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Brief Overview

In a capitalist system, private control of these productive enterprises is protected by the rule of law. A capitalist political system protects the exchange and distribution of capital between legal or private persons, which is driven by competition and profit-maximization, and where investments, distribution, income, production and pricing of goods, commodities and services are predominantly determined through the operation of a market economy] in which anyone can participate in supply and demand and form contracts with anyone else, rather than by central economic planning. Human labor power is for sale in the market as one of the many commodities.

Formal Definition

Capitalism is an economic system in which capital goods are operated and traded chiefly by private individuals or corporations for the purpose of profit, with the state confined in providing some public goods and infrastructure.

Detailed Description

In capitalist systems, goods and services, including those regarding the most basic necessities of life, are produced for profitable exchange. Capitalism is originally defined as a mode of production, where it is characterized by predominantly private ownership of the means of production, distribution and exchange in a mainly market economy. According to Marxist analysis, a core requirement of a capitalist society is that a large portion of the population must not possess sources of self-sustainment that would allow them to be independent, and must instead be compelled, in order to survive, to sell their labor for a living wage. Capitalism is usually considered to involve the right of individuals and businesses to trade, incorporate, and employ workers, in goods, services (including finance), labor and land. In modern "capitalist states", legislative action is confined to defining and enforcing the basic rules of the market though the state may provide some public goods and infrastructure. Capitalist economic practices became institutionalized in England between the 16th and 19th centuries, although some features of capitalist organization existed in the ancient world, and early forms of merchant capitalism flourished during the Middle Ages. Capitalism has been dominant in the Western world since the end of feudalism. From Britain it gradually spread throughout Europe, across political and cultural frontiers. In the 19th and 20th centuries, capitalism provided the main, but not exclusive, means of industrialization throughout much of the world. Because all large economies today have a mixture of private and public ownership and control, and some feel that the term "mixed economies" more precisely describes most contemporary economies. The capitalist mixed economy is the main capitalistic system, where the state intervenes in market activity and provides some services. Other systems include laissez-faire, where the state plays a minimal role and anarcho-capitalism where the market and private enterprise are completely free from the state which is nonexistent. During the last century capitalism has often been contrasted with centrally planned economies.

Recommended Reading

Bacher, Christian (2007) Capitalism, Ethics and the Paradoxon of Self-exploitation

Obrinsky, Mark (1983). Profit Theory and Capitalism, University of Pennsylvania Press

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