what is capitalism essay

• Search Search Please fill out this field.

What Is Capitalism?

Understanding capitalism, capitalism and the profit motive, precursors to capitalism: feudalism and mercantilism.

• Pros and Cons

Capitalism vs. Socialism

• Frequently Asked Questions

The Bottom Line

• Government & Policy

What Is Capitalism: Varieties, History, Pros & Cons, Socialism

Daniel Liberto is a journalist with over 10 years of experience working with publications such as the Financial Times, The Independent, and Investors Chronicle.

Pete Rathburn is a copy editor and fact-checker with expertise in economics and personal finance and over twenty years of experience in the classroom.

Capitalism is an economic system in which private individuals or businesses own capital goods. At the same time, business owners employ workers who receive only wages; labor doesn't own the means of production but instead uses them on behalf of the owners of capital.

The production of goods and services under capitalism is based on supply and demand in the general market, also known as the market economy . This is in contrast to a planned economy or a command economy , in which prices are set through central planning.

The purest form of capitalism is free-market or laissez-faire capitalism. Here, private individuals are unrestrained. They may determine where to invest, what to produce or sell, and at which prices to exchange goods and services. The laissez-faire marketplace operates without checks or controls. Today, most countries practice a mixed capitalist system that includes some degree of government regulation of business and some extent of public ownership of select industries.

Key Takeaways

• Capitalism is an economic system characterized by private ownership of the means of production, with labor solely paid wages.
• Capitalism depends on the enforcement of private property rights, which provide incentives for investment in and productive use of capital.
• Capitalism developed out of feudalism and mercantilism in Europe and dramatically expanded industrialization and the large-scale availability of mass-market consumer goods.
• Pure capitalism can be contrasted with pure socialism, in which all means of production are collective or state-owned.

Capitalism is one type of system of economic production and resource distribution. Instead of planning economic decisions through centralized political methods, as with socialism or feudalism, economic planning under capitalism occurs via decentralized, competitive, and voluntary decisions.

Capitalism is essentially an economic system in which the means of production—factories, tools, machines, raw materials, etc—are organized by one or more business owners, also known as capitalists. Capitalists then hire workers to operate the means of production in return for wages. Workers have no claim on the means of production or on the profits generated from their labor; these belong to the capitalists.

As such, private property rights are fundamental to capitalism. Most modern concepts of private property stem from John Locke's theory of homesteading, in which human beings claim ownership by mixing their labor with unclaimed resources. Once owned, the only legitimate means of transferring property are through voluntary exchange, gifts, inheritance , or the re-homesteading of abandoned property.

Private property promotes efficiency by giving the owner of resources an incentive to maximize the value of their property. The more valuable a resource is, the more trading power it provides the owner. In a capitalist system, the person who owns the property is entitled to any value associated with that property.

Why Private Property Rights Matter for Capitalism

For individuals or businesses to deploy their capital goods confidently, a system must exist that protects their legal right to own or transfer private property. A capitalist society relies on the use of contracts, fair dealing, and tort law to facilitate and enforce these private property rights.

When property isn't privately owned but rather is shared by the public, a problem known as the tragedy of the commons can emerge. With a common pool resource—which all people can use and none can limit access to—all individuals have an incentive to extract as much use-value as they can and no incentive to conserve or reinvest in the resource. Privatizing the resource is one possible solution to this problem, along with various voluntary or involuntary collective action approaches.  

Under capitalist production, the business owners retain ownership of the goods being produced. If a worker in a shoe factory were to take home a pair of shoes that they made, it would be theft. This concept is known as the alienation of workers from their labor.

Profits are closely associated with the concept of private property. By definition, an individual only enters into a voluntary exchange of private property when they believe the exchange benefits them in some psychic or material way. In such trades, each party gains extra subjective value, or profit, from the transaction.

The profit motive , or the desire to earn profits from business activity, is the driving force of capitalism. It creates a competitive environment in which businesses compete to be the low-cost producer of a certain good in order to gain market share. If it is more profitable to produce a different type of good, then a business is incentivized to switch.

Voluntary trade is another, related mechanism that drives activity in a capitalist system. The owners of resources compete with one another over consumers, who, in turn, compete with other consumers over goods and services. All this activity is built into the price system, which balances supply and demand to coordinate the distribution of resources.

A capitalist earns the highest profit by using capital goods such as machinery and tools most efficiently while producing the highest-value good or service. By contrast, the capitalist suffers losses when capital resources aren't used efficiently and instead create less-valuable outputs.

Capitalism vs. Markets

Capitalism is a system of economic production. Markets are systems of distribution and allocation of goods already produced. While they often go hand-in-hand, capitalism and free markets refer to two distinct systems.

Capitalism is a relatively new type of social arrangement for producing goods in an economy. It arose largely along with the advent of the Industrial Revolution , some time in the late 17th century. Before capitalism, other systems of production and social organization were prevalent.

Feudalism and the Roots of Capitalism

Capitalism grew out of European feudalism. Up until the 12th century, a very small percentage of the population of Europe lived in towns. Skilled workers lived in the city but received their keep from feudal lords rather than a real wage, and most workers were serfs for landed nobles. However, by the late Middle Ages, rising urbanism, with cities as centers of industry and trade, became more and more economically important.

Under feudalism, society was segmented into social classes based on birth or family lineage. Lords (nobility) were the landowners, while serfs (peasants and laborers) didn't own land but were under the employ of the landed nobility.

The advent of industrialization revolutionized the trades and encouraged more people to move into towns where they could earn more money working in a factory than existing at a subsistence level in exchange for labor.

Mercantilism

Mercantilism gradually replaced the feudal economic system in Western Europe and became the primary economic system of commerce during the 16th to 18th centuries. Mercantilism started as trade between towns, but it wasn't necessarily competitive trade. Initially, each town had vastly different products and services that were slowly homogenized over time by demand.

After the homogenization of goods, trade was carried out in broader and broader circles: town to town, county to county, province to province, and, finally, nation to nation. When too many nations were offering similar goods for trade, the trade took on a competitive edge that was sharpened by strong feelings of nationalism on a continent that was constantly embroiled in wars.

Colonialism flourished alongside mercantilism, but the nations seeding the world with settlements weren't trying to increase trade. Most colonies were set up with an economic system that smacked of feudalism, with their raw goods going back to the motherland and, in the case of the British colonies in North America, being forced to repurchase the finished product with a pseudo- currency that prevented them from trading with other nations.

It was economist Adam Smith who noticed that mercantilism was a regressive system that was creating trade imbalances between nations and keeping them from advancing. His ideas for a free market opened the world to capitalism.

The Growth of Industry

Adam Smith's ideas were well-timed, as the Industrial Revolution was starting to cause tremors that would soon shake the Western world. The (often-literal) gold mine of colonialism had brought new wealth and new demand for the products of domestic industries, which drove the expansion and mechanization of production.

As technology leaped ahead and factories no longer had to be built near waterways or windmills to function, industrialists began building in the cities where there were now thousands of people to supply labor.

Capitalism involved reorganizing society into social classes based not on ownership of land, but ownership of capital (in other words, businesses). Capitalists were able to earn profits from the surplus labor of the working class, who earned only wages. Thus, the two social classes defined by capitalism are the capitalists and the laboring classes.

Industrial tycoons were the first people to amass wealth, often outstripping both the landed nobles and many of the money-lending/banking families. For the first time in history, common people could have hopes of becoming wealthy. The new money crowd built more factories that required more labor, while also producing more goods for people to purchase.

During this period, the term "capitalism"—originating from the Latin word " capitalis ," which means "head of cattle"—rose to prominence. In 1850, French socialist Louis Blanc used the term to signify a system of exclusive ownership of industrial means of production by private individuals rather than shared ownership.

Pros and Cons of Capitalism

More efficient allocation of capital resources

Competition leads to lower consumer prices

Wages and general standards of living rise overall

Spurs innovation and invention

Creates inherent class conflict between capital and labor

Generates enormous wealth disparities and social inequalities

Can incentivize corruption and crony capitalism in the pursuit of profit

Produces negative effects such as pollution

Pros Explained

More efficient allocation of capital resources : Labor and means of production follow capital in this system because supply follows demand.

Competition leads to lower consumer prices : Capitalists are in competition against one another, and so will seek to increase their profits by cutting costs, including labor and materials costs. Mass production also usually benefits consumers.

Wages and general standards of living rise overall : Wages under capitalism increased, helped by the formation of unions. More and better goods became cheaply accessible to wide populations, raising standards of living in previously unthinkable ways.

Spurs innovation and invention : In capitalism, inequality is the driving force that encourages innovation, which then pushes economic development.

Cons Explained

Creates inherent class conflict between capital and labor : While capitalists enjoy the potential for high profits, workers may be exploited for their labor, with wages always kept lower than the true value of the work being done.

Generates enormous wealth disparities and social inequalities : Capitalism has created an immense gap between the wealthy and the poor, as well as social inequalities.

Can incentivize corruption and crony capitalism in the pursuit of profit : Capitalism can provide incentives for corruption emerging from favoritism and close relationships between business people and the state.

Produces negative effects such as pollution : Capitalism often leads to a host of negative externalities , such as air and noise pollution, and these costs paid for by society, rather than the producer of the effect.

In terms of political economy , capitalism is often contrasted with socialism . The fundamental difference between the two is the ownership and control of the means of production.

In a capitalist economy, property and businesses are owned and controlled by individuals. In a socialist economy, the state owns and manages the vital means of production. However, other differences also exist in the form of equity, efficiency, and employment.

The capitalist economy is unconcerned about equitable arrangements. The primary concern of the socialist model is the redistribution of wealth and resources from the rich to the poor, out of fairness, and to ensure equality in opportunity and equality of outcome. Equality is valued above high achievement, and the collective good is viewed above the opportunity for individuals to advance.

The capitalist argument is that the profit incentive drives corporations to develop innovative new products desired by the consumer and in demand in the marketplace. It is argued that the state ownership of the means of production leads to inefficiency because, without the motivation to earn more money, management, workers, and developers are less likely to put forth the extra effort to push new ideas or products.

