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{{redirect6|Free enterprise|the film|Free Enterprise (film)|other uses|Capitalism (disambiguation)}}
{{Capitalism}}
{{Individualism sidebar}}
'''Capitalism''' is an [[economic system]] in which [[wealth]], and the means of producing wealth, are [[private property|privately owned]] and controlled rather than commonly, publicly, or state-owned and controlled.<ref> Arleen J. Hoag, John H. Hoag. Introductory Economics. World Scientific, 2006. pp 43-44.</ref><ref>{{cite web |last=Marcus |first=B.K. |title=capitalism| url=http://www.blackcrayon.com/library/dictionary/?term=capitalism |work=[http://www.blackcrayon.com/library/dictionary/ BlackCrayon.com Dictionary] |publisher=[http://www.blackcrayon.com BlackCrayon.com] |accessdate=2008-12-27}}</ref> Through capitalism, the [[land (economics)|land]], [[labor (economics)|labor]], and [[capital (economics)|capital]] are owned, operated, and traded by private individuals either singly or jointly,<ref name="Wood2002">Wood 2002, p. 2</ref><ref>Obrinsky (1983) p.1</ref> and [[investment]]s, [[distribution (business)|distribution]], [[income]], [[Production, costs, and pricing|production]], [[pricing]] and [[Supply and demand|supply]] of [[goods]], [[commodities]] and [[Service (economics)|services]] are determined by [[autonomy|voluntary private decision]] in a [[market economy]].<ref> No purely capitalistic economy has ever existed. Karl Marx, [[Das Kapital]]</ref><ref name="Bacher">Bacher (2007) p. 2; De George (1986) pp.104, 111; Lash (2000) p.36</ref> A distinguishing feature of capitalism is that each person owns his or her own labor and therefore is allowed to sell the use of it to employers.<ref name="Wood2002">Wood 2002, p. 2</ref><ref name="altvater1993">{{cite book|title=The Future of the Market: An Essay on the Regulation of Money and Nature After the Collapse of "Actually Existing Socialism"|author=Altvater, E.|year=1993|publisher=Verso|pages=58–59}}</ref> In a "capitalist state", private [[rights]] and [[property]] relations are protected by the [[rule of law]] of a [[limited government|limited regulatory framework]].<ref name="lane2002">{{cite book|title=Government and the Economy: A Global Perspective|last=Lane|first=J.E.|coauthors=Ersson, S.O.|year=2002|publisher=Continuum International Publishing Group|pages=7–16}}</ref><ref name="pejovich1990">{{cite book|last=Pejovich|first=Svetozar|title=The Economics of Property Rights|page=31|publisher=Springer|year=1990|pages=31}}</ref> In the modern capitalist state, [[legislature|legislative]] action is confined to defining and enforcing the basic rules of the market,<ref name="lane2002"/><ref name="pejovich1990"/> though the state may provide some [[public goods]] and [[infrastructure]].<ref name="aaron2003">Eric Aaron, ''What's Right?'' (Dural, Australia: Rosenberg Publishing, 2003), 75.</ref>

Some consider [[laissez-faire]] to be "pure capitalism."<ref name="mcconnell1992">McConnell, Campbell R. and Brue, Stanley L., Microeconomics: Principles, Problems, and Policies. McGraw-Hill, 1992. p 38</ref> [[Laissez-faire]] (French, "leave to do (by itself)"), signifies [[Minarchism|minimizing]]<ref>François, Crouzet. The Victorian Economy. Routledge, 1982. p. 105</ref> or [[Anarcho-capitalism|eliminating]] state interference in economic affairs and the competitive process, allowing the free play of supply and demand. Laissez-faire capitalism has never existed in practice.<ref name="mcconnell1992"/><ref name="stromberg1977">{{Citation|last=Stromberg|first=Joseph R.|author-link=Joseph R. Stromberg|title=The Political Economy of Liberal Corporatism|url=http://tmh.floonet.net/articles/strombrg.html|year=1977|publisher=Center for Libertarian Studies}}</ref><ref name="mises1996chap15sec3">{{Citation|last=von Mises|first=Ludwig|author-link=Ludwig von Mises|title=[[Human Action]]|contribution=The Market: Capitalism|url=http://mises.org/humanaction/|contribution-url=http://mises.org/humanaction/chap15sec3.asp|publisher=[[Foundation for Economic Education]]|publication-place=Irvington, NY|year=1996|pages=264-268}}</ref> Because all large economies today have a mixture of private and public ownership and control, some feel that the term "[[mixed economies]]" more precisely describes most contemporary economies.<ref>{{cite book|author=Tucker, Irvin B.|title=Macroeconomics for Today|pages=553|year=1997}}</ref><ref>{{cite book|author=Case, Karl E.|title=Principles of Macroeconomics|publisher=Prentice Hall|year=2004}}</ref> In the "capitalist [[mixed economy]]", the state intervenes in market activity and provides many services.<ref>"all of the capitalistic societies of the West have mixed economies that temper capitalism" with interventionist government regulation and social programs. Shafritz, Jay M. (1992). The HarperCollins Dictionary of American Government and Politics. HarperPerennial. P. 93</ref>

During the last century, capitalism has often been contrasted with [[planned economy|centrally planned economies]]. The central axiom of capitalism is that the best allocation of resources is achieved through consumers having free choice, and producers responding accordingly to meet collective consumer demand. This contrasts with planned economies in which the state directs what shall be produced. A consequence is the belief that [[privatization]] of previously state-provided services will tend to achieve a more efficient delivery thereof. Further implications are usually in favor of [[free trade]], and abolition of [[subsidies]]. Although individuals and groups must act rationally in any society for their own good, the consequences of both rational and irrational actions are said to be more readily apparent in a capitalist society.

Capitalistic economic practices incrementally became institutionalized in [[England]] between the 16th and 19th centuries, although some features of capitalist organization existed in the [[Ancient history|ancient world]], and early aspects of [[merchant capitalism]]<ref name=Banaji>{{cite journal|author=Banaji, Jairus|year=2007|title=Islam, the Mediterranean and the rise of capitalism|journal=Journal Historical Materialism|volume=15|pages=47–74|publisher=Brill Publishers|doi=10.1163/156920607X171591}}</ref> flourished during the [[Late Middle Ages]].<ref name="britannica">{{cite book|title=Capitalism|publisher=Encyclopedia Britannica|year=2006}}</ref> Capitalism has been dominant in the Western world since the [[Transition from feudalism to capitalism|end of feudalism]].<ref name="britannica" /> 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.<ref name="Scott">{{cite book|title=Industrialism: A Dictionary of Sociology|author=Scott, John|publisher=Oxford University Press|year=2005}}</ref>

== Etymology ==

{| align="right" class="box" style="margin-right:10px;text-align: left; border: 3px solid #aaaaaa; padding: 2px; font-size: 80%; width: 25%;"
|bgcolor="#dbeaff"|

Other terms sometimes used for capitalism, include:
* [[commercialism]]<ref name="rogetcapitalism">"capitalism." Roget's 21st Century Thesaurus, Third Edition. Philip Lief Group 2008.</ref>
* economic individualism<ref name="individualism">[[Murray N. Rothbard]]. [http://mises.org/story/2648 Isaiah Berlin on Negative Freedom]</ref><ref name="individualism2">[[Ludwig von Mises]]. [http://mises.org/efandi/ch42.asp The Objectives of Economic Education]</ref>
* [[economic liberalism]]<ref>{{cite journal|title=Adam Smith and His Legacy for Modern Capitalism|author=Werhane, P.H.|journal=The Review of Metaphysics|volume=47|number=3|year=1994|publisher=Philosophy Education Society, Inc.}}</ref>
* free competition<ref name="rogetfreeenterprise"/>
* free cooperation<ref>[http://mises.org/books/socialism/part4_ch29.aspx SOCIALISM AS A MORAL IMPERATIVE, Ch.29 Christianity and Socialism]</ref>
* free economy<ref name="rogetfreeenterprise"/>
* free enterprise<ref name="rogetfreeenterprise"/>
* free-enterprise economy<ref name="britannica"/><ref name="rogetfreeenterprise">"free enterprise." Roget's 21st Century Thesaurus, Third Edition. Philip Lief Group 2008.</ref>
* free-enterprise system<ref name="rogetfreeenterprise"/>
* free exchange<ref>[http://mises.org/story/2382 The Fairness of "Unequal" Exchange]</ref>
* [[free market]]<ref name="rogetfreeenterprise"/><ref name="mutualist"/>
* free-market capitalism<ref name="rothbard"/>
* free-market economy<ref name="britannica"/>
* free-market liberalism
* free-market system<ref name="whatisthefreemarket">[[Murray N. Rothbard]]. (1993) "[http://mises.org/story/1973 What Is the Free Market?]" The Fortune Encyclopedia of Economics. ''Time Warner'' pp. 636-639</ref>
* [[free trade]]<ref name="whatisthefreemarket"/>
* [[individualism]]
* [[industrialism]]<ref name="rogetcapitalism"/>
* [[laissez-faire]]<ref name = friedman/>
* laissez-faire capitalism<ref name=friedman>Friedman, Milton. 1962. ''Capitalism and Freedom.'' University of Chicago Press. p 38.</ref>
* laissez-faire liberalism<ref>Ian Adams, Political Ideology Today (Manchester: Manchester University Press, 2001), 20.</ref>
* [[liberalism]]<ref name="rogetfreeenterprise"/>
* market capitalism<ref name="britannica"/>
* [[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.org |date= |accessdate=2008-11-06}}</ref><ref>{{cite web|url=http://www.cato.org/university/module10.html |title=The Achievements of Nineteenth-Century Classical Liberalism }} <blockquote>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.</blockquote></ref>
* [[market system]]<ref name="whatisthefreemarket"/>
* [[mercantilism]]<ref name="rogetcapitalism"/>
* [[mutual aid]]<ref name="mutualist">[http://www.mutualist.org/ Mutualist.org]. "...based on voluntary cooperation, free exchange, or mutual aid."</ref>
* mutual exchange<ref name="rothbard"/>
* open competition<ref>[[Llewellyn H. Rockwell, Jr.]]. (2005) "[http://mises.org/story/1780 Free Trade and the American Political Tradition]."</ref>
* open cooperation<ref name="hoppe">[[Hans-Hermann Hoppe]]. "[http://www.mises.org/story/1959 The Rise and Fall of the City]." [[Democracy: The God That Failed]].</ref>
* open economy
* open exchange<ref>[https://mises.org/story/777 A Modest Craft]</ref>
* [[open market]]<ref name="rogetfreeenterprise"/>
* private enterprise<ref name="britannica"/>
* self-regulating market<ref name="rogetfreeenterprise"/>
* unhampered market<ref>[[Ludwig von Mises]]. [http://mises.org/humanaction/chap27sec4.asp XXVII: The Government and the Market]</ref><ref>[[Gene Callahan]]. [http://mises.org/story/557 Safety and the Market Economy]</ref><ref>[[Murray N. Rothbard]]. "[http://mises.org/rothbard/mes/chap2a.asp Man, Economy, and State with Power and Market]."</ref>
* voluntary competition<ref name="mutualist2">[http://mutualist.blogspot.com/2005/10/richard-k-moore-escaping-matrix.html Mutualist Blog: Free Market Anti-Capitalism]</ref>
* voluntary cooperation<ref name="mutualist"/><ref>[http://blog.mises.org/archives/004608.asp Markets are both competitive and cooperative, but never coercive]</ref>
* voluntary exchange<ref name="rothbard"/>
* voluntary market<ref>[http://mises.org/freemarket_detail.aspx?control=572 The Democracy of the Market]</ref>
|}
{{wiktionary}}

The [[etymology]] of the word ''capital'' has roots in the trade and ownership of animals. The [[Latin]] root of ''capital'' is ''capitalis'', from the [[proto-Indo-European language|proto-Indo-European]] ''kaput'', which means "head", this being how wealth was measured--the number of heads in a person's livestock. The terms [[chattel]] and cattle itself also derive from this same origin.

