to the operation whereby profits are reinvested increasing the total quantity of capital. Capital is viewed by Marx as expanding value, that is, in other terms, as a sum of capital, usually expressed in money, that is transformed through human labor into a larger value, extracted as profits and expressed as money. Here, capital is defined essentially as economic or commercial asset [[Value (economics)|value]] in search of additional value or [[surplus-value]]. This requires property relations which enable objects of value to be appropriated and owned, and trading rights to be established. Capital accumulation has a double origin, namely in trade and in [[Confiscation|expropriation]], both of a legal or illegal kind. The reason is that a stock of capital can be increased through a process of exchange or "trading up", but also through directly taking an asset or resource from someone else without compensation. [[David Harvey (geographer)|David Harvey]] calls this [[accumulation by dispossession]].

The continuation and progress of capital accumulation depends on the removal of obstacles to the expansion of trade and this has historically often been a violent process. As markets expand, more and more new opportunities develop for accumulating capital because more and more types of goods and services can be traded in. However, capital accumulation may also confront resistance when people refuse to sell, or refuse to buy (for example a [[Strike action|strike]] by investors or workers, or [[consumer resistance]]).

=== Concentration and centralisation ===
According to Marx, capital has the tendency for concentration and centralization in the hands of the wealthy. Marx explains: "It is concentration of capitals already formed, destruction of their individual independence, expropriation of capitalist by capitalist, transformation of many small into few large capitals. [...] Capital grows in one place to a huge mass in a single hand, because it has in another place been lost by many. [...] The battle of competition is fought by cheapening of commodities. The cheapness of commodities demands, ''caeteris paribus'', on the productiveness of labour, and this again on the scale of production. Therefore, the larger capitals beat the smaller. It will further be remembered that, with the development of the capitalist mode of production, there is an increase in the minimum amount of individual capital necessary to carry on a business under its normal conditions. The smaller capitals, therefore, crowd into spheres of production which Modern Industry has only sporadically or incompletely got hold of. Here competition rages [...] It always ends in the ruin of many small capitalists, whose capitals partly pass into the hands of their conquerors, partly vanish".<ref>{{cite web|url=http://www.marxists.org/archive/marx/works/1867-c1/ch25.htm|title=Economic Manuscripts: Capital Vol. I – Chapter Twenty-Five|last=Marx|first=Karl}}</ref>

=== Rate of accumulation ===
In [[Marxian economics]], the rate of accumulation is defined as:

# the value of the real net increase in the [[Stock and flow|stock]] of capital in an accounting period; and
# the proportion of realised [[surplus-value]] or profit-income which is reinvested, rather than consumed.

This rate can be expressed by means of various ratios between the original capital outlay, the realised turnover, surplus-value or profit and reinvestments (e.g. the writings of the economist [[Michał Kalecki]]).

Other things being equal, the greater the amount of profit-income that is disbursed as personal earnings and used for consumptive purposes, the lower the savings rate and the lower the rate of accumulation is likely to be. However, earnings spent on consumption can also stimulate market demand and higher investment. This is the cause of endless controversies in economic theory about "how much to spend, and how much to save".

In a boom period of capitalism, the growth of investments is cumulative, i.e. one investment leads to another, leading to a constantly expanding market, an expanding [[labor force]] and an increase in the standard of living for the majority of the people.{{Citation needed|date=April 2019}}

In a stagnating, decadent capitalism, the accumulation process is increasingly oriented towards investment on military and security forces, real estate, financial speculation and luxury consumption. In that case, income from [[Value added|value-adding]] production will decline in favour of interest, rent and tax income, with as a corollary an increase in the level of permanent unemployment. The more capital one owns, the more capital one can also borrow. The inverse is also true and this is one factor in the widening gap between the rich and the poor.{{Citation needed|date=April 2019}}

[[Ernest Mandel]] emphasised that the rhythm of capital accumulation and growth depended critically on:

# the division of a society's social product between "[[necessary product]]" and "[[surplus product]]"; and
# the division of the surplus product between [[investment]] and [[Consumption (economics)|consumption]].

In turn, this allocation pattern reflected the outcome of [[competition]] among capitalists, competition between capitalists and workers and competition between workers. The pattern of capital accumulation can therefore never be simply explained by commercial factors as it also involved social factors and [[Economic power|power]] relationships.

=== Circuit of capital accumulation from production ===
Strictly speaking, capital has accumulated only when realised [[Profit (accounting)|profit]] income has been reinvested in capital assets. As suggested in the first volume of Marx' ''[[Das Kapital]]'', the process of capital accumulation in production has at least seven distinct but linked moments:

* The initial investment of [[Capital (economics)|capital]] (which could be borrowed capital) in [[means of production]] and [[labor power]].
* The command over [[surplus-labour]] and its appropriation.
* The [[valorisation]] (increase in value) of capital through production of new outputs.
* The appropriation of the new output produced by employees, containing the added value.
* The realisation of [[surplus-value]] through output sales.
* The appropriation of realised surplus-value as (profit) income after deduction of costs.
* The reinvestment of profit income in production.

All of these moments do not refer simply to an "economic" or commercial process. Rather, they assume the existence of legal, social, cultural and economic power conditions, without which creation, distribution and circulation of the new wealth could not occur. This becomes especially clear when the attempt is made to create a market where none exists, or where people refuse to trade.

=== Simple and expanded reproduction ===
In the second volume of ''Das Kapital'', Marx continues the story and shows that with the aid of bank [[Credit (finance)|credit]] capital in search of growth can more or less smoothly mutate from one form to another, alternately taking the form of:

* money capital (liquid deposits, securities and so on),
* commodity capital (tradable products, real estate and the like), or
* production capital ([[means of production]] and labor power).

His discussion of the simple and expanded [[Reproduction (economics)|reproduction]] of the conditions of production offers a more sophisticated model of the parameters of the accumulation process as a whole. At simple reproduction, a sufficient amount is produced to sustain society at the given [[living standard]]; the stock of capital stays constant. At expanded reproduction, more product-value is produced than is necessary to sustain society at a given living standard (a [[surplus product]]); the additional product-value is available for investments which enlarge the scale and variety of production.

The bourgeois {{who?|date=June 2020}} claim that there is no [[economic law]] according to which capital is necessarily re-invested in the expansion of production, that instead this depends on:

* anticipated profitability,
* market expectations, and
* perceptions of investment risk.

Such statements only explain the subjective experiences of investors and ignore the objective realities which would influence such opinions. As Marx states in the second volume of ''Das Kapital'', simple reproduction only exists if the variable and surplus capital realised by Dept. 1—producers of means of production—exactly equals that of the constant capital of Dept. 2, producers of articles of consumption (p.&nbsp;524). Such equilibrium rests on various assumptions, such as a constant labor supply (no population growth). Accumulation does not imply a necessary change in total magnitude of value produced, but can simply refer to a change in the composition of an industry (p.&nbsp;514).

[[Ernest Mandel]] introduced the additional concept of contracted economic reproduction, i.e. reduced accumulation where business operating at a loss outnumbers growing business, or economic reproduction on a decreasing scale, for example due to wars, natural disasters or [[Valorisation|devalorisation]].

Balanced [[economic growth]] requires that different factors in the accumulation process expand in appropriate proportions. However, markets themselves cannot spontaneously create that balance and in fact what drives business activity is precisely the imbalances between [[supply and demand]]: inequality is the motor of growth. This partly explains why the worldwide pattern of economic growth is very uneven and unequal, even although markets have existed almost everywhere for a very long-time. Some people argue that it also explains government regulation of market trade and [[protectionism]].

=== Capital accumulation as social relation ===
"Accumulation of capital" sometimes also refers in Marxist writings to the reproduction of capitalist [[social relations]] (institutions) on a larger scale over time, i.e. the expansion of the size of the [[proletariat]] and of the wealth owned by the [[bourgeoisie]].

This interpretation emphasises that capital ownership, predicated on command over labor, is a social relation: the growth of capital implies the growth of the [[working class]] (a "[[law of accumulation]]"). In the first volume of ''Das Kapital'', Marx had illustrated this idea with reference to [[Edward Gibbon Wakefield]]'s theory of colonisation:
{{Quotation|Wakefield discovered that in the Colonies, property in money, means of subsistence, machines, and other means of production, does not as yet stamp a man as a capitalist if there be wanting the correlative—the wage-worker, the other man who is compelled to sell himself of his own free-will. He discovered that capital is not a thing, but a social relation between persons, established by the instrumentality of things. Mr. Peel, he moans, took with him from England to Swan River, West Australia, means of subsistence and of production to the amount of £50,000. Mr. Peel had the foresight to bring with him, besides, 3,000 persons of the working-class, men, women, and children. Once arrived at his destination, 'Mr. Peel was left without a servant to make his bed or fetch him water from the river.' Unhappy Mr. Peel, who provided for everything except the export of English modes of production to Swan River!|''Das Kapital'', vol. 1, ch. 33}}
In the [[Capital, Volume III|third volume]] of ''Das Kapital'', Marx refers to the "fetishism of capital" reaching its highest point with interest-bearing capital because now capital seems to grow of its own accord without anybody doing anything:
{{Quotation|The relations of capital assume their most externalised and most fetish-like form in interest-bearing capital. We have here <math>M - M'</math>, money creating more money, self-expanding value, without the process that effectuates these two extremes. In merchant's capital, <math>M - C - M'</math>, there is at least the general form of the capitalistic movement, although it confines itself solely to the sphere of circulation, so that profit appears merely as profit derived from alienation; but it is at least seen to be the product of a social relation, not the product of a mere thing. [...] This is obliterated in <math>M - M'</math>, the form of interest-bearing capital. [...] The thing (money, commodity, value) is now capital even as a mere thing, and capital appears as a mere thing. The result of the entire process of reproduction appears as a property inherent in the thing itself. It depends on the owner of the money, i.e., of the commodity in its continually exchangeable form, whether he wants to spend it as money or loan it out as capital. In interest-bearing capital, therefore, this automatic fetish, self-expanding value, money generating money, are brought out in their pure state and in this form it no longer bears the birth-marks of its origin. The [[Social relations|social relation]] is consummated in the relation of a thing, of money, to itself. Instead of the actual transformation of money into capital, we see here only form without content.|''Das Kapital'', vol. 1, ch. 24|source=}}

== Wage labour ==
{{Main|Wage labour}}
[[Պատկեր:Worker_9.JPG|մինի|An industrial [[worker]] amidst heavy steel [[Semi-product|semi-products]] (Kinex Bearings, [[Bytča]], [[Slovakia]], c. 1995–2000)]]
[[Wage labour]] refers to the sale of [[Labour economics|labour]] under a formal or informal [[employment contract]] to an [[employer]].<ref>{{Harvnb|Steinfeld|2009|p=3}}: "All labor contracts were/are designed legally to bind a worker in one way or another to fulfill the labor obligations the worker has undertaken. That is one of the principal purposes of labor contracts."</ref> These transactions usually occur in a [[labour market]] where [[Wage|wages]] are market determined.<ref>{{Harvnb|Deakin|Wilkinson|2005}}.