In a capitalist economy, the state doesn't directly employ the workforce. This lack of government-run employment can lead to unemployment during economic recessions and depressions .

In a socialist economy, the state is the primary employer. During times of economic hardship, the socialist state can order hiring, so there is full employment. Also, there tends to be a stronger "safety net" in socialist systems for workers who are injured or permanently disabled. Those who can no longer work have fewer options available to help them in capitalist societies.

Karl Marx, Capitalism, and Socialism

Philosopher Karl Marx was famously critical of the capitalist system of production because he saw it as an engine for creating social ills, massive inequalities, and self-destructive tendencies. Marx argued that , over time, capitalist businesses would drive one another out of business through fierce competition, while, at the same time, the laboring class would swell and begin to resent their unfair conditions. His solution was socialism, through which the means of production would be handed over to the laboring class in an egalitarian fashion.

Varieties of Capitalism

Today, many countries operate with capitalist production, but this also exists along a spectrum . In reality, there are elements of pure capitalism that operate alongside otherwise-socialist institutions.

The standard spectrum of economic systems places laissez-faire capitalism at one extreme and a complete planned economy—such as communism —at the other. Everything in between could be said to be a mixed economy. The mixed economy has elements of both central planning and unplanned private business. By this definition, nearly every country in the world has a mixed economy.

Mixed Capitalism

When the government owns some but not all the means of production and may legally circumvent, replace, limit, or otherwise regulate private economic interests, it is said to be a mixed economy or mixed economic system . A mixed economy respects property rights, but places limits on them.

Property owners are restricted as to how they exchange with one another. These restrictions come in many forms, such as minimum wage laws, tariffs, quotas, windfall taxes, license restrictions, prohibited products or contracts, direct public expropriation , antitrust legislation, legal tender laws, subsidies, and eminent domain . Governments in mixed economies also fully or partly own and operate certain industries, especially those considered public goods .

Anarcho-Capitalism

In contrast, with pure capitalism, also known as laissez-faire capitalism or anarcho-capitalism , all industries are left up to private ownership and operation, including public goods, and no central government authority provides regulation or supervision of economic activity in general.

What Is an Example of Capitalism?

An example of capitalist production would be if an entrepreneur starts a new widget company and opens a factory. This individual uses available capital that they own or from outside investors and buys the land, builds the factory, orders the machinery, and sources the raw materials. Workers are then hired by the entrepreneur to operate the machines and produce widgets. Note that the workers don't own the machines they use or the widgets that they produce. Instead, they receive only wages in exchange for their labor. These wages represent a small fraction of what the entrepreneur earns from the venture.

Who Benefits From Capitalism?

Capitalism tends to benefit capitalists the most. These include business owners, investors, and other owners of capital. While capitalism has been praised for improving the standard of living for many people across the board, it has by far benefited those at the top.

Why Is Capitalism Harmful?

Because of how it is structured, capitalism will always pit business owners and investors against the working class. Capitalists are also in competition against one another, and so will seek to increase their profits by cutting costs, including labor costs. At the same time, workers seek higher wages, fairer treatment, and better working conditions. These two incentives are fundamentally at odds, which creates class conflict.

Is Capitalism the Same as Free Enterprise?

Capitalism and free enterprise are often seen as synonymous. In truth, they are closely related yet distinct terms with overlapping features. It is possible to have a capitalist economy without complete free enterprise, and a free market without capitalism. Any economy is capitalist as long as private individuals control the factors of production . However, a capitalist system can still be regulated by government laws, and the profits of capitalist endeavors can still be taxed heavily. "Free enterprise" can roughly be understood to mean economic exchanges free of coercive government influence.

Capitalism is an economic and political system where trade and industry are controlled by private owners for profit. Its core principles are accumulation, ownership, and profiting from capital. In its purest form, capitalism works best when these private owners have assurances that the wealth they generate will be kept in their own pocket, which is often a controversial proposition.

Capitalism is the dominant world economic system, although it often isn’t pure in form. In many countries, interventions from the state, a core trait of socialism, are frequent. Businesses are able to chase profit but within the boundaries set by the government. Most political theorists and nearly all economists argue that capitalism is the most efficient and productive system of exchange.

International Monetary Fund. " What Is Capitalism ?"

Nelson, Peter Lothian. " To Homestead a Nature Preserve: A Response to Block and Edelstein, 'Popsicle Sticks and Homesteading Land for Nature Preserves '. "  Review of Social and Economic Issues , vol. 2, no. 1, Spring 2019, pp. 71+. (Subscription required.)

Harvard Business School. " Tragedy of the Commons: What It Is and 5 Examples ."

Lester C. Thurow. " Profits ."

Michael Sonenscher. " Capitalism: The Word and the Thing ."

Laura LaHaye. " Mercantilism ."

Trinity University. " Adam Smith on Money, Mercantilism, and the System of Natural Liberty ."

Milios, John. " Social Classes in Classical and Marxist Political Economy ," The American Journal of Economics and Sociology, vol. 59, no. 2 (April 2000), pp. 283-302. (Subscription required.)

Cambridge University Press. " Cries of Pain: The Word 'Capitalism' ."

Columbia College. " Karl Marx ."

New World Encyclopedia. " Anarcho-Capitalism ."

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices

Home — Essay Samples — Economics — Political Economy — Capitalism

Essays on Capitalism

Capitalism and socialism essay topics and outline examples.

• The Evolution of Capitalism: From Its Origins to Modern Day
• Capitalism and Its Role in Promoting Innovation and Technology
• The Ethics of Capitalism: Exploring Moral Considerations in Free Markets
• Global Capitalism: Its Impact on Developing Economies
• The Relationship Between Capitalism and Environmental Sustainability
• Consumer Culture in Capitalist Societies: Implications and Critiques
• The Role of Government Regulation in Capitalist Economies
• Capitalism in the USA 1900-1940: A Historical Overview
• Capitalism vs. Socialism: Impact on Income Inequality
• The Impact of Capitalism on Underdevelopment in the Global South

Essay Title 1: Capitalism vs. Socialism: A Comparative Analysis of Economic Systems and Their Impacts

Thesis Statement: This argumentative essay critically evaluates capitalism and socialism as economic systems, analyzing their strengths, weaknesses, and societal consequences, and seeks to determine which system provides a more equitable and sustainable future.

• Introduction
• Capitalism: Market-Based Economy, Private Ownership, and Competition
• Socialism: Collective Ownership, Wealth Redistribution, and Government Control
• Economic Inequality: Wealth Disparities in Capitalist Societies
• Social Safety Nets: Welfare Programs and Social Services in Socialist Societies
• Innovation and Entrepreneurship: Capitalism's Role in Technological Advancements
• Environmental Sustainability: Examining the Impact of Both Systems on the Planet
• Conclusion: Striving for a Balanced Economic System that Addresses Inequities

Essay Title 2: The Role of Capitalism and Socialism in Modern Societies: Achieving Economic Prosperity and Social Equity

Thesis Statement: This argumentative essay explores the coexistence of capitalism and socialism within modern societies, emphasizing the potential benefits of a mixed economic system that combines market forces with social welfare measures to achieve economic prosperity and social equity.

• Mixed Economy: Combining Capitalist and Socialist Elements
• Income Redistribution: Progressive Taxation and Social Programs
• Healthcare and Education: Ensuring Universal Access and Quality
• Worker Rights: Labor Unions and Employment Protections
• Regulation and Competition: Balancing Market Dynamics and Consumer Protection
• Global Perspectives: Comparing Economic Systems in Different Countries
• Conclusion: Advancing Economic Prosperity and Social Equity Through a Balanced Approach

Essay Title 3: Capitalism, Socialism, and the Future of Economic Systems: Toward a More Equitable and Sustainable World

Thesis Statement: This argumentative essay envisions the future of economic systems, proposing the development of innovative models that incorporate the best aspects of both capitalism and socialism to create a more equitable, sustainable, and just global economy.

• Hybrid Models: Exploring Economic Systems That Promote Equity and Innovation
• Environmental Responsibility: Addressing Climate Change and Resource Conservation
• Global Wealth Distribution: Reducing Income Disparities Across Nations
• Education and Healthcare: Ensuring Access and Quality Worldwide
• Technology and Automation: Adapting to the Changing Nature of Work
• Collaborative Governance: International Cooperation for Economic Reform
• Conclusion: Striving for a New Economic Paradigm for a Better World

Why is Capitalism Better than Communism

Mercantilism vs capitalism, made-to-order essay as fast as you need it.

Each essay is customized to cater to your unique preferences

+ experts online

The Key Characteristics of The Free Enterprise System

Capitalism in today's society , review of the reasons why capitalism is bad for the poor, the philosophy of capitalism, let us write you an essay from scratch.

• 450+ experts on 30 subjects ready to help
• Custom essay delivered in as few as 3 hours

Pros and Cons of How Capitalism and Consumerism Play Role in One’s Destiny

Comparison of the economic systems in communism and capitalism, significant impacts underlying in the capitalism market structure, the origins and development of capitalism, get a personalized essay in under 3 hours.

Expert-written essays crafted with your exact needs in mind

The Solution to Poverty in India: Socialism Or Capitalism

The concept of alienation, the concept of social class in capitalist reality, a theme of global capitalism in vermeer’s hat by timothy brook and slave ship by marcus rediker, marx’s theory of commodity fetishism, new europe: the case of the city in smith’s view, what is pink capitalism and its representation in giovanni’s room, capitalism in sherwood anderson’s "mother", "capitalism: a love story": summary, comparison of free enterprise and communism, racism and capitalism in japan, depiction of industrial capitalism in the film modern times, the concept of alienation in the works of karl marx, why hawaii is not quite paradise, jay gould: one of the robber barons and captains of industry, the complex relationship between capitalism and poverty, socialism vs. capitalism: a comparative analysis, socialism and capitalism, how the columbian exchange benefited europe and north america, essay on capitalism and communism.

