Everything about Private Enterprise totally explained
Capitalism is an
economic system in which all
property is owned by either private individuals or a corporation. Private ownership is sometimes used as a synonym for
individual ownership, however the term "private" may also be used to refer to collective ownership of individuals in the form of
corporate ownership. Therefore, "privately owned" in the context of this definition means not owned or controlled by the state. and operated for
profit, and in which
investments,
distribution,
income,
production and
pricing of
goods and
services are determined through the operation of a
market economy. It is usually considered to involve the right of individuals and
corporations to
trade, using
money, in goods, services (including
finance),
labor and
land.
Capitalist economic practices became institutionalized in
England between the 16th and 19th centuries, although some features of capitalist organization existed in the
ancient world, and early forms of
merchant capitalism flourished during the
Middle Ages.
The concept of capitalism has limited analytic value, given the great variety of historical cases over which it's applied, varying in time, geography, politics and culture, and some feel that the term "
mixed economies" more precisely describes most contemporary economies. Some economists have specified a variety of different types of capitalism, depending on specifics of concentration of economic power and wealth, and methods of capital accumulation. In
The Principles of Political Economy and Taxation (1817) he developed the law of
comparative advantage, which explains why it's profitable for two parties to trade, even if one of the trading partners is more efficient in every type of economic production. This principle supports the economic case for
free trade. Ricardo was a supporter of
Say's Law and held the view that full employment is the normal equilibrium for a competitive economy. He also argued that
inflation is closely related to changes in quantity of
money and
credit and was a proponent of the law of
diminishing returns, which states that each additional unit of input yields less and less additional output.
The values of classical political economy are strongly associated with the
classical liberal doctrine of minimal government intervention in the economy. Classical liberal thought has generally assumed a clear division between the economy and other realms of social activity, such as the state.
Marxian political economy
Karl Marx considered capitalism to be a historically specific
mode of production (the way in which the productive property is owned and controlled, combined with the corresponding
social relations between individuals based on their connection with the process of production) in which capital has become the dominant mode of production. The capitalist stage of development or "bourgeois society," for Marx, represented the most advanced form of social organization to date.
Following
Adam Smith, Marx distinguished the
use value of commodities from their
exchange value in the market.
Capital, according to Marx, is created with the purchase of commodities for the purpose of creating new commodities with an exchange value higher than the sum of the original purchases. For Marx, the use of
labor power had itself become a commodity under capitalism; the exchange value of labor power, as reflected in the wage, is less than the value it produces for the capitalist. This difference in values, he argues, constitutes
surplus value, which the capitalists extract and accumulate. In his book
Capital, Marx argues that the
capitalist mode of production is distinguished by how the owners of capital extract this surplus from workers — all prior class societies had extracted
surplus labor, but capitalism was new in doing so via the sale-value of produced commodities.
For Marx, this cycle of the extraction of the surplus value by the owners of capital or the bourgeoisie becomes the basis of
class struggle. However, this argument is intertwined with Marx's version of the
labor theory of value asserting that labor is the source of all value, and thus of profit. This theory is contested by most current
economists, including some contemporary Marxian economists.
Vladimir Lenin, in
Imperialism, the Highest Stage of Capitalism (1916), modified classic Marxist theory and argued that capitalism necessarily induced
monopoly capitalism - which he also called "imperialism" - in order to find new markets and resources, representing the last and highest stage of capitalism.
In Marxist thought, capitalism is often linked with
patriarchal hegemony. Some 20th century
Marxian economists consider capitalism to be a social formation where capitalist class processes dominate, but are not exclusive. Capitalist class processes, to these thinkers, are simply those in which
surplus labor takes the form of
surplus value, usable as capital; other tendencies for utilization of labor nonetheless exist simultaneously in existing societies where capitalist processes are predominant. However, other late Marxian thinkers emphasize that capitalism is the mode by which a surplus is generated — the mode of surplus extraction — in modern societies where an absolute majority of the population is engaged in non-capitalist economic activity.
Weberian political sociology
In some
social sciences, the understanding of the defining characteristics of capitalism has been strongly influenced by 19th century German social theorist
Max Weber. Weber considered
market exchange, rather than production, as the defining feature of capitalism; capitalist enterprises, in contrast to their counterparts in prior modes of economic activity, was their rationalization of production, directed toward maximizing
efficiency and
productivity. According to Weber, workers in pre-capitalist economic institutions understood work in terms of a personal relationship between
master and
journeyman in a
guild, or between
lord and
peasant in a
manor.
