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Capitalism generally refers to an , and in which Investment s, Distribution , Income , Production and Pricing of Goods and Services are determined through the operation of a Market Economy . It is usually considered to involve the right of individuals and groups of individuals acting as "legal persons" or Corporation s to Trade Capital Goods , Labor , land and Money (''see'' Finance and Credit ). Because most economies today are Mixed Economies , "capitalism" does not precisely describe most contemporary economies,Tucker, Irvin B., Macroeconomics for Today, Page 553 (1997)Case, Karl E., Fair, Ray C., Principles of Macroeconomics, Chapter 22 Globalization, Prentice Hall (2004) due to these economies containing both Private-owned and State-owned Enterprise s, or that combines elements of capitalism and Socialism , or a mix of Market Economy and Planned Economy characteristics. Campbell Robertson McConnell and Stanley L. Brue, Macroeconomics, McGraw-Hill, Page 487 (1996) Theories of capitalism as a coherent economic system derive from the mid-nineteenth century.Metzloff, Mark. England's Internal Colonies, Page 21 (2003) In the late 19th century some German and Austrian theorists began developing concepts of capitalism that differed from Marx's analyses in studies of capital and interest.12 In the early 20th century in ''The Concise Encyclopedia of Economics''"Capitalism" by John Scott and Gordon Marshall in ''A Dictionary of Sociology'' Oxford University Press 2005. Oxford Reference Online. Oxford University Presssee also Oxford English Dictionary for etymology of the term. Capitalist economic practices became institutionalized in Europe between the 16th and 19th Centuries , although some features of capitalist organization existed in the ancient world."Capitalism." ''Encyclopædia Britannica''. 2006. Encyclopædia Britannica Online. Capitalism has emerged as the Western world's dominant economic system since the decline of Feudalism , which eroded traditional political and religious restraints on capitalist exchange. Capitalism gradually spread from Europe, particularly from Britain, across political and cultural frontiers. In the 19th and 20th centuries, capitalism provided the main, but not exclusive, means of Industrialization throughout much of the world."Industrialism" ''A Dictionary of Sociology''. John Scott and Gordon Marshall. Oxford University Press 2005. Oxford Reference Online. Oxford University Press. The concept of capitalism has limited analytic value, given the great variety of historical cases over which it is applied, varying in time, geography, politics and culture. Some economists have specified a variety of different types of capitalism, depending on specifics of concentration of economic power and wealth, and methods of capital accumulation. During the last century capitalism has been contrasted with Centrally Planned Economies . PERSPECTIVES ON THE CHARACTERISTICS OF CAPITALISM The concept of capitalism has evolved over time, with later thinkers often building on the analyses of earlier thinkers. Moreover, the component concepts used in defining capitalism—such as private ownership, markets and investment—have evolved along with changes in theory, in law, and in practice. The following subsections describe several schools of thought in which the thinkers involved do not necessarily agree on all analytic points, but participate in a common general approach to understanding what capitalism is. Classical political economy The "classical" tradition in Economic Thought emerged in Britain in the late 18th century. The classical political economists Adam Smith , David Ricardo , Jean-Baptiste Say , and John Stuart Mill published analyses of the production, distribution, and exchange of goods in a capitalist economy that have since formed the basis of study for most contemporary economists. Contributions to this tradition are also found in the earlier work of David Hume and the Physiocrats like Richard Cantillon . ]] , which explains why it is profitable for two parties to trade, even if one of the trading partners is more efficient in every type of economic production. This principle supports the economic case for Free Trade . Ricardo was a supporter of Say's Law and held the view that full employment is the normal equilibrium for a competitive economy."Blackwell Encyclopedia of Political Thought", Blackwell Publishing (1991), p.91 He also argued that Inflation is closely related to changes in quantity of Money and Credit and was a proponent of the law of Diminishing Returns , which states that each additional unit of input yields less and less additional output.Mark Skousen, "The Making of Modern Economics: The Lives and Ideas of the Great Thinkers", M.E. Sharpe (2001), p.98-102 The values of classical political economy are strongly associated with the Classical Liberal doctrine of minimal government intervention in the economy. Classical