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit.

Central characteristics of capitalism include capital accumulation, competitive markets, price system, private property, property rights recognition, voluntary exchange, and wage labor.

Main types of capitalism include advanced capitalism, corporate capitalism, finance capitalism, free-market capitalism, mercantilism, social capitalism, state capitalism and welfare capitalism. Other variants of capitalism include anarcho-capitalism, community capitalism, humanistic capitalism, neo-capitalism, state monopoly capitalism, and technocapitalism.

Singapore, New Zealand, Australia, Switzerland, Ireland, Taiwan, United Kingdom, Estonia, Canada, Denmark, etc.

Capitalism is driven by the law of supply and demand. In a capitalist society people have more freedom to choose their career paths. Countries that have capitalist economies today are not 100% capitalist. This is because they all have some form of government regulation to guide business.

Relevant topics

• Unemployment
• Penny Debate
• Universal Basic Income
• Minimum Wage
• American Dream
• Supply and Demand
• Real Estate
• Consumerism

By clicking “Check Writers’ Offers”, you agree to our terms of service and privacy policy . We’ll occasionally send you promo and account related email

No need to pay just yet!

We use cookies to personalyze your web-site experience. By continuing we’ll assume you board with our cookie policy .

• Instructions Followed To The Letter
• Deadlines Met At Every Stage
• Unique And Plagiarism Free

Socialism vs. Capitalism: What Is the Difference?

Fokusiert / Getty Images

• U.S. Economy
• Supply & Demand
• Archaeology
• B.S., Texas A&M University

Socialism and capitalism are the two main economic systems used in developed countries today. The main difference between capitalism and socialism is the extent to which the government controls the economy.

Key Takeaways: Socialism vs. Capitalism

• Socialism is an economic and political system under which the means of production are publicly owned. Production and consumer prices are controlled by the government to best meet the needs of the people.
• Capitalism is an economic system under which the means of production are privately owned. Production and consumer prices are based on a free-market system of “supply and demand.”
• Socialism is most often criticized for its provision of social services programs requiring high taxes that may decelerate economic growth.
• Capitalism is most often criticized for its tendency to allow income inequality and stratification of socio-economic classes.

Socialist governments strive to eliminate economic inequality by tightly controlling businesses and distributing wealth through programs that benefit the poor, such as free education and healthcare. Capitalism, on the other hand, holds that private enterprise utilizes economic resources more efficiently than the government and that society benefits when the distribution of wealth is determined by a freely-operating market.

The United States is generally considered to be a capitalist country, while many Scandinavian and Western European countries are considered socialist democracies. In reality, however, most developed countries—including the U.S.—employ a mixture of socialist and capitalist programs.

Capitalism Definition

Capitalism is an economic system under which private individuals own and control businesses, property, and capital—the “means of production.” The volume of goods and services produced is based on a system of “ supply and demand ,” which encourages businesses to manufacture quality products as efficiently and inexpensively as possible.

In the purest form of capitalism— free market or laissez-faire capitalism—individuals are unrestrained in participating in the economy. They decide where to invest their money, as well as what to produce and sell at what prices. True laissez-faire capitalism operates without government controls. In reality, however, most capitalist countries employ some degree of government regulation of business and private investment.

Capitalist systems make little or no effort to prevent income inequality . Theoretically, financial inequality encourages competition and innovation, which drive economic growth. Under capitalism, the government does not employ the general workforce. As a result, unemployment can increase during economic downturns . Under capitalism, individuals contribute to the economy based on the needs of the market and are rewarded by the economy based on their personal wealth.

Socialism Definition 

Socialism describes a variety of economic systems under which the means of production are owned equally by everyone in society. In some socialist economies, the democratically elected government owns and controls major businesses and industries. In other socialist economies, production is controlled by worker cooperatives. In a few others, individual ownership of enterprise and property is allowed, but with high taxes and government control. 

The mantra of socialism is, “From each according to his ability, to each according to his contribution.” This means that each person in society gets a share of the economy’s collective production—goods and wealth—based on how much they have contributed to generating it. Workers are paid their share of production after a percentage has been deducted to help pay for social programs that serve “the common good.” 

In contrast to capitalism, the main concern of socialism is the elimination of “rich” and “poor” socio-economic classes by ensuring an equal distribution of wealth among the people. To accomplish this, the socialist government controls the labor market, sometimes to the extent of being the primary employer. This allows the government to ensure full employment even during economic downturns. 

The Socialism vs. Capitalism Debate  

The key arguments in the socialism vs. capitalism debate focus on socio-economic equality and the extent to which the government controls wealth and production.

Ownership and Income Equality 

Capitalists argue that private ownership of property (land, businesses, goods, and wealth) is essential to ensuring the natural right of people to control their own affairs. Capitalists believe that because private-sector enterprise uses resources more efficiently than government, society is better off when the free market decides who profits and who does not. In addition, private ownership of property makes it possible for people to borrow and invest money, thus growing the economy. 

Socialists, on the other hand, believe that property should be owned by everyone. They argue that capitalism’s private ownership allows a relatively few wealthy people to acquire most of the property. The resulting income inequality leaves those less well off at the mercy of the rich. Socialists believe that since income inequality hurts the entire society, the government should reduce it through programs that benefit the poor such as free education and healthcare and higher taxes on the wealthy. 

Consumer Prices

Under capitalism, consumer prices are determined by free market forces. Socialists argue that this can enable businesses that have become monopolies to exploit their power by charging excessively higher prices than warranted by their production costs. 

In socialist economies, consumer prices are usually controlled by the government. Capitalists say this can lead to shortages and surpluses of essential products. Venezuela is often cited as an example. According to Human Rights Watch, “most Venezuelans go to bed hungry.” Hyperinflation and deteriorating health conditions under the socialist economic policies of President Nicolás Maduro have driven an estimated 3 million people to leave the country as food became a political weapon. 

Efficiency and Innovation 

The profit incentive of capitalism’s private ownership encourages businesses to be more efficient and innovative, enabling them to manufacture better products at lower costs. While businesses often fail under capitalism, these failures give rise to new, more efficient businesses through a process known as “creative destruction.” 

Socialists say that state ownership prevents business failures, prevents monopolies, and allows the government to control production to best meet the needs of the people. However, say capitalists, state ownership breeds inefficiency and indifference as labor and management have no personal profit incentive. 

Healthcare and Taxation 

Socialists argue that governments have a moral responsibility to provide essential social services. They believe that universally needed services like healthcare, as a natural right, should be provided free to everyone by the government. To this end, hospitals and clinics in socialist countries are often owned and controlled by the government. 

Capitalists contend that state, rather than private control, leads to inefficiency and lengthy delays in providing healthcare services. In addition, the costs of providing healthcare and other social services force socialist governments to impose high progressive taxes while increasing government spending, both of which have a chilling effect on the economy. 

Capitalist and Socialist Countries Today 

Today, there are few if any developed countries that are 100% capitalist or socialist. Indeed, the economies of most countries combine elements of socialism and capitalism.

In Norway, Sweden, and Denmark—generally considered socialist—the government provides healthcare, education, and pensions. However, private ownership of property creates a degree of income inequality. An average of 65% of each nation’s wealth is held by only 10% of the people—a characteristic of capitalism.

The economies of Cuba, China, Vietnam, Russia, and North Korea incorporate characteristics of both socialism and communism .

While countries such as Great Britain, France, and Ireland have strong socialist parties, and their governments provide many social support programs, most businesses are privately owned, making them essentially capitalist.

The United States, long considered the prototype of capitalism, isn’t even ranked in the top 10 most capitalist countries, according to the conservative think tank Heritage Foundation. The U.S. drops in the Foundation’s Index of Economic Freedom due to its level of government regulation of business and private investment.

Indeed, the Preamble of the U.S. Constitution sets one the nation’s goals to be “promote the general welfare.” In order to accomplish this, the United States employs certain socialist-like social safety net programs , such as Social Security, Medicare, food stamps , and housing assistance.

Contrary to popular belief, socialism did not evolve from Marxism . Societies that were to varying degrees “socialist” have existed or have been imagined since ancient times. Examples of actual socialist societies that predated or were uninfluenced by German philosopher and economic critic Karl Marx were Christian monastic enclaves during and after the Roman Empire and the 19th-century utopian social experiments proposed by Welsh philanthropist Robert Owen. Premodern or non-Marxist literature that envisioned ideal socialist societies include The Republic by Plato , Utopia by Sir Thomas More, and Social Destiny of Man by Charles Fourier. 

Socialism vs. Communism

Unlike socialism, communism is both an ideology and a form of government. As an ideology, it predicts the establishment of a dictatorship controlled by the working-class proletariat established through violent revolution and the eventual disappearance of social and economic class and state. As a form of government, communism is equivalent in principle to the dictatorship of the proletariat and in practice to a dictatorship of communists. In contrast, socialism is not tied to any specific ideology. It presupposes the existence of the state and is compatible with democracy and allows for peaceful political change.

Capitalism 

While no single person can be said to have invented capitalism, capitalist-like systems existed as far back as ancient times. The ideology of modern capitalism is usually attributed to Scottish political economist Adam Smith in his classic 1776 economic treatise The Wealth of Nations. The origins of capitalism as a functional economic system can be traced to 16th to 18th century England, where the early Industrial Revolution gave rise to mass enterprises, such as the textile industry, iron, and steam power . These industrial advancements led to a system in which accumulated profit was invested to increase productivity—the essence of capitalism.

Despite its modern status as the world’s predominant economic system, capitalism has been criticized for several reasons throughout history. These include the unpredictable and unstable nature of capitalist growth, social harms, such as pollution and abusive treatment of workers, and forms of economic disparity, such as income inequality . Some historians connect profit-driven economic models such as capitalism to the rise of oppressive institutions such as human enslavement , colonialism , and imperialism .