The lexical connections between animal trade and economics can also be seen in the names of many currencies and words about money: fee (faihu), rupee (rupya), buck (a deerskin), pecuniary (pecu), stock (livestock), and peso (pecu or pashu) all derive from animal-trade origins.

Although [[Adam Smith]] is often described as the "father of capitalist thinking," he never used the term "capitalism". He described his own preferred economic system as "the system of natural [[liberty]]." However, Smith defined "capital" as stock, and "profit" as the just expectation to keep the revenue from improvements to that stock. Smith also made capital improvement the central goal of the economic and political system.<ref>Smith, Adam (1776). ''An Inquiry into the Nature And Causes of the Wealth of Nations - Book Two, Chapter One.</ref>

[[Arthur Young (writer)|Arthur Young]]<ref name="OED"/> first used the term ''capitalist'' of his economic surveys in his work ''Travels in France'' (1792).<ref>Arthur Young. [http://oll.libertyfund.org/index.php?option=com_staticxt&staticfile=show.php%3Ftitle=292&Itemid=27 Travels in France]</ref> [[Samuel Taylor Coleridge]],<ref name="OED"/> an English [[poet]], used ''capitalist'' in his work ''Table Talk'' (1823).<ref>Samuel Taylor Coleridge. [http://books.google.com/books?id=ma-4W-XiGkIC&printsec=titlepage&dq=%22capitalists+for+having+labor+at+demand Tabel The Complete Works of Samuel Taylor Coleridge]. page 267.</ref> [[Pierre-Joseph Proudhon]] used ''capitalist'' in his first work ''[[What is Property?]]'' (1840) to refer to the owners of capital. [[Benjamin Disraeli]]<ref name="OED"/> used ''capitalist'' in the 1845 work ''[[Sybil (novel)|Sybil]]''. [[Karl Marx]] and [[Friedrich Engels]] also used ''capitalist'' (''Kapitalist'') as a private owner of capital in ''[[The Communist Manifesto]]'' (1848).

According to the ''[[Oxford English Dictionary]]'',<ref name="OED">James Augustus Henry Murray. "Capitalism". [http://www.archive.org/details/oedvol02 A New English Dictionary on Historical Principles]. ''Oxford English Press''. Vol 2. page 94.</ref> ''capitalism'' was first used by novelist [[William Makepeace Thackeray]] in 1854, by which he meant by having ownership of capital.

According to the ''OED'', [[Carl Adolph Douai]], a [[German-American]] [[socialism|socialist]] and [[abolitionism|abolitionist]], used the term ''private capitalism'' in 1863.

[[Karl Marx]] and [[Friedrich Engels]] referred the ''capitalistic system'' (''kapitalistischen System'')<ref>Karl Marx. Chapter Sixteen: Absolute and Relative Surplus-Value. ''[[Das Kapital]]''.
<blockquote>''{{lang|de|Die Verlängrung des Arbeitstags über den Punkt hinaus, wo der Arbeiter nur ein Äquivalent für den Wert seiner Arbeitskraft produziert hätte, und die Aneignung dieser Mehrarbeit durch das Kapital - das ist die Produktion des absoluten Mehrwerts. Sie bildet die allgemeine Grundlage des '''kapitalistischen Systems''' und den Ausgangspunkt der Produktion des relativen Mehrwerts.}}''</blockquote>
<blockquote>The prolongation of the working-day beyond the point at which the labourer would have produced just an equivalent for the value of his labour-power, and the appropriation of that surplus-labour by capital, this is 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.</blockquote></ref><ref>Karl Marx. Chapter Twenty-Five: The General Law of Capitalist Accumulation. ''[[Das Kapital]]''.
* ''{{lang|de|Die Erhöhung des Arbeitspreises bleibt also eingebannt in Grenzen, die die Grundlagen des '''kapitalistischen Systems''' nicht nur unangetastet lassen, sondern auch seine Reproduktion auf wachsender Stufenleiter sichern.}}''
* ''{{lang|de|Die allgemeinen Grundlagen des '''kapitalistischen Systems''' einmal gegeben, tritt im Verlauf der Akkumulation jedesmal ein Punkt ein, wo die Entwicklung der Produktivität der gesellschaftlichen Arbeit der mächtigste Hebel der Akkumulation wird.}}''
* ''{{lang|de|Wir sahen im vierten Abschnitt bei Analyse der Produktion des relativen Mehrwerts: innerhalb des '''kapitalistischen Systems''' vollziehn sich alle Methoden zur Steigerung der gesellschaftlichen Produktivkraft der Arbeit auf Kosten des individuellen Arbeiters;}}''</ref> to the [[capitalist mode of production]] (''kapitalistische Produktionsform'') in ''[[Das Kapital]]'' (1867).<ref>Saunders, Peter (1995). ''Capitalism''. University of Minnesota Press. p. 1</ref> The word "capitalism" only appears twice in ''Das Kapital'', namely in tome II, p.124 (German edition) and in ''Theories about Surplus Value'', tome II, p.493 (German edition). However, the late Engels made more frequent use of the term "capitalism". Marx's notion of the capitalist mode of production is characterised as a system of primarily private ownership of the [[means of production]] in a mainly [[market economy]], with a legal framework on [[commerce]] and a physical [[infrastructure]] provided by the state.<ref>Karl Marx. ''[[Das Kapital]]''.</ref>

An 1877 work entitled ''Better Times'', and an unknown author in 1884 of the ''[[Pall Mall Gazette]]'', also used the term ''capitalism''.<ref name="OED"/>

However, the first use of ''capitalism'' to describe the production system was by the [[Germany|German]] economist [[Werner Sombart]], in his [[1902]] book ''The Jews and Modern Capitalism'' (''Die Juden und das Wirtschaftsleben''). Sombart's close friend and colleague, [[Max Weber]], also used ''capitalism'' in his [[1904]] book ''[[The Protestant Ethic and the Spirit of Capitalism]]'' (''Die protestantische Ethik und der Geist des Kapitalismus'').

== Perspectives ==

The concept of capitalism has evolved over time, with later thinkers often building on the analysis of earlier thinkers. Moreover, the component concepts used in defining capitalism — such as [[private ownership]], markets and investment — have evolved along with changes in theory, in law, and in practice. This is a concept that is often compared with [[laborism]].

=== Classical political economy ===
{{main|Classical economics|Classical liberalism}}
The [[classical economics|classical school economic thought]] emerged in Britain in the late 18th century. The classical political economists [[Adam Smith]], [[David Ricardo]], [[Jean-Baptiste Say]], and [[John Stuart Mill]] published analyses of the production, distribution and exchange of goods in a [[market]] that have since formed the basis of study for most contemporary economists.

In [[France]], 'Physiocrats' like [[François Quesnay]] promoted [[free trade]] based on a conception that wealth originated from land. Quesnay's ''Tableau Économique'' (1759), described the economy analytically and laid the foundation of the Physiocrats economic theory, followed by [[Anne Robert Jacques Turgot]] who opposed tariffs and [[customs duties]] and advocated [[free trade]]. [[Richard Cantillon]] defined long-run equilibrium as the balance of flows of income, and argued that the [[supply and demand]] mechanism around land influenced short-term prices.

[[Adam Smith|Adam Smith's]] attack on [[mercantilism]] and his reasoning for "the system of natural liberty" in ''[[The Wealth of Nations]]'' (1776) are usually taken as the beginning of classical political economy. Smith devised a set of concepts that remain strongly associated with capitalism today, particularly his theory of the "[[invisible hand]]" of the market, through which the pursuit of individual self-interest unintentionally produces a collective good for society. It was necessary for Smith to be so forceful in his argument in favor of free markets because he had to overcome the popular mercantilist sentiment of the time period.<ref>Degen, Robert. ''The Triumph of Capitalism''. 1st ed. New Brunswick, NJ: Transaction Publishers, 2008.</ref> He criticized monopolies, tariffs, duties, and other state enforced restrictions of his time and believed that the market is the most fair and efficient arbitrator of resources. This view was shared by [[David Ricardo]], second most important of the classical political economists and one of the most influential economists of modern times.<ref>{{cite book|author=Hunt, E.K.|title=History of Economic Thought: A Critical Perspective|publisher=M.E. Sharpe|year=2002|pages=92}}</ref> In ''The Principles of Political Economy and Taxation'' (1817), he developed the law of [[comparative advantage]], which explains why it is profitable for two parties to trade, even if one of the trading partners is more efficient in every type of economic production. This principle supports the economic case for [[free trade]]. Ricardo was a supporter of [[Say's Law]] and held the view that full employment is the normal equilibrium for a competitive economy.<ref>{{cite book|title=Blackwell Encyclopedia of Political Thought|publisher=Blackwell Publishing|year=1991|pages=91}}</ref> He also argued that [[inflation]] is closely related to changes in quantity of [[money]] and [[Credit (finance)|credit]] and was a proponent of the law of [[diminishing returns]], which states that each additional unit of input yields less and less additional output.<ref>{{cite book|author=Skousen, Mark|title=The Making of Modern Economics: The Lives and Ideas of the Great Thinkers|publisher=M.E. Sharpe|year=2001|pages=98–102}}</ref>