In his book
The Protestant Ethic and the Spirit of Capitalism (1904-1905), Weber sought to trace how capitalism transformed traditional modes of economic activity. For Weber, the 'spirit' of rational calculation eroded traditional restraints on capitalist exchange, and fostered the development of modern capitalism. This 'spirit' was gradually codified by law; rendering wage-laborers legally 'free' to sell work; encouraging the development of technology aimed at the organization of production on the basis of rational principles; and clarifying the separation of the public and private lives of workers, especially between the home and the workplace. Therefore, unlike Marx, Weber didn't see capitalism as primarily the consequence of changes in the means of production. Instead, for Weber the origins of capitalism rested chiefly in the rise of a new
entrepreneurial 'spirit' in the political and cultural realm. In the
Protestant Ethic, Weber suggested that the origin of this 'spirit' (the
Protestant work ethic) was related to the rise of
Protestantism, particularly
Calvinism.
Capitalism, for Weber, is the most advanced economic system ever developed over the course of human history. Weber associated capitalism with the advance of the business
corporation, public credit, and the further advance of
bureaucracy of the modern world. Although Weber defended capitalism against its socialist critics of the period, he saw its rationalizing tendencies as a possible threat to traditional cultural values and institutions, and a possible 'iron cage' constraining human freedom.
German Historical School and Austrian School
From the perspective of the
German Historical School, capitalism is primarily identified in terms of the organization of production for
markets. Although this perspective shares similar theoretical roots with that of Weber, its emphasis on markets and
money lends it different focus. The premises of Keynes’s work have, however, since been challenged by neoclassical and
supply-side economics and the Austrian School.
Another challenge to Keynesian thinking came from his colleague
Piero Sraffa, and subsequently from the
Neo-Ricardian school that followed Sraffa. In Sraffa's highly-technical analysis, capitalism is defined by an entire system of social relations among both producers and consumers, but with a primary emphasis on the demands of production. According to Sraffa, the tendency of capital to seek its highest rate of profit causes a dynamic instability in social and economic relations.
Neoclassical economics and the Chicago School
Today, most academic research on capitalism in the English-speaking world draws on
neoclassical economic thought. It favors extensive market coordination and relatively neutral patterns of governmental market regulation aimed at maintaining property rights, rather than privileging particular social actors; deregulated
labor markets; corporate governance dominated by financial owners of firms; and financial systems depending chiefly on
capital market-based financing rather than state financing.
The
Chicago School of economics is best known for its free market advocacy and
monetarist ideas. According to
Milton Friedman and monetarists, market economies are inherently stable
if left to themselves and depressions result only from government intervention. Friedman, for example, argued that the Great Depression was result of a contraction of the money supply, controlled by the
Federal Reserve, and not by the lack of investment as Keynes had argued.
Ben Bernanke, current Chairman of the Federal Reserve, is among the economists today generally accepting Friedman's analysis of the causes of the Great Depression.
Neoclassical economists, which today are the majority of economists, consider value to be subjective, varying from person to person and for the same person at different times, and thus reject the labor theory of value.
Marginalism is the theory that economic value results from marginal utility and
marginal cost (the
marginal concepts). These economists see capitalists as earning profits by forgoing current consumption, by taking risks, and by organizing production.
History
Private ownership of some means of production has existed at least in a small degree since the invention of agriculture. Some writers see medieval
guilds as forerunners of the modern capitalist concern (especially through using
apprentices as a kind of paid laborer); but economic activity was bound by customs and controls which, along with the rule of the
aristocracy which would expropriate wealth through arbitrary fines, taxes and enforced loans, meant that
profits were difficult to accumulate. By the 18th century, however, these barriers to profit were overcome and capitalism became the dominant economic system of the United Kingdom and by the 19th century Western Europe.
Some writers trace back the earliest stages of
merchant capitalism even further to the
Caliphate during the 9th-12th centuries, where a vigorous
monetary market economy was created on the basis of the expanding levels of circulation of a stable high-value
currency (the
dinar) and the integration of
monetary areas that were previously independent. Innovative new
business techniques and forms of
business organization were introduced by
economists,
merchants and
traders during this time. Such innovations included
trading companies,
bills of exchange,
contracts, long-distance
trade,
big businesses, the first forms of
partnership (
mufawada in
Arabic) such as
limited partnerships (
mudaraba) (
mufawada partnership possessed features similar to those of the
early medieval family
compagnia in
Europe), and the concepts of
credit,
profit,
capital (
al-mal) and
capital accumulation (
nama al-mal). Many of these early capitalist ideas were further advanced in
medieval Europe from the 13th century onwards.