Sources and Further Reference

• “Back to Basics: What is Capitalism?” International Monetary Fund , June 2015, https://www.imf.org/external/pubs/ft/fandd/2015/06/basics.htm.
• Fulcher, James. “Capitalism A Very Short Introduction.” Oxford, 2004, ISBN 978-0-19-280218-7.
• de Soto, Hernando. The Mystery of Capital.” International Monetary Fund , March, 2001, https://www.imf.org/external/pubs/ft/fandd/2001/03/desoto.htm.
• Busky, Donald F. “Democratic Socialism: A Global Survey.” Praeger, 2000, ISBN 978-0-275-96886-1.
• Nove, Alec. “The Economics of Feasible Socialism Revisited.” Routledge, 1992, ISBN-10: 0044460155.
• Newport, Frank. “The Meaning of ‘Socialism’ to Americans Today.” Gallup , October 2018), https://news.gallup.com/opinion/polling-matters/243362/meaning-socialism-americans-today.aspx.
• The Differences Between Socialism and Communism
• List of Current Communist Countries in the World
• What Is Socialism? Definition and Examples
• What Is Communism? Definition and Examples
• What Is Capitalism?
• What Is Neoliberalism? Definition and Examples
• What Is Anarchy? Definition and Examples
• What Is a Free Market Economy?
• Command Economy Definition, Characteristics, Pros and Cons
• What Is a Traditional Economy? Definition and Examples
• A Mixed Economy: The Role of the Market
• What Is Classical Liberalism? Definition and Examples
• The Main Points of "The Communist Manifesto"
• What Is an Oligarchy? Definition and Examples
• Understanding Karl Marx's Class Consciousness and False Consciousness
• Vladimir Lenin Quotes

1000-Word Philosophy: An Introductory Anthology

Philosophy, One Thousand Words at a Time

Arguments for Capitalism and Socialism

Author: Thomas Metcalf Category: Social and Political Philosophy Wordcount: 993

Editor’s Note: This essay is the second in a two-part series authored by Tom on the topic of capitalism and socialism. The first essay, on defining capitalism and socialism, is available here .

Listen here

Suppose I had a magic wand that allowed one to produce 500 donuts per hour. I say to you, “Let’s make a deal. You use this wand to produce donuts, and then sell those donuts for $500 and give me the proceeds. I’ll give you $10 for every hour you spend doing this. I’ll spend that time playing video games.”

My activity—playing video games—seems pretty easy. Your job requires much more effort. And I might end up with a lot more money than $10 for every hour you work. How is that fair?

In the story, the magic wand is analogous to capital goods : assets (typically machinery and buildings, such as robots, sewing machines, computers, and factories) that make labor, or providing goods and services, more productive. Standard definitions of ‘capitalism’ and ‘socialism’ indicate that, in general, capitalist systems permit people to privately own and control capital goods, whereas socialist systems do not. And capitalist systems tend to contain widespread wage labor, absentee ownership, and property income; socialist systems generally don’t. [1]

Capital goods are morally interesting. As in the case of the magic wand, ownership of capital goods can allow one to make lots of money without working. In contrast, other people have to work for a living. This might be unfair or harmful. This essay surveys and explains the main arguments in this debate. [2]

1. Capitalism

Arguments for capitalism tend to hold that it’s beneficial to society for there to be incentives to produce, own, and use capital goods like the magic wand, or that it’s wrong to forcibly prevent people from doing so. Here are four arguments for capitalism, stated briefly:

(1) Competition: ‘When individuals compete with each other for profits, this benefits the consumer.’ [3]

Critique : Competition also may encourage selfish and predatory behavior. Competition can also occur in some socialist systems. [4]

(2) Freedom: ‘Preventing people from owning capital restricts their freedom. Seizing their income in the form of taxes may constitute theft.’ [5]

Critiques : Maybe owning property, itself, restricts freedom, by excluding others from using it. [6] If I announce that I own something, I may be thereby announcing that I will force you not to use it. And maybe “freedom” requires the ability to pursue one’s own goals, which in turn requires some amount of wealth. [7] Further, if people must choose between work and starvation, then their choice to work may not be really “free” anyway. [8] And the general distribution of wealth is arguably the result of a morally arbitrary “natural lottery,” [9] which may not actually confer strict property-rights over one’s holdings. [10] I didn’t choose where I was born, nor my parents’ wealth, nor my natural talents, which allow me to acquire wealth. So perhaps it’s not a violation of my rights to take some of that property from me.

(3) Public Goods: [11] ‘When objects, including capital, must be shared with others, then no one is strongly motivated to produce them. In turn, society is poorer and labor is more difficult because production is inefficient.’ [12]

Critique : People might be motivated to produce capital for altruistic reasons, [13] or may be coerced in some socialist systems to do so. Some putatively socialist systems allow for profitable production of capital goods. [14]

  (4) Tragedy of the Commons: ‘When capital, natural resources, or the environment are publicly controlled, no one is strongly motivated to protect them.’ [15]

Critique : As before, people might be motivated by altruism. [16] Some systems with partially-private control of capital may nevertheless qualify as socialist. [17]

2. Socialism

Arguments for socialism tend to hold that it’s unfair or harmful to have a system like in the story of the magic wand, a system with widespread wage labor and property income. Here are four arguments for socialism, stated briefly:

(1) Fairness: ‘It’s unfair to make money just by owning capital, as is possible only in a capitalist system.’ [18]

Critique : Perhaps fairness isn’t as morally important as consent, freedom, property rights, or beneficial consequences. And perhaps wage laborers consent to work, and capital owners have property rights over their capital. [19]

(2) Inequality: ‘When people can privately own capital, they can use it to get even richer relative to the poor, and the wage laborers are left poorer and poorer relative to the rich, thereby worsening the inequality that already exists between capital-owners and wage-laborers.’ [20]

Critiques : This is a disputable empirical claim. [21] And perhaps the ability to privately own capital encourages people to invest in building capital goods, thereby making goods and services cheaper. Further, perhaps monopolies commonly granted by social control over capital are “captured” by wealthy special-interests, [22] which harm the poor by enacting regressive laws. [23]

(3) Labor: ‘Wage laborers are alienated from their labor, exploited, and unfree because they must obey their bosses’ orders.’ [24]

Critiques : If this alienation and exploitation are net-harmful to workers, then why do workers consent to work? If the answer is ‘because they’ll suffer severe hardship otherwise,’ then strictly speaking, this is a critique of allowing poverty, not a critique of allowing wage labor.

(4) Selfishness: ‘When people can privately own capital, they selfishly pursue profit above all else, which leads to further inequality, environmental degradation, non-productive industries, economic instability, colonialism, mass murder, and slavery.’

Critique : These are also disputable empirical claims. Maybe when people are given control over socially -owned capital, they selfishly extract personal wealth from it. [25] Maybe when the environment is socially controlled, everyone is individually motivated to over-harvest and pollute. [26] State intervention in the economy may be a major cause of the existence of non-productive industry, pollution, and economic instability. [27] Last, some of the worst perpetrators of historical evils are governments, not private corporations. [28]

  3. Conclusion

It is difficult to justifiably draw general conclusions about what a pure capitalism or socialism would be like in practice. [29] But an examination of the merits and demerits of each system gives us some guidance about whether we should move a society in either direction.

[1] See my Defining Capitalism and Socialism for an explanation of how to define these systems.

[2] For much-more-extensive surveys, see Gilabert and O’Neill n.d. and Arnold n.d.

[3] By analogy, different people might try to construct even better magic wands, or use them for better purposes. Typically the benefits are thought to include lower prices, increased equality, innovation, and more options. See Smith 2003 [1776]: bk. 1, ch. 2 and Friedman and Friedman 1979: ch. 1.

[4] Schweickart 2011 presents an outline of a market socialism comprising much competition.

[5] By analogy, if I legitimately own the magic wand, then what gives you the right to threaten violence against me if I don’t give it to you? Nozick 1974: ch. 7 presents a general discussion of how socialism might restrict freedom and how taxation may be akin to theft or forced labor.

[6] Spencer 1995 [1871]: 103-4 and Zwolinski 2015 discuss how property might require coercion. See also Scott 2011: 32-33. Indeed, property in general may essentially be theft (Proudhon 1994 [1840]).

[7] See Rawls (1999: 176-7) for this sort of argument. See John Rawls’ ‘A Theory of Justice’ by Ben Davies for an introduction.

[8] See e.g. Burawoy 1979 for a discussion of whether workers consent to work. See also Marx 2004 (1867): vol. IV, ch. VII.

[9] Rawls 1999: 62 ff.

[10] Relatedly, while one may currently hold capital, one may greatly owe the existence of that product to many other people or to society in general. See e.g. Kropotkin 2015 [1913]: chs. 1-3 and Murphy and Nagel 2002.

[11] A public good is a good that is non-excludable (roughly, it is expensive to prevent people from using it) and non-rivalrously consumed (roughly, preventing people from using it causes harm without benefiting anyone) (Cowen 2008).

[12] By analogy, why bother building magic wands at all if someone else is immediately going to take it from me and start using it? Standard economic theory holds that public goods (non-excludable and non-rivalrous goods) will, on the free market, be underproduced. This is normally taken to be an argument for government to produce public goods. See e.g. Gaus 2008: 84 ff.

[13] For example, according to Marxist communism, the ideal socialist society would comprise production for use, not for profit. See e.g. Marx 2004 [1867]: vol. 1 ch. 7. See also Kropotkin 1902, which is a defense of the general claim that humans will tend to be altruistic, at least in anarcho-communist systems.

[14] In a market-socialist system (cf. Schweickart 2011), it is possible to make capital goods and sell them at a profit that gets distributed to the laborers.

[15] By analogy, if I know that anyone in the neighborhood can use the magic wand, I might not invest my own time and money to maintain it. But if it’s mine alone, I care a lot more about maintaining it. This is the basis of the well-known ‘Tragedy of the Commons’ alleged problem. See, e.g., Hardin 1968.

[16] Kropotkin 1902.

[17] As before, in Schweickart’s (2011) system, firms will be motivated to protect capital if they must pay for capital’s deprecation, even though the capital is owned by society.