The values of classical political economy are strongly associated with the [[classical liberalism|classical liberal]] doctrine of minimal government intervention in the economy, though it does not necessarily oppose the state's provision of a few basic [[public goods]].<ref name="aaron2003">Eric Aaron, ''What's Right?'' (Dural, Australia: Rosenberg Publishing, 2003), 75.</ref>. Classical liberal thought has generally assumed a clear division between the economy and other realms of social activity, such as the state.<ref>{{cite book|title=Capitalism: Dictionary of the Social Sciences|author=Calhoun, Craig|publisher=Oxford University Press|year=2002}}</ref>

While economic liberalism favors markets unfettered by the government, it maintains that the state has a legitimate role in providing [[public good]]s.<ref name = "econlib"/> For instance, Adam Smith argued that the state has a role in providing roads, canals, schools and bridges that cannot be efficiently implemented by private entities. However, he preferred that these goods should be paid proportionally to their consumption (e.g. putting a [[Toll road|toll]]). In addition, he advocated [[Free trade area|retaliatory tariffs]] to bring about free trade, and [[copyright]]s and [[patent]]s to encourage innovation.<ref name=econlib>{{cite web|title=Adam Smith|publisher=econlib.org|url=http://www.econlib.org/library/Enc/bios/Smith.html}}</ref>

=== Weberian political sociology ===
[[File:Max Weber 1917.jpg|thumb|250px|[[Max Weber]] in 1917]]
In some [[social science]]s, the understanding of the defining characteristics of capitalism has been strongly influenced by 19th century German social theorist [[Max Weber]]. Weber considered [[market]] [[trade|exchange]], rather than production, as the defining feature of capitalism; capitalist enterprises, in contrast to their counterparts in prior modes of economic activity, was their rationalization of production, directed toward maximizing [[Economic efficiency|efficiency]] and [[Productivity (economics)|productivity]]. According to Weber, workers in pre-capitalist economic institutions understood work in terms of a personal relationship between [[Master craftsman|master]] and [[journeyman]] in a [[guild]], or between [[lord]] and [[peasant]] in a [[Manorialism|manor]].<ref>{{cite web|url=http://www.humanities.mq.edu.au/Ockham/y64l10.html|title=MAX WEBER: ON CAPITALISM|accessdate=2008-02-26|publisher=Macquarie University|author=Kilcullen, John|year=1996}}</ref>

In his book ''[[The Protestant Ethic and the Spirit of Capitalism]]'' (1904-1905), Weber sought to trace how capitalism transformed these traditional modes of economic activity. For Weber, the 'spirit of capitalism' began with the Puritan understanding of one’s ‘calling’ in life and their laboring for God rather than for men. This is pictured in Proverbs 22:29, “Seest thou a man diligent in his calling? He shall stand before kings” and in Colossians 3:23, "Whatever you do, do your work heartily, as for the Lord rather than for men." In the ''Protestant Ethic'', Weber further stated that “moneymaking – provided it is done legally – is, within the modern economic order, the result and the expression of diligence in one’s calling…” Thus in Weber's opinion, it was with a devotion to God in the workplace and seeking assurance of salvation described as the [[Protestant work ethic]] that the Puritans helped form the basis to the modern economic order.

This 'spirit' was gradually codified by law; rendering wage-laborers legally 'free' to sell work; encouraging the development of technology aimed at the organization of production on the basis of rational principles; and clarifying the apparent separation of the public and private lives of workers, especially between the home and the workplace. Therefore, unlike Marx, Weber did not see capitalism as primarily the consequence of changes in the means of production.<ref>{{cite web|url=http://xroads.virginia.edu/~hyper/WEBER/WeberCH2.html|title=The Spirit of Capitalism|accessdate=2008-02-26|publisher=University of Virginia}}</ref>

Capitalism, for Weber, was the most advanced economic system ever developed over the course of human history. Weber associated capitalism with the advance of the business [[corporation]], public credit, and the further advance of [[bureaucracy]] of the modern world. Although Weber defended capitalism against its socialist critics of the period, he saw its rationalizing tendencies as a possible threat to traditional cultural values and institutions, and a possible 'iron cage' constraining human freedom.<ref>{{cite web|url=http://www.economyandsociety.com/events/Ethic&SpiritCapsm_Conf_Agenda2.pdf|format=PDF|title=Conference Agenda|publisher=Economy and Society|accessdate=2008-02-26}}</ref> This is further seen in his criticism of "specialists without spirit, hedonists without a heart" that were developing, in his opinion, with the fading of the original Puritan 'spirit' associated with capitalism.

=== German Historical School and Austrian School ===
From the perspective of the [[Historical school of economics|German Historical School]], capitalism is primarily identified in terms of the organization of production for [[market]]s. Although this perspective shares similar theoretical roots with that of Weber, its emphasis on markets and [[money]] lends it different focus.<ref name="Burnham">{{cite book|author=Burnham, Peter|title=Capitalism: The Concise Oxford Dictionary of Politics|publisher=Oxford University Press|year=2003}}</ref> For followers of the German Historical School, the key shift from traditional modes of economic activity to capitalism involved the shift from medieval restrictions on credit and money to the modern [[monetary system|monetary economy]] combined with an emphasis on the profit motive.

[[File:MisesLibrary.jpg|thumb|left|[[Ludwig von Mises]]]]

In the late 19th century, the German Historical School of economics diverged, with the emerging [[Austrian School]] of economics, led at the time by [[Carl Menger]]. Later generations of followers of the Austrian School continued to be influential in Western economic thought through much of the 20th century. The Austrian economist [[Joseph Schumpeter]], a forerunner of the Austrian School of economics, emphasized the "[[creative destruction]]" of capitalism — the fact that market economies undergo constant change. At any moment of time, posits Schumpeter, there are rising industries and declining industries. Schumpeter, and many contemporary economists influenced by his work, argue that resources should flow from the declining to the expanding industries for an economy to grow, but they recognized that sometimes resources are slow to withdraw from the declining industries because of various forms of institutional resistance to change.

The Austrian economists [[Ludwig von Mises]] and [[Friedrich Hayek]] were among the leading defenders of [[market capitalism]] against 20th century proponents of socialist [[planned economies]]. Mises and Hayek argued that only market capitalism could manage a complex, modern economy. Since a modern economy produces such a large array of distinct goods and services, and consists of such a large array of consumers and enterprises, asserted Mises and Hayek, the information problems facing any other form of economic organization other than market capitalism would exceed its capacity to handle information. Thinkers within [[Supply-side economics]] built on the work of the Austrian School, and particularly emphasize [[Say's Law]]: "supply creates its own demand." Capitalism, to this school, is defined by lack of state restraint on the decisions of producers.

Austrian economists claim that [[Carl Marx|Marx]] failed to make the distinction between ''capitalism'' and ''[[mercantilism]]''.<ref name="rothbard">{{cite journal|title=A Future of Peace and Capitalism |last=Rothbard |first=Murray N. |authorlink=Murray N. Rothbard |url=http://www.mises.org/story/1559 |journal=Modern Political Economy |pages=419-430 |location=Boston |publisher=Allyn and Bacon |year=1973|quote=In fact the mercantilist system is essentially what we’ve got right now. There is very little difference between state monopoly capitalism, or corporate state capitalism, whatever you want to call it, in the United States and Western Europe today, and the mercantilist system of the pre-Industrial Revolution era. There are only two differences; one is that their major activity was commerce and ours is industry. But the essential modus operandi of the two systems is exactly the same: monopoly privilege, a complete meshing in what is now called the "partnership of government and industry," a pervasive system of militarism and war contracts, a drive toward war and imperialism; the whole shebang characterized the seventeenth and eighteenth centuries.}}</ref><ref>{{cite journal |last=Osterfeld |first=David |title=Marxism, Capitalism and Mercantilism| journal=The Review of Austrian Eonomics |volume=5 |issue=1 |issn=0889-304 |year=1991|pages=107-114}}</ref> They argue that Marx conflated the [[imperialistic]], [[colonialistic]], [[protectionist]] and [[economic interventionism|interventionist]] doctrines of mercantilism with capitalism.

Austrian economics has been a major influence on the ideology of [[libertarianism]], which considers [[laissez-faire]] capitalism to be the ideal economic system. [[Murray Rothbard]], who founded the [[Center for Libertarian Studies]] and the [[Journal of Libertarian Studies]], is referred to as the father of [[Libertarianism]] in the United States. He was associated with the 1982 creation of the [[Ludwig von Mises Institute]] and later was its academic vice president. In 1987 he started the scholarly "Review of Austrian Economics," now called the [[Quarterly Journal of Austrian Economics]]. Rothbard coined the term "[[Anarcho-capitalism]]".

=== Keynesian economics ===
{{main|Keynesian economics}}
[[File:John Maynard Keynes.jpg|thumb|[[John Maynard Keynes]]]]

In his 1937 ''[[The General Theory of Employment, Interest, and Money]]'', the British economist [[John Maynard Keynes]] argued that capitalism suffered a basic problem in its ability to recover from periods of slowdowns in investment. Keynes argued that a capitalist economy could remain in an indefinite [[economic equilibrium|equilibrium]] despite high [[unemployment]]. Essentially rejecting [[Say's law]], he argued that some people may have a [[liquidity preference]] which would see them rather hold money than buy new goods or services, which therefore raised the prospect that the [[Great Depression]] would not end without what he termed in the ''General Theory'' "a somewhat comprehensive socialization of investment."

Keynesian economics challenged the notion that laissez-faire capitalist economics could operate well on their own, without state intervention used to promote [[aggregate demand]], fighting high unemployment and [[Deflation (economics)|deflation]] of the sort seen during the 1930s. He and his followers recommended "[[Deficit spending|pump-priming]]" the economy to avoid [[recession]]: cutting taxes, increasing government borrowing, and spending during an economic down-turn. This was to be accompanied by trying to control wages nationally partly through the use of [[inflation]] to cut real wages and to deter people from holding money.<ref>{{cite web |url=http://www.marxists.org/archive/mattick-paul/1969/marx-keynes/ch01.htm |title=Marx and Keynes: the limits of the mixed economy |author=Paul Mattick |accessdate=2008-02-26|publisher=Marxists }}</ref> John Maynard Keynes tried to provide solutions to many of Marx’s problems without completely abandoning the classical understanding of capitalism. His work attempted to show that regulation can be effective, and that economic stabilizers can reign in the aggressive expansions and recessions that Marx disliked. These changes sought to create more stability in the business cycle, and reduce the abuses of laborers. Keynesian economists argue that Keynesian policies were one of the primary reasons capitalism was able to recover following the Great Depression.<ref>Erhardt III, Erwin. "History of Economic Development." University of Cincinnati. Lindner Center Auditorium, Cincinnati. 07 Nov. 2008.</ref>The premises of Keynes’s work have, however, since been challenged by neoclassical and [[supply-side economics]] and the Austrian School.