Some
economic historians (like
Peter Temin) argue that the economy of the Early
Roman Empire was a
market economy and one of the most advanced agricultural economies to have existed (in terms of productivity, urbanization and development of capital markets), comparable to the most advanced economies of the world before the
Industrial Revolution, namely the economies of 18th century
England and 17th century
Netherlands. There were markets for every type of good, for land, for cargo ships; there was even an insurance market.
In the period between the late 15th century and the late 18th century the institution of private property was brought into existence in the full, legal meaning of the term. Important contribution to the theory of property is found in the work of
John Locke, who argued that the right to private property is a
natural right. During the Industrial Revolution much of Europe underwent a thorough economic transformation associated with the rise of capitalism and levels of wealth and economic output in the Western world have risen dramatically since that period.
Over the course of the past five hundred years, capital has been accumulated by a variety of different methods, in a variety of scales, and associated with a great deal of variation in the concentration of economic power and wealth. Similar practices of economic regimentation had begun earlier in the medieval towns. However, under mercantilism, given the contemporaneous rise of
absolutism, the state superseded the local
guilds as the regulator of the economy.
Among the major tenets of mercantilist theory was
bullionism, a doctrine stressing the importance of accumulating
precious metals. Mercantilists argued that a state should export more goods than it imported so that foreigners would have to pay the difference in precious metals. Mercantilists asserted that only raw materials that couldn't be extracted at home should be imported; and promoted government subsidies, such as the granting of monopolies and protective
tariffs, were necessary to encourage home production of manufactured goods.
Proponents of mercantilism emphasized state power and overseas conquest as the principal aim of economic policy. If a state couldn't supply its own raw materials, according to the mercantilists, it should acquire colonies from which they could be extracted. Colonies constituted not only sources of supply for raw materials but also markets for finished products. Because it wasn't in the interests of the state to allow competition, held the mercantilists, colonies should be prevented from engaging in manufacturing and trading with foreign powers.
Industrial capitalism and laissez-faire
Mercantilism declined in Great Britain in the mid-18th century, when a new group of economic theorists, led by
David Hume and
Adam Smith, challenged fundamental mercantilist doctrines as the belief that the amount of the world’s wealth remained constant and that a state could only increase its wealth at the expense of another state. However, in more undeveloped economies, such as
Prussia and
Russia, with their much younger manufacturing bases, mercantilism continued to find favor after other states had turned to newer doctrines.
The mid-18th century gave rise to industrial capitalism, made possible by the accumulation of vast amounts of capital under the merchant phase of capitalism and its investment in machinery. Industrial capitalism, which Marx dated from the last third of the 18th century, marked the development of the
factory system of manufacturing, characterized by a complex
division of labor between and within work process and the routinization of work tasks; and finally established the global domination of the capitalist mode of production. Although the concept of monopoly capitalism originated among Marxist theorists, non-Marxist economic historians have also commented on the rise of monopolies and trusts in the period.
Murray Rothbard, asserting that the large cartels of the late 19th century couldn't arise on the free market, argued that the "state monopoly capitalism" of the period was the result of interventionist policies adopted by governments, such as tariffs, quotas, licenses, and partnership between state and big business.
By the last quarter of the 19th century, the emergence of large industrial trusts had provoked legislation in the U.S. to reduce the monopolistic tendencies of the period. Gradually, the U.S. federal government played a larger and larger role in passing
antitrust laws and regulation of industrial standards for key industries of special public concern. However, some economic historians believe these new laws were in fact designed to aid large corporations at the expense of smaller competitors. By the end of the 19th century,
economic depressions and
boom and bust business cycles had become a recurring problem, although such problems were most likely caused by government intervention, not failures in free markets (Rand 1967, Friedman 1962, Bernstein 2005). In particular, the
Long Depression of the 1870s and 1880s and the
Great Depression of the 1930s affected almost the entire capitalist world, and generated discussion about capitalism’s long-term survival prospects. During the 1930s, Marxist commentators often posited the possibility of capitalism's decline or demise, often in alleged contrast to the ability of the
Soviet Union to avoid suffering the effects of the global depression.
After the Great Depression
The economic recovery of the world's leading capitalist economies in the period following the end of the Great Depression and the
Second World War — a period of unusually rapid growth by historical standards — eased discussion of capitalism's eventual decline or demise (Engerman 2001).