liberal thought has generally assumed a clear division between the economy and other realms of social activity, such as the state."Capitalism" ''Dictionary of the Social Sciences''. Craig Calhoun, ed. Oxford University Press 2002. Oxford Reference Online. Oxford University Press. Marxian political economy : ]] Karl Marx considered capitalism to be a historically specific Mode Of Production (the way in which the productive property is owned and controlled, combined with the corresponding Social Relations between individuals based on their connection with the process of production) in which capital has become the dominant Mode Of Production . Peter Burnham, "Capitalism" ''The Concise Oxford Dictionary of Politics''. Ed. Iain McLean and Alistair McMillan. Oxford University Press, 2003. Oxford Reference Online. Oxford University Press. The capitalist stage of development or "bourgeois society," for Marx, represented the most advanced form of social organization to date. Following Adam Smith, Marx distinguished the Use Value of commodities from their Exchange Value in the market. Capital , according to Marx, is created with the purchase of commodities for the purpose of creating new commodities with an exchange value higher than the sum of the original purchases. For Marx, the use of Labor Power had itself become a commodity under capitalism; the exchange value of labor power, as reflected in the wage, is less than the value it produces for the capitalist. This difference in values, he argues, constitutes Surplus Value , which the capitalists extract and accumulate. In his book '' Capital '', Marx argues that the capitalist mode of production is distinguished by how the owners of capital extract this surplus from workers—all prior societies had extracted Surplus Labor , but capitalism was new in doing so via the sale-value of produced commodities.3 For Marx, this cycle of the extraction of the surplus value by the owners of capital or the bourgeoisie becomes the basis of Class Struggle . However, this argument is intertwined with Marx's version of the Labor Theory Of Value asserting that labor is the source of all value, and thus of profit. This theory is contested by most current Economist s, including some contemporary Marxian economists. One line of subsequent Marxian thinking sees the centrally-planned economic systems of existing "communist" societies that were still based on exploitation of labor as " State Capitalism ."Early proponents of the term "state capitalism" include, for example, Tony Cliff , Raya Dunayevskaya , CLR James and Paul Mattick . Ernest Mandel has been a particularly prominent advocate of the analysis of post-WWII conditions as State Capitalism . (See, for example, Mandel's ''The Theory of “State Capitalism”''.4 Vladimir Lenin , in '' Imperialism, The Highest Stage Of Capitalism '' (1916), modified classic Marxist theory and argued that capitalism necessarily induced Monopoly Capitalism - which he also called "imperialism" - in order to find new markets and resources, representing the last and highest stage of capitalism. ''Imperialism, the Highest Stage of Capitalism'' In Marxist thought, capitalism is often linked with consider capitalism to be a social formation where capitalist class processes dominate, but are not exclusive. See, for example, the works of Stephen Resnick and Richard Wolff. Capitalist class processes, to these thinkers, are simply those in which Surplus Labor takes the form of Surplus Value , usable as capital; other tendencies for utilization of labor nonetheless exist simultaneously in existing societies where capitalist processes are predominant. However, other late Marxian thinkers emphasize that capitalism is the mode by which a surplus is generated — the mode of surplus extraction — in modern societies where an absolute majority of the population is engaged in non-capitalist economic activity. See, for example, G. E. M. De Ste. Croix , '' The Class Struggle In The Ancient Greek World '' (1982). Weberian political sociology in 1917 ]] In some Social Science s, the understanding of the defining characteristics of capitalism has been strongly influenced by 19th century German social theorist Max Weber . Weber considered Market Exchange , rather than production, as the defining feature of capitalism; capitalist enterprises, in contrast to their counterparts in prior modes of economic activity, was their rationalization of production, directed toward maximizing Efficiency and Productivity . According to Weber, workers in pre-capitalist economic institutions understood work in terms of a personal relationship between Master and Journeyman in a Guild , or between Lord and Peasant in a Manor . In his book '' The Protestant Ethic And The Spirit Of Capitalism '' (1904-1905), Weber sought to trace how capitalism transformed traditional modes of economic activity. For Weber, the 'spirit' of rational calculation eroded traditional restraints on capitalist exchange, and