Another challenge to Keynesian thinking came from his colleague [[Piero Sraffa]], and subsequently from the [[Neo-Ricardianism|Neo-Ricardian school]] that followed Sraffa. In Sraffa's highly technical analysis, capitalism is defined by an entire system of social relations among both producers and consumers, but with a primary emphasis on the demands of production. According to Sraffa, the tendency of capital to seek its highest [[rate of profit]] causes a dynamic instability in social and economic relations.

=== Neoclassical economics and the Chicago School ===
Today, most academic research on capitalism in the English-speaking world draws on [[neoclassical economics|neoclassical economic thought]]. It favors extensive market coordination and relatively neutral patterns of governmental market regulation aimed at maintaining property rights, rather than privileging particular social actors; deregulated [[labor market]]s; corporate governance dominated by financial owners of firms; and financial systems depending chiefly on [[capital market]]-based financing rather than state financing.

Milton Friedman effectively took many of the basic principles set forth by Adam Smith and the classical economists and modernized them, in a way. One example of this is his article in the September 1970 issue of The New York Times Magazine, where he claims that the social responsibility of business is “to use its resources and engage in activities designed to increase its profits…(through) open and free competition without deception or fraud.” This is tantamount to Smith’s argument that self interest in turn benefits the whole of society.<ref>Friedman, Milton. "The Social Responsibility of Business is to Increase its Profits." The New York Times Magazine 13 Sep. 1970.</ref> Work like this helped lay the foundations for the coming remarketization of capitalism and the supply-side economics of Ronald Reagan and Margaret Thatcher.

The [[Chicago school (economics)|Chicago School of economics]] is best known for its free market advocacy and [[monetarist]] ideas. According to [[Milton Friedman]] and monetarists, market economies are inherently stable [[laissez-faire|if left to themselves]] and depressions result only from government intervention.<ref>{{cite book|title=Macroeconomics and New Macroeconomics|author=Felderer, Bernhard}}</ref> Friedman, for example, argued that the Great Depression was result of a contraction of the money supply, controlled by the [[Federal Reserve System|Federal Reserve]], and not by the lack of investment as Keynes had argued. [[Ben Bernanke]], current Chairman of the Federal Reserve, is among the economists today generally accepting Friedman's analysis of the causes of the Great Depression.<ref name="fed">{{cite web|url=http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm|title=Remarks by Governor Ben S. Bernanke |publisher=The Federal Reserve Board|accessdate=2008-02-26|date=2002-11-08|author=Ben Bernanke}}</ref>

Neoclassical economists, today the majority of economists,<ref>{{cite book|author=Yonary, Yuval P.|title=The Struggle Over the Soul of Economics|year=1998|publisher=Princeton University Press|isbn=0691034192|pages=29}}</ref> consider value to be subjective, varying from person to person and for the same person at different times, and thus reject the labor theory of value. [[Marginalism]] is the theory that economic value results from marginal utility and [[marginal cost]] (the [[marginal concepts]]). These economists see capitalists as earning profits by forgoing current consumption, by taking risks, and by organizing production.

== History ==
{{Main|History of capitalism}}

=== Mercantilism ===
{{Main article|Mercantilism}}
[[File:Lorrain.seaport.jpg|left|thumb|A painting of a French seaport from 1638 at the height of [[mercantilism]].]]
The period between the 16th and 18th centuries is commonly described as [[mercantilism]]. <ref name="Burnham" /> This period was associated with geographic discoveries by merchant overseas traders, especially from England and the Low Countries; the [[European colonization of the Americas]]; and the rapid growth in overseas trade. Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist production methods.<ref name="Scott" /> While some scholars see mercantilism as the earliest stage of modern capitalism, others argue that modern capitalism did not emerge until later. For example, noting the pre-capitalist features of mercantilism, [[Karl Polanyi]] argued that capitalism did not emerge until the establishment of [[free trade]] in Britain in the 1830s.<ref>Polanyi, Karl. The Great Transformation. 1944.</ref>

The earliest forms of mercantilism date back to the [[Roman Empire]]. When the Roman Empire expanded, the mercantilist economy expanded throughout Europe. After the [[decline of the Roman Empire|collapse of the Roman Empire]], most of the European economy became controlled by local [[feudal]] powers, and mercantilism collapsed there. However, mercantilism persisted in [[Arabia]]. Due to its proximity to neighboring countries, the Arabs established trade routes to [[Egypt]], [[Persia]], and [[Byzantium]]. As [[Islam]] spread in the 7th century, mercantilism spread rapidly to [[Spain]], [[Portugal]], [[Northern Africa]], and [[Asia]]. Mercantilism finally revived in [[Europe]] in the 14th century, as mercantilism spread from [[Spain]] and [[Portugal]].<ref>[http://history.howstuffworks.com/european-history/capitalism3.htm The Rise of Capitalism]</ref>

Feudalism began to lay some of the foundations necessary for the development of mercantilism, a precursor to capitalism. Feudalism took place mostly in Europe and lasted from the medieval period up through the 16th century. Feudal manors were almost entirely self sufficient, and therefore limited the role of the market. This stifled the growth of capitalism. However, the relatively sudden emergence of new technologies and discoveries, particularly in the industries of agriculture <ref>James Fulcher, Capitalism (New York: Oxford University Press, 2004) 19</ref> and exploration, revitalized the growth of capitalism. The most important development at the end of Feudalism was the emergence of “the dichotomy between wage earners and capitalist merchants”.<ref>Degen, Robert. The Triumph of Capitalism. 1st ed. New Brunswick, NJ: Transaction Publishers, 2008. p. 12</ref>

Among the major tenets of mercantilist theory was [[bullionism]], a doctrine stressing the importance of accumulating [[precious metals]]. Mercantilists argued that a state should export more goods than it imported so that foreigners would have to pay the difference in precious metals. Mercantilists asserted that only raw materials that could not be extracted at home should be imported; and promoted government subsides, such as the granting of monopolies and protective [[tariff]]s, were necessary to encourage home production of manufactured goods. European [[merchant]]s, backed by state controls, [[subsidy|subsidies]], and [[monopoly|monopolies]], made most of their profits from the buying and selling of 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 Pres, 1961), p. 24.</ref> Similar practices of economic regimentation had begun earlier in the medieval towns. However, under mercantilism, given the contemporaneous rise of the [[absolutism]], the state superseded the local [[guild]]s as the regulator of the economy. During that time the guilds essentially functioned like [[cartels]] that monopolized the quantity of craftsmen to earn above-market wages.<ref>Mancur Olson, The rise and decline of nations: economic growth, staglaction, and social rigidities (New Haven & London 1982).</ref>

=== Commercialism ===
At the period of the 18th century, the commercial stage of capitalism transcended from the previous domination of capitalism by merchants. Commercialism, or commercial capitalism, originated from the start of the [[East India Company|British]] and [[Dutch East India Company]].<ref name="britannica2">{{cite book|title=Economic system :: Market systems|url=http://www.britannica.com/EBchecked/topic/178493/economic-system/61117/Market-systems#toc242146|publisher=Encyclopedia Britannica|year=2006}}</ref><ref name="Banaji" /> These companies were characterized by its monopoly on trade, granted by the [[letters patent]]s. Recognized as chartered [[joint-stock company|joint-stock companies]] by the state, these companies enjoyed a large sum of power, ranging from lawmaking, military, and treaty-making privileges.<ref>{{cite web |title=chartered company|url=http://www.bartleby.com/65/ch/chartere.html}}</ref> Characterized by its [[colonialism|colonial]] and [[expansionism|expansionary]] powers by states, powerful nation-states sought to accumulate precious metals, and military conflicts arose.<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]].

=== Industrialism ===
{{see also|Industrial Revolution}}
[[File:london.bankofengland.arp.jpg|thumb|The [[Bank of England]] is one of the oldest [[central bank]]s. It was founded in 1694 and [[nationalised]] in 1946.]]
By the late 18th century, mercantilism was in crisis: mercantile activity could not produce sufficient wealth to pay for the military expenditures of the states that protected, and depended on, commerce. This crisis intensified with the [[Industrial Revolution]]. Although mercantilist policies endured in European countries with weak industrial bases, such as [[Prussia]] and [[Imperial Russia|Russia]], into the 19th century, rapidly industrializing countries began questioning the value of mercantilist policies by the late 18th century. This is most evident in Great Britain, the home of the Industrial Revolution, where a new group of economic theorists, led by [[David Hume]]<ref>{{cite book|author=Hume, David|title=Political Discourses|location=Edinburgh|publisher=A. Kincaid &amp; A. Donaldson|year=1752}}</ref> and [[Adam Smith]], in the mid 18th century, challenged fundamental [[mercantilist]] doctrines as the belief that the amount of the world’s wealth remained constant and that a state could only increase its wealth at the expense of another state.

At the same time that philosophers and politicians were debating the merits of mercantilism, the mid-18th century gave rise to an alternative set of economic relations and practices: industrial (bourgeois) capitalism.<ref name="britannica2"/><ref name="Banaji" /> Most scholars agree that the emergence of capitalism was made possible by earlier economic developments in England. According to [[Marxism|Marxists]], it was made possible by the exploitation of wage-labor on a large scale, which English landowners first experimented with after the crisis of the 14th century. According to [[World Systems Theory|World Systems Theorists]] like [[Immanuel Wallerstein]], it was made possible by the accumulation of vast amounts of capital under the merchant phase of capitalism.

During the resulting [[Industrial Revolution]], the industrialist replaced the merchant as a dominant actor in the capitalist system and effected the decline of the traditional handicraft skills of [[artisan]]s, [[guild]]s, and [[journeyman|journeymen]]. Also during this period, capitalism marked the transformation of relations between the British landowning gentry and peasants, giving rise to the production of [[cash crop]]s for the market rather than for subsistence on a [[feudal]] [[Manorialism|manor]]. The surplus generated by the rise of commercial agriculture encouraged increased mechanization of agriculture and the rise of the [[bourgeoisie]].

