Capitalism

Since the early 20th century, the concept of capitalism has been used to capture the structure and dynamics of a particular historical formation of economy and society that first emerged during the late Middle Ages in Southern Europe and later spread to Northwestern Europe. Capitalism emphasizes the attainment of profit through the operation of the market and private ownership of the means of production. This entry describes the role of markets and property rights in capitalism and examines the functions of firms and institutions in its operation. The characteristics of capitalist culture are then discussed. The entry closes with a review of endogenous critiques of capitalism and of the shape it may take in the future.

Since its beginnings in Europe, capitalism has expanded to virtually all parts of the globe. Capitalism can be contrasted with subsistence economy, feudalism, socialism, and slave economy. Third World developing societies may contain insular capitalist patterns in their economy without thereby becoming capitalist societies. Comparative social scientists and historians have distinguished a great number of stages, types, qualifiers, and variants under the broad umbrella concept of capitalism, such as agrarian, commercial, industrial, and financial capitalism; state capitalism and coordinated capitalism; and Nordic, Anglo-Saxon (chiefly British and American), East Asian, and “Rhenish” capitalism.

Most scholars who use the concept of capitalism in a holistic way view it not only as an economic system but also as comprising a type of social structure, political institutions, and specific cultural norms and values. The complementarity, goodness of fit, and range of variation that exist among these realms—essentially the realms of capitalist interests, institutions, and ideas that together make up capitalism—have been the focus of social science analysis since the pioneering works, around the turn of the 19th century, by Max Weber and Werner Sombart to contemporary research on comparative capitalism. On the European continent, the use of the term capitalism, in both political and academic contexts, almost always had critical overtones. Authors who wish to avoid such connotations use “social market economy,” “industrial society,” or simply “modern society” instead; however, such usage may cause them occasionally to lose sight of the problèmatiques and insights of those classical authors of social science.