What is Capitalism?
Defining capitalism is like trying to identify an object in the middle of a fog bank -
you're pretty sure something is there, but it's hard to tell exactly what.
By Jack Barkstrom
Deciding on a definition of capitalism is like the joke about the accounting profession. Three job applicants interviewing for an accounting position are asked one question: 'What's 2 plus 2?' The first two, certain of the answer, immediately answer 4. The interviewer concludes the interview - with no job offer. The third applicant, on being asked the question, pauses for a moment before answering - 'Well, what do you want it to be? The interviewer responds - 'You're hired. When can you start?
Capitalism brought you this - Should we be grateful or skeptical?
Sometimes on the Internet, sometimes in conversation, the claim is made that capitalism is the reason that consumer goods and services are so widely available at affordable prices. Everything from TV sets, kitchen gadgets, and cell phones to plane tickets and vacation trips are a direct result of capitalism. We should be grateful for the high standard of living we enjoy - that standard of living is a direct benefit of the free market. It's hard to deny - looking at all the advances in technology and production and the creation of a 'consumer society' - that the standard of living has improved for many around the world. Once-remote regions of the world are now connecting to a global community.
There is a lot to be grateful for - advances in medicine and communications have clearly improved the general condition of the human race. At the same time, maybe we should be skeptical when it comes to the explanation. Do we really have capitalism to thank? - or are its claims little more than self-promotion. From a marketing perspective, the idea is to stake a claim before anyone else does and then repeat the idea at any and every opportunity. Perhaps the adage 'buyer beware' should be kept in mind.
Where does capitalism fit in in the overall scheme of things? Should (or does) it occupy its own branch of economics, and does it deserve a special status? Does an increased focus on 'capitalist principles' bring the field of economics into line with the realities of the world, or does it represent a distortion of the entire field? Economics, traditionally, has covered a wide range of economic activity. Where economics examines many different aspects of commerce - the production, transport, and sale of goods or trade between nations or geographical regions - can capitalism selectively claim ownership of just bits and pieces of the entire arena? Anyone who takes more than one economics class might come away with the impression that the real job of the economist is to serve as a cheerleader or advocate for capitalism. Capitalism, it would seem, represents the ideal economic model for a smoothly operating system. From that perspective, might economics really be considered just a branch of capitalism. Future courses might be more appropriately called Capitalism and Free Markets: the field of study formerly known as economics.
Shifting and uncertain meanings
What is capitalism? The answer seems to vary minute by minute. In a political context, conservatives, on the right, view capitalism or the free market, as the system which has brought prosperity and freedom to the modern world. The left, on the other hand, sees capitalism as an exploitive system which has increased the economic disparity between the rich and poor - the benefits have gone mostly to the rich, who have become richer and the poor have seen few, if any gains. Is capitalism a generic term for market operations in a globalized economy, an economic or political explanation for the collapse of the Soviet Union and the triumph of Western democracy, or just a popular term that happens to be in vogue?
Is capitalism an economic term which can be defined exactly? Is there one definition which everyone can agree on? That seems unlikely since people cannot even agree on a date when capitalism began. Some have argued that 'true' capitalism only began in the nineteenth century with the rise of the factory and mass production - capitalism was a product of the Industrial Revolution. [1] There was a clear dividing line between modern capitalist economies and those coming before, say 1800 or 1850, which were labeled pre-capitalist systems. Others have argued that it had its origins in the Reformation, Calvinism, and the Protestant work ethic. [2] But did these disagreements over origins and dates make capitalism less of an economic term and more of a general historical category - a convenient label for a period of time - the Age of Capitalism could be compared to the Age of Enlightenment, or the Gilded Age, or the Iron Age?