Marx dated industrial capitalism from the last third of the 18th century, marked the development of the [[factory]] system of manufacturing, characterized by a complex [[division of labor]] between and within work process and the routinization of work tasks; and finally established the global domination of the capitalist mode of production.<ref name="Burnham" /> In the midst of this newly developing concept of division of labor came exploitation of labor on a much larger scale than was ever seen before.<ref name="Fulcher, James 2004">Fulcher, James. Capitalism. 1st ed. New York: Oxford University Press, 2004.</ref>

Britain also abandoned its [[protectionist]] policy, as embraced 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.<ref name="laissezf">{{cite web |title=laissez-faire|url=http://www.bartleby.com/65/la/laissezf.html}}</ref> In the 1840s, Britain adopted a less protectionist policy, with the repeal of the [[Corn Laws]] and the [[Navigation Acts]].<ref name="Burnham" /> Britain reduced [[tariffs]] and [[import quota|quotas]], in line with [[Adam Smith]] and [[David Ricardo]]'s advocacy for [[free trade]]. As noting the various pre-capitalist features of mercantilism, [[Karl Polanyi]] argued that capitalism did not emerge until the establishment of [[free trade]] in Britain in the 1830s. Other sources indicate that mercantilism fell after the repeal of the Navigation Acts in 1849,<ref name="laissezf"/><ref>{{cite web |title=Navigation Acts |url=http://www.bartleby.com/65/na/NavigatA.html}}</ref><ref name="mercantilism">{{cite web|last=LaHaye|first=Laura|title=Mercantilism|url=http://www.econlib.org/library/Enc/Mercantilism.html|work=[[Concise Encyclepedia of Economics]]|publisher=Fortune Encyclopedia of Economics|year=1993}}</ref> and [[libertarians]] argue that the current system is still mercantilist.<ref name="rothbard"/>

However, due to [[United Kingdom company law|companies legislation]], British capitalism was not exclusively laissez-faire.<ref name="walker">{{cite journal|title=Laissez-faire, Collectivism And Companies Legislation In Nineteenth-century Britain|last=Walker|first=S.P.|journal=The British Accounting Review|volume=28|number=4|pages=305--324|year=1996|publisher=Elsevier|doi=10.1006/bare.1996.0021}}</ref> The British state created [[charter]]s, creating immunites for the coporations under the [[Limited Liability Act 1855]] and the [[Joint Stock Companies Act 1856]]. The [[British East India Company]] and controls in major industries during that time were also important examples of economic regulations. ''See [[List of Acts of Parliament of the United Kingdom Parliament, 1840-1859]] and [[History of labour law in the United Kingdom]]''.

Most of the early proponents of the [[liberal theory of economics]] in the United States subscribed to the [[American School (economics)|American School]]. This school of thought was inspired by the ideas of [[Alexander Hamilton]], who proposed the creation of the [[First Bank of the United States|First National Bank]] and the [[Second National Bank]] and increased tariffs (e.g. [[tariff of 1828]]) to favor northern industrial interests. Following Hamilton's death, the more abiding protectionist influence in the antebellum period came from [[Henry Clay]] and his ''[[American System (economic plan)|American System]]''.

In the mid-19th century, the United States followed the [[Whig Party (United States)|Whig]] tradition of economic liberalism, which included increased state control, regulation and [[macroeconomic]] development of [[infrastructure]].<ref name=guelzo>{{citation|first=Allen C.|last=Guelzo|title=Abraham Lincoln: Redeemer President|isbn=0-8028-3872-3|year=1999|url=http://www.questia.com/PM.qst?a=o&d=99466893|publisher=W.B. Eerdmans Pub. Co|location=Grand Rapids, Mich.}}</ref> [[Public works]] such as the provision and regulation [[transportation]] such as railroads took effect. The [[Pacific Railway Acts]] provided the development of the [[First Transcontinental Railroad]].<ref name=guelzo/> In order to help pay for its war effort in the [[American Civil War]], the [[United States government]] imposed its first personal [[income tax]], on August 5, 1861, as part of the [[Revenue Act of 1861]] (3% of all incomes over US $800; rescinded in 1872).

Following the [[American Civil War]], the movement towards a mixed economy accelerated with even more [[protectionism]] and [[government regulation]]. In the 1880s and 1890s, significant tariff increases were enacted (see the [[McKinley Tariff]] and [[Dingley Tariff]]). Moreover, with the enactment of the [[Interstate Commerce Act of 1887]], the [[Sherman Anti-trust Act]], the federal government began to assume an increasing role in regulating and directing the country's economy.

=== Monopolism ===
{{see also|Gilded Age|Progressive Era}}
In the late 19th century, the control and direction of large areas of industry came into the hands of financiers. This period has been defined as [[state capitalism]], [[state monopoly capitalism]], or [[corporate capitalism]],<ref name="rothbard"/><ref>{{cite web |last=Carson |first=Kevin |title=The Iron Fist Behind the Invisible Hand: Corporate Capitalism As a State-Guaranteed System of Privilege |url=http://www.mutualist.org/id4.html}}</ref><ref>{{cite journal |last=Block |first=Walter |authorlink=Walter Block |title=Kevin Carson as Dr. Jekyll and Mr. Hyde |url=http://mises.org/journals/jls/20_1/20_1_4.pdf |journal=[[Journal of Libertarian Studies]] |volume=20 |issue=1 |pages=35–46 |year=2006}}</ref> characterized by the subordination of processes of production to the accumulation of profits in a [[financial system]].<ref name="Scott" /> Major characteristics of capitalism in this period included the establishment of large industrial cartels or [[monopoly|monopolies]]; the ownership and management of industry by financiers divorced from the production process; and the development of a complex system of [[banking]], an [[equity market]], and corporate holdings of capital through [[stock]] ownership.<ref name="Scott" /> Increasingly, large industries and land became the subject of profit and loss by financial [[speculator]]s.

From about the [[American Civil War]]<ref name="stromberg-monopoly-capitalism">{{cite journal|author=Stromberg, Joseph R.|authorlink=Joseph R. Stromberg|title=The Role of State Monopoly Capitalism in the American Empire|url=http://mises.org/journals/jls/15_3/15_3_3.pdf|journal=Journal of Libertarian Studies|volume=15|issue=3|year=2001|pages=74–75}}</ref><ref>{{cite web |last=Carson |first=Kevin |authorlink=Kevin Carson |title=Chapter Six: The Rise of Monopoly Capitalism |url=http://www.mutualist.org/id80.html}}</ref> to the early 20th century, capitalism has also been increasingly influenced by large, [[monopoly|monopolistic]] corporations. The [[oil]], [[telecommunication]], [[railroad]], [[shipping]], [[banking]] and [[financial]] industries are characterized by its monopolistic domination. Inside these [[corporation]]s, a division of labor separates [[shareholder]]s, owners, managers, and actual laborers.<ref>{{cite book|author=Scott, John|title=A Dictionary of Sociology|publisher=Oxford University Press|year=2005}}</ref> Although the concept of monopoly capitalism originated among Marxist theorists,<ref>{{cite journal|author=Charlene Gannage|title=E.S. Varga and the Theory of State Monopoly Capitalism|year=1980|journal=Review of Radical Political Economics|volume=12|issue=3|pages=36–49|doi=10.1177/048661348001200304}}</ref> non-Marxist economic historians have also commented on the rise of monopolies and trusts in the period. {{cite journal|author=Stromberg, Joseph R.|authorlink=Joseph R. Stromberg|title=The Role of State Monopoly Capitalism in the American Empire|url=http://mises.org/journals/jls/15_3/15_3_3.pdf|journal=Journal of Libertarian Studies|volume=15|issue=3|year=2001|pages=74–75}}">

By the last quarter of the 19th century, the emergence of large industrial trusts had provoked legislation in the U.S. to reduce the monopolistic tendencies of the period. Gradually, during this [[Progressive Era]], the U.S. federal government played a larger and larger role in passing [[United States antitrust law|antitrust]] laws and regulation of industrial standards for key industries of special public concern. However, contemporary, non-bourgeois economic historians believe these new laws were in fact designed to aid large corporations at the expense of smaller competitors.<ref>{{cite book|title=A History of Money and Banking in the United States: The Colonial Era to World War II|pages=185–186|author=Rothbard, Murray}}</ref> By the end of the 19th century, [[Depression (economics)|economic depressions]] and [[boom and bust]] [[business cycle]]s had become a recurring problem, although such problems were most likely caused by government intervention, not failures in free markets (Rand 1967, Friedman 1962, Bernstein 2005). In particular, the [[Long Depression]] of the 1870s and 1880s and the [[Great Depression]] of the 1930s affected almost the entire capitalist world, and generated discussion about capitalism’s long-term survival prospects. In the early 20th century, a succession of U.S. Presidents, beginning with Warren Harding's "Return to Normalcy," the state decreased taxation rates, with the [[Revenue Act of 1924]] and [[Revenue Act of 1926|1926]]. This allowed for the prosperity of "The Roaring Twenties," but later was said to be largely responsible for the Great Depression.<ref>Degen, Robert. The Triumph of Capitalism. 1st ed. New Brunswick, NJ: Transaction Publishers, 2008.</ref> During the 1930s, Marxist commentators often posited the possibility of capitalism's decline or demise, often in alleged contrast to the ability of the [[Soviet Union]] to avoid suffering the effects of the global depression.<ref>{{cite book|author=Engerman, Stanley L.|title=The Oxford Companion to United States History|publisher=Oxford University Press|year=2001}}</ref>

=== Keynesianism and neoliberalism ===
{{main|Keynesianism|Neoliberalism}}
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. In 1929, for example, total U.S. government expenditures (federal, state, and local) amounted to less than one-tenth of [[GNP]]; from the 1970s they amounted to around one-third (EB). Similar increases were seen in all bourgeois economies, some of which, such as France, have reached even higher ratios of government expenditures to GNP than the United States. These economies have since been widely described as "[[mixed economy|mixed economies]]."

