What is Capitalism?

Before defining what is Capitalism I have decided to provide you with five videos that explain the philosophical foundations of Capitalism as a social system. By listening to these videos, you’ll get a wonderfully elaborated explanation of What Capitalism is and of what it consists of.

Video – What Is Capitalism (1/5)

“Capitalism is the only social system based on the recognition of individual rights and, therefore, the only system that bans force from social relationships.”¹

Published in 1966 this abstract from Ayn Rand‘s work on Capitalism explains in a clear and unequivocal way the true concept and definition of a system based on reason and in the recognition of the rights of free and responsible men.

Capitalism in the previous quote means a full, pure, uncontrolled, unregulated social system known as “Capitalism Laissez-faire“. It is a system that works as a set of interacting or interdependent moral, political and economical principles that are incorporated into legal systems, institutions and governments. This moral, economical and political principles are contingent to the identification that the members of the system do in order to understand the nature of man and are applied to the rational understanding of man’s psycho-epistemology (man’s mode of functioning in acquiring knowledge).

In human history there hasn’t yet existed a capitalist laissez-faire social system that fulfills the previous requirements; and only glimpses of its potentiality have been achieved through history. However, since the 15th Century “economies organizing themselves on capitalist lines have experienced greater economic dynamism: increasing productivity, increasing employment, and generating more rapid advances in economic wealth, living standards, and improved health of the population.”²  It is because of many of the principles of Capitalism Laissez-faire that Globalization and all the different forms of Capitalism have managed to benefit humanity and achieved our current conditions. Unfortunately, it has been because of the philosophical contradictions and irrational actions of man that also many adverse results have come into being from these mixed forms of capitalism and economic crisis, inequalities in the distribution of wealth and environmental degradation are still existing.

The Board of the Center for the Study of Capitalism at Wake Forest University explains what are some of these forms of Capitalism that currently exist and also explain which are some of its capitalist characteristics,

In the 21^st century capitalism exists in several forms. These include 1) free market or market-led capitalism such as we are accustomed to in the U.S.; 2) corporatist or state-led capitalism where the government exerts significant guidance, leadership, and influence over the deployment of private capital (e.g. France, Japan in the 1980s); and 3) managed capitalism, in which worker groups and broad social welfare issues exert significant influence on private corporate behavior (e.g. Sweden, Germany).³ Whereas some evidence suggests that market-led capitalist economies experience greater economic dynamism and higher rates of per capita income growth than economies with other forms of capitalism,⁴ other evidence points to less volatility and fewer inequities in other forms of capitalism than in market-led economies.⁵

This blog was created to study how and when Capitalism and its philosophical principles played a role in Global History.  It is my goal to demonstrate with a narration of past events how the roots of Wealth enabled for the interconnection of the World and how we could learn from the past to build more rational and objective societies.

Sources:

¹ Rand, Ayn. Capitalism: The Unknown Ideal. Signet; Fitst Signet Printing, 1967 edition (July 15, 1986)

² About Capitalism. BB&T Center for The Study of Capitalism. http://capitalism.wfu.edu/about/capitalism/

³ D. Coates, 2000, Models of Capitalism, Blackwell: Malden MA.

⁴ R. L. Heilbroner & W. Milberg, 2006, The Making of Economic Society, Prentice-Hall: Upper Saddle River NJ; E. Phelps, 1999, “Lessons from the Corporatist Crisis in Some Asian Nations”, Journal of Policy Modeling, 21 (3), 331-339. E. Phelps, 2007, “The Economic Performance of Nations: Prosperity Depends on Dynamism, Dynamism on Institutions”, in E. Sheshinski, et al, ed., Entrepreneurship, Innovation, and the Growth Mechanism of Free Enterprise Economies, 342-356, Princeton University Press: Princeton NJ.

⁵ M. Walker & R. Thurow, 2009, “U.S., Europe are an Oceans Apart on Human Toll of Joblessness”, Wall Street Journal, May 7, A1.