Capitalism

Definition of Capitalism

Capitalism is a mode of production, based on the principles of institutional privatization, the maximization of profits, and a free-market economy. Under capitalism, all means of production are owned and operated by individuals or firms with the sole consideration of the desire to earn a profit.

Sidney Webbs defines capitalism with the necessary implications of the system. He states that “by the term ‘capitalism,’ we mean the particular stage in the development of industry and legal institutions in which the bulk of the workers find themselves divorced from the ownership of the instruments of production in such a way as to pass into the position of wage-earners whose subsistence, security and personal freedom seem dependent on the will of a relatively small proportion of the nation, namely, those who own and, through their legal ownership, control the organization of land, the machinery and the labour forces of the community and do so with the object of making for themselves individual and private gains.”

Features of Capitalism

A wide study of capitalism reveals the important features or characteristics of this system with an assumption of laissez faire. The following are some of the common features of capitalism as experienced in different capitalist countries in the world.

The most important feature of capitalism, as experienced in various capitalist countries, is the individual ownership of private property and the existence of the system of inheritance. It results in the vital inequalities in respect to the distribution of wealth and property in the society. Rich persons become richer and, on the other hand, the poor become poorer.

Moreover, capitalism also consists of the private ownership of the means of production, which are utilized exclusively by a few individuals in their own interest. The result is that the lion's share of national income goes to a few rich people and the masses share the rest.

Economic freedom means the freedom of a producer or an individual to select his or her own enterprise, to operate it on a contract or agreement basis, and [Page 119]to utilize personal property and wealth in his or her own way. It is a very outstanding feature of capitalism. An individual has the full liberty to establish and operate any firm in a capitalist society wherever he or she likes, provided that he or she has the desired capital and ability.

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