One view of capitalism is that it is more of a mental attitude - the capitalist ethic or the capitalist spirit, a capitalist mentality or the embodiment of an entrepreneurial spirit? . The capitalist ethic was associated with, or had harnessed, the inventive minds of entrepreneurs.[3] Capitalism, embodying the 'innovative spirit of entrepreneurship' was something more than a description of free market activity, it was a 'general feeling' "...[that] capitalism equals growth; that capitalism is not one stimulus among many, but the stimulus, the tiger in the tank, the prime mover of progress..."[4]
Deciding on a single definition is bad enough when there are competing explanations for a single idea. What happens when capitalism is subdivided into different variations? 'Capitalism' has not been labeled simply as 'capitalism' but classified as agrarian capitalism, industrial capitalism, financial capitalism, monopoly capitalism, state capitalism, crony capitalism, and creative capitalism.[5] If there are a number of varieties, do they have any common elements? One analysis suggests there are four elements: 1) private property rights; 2) contracts enforceable by third parties; 3) markets with responsive prices; and 4) supportive governments.[6] Unfortunately this explanation sounds like a description of a mature, highly-developed, prosperous system like that of the US or European nations. Does this mean that this definition can only be useful in limited cases - situations where economies have reached their full potential - or does it automatically exclude 'poor' or undeveloped economies? It seems to list or classify economic traits, but does it have any predictive value, i.e., can it explain how those traits operate or whether they will produce a specific outcome? Cities can be classified by their architectural style, by the materials used in construction, such as steel, brick, or wood, or by the height or use of buildings. Such a classification does not explain why one architectural style would dominate, or why certain building materials would be used. For example, was wood used because it was more available or because its style was more appealing?
The word 'capitalist' was first used, or at least first appeared in print, in 1633 in the 'Hollandisch Mercurius,' which used the term again in 1654. [7] In 1699 a French memorandum suggested that 'capitalists' were individuals wealthy enough to pay a tax of 3 florins, in contrast to poorer people, who would only pay 30 sols, under a new tax imposed by the States-General of the United Provinces. [8] The word 'capitalist,' during the 1700s, was just one term among many to describe individuals with money. Other terms were applied to the very rich: men of means, millionaires, nouveau riches, moneybags, and 'moneyed men. [9] Sometime in the mid-1700s, 'capitalist' came to be associated more specifically with wealthy individuals willing to provide the capital funds, i.e., to lend money or to invest in businesses needing funds for operations or projects.[10] The concept of 'capital,' meaning the basic value of a firm, its merchandise, and property holdings, in contrast to the 'income' generated by operations, probably went back to the twelfth and thirteenth centuries, in Italy. [11]
The word 'capitalism' did not come into general use until the early 1900s, when it was seen more as a contrast to socialism. While Marx discussed capital and capitalists, he did not use the term capitalism. Other writers nevertheless considered it part of the Marxist model, where it was considered one of the three major stages of development: slavery, feudalism, and capitalism.[12]
Returning to the Cold War
The ideological struggle between Communism and Democracy, which turned into the Cold War following the end of the Second World War, had been going on in some form since the Russian Revolution. In that context, was capitalism more of a political than an economic term? Capitalism was defined not so much by what it was as by what it was not - it was not communism. The term 'free market' had an immediate association with freedom - not just economic freedom - but political freedom.
Communism's fatal flaw, from a free market perspective - the economic weakness which undermined its foundation - was the elimination of private property. Individuals and businesses were not allowed to make a profit and the state had taken control of private businesses and factories - the state owned the means of production. With the collapse of the Soviet Union, capitalism had the proof that that system did not work. Did this struggle alter the definition or perception of capitalism? In some areas it seemed to. While the Soviet Union existed, capitalism suffered from the criticism that it was a system which exploited workers. Following the collapse, capitalism promoted the idea that it had been proved successful while communism had been proved a failure. Instead of exploiting workers, it was providing jobs and producing goods, both of which meant greater prosperity for more people, while communism had only brought poverty - fewer goods and less income. Finally, capitalism had had a hand in bringing political freedoms to those suffering under communist regimes. Capitalism was now defined, not by everyday economic operations, but by the big idea, and by one big idea in particular - private property and the individual's right to keep whatever profits they made had been key to its success - and that was all that mattered. Opposition to government regulations was an extension of this argument. If the state did not actually own the means of production, as it did under communist regimes, it was placing an undue burden on businesses with unnecessary regulations, which impacted profits.