[[File:NY stock exchange traders floor LC-U9-10548-6.jpg|thumb|The New York [[stock exchange]] [[trading room|traders' floor]] (1963)]]

During the postwar boom, a broad array of new analytical tools in the social sciences were developed to explain the social and economic trends of the period, including the concepts of [[post-industrial society]] and the [[welfare state]].<ref name="Burnham" /> The phase of capitalism from the beginning of the postwar period through the 1970s has sometimes been described as “[[state capitalism]]”, especially by Marxian thinkers.<ref name="state capitalism">Early proponents of the term "state capitalism" include, for example, [[Tony Cliff]], [[Raya Dunayevskaya]], [[CLR James]] and [[Paul Mattick]]. [[Ernest Mandel]] has been a particularly prominent advocate of the analysis of post-WWII conditions as [[state capitalism]]. (See, for example, Mandel's ''The Theory of “State Capitalism”''.{{cite web |title=The Theory of “State Capitalism”|year=1951-06-01 |url=http://www.ernestmandel.org/en/works/txt/FI/theory_of_statecapitalism.htm |archiveurl=http://web.archive.org/web/20061002030657/http://www.ernestmandel.org/en/works/txt/FI/theory_of_statecapitalism.htm |archivedate=2006-10-02 |author=Ernest Mandel |accessdate=2008-02-26}}</ref> This era was greatly influenced by Keynesian economic stabilization policies.

The long postwar boom ended in the late 1960s and early 1970s, and the situation was worsened by the rise of [[stagflation]].<ref>{{cite book|author=Barnes, Trevor J.|title=Reading economic geography|publisher=Blackwell Publishing|isbn=063123554X|pages=127|year=2004}}</ref> Exceptionally high [[inflation]] combined with slow output growth, rising unemployment, and eventually [[recession]] caused loss of credibility of [[Keynesian]] welfare-statist mode of regulation. Under the influence of [[Friedrich Hayek]] and [[Milton Friedman]], Western states embraced policy prescriptions inspired by the laissez-faire capitalism and [[classical liberalism]]. In particular, [[monetarism]], a theoretical alternative to Keynesianism that is more compatible with laissez-faire, gained increasing prominence in the capitalist world, especially under the leadership of [[Ronald Reagan]] in the U.S. and [[Margaret Thatcher]] in the UK in the 1980s. Finally, the general public's interest shifted from the collectivist concerns of Keynes's managed capitalism to a focus on individual freedom and choice, called "remarketized capitalism." <ref name="Fulcher, James 2004"/> In the eyes of many economic and political commentators, collapse of the [[Soviet Union]] supposedly brought further evidence of superiority of market capitalism over communism.

=== Globalization ===
:{{main article|Globalization}}
Although overseas trade has been associated with the development of capitalism for over five hundred years, some thinkers argue that a number of trends associated with [[globalization]] have acted to increase the mobility of people and capital since the last quarter of the 20th century, combining to circumscribe the room to maneuver of states in choosing non-capitalist models of development. Today, these trends have bolstered the argument that capitalism should now be viewed as a truly [[world government|world system]].<ref name="Burnham" /> However, other thinkers argue that globalization, even in its quantitative degree, is no greater now than during earlier periods of capitalist trade.<ref>{{cite book |title=After the New Economy |last=Henwood |first=Doug |publisher=New Press |date=2003-10-01 |isbn=1-56584-770-9}}</ref> The roots of globalized capitalism can be traced back to the imperialism of the early 20th century. Imperialistic policies promoted the spread of capitalistic principles, and the doors of trade stayed open in foreign countries even after imperialism had come to an end.<ref name="Fulcher, James 2004"/>

After the abandonment of the [[Bretton Woods system]] and the strict state control of foreign exchange rates, the total value of transactions in foreign exchange was estimated to be at least twenty times greater than that of all foreign movements of goods and services (EB). The internationalization of finance, which some see as beyond the reach of state control, combined with the growing ease with which large corporations have been able to relocate their operations to low-wage states, has posed the question of the 'eclipse' of state sovereignty, arising from the growing 'globalization' of capital.<ref>{{cite journal|author=Evans, Peter|title=The Eclipse of the State? Reflections on Stateness in an Era of Globalization|journal=World Politics|volume=50|issue=1|date=1997-10-01|pages=62–87}}</ref>

While scientists generally agree about the size of global [[income inequality]], there is a general disagreement about the recent direction of change of it.<ref>{{cite journal|author=Milanovic, Branko|title=Global Income Inequality: What It Is And Why It Matters?|journal=DESA Working Paper|volume=26|date=2006-08-01|pages=9}}</ref> However, it is growing within particular nations such as China.<ref>{{cite web|url=http://www.columbia.edu/~xs23/papers/worldistribution/NYT_november_27.htm|author=Brooks, David|title=Good News about Poverty|accessdate=2008-02-26|date=2004-11-27}}</ref> The book ''[[The Improving State of the World]]'' argues that economic growth since the Industrial Revolution has been very strong and that factors such as adequate [[nutrition]], [[life expectancy]], [[infant mortality]], [[literacy]], prevalence of [[child labor]], [[education]], and available free time have improved greatly.

The biggest reason for the increasingly global capitalist economy is the telecommunications revolution that has taken place over the last twenty years. Fax machines, cell phones, and the internet have made it possible for work to be done and transactions to take place from almost anywhere in the world.<ref name="Fulcher, James 2004"/>

In 2008, state intervention in global capital markets by the American and other governments was seen by many as signaling a crisis for free-market capitalism. Serious turmoil in the banking system and financial markets due in part to the [[subprime mortgage crisis]] reached a critical stage during September 2008, characterized by severely contracted [[Market liquidity|liquidity]] in the global credit markets and going-concern threats to investment banks and other institutions. <ref>[http://www.whitehouse.gov/news/releases/2008/09/images/20080925-9_v092508db-0111-515h.html "President Bush Meets with Bicameral and Bipartisan Members of Congress to Discuss Economy"], [[Whitehouse.gov]], September 25, 2008.</ref><ref>[http://news.bbc.co.uk/1/hi/business/7641733.stm House Votes Down Bail-Out Package]</ref>

== Political advocacy ==
=== Support ===
[[File:Gdp chart.png|thumb|300px|World's [[GDP]] per capita shows exponential acceleration since the beginning of the Industrial Revolution.<ref>{{cite book |title=The World Economy: A Millennial Perspective |author=Angus Maddison |publisher=[[OECD]] |location=Paris |date=2001 |isbn=92-64-18998-X}}</ref>]]
Many theorists and policymakers in predominantly capitalist nations have emphasized capitalism's 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=http://www.minneapolisfed.org/pubs/region/04-05/essay.cfm |title=The Industrial Revolution: Past and Future |author=Robert E. Lucas Jr. |work=Federal Reserve Bank of Minneapolis 2003 Annual Report |accessdate=2008-02-26}}</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 |author=J. Bradford DeLong |accessdate=2008-02-26 }}</ref> While the measurements are not identical, proponents argue that increasing GDP (per capita) is empirically shown to bring about improved standards of living, such as better availability of food, housing, clothing, and health care.<ref>{{cite web |url=http://www.econlib.org/library/Enc/IndustrialRevolutionandtheStandardofLiving.html |title=Industrial Revolution and the Standard of Living |author=Clark Nardinelli |accessdate=2008-02-26 }}</ref> The decrease in the number of hours worked per week and the decreased participation of children and the elderly in the workforce have been attributed to capitalism.<ref>{{cite book|author=Barro, Robert J.|title=Macroeconomics|publisher=MIT Press|year=1997|isbn=0262024365}}</ref><ref>{{cite web|url=http://www.capitalism.org/faq/labor.htm|title=Labor and Minimum Wages|publisher=Capitalism.org|accessdate=2008-02-26}}</ref><ref>{{cite web|url=http://www.mises.org/article.aspx?Id=1481|title=Morality and Economic Law: Toward a Reconciliation|publisher=Ludwig von Mises Institute|accessdate=2008-02-26|author=Woods, Thomas E.|date=2004-04-05}}</ref><ref>{{cite web|url=http://www.taemag.com/issues/articleid.18013/article_detail.asp|title=Three Cheers for Global Capitalism |publisher=The American Enterprise|accessdate=2008-02-26|author=Norberg, Johan}}</ref> Proponents also believe that a capitalist economy offers far more opportunities for individuals to raise their income through new professions or business ventures than do other economic forms. To their thinking, this potential is much greater than in either traditional [[feudal]] or [[tribe|tribal]] societies or in socialist societies.

[[Milton Friedman]] has argued that the [[economic freedom]] of competitive capitalism is a requisite of [[political freedom]]. Friedman argued that centralized control of economic activity is always accompanied by political repression. In his view, transactions in a market economy are voluntary, and the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminish power to coerce. Friedman's view was also shared by [[Friedrich Hayek]] and [[John Maynard Keynes]], both of whom believed that capitalism is vital for freedom to survive and thrive.<ref>{{cite book|author=Friedrich Hayek|title=The Road to Serfdom|publisher=University Of Chicago Press|year=1944|isbn=0-226-32061-8}}</ref><ref>{{cite book|author=Bellamy, Richard|title=The Cambridge History of Twentieth-Century Political Thought|publisher=Cambridge University Press|year=2003|isbn=0-521-56354-2|pages=60}}</ref>

Austrian School economists have argued that capitalism can organize itself into a complex system without an external guidance or planning mechanism. Friedrich Hayek coined the term "[[catallaxy]]" to describe what he considered the phenomenon of [[self-organization]] underpinning capitalism. From this perspective, in process of self-organization, the [[profit (economics)|profit]] motive has an important role. From transactions between buyers and sellers price systems emerge, and prices serve as a signal as to the urgent and unfilled wants of people. The promise of profits gives entrepreneurs incentive to use their knowledge and resources to satisfy those wants. Thus the activities of millions of people, each seeking his own interest, are coordinated.<ref>{{cite book|author=Walberg, Herbert|title=Education and Capitalism|publisher=Hoover Institution Press|year=2001|pages=87–89|isbn=0-8179-3972-5}}</ref>

This decentralized system of coordination is viewed by some supporters of capitalism as one of its greatest strengths. They argue that it permits many solutions to be tried, and that real-world competition generally finds a good solution to emerging challenges. In contrast, they argue, [[central planning]] often selects inappropriate solutions as a result of faulty forecasting. However, in all existing modern economies, the state conducts some degree of [[planned economy|centralized economic planning]] (using such tools as allowing the country's [[central bank]] to set base [[interest rates]]), ostensibly as an attempt to improve efficiency, attenuate cyclical volatility, and further particular social goals. Proponents who follow the Austrian School argue that even this limited control creates inefficiencies because we cannot predict the long-term activity of the economy. Milton Friedman, for example, has argued that the [[Great Depression]] was caused by the erroneous policy of the [[Federal Reserve System|Federal Reserve]].<ref name="fed"/>

[[Ayn Rand]] was a prominent philosophical supporter of [[laissez-faire capitalism]]; her novel [[Atlas Shrugged]] was one of the most influential publications ever written on the subject of business and continues to be a best-seller.<ref>[http://www.nytimes.com/2007/09/15/business/15atlas.html?_r=1&oref=slogin ''Ayn Rand's Literature of Capitalism'', The New York Times]</ref> The first person to endow capitalism with a new code of morality (Rational [[Selfishness]]),<ref>[[The Virtue of Selfishness]]</ref> she did not justify capitalism on the grounds of pure "practicality" (that it is the best wealth-creating system), or the [[supernatural]] (that [[God]] or [[religion]] supports [[Capitalism: the Unknown Ideal|capitalism]]), or because it benefits the most people, but maintained that it is the only morally valid [[socio-political]] system because it allows people to be free to act in their rational self-interest.<ref>[[Capitalism: The Unknown Ideal]]</ref> These thinkers have had a substantial influence on the [[Libertarian Party (United States)|Libertarian Party]]. The Libertarian Party strongly advocates the elimination of most, if not all, [[Sovereign state|state]] involvement in the marketplace. The [[Republican Liberty Caucus]] is the [[libertarian]] branch of the [[Republican Party (United States)|Republican Party]].