In the period following the global depression of the 1930s, the state played an increasingly prominent role in the capitalistic system throughout much of the world. In 1929, for example, total U.S. government expenditures (federal, state, and local) amounted to less than one-tenth of
GNP; from the 1970s they amounted to around one-third (EB). Similar increases were seen in all industrialized capitalist economies, some of which, such as France, have reached even higher ratios of government expenditures to GNP than the United States. These economies have since been widely described as "
mixed economies."
During the postwar boom, a broad array of new analytical tools in the social sciences were developed to explain the social and economic trends of the period, including the concepts of
post-industrial society and the
welfare state. Exceptionally high
inflation combined with slow output growth, rising unemployment, and eventually
recession caused loss of credibility of
Keynesian welfare-statist mode of regulation. Under the influence of
Friedrich Hayek and
Milton Friedman, Western states embraced policy prescriptions inspired by the laissez-faire capitalism and
classical liberalism. In particular,
monetarism, a theoretical alternative to Keynesianism that's more compatible with laissez-faire, gained increasing prominence in the capitalist world, especially under the leadership of
Ronald Reagan in the U.S. and
Margaret Thatcher in the UK in the 1980s. In the eyes of many economic and political commentators, collapse of the
Soviet Union brought further evidence of superiority of market capitalism over state-centered economic systems.
Globalization
»
Although overseas trade has been associated with the development of capitalism for over five hundred years, some thinkers argue that a number of trends associated with
globalization have acted to increase the mobility of people and capital since the last quarter of the 20th century, combining to circumscribe the room to maneuver of states in choosing non-capitalist models of development. Today, these trends have bolstered the argument that capitalism should now be viewed as a truly
world system.
After the abandonment of the
Bretton Woods system and the strict state control of foreign exchange rates, the total value of transactions in foreign exchange was estimated to be at least twenty times greater than that of all foreign movements of goods and services (EB). The internationalization of finance, which some see as beyond the reach of state control, combined with the growing ease with which large corporations have been able to relocate their operations to low-wage states, has posed the question of the 'eclipse' of state sovereignty, arising from the growing 'globalization' of capital.
Economic growth in the last half-century has been consistently strong.
Life expectancy has almost doubled in the developing world since the postwar years and is starting to close the gap on the developed world where the improvement has been smaller.
Infant mortality has decreased in every developing region of the world. While scientists generally agree about the size of global
income inequality, there's a general disagreement about the recent direction of change of it. However, it's growing within particular nations such as China. The book
The Improving State of the World argues that economic growth since the industrial revolution has been very strong and that factors such as adequate
nutrition,
life expectancy,
infant mortality,
literacy, prevalence of
child labor,
education, and available free time have improved greatly.
State Capitalism
State capitalism, in its classic meaning, is a private
capitalist economy under
state control. This term was often used to describe the controlled economies of the great powers in the
First World War. In more modern sense, state capitalism is a term used to describe a system where state is intervening in the markets to protect and advance interests of
big business. This practice is in sharp contrast with the ideals of
free market capitalism and
socialism.
Political advocacy
Support
Many theorists and policymakers in predominantly capitalist nations have emphasized capitalism's ability to promote economic growth, as measured by
Gross Domestic Product (GDP),
capacity utilization or
standard of living. This argument was central, for example, to
Adam Smith's advocacy of letting a free market control production and price, and allocate resources. Many theorists have noted that this increase in global GDP over time coincides with the emergence of the modern world capitalist system. While the measurements are not identical, proponents argue that increasing GDP (per capita) is empirically shown to bring about improved standards of living, such as better availability of food, housing, clothing, and health care. The decrease in the number of hours worked per week and the decreased participation of children and the elderly in the workforce have been attributed to capitalism. Proponents also believe that a capitalist economy offers far more opportunities for individuals to raise their income through new professions or business ventures than do other economic forms. To their thinking, this potential is much greater than in either traditional
feudal or
tribal societies or in socialist societies.
Milton Friedman has argued that the
economic freedom of competitive capitalism is a requisite of
political freedom. Friedman argued that centralized control of economic activity is always accompanied by political repression. In his view, transactions in a market economy are voluntary, and the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminish power to coerce. Friedman's view was also shared by
Friedrich Hayek and
John Maynard Keynes, both of whom believed that capitalism is vital for freedom to survive and thrive.