One of the sweeping generalizations about capitalism has come in this area. Go to any grocery store or hardware store or department store, or nowadays, on-line, in a country such as the U.S., and see the variety of goods available to consumers. The availability of those goods, it is said, is because of the capitalist system. Compare that to store shelves in the former Soviet Union, where consumers, after waiting in long lines for hours, only found empty shelves, or if goods were available, a very limited selection of poor quality goods. But is this a definition of capitalism, an observation, or a type of sound bite answer meant to settle an argument?
The question is - what was the question? - or, what question was this answer meant to answer? In fairness, the question is whether capitalism, long blamed for low wages and the exploitation of labor, is better than a communist system, which seemed to create just as many problems - not quite identical, but similar - wages too low to afford anything and, the exploitation, not just of labor, but of people. Communism, while proclaiming its devotion to the fair treatment of workers and the working class, could not provide for basic needs - it could barely produce enough service or goods to feed and clothe people. If this definition is somewhat lacking in definitional details, it is nevertheless useful as a definition, in that it at least hints at a core idea: capitalism is basically a business model. But not just any business model - it is a business model for a system which actually works. In the context of the wider debate between capitalism and communism, the reason capitalism works is because it takes human nature into account, or at least one aspect of human nature - the desire to accumulate goods, i.e., the drive to become wealthy, or, in business terms, the need to make a profit. Capitalism attributes its success mainly to one thing. It places a higher value on private property. Businesses and individuals can keep whatever profits they make. Communism, in contrast, is too idealistic. By eliminating private property, and profits, it only demonstrates that it lacks a fundamental understanding of how people and businesses operate in the real world. Capitalism, for all its flaws, keeps the store shelves stocked and delivers services people need. It knows how to keep things running.
So, are store shelves brimming with goods part of the definition of capitalism? If nothing else, they do demonstrate the practical, business side of the free market. Or, are store shelves, whether full or empty, just a measure of success or failure - not really part of any definition? That raises a related question - if the availability of consumer goods serves as the standard for measuring success, is the lack of goods an indication of failure? Recently, cities and regions of the U.S. and other countries have suffered a series of natural disasters - flooding in Europe, wildfires in Australia, the U.S., and Canada, hurricanes in the Caribbean, New Orleans, and Houston. There have been recent stories of food, fuel, and material shortages in Puerto Rico, as a result of hurricane Maria, and Houston, as a result of excessive amounts of rain. Do such shortages represent a systemic failure of the capitalist system, or are they simply the result of specific problems? Roads or bridges may have washed out, preventing trucks from making store deliveries, or factories and production facilities may have been destroyed, or their raw material deliveries may have been interrupted. Should the explanations be viewed as excuses for failure, or is it necessary to look at specific causes before passing judgment? In the case of the Soviet Union, shortages were immediately blamed on government price-setting, central planning, and the socialist system. Is the same standard being applied? Were shortages in the Soviet Union related to local or regional difficulties, or natural obstacles, such as climate or terrain, and were those differences examined or explained? Or were they too easily lumped into a single category and dismissed. There was only one explanation for economic problems in the Soviet Union - not weather, not poor transport due to swampy terrain, not large distances - it had to be the communist system.
Simple greed or a desire to be successful?
When capitalism compares itself to communism, it tends to focus on communist treatment of private property, especially restrictions on profits. It proudly points to the pursuit of profits as the major explanation for its success. In other contexts, capitalism seems embarrassed by any suggestion that the 'pursuit of profits,' while providing a positive message, is really just another term for 'greed' or 'avarice' - an extreme desire for money or riches - terms associated with the sordid side of human nature. Greed, after all, was condemned as one of the Seven Deadly Sins. Capitalism both embraces the term while distancing itself from the concept. The word 'greed' is downplayed or avoided altogether. In attempting to define capitalism, what role does greed play? Is it central to the capitalist message? Few are likely to forget the line uttered by Gordon Gekko, the villainous character in the 1987 movie 'Wall Street:' "Greed, for lack of a better word, is good."