=== Criticism ===
{{main|Criticisms of capitalism|Anti-capitalism}}
{{Weasel|date=March 2009}}
{{Refimprove|date=March 2009}}

Prominent leftist critics have included [[socialism|socialists]] (like [[Karl Marx]], [[Friedrich Engels]], [[Vladimir Lenin]], [[Mao Zedong]], [[Leon Trotsky]], [[Antonio Gramsci]], [[Rosa Luxemburg]], [[Slavoj Zizek]], [[Che Guevara]], [[Fidel Castro]]) and [[anarchism|anarchists]] (including [[Benjamin Tucker]], [[Lysander Spooner]], [[Pierre-Joseph Proudhon]], [[Mikhail Bakunin]], [[Peter Kropotkin]], [[Emma Goldman]], [[Murray Bookchin]], [[Rudolf Rocker]], [[Noam Chomsky]], and many others). Movements like the [[Luddite]]s, [[Narodnik]]s, [[Shakers]], [[Utopian socialism|Utopian Socialists]] and others have opposed capitalism for various reasons. [[Marxism]] advocated a revolutionary overthrow of capitalism that would lead eventually to [[communism]]. Marxism also influenced [[Social democracy|social democratic]] and [[Labour Party|labour parties]], which seek change through existing democratic channels instead of revolution, and believe that capitalism should be heavily regulated rather than abolished. Many aspects of capitalism have come under attack from the relatively recent [[anti-globalization]] movement.

Some religions criticize or outright oppose specific elements of capitalism. Some traditions of [[Judaism]], [[Christianity]], and [[Islam]] forbid [[usury|lending money at interest]], although methods of [[Islamic banking]] have been developed. Christianity has been a source of both praise and criticism for capitalism, particularly its [[economic materialism|materialist]] aspects.<ref>{{cite web|url=http://www.vatican.va/archive/ENG0015/__P8C.HTM#-2FX|title=III. The Social Doctrine of the Church|publisher=The Vatican|accessdate=2008-02-26}}</ref> The first socialists drew many of their principles from Christian values (see [[Christian socialism]]), against "bourgeois" values of profiteering, greed, selfishness, and hoarding. Christian critics of capitalism may not oppose capitalism entirely, but support a mixed economy in order to ensure adequate labor standards and relations, as well as economic justice. In addition, there are many prominent [[Protestant]] denominations (particularly in the United States) who have reconciled with — or are ardently in favor of — capitalism, particularly in opposition to secular socialism. However, in the U.S. and around the world there are many Protestant Christian traditions which are critical of, or even oppose, capitalism. Another critic is the Indian philosopher [[P.R. Sarkar]], founder of the [[Ananda Marga]] movement, who developed the [[Social cycle theory (Sarkar)|Social Cycle Theory]] as a solution to the [[Economic collapse|problems of capitalism]] called the [[Progressive Utilization Theory]] (PROUT).<ref>{{cite web |url=http://www.prout.org/aftercapitalism/ |title=After Capitalism |author=Dada Maheshvarananda |accessdate=2008-02-26}}</ref><ref>{{cite web |url=http://www.proutworld.org/|title=proutworld|accessdate=2008-02-26|publisher=ProutWorld}}</ref>

Some problems said to be associated with capitalism include: unfair and inefficient [[distribution of wealth]] and power; a tendency toward market [[monopoly]] or [[oligopoly]] (and government by [[oligarchy]]); [[imperialism]] and various forms of economic and cultural [[exploitation]]; and phenomena such as [[social alienation]], [[economic inequality|inequality]], [[unemployment]], and economic instability. Critics have maintained that there is an inherent tendency towards oligolopolistic structures when laissez-faire is combined with capitalist private property. Because of this tendency either laissez-faire, or private property, or both, have drawn fire from critics who believe an essential aspect of economic freedom is the extension of the freedom to have meaningful decision-making control over productive resources to everyone. Economist Branko Horvat asserts, "it is now well known that capitalist development leads to the concentration of capital, employment and power. It is somewhat less known that it leads to the almost complete destruction of economic freedom."<ref>{{cite book|author=Horvat, B.|title=The Political Economy of Socialism|location=Armonk, NY|publisher=M.E.Sharpe Inc.|pages=11}}</ref> [[Southern Methodist University|SMU]] Economics Professor and New York Times #1 best-selling author, [[Ravi Batra]], has long maintained that excessive income and wealth inequalities are a fundamental cause of financial crisis and economic depression in the capitalist economy.

Near the start of the 20th century, Vladimir Lenin argued that that state use of military power to defend capitalist interests abroad was an inevitable corollary of monopoly capitalism.<ref>{{cite web |url=http://www.marxists.org/archive/lenin/works/1916/imp-hsc/index.htm |title=Imperialism: The Highest Stage of Capitalism |author=Vladimir Lenin |accessdate=2008-02-26}}</ref> This concept of [[political economy]] concerning the relationship between economic and political power among and within states includes critics of capitalism who assign to it responsibility for not only economic [[exploitation]], but [[imperialism|imperialist]], [[colonialist]] and [[counter-revolutionary]] wars, repressions of workers and trade unionists, [[genocide]]s, [[wiktionary:massacre|massacres]], and so on.

Some environmentalists argue that capitalism requires continual economic growth, and will inevitably deplete the finite natural resources of the earth, and other broadly utilized resources. Such thinkers, including [[Murray Bookchin]], have argued that capitalist production [[externalities|externalizes]] environmental costs to all of society, and is unable to adequately mitigate its impact upon ecosystems and the biosphere at large. Supporters maintain, however, that it would be imprudent for capitalist societies to deplete resources to such an extent.

Some [[labor history (discipline)|labor historians]] and scholars, such as [[Immanuel Wallerstein]], Tom Brass and, latterly [[Marcel van der Linden]], have also argued that [[unfree labour|unfree labor]] — the use of a labor force of [[slavery|slaves]], [[indentured servant]]s, criminal convicts, political prisoners, and/or other coerced persons — is compatible with capitalist relations.<ref>That unfree labor is acceptable to capital was argued during the 1980s by Tom Brass. See ''Towards a Comparative Political Economy of Unfree Labor'' (Cass, 1999). {{cite web |url=http://www.historycooperative.org/journals/llt/52/linden.html |title="Labour History as the History of Multitudes", ''Labour/Le Travail'', 52, Fall 2003, p. 235-244 |author=Marcel van der Linden |accessdate=2008-02-26}}</ref>

=== Democracy, the state, and legal frameworks ===
{{Main|History of capitalist theory}}

The relationship between the [[Sovereign state|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 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|author=Hernando de Soto|accessdate=2008-02-26}}</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|author=Karl Marx|accessdate=2008-02-26}}</ref><ref>{{cite journal |author=N. F. R. Crafts |title=Enclosure and labor supply revisited |journal=Explorations in economic history |issue=15 |month=April |year=1978 |pages=172–183 |doi=10.1016/0014-4983(78)90019-0 |volume=15}}.</ref>

[[New institutional economics]], a field pioneered by [[Douglass North]], stresses the need of capitalism for a legal framework to function optimally, and focuses on the relationship between the historical development of capitalism and the creation and maintenance of political and economic institutions.<ref>{{cite book|author=North, Douglass C.|title=Institutions, Institutional Change and Economic Performance|publisher=Cambridge University Press|year=1990}}</ref> In new institutional economics and other fields focusing on public policy, economists seek to judge when and whether governmental intervention (such as [[tax]]es, [[Welfare (financial aid)|welfare]], and [[Regulatory economics|government regulation]]) can result in potential gains in efficiency. According to [[Gregory Mankiw]], a [[New Keynesian economics|New Keynesian economist]], governmental intervention can improve on market outcomes under conditions of "[[market failure]]," or situations in which the market on its own does not allocate resources efficiently.<ref>{{cite book|title=Principles of Economics|publisher=Harvard University|year=1997|pages=10|unused_data=Mankiw, N. Gregory}}</ref> The idea of market failure is that markets fail to realize all potential gains from trade. This means that markets fail to deliver perfect economic results. 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. Market failures are often small, and government failures are sometimes large. It is therefore the case that imperfect markets are often better than imperfect governmental alternatives. While all nations currently have some kind of market regulations, the desirable degree of regulation is disputed.

The relationship between [[democracy]] and capitalism is a contentious area in theory and 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 many theorists to posit a causal relationship between them, or that each affects the other. However, in the 20th century, according to some authors, capitalism also accompanied a variety of political formations quite distinct from liberal democracies, including [[fascism|fascist]] regimes, monarchies, and single-party states,<ref name="Burnham" /> while it has been observed{{Who|date=March 2008}} that many democratic societies such as the [[Bolivarian Republic of Venezuela]] and [[Anarchist Catalonia]] have been expressly anti-capitalist.<ref>On the democratic nature of the Venezuelan state, see [http://www.gobiernoenlinea.ve/estructura_edo/estructura_edo4.html]. On the current government's rejection of capitalism in favor of socialism, see[http://www.gobiernoenlinea.ve/misc-view/sharedfiles/Metas_Milenio.pdf] and[http://www.minci.gob.ve/motores/62/11852]</ref> While some thinkers argue that capitalist development more-or-less inevitably eventually leads to the emergence of democracy, others dispute this claim. Research on the [[democratic peace theory]] further indicates that capitalist democracies rarely make war with one another and have little internal violence.<ref>{{cite web |url=http://www.mtholyoke.edu/acad/intrel/ray.htm |title=Does democracy cause peace|author=James Lee Ray|accessdate=2008-02-26}}</ref><ref>{{cite web |url=http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTENERGY/0,,contentMDK:20708340~pagePK:210058~piPK:210062~theSitePK:336806,00.html |title=Towards a democratic civil peace? : opportunity, grievance, and civil war 1816-1992|author=Hegre, Håvard|accessdate=2008-02-26}}</ref> However critics of the democratic peace theory note that democratic capitalist states may fight infrequently or never with other democratic capitalist states because of Political similarity or political stability rather than because they are democratic (or capitalist).