{{Harvnb|Marx|1990|p=1005}}, defines wage labour succinctly as "the labour of the worker who sells his own labour-power."</ref> Individuals who possess and supply financial capital or labor to productive ventures often become owners, either jointly (as [[Shareholder|shareholders]]) or individually.{{Citation needed|date=March 2020}} In Marxist economics, these owners of the means of production and suppliers of capital are generally called capitalists. The description of the role of the capitalist has shifted, first referring to a useless intermediary between producers, then to an employer of producers, and finally to the owners of the means of production.<ref name="Williams 1983 51">{{cite book|title=Keywords: A vocabulary of culture and society, revised edition|last=Williams|first=Raymond|publisher=Oxford University Press|year=1983|isbn=978-0-19-520469-8|page=[https://archive.org/details/keywordsvocabula00willrich/page/51 51]|chapter=Capitalism|chapter-url=https://archive.org/details/keywordsvocabula00willrich/page/51}}</ref> [[Labor (economics)|Labor]] includes all physical and mental human resources, including entrepreneurial capacity and management skills, which are needed to produce products and services. [[Production (economics)|Production]] is the act of making goods or services by applying [[labor power]].<ref>Christopher T.S. Ragan and Richard G. Lipsey. ''Microeconomics''. Twelfth Canadian Edition ed. Toronto, Pearson Education Canada, 2008. Print.</ref><ref>Robbins, Richard H. ''Global problems and the culture of capitalism''. Boston: Allyn & Bacon, 2007. Print.</ref>

Critics of the capitalist mode of production see wage labour as a major, if not defining, aspect of hierarchical industrial systems. Most opponents of the institution support [[worker self-management]] and [[economic democracy]] as alternatives to both wage labour and capitalism. While most opponents of the wage system<!--boldface per WP:R#PLA--> blame the capitalist owners of the means of production for its existence, most [[anarchists]] and other [[libertarian socialists]] also hold the state as equally responsible as it exists as a tool utilised by capitalists to subsidise themselves and protect the institution of [[Privatism|private ownership of the means of production]]. As some opponents of wage labour take influence from Marxist propositions, many are opposed to [[private property]], but maintain respect for [[personal property]].

=== Types ===
The most common form of wage labour currently is ordinary direct, or "full-time", employment in which a free worker sells his or her labour for an indeterminate time (from a few years to the entire career of the worker) in return for a money-wage or salary and a continuing relationship with the employer (which it does not in general offer contractors or other irregular staff). However, wage labour takes many other forms and explicit as opposed to implicit (i.e. conditioned by local labour and tax law) contracts are not uncommon. Economic history shows a great variety of ways in which labour is traded and exchanged. The differences show up in the form of:

* Employment status: a worker could be employed full-time, part-time, or on a casual basis. He or she could be employed for example temporarily for a specific project only, or on a permanent basis. Part-time wage labour could combine with part-time [[self-employment]]. The worker could be employed also as an [[Apprenticeship|apprentice]].
* Civil (legal) status: the worker could for example be a free citizen, an [[Indentured labour|indentured labourer]], the subject of [[forced labour]] (including some prison or army labour); a worker could be assigned by the political authorities to a task, they could be a [[Slavery|semi-slave]] or a [[Serfdom|serf]] bound to the land who is hired out part of the time. So the labour might be performed on a more or less voluntary basis, or on a more or less involuntary basis, in which there are many gradations.
* Method of payment (remuneration or [[Compensation of employees|compensation]]): the work done could be paid "in cash" (a money-wage) or "in kind" (through receiving goods and/or services), or in the form of "[[Piecework|piece rates]]" where the wage is directly dependent on how much the worker produces. In some cases, the worker might be paid in the form of credit used to buy goods and services, or in the form of [[Employee stock option|stock options]] or [[Share (finance)|shares]] in an enterprise.
* Method of hiring: the worker might engage in a labour-contract on his or her own initiative, or he or she might hire out their labour as part of a group. However, he or she may also hire out their labour via an intermediary (such as an employment agency) to a third party. In this case, he or she is paid by the intermediary, but works for a third party which pays the intermediary. In some cases, labour is [[Subcontracting|subcontracted]] several times, with several intermediaries. Another possibility is that the worker is assigned or posted to a job by a political authority, or that an agency hires out a worker to an enterprise together with the [[means of production]].

== Effects of war ==
[[Պատկեր:Alfred_T._Palmer_-_Assembling_the_North_American_B-25_Mitchell_at_Kansas_City,_Kansas_(USA).jpg|մինի|The common view among economic historians is that the [[Great Depression]] ended with the advent of World War II (assembling the North American [[B-25 Mitchell]] at [[Kansas City]], 1942)]]
War typically causes the diversion, destruction and creation of capital assets as capital assets are both destroyed or consumed and diverted to types of production needed to fight the war. Many assets are wasted and in some few cases created specifically to fight a war. War driven demands may be a powerful stimulus for the accumulation of capital and production capability in limited areas and market expansion outside the immediate theatre of war. Often this has induced laws against perceived and real [[war profiteering]].

The total hours worked in the United States rose by 34 percent during World War II, even though the military draft reduced the civilian labor force by 11 percent.<ref>{{cite journal|last1=Grattan|first1=Ellen R.|last2=Ohanian|first2=Lee E.|date=December 1999|title=The macroeconomic effects of big fiscal shocks: the case of world war II|url=https://www.minneapolisfed.org/research/wp/wp599.pdf|journal=Minneapolis Federal Reserve, Working Paper 599}}</ref>

War destruction can be illustrated by looking at [[World War II]]. Industrial war damage was heaviest in Japan, where 1/4 of factory buildings and 1/3 of plant and equipment were destroyed; 1/7 of electric power-generating capacity was destroyed and 6/7 of oil refining capacity. The Japanese merchant fleet lost 80% of their ships. In Germany in 1944, when air attacks were heaviest, 6.5% of machine tools were damaged or destroyed, but around 90% were later repaired. About 10% of steel production capacity was lost. In Europe, the United States and the Soviet Union enormous resources were accumulated and ultimately dissipated as planes, ships, tanks and so on were built and then lost or destroyed.

Germany's total war damage was estimated at about 17.5% of the pre-war total capital stock by value, i.e. about 1/6. In the [[Berlin]] area alone, there were 8 million refugees lacking basic necessities. In 1945, less than 10% of the railways were still operating. 2,395 rail bridges were destroyed and a total of 7,500 bridges, 10,000 locomotives and more than 100,000 goods wagons were destroyed. Less than 40% of the remaining locomotives were operational.

However, by the first quarter of 1946 European rail traffic, which was given assistance and preferences (by Western appointed military governors) for resources and material as an essential asset, regained its prewar operational level. At the end of the year, 90% of Germany's railway lines were operating again. In retrospect, the rapidity of infrastructure reconstruction appears astonishing.

Initially, in May 1945 newly installed United States president [[Harry S. Truman]]'s directive had been that no steps would be taken towards economic rehabilitation of Germany. In fact, the initial industry plan of 1946 prohibited production in excess of half of the 1938 level; the iron and steel industry was allowed to produce only less than a third of pre-war output. These plans were rapidly revised and better plans were instituted. In 1946, over 10% of Germany's physical capital stock (plant and equipment) was also dismantled and confiscated, most of it going to the Soviet Union. By 1947, industrial production in Germany was at 1/3 of the 1938 level and industrial investment at about 1/2 the 1938 level.

The first big strike-wave in the [[Ruhr]] occurred in early 1947—it was about food rations and housing, but soon there were demands for nationalisation. However, the United States appointed military governor (Newman) stated at the time that he had the power to break strikes by withholding food rations. The clear message was "no work, no eat". As the military controls in Western Germany were nearly all relinquished and the Germans were allowed to rebuild their own economy with [[Marshall Plan]] aid things rapidly improved. By 1951, German industrial production had overtaken the prewar level. The Marshall Aid funds were important, but after the currency reform (which permitted German capitalists to revalue their assets) and the establishment of a new political system much more important was the commitment of the United States to rebuilding German capitalism and establishing a free market economy and government, rather than keeping Germany in a weak position. Initially, average [[real wages]] remained low, lower even than in 1938, until the early 1950s while profitability was unusually high. So the total investment fund, aided by credits, was also high, resulting in a high rate of capital accumulation which was nearly all reinvested in new construction or new tools. This was called the [[German economic miracle]] or ''Wirtschaftswunder''.<ref>Armstrong, Glyn & Harrison, ''Capitalism since world war 2''. Fontana, 1984. See also Karl Hardach, "Germany 1914–1917", in: Carlo M. Cipolla, ''The Fontana History of Europe'', Part One. Fontana, 1976, p. 224.</ref>

In Italy, the victorious Allies did three things in 1945: they imposed their absolute military authority; they quickly disarmed the Italian partisans from a very large stock of weapons; and they agreed to a state guarantee of wage payments as well as a veto on all sackings of workers from their jobs.<ref>{{cite book|url=https://archive.org/details/historyofcontemp00paul/page/70|title=A History of Contemporary Italy – Society and Politics 1943–1988|last=Ginsborg|first=Paul|publisher=Penguin Books|year=1990|isbn=978-0-14-012496-5|location=London|page=[https://archive.org/details/historyofcontemp00paul/page/70 70]}}</ref> Although the Italian Communist Party grew very large immediately after the war ended—it achieved a membership of 1.7 million people in a population of 45 million—it was outmaneuvered<!-- spelling? this seems incorrect --> through a complicated political battle by the Christian Democrats after three years.<ref>Ginsborg (1990), chapter 3.</ref> In the 1950s, an economic boom began in Italy, at first fueled by internal demand and then also by exports.<ref>Ginsborg (1990), p. 214.</ref>

In modern times, it has often been possible to rebuild physical capital assets destroyed in wars completely within the space of about 10 years, except in cases of severe pollution by [[chemical warfare]] or other kinds of irreparable devastation. However, damage to [[human capital]] has been much more devastating in terms of fatalities (in the case of World War II, about 55 million deaths), permanent physical disability, enduring ethnic hostility and psychological injuries which have effects for at least several generations.