[18] By analogy, as noted, the wand-owner might make lots of money for basically doing no work. Sherman 1995: 130; Schweickart 2011: § 3.2.

[19] See e.g. Friedman 2002 for a collection of consequentialist arguments for capitalism, and Nozick 1974: chs. 3 and 7 for some arguments concerning freedom and capitalist systems.

[20] By analogy, the wand-owner might accumulate so much money as to start buying other magic wands and renting those out as well. See e.g. Piketty 2014.

[21] Taking the world as a whole, wealth in absolute terms has been increasing greatly, and global poverty has been decreasing steeply, including in countries that have moved in mostly capitalist directions. See e.g. World Bank Group 2016: 3. Friedman 1989: ch. 5 argues that capitalism is responsible for the improved position of the poor today compared to the past.

[22] See e.g. Friedman 1989: ch. 7 for a discussion of regulatory capture.

[23] Friedman 2002: chs. IV and IX; Friedman 1989: ch. 4.

[24] By analogy, the person I’ve hired to use the wand might need to obey my orders, because they don’t have a wand of their own to rent out, and they might starve without the job I’ve offered them. Marx 2009 [1932] introduces and develops this concept of alienation. See Dan Lowe’s 2015 Karl Marx’s Conception of Alienation for an overview. See also Anderson 2015 for an argument that private corporations coercively violate their workers’ freedom.

[25] See n. 21 above. This result is most-obvious in countries in which dictators enrich themselves, but there is nothing in principle preventing rulers of ostensibly democratic countries from doing so as well. Presumably this worry explains the presence of the Emoluments Clause in the U. S. Constitution.

[26] See n. 14.

[27] See e.g. Friedman 2002: chs. III and V and the example of compliance costs for regulations.

[28] See Huemer 2013: ch. 6 ff.

[29] All or nearly all large-scale economies have been mixed economies. In contrast, a pure capitalism would be an anarcho-capitalism (see e.g. Gaus 2010: 75 ff. and Huemer 2013), and a pure socialism wouldn’t permit people to privately own scissors. See also the entry “Defining Capitalism and Socialism.”

Anderson, Elizabeth. 2015. Private Government: How Employers Rule Our Lives (and Why We Don’t Talk about It) . Princeton, NJ: Princeton University Press.

Arnold, Samuel. N. d. “Socialism.” In The Internet Encyclopedia of Philosophy (ed.), The Internet Encyclopedia of Philosophy , URL = < https://www.iep.utm.edu/socialis/ >

Burawoy, Michael. 1979. Manufacturing Consent: Changes in the Labor Process under Monopoly Capitalism . Chicago, IL and London, UK: The University of Chicago Press.

Cohen, G. A. 2009. Why Not Socialism? Princeton, NJ: Princeton University Press.

Cowen, Tyler. 2008. “Public Goods.” In David R. Henderson (ed.), The Concise Encyclopedia of Economics . Indianapolis, IN: Liberty Fund.

Dagger, Richard and Terence Ball. 2019. “Socialism.” In Encyclopædia Britannica, inc. (ed.), E ncyclopædia Britannica . Retrieved from https://www.britannica.com/topic/socialism

Dahl, Robert A. 1993. “Why All Democratic Countries have Mixed Economies.” Nomos 35: 259-82.

Dictionary.com. N.d. “Capitalism.” URL = < https://www.dictionary.com/browse/capitalism >

Editors of Encyclopædia Britannica. 2019. “Henri de Saint-Simon.” In Encyclopædia Britannica , Retrieved from https://www.britannica.com/biography/Henri-de-Saint-Simon

Friedman, David D. 1989. The Machinery of Freedom: Guide to a Radical Capitalism , Second Edition. La Salle, IL: Open Court Publishing Company.

Friedman, Milton. 2002. Capitalism and Freedom . Chicago, IL: University of Chicago Press.

Friedman, Milton and Rose Friedman. 1979. Free to Choose: A Personal Statement . New York, NY: Harcourt Brace.

Gaus, Gerald. 2010. “The Idea and Ideal of Capitalism.” In George G. Brenkert and Tom L. Beauchamp (eds.), The Oxford Handbook of Business Ethics . New York, NY: Oxford University Press.

Gaus, Gerald. 2008. On Philosophy, Politics, and Economics . Belmont, CA: Thomson Wadsworth.

Gilabert, Pablo and Martin O’Neill. 2019. “Socialism.” In E. N. Zalta (ed.), The Stanford Encyclopedia of Philosophy . Retrieved from https://plato.stanford.edu/entries/socialism/ .

Hardin, Garrett. 1968. “The Tragedy of the Commons.” Science 162(3859): 1243-48.

Herzog, Lisa. 2019. “Markets.” In E. N. Zalta (ed.), The Stanford Encyclopedia of Philosophy , Spring 2019 Edition, URL =https://plato.stanford.edu/archives/spr2019/entries/markets/

Huemer, Michael. 2013. The Problem of Political Authority: An Examination of the Right to Coerce and the Duty to Obey . Houndmills, UK and New York, NY: Palgrave Macmillan.

Investopedia. 2019. “Mixed Economic System.” Retrieved from https://www.investopedia.com/terms/m/mixed-economic-system.asp

Kropotkin, P. 1902. Mutual Aid: A Factor of Evolution . New York, NY: McClure Phillips & Co.

Kropotkin, Peter. 2015 [1913]. The Conquest of Bread. London, UK: Penguin Classics.

Lowe, Dan. 2015. “Karl Marx’s Conception of Alienation.” 1000-Word Philosophy . Retrieved from https://1000wordphilosophy.com/2015/05/13/karl-marxs-conception-of-alienation/.

Marx, Karl. 2009 [1932]. “Economic and Philosophic Manuscripts of 1844.” In Karl Marx and Friedrich Engels, Economic and Philosophic Manuscripts of 1844 and the Communist Manifesto , tr. Martin Milligan (Amherst, NY: Prometheus Books), pp. 13-202.

Marx, Karl. 2004 [1867]. Capital: A Critique of Political Economy, Volume One . New York, NY: Penguin Classics.

Merriam-Webster. N.d. “Capitalism.” URL = < https://www.merriam-webster.com/dictionary/capitalism >

Mill, John Stuart. 1965 [1848]. Principles of Political Economy with Some of Their Applications to Social Philosophy, Volume I: The Principles of Political Economy I , ed. J. M. Robson. Toronto, ON: University of Toronto Press.

Murphy, Liam and Thomas Nagel. 2002. The Myth of Ownership: Taxes and Justice. Oxford, UK: Oxford University Press.

Nozick, Robert. 1974. Anarchy, State, and Utopia . New York, NY: Basic Books.

Oxford English Dictionary, N.d. a. “Capital.” Retrieved from http://www.oed.com/view/Entry/27450

Oxford English Dictionary. N.d. b. “Capitalism.” Retrieved from http://www.oed.com/view/Entry/27454

Oxford English Dictionary. N.d. c. “Mixed Economy.” Retrieved from http://www.oed.com/view/Entry/120348

Oxford English Dictionary. N.d. d. “Socialism.” Retrieved from http://www.oed.com/view/Entry/183741

Piketty, Thomas. 2014. Capital in the Twenty-First Century , tr. Arthur Goldhammer. Cambridge, MA: Harvard University Press.

Proudhon, Pierre-Joseph. 1994 [1840]. What is Property? Ed. Donald R. Kelley and Bonnie G. Smith. Cambridge, UK: Cambridge University Press.

Rawls, John. 1999. A Theory of Justice, Revised Edition . Cambridge, MA: Harvard University Press.

Schweickart, David. 2011. After Capitalism , Second Edition. Lanham, MD: Rowman & Littlefield.

Scott, Bruce R. 2011. Capitalism: Its Origins and Evolution as a System of Governance . New York, NY: Springer Science+Business Media.

Sherman, Howard J. 1995. Reinventing Marxism . Baltimore, MD: Johns Hopkins University Press.

Smith, Adam. 2003 [1776]. The Wealth of Nations . New York, NY: Bantam Dell.

Wikipedia. N.d. “Capitalism.” URL =

Wiktionary. N.d. “Capitalism.” URL =

World Bank Group. 2016. Global Monitoring Report 2015/2016: Development Goals in an Era of Demographic Change. Washington, DC: World Bank Group and The International Monetary Fund.

Zwolinski, Matt. 2015. “Property Rights, Coercion, and the Welfare State: The Libertarian Case for a Basic Income for All.” The Independent Review 19(4): 515-29

Related Essays

Defining Capitalism and Socialism by Tom Metcalf

Marx’s Conception of Alienation by Dan Lowe

Karl Marx’s Theory of History by Angus Taylor

On Karl Marx’s Slogan “From Each According to their Ability, To Each According to their Need”  by Sam Badger

John Rawls’ ‘A Theory of Justice’ by Ben Davies

Social Contract Theory by David Antonini

Ethical Egoism: The Morality of Selfishness  by Nathan Nobis

Reparations for Historic Injustice by Joseph Frigault 

George Orwell’s Philosophical Views by Mark Satta

PDF Download

Download this essay in PDF . 

About the Author

Tom Metcalf is an associate professor at Spring Hill College in Mobile, AL. He received his PhD in philosophy from the University of Colorado, Boulder. He specializes in ethics, metaethics, epistemology, and the philosophy of religion. Tom has two cats whose names are Hesperus and Phosphorus. shc.academia.edu/ThomasMetcalf

Follow 1000-Word Philosophy on Facebook , Twitter and subscribe to receive email notifications of new essays at 1000WordPhilosophy.com

Share this:, 13 thoughts on “ arguments for capitalism and socialism ”.