Austrian School economists have argued that capitalism can organize itself into a complex system without an external guidance or planning mechanism. Friedrich Hayek coined the term "
catallaxy" to describe what he considered the phenomenon of
self-organization underpinning capitalism. From this perspective, in process of self-organization, the
profit motive has an important role. From transactions between buyers and sellers price systems emerge, and prices serve as a signal as to the urgent and unfilled wants of people. The promise of profits gives entrepreneurs incentive to use their knowledge and resources to satisfy those wants. Thus the activities of millions of people, each seeking his own interest, are coordinated.
This decentralized system of coordination is viewed by some supporters of capitalism as one of its greatest strengths. They argue that it permits many solutions to be tried, and that real-world competition generally finds a good solution to emerging challenges. In contrast, they argue,
central planning often selects inappropriate solutions as a result of faulty forecasting. However, in all existing modern economies, the state conducts some degree of
centralized economic planning (using such tools as allowing the country's
central bank to set base
interest rates), ostensibly as an attempt to improve efficiency, attenuate cyclical volatility, and further particular social goals. Proponents who follow the Austrian School argue that even this limited control creates inefficiencies because we can't predict the long-term activity of the economy. Milton Friedman, for example, has argued that the
Great Depression was caused by the erroneous policy of the
Federal Reserve. The first person to endow capitalism with a new code of morality (
Rational Selfishness), she didn't justify capitalism on the grounds of pure "practicality" (that it's the best wealth-creating system), or the
supernatural (that
God or
religion supports capitalism), or because it benefits the most people, but maintained that it's the only morally valid
socio-political system because it allows people to be free to act in their rational self-interest.
TINA is a commonly used argument in support of capitalism; "
There Is No Alternative" to capitalism. The slogan attributed to
Margaret Thatcher claims despite
capitalism's problems, any deviation from their doctrine is certain to lead to disaster.
Criticism
Capitalism has met with strong opposition throughout its history. Most of the criticism came from the left, but some from the right, and some from religious elements. Many 19th century conservatives were among the most strident critics of capitalism, seeing market exchange and commodity production as threats to cultural and religious traditions. Some critics of capitalism consider economic regulation necessary in order to reduce corruption, negligence, and numerous of other problems caused by free markets.
Prominent leftist critics have included socialists like Karl Marx, Frantz Fanon, Vladimir Lenin, Mao Zedong, Leon Trotsky, Antonio Gramsci and Rosa Luxemburg, and anarchists including Benjamin Tucker, Lysander Spooner, Pierre-Joseph Proudhon, Mikhail Bakunin, Peter Kropotkin, Emma Goldman, Murray Bookchin, Rudolf Rocker, Noam Chomsky, and others. Movements like the Luddites, Narodniks, Shakers, Utopian Socialists and others have opposed capitalism for various reasons. Marxism advocated a revolutionary overthrow of capitalism that would lead eventually to communism. Marxism also influenced social democratic and labour parties, which seek change through existing democratic channels instead of revolution, and believe that capitalism should be heavily regulated rather than abolished. Many aspects of capitalism have come under attack from the relatively recent anti-globalization movement.
Some religions criticize or outright oppose specific elements of capitalism. Some traditions of Judaism, Christianity, and Islam forbid lending money at interest, although methods of Islamic banking have been developed. Christianity has been a source of both praise and criticism for capitalism, particularly its materialist aspects. The first socialists drew many of their principles from Christian values (see Christian socialism), against "bourgeois" values of profiteering, greed, selfishness, and hoarding. Christian critics of capitalism may not oppose capitalism entirely, but support a mixed economy in order to ensure adequate labor standards and relations, as well as economic justice. There are many Protestant denominations (particularly in the United States) who have reconciled with — or are ardently in favor of — capitalism, particularly in opposition to secular socialism. However, in the U.S. and around the world there are many Protestant Christian traditions which are critical of, or even oppose, capitalism. Another critic is the Indian philosopher P.R. Sarkar, founder of the Ananda Marga movement, who developed the Social Cycle Theory and proposed a solution called the Progressive Utilization Theory (PROUT).
Some problems said to be associated with capitalism include: unfair and inefficient distribution of wealth and power; a tendency toward market monopoly or oligopoly (and government by oligarchy); imperialism and various forms of economic and cultural exploitation; and phenomena such as social alienation, inequality, unemployment, and economic instability. Critics have maintained that there's an inherent tendency towards oligolopolistic structures when laissez-faire is combined with capitalist private property. Because of this tendency either laissez-faire, or private property, or both, have drawn fire from critics who believe an essential aspect of economic freedom is the extension of the freedom to have meaningful decision-making control over productive resources to everyone. Economist Branko Horvat explains, "it is now well known that capitalist development leads to the concentration of capital, employment and power. It is somewhat less known that it leads to the almost complete destruction of economic freedom."
