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What is capitalism ?  Capitalism is an economic system in which trade, industry, and the means of production are largely or entirely privately owned and.

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Presentation on theme: "What is capitalism ?  Capitalism is an economic system in which trade, industry, and the means of production are largely or entirely privately owned and."— Presentation transcript:

1 What is capitalism ?  Capitalism is an economic system in which trade, industry, and the means of production are largely or entirely privately owned and operated for profit.

2 Etymology and early usage  The term capitalist as referring to an owner of capital.  Capitalist is derived from capital, which evolved from capitale, a late Latin word based on caput, meaning "head" — also the origin of chattel and cattle in the sense of movable property.  Capitale emerged in the 12th to 13th centuries in the sense of referring to funds, stock of merchandise, sum of money, or money carrying interest.  By 1283 it was used in the sense of the capital assets of a trading firm.  According to the Oxford English Dictionary (OED), the term capitalism was first used by novelist William Makepeace Thackeray in 1854 in The Newcomers, where he meant "having ownership of capital“.

3 Element / Features of capitalism  Private Property.  Large Scale Production.  Profit Institution.  Competition.  Price Mechanism.  Wage Institution.  Market Economy.

4 Types of capitalism 1. Mercantilism 2.Free-market economy 3.Social-market economy 4.State capitalism 5.Corporate capitalism 6.Mixed economy

5 1. MERCANTILISM : 2. FREE-MARKET ECONOMY : 1. MERCANTILISM : Is a nationalist form of early capitalism that came into existence approximately in the late 16th century. It is characterized by the intertwining of national business interests to state-interest and imperialism, and consequently, the state apparatus is utilized to advance national business interests abroad. 2. FREE-MARKET ECONOMY : Free-market economy refers to a capitalist economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy. Laissez-faire is a more extensive form of free-market economy where the role of the state is limited to protecting property rights.

6 3. SOCIAL MARKET ECONOMY IS BASED ON PHILOSOPHICAL VIEWS Philosophy is ever thought of as the lamp of all sciences, as the means of all action & as the support of all laws” Kautilya Arthashstra 2400 B.C A social-market economy is a nominally free-market system where government intervention in price formation is kept to a minimum but the state provides significant services in the area of social security, unemployment benefits and recognition of labor rights through national collective bargaining arrangements Concepts of the Social Market Economy are from the Austrian School and the English Classics. Ludwig von Mises & Austrian economist Eugen von Böhm–Bawerk Eucken distilled from the historical multitude of economic orders the two main types: the centrally directed Command Economy and the Free Market Economy. Eg Germany The state guarantees the free play of entrepreneurial forces, while at the same time endeavoring to maintain the social balance. Institutionalized settlement of conflicts.

7 STATE CAPITALISM State capitalism consists of state ownership of the means of production within a state, and the organization of state enterprises as commercial, profit-seeking businesses Eg Russia & Singapore

8 5. CORPORATE CAPITALISM Corporate capitalism is a free or mixed-market economy characterized by the dominance of hierarchical, bureaucratic corporations. 6. MIXED ECONOMY A mixed economy is a largely market-based economy consisting of both private and public ownership of the means of production and economic interventionism through macroeconomic policies intended to correct market failures, reduce unemployment and keep inflation low.

9 NEOCLASSICAL ECONOMIC THEORY Neoclassical economics explain capitalism as made up of individuals, enterprises, markets and government. INDIVIDUALS : according to their theories, individuals engage in a capitalist economy as consumers, laborers, and investors. BUSINESS FIRMS : decide what to produce and where this production should occur. Driving the capitalist economy is the search for profit,known as the profit motive.

10 Markets : In capitalist theory competition leads to innovation and affordable prices. In market prices tend to rise when demand exceeds supply, and fall when supply exceeds demand. The market is able to coordinate itself when a new equilibrium price and quantity is reached.

11 ROLE OF GOVERNMENT In a capitalist system, the government does not prohibit private property or prevent individuals from working where they want. The government does not prevent firms from determining what wages they will pay and what prices they will charge for their products This neo classic theory says under some version of capitalism, the government carries out number of economic functions.

12 Advantage of capitalism : Economic Freedom Maximum utilization of resources Higher standard of living Encourages creativity Greater heights Greater Paid

13 Disadvantage :  Inequality -  It allows capital holders the freedom to proceed with production activities as they please.  Less concern about workers conditions, compensation, environmental safeguards.  Rich become richer and poor continues to become poorer.  Anti social –  the former does not consider the social needs of the nation as its primary objective.  Poverty  Unemployment.  Leeds to revolutionary tendencies among the majority of the low income population.

14  Eg :- “Occupy Wall Street” September 17, 2011.The slogan, "We are the 99%", refers to income inequality and wealth distribution in the U.S. between the wealthiest 1% and the rest of the population.We are the 99%income inequality and wealth distribution  Monopolisation.  Few major organization have utmost power to control the market environment due to low govt. intervention.  Governance over prime factors like Price Quantity supplied. Quality of product.  Ruthless environment for new entrepreneurs.


16 Group 4 (Roll No : 31 to 39)

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