• Pingback: Ethical Egoism: The Morality of Selfishness – 1000-Word Philosophy: An Introductory Anthology
• Pingback: Karl Marx’s Conception of Alienation – 1000-Word Philosophy: An Introductory Anthology
• Pingback: George Orwell’s Philosophical Views – 1000-Word Philosophy: An Introductory Anthology
• Pingback: Business Ethics – 1000-Word Philosophy: An Introductory Anthology
• Pingback: Distributive Justice: How Should Resources be Allocated? – 1000-Word Philosophy: An Introductory Anthology
• Pingback: Political Philosophy: A collection of articles, videos, and podcasts - The Daily Idea
• Pingback: John Rawls’ ‘A Theory of Justice’ – 1000-Word Philosophy: An Introductory Anthology
• Pingback: Reparations for Historic Injustice – 1000-Word Philosophy: An Introductory Anthology
• Pingback: Online Philosophy Resources Weekly Update - Daily Nous
• Pingback: The Week’s End // A Thought-Provoking Round-Up – Lisa Marie Blair

Reblogged this on SIPAHOUSEPRESS .

• Pingback: Defining Capitalism and Socialism – 1000-Word Philosophy: An Introductory Anthology

Comments are closed.

• Works & Talks
• Newsletter Sign Up

What Is Capitalism?

This essay was first published in the November — December 1965 issues of The Objectivist Newsletter and later anthologized in Capitalism: The Unknown Ideal (1966 and 1967). An edited version was given as a talk in November 1967 at the Ford Hall Forum in Boston. The audio lecture lasts 47 minutes. This talk also became the core of an ARI Campus lesson called “What Is Capitalism?” which features an outline and quiz, recommended readings and supplemental video elements such as images, graphics, diagrams and summaries of key points. A link to it appears in “Related Lessons” below.

The disintegration of philosophy in the nineteenth century and its collapse in the twentieth have led to a similar, though much slower and less obvious, process in the course of modern science.

Today’s frantic development in the field of technology has a quality reminiscent of the days preceding the economic crash of 1929: riding on the momentum of the past, on the unacknowledged remnants of an Aristotelian epistemology, it is a hectic, feverish expansion, heedless of the fact that its theoretical account is long since overdrawn — that in the field of scientific theory, unable to integrate or interpret their own data, scientists are abetting the resurgence of a primitive mysticism. In the humanities, however, the crash is past, the depression has set in, and the collapse of science is all but complete.

The clearest evidence of it may be seen in such comparatively young sciences as psychology and political economy. In psychology, one may observe the attempt to study human behavior without reference to the fact that man is conscious. In political economy, one may observe the attempt to study and to devise social systems without reference to man .

It is philosophy that defines and establishes the epistemological criteria to guide human knowledge in general and specific sciences in particular. Political economy came into prominence in the nineteenth century, in the era of philosophy’s post-Kantian disintegration, and no one rose to check its premises or to challenge its base. Implicitly, uncritically, and by default, political economy accepted as its axioms the fundamental tenets of collectivism.

Political economists — including the advocates of capitalism — defined their science as the study of the management or direction or organization or manipulation of a “community’s” or a nation’s “resources.” The nature of these “resources” was not defined; their communal ownership was taken for granted — and the goal of political economy was assumed to be the study of how to utilize these “resources” for “the common good.”

The fact that the principal “resource” involved was man himself, that he was an entity of a specific nature with specific capacities and requirements, was given the most superficial attention, if any. Man was regarded simply as one of the factors of production, along with land, forests, or mines — as one of the less significant factors, since more study was devoted to the influence and quality of these others than to  his  role or quality.

Political economy was, in effect, a science starting in midstream: it observed that men were producing and trading, it took for granted that they had always done so and always would — it accepted this fact as the given, requiring no further consideration — and it addressed itself to the problem of how to devise the best way for the “community” to dispose of human effort.

There were many reasons for this tribal view of man. The morality of altruism was one; the growing dominance of political statism among the intellectuals of the nineteenth century was another. Psychologically, the main reason was the soul-body dichotomy permeating European culture: material production was regarded as a demeaning task of a lower order, unrelated to the concerns of man’s intellect, a task assigned to slaves or serfs since the beginning of recorded history. The institution of serfdom had lasted, in one form or another, till well into the nineteenth century; it was abolished, politically, only by the advent of capitalism; politically, but not intellectually.

The concept of man as a free, independent individual was profoundly alien to the culture of Europe. It was a tribal culture down to its roots; in European thinking, the tribe was the entity, the unit, and man was only one of its expendable cells. Share The concept of man as a free, independent individual was profoundly alien to the culture of Europe. It was a tribal culture down to its roots; in European thinking, the tribe was the entity, the unit, and man was only one of its expendable cells. This applied to rulers and serfs alike: the rulers were believed to hold their privileges only by virtue of the services they rendered to the tribe, services regarded as of a noble order, namely, armed force or military defense. But a nobleman was as much chattel of the tribe as a serf: his life and property belonged to the king. It must be remembered that the institution of private property, in the full, legal meaning of the term, was brought into existence only by capitalism. In the pre-capitalist eras, private property existed  de facto , but not  de jure , i.e., by custom and sufferance, not by right or by law. In law and in principle, all property belonged to the head of the tribe, the king, and was held only by his permission, which could be revoked at any time, at his pleasure. (The king could and did expropriate the estates of recalcitrant noblemen throughout the course of Europe’s history.)

The American philosophy of the Rights of Man was never grasped fully by European intellectuals. Europe’s predominant idea of emancipation consisted of changing the concept of man as a slave of the absolute state embodied by a king, to the concept of man as a slave of the absolute state embodied by “the people” — i.e., switching from slavery to a tribal chief into slavery to the tribe. A non-tribal view of existence could not penetrate the mentalities that regarded the privilege of ruling material producers by physical force as a badge of nobility.

Thus Europe’s thinkers did not notice the fact that during the nineteenth century, the galley slaves had been replaced by the inventors of steamboats, and the village blacksmiths by the owners of blast furnaces, and they went on thinking in such terms (such contradictions in terms) as “wage slavery” or “the antisocial selfishness of industrialists who take so much from society without giving anything in return” — on the unchallenged axiom that wealth is an anonymous, social, tribal product.

That notion has not been challenged to this day; it represents the implicit assumption and the base of contemporary political economy.

As an example of this view and its consequences, I shall cite the article on “Capitalism” in the  Encyclopaedia Britannica . The article gives no definition of its subject; it opens as follows:

capitalism, a term used to denote the economic system that has been dominant in the western world since the breakup of feudalism. Fundamental to any system called capitalist are the relations between private owners of nonpersonal means of production (land, mines,  industrial plants , etc., collectively known as capital) [italics mine] and free but capitalless workers, who sell their labour services to employers. . . . The resulting wage bargains determine the proportion in which the total product of society will be shared between the class of labourers and the class of capitalist entrepreneurs. 1 Encyclopedia Britannica , 1964. Vol. IV, pp. 839-845.

(I quote from Galt’s speech in  Atlas Shrugged , from a passage describing the tenets of collectivism: “An industrialist — blank-out — there is no such person. A factory is a ‘natural resource,’ like a tree, a rock or a mud-puddle.”)

The success of capitalism is explained by the  Britannica  as follows:

Productive use of the “social surplus” was the special virtue that enabled capitalism to outstrip all prior economic systems. Instead of building pyramids and cathedrals, those in command of the social surplus chose to invest in ships, warehouses, raw materials, finished goods and other material forms of wealth. The social surplus was thus converted into enlarged productive capacity.

This is said about a time when Europe’s population subsisted in such poverty that child mortality approached fifty percent, and periodic famines wiped out the “surplus”  population  which the pre-capitalist economies were unable to feed. Yet, making no distinction between tax-expropriated and industrially produced wealth, the  Britannica  asserts that it was the  surplus wealth  of that time that the early capitalists “commanded” and “chose to invest” — and that this investment was the cause of the stupendous prosperity of the age that followed.

What  is a “social surplus”? The article gives no definition or explanation. A “surplus” presupposes a norm; if subsistence on a chronic starvation level is above the implied norm, what is that norm? The article does not answer.

There is, of course, no such thing as a “social surplus.” All wealth is produced by somebody and belongs to somebody. And “the special virtue that enabled capitalism to outstrip all prior economic systems” was  freedom  (a concept eloquently absent from the  Britannica ’s account), which led, not to the expropriation, but to the  creation  of wealth.

I shall have more to say later about that disgraceful article (disgraceful on many counts, not the least of which is scholarship). At this point, I quoted it only as a succinct example of the tribal premise that underlies today’s political economy. That premise is shared by the enemies and the champions of capitalism alike; it provides the former with a certain inner consistency, and disarms the latter by a subtle, yet devastating aura of moral hypocrisy — as witness, their attempts to justify capitalism on the ground of “the common good” or “service to the consumer” or “the best allocation of resources.” ( Whose  resources?)

If capitalism is to be understood, it is this  tribal premise  that has to be checked — and challenged.

Mankind is not an entity, an organism, or a coral bush. The entity involved in production and trade is man . It is with the study of man — not of the loose aggregate known as a “community” — that any science of the humanities has to begin. Share man . It is with the study of man — not of the loose aggregate known as a “community” — that any science of the humanities has to begin." class="twitter"> man . It is with the study of man — not of the loose aggregate known as a “community” — that any science of the humanities has to begin." class="pinterest"> Mankind is not an entity, an organism, or a coral bush. The entity involved in production and trade is  man . It is with the study of man — not of the loose aggregate known as a “community” — that any science of the humanities has to begin.

This issue represents one of the epistemological differences between the humanities and the physical sciences, one of the causes of the former’s well-earned inferiority complex in regard to the latter. A physical science would not permit itself (not yet, at least) to ignore or bypass the nature of its subject. Such an attempt would mean: a science of astronomy that gazed at the sky, but refused to study individual stars, planets, and satellites — or a science of medicine that studied disease, without any knowledge or criterion of health, and took, as its basic subject of study, a hospital as a whole, never focusing on individual patients.

A great deal may be learned about society by studying man; but this process cannot be reversed: nothing can be learned about man by studying society — by studying the inter-relationships of entities one has never identified or defined. Yet that is the methodology adopted by most political economists. Their attitude, in effect, amounts to the unstated, implicit postulate: “Man is that which fits economic equations.” Since he obviously does not, this leads to the curious fact that in spite of the practical nature of their science, political economists are oddly unable to relate their abstractions to the concretes of actual existence.