Does greed play a more limited role even if it is an acknowledged part of capitalism? Adam Smith, in "The Wealth of Nations,' did not actually use the term 'greed.' He called it 'self-love,' or 'own interest,' sometimes referred to as 'self-interest.'[13] On the distancing side, who wants to be accused of being selfish or being greedy or being driven by blind ambition? To address that charge, capitalism, it has been said, is more than just greed, it is a 'system.' Even the terminology gets changed to emphasize a more positive side. Using the term 'self-interest' or describing ambition as the drive for 'success' sounds better than being greedy. By emphasizing the capitalist ethic and the 'innovative spirit of entrepreneurship' the free market is a mythical force for good and capitalism looks to be above the mundane world of economics. But how does capitalism deal with the baser side of human nature?
Whether capitalism, as a system, views greed as central to its operation, its advocates, the people who champion the free market, certainly take that view. The ambiguity about greed still exists. They term greed is avoided whenever possible. At the same time, advocates find it hard to hide their enthusiasm when the subject of making money comes up. The idea of becoming wealthy is almost an obsession. Stories of successful companies make major headlines, stock prices, particularly when prices rise, attract attention, and the 'rags to riches' legends are read enthusiastically. Bitcoin is only the most recent market field to attract attention, and investors, because of its incredibly fast rise. Like real estate and the Internet, there are also warnings about the dangers of a 'bubble' collapse, if market prices unexpectedly fall. Go to any seminar on investment and someone is likely to talk about how they could be successful in this area, since they 'know how to pick winners.'
Apart from a fixation on money, there has also been an obsession with finding some justification for greed or avarice - something which could associate capitalism with an idealistic mission or something which at least sounds scientific. They saw in Adam Smith a champion, although he devoted only a few sentences of "The Wealth of Nations," in a manuscript of several hundred pages, to the ideas they considered crucial. The first selection states: "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."[14] Later in the work Smith argues that "... an invisible hand [market forces] guides an individual to produce for society. "...By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it."[15] While Smith does not mention charitable organizations or charities, the message can be understood in that context: The individual or merchant, in trying to make a profit for his or her business, benefits society more by producing needed goods or services, than if he devotes time to a charitable organization or donates to that organization.
Should capitalism be criticized because of its obsession with making money or praised for being honest about its goals? If nothing else, does it take a more realistic view of the world? Adam Smith's 'self interest' idea has seemingly proved correct. If there are still problems with poverty, the standard of living has improved for many people around the world. Factory production worldwide has increased the availability of consumer goods for more people than ever before.
Private Property Rights - A new element or an ancient tradition?
Private property rights are seen as crucial, or at least central, to the success of capitalism. [16] The private property argument may be aimed at distinguishing capitalist systems from communist systems, but the distinction is less clear when it comes to pre-capitalist societies. One problem with this argument is that even ancient societies, clearly in the pre-capitalist category, such as Rome, Athens or Egypt, went out of their way to protect the privileges - and property rights - of wealthy individuals.
The achievements of ancient civilizations are often measured by the remains of architectural wonders, ruins, and buildings seen today, such as the Great Wall of China, the Parthenon in Athens, the pyramids of Egypt or the Colosseum in Rome. Often overlooked or overshadowed by these structures are the villas and private estates of wealthy individuals, still seen in the countryside in Italy or at the ruins of the buried city of Pompeii, destroyed in 79 A.D. by the eruption of Mount Vesuvius. Many of the sculptures, wall paintings and mosaics, while providing insights into then-current artistic styles, also serve as evidence of wealth and the legal protections accorded to individuals for property they owned. Much earlier, in Egypt, during the period of the New Kingdom (1550-1295 BC), are examples of wealthy individuals in possession of magnificent estates, such as that of Sennefer, mayor of Thebes under Amenhotep II (1427 - 1400 BC). [17] Even earlier, in Egypt, during the Middle Kingdom (2055-1650 BC), the state decided to change its military system, from a militia force raised when needed, to a professional army. The state paid its soldiers by a system of land allotments, whereby they could exploit the land and profit from the harvests. Such allotments sometimes came with serfs to work the land. In addition, the legal system included a form of inheritance transfer, known as usufruct, whereby they could leave these rights to their descendants.[18]
In Rome, the legal protections surrounding private property rights were so enshrined in law that even the Roman state had difficulty curbing the powers of wealthy individuals. For some years the Roman state had divided up land gained by conquest. Part was sold publicly and part was divided among the poorer citizens for a nominal rent. Over time wealthy individuals began to acquire the lots owned by the poor. To curb this abuse, in 366 BC, Rome had enacted a law, the Lex Licinia, limiting landholdings by any individual to five hundred jugera of land (roughly 310 acres). Landholders eventually got around this restriction by buying property under other people's names.
