What is Capitalism?

by Investing School on July 14, 2010

Capitalism is an economic system where investment and ownership of goods, services, and the production of such things and distribution are chiefly owned by private individuals or corporations. Good and capital are traded in stock markets and profits are distributed to investors in the enterprise. This is in contrast to a state-owned system.

Economists, political economists and historians have had varying ideas on how to analyze capitalism. Some economists look heavily at the market mechanism, the degree to which government has control over the markets and property rights. However, political economists will say that property, power relations, wage labor and class are the over-arching mechanisms that drive capitalism. There is one consensus, however, and that is that capitalism stimulates economic growth. How “free” a market is may be determined by politics and policy and some economies are regarded as “mixed”. Capitalism is also said to have been the main means of industrialization throughout many areas of the world.

Capitalism is said to have come into practice in the 16th century in Europe. There have been some historical instances that show some capitalist-like economies that existed far earlier than that in the ancient world and also in the Middle Ages.

The word capital comes from the Latin word “kaput” meaning “head”. It has also been used interchangeably with other words, such as wealth, money, funds, goods, principal, assets, property and patrimony.
When considering the economic elements of capitalism, you should include the following: commodities (capital goods and consumer goods), money, labor power, means of production and production.

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