Introduction
Capitalism
“Capitalism is an economic system in which the means of production
are privately owned.”
Organizations in business make products for a marketplace with the
help of demand and supply forces. Fundamental capitalism is the presupposition
that private enterprise is very competent system to organize activity in economic.
Adam-smith
Adam smith revealed this concept in his book “Wealth of Nations
(1776)” approving the free-market in which the business man is ‘directed by
in-visible hands to encourage an end which was no part of his intent.’
The system of economy is based upon
political-economy. Democracy is important feature of this ruling system.
However, capitalism in its ideal logic
can-not be observe anywhere in all over the world, what exist is free-competition
and government authority.
Definitions
1.
Capitalism
is a type of economic system in which most resources are owned and controlled
by the people.
2.
----“as
the social system based on the individual right.”
3.
----The
economic-system which is classified by the following
i) ---- Ownership prevails in private-property—
ii)
----individual and enterprises are permitted to contend for their personal
(we can say a center of international private enterprise).
4.
-----capitalism
is also given the name of laissez faire economy.
The term laissez faire means leave us alone. There is no
need of government intervention. So we can say that, capitalism is nothing else
but economic freedom subject to few limitation imposed by the state.
Features of capitalism
1.
------Laissez
Faire Economy
The capitalism is given as natural system
of economics, free-enterprise economy. The consumer is like those voters who
cast their vote’s ̶with the help of his money.
2.
-----a system of self interest
The self interest system completely works
under the intention of self-interest. Each unit of economics aims to work, what
is greatest for oneself. It is explained like this:
Every consumer desires to utility maximization.
Every producer desires to profit maximization.
3.
-----right of private property
Under this system one can acquire
private property; he can consume exchange or manage the property.
4.
-----role of price mechanism
All the central decisions of the
economy like what to produce, how much to produce are arrived through the price
mechanism.
5.
-----consumer is the king
In this system consumer is compared
as king. The producer produces those goods which consumer demanded.
6.
-----economic freedom
Everyone is free to do any business
he likes, but according the law
7.
-----freedom of contact
Everyone is free to contact with
other citizen for his own profit.
8.
-----Dominant role of entrepreneur
Under capitalism, the private
entrepreneur plays vital role. He hires the other and pays them.
9.
-----specialization
Under this system productive
efficiency increases because of this method.
10.
-----profit goes with risk
He who risks his money must earn
profit
11.
-----The system of limited role of
government
There is limited role of government.
Government performs the duties of law and order, issue the currency, and save
the domestic border.
Capitalism Disadvantages (Demerits)
1: ----Unequal
distribution of wealth
The result of this system is that
wealth goes into few hands, richer becomes richer and poor becomes poorer.
2:---Class
distinction
Due to this system society is
divided in to two classes, rich and poor
Richer enjoys all amenities of life.
While majority faces poverty and hunger.
3:---Cause of
unrest in society
There is lot of hatred between labor
and capital class.
4:---Cause of
overproduction and crises
In this system producer produce more to get maximum profit and they
ignore the demand side. Supply increases than the demand and it becomes the
cause of crises.
5:---Causes of unemployment
When over production will take place the producer will decrease the
production and the rate of unemployment will rise.
6:---Misuse of resources
A lot of money is wasted on advertisement in competition. It is
great loss of resources.
7:---Misallocation of resources
In capitalistic economy only those goods are produced which gives
larger profit, in this way resources are not properly allocated.
8:---Monopolistic association
In Capitalist loots the people by making monopolies. They create
shortage of goods and earn maximum profit.
9:---Social welfare is neglected
In this system no attention is paid to the sick and poor people
10:---Cause of war
To find new market in the world sometimes competition becomes the
cause of the war.