Tiberius Gracchus was elected tribune in 133 BC. He proposed that the Lex Licinia be enforced and the freed up lands be distributed among the poor. Members of the Roman Senate, and their supporters, on one of the days he was speaking to his supporters, grew so angry that they attacked him. When the confrontation ended, Tiberius, and some 300 of his supporters had been beaten to death that day. Their bodies were thrown into the Tiber river.[19] In 123 BC, Gaius Gracchus, Tiberius' brother, was elected tribune. One of his proposals was a redistribution of public lands. In 121 BC, Gaius and 3,000 of his followers were killed when the Senate authorized military action against him.[20]
So, when capitalism elevates the status of private property, is it taking its cue from ancient societies, carrying on a tradition with roots in the past, or absorbing the best of what earlier civilizations had to offer? Or, are definitions of capitalism which place private property rights and enforceable contract rights at their center really unrelated to the ancient past? Perhaps they are only relevant in the context of the recent struggle between capitalism and communism. Capitalism still sees its mission as the defeat of communism, and defines itself by what it sees as the key difference between the two philosophies.
Which came first - The inventor or the marketing executive?
In 1455, Johannes Gutenberg produced copies of what would become known as the Gutenberg Bible. He had developed a punch-stamp capable of producing individual letters and then modified the screw of a wine press to imprint the letters on a sheet of paper. The ability to reproduce printed copies at the rate of 240 pages per hour revolutionized the field of communications. Oddly, Gutenberg himself did not profit from his own invention. He was sued by his financier, who won the rights to the press, and the wealth which came with those rights.[21]
In one sense, Gutenberg had the last word, since his name is remembered, while the financier's is not. The story may point to a wider lessen. Gutenberg may not have been able to develop his invention without the financial backing of an investor. On the other hand, inventions themselves, however significant at the time, seem to fade into the background of history, as they become commonplace. The marketing of the invention can be as important as the invention itself.
Is capitalism, in one sense, basking in reflected glory, by stepping in to take credit for the achievements of others only after their work is done? It seems to spend more energy in self-promotion and makes exaggerated claims about its role. It overemphasizes the importance of its accomplishments, while others are doing the actual creating. What capitalism claims to have recently discovered are long-standing business practices in use almost from the start of time. Capitalism inherited much of what it claims to own from earlier merchants and business practitioners. The body of knowledge and practices involving trade has been accumulated over time, a collective response to a wide range of problems encountered in business. Is the growth of trade, which capitalism points to as its achievement, just a natural result of expanding markets and new opportunities? [22]
Globalization and the new global economy certainly seem new. Advances in telecommunications have created almost instantaneous contact with a global community and audience, most places on the globe are accessible in a day by air, and transport has increased the speed with which packages and goods can be delivered. At the same time, shipping and transport, a major segment of commercial activity, has changed little in thousands of years. Water transport is one such area. Boats and ships, once made of wood, are now made of steel. Sails once harnessed the power of the wind to move ships, while oars and human power served as an alternative propulsion source, then both were replaced by coal, which was in turn, replaced by oil. Ships have increased in size and carrying capacity, while automation has reduced the number of people required for operations. Ship designs were adapted to local conditions.