fostered the development of modern capitalism. This 'spirit' was gradually codified by law; rendering wage-laborers legally 'free' to sell work; encouraging the development of technology aimed at the organization of production on the basis of rational principles; and clarifying the separation of the public and private lives of workers, especially between the home and the workplace. Therefore, unlike Marx, Weber did not see capitalism as primarily the consequence of changes in the means of production. Instead, for Weber the origins of capitalism rested chiefly in the rise of a new Entrepreneur ial 'spirit' in the political and cultural realm. In the ''Protestant Ethic'', Weber suggested that the origin of this 'spirit' was related to the rise of Protestantism , particularly Calvinism . Capitalism, for Weber, is the most advanced economic system ever developed over the course of human history. Weber associated capitalism with the advance of the business Corporation , public credit, and the further advance of Bureaucracy of the modern world. Although Weber defended capitalism against its socialist critics of the period, he saw its rationalizing tendencies as a possible threat to traditional cultural values and institutions, and a possible 'iron cage' constraining human freedom. The German Historical School and the Austrian School From the perspective of the German Historical School , capitalism is primarily identified in terms of the organization of production for Market s. Although this perspective shares similar theoretical roots with that of Weber, its emphasis on markets and Money lends it different focus. For followers of the German Historical School, the key shift from traditional modes of economic activity to capitalism involved the shift from medieval restrictions on credit and money to the modern Monetary Economy combined with an emphasis on the profit motive. ]] In the late 19th century the German historical school of economics diverged with the emerging Austrian School of economics, led at the time by Carl Menger . Later generations of followers of the Austrian School continued to be influential in Western economic thought through much of the 20th century. The Austrian economist Joseph Schumpeter , a forerunner of the Austrian School of economics, emphasized the " Creative Destruction " of capitalism—the fact that market economies undergo constant change. At any moment of time, posits Schumpeter, there are rising industries and declining industries. Schumpeter, and many contemporary economists influenced by his work, argue that resources should flow from the declining to the expanding industries for an economy to grow, but they recognized that sometimes resources are slow to withdraw from the declining industries because of various forms of institutional resistance to change. The Austrian economists Ludwig Von Mises and Friedrich Hayek were among the leading defenders of Market Capitalism against 20th century proponents of socialist Planned Economies . Mises and Hayek argued that only market capitalism could manage a complex, modern economy. Since a modern economy produces such a large array of distinct goods and services, and consists of such a large array of consumers and enterprises, asserted Mises and Hayek, the information problems facing any other form of economic organization other than market capitalism would exceed its capacity to handle information. Thinkers within Supply-side Economics built on the work of the Austrian School, and particular emphasize Say's Law : "supply creates its own demand." Capitalism, to this school, is defined by lack of state restraint on the decisions of producers. Austrian economics has been a major influence on the ideology of Libertarianism , which considers Laissez-faire capitalism to be the ideal economic system. Keynesian economics ]] In his 1936 '' The General Theory Of Employment, Interest, And Money '', the British economist John Maynard Keynes argued that capitalism suffered a basic problem in its ability to recover from periods of slowdowns in investment. Keynes argued that a capitalist economy could remain in an indefinite Equilibrium despite high Unemployment . Essentially rejecting Say's Law , he argued that some people may have a Liquidity Preference which would see them rather hold money than buy new goods or services, which therefore raised the prospect that the Great Depression would not end without what he termed in the ''General Theory'' "a somewhat comprehensive socialization of investment." Keynesian economics challenged the notion that laissez-faire capitalist economics could operate well on their own, without state intervention used to promote aggregate demand, fighting high unemployment and to cut real wages and to deter people from holding money.5 (Originally published Extending Horizons Books/Porter Sargent Publisher Boston, 1969) The premises of Keynes’s work have, however, since been challenged by neoclassical and Supply-side