== Criticism ==
{{Main|Criticism of capitalism}}
[[Պատկեր:Anti-capitalism_color—_Restored.png|մինի|The [[Industrial Workers of the World]] poster "[[Pyramid of Capitalist System]]" (1911)]]
Critics of capitalism associate the economic system with [[social inequality]]; unfair [[distribution of wealth]] and power; [[Economic materialism|materialism]]; repression of workers and [[Trade union|trade unionists]]; [[social alienation]]; [[economic inequality]]; [[unemployment]]; and economic instability. Many socialists consider capitalism to be irrational in that production and the direction of the economy are unplanned, creating many inconsistencies and internal contradictions.<ref>Brander, James A. ''Government policy toward business''. 4th {{abbr|ed.|edition}} Mississauga, Ontario, John Wiley & Sons Canada, 2006. Print.</ref> Capitalism and individual property rights have been associated with the [[tragedy of the anticommons]] where owners are unable to agree. [[Marxian economist]] [[Richard D. Wolff]] postulates that capitalist economies prioritize profits and capital accumulation over the social needs of communities and capitalist enterprises rarely include the workers in the basic decisions of the enterprise.<ref>Frances Goldin, Debby Smith, Michael Smith (2014). ''Imagine: Living in a Socialist USA.'' [[Harper Perennial]]. {{ISBN|0-06-230557-3}} pp. 49–50.</ref> [[Democratic socialist|Democratic socialists]] argue that the role of the state in a capitalist society is to defend the interests of the [[bourgeoisie]].<ref name="democraticsocialists">{{cite web|url=https://dsp.org.au/node/35|title=The role and character of the state under capitalism|date=7 August 2008|publisher=[[Democratic Socialist Perspective]]|archive-url=https://web.archive.org/web/20180406141728/https://dsp.org.au/node/35|archive-date=6 April 2018|url-status=dead|access-date=6 April 2018}}</ref> These states take actions to implement such things as unified national markets, national currencies and customs system.<ref name="democraticsocialists" /> Capitalism and capitalist governments have also been criticized as [[oligarchic]] in nature<ref>{{cite web|url=https://www.vox.com/2014/4/11/5581272/doom-loop-oligarchy|title=The Doom Loop of Oligarchy|last=Klein|first=Ezra|date=11 April 2014|publisher=Vox|archive-url=https://web.archive.org/web/20180406143025/https://www.vox.com/2014/4/11/5581272/doom-loop-oligarchy|archive-date=6 April 2018|quote=In the year's scariest economics book, [[Thomas Piketty]] argues that capitalism, left unchecked, subverts democracy by always and everywhere concentrating wealth at the tippy-top. That creates a class with so much economic power that they begin wielding tremendous political power, too. And then they use that political power to further increase their wealth, and then they use that wealth to further increase their political power, and so on. You might call this the Doom Loop of Oligarchy: wealth buys power, which buys more wealth. You can see it playing out over the last two weeks in American politics.|author-link=Ezra Klein|url-status=live|access-date=6 April 2018}}</ref><ref>{{cite news|last=Gorman|first=Connor|date=14 January 2018|title=Guest Commentary: Capitalism is Economic Oligarchy, Socialism is Economic Democracy|url=http://www.davisvanguard.org/2018/01/guest-commentary-capitalism-economic-oligarchy-socialism-economic-democracy/|url-status=live|work=Davis Vanguard|archive-url=https://web.archive.org/web/20180406144110/http://www.davisvanguard.org/2018/01/guest-commentary-capitalism-economic-oligarchy-socialism-economic-democracy/|archive-date=6 April 2018|access-date=6 April 2018}}</ref><ref>{{cite book|url=https://books.google.com/books?id=GqkrvgAACAAJ|title=Capitalism as Oligarchy: 5,000 Years of Diversion and Suppression|last=O'Reilly|first=Jim|date=21 August 2016|publisher=Jor|isbn=978-0692514269|edition=1|via=Google Books}}</ref> due to the inevitable inequality<ref>{{cite magazine|last=Muller|date=March–April 2013|access-date=6 April 2018|archive-date=6 April 2018|archive-url=https://web.archive.org/web/20180406151044/https://www.foreignaffairs.com/articles/2013-02-11/capitalism-and-inequality|issn=0015-7120|issue=2|volume=92|publisher=[[Council of Foreign Relations]]|first=Jerry Z.|type=Essay|magazine=Foreign Affairs|url-status=live|url-access=registration|url=https://www.foreignaffairs.com/articles/2013-02-11/capitalism-and-inequality|title=Capitalism and Inequality: What the Right and the Left Get Wrong|quote=Inequality is indeed increasing almost everywhere in the postindustrial capitalist world. But despite what many on the left think, this is not the result of politics, nor is politics likely to reverse it, for the problem is more deeply rooted and intractable than generally recognized. Inequality is an inevitable product of capitalist activity, and expanding equality of opportunity only increases it—because some individuals and communities are simply better able than others to exploit the opportunities for development and advancement that capitalism affords.}}</ref><ref>{{cite news|last=Satherly|first=Dan|date=19 January 2015<!--Per the Newshub archive, but the oldest copy archived in Internet Archive from 11 March 2016 states 19 January-->|title=Inequality inevitable under capitalism – expert|url=https://www.newshub.co.nz/nznews/inequality-inevitable-under-capitalism---expert-2015012010|url-status=live|work=[[Newshub]]|archive-url=https://web.archive.org/web/20180406153501/https://www.newshub.co.nz/nznews/inequality-inevitable-under-capitalism---expert-2015012010|archive-date=6 April 2018|access-date=6 April 2018}}</ref> characteristic of economic progress.<ref>{{cite journal|last=Yilmaz|first=Serafettin|title=Theories of Class and Social Inequality|url=https://www.academia.edu/2114498|archive-url=https://web.archive.org/web/20180406154332/https://www.academia.edu/2114498/Theories_of_Class_and_Social_Inequality|archive-date=6 April 2018|access-date=6 April 2018|url-access=registration|url-status=live|via=[[Academia.edu]]}}</ref><ref>{{cite web|url=https://www.pragcap.com/is-wealth-and-income-inequality-inevitable-in-a-capitalist-system/|title=Is Wealth and Income Inequality Inevitable in a Capitalist System?|last=Roche|first=Cullen|date=22 August 2014|website=Pragmatic Capitalism|archive-url=https://web.archive.org/web/20180406155201/https://www.pragcap.com/is-wealth-and-income-inequality-inevitable-in-a-capitalist-system/|archive-date=6 April 2018|quote='Inevitable' is a bit of a generalization. 'Highly probable'—yes. The thing is, capitalism runs on profits. And profits are optimized when they're monopolized. A good capitalist will try to monopolize the means of production therefore maximizing profits. And when profits are monopolized then you are very likely to get inequality because only a handful of people own the means of production. So capitalism has a natural tendency towards monopolization because capitalists naturally want to maximize profits.|url-status=live|access-date=6 April 2018}}</ref>

Some [[Labor history (discipline)|labor historians]] and scholars have argued that [[unfree labor]]—by [[Slave|slaves]], [[Indentured servant|indentured servants]], [[Incarceration in the United States#Employment|prisoners]] or other coerced persons—is compatible with capitalist relations. [[Tom Brass]] argued that unfree labor is acceptable to capital.<ref>Cass, ''Towards a Comparative Political Economy of Unfree Labor'' (1999)</ref><ref>{{cite journal|author=Marcel van der Linden|date=Fall 2003|title=Labour History as the History of Multitudes|url=http://www.historycooperative.org/journals/llt/52/linden.html|journal=Labour/Le Travail|volume=52|pages=235–44|doi=10.2307/25149390|jstor=25149390|archiveurl=https://web.archive.org/web/20071217185826/http://www.historycooperative.org/journals/llt/52/linden.html|archivedate=17 December 2007|accessdate=26 February 2008|url-status=dead}}</ref> Historian [[Greg Grandin]] argues that capitalism has its origins in slavery, saying that "[w]hen historians talk about the Atlantic market revolution, they are talking about capitalism. And when they are talking about capitalism, they are talking about slavery."<ref name="Grandin">{{Cite interview|last=Grandin|first=Greg|subject-link=Greg Grandin|interviewer=Alex Gourevitch|title=Capitalism and Slavery: An Interview with Greg Grandin|url=https://www.jacobinmag.com/2014/08/capitalism-and-slavery-an-interview-with-greg-grandin/|work=[[Jacobin (magazine)|Jacobin]]|date=1 August 2014|access-date=6 April 2018|archive-url=https://web.archive.org/web/20180406181935/https://www.jacobinmag.com/2014/08/capitalism-and-slavery-an-interview-with-greg-grandin/|archive-date=6 April 2018|url-status=live|quote=There's many ways this happens. Deceit, through [[contraband]], is absolutely key to the expansion of slavery in South America. When historians talk about the Atlantic market revolution, they are talking about capitalism. And when they are talking about capitalism, they are talking about slavery. And when they are talking about slavery, they are talking about corruption and crime. Not in a moral sense, in that the slave system was a crime against humanity. That it was. But it was also a crime in a technical sense: probably as many enslaved Africans came into South America as contraband, to avoid taxes and other lingering restrictions, as legally.}}</ref> Some historians, including [[Edward E. Baptist]] and [[Sven Beckert]], assert that slavery was an integral component in the violent development of American and global capitalism.<ref>Edward E. Baptist. ''[http://www.basicbooks.com/full-details?isbn=9780465002962 The Half Has Never Been Told: Slavery And The Making Of American Capitalism] {{webarchive|url=https://web.archive.org/web/20150324174604/http://www.basicbooks.com/full-details?isbn=9780465002962|date=24 March 2015}}.'' [[Basic Books]], September 2014. {{ISBN|0-465-00296-X}}.</ref><ref>{{cite book|url=http://www.upenn.edu/pennpress/book/15556.html|title=Slavery's Capitalism: A New History of American Economic Development|publisher=[[University of Pennsylvania Press]]|year=2016|isbn=9780812224177|editor1-last=Beckert|editor1-first=Sven|editor1-link=Sven Beckert|editor2-last=Rockman|editor2-first=Seth}}</ref> The Slovenian [[continental philosopher]] [[Slavoj Žižek]] posits that the new era of global capitalism has ushered in new forms of [[Slavery#Contemporary slavery|contemporary slavery]], including migrant workers deprived of basic civil rights on the [[Arabian Peninsula]], the total control of workers in Asian [[sweatshops]], and the use of forced labor in the exploitation of natural resources in [[Central Africa]].<ref>{{cite book|url=https://books.google.com/books?id=POZFDwAAQBAJ&lpg=PP1&pg=PA29|title=The Courage of Hopelessness: A Year of Acting Dangerously|last=Žižek|first=Slavoj|date=2018|publisher=Melville House|isbn=978-1612190037|page=29}}</ref>

According to [[Immanuel Wallerstein]], [[institutional racism]] has been "one of the most significant pillars" of the capitalist system and serves as "the ideological justification for the hierarchization of the work-force and its highly unequal distributions of reward".<ref>{{cite book|title=Historical Capitalism|last=Wallerstein|first=Immanuel|publisher=[[Verso Books]]|year=1983|isbn=978-0-86091-761-8|page=78|authorlink=Immanuel Wallerstein}}</ref>