The Vikings relied on the Long Ship for sea voyages into the Atlantic, the Chinese junk was designed for travel in Asian waters, and the Hanseatic League, in the 1200s, developed the cog for cargo carried around the Baltic. The Romans converted their war galleys into large cargo ships for carrying grain across the Mediterranean. The Italian cities of Genoa and Venice, and the French city of Marseilles, were operating two and three deck cargo ships at the time of the Crusades.[23] In the 1400s, the Portuguese were using the two and three-masted, multi-decked carrack, for their voyages around Africa. The carrack design would evolve into the larger smooth-hulled caravel for the long voyages of the Asian spice trade, and employed by Columbus in his famous voyage. The Niña and Pinta were both caravels.[24]
The Dutch, in the late sixteenth and early seventeenth centuries would contribute the fluit or fluyt (flute)(wine glass) design, a wide-bottomed coastal vessel suitable for carrying bulk cargo but capable of service as a whaler and fishing vessel.[25] The demands of empire and conflicts between European powers led to an 'arms race' in ship design, producing larger, heavier, and more heavily armed ships. HMS Victory, Lord Nelson's flagship at Trafalgar, fought in 1805, displaced some 2500 tons and carried 100 guns. Trafalgar was perhaps the last battle major between wooden sailing ships. They would be replaced by the auxiliary steam battleship, in use during the Crimean War in mid-century. Paddle steamers began appearing on inland waterways in the early 1800s. In 1833, the Canadian-built 'Royal William' made the first trans-Atlantic steam-powered crossing in nineteen days. This was followed, in 1838, by a race between the 'Sirius,' sailing out of the Cove of Cork, and the 'Great Western,' sailing from Bristol. The Great Western reached New York in fifteen days and five hours. [26] The age of sail was not completely over. American companies developed the clipper ship, used first in the opium trade in the 1830s, the tea trade in the 1840's, then to carry passengers in the gold rushes in California, in 1849, Australia, in 1852, and New Zealand in 1861, and later Australian wool. In the 1840s, Britain began using iron in frigate construction. [27] By 1878, steel, lighter, cheaper, and stronger, was replacing iron in ship hull construction.[28] Rising demand for crude oil since 1945, led to the construction of the supertanker in the 1960s and ultimately to the Ultra Large Crude Carrier (ULCC), with tonnages in excess of 500,000 deadweight tons.[29] Demand in specialized product markets has led to the development of chemical tankers, gas tankers, ore/bulk/oil (OBO) carriers, and other bulk carriers.[30]
Could Capitalism take credit for any of these developments? or for some? If each of these innovations add to the cumulative body of knowledge, should they be claimed as the exclusive property of the capitalist narrative, or are they more generally independent events which together tell the story of shipping or more broadly, trade and commerce?
In 1661 the Stockholm Bank began issuing banknotes (bills) which could be converted into coins. Those holding the notes no longer needed to carry large amounts of coins, which at the time in Sweden, were made of copper. The Bank of England followed suit in 1694, as did the Bank of Scotland in 1695, which also began issuing their own notes.[31] While these notes could have been hand written, the ability to issue notes would not have been possible prior to the invention of the printing press, Gutenberg's 1455 invention. It was one of those incremental changes which advanced the field of commerce. The innovation did not give the Stockholm Bank a permanent advantage, since it went bankrupt from over lending in 1667.
A question of causation
Capitalism can be defined by any number of characteristics, whether enforceable contracts or responsive markets, without having to prove itself as the dynamic force of nature which holds the fate of the world in its hands. At the same time, if it chooses to include in its definition claims about its ability to influence events, it opens itself up to questions of causation. Was it the reason something happened - or just a bystander observing events from afar? The Greek god Zeus was said to hurl thunderbolts from Mount Olympus during storms - the explanation for lightning - while humans could only play the role of observer - wondering at the spectacle in the heavens - amazed at the power of thunderstorms, but powerless to do anything about them. Causation issues, to bring in another Greek myth, open a Pandora's box of questions. A related question involves the predictive value of a definition, when it includes causation claims, i.e., can a definition help to predict whether future events will occur or how they will unfold, if they happen?
If causation is the issue, how much of economic activity can be attributed specifically to capitalism? Put another way, what portion of growth and trade, present or past, is captured by the concept of capitalism? Many of the advances in weapons or military technology would fall outside the capitalist sphere, since capitalism, almost by definition, excludes government involvement. In the past, governments have been the primary market for weapons technology, and the only entities with the financial resources to provide funding. The Roman government demanded and funded the overhaul of its fleets, both in the military area and for trading. The British, Dutch, French, and Spanish fleets of empire were dependent on government funding, under government supervision. The British government began using iron in ship construction in the 1840s. The atomic bomb was another government project, whether developed in the U.S., the Soviet Union, or China.
