What is Capitalism
Many countries today are running on the system of capitalism. It is a form of market, which prevails today along with socialism and mixed markets. This form of market is known as a capitalistic market. However, the exact definition is not clearly known to us. This was first taken up by the western countries when feudalism ended. The general definition of capitalism is ‘the private ownership of rights to produce goods and services for sale in the market’. This private ownership is for the main purpose of earning profit. This is also known as free markets as there is minimal government control over them.
There are a few features of capitalistic market, which we will discuss in this article.
- Right to private property: this is the first feature of a capitalistic economy under which the citizens can own private property. The limit to this type of ownership is absent in this economy. The citizens also have the right to use the property in a manner they deem appropriate.
- Profit motive: this is the main function of the market on based on which it functions. All the decisions taken by the firm owners are purely based on making profits and maximizing sales. Thus, it is said that profit motive is the driving force behind the economy.
- Market forces: the market forces in the capitalistic economy are demand and supply. These are the only market forces that operate and thus, the goods, which have high demand, are produced in large quantities due to the profit involved in it. It is here that the question of ‘what to produce and how much to produce’ is answered.
- What to produce: this is a decision, which is completely taken by the firm owner. He has the complete right to produce what he wants in the quantity of his choice. Nobody forces this opinion on the firm owner.
- Government: the government has a minimal role to play in this economy. All the basic troubles are taken care by the market forces of demand and supply, the government is expected to take care of the more important functions like regulatory policies for the safeguarding of consumer interests and such other matters.
While these are the features of the capitalistic market, there are a few benefits of the market too. There is improvement in the technology that is used in the economy and this leads to better production of goods. Again, there is high productivity due to the free market or perfect competition that prevails. This is a benefit to the economy as the welfare increases in the society.