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Capitalism Frequently Asked Questions
Since the end of the Cold War, capitalism has enjoyed unchallenged ideological and practical dominance throughout the world. But this was not always the case, and some serious issues with capitalism still remain. What is capitalism, and what are its implications? This article will seek to answer common questions about capitalism in theory and practice.
What is capitalism?
- Capitalism is a system of economic exchange in which relatively few private persons own the equipment, raw materials, and other means of producing goods and services that have market value.
- The great majority of people in the system are workers who are employed at the will of these owners, and who sell their labor to the owners, but produce no profitable goods or services on their own account.
- Capitalism is built around a system of markets in which all people act more or less independently to further their own desires by making purchases or sales; this is also true of the “labor market”, where owners select which workers to hire or fire.
- In a capitalist system, it may be very difficult or relatively easy for a worker to acquire the means of production and become an owner.
What is capitalism’s essential nature?
- It is generally agreed that competition between private individuals and firms is the most essential feature of capitalism.
- A limited number of owners who produce similar goods and services all compete against one another for the limited number of consumers who desire those goods and services.
- These consumers represent all the profit that may possibly be made by selling the goods or services in question, and are a limited resource.
What is the philosophy behind capitalism?
- Capitalism is based on the idea that ongoing competition will produce increasingly better goods and services that will benefit society in general.
- The selection of goods and services, and removal of poor goods and services, is a function of the “invisible hand of the market” (the aggregate of all buying and selling decisions) which many advocates claim works best in the absence of regulation.
What is the role of the government in a capitalist society?
- The role of government in a capitalist society is a subject of debate.
- Many advocates believe that the role of government should be minimal.
- Others believe that government should perform functions that maximize competition, such as acting against monopolies.
- Still others feel that government’s role should include protecting workers from potential exploitation by the owners and protecting buyers from potential exploitation by sellers.
What does capitalism have to do with freedom?
- Advocates of capitalism feel that it is an inherently “free” system because it maximizes individual choice and usually minimizes barriers to individual buying and selling.
- Detractors claim that, without a strong system of regulation, the freedom of the most powerful sellers essentially comes at the expense of freedom of buyers and workers.
Is capitalism a just social system?
- Advocates of capitalism consider it “just” because, under a capitalist system, workers, buyers, and others affected by the system are free to break their ties with individual providers of goods and services at any time in favor of other providers of their choice.
- Capitalist systems also tend to provide a relatively high standard of living.
- However, in many capitalist systems, a relatively small number of extremely wealthy people may co ntrol a relatively large percentage of total wealth.
- For example, it has been estimated that the richest 1% of all households in the U.S. control about 38% of the country’s total wealth.
What is a capitalist?
- While all people in a capitalist system can be correctly described as capitalist, “a capitalist” is a person who owns the means of producing goods and services and who uses those resources to hire workers and managers who produce things the capitalist sells for profit.
- In other words, a capitalist is an owner or investor, not a manager or worker.
How is democracy related to capitalism?
- Capitalism is an economic system; democracy is a political system.
- Historically, most democracies have been strongly capitalist in orientation.
- However, countries such as Denmark, Sweden, and others have democracies with moderately socialist economic tendencies.
What is the opposite of capitalism?
- Communism is the opposite of capitalism.
- Communism is a system in which all people (“the workers”) control a stake in the means of producing goods and services.
- Socialism is an intermediate economic system in which the people exercise a stake in the means of production through the government; it is sometimes considered to be a step toward the implementation of communism.
Is socialism ideal?
- In modern times, countries with strong socialist orientation have been associated with such features as government-subsidized medical care, government-subsidized or free higher education, and relatively less economic disparity than countries that strongly oppose socialist policies.
- However, historically speaking, socialist countries have also had relatively less political freedom and have often been associated in the United States and elsewhere with political oppression and corruption.
Who are the defenders of capitalism?
- Anyone who benefits from the capitalist system may be a “defender” of capitalism.
- Capitalism is often strongly advocated for by multinational business interests that depend upon markets with strong capitalist orientation for their hiring, development, and marketing policies.
- Many citizens and politicians who equate capitalism with greater economic and social freedom support a capitalist agenda and may be considered “defenders” of capitalism.
- In modern times, “right-wing” political parties and organizations have generally been associated more readily with aggressive capitalist policies than “left-wing” organizations.
Are monopolies a natural product of capitalism?
- Monopolies occur in a capitalist system when one business interest grows extremely powerful over a certain sector of the market and is able to freeze out competition in the realm of its goods or services.
- Monopolies are not unique to capitalism.
- In socialist and communist systems, the government may hold numerous monopolies.
- In a regulated capitalist system, monopolies are usually considered a barrier to free competition that should be avoided.
Does unregulated capitalism result in worker exploitation?
- In general, laws providing for minimum wage, overtime, and safe working conditions are considered necessary to protect workers from potential abuses.
- In a totally unregulated capitalist system, the ability to compel workers to work extreme hours at minimal pay may result in higher profits and thus serve as a temptation for owners.
- Though workers are free to le ave employers at any time, the total number of employment options at any given time are limited by geography and training.
- Laws providing for minimum standards ensure workers the concessions from owners that they need to survive, such as a basic wage, while still providing for profitable operation of businesses.
Does unregulated capitalism lead to unsafe products and services?
- In a totally unregulated capitalist system, unqualified persons may enter into businesses like medicine and law without meeting minimum safety standards, or may be subject to a host of conflicting standards, set by self-selected experts, that would be difficult for buyers to decipher.
- Likewise, totally unregulated capitalism, without safety standards pertaining to such things as additives in foods, rigorously tested medical products, and so forth may result in serious harm to consumers.
- As a result, capitalist systems the world over tend to permit for some level of government intervention in realms of activity where serious harm may result if relevant credentials are not present or are presented to buyers in a deceitful way.
Does capitalism promote racism?
- It has been argued that multinational business interests may exploit workers in countries outside of the U.S. and European sphere who lack the protections of minimum wage and overtime in an effort to cater more cheaply to markets where these protections are present.
- However, this does not mean that racism is an inherent feature of capitalism.
Is the United States of America a capitalist nation?
- The United States of America is a capitalist nation.
- Though there is no such thing in practice as a totally unregulated capitalist system or a totally “free” market, the United States has one of the strongest capitalist traditions and its public policy is strongly oriented toward capitalist activity.
Is capitalism like Social Darwinism?
- It can be argued that, in a capitalist system, businesses and workers alike are subject to “survival of the fittest”, as the most effective businesses and employees will continue to expand their potential for profit at the expense of weaker and less qualified businesses and workers.
- However, “fitness” in this context is decided by the perceptions of other buyers and sellers making economic decisions (“the market”).
- These perceptions may be incomplete or inaccurate, and can be circumvented; they lack the strength of a biological law and are not applied consistently in the social world at all times.