Many aspects of capitalism have come under attack from the [[anti-globalization movement]], which is primarily opposed to [[corporate capitalism]]. [[Environmentalist|Environmentalists]] have argued that capitalism requires continual economic growth and that it will inevitably deplete the finite natural resources of Earth and cause [[Holocene extinction|mass extinctions]] of animal and plant life.<ref name="McMurty 1999">{{cite book|title=The Cancer Stage of Capitalism|last=McMurty|first=John|publisher=Pluto Press|year=1999|isbn=978-0-7453-1347-4}}</ref><ref>{{cite news|url=https://www.theguardian.com/environment/georgemonbiot/2014/oct/01/george-monbiot-war-on-the-living-world-wildlife|title=It's time to shout stop on this war on the living world|last=Monbiot|first=George|author-link=George Monbiot|date=1 October 2014|newspaper=[[The Guardian]]|archive-url=https://web.archive.org/web/20180406160337/https://www.theguardian.com/environment/georgemonbiot/2014/oct/01/george-monbiot-war-on-the-living-world-wildlife|archive-date=6 April 2018|url-status=live|access-date=6 April 2018}}</ref><ref>{{cite book|url=http://www.orbooks.com/catalog/extinction-by-ashley-dawson/|title=Extinction: A Radical History|last=Dawson|first=Ashley|date=2016|publisher=[[OR Books]]|isbn=978-1-944869-01-4|page=41|authorlink=Ashley Dawson}}</ref> Such critics argue that while [[neoliberalism]], the ideological backbone of contemporary globalized capitalism, has indeed increased global trade, it has also destroyed traditional ways of life, exacerbated inequality, increased global [[poverty]], and that environmental indicators indicate massive [[environmental degradation]] since the late 1970s.<ref name="Duménil" /><ref>Jones, Campbell, Martin Parker and Rene Ten Bos, ''For Business Ethics''. ([[Routledge]], 2005) {{ISBN|0-415-31135-7}}, p. 101.</ref><ref>Stephen Haymes, Maria Vidal de Haymes and Reuben Miller (eds), ''[http://www.routledge.com/books/details/9780415673440/ The Routledge Handbook of Poverty in the United States],'' (London: Routledge, 2015), {{ISBN|0415673445}}, [https://books.google.com/books?id=qnHfBQAAQBAJ&lpg=PP1&pg=PA1#v=onepage pp. 1–2].</ref><ref>{{Cite news|last=Udland|first=Myles|date=27 May 2016|title=IMF: The last generation of economic policies may have been a complete failure|url=https://www.businessinsider.com/imf-neoliberalism-warnings-2016-5|url-status=live|work=[[Business Insider]]|archive-url=https://web.archive.org/web/20180406161633/https://www.businessinsider.com/imf-neoliberalism-warnings-2016-5|archive-date=6 April 2018|access-date=6 April 2018|quote=Neoliberalism—which IMF researchers [[Jonathan D. Ostry|Jonathan Ostry]], [[Prakash Loungani]], and Davide Furceri loosely define as the opening of economies to foreign capital along with a reduction in government debt burdens—has been the dominant trend in economic policymaking over the past 30 years. [...] But now it seems some at the IMF aren't so sure this tradition is all it's been cracked up to be. In their paper, Ostray, Loungani, and Furceri argue that these goals have both hampered the economic growth that neoliberalism champions and exacerbated the rise of inequality.}}</ref>
[[Պատկեր:Total US family wealth timeline by wealth group.png|մինի|[[Wealth inequality in the United States|Wealth inequality]] in the United States increased from 1989 to 2013.<ref>{{cite news|title=Trends in Family Wealth, 1989 to 2013|url=https://www.cbo.gov/publication/51846|date=18 August 2016|work=[[Congressional Budget Office]]}}</ref>]]
Some scholars blame the [[financial crisis of 2007–2008]] on the neoliberal capitalist model.{{refn|<ref>{{cite journal |last=Lavoie |first=Marc |title=Financialization, neo-liberalism, and securitization |journal=Journal of Post Keynesian Economics |volume=35 |issue=2 |pages=215–33 |jstor=23469991 |date=Winter 2012–2013  |doi=10.2753/pke0160-3477350203}}</ref><ref>{{cite journal |last= Stein|first=Howard|s2cid=26437908|date=25 July 2012|title=The Neoliberal Policy Paradigm and the Great Recession|journal=Panoeconomicus|volume=59 |issue= 4|pages= 421–40|doi=10.2298/PAN1204421S|quote=The role of deregulation and related neoliberal policies as a both a source of massive financialization of the economy and cause of the Great Recession is widely recognized in the literature (David M. Kotz 2009; Bill Lucarelli 2009; Joseph Stiglitz 2010; William Tabb 2012). Some authors aptly call it the 'crisis of neoliberal capitalism' (Kotz 2010).}}</ref><ref>Susan Braedley and Meg Luxton, ''[http://www.mqup.ca/neoliberalism-and-everyday-life-products-9780773536739.php Neoliberalism and Everyday Life]'' ([[McGill-Queen's University Press]], 2010), {{ISBN|0-7735-3692-2}}, [https://books.google.com/books?id=CvD-6GQWr04C&lpg=PP1&pg=PA3 p. 3]</ref><ref>[[Manfred B. Steger]] and Ravi K. Roy. ''[https://global.oup.com/academic/product/neoliberalism-a-very-short-introduction-9780199560516?cc=us&# Neoliberalism: A Very Short Introduction]''. ([[Oxford University Press]], 2010.) {{ISBN|0-19-956051-X}}. p. 123.</ref><ref>[[Gérard Duménil]] and Dominique Lévy, ''[http://www.hup.harvard.edu/catalog.php?isbn=9780674072244 The Crisis of Neoliberalism].'' ([[Harvard University Press]], 2013), {{ISBN|0-674-07224-3}}</ref><ref>David M Kotz, ''[https://www.hup.harvard.edu/catalog.php?isbn=9780674980013 The Rise and Fall of Neoliberal Capitalism]'' ([[Harvard University Press]], 2015), {{ISBN|0-674-72565-4}}</ref>}} Following the banking crisis of 2007, [[Alan Greenspan]] told the United States Congress on 23 October 2008 that "[t]his modern risk-management paradigm held sway for decades. The whole intellectual edifice, however, collapsed in the summer of last year",<ref>{{cite news|last=Andrews|first=Edmund L.|author-link=Edmund L. Andrews|date=23 October 2008|title=Greenspan Concedes Error on Regulation|url=https://www.nytimes.com/2008/10/24/business/economy/24panel.html|url-status=live|department=Economy|work=The New York Times|archive-url=https://web.archive.org/web/20180406173958/https://www.nytimes.com/2008/10/24/business/economy/24panel.html|archive-date=6 April 2018|access-date=6 April 2018|quote=He noted that the immense and largely unregulated business of spreading financial risk widely, through the use of exotic financial instruments called [[Derivative (finance)|derivatives]], had gotten out of control and had added to the havoc of today's crisis. As far back as 1994, Mr. Greenspan staunchly and successfully opposed tougher regulation on derivatives. But on Thursday, he agreed that the multitrillion-dollar market for [[credit default swap]]s, instruments originally created to insure bond investors against the risk of default, needed to be restrained. 'This modern risk-management paradigm held sway for decades,' he said. 'The whole intellectual edifice, however, collapsed in the summer of last year.'}}</ref> and that "I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders and their equity in firms [...] I was shocked".<ref>{{cite news|last1=Knowlton|first1=Brian|last2=Grynbaum|first2=Michael M.|date=23 October 2008|title=Greenspan 'shocked' that free markets are flawed|url=https://www.nytimes.com/2008/10/23/business/worldbusiness/23iht-gspan.4.17206624.html|url-status=live|department=International Business|work=The New York Times|archive-url=https://web.archive.org/web/20180406175418/https://www.nytimes.com/2008/10/23/business/worldbusiness/23iht-gspan.4.17206624.html|archive-date=6 April 2018|access-date=6 April 2018|quote=Pressed by [[Henry Waxman|Waxman]], Greenspan conceded a more serious flaw in his own philosophy that unfettered free markets sit at the root of a superior economy. 'I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms,' Greenspan said. [...] 'In other words, you found that your view of the world, your ideology, was not right, it was not working,' Waxman said. 'Absolutely, precisely,' Greenspan replied. "You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well.'}}</ref>

Many religions have criticized or opposed specific elements of capitalism. Traditional [[Judaism]], [[Christianity]], and [[Islam]] forbid [[Usury|lending money at interest]],<ref>''[[Baba Metzia]]'' 61b</ref><ref>Moehlman, 1934, pp. 6–7.</ref> although alternative methods of banking have been developed. Some Christians have criticized capitalism for its [[Economic materialism|materialist]] aspects and its inability to account for the wellbeing of all people.<ref>{{cite web|url=https://www.vatican.va/archive/ENG0015/__P8C.HTM|title=Catechism of the Catholic Church: III. The Social Doctrine of the Church|publisher=[[Vatican Publishing House]]|archive-url=https://web.archive.org/web/20180406163022/https://www.vatican.va/archive/ENG0015/__P8C.HTM|archive-date=6 April 2018|quote=[2425] The Church has rejected the totalitarian and atheistic ideologies associated in modem times with 'communism' or 'socialism.' She has likewise refused to accept, in the practice of 'capitalism,' individualism and the absolute primacy of the law of the marketplace over human labor.206 Regulating the economy solely by centralized planning perverts the basis of social bonds; regulating it solely by the law of the marketplace fails social justice, for 'there are many human needs which cannot be satisfied by the market.'<sup>207</sup> Reasonable regulation of the marketplace and economic initiatives, in keeping with a just hierarchy of values and a view to the common good, is to be commended.|url-status=live|access-date=6 April 2018}}</ref> Many of Jesus' parables deal with economic concerns: farming, shepherding, being in debt, doing hard labor, being excluded from banquets and the houses of the rich and have implications for wealth and power distribution.<ref>{{cite web|url=https://www.smh.com.au/business/what-jesus-said-about-capitalism-20120408-1wjmm.html|title=What Jesus said about capitalism|last=Gittins|first=Ross|date=9 April 2012|publisher=[[Fairfax Media]]|archive-url=https://web.archive.org/web/20180406163539/https://www.smh.com.au/business/what-jesus-said-about-capitalism-20120408-1wjmm.html|archive-date=6 April 2018|quote=It's certainly true that Jesus was always blessing the poor, challenging the rich, mixing with despised tax-gatherers and speaking of a time when the social order is overturned and 'the last shall be first'. It's also true, as Myers reminds us, that many of Jesus's parables deal with clearly economic concerns: farming, shepherding, being in debt, doing hard labour, being excluded from banquets and the houses of the rich.|author-link=Ross Gittins|department=Business|newspaper=[[The Sydney Morning Herald]]|url-status=live|access-date=6 April 2018}}</ref><ref>Thomas Gubleton, archbishop of Detroit speaking in ''[[Capitalism: A Love Story]]''</ref> Catholic scholars and clergy have often criticized capitalism because of its disenfranchisement of the poor, often promoting [[distributism]] as an alternative. In his 84-page [[apostolic exhortation]] {{lang|la|[[Evangelii gaudium]]}}, [[Pope|Catholic Pope]] [[Pope Francis|Francis]] described unfettered capitalism as "a new tyranny" and called on world leaders to fight rising poverty and inequality:<ref>{{cite news|last=O'Leary|first=Naomi|date=26 November 2013|title=Pope attacks 'tyranny' of markets in manifesto for papacy|url=https://www.reuters.com/article/us-pope-document/pope-attacks-tyranny-of-markets-in-manifesto-for-papacy-idUSBRE9AP0EQ20131126|url-status=live|department=Business News|agency=Reuters|archive-url=https://archive.today/20180406170738/https://www.reuters.com/article/us-pope-document/pope-attacks-tyranny-of-markets-in-manifesto-for-papacy-idUSBRE9AP0EQ20131126|archive-date=6 April 2018|access-date=6 April 2018|quote=Pope Francis attacked unfettered capitalism as 'a new tyranny' and beseeched global leaders to fight poverty and growing inequality, in a document on Tuesday setting out a platform for his papacy and calling for a renewal of the Catholic Church.}}</ref>
{{Quote|Some people continue to defend [[Trickle-down economics|trickle-down theories]] which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.<ref>{{cite news|last1=Goldfarb|first1=Zachary A.|last2=Boorstein|first2=Michelle|date=26 November 2013|title=Pope Francis denounces 'trickle-down' economic theories in sharp criticism of inequality|url=https://www.washingtonpost.com/business/economy/pope-francis-denounces-trickle-down-economic-theories-in-critique-of-inequality/2013/11/26/e17ffe4e-56b6-11e3-8304-caf30787c0a9_story.html|url-status=live|department=Business|work=The Washington Post|archive-url=https://web.archive.org/web/20180406171743/https://www.washingtonpost.com/business/economy/pope-francis-denounces-trickle-down-economic-theories-in-critique-of-inequality/2013/11/26/e17ffe4e-56b6-11e3-8304-caf30787c0a9_story.html|archive-date=6 April 2018|access-date=6 April 2018}}</ref>}}
Proponents of capitalism argue that it creates more prosperity than any other economic system and that its benefits are mainly to the ordinary person.<ref>Friedman, Milton. ''Capitalism and Freedom''. [Chicago] University of Chicago, 1962.</ref> Critics of capitalism variously associate it with economic instability,<ref>Krugman, Paul, Wells, Robin, ''Economics'', Worth Publishers, New York (2006)</ref> an inability to provide for the well-being of all people<ref>{{cite web|url=http://w2.vatican.va/content/benedict-xvi/en/encyclicals/documents/hf_ben-xvi_enc_20090629_caritas-in-veritate.html|title=Encyclical Letter ''Caritas in veritate'' of the Supreme Pontiff Benedict XVI to the Bishops, Priests, and Deacons; Men and Women; Religious, the Lay, Faithful; and All Good People of Good Will on Integral Human Development in Charity and Truth|date=29 June 2009|publisher=[[Vatican Publishing House]]|location=St. Peter's Basilica, Rome|type=[[Encyclical]]|archive-url=https://web.archive.org/web/20180406171929/http://w2.vatican.va/content/benedict-xvi/en/encyclicals/documents/hf_ben-xvi_enc_20090629_caritas-in-veritate.html|archive-date=6 April 2018|author=Pope Emeritus Benedict XVI|url-status=live|access-date=6 April 2018|author-link=Pope Emeritus Benedict XVI}}</ref> and an unsustainable danger to the natural environment.<ref name="McMurty 1999" /> [[Socialist|Socialists]] maintain that although capitalism is superior to all previously existing economic systems (such as feudalism or slavery), the contradiction between class interests will only be resolved by advancing into a completely new social system of production and distribution in which all persons have an equal relationship to the means of production.<ref>''The Rise of Capitalism'', 2011. Socialist Standard, no. 1284, August 2011.</ref>

