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Where is it invested? Only an approximate answer can be given to these questions, but it is one sufficient to throw light on certain general relations and connections of modern imperialism. The principal spheres of investment of British capital are the British colonies, which are very large also in America for example, Canada , not to mention Asia, etc. In this case, enormous exports of capital are bound up most closely with vast colonies, of tile importance of which for imperialism I shall speak later.

In the case of France the situation is different. French capital exports are invested mainly in Europe, primarily in Russia at least ten thousand million francs. This is mainly loan capital, government loans, and not capital invested in industrial undertakings. Unlike British colonial imperialism, French imperialism might be termed usury imperialism. In the case of Germany, we have a third type; colonies are inconsiderable, and German capital invested abroad is divided most evenly between Europe and America.

The export of capital influences and greatly accelerates the development of capitalism in those countries to which it is exported. While, therefore, the export of capital may tend to a certain extent to arrest development in the capital-exporting countries, it can only do so by expanding and deepening the further development of capitalism throughout the world.

The following passage, for instance, appeared in the Berlin review, Die Bank , for October Numerous foreign countries, from Spain to the Balkan states, from Russia to Argentina, Brazil and China, are openly or secretly coming into the big money market with demands, sometimes very persistent, for loans. The money markets are not very bright at the moment and the political outlook is not promising. But not a single money market dares to refuse a loan for fear that its neighbour may forestall it, consent to grant a loan and so secure some reciprocal service. Free delivery. Arrives by Tuesday, Oct 8.

Pickup not available. About This Item We aim to show you accurate product information. Manufacturers, suppliers and others provide what you see here, and we have not verified it. See our disclaimer. Specifications Series Title Frontiers in Finance. Customer Reviews. Write a review. See any care plans, options and policies that may be associated with this product. Email address. Please enter a valid email address. Walmart Services. The degree of competition in markets, the role of intervention and regulation, and the scope of state ownership vary across different models of capitalism.

Most existing capitalist economies are mixed economies which combine elements of free markets with state intervention and in some cases economic planning. 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 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, capitalist countries have experienced consistent economic growth and an increase in the standard of living. 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; prioritizes profit over social good, natural resources and the environment; and is an engine of inequality, corruption and economic instabilities. Supporters argue that it provides better products and innovation through competition, disperses wealth to all productive people, promotes pluralism and decentralization of power, creates strong economic growth and yields productivity and prosperity that greatly benefit society.

The term "capitalist", meaning an owner of capital , appears earlier than the term "capitalism" and it dates back to the midth century. Capitale emerged in the 12th to 13th centuries in the sense of referring to funds, stock of merchandise, sum of money or money carrying interest. The Hollandische Mercurius uses "capitalists" in and to refer to owners of capital. Benjamin Disraeli used the term "capitalist" in his work Sybil.

Vladimir Ilyich Lenin

The initial usage of the term "capitalism" in its modern sense has been attributed to Louis Blanc in "What I call 'capitalism' that is to say the appropriation of capital by some to the exclusion of others" and Pierre-Joseph Proudhon in "Economic and social regime in which capital, the source of income, does not generally belong to those who make it work through their labour".

Marx did not extensively use the form capitalism, but instead those of capitalist and capitalist mode of production , which appear more than 2, times in the trilogy The Capital. According to the Oxford English Dictionary OED , the term "capitalism" first appeared in English in in the novel The Newcomes by novelist William Makepeace Thackeray , where he meant "having ownership of capital".

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. Simple commodity exchange and consequently simple commodity production, which are the initial basis for the growth of capital from trade, have a very long history. 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. Capital and commercial trade thus existed for much of history, but it did not lead to industrialisation 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 labour 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 labour. The obstacles for the development of capitalist markets are therefore less technical and more social, cultural and political. 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 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 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. 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 Continent. The economic doctrine prevailing from the 16th to the 18th centuries is commonly called mercantilism. Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist methods.

Accordingly, he argued that "not until was a competitive labor market established in England, hence industrial capitalism as a social system cannot be said to have existed before that date". England began a large-scale and integrative approach to mercantilism during the Elizabethan Era — It was written in the s and published in European merchants , backed by state controls, subsidies and 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 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 , [48] [49] inaugurated an expansive era of commerce and trade.

In the midth century a group of economic theorists, led by David Hume [53] and Adam Smith , 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 affected the decline of the traditional handicraft skills of artisans , guilds and journeymen.

Also during this period, the surplus generated by the rise of commercial agriculture encouraged increased mechanization of agriculture. Industrial Britain eventually abandoned the protectionist policy formerly prescribed by mercantilism. In the 19th century, Richard Cobden and John Bright , who based their beliefs on the Manchester School , initiated a movement to lower tariffs. 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.

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. After the First and Second Opium Wars and the completion of 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 colonised. 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:.