Some commentators argue that though economic growth under capitalism has led to democratization in the past, it may not do so in the future. Under this line of thinking, authoritarian regimes have been able to manage economic growth without making concessions to greater political freedom.<ref>{{cite web|author=Mesquita, Bruce Bueno de|url=http://www.foreignaffairs.org/20050901faessay84507/bruce-bueno-de-mesquita-george-w-downs/development-and-democracy.html|title=Development and Democracy|date=2005-09|accessdate=2008-02-26|publisher=Foreign Affairs}}</ref><ref>{{cite web|author=Single, Joseph T.|url=http://www10.nytimes.com/cfr/international/20040901facomment_v83n4_siegle-weinstein-halperin.html?_r=5&oref=slogin&oref=slogin&oref=slogin&oref=slogin|title=Why Democracies Excel|date=2004-09|accessdate=2008-02-26|publisher=New York Times}}</ref>

In response to criticism of the system, some proponents of capitalism have argued that its advantages are supported by empirical research. For example, advocates of different [[Index of Economic Freedom]] point to a statistical correlation between nations with more economic freedom (as defined by the Indices) and higher scores on variables such as income and life expectancy, including the poor in these nations.

== See also ==
{{Portal|Capitalism}}
{{colbegin}}
* [[Anti-capitalism]]
* [[Anarcho-capitalism]]
* [[Capitalist mode of production]]
* [[Communism]]
* [[Corporate capitalism]]
* [[Crony capitalism]]
* [[Debt bondage]]
* [[Economic liberalism]]
* [[Finance capitalism]]
* [[Guaranteed minimum income]]
* [[Late capitalism]]
* [[Laissez-faire capitalism]]
* [[Liberal capitalism]]
* [[Libertarian Party (United States)]]
* [[Neo-Capitalism]]
* [[Objectivism (Ayn Rand)]]
* [[Pollution]]
* [[Post-capitalism]]
* [[Rogue State]] by William Blum
* [[Socialism]]
* [[State capitalism]]
* [[State monopoly capitalism]]
* [[Taxation as slavery]]
* [[The End of Work]]
* [[Technocapitalism]]
* [[Wage slavery]]
* [[When Corporations Rule the World]]
{{colend}}

== Notes ==
{{reflist|2}}

== References ==
* [[Christian Bacher|Bacher, Christian]] (2007) ''[http://books.google.co.uk/books?id=w_6PqBp64y0C Capitalism, Ethics and the Paradoxon of Self-exploitation]'' Grin Verlag. p.2
* [[Richard T. De George|De George, Richard T.]] (1986) ''Business ethics'' p. 104
* [[Scott Lash|Lash, Scott]] and [[John Urry (sociologist)|Urry, John]] (2000). ''Capitalism''. In [[Nicholas Abercrombie]], S. Hill & BS Turner (Eds.), ''[[The Penguin dictionary of sociology]]'' (4th ed.) (pp. 36–40).
* {{cite book|title=Profit Theory and Capitalism|author=Obrinsky, Mark|authorlink=Mark Obrinsky|publisher=University of Pennsylvania Press|url=http://www.questia.com/PM.qst?a=o&d=4995059|year=1983|pages=p.1}}
* [[Eric Wolf|Wolf, Eric]] (1982) ''[[Europe and the People Without History]]''
* [[Ellen Meiksins Wood|Wood, Ellen Meiksins]] (2002) ''[http://books.google.co.uk/books?id=FZPyKjVguVoC The Origins of Capitalism: A Longer View]'' London: Verso

==Further reading==

* {{cite book |last=Ackerman |first=Frank |authorlink= |coauthors=Lisa Heinzerling |title=Priceless: On Knowing the Price of Everything and the Value of Nothing |publisher=New Press |date=August 24, 2005 |location= |pages=277 |url= |doi= |id= |isbn=1565849817}}
* {{cite book|title=Politics Without Romance|author=Buchanan, James M.}}
* {{cite book|title=Civilization and Capitalism: 15th - 18 Century|author=Braudel, Fernand}}
* {{cite book|title=Theories of Modern Capitalism|author=Bottomore, Tom|year=1985}}
* {{cite journal |author=H. Doucouliagos and M. Ulubasoglu |title=Democracy and Economic Growth: A meta-analysis |journal=School of Accounting, Economics and Finance Deakin University Australia |year=2006 }}
* {{cite book|author=Coase, Ronald|year=1974|title=The Lighthouse in Economics}}
* {{cite book|author=Demsetz, Harold|year=1969|title=Information and Efficiency}}
* {{cite book|author=Fulcher, James|title=Capitalism|year=2004}}
* {{cite book|author=Friedman, Milton|title=Capitalism and Freedom|year=1952}}
* {{cite book|author=Galbraith, J.K.|title=American Capitalism|year=1952}}
* {{cite book|author=Böhm-Bawerk, Eugen von|title=Capital and Interest: A Critical History of Economical Theory|location=London|publisher=Macmillan and Co.|year=1890}}
* {{cite book|author=Harvey, David|title=The Political-Economic Transformation of Late Twentieth Century Capitalism.|location=Cambridge, MA|publisher=Blackwell Publishers|year=1990|isbn=0-631-16294-1}}
* {{cite book|author=Hayek, Friedrich A.|title=The Pure Theory of Capital|location=Chicago|publisher=University of Chicago Press|year=1975|isbn=0-226-32081-2}}
* {{cite book|author=Hayek, Friedrich A.|title=Capitalism and the Historians|location=Chicago|publisher=University of Chicago Press|year=1963}}
* {{cite book|author=Heilbroner, Robert L.|title=The Limits of American Capitalism|year=1966}}
* {{cite book|author=Heilbroner, Robert L.|title=The Nature and Logic of Capitalism|year=1985}}
* {{cite book|author=Heilbroner, Robert L.|title=Economics Explained|year=1987}}
* [[Matthew Josephson|Josephson, Matthew]], ''The Money Lords; the great finance capitalists, 1925-1950'', New York, Weybright and Talley, 1972.
* {{cite book|author=Marx, Karl|title=Capital: A Critical Analysis of Capitalist Production|year=1886}}
* {{cite book|author=Mises, Ludwig von|title=Human Action: A Treatise on Economics|publisher=Scholars Edition|year=1998}}
* {{cite book|author=Rand, Ayn|title=[[Capitalism: The Unknown Ideal]]|publisher=Signet|year=1986}}
* {{cite book|author=Reisman, George|year=1996|title=Capitalism: A Treatise on Economics|location=Ottawa, Illinois|publisher=Jameson Books|isbn=0-915463-73-3}}
* {{cite book|author=Resnick, Stephen|year=1987|title=Knowledge & Class: a Marxian critique of political economy|location=Chicago|publisher=University of Chicago Press}}
* {{cite book|author=Rostow, W. W.|title=The Stages of Economic Growth: A Non-Communist Manifesto|location=Cambridge|publisher=Cambridge University Press|year=1960}}
* {{cite book|author=Schumpeter, J. A.|title=Capitalism, Socialism, and Democracy|year=1983}}
* {{cite book|author=Scott, John|title=Corporate Business and Capitalist Classes|year=1997}}
* {{cite book|author=Seldon, Arthur|year=2007|title=Capitalism: A Condensed Version|location=London|publisher=Institute of Economic Affairs}}
* {{cite book|author=Sennett, Richard|title=The Culture of the New Capitalism|year=2006}}
* {{cite book|author=Smith, Adam|title=An Inquiry into the Nature and Causes of the Wealth of Nations|year=1776}}
* {{cite book|author=De Soto, Hernando|year=2000|title=The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else|location=New York|publisher=Basic Books|isbn=0-465-01614-6}}
* {{cite book|author=Strange, Susan|title=Casino Capitalism|year=1986}}
* {{cite book|author=Wallerstein, Immanuel|title=The Modern World System}}
* {{cite book|author=Weber, Max|title=The Protestant Ethic and the Spirit of Capitalism|year=1926}}
* {{cite book|author=Norberg, Johan|title=In Defense of Global Capitalism|year=2001|isbn=978-1-93-086547-1|publisher=Cato Institute|location=Washington, DC}}

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[[ko:자본주의]]
[[hi:पूंजीवाद]]
[[hr:Kapitalizam]]
[[id:Kapitalisme]]
[[is:Kapítalismi]]
[[it:Capitalismo]]
[[he:קפיטליזם]]
[[ka:კაპიტალიზმი]]
[[ku:Kapîtalîzm]]
[[la:Capitalismus]]
[[lt:Kapitalizmas]]
[[ln:Kapitalismɛ]]
[[hu:Kapitalizmus]]
[[mk:Капитализам]]
[[mr:भांडवलशाही]]
[[arz:راسماليه]]
[[ms:Kapitalisme]]
[[nl:Kapitalisme]]
[[ja:資本主義]]
[[no:Kapitalisme]]
[[nn:Kapitalisme]]
[[uz:Kapitalizm]]
[[pl:Kapitalizm]]
[[pt:Capitalismo]]
[[ro:Capitalism]]
[[qu:Kapitalismu]]
[[ru:Капитализм]]
[[scn:Capitalismu]]
[[simple:Capitalism]]
[[sk:Kapitalizmus]]
[[sl:Kapitalizem]]
[[sr:Капитализам]]
[[sh:Kapitalizam]]
[[fi:Kapitalismi]]
[[sv:Kapitalism]]
[[ta:முதலாளித்துவம்]]
[[th:ทุนนิยม]]
[[tr:Kapitalizm]]
[[uk:Капіталізм]]
[[vi:Chủ nghĩa tư bản]]
[[yi:קאפיטאליזם]]
[[zh-yue:資本主義]]
[[diq:Qapitalizm]]
[[zh:资本主义]]

Revision as of 15:28, 6 April 2009

Communism is a much better system than Capitalism. It is a much superior system and it totally makes capitalism look like a system for little girls. LONG LIVE RUSSIA!!!

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