It leads also to a baffling sort of double standard or double perspective in their way of viewing men and events: if they observe a shoemaker, they find no difficulty in concluding that he is working in order to make a living; but as political economists, on the tribal premise, they declare that his purpose (and duty) is to provide society with shoes. If they observe a panhandler on a street corner, they identify him as a bum; in political economy, he becomes “a sovereign consumer.” If they hear the communist doctrine that all property should belong to the state, they reject it emphatically and feel,  sincerely , that they would fight communism to the death; but in political economy, they speak of the government’s duty to effect a fair redistribution of wealth,” and they speak of businessmen as the best, most efficient trustees of the nation’s “natural resources.”

This is what a basic premise (and philosophical negligence) will do; this is what the tribal premise has done.

To reject that premise and begin at the beginning — in one’s approach to political economy and to the evaluation of various social systems — one must begin by identifying man’s nature, i.e., those essential characteristics which distinguish him from all other living species.

Man’s essential characteristic is his rational faculty. Man’s mind is his basic means of survival — his only means of gaining knowledge.

Man cannot survive, as animals do, by the guidance of mere percepts. . . .He cannot provide for his simplest physical needs without a process of thought. He needs a process of thought to discover how to plant and grow his food or how to make weapons for hunting. His percepts might lead him to a cave, if one is available — but to build the simplest shelter, he needs a process of thought. No percepts and no “instincts” will tell him how to light a fire, how to weave cloth, how to forge tools, how to make a wheel, how to make an airplane, how to perform an appendectomy, how to produce an electric light bulb or an electronic tube or a cyclotron or a box of matches. Yet his life depends on such knowledge — and only a volitional act of his consciousness, a process of thought, can provide it. 2 Ayn Rand, “The Objectivist Ethics,” in The Virtue of Selfishness .

A process of thought is an enormously complex process of identification and integration, which only an individual mind can perform. There is no such thing as a collective brain. Men can learn from one another, but learning requires a process of thought on the part of every individual student. Men can cooperate in the discovery of new knowledge, but such cooperation requires the independent exercise of his rational faculty by every individual scientist. Man is the only living species that can transmit and expand his store of knowledge from generation to generation; but such transmission requires a process of thought on the part of the individual recipients. As witness, the breakdowns of civilization, the dark ages in the history of mankind’s progress, when the accumulated knowledge of centuries vanished from the lives of men who were unable, unwilling, or forbidden to think.

In order to sustain its life, every living species has to follow a certain course of action required by its nature. The action required to sustain human life is primarily intellectual: everything man needs has to be discovered by his mind and produced by his effort. Production is the application of reason to the problem of survival.

If some men do not choose to think, they can survive only by imitating and repeating a routine of work discovered by others — but those others had to discover it, or none would have survived. If some men do not choose to think or to work, they can survive (temporarily) only by looting the goods produced by others — but those others had to produce them, or none would have survived. Regardless of what choice is made, in this issue, by any man or by any number of men, regardless of what blind, irrational, or evil course they may choose to pursue — the fact remains that reason is man’s means of survival and that men prosper or fail, survive or perish in proportion to the degree of their rationality.

Since knowledge, thinking, and rational action are properties of the individual, since the choice to exercise his rational faculty or not depends on the individual, man’s survival requires that those who think be free of the interference of those who don’t. Since men are neither omniscient nor infallible, they must be free to agree or disagree, to cooperate or to pursue their own independent course, each according to his own rational judgment. Freedom is the fundamental requirement of man’s mind.

A rational mind does not work under compulsion; it does not subordinate its grasp of reality to anyone’s orders, directives, or controls; it does not sacrifice its knowledge, its view of the truth, to anyone’s opinions, threats, wishes, plans, or “welfare.” Share A rational mind does not work under compulsion; it does not subordinate its grasp of reality to anyone’s orders, directives, or controls; it does not sacrifice its knowledge, its view of the truth, to anyone’s opinions, threats, wishes, plans, or “welfare.” Such a mind may be hampered by others, it may be silenced, proscribed, imprisoned, or destroyed; it cannot be forced; a gun is not an argument. (An example and symbol of this attitude is Galileo.)

It is from the work and the inviolate integrity of such minds — from the intransigent innovators — that all of mankind’s knowledge and achievements have come. (See  The Fountainhead .) It is to such minds that mankind owes its survival. (See  Atlas Shrugged .)

The same principle applies to all men, on every level of ability and ambition. To the extent that a man is guided by his rational judgment, he acts in accordance with the requirements of his nature and, to that extent, succeeds in achieving a human form of survival and well-being; to the extent that he acts irrationally, he acts as his own destroyer.

The social recognition of man’s rational nature — of the connection between his survival and his use of reason — is the concept of  individual rights .

I shall remind you that “rights” are a moral principle defining and sanctioning a man’s freedom of action in a social context, that they are derived from man’s nature as a rational being and represent a necessary condition of his particular mode of survival. I shall remind you also that the right to life is the source of all rights, including the right to property. 3 For a fuller discussion of rights, I refer you to my articles “Man’s Rights” in the appendix, and “Collectivized ‘Rights’” in The Virtue of Selfishness .

In regard to political economy, this last requires special emphasis: man has to work and produce in order to support his life. He has to support his life by his own effort and by the guidance of his own mind. If he cannot dispose of the product of his effort, he cannot dispose of his effort; if he cannot dispose of his effort, he cannot dispose of his life. Without property rights, no other rights can be practiced.

Now, bearing these facts in mind, consider the question of what social system is appropriate to man.

A social system is a set of moral-political-economic principles embodied in a society’s laws, institutions, and government, which determine the relationships, the terms of association, among the men living in a given geographical area. It is obvious that these terms and relationships depend on an identification of man’s nature, that they would be different if they pertain to a society of rational beings or to a colony of ants. It is obvious that they will be radically different if men deal with one another as free, independent individuals, on the premise that every man is an end in himself — or as members of a pack, each regarding the others as the means to  his  ends and to the ends of “the pack as a whole.”

There are only two fundamental questions (or two aspects of the same question) that determine the nature of any social system: Does a social system recognize individual rights? — and: Does a social system ban physical force from human relationships? The answer to the second question is the practical implementation of the answer to the first.

Is man a sovereign individual who owns his person, his mind, his life, his work and its products — or is he the property of the tribe (the state, the society, the collective) that may dispose of him in any way it pleases, that may dictate his convictions, prescribe the course of his life, control his work and expropriate his products? Does man have the  right  to exist for his own sake — or is he born in bondage, as an indentured servant who must keep buying his life by serving the tribe but can never acquire it free and clear?

This is the first question to answer. The rest is consequences and practical implementations. The basic issue is only: Is man free?

In mankind’s history, capitalism is the only system that answers: Yes.

Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned. Share Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned. " class="twitter"> Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned. " class="pinterest"> Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.

The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a capitalist society, no man or group may  initiate  the use of physical force against others. The only function of the government, in such a society, is the task of protecting man’s rights, i.e., the task of protecting him from physical force; the government acts as the agent of man’s right of self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under  objective control . 4 For a fuller discussion of this subject, see my article “The Nature of Government” in the appendix.

It is the basic, metaphysical fact of man’s nature — the connection between his survival and his use of reason — that capitalism recognizes and protects. Share It is the basic, metaphysical fact of man’s nature — the connection between his survival and his use of reason — that capitalism recognizes and protects.

In a capitalist society, all human relationships are  voluntary . Men are free to cooperate or not, to deal with one another or not, as their own individual judgments, convictions, and interests dictate. They can deal with one another only in terms of and by means of reason, i.e., by means of discussion, persuasion, and  contractual  agreement, by voluntary choice to mutual benefit. The right to agree with others is not a problem in any society; it is  the right to disagree  that is crucial. It is the institution of private property that protects and implements the right to disagree — and thus keeps the road open to man’s most valuable attribute (valuable personally, socially, and  objectively ): the creative mind.

This is the cardinal difference between capitalism and collectivism.

The power that determines the establishment, the changes, the evolution, and the destruction of social systems is philosophy. The role of chance, accident, or tradition, in this context, is the same as their role in the life of an individual: their power stands in inverse ratio to the power of a culture’s (or an individual’s) philosophical equipment, and grows as philosophy collapses. It is, therefore, by reference to philosophy that the character of a social system has to be defined and evaluated. Corresponding to the four branches of philosophy, the four keystones of capitalism are: metaphysically, the requirements of man’s nature and survival — epistemologically, reason — ethically, individual rights — politically, freedom.

This, in substance, is the base of the proper approach to political economy and to an understanding of capitalism — not the tribal premise inherited from prehistorical traditions.

The “practical” justification of capitalism does not lie in the collectivist claim that it effects “the best allocation of national resources.” Man is  not  a “national resource” and neither is his mind — and without the creative power of man’s intelligence, raw materials remain just so many useless raw materials.

The  moral  justification of capitalism does not lie in the altruist claim that it represents the best way to achieve “the common good.” It is true that capitalism does — if that catch-phrase has any meaning — but this is merely a secondary consequence. The moral justification of capitalism lies in the fact that it is the only system consonant with man’s rational nature, that it protects man’s survival  qua  man, and that its ruling principle is:  justice .

Every social system is based, explicitly or implicitly, on some theory of ethics. The tribal notion of “the common good” has served as the moral justification of most social systems — and of all tyrannies — in history. The degree of a society’s enslavement or freedom corresponded to the degree to which that tribal slogan was invoked or ignored.

“The common good” (or “public interest”) is an undefined and undefinable concept: there is no such entity as “the tribe” or “the public”; the tribe (or the public or society) is only a number of individual men. Nothing can be good for the tribe as such; “good” and “value” pertain  only  to a living organism — to an individual living organism — not to a disembodied aggregate of relationships.

