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Capitalism is the economic system founded on capital as a basic social relation of production. Capital is a factor of production consisting of buildings, machinery or installations of any kind, which, in collaboration with other factors, mainly labor and intermediate goods, is used for the production of consumer goods. It is the amount of resources, goods and values available to satisfy a need or carry out a defined activity and generate a particular economic benefit or gain. The labor force is often considered part of the capital. Also credit, since it implies an economic benefit in the form of interest, is considered a form of capital (financial capital).
The fundamental factors of production are labor and capital. Capitalism proposes that labor is provided in return for monetary wages and must be freely accepted by the employees. Economic activity is organized in such a way that the people who organize the means of production can obtain an economic benefit and increase their capital. Goods and services are distributed through market mechanisms, promoting competition between companies. The increase of capital, through the investment helps the generation of wealth. If individuals pursue the economic benefit and competition in the market, wealth will increase. And with the increase of wealth, the available resources will increase.
Generally, capitalism is considered an economic system in which the domination of private property over the means of production plays a fundamental role. It is important to understand what is meant by private property in capitalism, since there are many opinions, even though this is one of the basic principles of capitalism: it gives social influence to those who own ownership of the means of production (or in this If capital), the bourgeoisie, giving rise to a hierarchical relationship of functions between the employer and the employee. This in turn creates a society of mobile classes in relation to economic success or failure in the consumer market, which influences the rest of the social structure according to the accumulated capital variable; For that reason in capitalism the membership of a social class is movable and not static.
In broad outline, capitalism differs from its predecessor economic system, feudalism, because capitalists buy labor from workers in exchange for a wage and not under a moralistic demand that obliges people to work in a slave-like manner. Likewise, the most marked difference between capitalism and socialism is the existence of private property as a right that all individuals have, in socialism there is social ownership of the elements of production and the exchange of goods. It should be noted that no socialist state kept these ideas to the fore and that the way to impose such an economic and social system was through measures of force.
Capitalism can only function when there are sufficient social and technological means to secure consumption and accumulate capital, for example, there must be the employer, who owns the resources and capital and seeks the maximization of self-profit through accumulation and Production of resources; Also the employees, who sell their work (the salary) to their employer; And, finally, consumers, who seek to obtain the greatest satisfaction or utility by acquiring what they want and need depending on the quality of the product or the quantity of its price. When this happens, the system has been maintained and even increases the economic capacity to produce wealth.
The main task of government according to capitalism is to control market failures, that the system does not derive in situations of abuse and is responsible for promoting competition. Under this concept there are different types of derivative systems, such as monopoly capitalism, financial capitalism or neocapitalism.
In that sense, the limited presence and influence of political power in the market stands out especially, since it allows owners or entrepreneurs to operate with a high degree of freedom and independence for the achievement of profits. With these, the employers achieve the reinvestment in the companies and the payment to the workers. At the same time it implies the reduction of power that the state has in the day to day financial and business, giving greater weight to the private agents and taking care of the supervision of the markets.
The basic principles of capitalism are:
• Defense of individual rights: private ownership of capital and productive means.
• Freedom of enterprise, through which it is possible to carry out business projects or end them.
• Competitive market, which means that the exchange price is given by the interaction of supply and demand with the least possible interference of the State.
On the defense of individual rights, capitalism establishes that the resources invested by capital providers for social production must be in the hands of the companies and individuals who acquire them. In this way, individuals are given the opportunity to use, use and control the resources they use in their productive work, which, for business purposes, can use as they see fit.
The freedom of company proposes that all companies are free to obtain economic resources and transform them into a new merchandise or service that will be offered in the market that they have. In turn, they are free to choose the business they wish to develop and the time to enter or leave it. Freedom of choice applies to companies, workers and consumers, as the company can manage its resources as it sees fit, workers can do any job that is within their capabilities and consumers are free to choose what they want Consuming, seeking that the chosen product meets their needs and is within the limits of their income.
Competition refers to the existence of a large number of companies or individuals that offer and sell a product (they are bidders) in a certain market. In this market there is also a large number of people or companies, called consumers (also called plaintiffs), who, according to their preferences and needs, buy or demand those goods or merchandise. Through competition a “rivalry” or antagonism between producers is established. Producers seek to hoard as many consumers / buyers for themselves. To achieve this, they use strategies of price reduction, quality improvement, etc.
The political doctrine that has historically spearheaded the defense and implantation of this economic and political system has been the economic and classical liberalism of which John Locke, John of Mariana, Adam Smith, and Benjamin Franklin are considered their founding fathers. Classical liberal thought holds in economics that government intervention must be reduced to its minimum expression. It should only be in charge of the legal system that guarantees respect for private property, the defense of so-called negative freedoms: civil and political rights, internal and external security control (justice and protection) and, eventually, Ensure the free operation of markets, as the presence of the state in the economy would disrupt its operation. Its most prominent contemporary representatives are Ludwig von Mises and Friedrich Hayek by the so-called Vienna School of Economics; George Stigler and Milton Friedman on the part of the call School of Chicago, existing deep differences between both.
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