The Distinctive Features of Capitalism (2008)

8/9/2019 The Distinctive Features of Capitalism (2008)

1/21

1

The Distinctive Features ofThe Distinctive Features ofCapitalismCapitalism

What different systems of economic

organisation are possible?What is special about capitalism?

What are the common features of capitalist

economies, and what are the differences?


2/21

2

Economic activity can be organised in

various ways in the attempt to satisfy the

social purposes we have identified. Communal, slave, feudal, capitalist, and

socialist systems are usually distinguished

as the principal alternatives. Capitalism is evidently the predominant

system at the present time.


3/21

3

Alternative Economic Systems

Economic activity can be organised

communally.

In small social clusters, members of the societycan gather to decide what they will produce,

how the tasks will be shared, and how the

fruits of their economic effort will bedistributed and used. These decisions may be

strongly influenced by custom and convention.

E.g., tribal societies, primitive communalism.


4/21

4

Socialism may be regarded as the application ofcollectivist principles in the context of amodern advanced economy; the central organising

principle is collective decision-making. The nature of the economic activity performed,

who performs it , how it is performed, and whereand when it is performed are determined by aplanning process.

There is no single model of socialism: marketsocialism, for example, strikes a different balancebetween planning and markets from a commandeconomy, in which the allocation of economic

resources is determined by the state.


5/21

5

Slavery.

Explicit use of force or coercion by one class

(slave-owners) over another (slaves) is the centralorganising principle.

Violence (or the threat of it) is the driver ofeconomic activity, determining what gets done, bywhom, how, where, and when.

Residual elements of slavery persist today in othernations- the use of child labour and prison labourto produce cheap products is very similar toslavery.


6/21

6


7/21


8/21

8

Capitalism, broadly speaking, is the economic

system in which financial considerations dominate.

It is a system in which the quest for financialreward is the driving force shaping what is done,

by whom, how, where and when.

It also determines who gets what in the

distribution of rewards. Work is done for wages;business activity is undertaken for profit. The

primacy of these pecuniary relationships is the

basic defining feature of capitalism.


9/21

9

The distinctive features of capitalism Capitalism cannot be defined easily.

A definition that is to serve as the basis for

political economic analysis, showingcapitalism as a cluster of interconnected

characteristics, has to be set out more fully.

The following features identify what isspecial about the system. Each is not unique

to capitalism, but together they convey its

distinctive character.


10/21

10


11/21

11

Private ownership of the means of

production Capitalism is based on a distinctive system of

property rights. Economic resources arecharacteristically owned by private individuals

and institutions.

The capacity of these property owners to deriveincome from their control over the means ofproduction identifies them as a distinctive class.

Its existence as a class does not mean that internalconflicts of interests cannot occur, but its definingfeature is a common interest in the pursuit ofprofit.


12/21

12

The labour market Those who do not own the means of production

depend for their economic livelihood on the saleof their capacity to work.

The buyers of labourer interact there with thesellers of labour.

Sometimes there is direct negotiation of wages

and employment conditions between individualbuyers and sellers, but the negotiation process isusually mediated by trade unions, employerassociations, and regulatory institutions that setthe rules of the game.


13/21

13

Workers under capitalism are free in that,unlike slaves of serfs, they are not tied to a

particular employer by force or convention. Their freedom is a constrained freedom to

sell their capacity to work.

This is why capitalism is sometimes said tobe a system of alienated labour or asystem in which labour is treated as acommodity.


14/21

14

The capital market Those who establish and run capitalist

businesses need funds for that purpose.

They need financial capital before theycan employ the means of production in

order to make goods and services.

The most characteristic capital marketinstitution under capitalism is thestock

exchange. It is a place where fortunes can

be made or lost.


15/21

15

The land market Land is of fundamental importance in all

types of economic organisation.

In a rural context, its fertility and theefficiency of its stewardship determines itscapacity to contribute that most basic ofhuman needs food. In an urban context, itsuse has a major bearing on the effectivenessof cities as focal points of modern economiclife.


16/21

16

Under capitalism, land is characteristically

privately owned and is usually allocatedthrough market processes subject to

varying degrees of regulation by the state.

Land, like labour and capital, is bought and

sold in the market.


17/21

17

Markets for goods and services Capitalism is a system ofgeneralised commodity

production.

The production of goods and services for

exchange in the market makes those goods andservices commodities, i.e. items produced for salerather than for personal use by their producer.

The processes of exchange sometimes involvedirect interaction between buyer and seller, but

usually they are medicated by the institutions ofwholesale and retail trade.

Shopping is the name of the game! If consumerspurchases do not match the volume and array ofcommodities produced, economic crises mayoccur.


18/21

18

The distinctive role of the state Under capitalism, the state regulations and

enforces the property rights on which the capitalisteconomy is based. It determines the riles

underpinning the operation of markets for labour,capital, land, and commodities.

It may act as an umpire in respect of rivalriesbetween businesses that might otherwise be

sources of economic instability. It may seek toredistribute market incomes in order to ensuresocial stability. It may also be directly engaged inthe provision of goods and services that are not

otherwise provided because of market failure.


19/21

19

Distinctive ideology All economic systems have ideologies associated

with them. What matters is how the dominantideologies are shaped by, or reflect, the structure

of the economy.

E.g., consumerism (or generally, the emphasis onmaterial goods as the source of personalsatisfaction and social status) is by no means

unique to capitalism, but it seems to reach itszenith in this type of economy.

The predominant ideology is consumerist andcompetitive.


20/21

20

Expansionary tendency An a system driven by the quest for profit, it is

geared for growth.

There is perpetual conflict between the profit-seeking interests and the broader goals of society,

as the former continually challenge the prevailing

social structures.

There is also a fundamental tension between thisgrowth-oriented economy and the finite character

of the planet on which it exists (environmental

stresses).


21/21

21

Final thoughts Defining capitalism in terms of a cluster of key

characteristics doe not produce a simple picture. It

is a description of an ideal model. It is notnecessarily ideal in the normative sense of being

desirable, but in the sense of being a simplified

abstraction of a complex reality.

The distinctive methodological position beingargued here is that a necessary prelude to those

investigations is an analysis ofcapitalism in

general.

The Distinctive Features of Capitalism (2008)

Documents

Transcript of The Distinctive Features of Capitalism (2008)