The term capitalism in its modern sense is often attributed to [[Karl Marx]].<ref name="Scott" /><ref>{{cite web|url=http://www.oed.com/view/Entry/27454?rskey=ZVI1hr&result=2&isAdvanced=false|title="capitalism, n.2". OED Online}}</ref> In his ''[[Das Kapital]]'', Marx analyzed the "[[Capitalist mode of production (Marxist theory)|capitalist mode of production]]" using a method of understanding today known as [[Marxism]]. However, Marx himself rarely used the term "capitalism" while it was used twice in the more political interpretations of his work, primarily authored by his collaborator [[Friedrich Engels]]. In the 20th century, defenders of the capitalist system often replaced the term capitalism with phrases such as free enterprise and private enterprise and replaced capitalist with [[Rentier capitalism|rentier]] and [[investor]] in reaction to the negative connotations associated with capitalism.<ref name="Williams 1983 51" />

=== Profit motive ===
The majority of criticisms against the profit motive centre on the idea that the profit motive encourages selfishness and greed, rather than serve the public good or necessarily creating an increase in net wealth. Critics of the profit motive contend that companies disregard morals or public safety in the pursuit of profits.<ref>{{cite web|url=https://www.pbs.org/newshour/show/budding-wall-street-movement-gives-voice-to-anger-over-greed-corporations|title='Occupy Wall Street' Protests Give Voice to Anger Over Greed, Corporate Culture|date=5 October 2011|publisher=PBS|archive-url=https://web.archive.org/web/20180406122942/https://www.pbs.org/newshour/show/budding-wall-street-movement-gives-voice-to-anger-over-greed-corporations|archive-date=6 April 2018|department=[[PBS NewsHour]]|url-status=live|access-date=6 April 2018}}</ref><ref>{{cite web|url=https://www.theatlantic.com/business/archive/2014/04/greed-is-good-a-300-year-history-of-a-dangerous-idea/360265/|title=Greed is Good: A 300-Year History of a Dangerous Idea|last=Rollert|first=John Paul|date=7 April 2014|website=The Atlantic|archive-url=https://web.archive.org/web/20180406121500/https://www.theatlantic.com/business/archive/2014/04/greed-is-good-a-300-year-history-of-a-dangerous-idea/360265/|archive-date=6 April 2018|url-status=live|access-date=6 April 2018}}</ref><ref>{{cite news|last=Szalavitz|first=Maia|date=28 February 2012|title=Why the Rich Are Less Ethical: They See Greed as Good|url=http://healthland.time.com/2012/02/28/why-the-rich-are-less-ethical-they-see-greed-as-good/|department=Healthland|access-date=6 April 2018}}</ref><ref>{{cite journal|last=Norton|first=Michael I.|author-link=Michael Norton (professor)|date=1 March 2014|title=Why Greed Begets More Greed|journal=Scientific American|volume=25|issue=2|pages=24–25|doi=10.1038/scientificamericanmind0314-24}}</ref>

[[Free market]] economists counter that the profit motive, coupled with competition, actually reduces the final price of an item for consumption, rather than raising it. They argue that businesses profit by selling a good at a lower price and at a greater volume than the competition. Economist [[Thomas Sowell]] uses supermarkets as an example to illustrate this point: "It has been estimated that a supermarket makes a clear profit of about a penny on a dollar of sales. If that sounds pretty skimpy, remember that it is collecting that penny on every dollar at several cash registers simultaneously and, in many cases, around the clock".<ref>{{cite news|last=Sowell|first=Thomas|author-link=Thomas Sowell|date=26 December 2003|title=Profit Motive Underrated By Intelligentsia|url=http://articles.sun-sentinel.com/2003-12-26/news/0312241220_1_profits-million-dollars-costs|url-status=live|work=[[Sun-Sentinel]]|archive-url=https://web.archive.org/web/20180406123403/http://articles.sun-sentinel.com/2003-12-26/news/0312241220_1_profits-million-dollars-costs|archive-date=6 April 2018|access-date=6 April 2018}}</ref>

American economist [[Milton Friedman]] has argued that greed and self-interest are [[Trait theory#List of personality traits|universal human traits]]. On a 1979 episode of ''[[The Phil Donahue Show]]'', Friedman states: "The world runs on individuals pursuing their separate interests". He continues by explaining that only in capitalist countries, where individuals can pursue their own self-interest, people have been able to escape from "grinding poverty".<ref>{{cite news|last=Pantin|first=Travis|date=12 November 2007|title=Milton Friedman Answers Phil Donahue's Charges|url=https://www.nysun.com/business/milton-friedman-answers-phil-donahues-charges/66258/|url-status=live|department=Business|work=[[The New York Sun]]|archive-url=https://web.archive.org/web/20180406124106/https://www.nysun.com/business/milton-friedman-answers-phil-donahues-charges/66258/|archive-date=6 April 2018|access-date=6 April 2018|quote=<!--The ellipses in this quote are present in the cited source text, so they should not be bracketed.-->Friedman responds, 'What is greed? Of course none of us are greedy; it's only the other fellow who's greedy. The world runs on individuals pursuing their separate interests. ... In the only cases in which the masses have escaped from the kind of grinding poverty you're talking about ... they have had capitalism and largely free trade. ... So that the record of history is absolutely crystal clear: that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.'&nbsp;}}</ref>

=== Comparison to slavery ===
{{Main|Wage slavery}}
[[Պատկեր:Pinkerton_escorts_hocking_valley_leslies.jpg|մինի|[[Pinkerton National Detective Agency|Pinkerton guards]] escort strikebreakers in [[Buchtel, Ohio]], 1884]]
Wage labor has long been compared to slavery.<ref name="English Working Class p. 599">{{Harvnb|Thompson|1966|p=599}}.</ref><ref name="English Working Class p. 912">{{Harvnb|Thompson|1966|p=912}}.</ref><ref name="Geoffrey Ostergaard p. 133">{{Harvnb|Ostergaard|1997|p=133}}.</ref><ref name="Shop Floor p. 37">{{Harvnb|Lazonick|1990|p=37}}.</ref> As a result, the phrase "[[Labour economics#Wage slavery|wage slavery]]" is often utilized as a pejorative for wage labor.<ref>{{Harvnb|Hallgrimsdottir|Benoit|2007}}; {{Harvnb|Roediger|2007a}}.

The term is not without its critics, as {{Harvnb|Roediger|2007b|p=247}}, notes: "[T]he challenge to loose connections of wage (or white) slavery to chattel slavery was led by [[Frederick Douglass]] and other Black, often fugitive, abolitionists. Their challenge was mercilessly concrete. Douglass, who tried out speeches in work places before giving them in halls, was far from unable to speak to or hear white workers, but he and [[William Wells Brown]] did challenge metaphors regarding white slavery sharply. They noted, for example, that their escapes from slavery had left job openings and wondered if any white workers wanted to take the jobs."</ref> Similarly, advocates of slavery looked upon the "comparative evils of Slave Society and of Free Society, of slavery to human Masters and slavery to Capital"<ref name="Fitzhugh 1857 xvi">{{Harvnb|Fitzhugh|1857|p=[https://books.google.com/books?id=ECdb7EjiBnEC&pg=PR16 xvi]}}</ref> and proceeded to argue that wage slavery was actually worse than [[chattel slavery]].<ref>{{Harvnb|Carsel|1940}}.</ref> Slavery apologists like [[George Fitzhugh]] contended that workers only accepted wage labor with the passage of time as they became "familiarised and inattentive to the infected social atmosphere they continually inhale".<ref name="Fitzhugh 1857 xvi" /> Scholars have debated the exact relationship between wage labor, slavery, and capitalism at length, especially for the [[Antebellum South]].<ref>{{cite web|url=https://networks.h-net.org/node/11465/pages/76870/capitalism-and-slavery-united-states-topical-guide|title=Capitalism and Slavery in the United States (Topical Guide)|last=Leccese|first=Stephen R.|date=28 July 2015|publisher=[[H-Net]]|archive-url=https://web.archive.org/web/20180406205713/https://networks.h-net.org/node/11465/pages/76870/capitalism-and-slavery-united-states-topical-guide|archive-date=6 April 2018|url-status=live|access-date=6 April 2018}}</ref>

Similarities between wage labor and slavery were noted as early as [[Cicero]] in Ancient Rome, such as in ''[[De Officiis]]''.<ref>{{cite book|url=https://www.loebclassics.com/view/LCL030/1913/volume.xml|title=De Officiis|last=Cicero|first=Marcus Tullius|date=1 January 1913|publisher=Harvard University Press|isbn=978-0-674-99033-3|editor-last=Henderson|editor-first=Jeffrey|edition=Digital|series=[[Loeb Classical Library]] [LCL030]|volume=XXI|location=Cambridge, MA|pages=[https://www.loebclassics.com/view/marcus_tullius_cicero-de_officiis/1913/pb_LCL030.153.xml 152–53 (XLII)]|language=la, en|translator-last=Miller|translator-first=Walter|trans-title=On Duties|chapter=Liber I|trans-chapter=Book I|doi=10.4159/DLCL.marcus_tullius_cicero-de_officiis.1913|oclc=902696620|ol=7693830M|quote=XLII. Now in regard to trades and other means of livelihood, which ones are to be considered becoming to a gentleman and which ones are vulgar, we have been taught, in general, as follows. First, those means of livelihood are rejected as undesirable which incur people’s ill-will, as those of tax-gatherers and usurers. Unbecoming to a gentleman, too, and vulgar are the means of livelihood of all hired workmen whom we pay for mere manual labour, not for artistic skill; for in their case the very wage they receive is a pledge of their slavery. Vulgar we must consider those also who buy from wholesale merchants to retail immediately; for they would get no profits without a great deal of downright lying; and verily, there is no action that is meaner than misrepresentation. And all mechanics are engaged in vulgar trades; for no workshop can have anything liberal about it. Least respectable of all are those trades which cater for sensual pleasures[.]|author-link=Cicero|orig-year=First written in October–November 44&nbsp;BC|translator-link=Walter Miller (philologist)|chapter-url=https://www.loebclassics.com/view/marcus_tullius_cicero-de_officiis/1913/pb_LCL030.3.xml|archive-url=https://web.archive.org/web/20180406221818/https://www.loebclassics.com/view/marcus_tullius_cicero-de_officiis/1913/pb_LCL030.153.xml|archive-date=6 April 2018|url-status=live}}</ref> With the advent of the [[Industrial Revolution]], thinkers such as [[Pierre-Joseph Proudhon]] and [[Karl Marx]] elaborated the comparison between wage labor and slavery in the context of a critique of societal property not intended for active personal use<ref>{{Harvnb|Proudhon|1890}}.</ref><ref name="Marx 1863 c7">{{Harvnb|Marx|1969|loc=[http://www.marxists.org/archive/marx/works/1863/theories-surplus-value/ch07.htm Chapter VII]}}</ref> while [[Luddite|Luddites]] emphasized the [[dehumanisation]] brought about by machines. Before the [[American Civil War]], Southern defenders of [[African American]] slavery invoked the concept of wage slavery to favorably compare the condition of their slaves to workers in the North.<ref>{{Harvnb|Foner|1995|p=xix}}.</ref><ref>{{Harvnb|Jensen|2002}}.</ref> The United States abolished slavery during the Civil War, but labor union activists found the metaphor useful. According to [[Lawrence B. Glickman|Lawrence Glickman]], in the [[Gilded Age]] "references abounded in the labor press, and it is hard to find a speech by a labour leader without the phrase".<ref>{{cite book|url=https://books.google.com/books?id=uaZeBhl2QLYC&pg=PA19|title=A Living Wage: American Workers and the Making of Consumer Society|author=Lawrence B. Glickman|publisher=Cornell UP|year=1999|isbn=978-0801486142|page=19}}</ref>{{quote box|quote=The slave, together with his labour-power, was sold to his owner once for all. [...] The [wage] labourer, on the other hand, sells his very self, and that by fractions. [...] He [belongs] to the capitalist class; and it is for him [...] to find a buyer in this capitalist class.<ref>{{Harvnb|Marx|1847|loc=[http://www.marxists.org/archive/marx/works/1847/wage-labour/ch02.htm Chapter&nbsp;2]}}</ref>|source=—[[Karl Marx]]|align=left|width=40%|fontsize=91%|bgcolor=AliceBlue|tstyle=text-align: left;|qalign=right|qstyle=text-align: left;|quoted=yes|salign=right|sstyle=text-align: right;}}According to [[Noam Chomsky]], analysis of the psychological implications of wage slavery goes back to the [[Age of Enlightenment|Enlightenment]] era. In his 1791 book ''On the Limits of State Action'', [[Liberalism|liberal]] thinker [[Wilhelm von Humboldt]] explained how "whatever does not spring from a man's free choice, or is only the result of instruction and guidance, does not enter into his very nature; he does not perform it with truly human energies, but merely with mechanical exactness" and so when the laborer works under external control, "we may admire what he does, but we despise what he is".<ref>{{Harvnb|Chomsky|1993|p=[https://books.google.com/books?id=DIpW10rWZFAC&pg=PA19 19]}}</ref> Both the [[Milgram experiment|Milgram]] and [[Stanford prison experiment|Stanford experiments]] have been found useful in the psychological study of wage-based workplace relations.<ref>{{Harvnb|Thye|Lawler|2006}}.</ref> Additionally, as per anthropologist [[David Graeber]], the earliest wage labor contracts we know about were in fact contracts for the rental of chattel slaves (usually the owner would receive a share of the money and the slave another, with which to maintain his or her living expenses). According to Graeber, such arrangements were quite common in New World slavery as well, whether in the United States or Brazil.<ref>{{Harvnb|Graeber|2004|p=[http://www.eleuthera.it/files/materiali/David_Graeber_Fragments_%20Anarchist_Anthropology.pdf 71]}}</ref> [[C. L. R. James]] argued in ''[[The Black Jacobins]]'' that most of the techniques of human organisation employed on factory workers during the Industrial Revolution were first developed on slave plantations.<ref>{{Harvnb|Graeber|2007|p=106}}.</ref>
[[Պատկեր:Coaltub.png|մինի|Girl pulling a coal tub in mine, from official report of the British parliamentary commission in the mid 19th century<ref>[http://www.victorianweb.org/history/ashley.html Testimony Gathered by Ashley's Mines Commission] Laura Del Col, West Virginia University</ref>]]
Some [[Anti-capitalism|anti-capitalist]] thinkers claim that the [[elite]] maintain wage [[slavery]] and a divided working class through their influence over the media and entertainment industry,<ref>{{cite web|url=http://www.democracynow.org/article.pl?sid=07/10/19/144225|title=Democracy Now|date=19 October 2007|archiveurl=https://web.archive.org/web/20071113204609/http://www.democracynow.org/article.pl?sid=07%2F10%2F19%2F144225|archivedate=13 November 2007|url-status=dead}}</ref><ref>{{cite web|url=http://www.chomsky.info/interviews/1992----02.htm|title=Interview|year=1992|archiveurl=https://web.archive.org/web/20060721164116/http://www.chomsky.info/interviews/1992----02.htm|archivedate=21 July 2006|author=Chomsky, Noam|url-status=dead}}</ref> educational institutions, unjust laws, nationalist and corporate [[propaganda]], pressures and incentives to internalize values serviceable to the power structure, [[State (polity)|state]] violence, fear of [[unemployment]]<ref>{{cite web|url=http://question-everything.mahost.org/Socio-Politics/thoughtcontrol.html|title=Thought Control|work=Socio-Politics|publisher=Question Everything}}</ref> and a historical legacy of exploitation and profit accumulation/transfer under prior systems, which shaped the development of economic theory:

