What is capitalism is one of the most curious questions in today’s world. Mainly negative views are put forward about capitalism, which refers to an economic system in which private institutions own the means of production.
So, is there no good side to capitalism? When we take a closer look at this economic system, you can be sure that many of your thoughts about capitalism will change. Of course, for this we must first examine the development of capitalism since its emergence. If you’re ready, let’s start.
What is Capitalism?
Capitalism is an economic system in which the means of production are subordinated to private institutions and they are used for profit. In countries where this economic system is valid, the income of private organizations or property owners is based on their property. This also gives them the opportunity to maximize the rate of profit.
A free market economy is a necessity for capitalism to exist fully in a country. Products and services are offered according to the laws of supply and demand. According to the law of demand, the higher the demand for a product, the higher the price. When competitors realize that they can make more profit, they start to produce more.
In countries where capitalism is adopted as a mode of production, property owners compete with each other to get the most profit. They try to sell their products at the highest possible price while keeping costs as low as possible.
The competition of competitors with each other contributes to keeping the prices at a reasonable level and keeping the production alive.
The implementation of capitalism in countries where workers are not well supported by law is a disaster, so to speak. Due to poor working conditions, people cannot see the value they deserve and experience health problems as time progresses.
In this respect, the capitalist economic system is a system that works smoothly only in developed countries where income distribution is good. Any outside intervention in this order will cause disruptions.
How Did Capitalism Emerge?
Capitalism literally emerged towards the end of the 17th century . It became popular during the Industrial Revolution. Its origins date back to feudalism in Europe. Until the 12th century, only a tiny fraction of the European population was urbanized. Skilled workers lived in the city. He received a very small portion of his labor from the landowners.
Under feudalism society was divided into different classes. On the one hand, there were the nobility, consisting of landlords, and on the other, the workers who had nothing but their labor. The workers worked under the orders of the landlords.
With industrialization, there was a revolution in trade. People started to migrate to earn more money by breaking their ties with the feudal system and working in factories, where they earned enough to make a living in return for their labor.
While the system provided wealth and prestige to the property owners, the proletarian class, who had nothing but their labor, began to be exploited.
When it comes to capitalism, Adam Smith must be mentioned. Adam Smith is considered the father of modern capitalism. Smith, in his book titled The Wealth of Nations dated 1776, touches on concepts such as division of labor, capital and labor.
According to Smith, the division of labor is of great importance. For example, if a phone case is to be produced, a person can devote a whole day to it and produce a limited number of cases.
With the division of labor, time is saved and the supply is increased. According to this idea, the better the distribution of tasks for a job, the more efficient the production process will be.
Smith states that capital ensures the most efficient use of the labor spent by the person working for the owner. According to him, the smaller the capital, the lower the production.
Another concept that Smith mentioned, labor is the factor that determines how rich a country is. Of course, the important thing is not to put in the effort, but to value the effort.
What Does Capitalist Mean?
Capitalist is the name given to countries that have adopted the system of capitalism. Private property owners, however, can also be called capitalists. If concepts such as private property, labor, capital and invisible hand mentioned by Smith are valid in a country, that country is likely to be a capitalist country.
Of course, not every country is entirely capitalist. The United States, for example, has a mixed economy in which both capitalism and socialism are mixed.
In the United States, the means of production are privately owned and operated for profit. From this point of view, it can be said that it is a capitalist country. On the other hand, it is also included in the scope of socialism with taxes, economic regulations and supports.
The government has partial control over education, roads and health services. It also supports some companies. Russia has a mixed economy just like the United States. On the other hand, in the eyes of many, Russia has a state capitalist economy. The state has control over more than half of the Russian economy. It also employs millions of workers.
What Are the Good Aspects of Capitalism?
- It provides equality in competition.
- Thanks to competition, prices become more affordable.
- It is easier to find alternatives to a product.
- It encourages innovation.
What are the Negative Aspects of Capitalism?
- There is no equal opportunity.
- Workers may face adverse working conditions.
- It may cause issues such as climate change to be given less attention.