Near the start of the 20th century, Vladimir Lenin claimed that state use of military power to defend capitalist interests abroad was an inevitable corollary of monopoly capitalism. This concept of political economy concerning the relationship between economic and political power among and within states includes critics of capitalism who assign to it responsibility for not only economic exploitation, but imperialist, colonialist and counter-revolutionary wars, repressions of workers and trade unionists, genocides, massacres, and so on.
Some environmentalists claim that capitalism requires continual economic growth, and will inevitably deplete the finite natural resources of the earth, and other broadly utilized resources. Such thinkers, including Murray Bookchin, have argued that capitalist production passes on environmental costs to all of society, and is unable to adequately mitigate its impact upon ecosystems and the biosphere at large.
Some labor historians and scholars, such as Immanuel Wallerstein, Tom Brass and, latterly Marcel van der Linden, have also argued that unfree labor — the use of a labor force comprised of slaves, indentured servants, criminal convicts, political prisoners, and/or other coerced persons — is compatible with capitalist relations.
Democracy, the state, and legal frameworks
The relationship between the state, its formal mechanisms, and capitalist societies has been debated in many fields of social and political theory, with active discussion since the 19th century. Hernando de Soto is a contemporary economist who has argued that an important characteristic of capitalism is the functioning state protection of property rights in a formal property system where ownership and transactions are clearly recorded. According to de Soto, this is the process by which physical assets are transformed into capital, which in turn may be used in many more ways and much more efficiently in the market economy. A number of Marxian economists have argued that the Enclosure Acts in England, and similar legislation elsewhere, were an integral part of capitalist primitive accumulation and that specific legal frameworks of private land ownership have been integral to the development of capitalism.
New institutional economics, a field pioneered by Douglass North, stresses the need of capitalism for a legal framework to function optimally, and focuses on the relationship between the historical development of capitalism and the creation and maintenance of political and economic institutions. In new institutional economics and other fields focusing on public policy, economists seek to judge when and whether governmental intervention (such as taxes, welfare, and government regulation) can result in potential gains in efficiency. According to Gregory Mankiw, a New Keynesian economist, governmental intervention can improve on market outcomes under conditions of "market failure," or situations in which the market on its own doesn't allocate resources efficiently. The idea of market failure is that markets fail to realize all potential gains from trade. This means that markets fail to deliver perfect economic results. Critics of market failure theory, like Ronald Coase, Harold Demsetz, and James M. Buchanan argue that government programs and policies also fall short of absolute perfection. Market failures are often small, and government failures are sometimes large. It is therefore the case that imperfect markets are often better than imperfect governmental alternatives. While all nations currently have some kind of market regulations, the desirable degree of regulation is disputed.
The relationship between democracy and capitalism is a contentious area in theory and popular political movements. The extension of universal adult male suffrage in 19th century Britain occurred along with the development of industrial capitalism, and democracy became widespread at the same time as capitalism, leading many theorists to posit a causal relationship between them, or that each affects the other. However, in the 20th century, according to some authors, capitalism also accompanied a variety of political formations quite distinct from liberal democracies, including fascist regimes, monarchies, and single-party states, While some thinkers argue that capitalist development more-or-less inevitably eventually leads to the emergence of democracy, others dispute this claim. Research on the democratic peace theory further argue that capitalist democracies rarely make war with one another and have little internal violence. However critics of the democratic peace theory note that democratic capitalist states may fight infrequently or never with other democratic capitalist states because of Political similarity or political stability rather than because they're democratic (or capitalist).
Some commentators argue that though economic growth under capitalism has led to democratization in the past, it may not do so in the future. Under this line of thinking, authoritarian regimes have been able to manage economic growth without making concessions to greater political freedom.
In response to criticism of the system, some proponents of capitalism have argued that its advantages are supported by empirical research. For example, advocates of different Index of Economic Freedom point to a statistical correlation between nations with more economic freedom (as defined by the Indices) and higher scores on variables such as income and life expectancy, including the poor in these nations. Some peer-reviewed studies find evidence for causation.
Related articles
Forms of capitalism
Anarcho-capitalism
Crony capitalism
Late capitalism
Liberal capitalism
Post-capitalism
Technocapitalism
State capitalismFurther Information
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