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What is capitalist Economy? An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market. A Free Market is a market without economic intervention and regulation by government except to outlaw and prosecute force or fraud. It is the opposite of a controlled market, where the government regulates how the means of production, goods, and services are used, priced, or distributed.
In Capitalist economy, there is a term laissez-faire means allowing industry to be free from state intervention, especially restrictions in the form of tariffs and government monopolies. The phrase is French and literally implies "let it be", or "leave it alone. In “Capitalist" economy, a term coined by 19th-century German economist and social theorist Karl Marx to describe a system in which a small group of people who control large amounts of money, or capital, make the most important economic decisions.
Marx contrasted capitalist economies to "socialist" ones, which vest more power in the political system. Marx and his followers believed that capitalist economies concentrate power in the hands of wealthy business people, who aim mainly to maximize profits; socialist economies, on the other hand, would be more likely to feature greater control by government, which tends to put political aims -- a more equal distribution of society's resources, for instance -- ahead of profits.
Properties of Capitalism Social/cultural rules and political laws define the environment. Supply and demand provide environmental pressures. Those that best "fit" that environment survive and maintain the rules/laws. Those that can't/don't thrive in the system, and otherwise lack participation, are culled. Successful capitalistic systems tend to be open and competitive. A healthy capitalistic system results in economic incentives.
Features of Capitalist economy In a capitalist economy, the prices of goods and services are controlled mainly through supply and demand and competition. Supply is the amount of a good or service produced and is available for sale. Demand is the amount that people are willing to buy at a specific price. Prices tend to rise when demand exceeds supply, and fall when supply exceeds demand. In theory, the market is able to coordinate itself when a new equilibrium price and quantity is reached. Competition arises when more than one producer is trying to sell the same or similar products to the same buyers. In capitalist theory, competition leads to innovation and more affordable prices. Without competition, a monopoly can develop.
Some advantages of capitalist Economic system ; 1) Capitalist economies give an equal opportunity to every individual of the state to be wealthy and grow depending on the effort they put in and are generally considered to be "free" to write their own destiny and seek out their own prosperity. 2) Capitalist governance means little interference from the government in a command economic system and means an equal opportunity for all. 3) There's no limit to how much wealthan individual can accumulate and how far he can progress in a capitalist economic system.
Some disadvantages are: 1) It gives rise to rigid class systems where one class of individuals may remain as the unfortunate ones and the ones with all the resources in their control tend to cannibalize their share in economy at their expense. 2) Money tends to remain concentrated in a few hands and has limited circulation for the benefit of all, the downtrodden masses remain dependent on the "trickle down" effect.
Support Capitalist nations have emphasized capitalism's ability to promote economic growth, as measured by (GDP), capacity utilization / standard of living. Capitalist offers far more opportunities for individuals As compare to socialist societies. Austrian School economists have argued that capitalism can organize itself into a complex system without an external guidance or planning mechanism. Friedrich Hayek coined the term "catallaxy” to describe phenomenon of self-organization underpinning capitalism. This decentralized system of coordination is viewed by some supporters of capitalism as one of its greatest strengths. It permits many solutions to be tried, and that real-world competition generally finds a good solution to emerging challenges.
Countries as Capitalist economy Capitalism is an economic system and not a political system. Countries thus do not (typically) enshrine capitalism as a part of their constitutional framework, nor do they typically limit policy choices to capitalism. However, the vast majority of countries (almost all liberal democracies and most authoritarian systems) in the world use capitalism as their dominant economic system, United States, Canada , Mexico, all of the 27 countries of the European Union. Many other countries (such as Australia, Japan, India, Egypt, Tunisia, Indonesia, New Zealand, South Africa, Switzerland, Botswana, Brazil, Colombia, Chile, etc) Even some countries which in-name follow different economic systems (such as China, claiming to have a "communist economy with Chinese characteristics") are capitalist (i.e. have most of the output coming from industries in private property trading and setting prices on a free market by the laws of supply and demand, and have a legal framework geared to protecting and encouraging such a system of production).
It is actually easier to count countries that are not capitalist (such as North Korea, Cuba or most of Vietnam), or still have some way to go until ancient economic structures make way for capitalism (such as in Bhutan or in significant parts of Sub-Saharan Africa). World trade overall, and the international economy is capitalist overall (international prices and company values are established in stock and mercantile exchanges such as NYSE or NYMEX with international overseeing from institutions such as the WTO)
Does Pure Capitalism Exist in the United States? While those categories, though oversimplified, have elements of truth to them, they are far less relevant today. If the pure capitalism described by Marx ever existed, it has long since disappeared, as governments in the United States and many other countries have intervened in their economies to limit concentrations of power and address many of the social problems associated with unchecked private commercial interests. As a result, the American economy is perhaps better described as a "mixed" economy, with government playing an important role along with private enterprise.