[[Adam Smith]] noted that employers often conspire together to keep wages low:<ref>[http://www.adamsmith.org/smith/won-b5-c1-article-2-ss3.htm Adam Smith – An Inquiry into the Nature and Causes of the Wealth of Nations – The Adam Smith Institute] {{webarchive|url=https://web.archive.org/web/20091001132821/http://www.adamsmith.org/smith/won-b5-c1-article-2-ss3.htm|date=1 October 2009}}</ref>
{{quote|The interest of the dealers... in any particular branch of trade or manufactures, is always in some respects different from, and even opposite to, that of the public… [They] have generally an interest to deceive and even to oppress the public… We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labor above their actual rate… It is not, however, difficult to foresee which of the two parties must, upon all ordinary occasions, have the advantage in the dispute, and force the other into a compliance with their terms.}}
[[Aristotle]] made the statement that "the citizens must not live a mechanic or a mercantile life (for such a life is ignoble and inimical to virtue), nor yet must those who are to be citizens in the best state be tillers of the soil (for leisure is needed both for the development of virtue and for active participation in politics)",<ref>Aristotle, ''[[Politics (Aristotle)|Politics]]'' 1328b–29a, H. Rackham trans.</ref> often paraphrased as "all paid jobs absorb and degrade the mind".<ref name="quotationspage.com">{{cite web|url=http://www.quotationspage.com/quote/1097.html|title=The Quotations Page: Quote from Aristotle}}</ref> Cicero wrote in 44 BC that "vulgar are the means of livelihood of all hired workmen whom we pay for mere manual labour, not for artistic skill; for in their case the very wage they receive is a pledge of their slavery".<ref>[[De Officiis]] Liber I XI.II</ref> Somewhat similar criticisms have also been expressed by some proponents of liberalism, like [[Henry George]],<ref>{{Harvnb|George|1981|loc=[http://schalkenbach.org/library/henry-george/social-problems/sp15.html Chapter 15]}}</ref><ref>{{cite web|url=http://globetrotter.berkeley.edu/people2/Chomsky/chomsky-con2.html|title=Conversation with Noam Chomsky, p. 2 of 5}}</ref> [[Silvio Gesell]] and [[Thomas Paine]]<ref>{{cite web|url=http://www.ssa.gov/history/paine4.html|title=Social Security History}}</ref> as well as the [[Distributism|Distributist]] school of thought within the [[Roman Catholic Church]].

To [[Marxism|Marxist]] and [[Anarchism|anarchist]] thinkers like [[Mikhail Bakunin]] and [[Peter Kropotkin]], wage slavery was a [[Class (social)|class condition]] in place due to the existence of [[private property]] and the [[Sovereign state|state]]. This class situation rested primarily on:

# The existence of property not intended for active use.
# The concentration of ownership in few hands.
# The lack of direct access by workers to the [[means of production]] and consumption goods.
# The perpetuation of a [[Reserve army of labour|reserve army of unemployed workers]].

For Marxists, labor as commodity, which is how they regard wage labor,<ref>{{Harvnb|Marx|1990|p=1006}}: "[L]abour-power, a commodity sold by the worker himself."</ref> provides a fundamental point of attack against capitalism.<ref>Another one, of course, being the capitalists' theft from workers via [[surplus-value]].</ref> "It can be persuasively argued", noted one concerned philosopher, "that the conception of the worker's labour as a commodity confirms Marx's stigmatization of the wage system of private capitalism as 'wage-slavery;' that is, as an instrument of the capitalist's for reducing the worker's condition to that of a slave, if not below it".<ref>{{Harvnb|Nelson|1995|p=158}}. This Marxist objection is what motivated Nelson's essay, which argues that labor is not, in fact, a commodity.</ref> That this objection is fundamental follows immediately from Marx's conclusion that wage labor is the very foundation of capitalism: "Without a class dependent on wages, the moment individuals confront each other as free persons, there can be no production of surplus value; without the production of surplus-value there can be no capitalist production, and hence no capital and no capitalist!".<ref>{{Harvnb|Marx|1990|p=1005}}. Emphasis in the original.{{pb}}See also p.&nbsp;716: "[T]he capitalist produces [and reproduces] the worker as a wage-labourer. This incessant reproduction, this perpetuation of the worker, is the absolutely necessary condition for capitalist production."</ref>

=== Marxian responses ===
{{Main|Marxian economics}}{{Marxian economics}} Marx considered capitalism to be a historically specific [[mode of production]] (the way in which the productive property is owned and controlled, combined with the corresponding [[Social relations of production|social relations]] between individuals based on their connection with the process of production).<ref name="Burnham" />

The "capitalistic era" according to Karl Marx dates from 16th-century merchants and small urban workshops.<ref name="GSGB" /> Marx knew that wage labour existed on a modest scale for centuries before capitalist industry. For Marx, the capitalist stage of development or "[[bourgeois]] society" represented the most advanced form of social organization to date, but he also thought that the working classes would come to power in a worldwide [[Socialism|socialist]] or [[Communism|communist]] transformation of human society as the end of the series of first aristocratic, then capitalist and finally working class rule was reached.<ref>''[[The Communist Manifesto]]''</ref><ref>"To Marx, the problem of reconstituting society did not arise from some prescription, motivated by his personal predilections; it followed, as an iron-clad historical necessity—on the one hand, from the productive forces grown to powerful maturity; on the other, from the impossibility further to organize these forces according to the will of the [[law of value]]." — [[Leon Trotsky]], "Marxism in our Time", 1939 (Inevitability of Socialism), [http://wsws.org/articles/2008/nov2008/time-n01.shtml WSWS.org]</ref>

Following [[Adam Smith]], Marx distinguished the [[use value]] of commodities from their [[exchange value]] in the market. According to Marx, capital is created with the purchase of commodities for the purpose of creating new commodities with an exchange value higher than the sum of the original purchases. For Marx, the use of [[labor power]] had itself become a commodity under capitalism and the exchange value of labor power, as reflected in the wage, is less than the value it produces for the capitalist.

This difference in values, he argues, constitutes [[surplus value]], which the capitalists extract and accumulate. In his book ''[[Das Kapital|Capital]]'', Marx argues that the [[Capitalist mode of production (Marxist theory)|capitalist mode of production]] is distinguished by how the owners of capital extract this surplus from workers—all prior class societies had extracted [[surplus labor]], but capitalism was new in doing so via the sale-value of produced commodities.<ref>{{cite web|url=http://www.marxists.org/archive/marx/works/1894-c3/ch47.htm|title=Capital. V. 3. Chapter 47: Genesis of capitalist ground rent|publisher=Marxists|accessdate=26 February 2008|author=Karl Marx}}</ref> He argues that a core requirement of a capitalist society is that a large portion of the population must not possess sources of self-sustenance that would allow them to be independent and are instead forced to sell their labor for a wage.<ref>Karl Marx. Chapter Twenty-Five: The General Law of Capitalist Accumulation. ''[[Das Kapital]]''.</ref><ref>Dobb, Maurice, 1947. ''Studies in the Development of Capitalism''. New York, International Publishers Co.</ref><ref>David Harvey 1989 ''The Condition of Postmodernity''</ref>

In conjunction with his criticism of capitalism was Marx's belief that the working class, due to its relationship to the means of production and numerical superiority under capitalism, would be the driving force behind the socialist revolution.<ref>Wheen, Francis. ''Books That Shook the World: Marx's Das Kapital'' • 1st {{abbr|ed.|ediition}}, London, Atlantic Books, 2006.</ref> This argument is intertwined with Marx' version of the [[labor theory of value]] arguing that labor is the source of all value and thus of profit.