Economics and the Austrian School. Another challenge to Keynesian thinking came from his colleague Piero Sraffa , and subsequently from the Neo-Ricardian School that followed Sraffa. In Sraffa's highly-technical analysis, capitalism is defined by an entire system of social relations among both producers and consumers, but with a primary emphasis on the demands of production. According to Sraffa, the tendency of capital to seek its highest rate of profit causes a dynamic instability in social and economic relations. Neoclassical economics and the Chicago School ]] Today, most academic research on capitalism in the English-speaking world draws on Neoclassical Economic Thought . It favors extensive market coordination and relatively neutral patterns of governmental market regulation aimed at maintaining property rights, rather than privileging particular social actors; deregulated Labor Market s; corporate governance dominated by financial owners of firms; and financial systems depending chiefly on Capital Market -based financing rather than state financing. The Chicago School Of Economics is best known for its free market advocacy and Monetarist ideas. According to Milton Friedman and monetarists, market economies are inherently stable If Left To Themselves and depressions result only from government intervention."Macroeconomics and New Macroeconomics," by Bernhard Felderer, Stefan Homburg Friedman, for example, argued that the Great Depression was result of a contraction of the money supply, controlled by the Federal Reserve , and not by the lack of investment as Keynes had argued. Ben Bernanke , current Chairman of the Federal Reserve, is among the economists today generally accepting Friedman's analysis of the causes of the Great Depression. Speech by Ben Bernanke, November 8, 2002 , The Federal Reserve Board, retrieved October 19, 2006 Neoclassical economists, which today are the majority of economistsYuval P. Yonary. ''The Struggle Over the Soul of Economics'' (1998). Princeton University Press. ISBN 0691034192 p.29, consider value to be subjective, varying from person to person and for the same person at different times, and thus reject the labor theory of value. Marginalism is the theory that economic value results from marginal utility and Marginal Cost (the Marginal Concepts ). These economists see capitalists as earning profits by forgoing current consumption, by taking risks, and by organizing production. HISTORY OF CAPITALISM See Also: History of capitalism Private ownership of some means of production has existed at least in a small degree since the invention of agriculture. Some writers see medieval Guilds as forerunners of the modern capitalist concern (especially through using Apprentices as a kind of paid laborer); but economic activity was bound by customs and controls which, along with the rule of the Aristocracy which would expropriate wealth through arbitrary fines, taxes and enforced loans, meant that Profit s were difficult to accumulate. By the 18th century, however, these barriers to profit were overcome and capitalism became the dominant economic system of the United Kingdom and by the 19th century Western Europe. In the period between the late 15th century and the late 18th century the institution of private property was brought into existence in the full, legal meaning of the term. Important contribution to the theory of property is found in the work of John Locke , who argued that the right to private property is a Natural Right . During the Industrial Revolution much of Europe underwent a thorough economic transformation associated with the rise of capitalism and levels of wealth and economic output in the Western world have risen dramatically since that period. Over the course of the past five hundred years, capital has been accumulated by a variety of different methods, in a variety of scales, and associated with a great deal of variation in the concentration of economic power and wealth. Much of the history of the past five hundred years is concerned with the development of capitalism in its various forms, its defense and its rejection, particularly by Socialists . Mercantilism seaport from 1638 at the height of Mercantilism .]] An earlier system from which capitalism evolved, arising in the period between the 16th and 18th centuries, is commonly described as Merchant Capitalism and Mercantilism (EB). This period was associated with geographic discoveries by merchant overseas traders, especially from England and the Low Countries; the European Colonization Of The Americas ; and the rapid growth in overseas trade. The associated rise of a bourgeoisie class eclipsed the prior feudal system. It is mercantilism that Adam Smith refuted in his Wealth of Nations which is a recognized treatise of capitalist theory. Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist production methods. Noting the various pre-capitalist features of mercantilism, Karl Polanyi argued that capitalism did not emerge until the establishment of Free Trade in Britain in the 1830s. Under mercantilism, European , the state superseded the local Guild s as the regulator of the economy. Among the major tenets of mercantilist theory was Bullionism , a doctrine stressing the importance of accumulating Precious Metals . Mercantilists argued that a state should export more goods than it imported so that foreigners would have to pay the difference in precious metals. Mercantilists asserted that only raw materials that could not be extracted at home should be imported; and promoted government subsidies, such as the granting of monopolies and protective Tariff s, were necessary to encourage home production of manufactured goods. Proponents of mercantilism emphasized state power and overseas conquest as the principal aim of economic policy. If a state could not supply its own raw materials, according to the mercantilists, it should acquire colonies from which they could be extracted. Colonies constituted not only sources of supply for raw materials but also markets for finished products. Because it was not in the interests of the state to allow competition, held the mercantilists, colonies should be prevented from engaging in manufacturing and trading with foreign powers. Industrial capitalism and laissez-faire is one of the oldest Central Bank s. It was founded in 1694 and Nationalised in 1946 .]] Mercantilism declined in Great Britain in the mid-18th century, when a new group of economic theorists, led by David Hume David Hume. ''Political Discourses''. Edinburgh, A. Kincaid & A. Donaldson (1752) and Adam Smith , challenged fundamental mercantilist doctrines as the belief that the amount of the world’s wealth remained constant and that a state could only increase its wealth at the expense of another state. However, in more undeveloped economies, such as Prussia and Russia , with their much younger manufacturing bases, mercantilism continued to find favor after other states had turned to newer doctrines. The mid-18th century gave rise to industrial capitalism, made possible by the accumulation of vast amounts of capital under the merchant phase of capitalism and its investment in machinery. Industrial capitalism, which Marx dated from the last third of the 18th century, marked the development of the Factory system of manufacturing, characterized by a complex Division Of Labor between and within work process and the routinization of work tasks; and finally established the global domination of the capitalist mode of production. During the resulting Industrial Revolution , the industrialist replaced the merchant as a dominant actor in the capitalist system and affected the decline of the traditional handicraft skills of Artisan s, Guild s, and Journeymen . Also during this period, capitalism marked the transformation of relations between the British landowning gentry and peasants, giving rise to the production of Cash Crop s for the market rather than for subsistence on a Feudal Manor . The surplus generated by the rise of commercial agriculture encouraged increased mechanization of agriculture. The rise of industrial capitalism was also associated with the decline of mercantilism. Mid- to late-nineteenth-century Britain is widely regarded as the classic case of Laissez-faire capitalism. Laissez-faire gained favor over mercantilism in Britain in the 1840s with the repeal of the Corn Laws and the Navigation Acts . In line with the teachings of the classical political economists, led by Adam Smith and David Ricardo , Britain embraced Liberalism , encouraging competition and the development of a Market Economy . Capitalism in the late 19th and early 20th centuries In the late 19th century, the control and direction of large areas of industry came into the hands of financiers. This period has been defined as " Finance Capitalism ," characterized by the subordination of processes of production to the accumulation of Money profits in a Financial System . Major characteristics of capitalism in this period included the establishment of large industrial cartels or Monopolies ; the ownership and management of industry by financiers divorced from the production process; and the development of a complex system of Banking , an Equity Market , and corporate holdings of capital through Stock ownership. Increasingly, large industries and land became the subject of profit and loss by financial Speculator s. Late 19th and early 20th century capitalism has also been described as an era of ", asserting that the large cartels of the late 19th century could not arise on the free market, argued that the "state monopoly capitalism" of the period was the result of interventionist policies adopted by governments, such as tariffs, quotas, licenses, and partnership between state and big business.Joseph R. Stromberg, "The Role of State Monopoly Capitalism in the American Empire," ''Journal of Libertarian Studies'', Vol. 15, No. 3, 2001, pp. 