Can capitalism carve out a particular niche in time as its own, when it comes to causation? The period after the collapse of the Soviet Union has been suggested, but distinguishing between normally expected growth and growth caused by capitalism is difficult. As new markets opened and more people, with more money, began to participate in the world economy, increases in the standard of living could be expected. In addition, separating what capitalism created and what it inherited is difficult.
Capitalism can legitimately claim its core activity - providing capital or investment funds for business projects - as its contribution to the world economy. At the same time, not all businesses need or ask for investment funds. Many restaurants, contractors, and small businesses become successful without ever having to borrow money. Venture capitalists like to call themselves saving 'angels' because they come to the aid of struggling or newly emerging businesses. The price for their help can be steep however, either partial ownership in a business or effective interest rates above 20 percent. The major stock exchanges, such as the New York Stock Exchange or NASDAQ, considered the symbolic flagships of capitalism, provide funds directly to companies only when companies offer new shares of stock or bonds, such as in an Initial Public Offering (IPO) or offer previously issued stock (secondary distribution). The price of stock, once on the market, is more of an educated guess at the value of a company, subject to good or bad news or events which may impact a given company. Investors like to believe that their investment decisions, which collectively reward well-run companies and punish poor performers, are the difference between success and failure.
If providing investment funds is the major contribution of capitalism, the question is how is it measured and what is the value of its contribution?
What is capitalism?
If the question is 'what is capitalism?' -
The answer is - It depends.
If the question is 'Do we have capitalism to thank for the benefits of the global market?' -
The answer is - It depends on who you ask.
Footnotes
(1) Fernand Braudel,"The Wheels of Commerce: Civilization and Capitalism 15th-18th Century, Volume 2," (Harper & Row: New York), (English translation) (1982), p. 239.
(2) Braudel, ibid, pp. 567-569, 578, citing Max Weber, "The Protestant Ethic and the Spirit of Capitalism" (1904)
(3) Braudel, ibid, p. 572
(4) Braudel, ibid, p. 575
(5) Larry Neal, "The Cambridge History of Capitalism, Volume 1, The Rise of Capitalism: From Ancient Origins to 1848, (Cambridge University Press: Cambridge) (2015), p. 2
(6) Larry Neal, ibid, p. 2
(7) Braudel, op.cit., p. 234
(8) Braudel, ibid, p. 235
(9) Braudel, ibid, p. 235
(10) Braudel, ibid, p. 236
(11) Braudel, ibid, p. 232
(12) Braudel, ibid, p. 237
(13) Adam Smith, "The Wealth of Nations, Book I, Chapter 2, (Barnes & Noble: New York), (2004), p.12.
(14) Adam Smith, ibid, p.12.
(15) Adam Smith, ibid, p. 300.
(16) Gareth Austin, Capitalism and the Colonies, from Capitalism, Volume 2, op.cit., p. 306
(17) (5Egypt) 'The Encyclopedia of Ancient Egypt,' Helen Strudwick, ed., (Metro Books: New York), 2006, p357.
(18) (6Egypt) Ibid, p. 364
(19) Plutarch, Tiberius Gracchus from "Lives of the Noble Grecians and Romans," Arthur Hugh Clough, ed., (Benediction Classics: Oxford)(2015), p.780.
(20) Plutarch, Gaius Gracchus from "Lives of the Noble Grecians and Romans," Arthur Hugh Clough, ed., (Benediction Classics: Oxford)(2015), p.790.
(21) 1000 Events That Shaped the World, Barbara Brownell Grogan, Exec. Ed., (National Geographic Society: Washington, D.C.) (2007), p. 111.
(22) Braudel, op.cit., p. 575
(23) Richard Woodman, "The History of the Ship: The comprehensive story of seafaring from the earliest times to the present day," (Conway Maritime Press: London)(1997), p. 47
(24) Woodman, ibid, p. 58
(25) Woodman, ibid, pp. 68-73
(26) Woodman, ibid, p. 138
(27) Woodman, ibid, p. 187
(28) Woodman, ibid, p. 204
(29) Woodman, ibid, p. 317
(30) Woodman, ibid, pp. 320-324
(31) 1000 Events That Shaped the World, op.cit., p. 154.