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Defining capitalism
Economic systems are often classified according to whatever the factors of production are privately owned, publicly owned or some mixture of the two. If private ownership prevails, the system is considered capitalistic. If public ownership prevails, socialistic or communistic is deemed an appropriate description. The term mixed economy is retained for those systems that reveal ownership features of capitalism and socialism, although where capitalism becomes a mixed system and the latter turns into socialism is never clear-cut.
Classifying economic systems solely on the basis of one criterion fails to capture some very important economic (and political) differences between capitalist economies, especially as they have evolved in the postWorld War II period. However important as these differences might be, it seems more important to define capitalism in such a way that it can be used to denote a wide variety of real world economies that are distinguishable from a group of other economies that do not share the basic political and cultural as well as the economic institutions that are the essence of capitalism.
To sharpen the analysis, it is useful to begin with a favorite tool of those economists concerned with the manner in which economic activities are organized under capitalismthe model of the perfectly competitive market system.
In this model, the economy is viewed as a system of markets in each of which a homogeneous good is traded. Moreover, in each market buyers and sellers of the good are so numerous that no singly buyer or seller can influence the price at which the good is exchanged. Furthermore, this price, or the price mechanism, acts as a sign that provides all the information necessary to distribute output and factors throughout the economy in such a way that an optimal situation results. In other words, given the initial distribution of resource endowments among the population - human skills, ownership of physical and financial capital and land - the resulting production and distribution of that production will be such that no member of the society can be made better off in some material sense with making someone else worse off.
One of the outstanding developments under capitalism has been the increased role played by government in determining the composition of output. Government expenditures and tax revenues as a percentage of total output have been rising fairly steadily throughout most of the twentieth century, and consumption of nondurable goods and services as a percentage of output has declined. The rise of the role of government within the context of a system of predominant private ownership of the factors of production is largely the reflection of the rise of the so-called welfare state. The spread of public education, public medical and dental systems, pension and welfare schemes, and retraining programs along with retirement and unemployment benefit programs has been one of the outstanding features of postWorld War II capitalist development. The rise of the welfare state and increase in public ownership indicate a shift in economic decision making in capitalist economies away from the private sector. This trend leads to a final consideration in the definition of capitalism.
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Capitalism is an economic system in which the owners of the factors of production and those making economic decisions concerning such things as production, savings, and investment are predominantly private individuals. Although somewhat vague, such a definition allows the analysis to incorporate some important historical developments as part of the definitive features of capitalism, features which are useful in distinguishing it from other forms of economic organization.
The increased significance of the government sector, especially during the post-World War II period, in determining the composition of output was accomplished without a decline in private consumption levels. Thus, although consumption of nondurable goods and services as a percentage of total output fell in capitalist economies during this period, the absolute level of per capita consumption rose. Moreover, this took place at a time when investment by businesses in plant and equipment in each country as a share of total output was at an all-time historical high, at least outside North America. The key to this seemingly paradoxical series of developments lay in the fact that never in the past had so many capitalist economies grown so rapidly for such sustained periods. The one exception was the United States. Thus, during the postwar period from, say, the early 1950s up through the early 1970s, in almost every capitalist economy rates of growth of total output and output per worker were outstanding compared with each country's previous performance. From the mid-1970s on, a definite slowdown in the growth of total output and output per worker occurred throughout the developed capitalist world. Consumption levels continued to rise but at a much reduced rate.
2. :
1. clear-cut;
2. competitive market system;
3. the composition of output;
4. consumption of nondurable goods;
5. welfare state;
6. to incorporate important historical developments;
7. a decline in private consumption levels;
8. per capita;
9. an all-time historical high;
10. a shift in economic decision making;
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4. , . , , :
1. consume;
2. own;
3. capital;
4. economy;
5. to distribute;
6. to develop;
7. percent;
8. to employ;
9. to produce;
10. to decide.
5. : , , , , .
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One of the outstanding developments under capitalism has been the increased role played by government in determining the composition of output.
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1. Economic systems are often classified according to whatever the factors of production are privately owned, publicly owned or some mixture of the two.
2. Classifying economic systems solely on the basis of one criterion fails to capture some very important economic (and political) differences between capitalist economies, especially as they have evolved in the postWorld War II period.
3. To sharpen the analysis, it is useful to begin with a favorite tool of those
economists concerned with the manner in which economic activities are
organized under capitalismthe model of the perfectly competitive market
system.
4. One of the outstanding developments under capitalism has been the increased role played by government in determining the composition of output
5. The increased significance of the government sector, especially during the post-World War II period, in determining the composition of output was accomplished without a decline in private consumption levels.
7. :
1. How economic systems are often classified?
2. What term is retained for the systems that reveal ownership features of capitalism and socialism?
3. In what way does it seem more important to define capitalism?
4. What is it useful to do to sharpen the analysis?
5. Can a singly buyer or seller influence the price?
6. How does price mechanism act?
7. Consumption of nondurable goods and services as a percentage of output hasnt declined, has it?
8. What is the reflection of the welfare state?
9. How was the increased significance of the government sector accomplished?
10. Did the absolute level of per capita fall or rise?