74-75. {Link without Title} By the last quarter of the 19th century, the emergence of large industrial trusts had provoked legislation in the U.S. to reduce the monopolistic tendencies of the period. Gradually, the U.S. federal government played a larger and larger role in passing . p185-186, by Murray Rothbard By the end of the 19th century, Economic Depression s and Boom And Bust Business Cycle s had become a recurring problem. In particular, the Long Depression of the 1870s and 1880s and the Great Depression of the 1930s affected almost the entire capitalist world, and generated discussion about capitalism’s long-term survival prospects. During the 1930s, Marxist commentators often posited the possibility of capitalism's decline or demise, often in alleged contrast to the ability of the Soviet Union to avoid suffering the effects of the global depression.Stanley L. Engerman "Capitalism" ''The Oxford Companion to United States History''. Paul S. Boyer, ed. Oxford University Press 2001. Oxford Reference Online. Oxford University Press. Capitalism following the Great Depression The economic recovery of the world's leading capitalist economies in the period following the end of the Great Depression and the Second World War — a period of unusually rapid growth by historical standards — eased discussion of capitalism's eventual decline or demise (Engerman 2001). In the period following the global depression of the 1930s, the state played an increasingly prominent role in the capitalistic system throughout much of the world. In 1929, for example, total U.S. government expenditures (federal, state, and local) amounted to less than one-tenth of GNP ; from the 1970s they amounted to around one-third (EB). Similar increases were seen in all industrialized capitalist economies, some of which, such as France, have reached even higher ratios of government expenditures to GNP than the United States. These economies have since been widely described as " Mixed Economies ." Traders' Floor ( 1963 )]] During the postwar boom, a broad array of new analytical tools in the social sciences were developed to explain the social and economic trends of the period, including the concepts of Post-industrial Society and Welfare Statism . The phase of capitalism from the beginning of the postwar period through the 1970s has sometimes been described as “ State Capitalism ”, especially by Marxian thinkers. The long postwar boom ended in the 1970s, amid the economic crises experienced following the 1973 Oil Crisis . The “ Stagflation ” of the 1970s led many economic commentators politicians to embrace Neoliberal policy prescriptions inspired by the laissez-faire capitalism and Classical Liberalism of the 19th century, particularly under the influence of Friedrich Hayek and Milton Friedman . In particular, Monetarism , a theoretical alternative to Keynesianism that is more compatible with laissez-faire, gained increasing prominence in the capitalist world, especially under the leadership of Ronald Reagan in the U.S. and Margaret Thatcher in the UK in the 1980s. Globalization : Although overseas trade has been associated with the development of capitalism for over five hundred years, some thinkers argue that a number of trends associated with Globalization have acted to increase the mobility of people and capital since the last quarter of the 20th century, combining to circumscribe the room to maneuver of states in choosing non-capitalist models of development. Today, these trends have bolstered the argument that capitalism should now be viewed as a truly World System . However, other thinkers argue that globalization, even in its quantitative degree, is no greater now than during earlier periods of capitalist trade. Doug Henwood is an economists who has argued that the heyday of globalization was during the mid-19th century. For example, he writes in ''What Is Globalization Anyway?'': Not only is the novelty of "globalization" exaggerated, so is its extent. Capital flows were freer, and foreign holdings by British investors far larger, 100 years ago than anything we see today. Images of multinational corporations shuttling raw materials and parts around the world, as if the whole globe were an assembly line, are grossly overblown, accounting for only about a tenth of U.S. trade. {Link without Title} (See also 7) After the abandonment of the Bretton Woods System and the strict state control of foreign exchange rates, the total value of transactions in foreign exchange was estimated to be at least twenty times greater than that of all foreign movements of goods and services (EB). The internationalization of finance, which some see as beyond the reach of state control, combined with the growing ease with which large corporations have been able to relocate their operations to low-wage states, has posed the question of the 'eclipse' of state sovereignty, arising from the growing 'globalization' of capital.For an assessment of this