In ''[[Imperialism, the Highest Stage of Capitalism]]'' (1916), [[Vladimir Lenin]] further developed Marxist theory and argued that capitalism necessarily led to [[monopoly capitalism]] and the export of capital—which he also called "imperialism"—to find new markets and resources, representing the last and highest stage of capitalism.<ref>{{cite web|url=http://www.marxists.org/archive/lenin/works/1916/imp-hsc/index.htm|title=Imperialism, the Highest Stage of Capitalism|year=1916|publisher=Marxists|accessdate=26 February 2008}}</ref> Some 20th century [[Marxian economics|Marxian economists]] consider capitalism to be a social formation where capitalist class processes dominate, but are not exclusive.<ref>See, for example, the works of Stephen Resnick and Richard Wolff.</ref>

To these thinkers, capitalist class processes are simply those in which surplus labor takes the form of surplus value, usable as capital; other tendencies for utilization of labor nonetheless exist simultaneously in existing societies where capitalist processes predominate. However, other late Marxian thinkers argue that a social formation as a whole may be classed as capitalist if capitalism is the mode by which a surplus is extracted, even if this surplus is not produced by capitalist activity as when an absolute majority of the population is engaged in non-capitalist economic activity.<ref>{{cite book|title=The Class Struggle in the Ancient Greek World|author1=Ste. Croix|author2=G. E. M. de|year=1982|pages=52–53}}</ref>

In ''Limits to Capital'' (1982), [[David Harvey]] outlines an overdetermined, "spatially restless" capitalism coupled with the spatiality of crisis formation and resolution.<ref>[[David Harvey]]. ''The Limits to Capital''. [[Verso]], 17 January 2007. {{ISBN|1-84467-095-3}}</ref> Harvey used Marx's theory of crisis to aid his argument that capitalism must have its "fixes", but that we cannot predetermine what fixes will be implemented, nor in what form they will be. His work on contractions of capital accumulation and international movements of capitalist modes of production and money flows has been influential.<ref name="Lawson, Victoria 2007">Lawson, Victoria. Making Development Geography (Human Geography in the Making). New York: A Hodder Arnold Publication, 2007. Print.</ref> According to Harvey, capitalism creates the conditions for volatile and geographically uneven development<ref>Harvey, David. ''Notes towards a theory of uneven geographical development''. Print.</ref>

Sociologists such as Ulrich Beck envisioned the society of risk as a new cultural value which saw risk as a commodity to be exchanged in globalized economies. This theory suggested that disasters and capitalist economy were inevitably entwined. Disasters allow the introduction of economic programs which otherwise would be rejected as well as decentralizing the class structure in production.<ref>Beck, U. (1992). Risk society: Towards a new modernity (Vol. 17). Sage.</ref>

=== Environmental sustainability ===
[[Պատկեր:Gullfaks_Alpha.jpg|մինի|[[Gullfaks oil field]] in the North Sea. As petroleum is a [[Non-renewable resource|non-renewable natural resource]] the industry is faced with an inevitable eventual depletion of the world's oil supply.]]
Scholars argue that the capitalist approach to [[environmental economics]] does not take into consideration the preserving of natural resources.<ref>{{Cite journal|last=Castro|first=Carlos J.|date=June 2004|title=Sustainable Development|url=http://www.e-elgar.com/shop/isbn/9781852781675|journal=Organization & Environment|volume=17|issue=2|pages=195–225|doi=10.1177/1086026604264910|issn=1086-0266}}</ref> Capitalism creates three ecological problems: growth, technology, and consumption.<ref name="Jones 54–73">{{Cite journal|last=Jones|first=Andrew W.|date=March 2011|title=Solving the Ecological Problems of Capitalism: Capitalist and Socialist Possibilities|journal=Organization & Environment|language=en|volume=24|issue=1|pages=54–73|doi=10.1177/1086026611402010|issn=1086-0266}}</ref> The growth problem results from the nature of capitalism, as it focuses around the accumulation of Capital.<ref name="Jones 54–73" /> &nbsp;The innovation of new technologies has an impact on the environmental future as they serve as a capitalist tool in which environmental technologies can result in the expansion of the system.<ref>{{Cite journal|last=Harris|first=Jerry|date=2014-01-01|title=Can Green Capitalism Build a Sustainable Society?*|journal=Perspectives on Global Development and Technology|volume=13|issue=1–2|pages=43–60|doi=10.1163/15691497-12341288|issn=1569-1500}}</ref> Consumption is focused around the capital accumulation of commodities and neglects the use-value of production.<ref name="Jones 54–73" />  &nbsp;

=== Supply and demand ===
At least two assumptions are necessary for the validity of the standard model: first, that supply and demand are independent; and second, that supply is "constrained by a fixed resource". If these conditions do not hold, then the [[Marshallian surplus|Marshallian]] model cannot be sustained. [[Piero Sraffa|Sraffa's]] critique focused on the inconsistency (except in implausible circumstances) of partial equilibrium analysis and the rationale for the upward slope of the supply curve in a market for a produced consumption good.<ref>Avi J. Cohen, "'The Laws of Returns Under Competitive Conditions': Progress in Microeconomics Since Sraffa (1926)?", ''Eastern Economic Journal'', {{abbr|vol.|volume}} 9, no. 3 (Jul.–Sep.): 1983)</ref> The notability of Sraffa's critique is also demonstrated by [[Paul A. Samuelson]]'s comments and engagements with it over many years, for example:

: What a cleaned-up version of Sraffa (1926) establishes is how nearly empty are all of Marshall's partial equilibrium boxes. To a logical purist of Wittgenstein and Sraffa class, the Marshallian partial equilibrium box of constant cost is even more empty than the box of increasing cost.<ref>Paul A. Samuelson, "Reply" in ''Critical Essays on Piero Sraffa's Legacy in Economics'' (edited by H.D. Kurz), Cambridge University Press, 2000</ref>

Aggregate excess demand in a market is the difference between the quantity demanded and the quantity supplied as a function of price. In the model with an upward-sloping supply curve and downward-sloping demand curve, the aggregate excess demand function only intersects the axis at one point, namely at the point where the supply and demand curves intersect. The [[Sonnenschein–Mantel–Debreu theorem]] shows that the standard model cannot be rigorously derived in general from [[general equilibrium theory]].<ref>Alan Kirman, "The Intrinsic Limits of Modern Economic Theory: The Emperor has No Clothes", ''The Economic Journal'', {{abbr|vol.|volume}} 99, no. 395, Supplement: Conference Papers (1989): pp. 126–39</ref>

The model of prices being determined by supply and demand assumes [[perfect competition]]. However, "economists have no adequate model of how individuals and firms adjust prices in a competitive model. If all participants are price-takers by definition, then the actor who adjusts prices to eliminate excess demand is not specified".<ref>Alan P. Kirman, "Whom or What Does the Representative Individual Represent?" ''Journal of Economic Perspectives'', {{abbr|vol.|volume}} 6, no.  2 (Spring 1992): pp. 117–36</ref> Goodwin, Nelson, Ackerman and Weisskopf write:

: If we mistakenly confuse [[Accuracy and precision|precision with accuracy]], then we might be misled into thinking that an explanation expressed in precise mathematical or graphical terms is somehow more rigorous or useful than one that takes into account particulars of history, institutions or business strategy. This is not the case. Therefore, it is important not to put too much confidence in the apparent precision of supply and demand graphs. Supply and demand analysis is a useful precisely formulated conceptual tool that clever people have devised to help us gain an abstract understanding of a complex world. It does not—nor should it be expected to—give us in addition an accurate and complete description of any particular real world market.<ref>Goodwin, N, Nelson, J; Ackerman, F; & Weisskopf, T: Microeconomics in Context 2d {{abbr|ed.|edition}} Sharpe 2009 {{ISBN|978-0-7656-2301-0}}</ref>

=== Externalities ===
{{Main|Externality|Commons}}Market failure occurs when an [[externality]] is present and a market will often either under-produce a product with a positive externalisation or overproduce a product that generates a negative externalisation.{{Citation needed|date=December 2018}} Air pollution, for instance, is a negative externalisation that cannot be easily incorporated into markets as the world's air is not owned and then sold for use to polluters.{{Citation needed|date=December 2018}} So too much pollution could be emitted and people not involved in the production pay the cost of the pollution instead of the firm that initially emitted the air pollution.{{Citation needed|date=December 2018}} Critics of market failure theory, like [[Ronald Coase]], [[Harold Demsetz]] and [[James M. Buchanan]], argue that government programs and policies also fall short of absolute perfection.{{Citation needed|date=December 2018}} While all nations currently have some kind of market regulations, the desirable degree of regulation is disputed.{{citation needed|date=February 2016}}

=== Counter-criticism ===

==== Austrian School ====
[[Austrian School]] economists have argued that capitalism can organize itself into a complex system without an external guidance or central planning mechanism. [[Friedrich Hayek]] considered the phenomenon of [[self-organisation]] as underpinning capitalism. Prices serve as a signal as to the urgent and unfilled wants of people and the opportunity to earn profits if successful, or absorb losses if resources are used poorly or left idle, gives entrepreneurs [[incentive]] to use their [[Dispersed knowledge|knowledge]] and resources to satisfy those wants. Thus the activities of millions of people, each seeking his own interest, are coordinated.<ref name="walberg2003">{{cite book|title=Education and Capitalism|author=Walberg, Herbert|publisher=Hoover Institution Press|year=2003|isbn=978-0-8179-3972-4|pages=87–89|chapter=4, What is Capitalism?|chapter-url=http://www.hoover.org/publications/books/8328}}</ref>

==== Ayn Rand ====
The novelist and philosopher [[Ayn Rand]] made positive moral defenses of ''laissez-faire'' capitalism, most notably in her 1957 novel ''[[Atlas Shrugged]]'' and in her 1966 collection of essays ''[[Capitalism: The Unknown Ideal]]''. She argued that capitalism should be supported on moral grounds, not just on the basis of practical benefits.<ref>{{cite book|title=American Capitalism: Social Thought and Political Economy in the Twentieth Century|last=Burns|first=Jennifer|publisher=University of Pennsylvania Press|year=2006|isbn=978-0-8122-3923-2|editor-last=Lichtenstein|editor-first=Nelson|location=Philadelphia|pages=282–83|chapter=Godless Capitalism: Ayn Rand and the Conservative Movement}}</ref><ref>{{cite book|title=The Philosophic Thought of Ayn Rand|title-link=The Philosophic Thought of Ayn Rand|last1=Den Uyl|first1=Douglas|last2=Rasmussen|first2=Douglas|publisher=University of Illinois Press|year=1984|isbn=978-0-252-01033-0|editor1-last=Den Uyl|editor1-first=Douglas|location=Chicago|pages=[https://archive.org/details/philosophicthoug0000unse/page/173 173–74]|chapter=Capitalism|oclc=9392804|authorlink2=Douglas B. Rasmussen|editor2-last=Rasmussen|editor2-first=Douglas|lastauthoramp=y}}</ref> Her ideas have had significant influence over conservative and libertarian supporters of capitalism, especially within the American [[Tea Party movement]].<ref>{{cite book|url=https://archive.org/details/aynrandnationhid0000weis/page/14|title=Ayn Rand Nation: The Hidden Struggle for America's Soul|last=Weiss|first=Gary|publisher=St. Martin's Press|year=2012|isbn=978-0-312-59073-4|location=New York|pages=[https://archive.org/details/aynrandnationhid0000weis/page/14 14–16]|oclc=740628885|authorlink=Gary Weiss}}</ref> Rand defined capitalism as "a social system based on the recognition of individual rights, including property rights, in which all property is privately owned".<ref>Ayn Rand, "What Is Capitalism?” Capitalism: The Unknown Ideal, 19</ref> According to Rand, the role of government in a capitalist state has three broad categories of proper functions: first, the police "to protect men from criminals"; second, the armed services "to protect men from foreign invaders"; and third, the law courts "to settle disputes among men according to objective laws".<ref>Ayn Rand,"Nature of Government", Virtue of selfishness.</ref>

== See also ==
{{div col begin|colwidth=27em}}

* [[Anti-capitalism]]
* [[Capitalism (disambiguation)]]
* [[Christian views on poverty and wealth]]
* [[Communism]]
* [[Corporatocracy]]
* [[Crony capitalism]]
* [[Economic sociology]]
* [[Free market]]
* [[Global financial crisis in September 2008]]
* [[Humanistic economics]]
* [[Invisible hand]]
* [[Late capitalism]]
* ''[[Le Livre noir du capitalisme]]'' – 1998 French book (''The Black Book of Capitalism'')
* [[Market socialism]]
* [[Perspectives on capitalism by school of thought]]
* [[Post-capitalism]]
* [[Post-Fordism]]
* [[Rent-seeking]]
* [[State monopoly capitalism]]
* [[Sustainable capitalism]]