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 In this period, the global financial system was mainly tied to the gold standard.

The United Kingdom first formally adopted this standard in Soon to follow were Canada in , Newfoundland in , the United States and Germany de jure in New technologies, such as the telegraph , the transatlantic cable , the radiotelephone , the steamship and railway allowed goods and information to move around the world at an unprecedented degree. In the period following the global depression of the s, the state played an increasingly prominent role in the capitalistic system throughout much of the world.

The postwar boom ended in the late s and early s and the situation was worsened by the rise of stagflation. 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". According to Harvard academic Shoshana Zuboff , a new genus of capitalism, surveillance capitalism , monetizes data acquired through surveillance.

The relationship between democracy and capitalism is a contentious area in theory and in popular political movements. The extension of universal 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. 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 [68] [69] without making concessions to greater political freedom.

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. 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 to the interests and undermining true democracy.

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 , Thomas Piketty of the Paris School of Economics asserts that inequality is the inevitable consequence of economic growth in a capitalist economy and the resulting concentration of wealth can destabilize democratic societies and undermine the ideals of social justice upon which they are built.


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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 [73] it also operates largely under a one-party rule and does not vigorously defend freedom of expression given its government-regulated press as well as 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. Augusto Pinochet's rule in Chile led to economic growth and high levels of inequality [74] by using authoritarian means to create a safe environment for investment and capitalism. Similarly, Suharto 's authoritarian reign and extirpation of the Communist Party of Indonesia allowed for the expansion of capitalism in Indonesia. Peter A. Hall and David Soskice argued that modern economies have developed two different forms of capitalism: liberal market economies or LME e.

Germany, Japan, Sweden and Austria. Those two types can be distinguished by the primary way in which firms coordinate with each other and other actors, such as trade unions. In LMEs, firms primarily coordinate their endeavors by way of hierarchies and market mechanisms. Coordinated market economies more heavily rely on non-market forms of interaction in the coordination of their relationship with other actors for a detailed description see Varieties of Capitalism.

These two forms of capitalisms developed different industrial relations , vocational training and education , corporate governance , inter-firm relations and relations with employees. The existence of these different forms of capitalism has important societal effects, especially in periods of crisis and instability. Since the early s, the number of labor market outsiders has rapidly grown in Europe, especially among the youth, potentially influencing social and political participation. Using varieties of capitalism theory, it is possible to disentangle the different effects on social and political participation that an increase of labor market outsiders has in liberal and coordinated market economies Ferragina et al.

This signals an important problem for liberal market economies in a period of crisis. If the market does not provide consistent job opportunities as it has in previous decades , the shortcomings of liberal social security systems may depress social and political participation even further than in other capitalist economies.

In general, capitalism as an economic system and mode of production can be summarised by the following: [78]. 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, [86] markets continue to play a dominant role, but they are regulated to some extent by the state in order to correct market failures , promote social welfare , conserve natural resources , fund defense and public safety or other rationale.

In 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.

Competition arises when more than one producer is trying to sell the same or similar products to the same buyers. In capitalist theory, competition leads to innovation and more affordable prices. Without competition, a monopoly or cartel may develop. 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. 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.

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".

Theoretically, in free and competitive markets maximising profit ensures that resources are not wasted. The relationship between the 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 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. 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. 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".

Smith and other classical economists before 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 equilibrium.

It is a condition where "buyers tend to compete with other buyers, and sellers tend to compete with other sellers". 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". 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. Between and , world economy grew fold, a much faster rate than the population growth, so individuals enjoyed on average a 9-fold increase in income.

In the Third World , there was an increase, but only 5-fold per person. The capitalist mode of production refers to the systems of organising production and distribution within capitalist 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.

The term capitalist mode of production is defined by private ownership of the means of production , extraction of surplus value by the owning class for the purpose of capital accumulation , wage-based labour and at least as far as commodities are concerned being market-based.

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.

Essentially, capital accumulation comes to define economic rationality in capitalist production. 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. In capitalist economic structures, supply and demand is an economic model of price determination in a market. It concludes that in a competitive market , the unit price for a particular 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 quantity.

The four basic laws of supply and demand are: [] : Although it is normal to regard the quantity demanded and the quantity supplied as 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. 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 shifting costs up while a discount would increase supply, shifting costs down and hurting producers as producer surplus decreases. By its very nature, conceptualising a supply curve requires the firm to be a perfect competitor i.

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 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. A demand schedule, depicted graphically as the demand curve , represents the amount of some 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 goods and the price of 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. Just like the supply curves reflect marginal cost curves, demand curves are determined by marginal utility curves. 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.

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Two different hypothetical types of goods with upward-sloping demand curves are Giffen goods an inferior, but staple good and 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. 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 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. This price is often called the competitive price or market clearing price and will tend not to change unless demand or supply changes and the quantity is called "competitive quantity" or market clearing quantity. 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". The supply and demand model is a partial equilibrium model of economic equilibrium , where the clearance on the market of some specific goods is obtained independently from prices and quantities in other markets.