question, see Peter Evans, "The Eclipse of the State? Reflections on Stateness in an Era of Globalization," ''World Politics'', 50, 1 (October 1997): 62-87. Economic growth in the last half-century has been consistently strong. '' argues that economic growth since the industrial revolution has been very strong and that factors such as adequate Nutrition , Life Expectancy , Infant Mortality , Literacy , prevalence of Child Labor , Education , and available free time have improved greatly. It is argued that important factors behind these improvements are globalization and capitalism. POLITICAL ADVOCACY Proponents of capitalism per capita shows exponential acceleration since the beginning of the industrial revolution.See data in Table B-18. (World GDP) and Table B-10. (World Population) published in 8]] Many theorists and policymakers in predominantly capitalist nations have emphasized capitalism's ability to promote economic growth, as measured by or Tribal societies or in socialist societies. Milton Friedman has argued that the " Economic Freedom " of competitive capitalism is a requisite of Political Freedom . Friedman argued that centralized control of economic activity is always accompanied by political repression. In his view, transactions in a market economy are voluntary, and the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminish power to coerce. Friedman's view was also shared by Friedrich Hayek and John Maynard Keynes , both of whom believed that capitalism is vital for freedom to survive and thrive. Friedrich Hayek , '' The Road To Serfdom '', University Of Chicago Press; 50th Anniversary edition (1944), ISBN 0-226-32061-8Richard (edt) Bellamy, Terence Ball, ''The Cambridge History of Twentieth-Century Political Thought'', Cambridge University Press (2003), ISBN 0-521-56354-2, p.60 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 what he considered the phenomenon of Self-organization underpinning capitalism. From this perspective, in process of self-organization, the Profit motive has an important role. From transactions between buyers and sellers price systems emerge, and prices serve as a signal as to the urgent and unfilled wants of people. The promise of profits gives entrepreneurs incentive to use their knowledge and resources to satisfy those wants. Thus the activities of millions of people, each seeking his own interest, are coordinated.Herbert Walberg, Joseph Bast. ''Education and Capitalism'', Hoover Institution Press (2001) p. 87-89 ISBN 0-8179-3972-5 This decentralized system of coordination is viewed by some supporters of capitalism as one of its greatest strengths. They argue that it permits many solutions to be tried, and that real-world competition generally finds a good solution to emerging challenges. In contrast, they argue, Central Planning often selects inappropriate solutions as a result of faulty forecasting. However, in all existing modern economies, the state conducts some degree of Centralized Economic Planning (using such tools as allowing the country's Central Bank to set base Interest Rates ), ostensibly as an attempt to improve efficiency, attenuate cyclical volatility, and further particular social goals. Proponents who follow the Austrian School argue that even this limited control creates inefficiencies because we cannot predict the long-term activity of the economy. Milton Friedman, for example, has argued that the Great Depression was caused by the erroneous policy of the Federal Reserve . Critics of capitalism Main article: Criticisms Of Capitalism , Anti-capitalism Capitalism has met with strong opposition throughout its history. Most of the criticism came from the left, but some from the right, and some from religious elements. Many 19th century conservatives were among the most strident critics of capitalism, seeing market exchange and commodity production as threats to cultural and religious traditions. Some critics of capitalism consider economic regulation necessary in order to reduce corruption, negligence, and a slew of other problems they attribute to free markets. Prominent leftist critics have included socialists like Karl Marx , Frantz Fanon , Vladimir Lenin , Mao Zedong , Leon Trotsky , Antonio Gramsci and Rosa Luxemburg and Anarchists including Benjamin Tucker , Lysander Spooner , Pierre-Joseph Proudhon , Mikhail Bakunin , Peter Kropotkin , Emma Goldman , Murray Bookchin , Rudolf Rocker , Noam Chomsky , and others. Movements like the Luddite s, Narodnik s, Shakers , Utopian Socialists and others have opposed capitalism for various reasons. Marxism has influenced the creation of Social Democratic and Labour Parties , which seek change through existing democratic channels instead of revolution. These parties believe that capitalism should be heavily regulated rather than abolished. Many aspects of capitalism have come under attack from the relatively recent Anti-globalization movement. |
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