Describe the concept of capitalism
I would like to tell you about capitalism which has been characterized as “creative destruction”. The main goals of my project are to describe the concept of capitalism, the history of capitalism and its basic lines, to prove the thesis that capitalism is really a creative destruction and to answer question how the opposing forces of change bear on the question of the meaning and experience of work today.
The concept of capitalism
According to Mark Block the word “capitalist” is "a splinter of a slang of speculators at the first European stock exchanges". (Blok,1973)
According to Akulov capitalism is the economic system of the manufacture and distribution based on a private property, general legal equality and a freedom of enterprise. The main criterion for the acceptance of economic decisions is the aspiration to increase a capital and to get a profit.
The famous scientific Yavlinsky considers capitalism to be an economic abstraction in which characteristic features of economy are allocated at a certain stage of its development. The real economy of the concrete countries has never based only on a private property and has not given a full freedom of enterprise. There were always unusual lines for capitalism such as class privileges, restrictions on possession of the property, including restrictions on the sizes of the real estate or the ground areas, traffic walls, anti-monopoly rules, etc. A part from them is a heritage of the previous epoch.
Capitalism is an economic system in which industrial decisions are supervised by those who invests in a private business. Thus, the joint-stock companies are supervised by shareholders.
The basic features of capitalism are a domination of commodity-money relations and a private property on the means of production. The presence of the developed public division of labour, growth of nationalisation of manufacture, transformation of a labour into the goods, operation of hired workers by capitalists. The purpose of capitalist manufacture is to own a surplus value created by job of hired workers. Capitalism passes some stages in its development, but its typical lines are the same.
The basic capitalism's contradiction between the public character of manufacture and the private-capitalist form of assignment of its results generates the manufacture anarchy, unemployment, economic crises and the uncompromising fight between the basic classes of a capitalist society.
Mark Blok marks difficulty to specify a concrete time of occurrence of capitalism in his work “History Apologia”.
The occurrence of the industrial capitalism concerns a boundary of the eighteenth and nineteenth centuries. The use of steam-engines leads to the fact that workshops and manufactures turn to huge factories. Owning their own means of production, the handicrafts-men turn to a class of the hired workers. Capitalists form a ruling class and push aside the previous landowners.
Colonialism was a characteristic element of developing capitalism. About third of English investments had the Indian origin. At this time England wins Bengal and turns to colonial empire.
Classical capitalism disappears in the XX-th century and the means of production pass to the state hands (the socialist project) or to the hands of joint-stock companies (the neoliberal project).
But we can trace through the history that capitalism keeps the basic lines though undergoes certain changes. The state, trade unions and other public institutes seriously increase the size of a payment and social deductions. The number of workers steadily falls in the sphere of production of goods and the number of workers rises in the sphere of services.
The owners of the capital transfer the manufacture to developing countries in order to reduce the expenses on a payment of the labour, tax and social deductions.
Capitalism possesses the following lines
The basis of economy is made by commodity manufacture. Everything is made for the sale or for the exchange. The exchange occurs in the free markets on the basis of mutually advantageous contracts (market economy).
The means of production are used as a capital. Owners of the capital (capitalists) have a great opportunity not to accept a participation in the productive work. The source of their vital blessings is the surplus value in the form of the profit, rent or percent.
The part of a given capital in the general involved sum which was required for the given project is a basis for the surplus value section between various capitalists.
Thus, the degree of a personal labour participation has no value. Such participation can be compensated before the profit distribution (for example, in the form of wages to a director or to a manager) or can be compensated as a payment of the capital of the certain size (for example, in the form of the intellectual property).
The source of the vital blessings for the majority workers is a job on the terms of employment.
Capitalism as a creative destruction
The famous economist Robert Shiller, who is the author of a book: “How today's Global Financial Crisis happened, and what to do about it?” wrote in his work that capitalism is the world engine of economic growth. But this dynamism is a creative destruction. Unsuccessful firms are rejected to let pass to new and best firms and people whose productive ability decreases (often not on their fault) can be also thrown out the market. Their career can be interrupted and their investments are reduced to a part from their previous value.
Shumpeter, the former Minister of Finance of Austria and the professor of the Harward business school has expressed a capitalism essence as «creative destruction». He says that capitalism is a continuous replacement of out-of-date inefficient process or the organisation new, more effective. J. Shumpeter shows that the new product, process or a way of the organisation can be effective and favourable, thus destroying the old organisation. He considered a creative destruction to be a process of transformation which accompanies the radical innovations.
In conclusion I want to say that I proved the thesis that capitalism is a creative destruction because the fundamental impulse which supports the capitalism engine in movement, proceeds from the new consumers, the new goods, new methods of manufacture and transportation, from the new markets and new forms of industrial organisations. This process calls a creative destruction. The concept of a creative destruction is a key word for capitalism. Moreover, the main lacks of capitalism are the unequal distribution of the blessings, the absence of uniting base, the anarchy which was born by a private property and separating to the policy and economy. That's why the opposing forces of change bear on the question of the meaning and experience of work today.
Akulov, V. B. & Akulov, O. V The Economic Theory.. Petrozavodsk: PetrGU, 2002.
Blok, M. History apologia, 2nd ed. ?: Knowledge, 1973.
Shiller, R. The Subprime Solution: How Today's Global Financial Crisis Happened, and What to Do about It. Princeton University Press, 2008.
Shumpeter, J.A. Capitalism, Socialism and Democracy: the Lane with English translated by V.S.Avtonomova. M: Economy, 1995.
Yavlinsky, G. We are going to construct what economy and what society and how it to achieve? (The economic policy and a long-term strategy of modernization of the country). M: Lotos, 2004.
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