In other words, the prices of all substitutes and complements as well as income levels of 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 equilibrium , 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. 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 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 parameter identification problem is a common issue in "structural estimation". Typically, data on exogenous variables that is, variables other than price and quantity, both of which are endogenous variables are needed to perform such an estimation.

An alternative to "structural estimation" is reduced-form estimation, which regresses each of the endogenous variables on the respective exogenous variables. Demand and supply have also been generalised to explain macroeconomic variables in a market economy , including the quantity of total output and the general price level.

The 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 rates and to relate labor supply and labor demand to wage rates.

According to Hamid S. Hosseini, the power of supply and demand was understood 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". John Locke 's work Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money [] includes an early and clear description of supply and demand and their relationship.

In this description, demand is 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 The phrase "supply and demand" was first used by James Denham-Steuart in his Inquiry into the Principles of Political Economy , published in 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.

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 Researches into the Mathematical Principles of Wealth , including diagrams. During the late 19th century, the marginalist school of thought emerged. 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 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, [] including comparative statics from a shift of supply or demand and application to the labor market. In a capitalist system, the government does not prohibit private property or prevent individuals from working where they please.

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 laws that prohibit monopolies and cartels from forming. 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 entry is reduced. In many countries, public utilities e. 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 factors such as inflation and unemployment. In his book The Road to Serfdom , Friedrich Hayek asserts that the economic freedom of capitalism is a requisite of political freedom. He argues that the market mechanism is the only way of deciding what to produce and how to distribute the items without using coercion.

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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. There are many variants of capitalism in existence that differ according to country and region.

They vary in their institutional makeup and by their economic policies.

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The common features among all the different forms of capitalism is that they are based on the production of goods and services for profit, predominantly market-based allocation of resources and they are structured upon the accumulation of capital. The major forms of capitalism are listed hereafter:.

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.

Habermas observed four general features that characterise advanced capitalism:. In their critique of capitalism, Marxism and Leninism both emphasise the role of " finance capital " as the determining and ruling-class interest in capitalist society, particularly in the latter stages. Rudolf Hilferding is credited [ by whom? Fernnand 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.

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 to state-interest and imperialism; and 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. Britain, Portugal and France. 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.

Free-market economy refers to a capitalist economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy. It typically entails support for highly competitive markets and private ownership of productive enterprises. Laissez-faire is a more extensive form of free-market economy where the role of the state is limited to protecting property rights , or for plumbline anarcho-capitalists, property rights are protected by private firms and market-generated law.

A social market economy is a nominally free market system where government intervention in price formation is kept to a minimum, but the state provides significant services in the area of social security, unemployment benefits and 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 refers to the contemporary model of capitalism and adaptation of the social market model that exists in continental Western Europe today. 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. 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 bourgeois state.

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Some economists and left-wing academics including Richard D. Wolff and Noam Chomsky 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. 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.

The debate between proponents of private versus state capitalism is centered around questions of managerial efficacy, productive efficiency and fair distribution of wealth. Corporate capitalism is a free or mixed-market economy characterized by the dominance of hierarchical, bureaucratic corporations.

A mixed economy is a largely market-based economy consisting of both private and public ownership of the means of production and economic interventionism through macroeconomic policies intended to correct 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 indirect economic planning over a largely capitalist-based economy.

Most modern capitalist economies are defined as "mixed economies" to some degree. 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 , defined as investment in order to realize a financial profit.

In mainstream economics , accounting and Marxian economics , capital accumulation is often equated with investment of profit income or saving, especially in 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". Accumulation can be measured as the monetary value of investments, the amount of income that is reinvested, or as the change in the value of assets owned the increase in the value of the capital stock.

Using company balance sheets , tax data and direct 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 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. Other useful sources of investment information are business magazines such as Fortune , Forbes , The Economist , Business Week and so on as well as various corporate " watchdog " organisations and non-governmental organisation publications.

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 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 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 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 by investors or workers, or consumer resistance. 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. 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 [ In Marxian economics , the rate of accumulation is defined as 1 the value of the real net increase in the stock of capital in an accounting period; and 2 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. 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. 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-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.

Ernest Mandel emphasised that the rhythm of capital accumulation and growth depended critically on 1 the division of a society's social product between " necessary product " and " surplus product "; and 2 the division of the surplus product between investment and 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 power relationships. Strictly speaking, capital has accumulated only when realised 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:. All of these moments do not refer simply to an "economic" or commercial process.


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  7. 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. In the second volume of Das Kapital , Marx continues the story and shows that with the aid of bank 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 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 claim there is no economic law according to which capital is necessarily re-invested in the expansion of production, that such 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.