== References ==

; Notes
{{reflist}}

; Bibliography
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* {{cite journal|last=Steinfeld|first=Robert|year=2009|title=Coercion/Consent in Labor|url=http://www.compas.ox.ac.uk/fileadmin/files/Publications/working_papers/WP_2009/WP0966%20Steinfeld.pdf|series=COMPAS Working Paper No. 66|location=Oxford|publisher=University of Oxford|archiveurl=https://web.archive.org/web/20140301173031/http://www.compas.ox.ac.uk/fileadmin/files/Publications/working_papers/WP_2009/WP0966%20Steinfeld.pdf|archivedate=1 March 2014|accessdate=3 March 2013|ref=harv|url-status=dead}}
* {{cite book|title=Europe and the People Without History|title-link=Europe and the People Without History|last=Wolf|first=Eric R.|publisher=University of California Press|year=1982|isbn=978-0-520-04459-3|location=Berkeley|authorlink=Eric Wolf}}
* {{cite book|url=https://books.google.com/books?id=FZPyKjVguVoC|title=The Origin of Capitalism: A Longer View|last=Wood|first=Ellen Meiksins|publisher=Verso|year=2002|isbn=978-1-85984-392-5|location=London|authorlink=Ellen Meiksins Wood}}
* {{cite book|title=Peasant Revolution in Ethiopia: The Tigray People's Liberation Front, 1975–1991|last=Young|first=John|publisher=Cambridge University Press|year=1997|isbn=978-0-521-02606-2|location=Cambridge|ref=harv}}
{{refend}}

== Further reading ==
{{refbegin|colwidth=30em}}
* [[Gar Alperovitz|Alperovitz, Gar]] (2011). ''America Beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy, 2nd Edition.'' Democracy Collaborative Press. {{ISBN|0-9847857-0-1}}.
* {{cite book|title=Anthropocene or Capitalocene? Nature, History, and the Crisis of Capitalism|last1=Altvater|first1=Elmar|last2=Crist|first2=Eileen|last3=Haraway|first3=Donna|last4=Hartley|first4=Daniel|last5=Parenti|first5=Christian|last6=McBrien|first6=Justin|last7=Moore|first7=Jason|date=2016|publisher=PM Press|isbn=978-1629631486}}
* Ascher, Ivan. ''Portfolio Society: On the Capitalist Mode of Prediction.'' Zone Books, 2016. {{ISBN|978-1935408741}}
* [[Edward E. Baptist|Baptist, Edward E.]] ''The Half Has Never Been Told: Slavery and the Making of American Capitalism.'' New York, [[Basic Books]], 2014. {{ISBN|0-465-00296-X}}.
* {{cite book|url=http://www.theclassofthenew.net|title=The Class of the New|last=Barbrook|first=Richard|publisher=OpenMute|year=2006|isbn=978-0-9550664-7-4|edition=paperback|location=London|access-date=11 June 2019|archive-url=https://web.archive.org/web/20180801045453/http://www.theclassofthenew.net/|archive-date=1 August 2018|url-status=dead}}
* {{cite book|title=The Power of Market Fundamentalism: Karl Polyani's Critique|last1=Block|first1=Fred|last2=Somers|first2=Margaret R.|publisher=Harvard University Press|year=2014|isbn=978-0-674-05071-6|location=Cambridge, MA|ref=harv|author1-link=Fred L. Block}}
* {{cite book|title=Foretelling the End of Capitalism: Intellectual Misadventures since Karl Marx|last=Boldizzoni|first=Francesco|publisher=Harvard University Press|year=2020|isbn=978-0674919327|authorlink=Francesco Boldizzoni}}
* Braudel, Fernand. ''Civilization and Capitalism''.
* Callinicos, Alex. "Wage Labour and State Capitalism – A reply to Peter Binns and Mike Haynes", ''International Socialism'', second series, 12, Spring 1979.
*{{cite book|url=https://press.princeton.edu/books/hardcover/9780691190785/deaths-of-despair-and-the-future-of-capitalism|title=Deaths of Despair and the Future of Capitalism|last1=Case|first1=Anne|last2=Deaton|first2=Angus|date=2020|publisher=[[Princeton University Press]]|isbn=978-0691190785|author-link1=Anne Case|author-link2=Angus Deaton}}
* Farl, Erich. "The Genealogy of State Capitalism". In: ''International'' London, vol. 2, no. 1, 1973.
* Gough, Ian. ''[http://www.newleftreview.org/?view=558 State Expenditure in Advanced Capitalism]'' New Left Review.
* [[Jürgen Habermas|Habermas, J.]] [1973] ''[[Legitimation Crisis]]'' (eng. translation by T. McCarthy). Boston, Beacon. [https://books.google.com/books?id=3WFy6vsyLNEC From Google books]; [https://web.archive.org/web/20090714123532/http://www.cf.ac.uk/socsi/undergraduate/introsoc/legitcri.html excerpt].
* {{cite book|title=Seventeen Contradictions and the End of Capitalism|last=Harvey|first=David|publisher=Oxford University Press|year=2014|isbn=978-0-19-936026-0|authorlink=David Harvey}}
* Hyman, Louis and Edward E. Baptist (2014). ''American Capitalism: A Reader.'' Simon & Schuster. {{ISBN|978-1-4767-8431-1}}.
* {{cite book|url=https://www.academia.edu/4211923|title=Globalization and Economy, Vol. 2: Global Finance and the New Global Economy|last1=James|first1=Paul|last2=Patomäki|first2=Heikki|publisher=Sage Publications|year=2007|location=London|authorlink=Paul James (academic)}}
* {{cite book|url=https://www.academia.edu/4251331|title=Globalization and Economy, Vol. 3: Global Economic Regimes and Institutions|last1=James|first1=Paul|last2=Palen|first2=Ronen|publisher=Sage Publications|year=2007|location=London|authorlink=Paul James (academic)}}
* {{cite book|url=https://www.academia.edu/4303461|title=Globalization and Economy, Vol. 4: Globalizing Labour|last1=James|first1=Paul|last2=O’Brien|first2=Robert|publisher=Sage Publications|year=2007|location=London|authorlink=Paul James (academic)}}
*  Jameson, Fredric (1991). ''[[Postmodernism, or, the Cultural Logic of Late Capitalism]]''.
* Kotler, Philip (2015). ''Confronting Capitalism: Real Solutions for a Troubled Economic System.'' AMACOM. {{ISBN|978-0814436455}}
* Mandel, Ernest (1999). ''Late Capitalism.'' {{ISBN|978-1859842027}}
* {{cite book|title=The Capitalism Papers: Fatal Flaws of an Obsolete System|last=Mander|first=Jerry|publisher=Counterpoint|year=2012|isbn=978-1-61902-158-7|authorlink=Jerry Mander}}
* Marcel van der Linden, ''Western Marxism and the Soviet Union''. New York, Brill Publishers, 2007.
* Mayfield, Anthony. "Economics", in his ''On the Brink: Resource Depletion, Debt Collapse, and Super-technology'' ([Vancouver, B.C., Canada]: On the Brink Publishing, 2013), pp.&nbsp;50–104.
* {{cite book|title=Reinventing State Capitalism: Leviathan in Business, Brazil and Beyond|last1=Musacchio|first1=Aldo|last2=Lazzarini|first2=Sergio G.|publisher=Harvard University Press|year=2014|isbn=978-0-674-72968-1|location=Cambridge, MA|ref=harv}}
* {{cite book|url=https://www.dukeupress.edu/Pretend-Were-Dead/|title=Pretend We′re Dead: Capitalist Monsters in American Pop Culture|last=Newitz|first=Annalee|date=2006|publisher=Duke University Press|isbn=978-0822337454|location=Durham, NC}}
* Panitch, Leo, and Sam Gindin (2012). ''The Making of Global Capitalism: the Political Economy of American Empire''. London, Verso. {{ISBN|978-1-84467-742-9}}.
* {{cite book|title=Capital in the Twenty-First Century|title-link=Capital in the Twenty-First Century|last=Piketty|first=Thomas|publisher=[[Belknap Press]]|year=2014|isbn=978-0-674-43000-6|location=Cambridge, MA|ref=harv|authorlink=Thomas Piketty}}
* {{cite book|title=Capital and Ideology|title-link=Capital and Ideology|last=Piketty|first=Thomas|publisher=Belknap Press|year=2020|isbn=978-0674980822|location=Cambridge, MA}}
* [[Karl Polanyi|Polanyi, Karl]] (2001). ''[[The Great Transformation (book)|The Great Transformation]]: The Political and Economic Origins of Our Time.'' [[Beacon Press]]; 2nd ed. {{ISBN|0-8070-5643-X}}
* {{cite book|title=Capitalism: A complete understanding of the nature and value of human economic life|last=Reisman|first=George|publisher=Jameson Books|year=1998|isbn=978-0-915463-73-2}}
* [[Jay W. Richards|Richards, Jay W.]] (2009). ''Money, Greed, and God: Why Capitalism is the Solution and Not the Problem''. New York: [[HarperOne]]. {{ISBN|978-0-06-137561-3}}
* [[Paul Craig Roberts|Roberts, Paul Craig]] (2013). ''The Failure of Laissez-faire Capitalism: towards a New Economics for a Full World''. Atlanta, Ga.: Clarity Press. {{ISBN|978-0-9860362-5-5}}
* [[William I. Robinson|Robinson, William I.]] ''Global Capitalism and the Crisis of Humanity.'' Cambridge University Press, 2014. {{ISBN|1-107-69111-7}}
* {{cite book|url=https://global.oup.com/academic/product/the-return-of-ordinary-capitalism-9780190253011?cc=us&|title=The Return of Ordinary Capitalism: Neoliberalism, Precarity, Occupy|last=Schram|first=Sanford F.|publisher=Oxford University Press|year=2015|isbn=978-0190253028|ref=harv|authorlink=Sanford Schram}}
* Shaikh, Anwar. [https://web.archive.org/web/20120603131601/http://homepage.newschool.edu/~AShaikh/pal2.pdf "Capital as a Social Relation"] (New Palgrave article)
* [[Werner Sombart|Sombart, Werner]] (1916) ''Der moderne Kapitalismus. Historisch-systematische Darstellung des gesamteuropäischen Wirtschaftslebens von seinen Anfängen bis zur Gegenwart.'' Final edn. 1916, repr. 1969, paperback edn. (3 vols. in 6): 1987 Munich: dtv.  (Also in Spanish; no English translation yet.)
* {{cite book|title=Historical Capitalism|last=Wallerstein|first=Immanuel|publisher=[[Verso Books]]|year=1983|isbn=978-0-86091-761-8|authorlink=Immanuel Wallerstein}}
* {{cite book|title=Democracy at Work: A Cure for Capitalism|last=Wolff|first=Richard D.|publisher=[[Haymarket Books]]|year=2012|isbn=978-1-60846-247-6|authorlink=Richard D. Wolff}}
* {{cite book|title=The Origin of Capitalism: A Longer View|last=Wood|first=Ellen Meiksins|publisher=[[Verso]]|year=2002|isbn=978-1-85984-392-5|authorlink=Ellen Meiksins Wood}}
{{refend}}

== External links ==
{{Commons category|Capitalism}}
{{EB1922 Poster}}{{Wikiquote}}{{Wiktionary}}

* {{In Our Time|Capitalism|p00545kv|Capitalism}}
* [https://www.britannica.com/topic/capitalism Capitalism] at ''[[Encyclopædia Britannica]]'' Online.
* [http://www.hup.harvard.edu/features/capitalism-and-its-discontents.html Selected Titles on Capitalism and Its Discontents]. [[Harvard University Press]].

{{library resources box|by=no|onlinebooks=no|others=no|about=yes|label=Capitalism}} {{aspects of capitalism}} {{Marxist & Communist phraseology}} {{Western culture}}
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