“The common good” is a meaningless concept, unless taken literally, in which case its only possible meaning is: the sum of the good of  all  the individual men involved, But in that case, the concept is meaningless as a moral criterion: it leaves open the question of what  is  the good of individual men and how does one determine it?

It is not, however, in its literal meaning that that concept is generally used. It is accepted precisely for its elastic, undefinable, mystical character which serves, not as a moral guide, but as an escape from morality. Since the good is not applicable to the disembodied, it becomes a moral blank check for those who attempt to embody it.

When “the common good” of a society is regarded as something apart from and superior to the individual good of its members, it means that the good of  some  men takes precedence over the good of others, with those others consigned to the status of sacrificial animals. It is tacitly assumed, in such cases, that “the common good” means “the good of the  majority ” as against the minority or the individual. Observe the significant fact that that assumption is  tacit : even the most collectivized mentalities seem to sense the impossibility of justifying it morally. But “the good of the majority,” too, is only a pretense and a delusion: since, in fact, the violation of an individual’s rights means the abrogation of all rights, it delivers the helpless majority into the power of any gang that proclaims itself to be “the voice of society” and proceeds to rule by means of physical force, until deposed by another gang employing the same means.

If one begins by defining the good of individual men, one will accept as proper only a society in which that good is achieved and  achievable . But if one begins by accepting “the common good” as an axiom and regarding individual good as its possible but not necessary consequence (not necessary in any particular case), one ends up with such a gruesome absurdity as Soviet Russia, a country professedly dedicated to “the common good,” where, with the exception of a minuscule clique of rulers, the entire population has existed in subhuman misery for over two generations.

What makes the victims and, worse, the observers accept this and other similar historical atrocities, and still cling to the myth of “the common good”? The answer lies in philosophy — in philosophical theories on the nature of moral values.

There are, in essence, three schools of thought on the nature of the good: the intrinsic, the subjective, and the objective. Share There are, in essence, three schools of thought on the nature of the good: the intrinsic, the subjective, and the objective. The  intrinsic  theory holds that the good is inherent in certain things or actions as such, regardless of their context and consequences, regardless of any benefit or injury they may cause to the actors and subjects involved. It is a theory that divorces the concept of “good” from beneficiaries, and the concept of “value” from valuer and purpose — claiming that the good is good in, by, and of itself.

The  subjectivist  theory holds that the good bears no relation to the facts of reality, that it is the product of a man’s consciousness, created by his feelings, desires, “intuitions,” or whims, and that it is merely an “arbitrary postulate” or an “emotional commitment.”

The intrinsic theory holds that the good resides in some sort of reality, independent of man’s consciousness; the subjectivist theory holds that the good resides in man’s consciousness, independent of reality.

The  objective  theory holds that the good is neither an attribute of “things in themselves” nor of man’s emotional states, but  an evaluation  of the facts of reality by man’s consciousness according to a rational standard of value. (Rational, in this context, means: derived from the facts of reality and validated by a process of reason.) The objective theory holds that  the good is an aspect of reality in relation to man  — and that it must be discovered, not invented, by man. Fundamental to an objective theory of values is the question: Of value to whom and for what? An objective theory does not permit context-dropping or “concept-stealing”; it does not permit the separation of “value” from “purpose,” of the good from beneficiaries, and of man’s actions from reason.

Of all the social systems in mankind’s history,  capitalism is the only system based on an objective theory of values .

The intrinsic theory and the subjectivist theory (or a mixture of both) are the necessary base of every dictatorship, tyranny, or variant of the absolute state. Whether they are held consciously or subconsciously — in the explicit form of a philosopher’s treatise or in the implicit chaos of its echoes in an average man’s feelings — these theories make it possible for a man to believe that the good is independent of man’s mind and can be achieved by physical force.

If a man believes that the good is intrinsic in certain actions, he will not hesitate to force others to perform them. If he believes that the human benefit or injury caused by such actions is of no significance, he will regard a sea of blood as of no significance. If he believes that the beneficiaries of such actions are irrelevant (or interchangeable), he will regard wholesale slaughter as his moral duty in the service of a “higher” good. It is the intrinsic theory of values that produces a Robespierre, a Lenin, a Stalin, or a Hitler. It is not an accident that Eichmann was a Kantian.

If a man believes that the good is a matter of arbitrary, subjective choice, the issue of good or evil becomes, for him, an issue of:  my  feelings or  theirs ? No bridge, understanding, or communication is possible to him. Reason is the only means of communication among men, and an objectively perceivable reality is their only common frame of reference; when these are invalidated (i.e., held to be irrelevant) in the field of morality, force becomes men’s only way of dealing with one another. If the subjectivist wants to pursue some social ideal of his own, he feels morally entitled to force men “for their own good,” since he  feels  that he is right and that there is nothing to oppose him but their misguided feelings.

Thus, in practice, the proponents of the intrinsic and the subjectivist schools meet and blend. (They blend in terms of their psycho-epistemology as well: by what means do the moralists of the intrinsic school discover their transcendental “good,” if not by means of special, non-rational intuitions and revelations, i.e., by means of their feelings?) It is doubtful whether anyone can hold either of these theories as an actual, if mistaken, conviction. But both serve as a rationalization of power-lust and of rule by brute force, unleashing the potential dictator and disarming his victims.

The objective theory of values is the only moral theory incompatible with rule by force. Capitalism is the only system based implicitly on an objective theory of values — and the historic tragedy is that this has never been made explicit.

If one knows that the good is  objective  — i.e., determined by the nature of reality, but to be discovered by man’s mind — one knows that an attempt to achieve the good by physical force is a monstrous contradiction which negates morality at its root by destroying man’s capacity to recognize the good, i.e., his capacity to value. Force invalidates and paralyzes a man’s judgment, demanding that he act against it, thus rendering him morally impotent.

A value which one is forced to accept at the price of surrendering one’s mind, is not a value to anyone; the forcibly mindless can neither judge nor choose nor value. An attempt to achieve the good by force is like an attempt to provide a man with a picture gallery at the price of cutting out his eyes. Share A value which one is forced to accept at the price of surrendering one’s mind, is not a value to anyone; the forcibly mindless can neither judge nor choose nor value. An attempt to achieve the good by force is like an attempt to provide a man with a picture gallery at the price of cutting out his eyes. Values cannot exist (cannot be valued) outside the full context of a man’s life, needs, goals, and  knowledge .

The objective view of values permeates the entire structure of a capitalist society.

The recognition of individual rights implies the recognition of the fact that the good is not an ineffable abstraction in some supernatural dimension, but a value pertaining to reality, to this earth, to the lives of individual human beings (note the right to the pursuit of happiness). It implies that the good cannot be divorced from beneficiaries, that men are not to be regarded as interchangeable, and that no man or tribe may attempt to achieve the good of some at the price of the immolation of others.

The free market represents the  social  application of an objective theory of values. Since values are to be discovered by man’s mind, men must be free to discover them — to think, to study, to translate their knowledge into physical form, to offer their products for trade, to judge them, and to choose, be it material goods or ideas, a loaf of bread or a philosophical treatise. Since values are established contextually, every man must judge for himself, in the context of his own knowledge, goals, and interests. Since values are determined by the nature of reality, it is reality that serves as men’s ultimate arbiter: if a man’s judgment is right, the rewards are his; if it is wrong, he is his only victim.

It is in regard to a free market that the distinction between an intrinsic, subjective, and objective view of values is particularly important to understand. The market value of a product is  not  an intrinsic value, not a “value in itself” hanging in a vacuum. A free market never loses sight of the question: Of value to  whom ? And, within the broad field of objectivity, the market value of a product does not reflect its  philosophically objective  value, but only its  socially objective  value.

By “philosophically objective,” I mean a value estimated from the standpoint of the best possible to man, i.e., by the criterion of the most rational mind possessing the greatest knowledge, in a given category, in a given period, and in a defined context (nothing can be estimated in an undefined context). For instance, it can be rationally proved that the airplane is  objectively  of immeasurably greater value to man (to  man at his best ) than the bicycle — and that the works of Victor Hugo are  objectively  of immeasurably greater value than true-confession magazines. But if a given man’s intellectual potential can barely manage to enjoy true confessions, there is no reason why his meager earnings, the product of  his  effort, should be spent on books he cannot read — or on subsidizing the airplane industry, if his own transportation needs do not extend beyond the range of a bicycle. (Nor is there any reason why the rest of mankind should be held down to the level of his literary taste, his engineering capacity, and his income. Values are not determined by fiat nor by majority vote.)

Just as the number of its adherents is not a proof of an idea’s truth or falsehood, of an art work’s merit or demerit, of a product’s efficacy or inefficacy — so the free-market value of goods or services does not necessarily represent their philosophically objective value, but only their  socially objective  value, i.e., the sum of the individual judgments of all the men involved in trade at a given time, the sum of what  they  valued, each in the context of his own life.

Thus, a manufacturer of lipstick may well make a greater fortune than a manufacturer of microscopes — even though it can be rationally demonstrated that microscopes are scientifically more valuable than lipstick. But — valuable  to whom ?

A microscope is of no value to a little stenographer struggling to make a living; a lipstick is; a lipstick, to her, may mean the difference between self-confidence and self-doubt, between glamour and drudgery.

This does not mean, however, that the values ruling a free market are  subjective . If the stenographer spends all her money on cosmetics and has none left to pay for the use of a microscope (for a visit to the doctor)  when she needs it , she learns a better method of budgeting her income; the free market serves as her teacher: she has no way to penalize others for her mistakes. If she budgets rationally, the microscope is always available to serve her own specific needs  and no more , as far as she is concerned: she is not taxed to support an entire hospital, a research laboratory, or a space ship’s journey to the moon. Within her own productive power, she does pay a part of the cost of scientific achievements,  when and as she needs them . She has no “social duty,” her own life is her only responsibility — and the only thing that a capitalist system requires of her is the thing that  nature  requires: rationality, i.e., that she live and act to the best of her own judgment.

Within every category of goods and services offered on a free market, it is the purveyor of the best product at the cheapest price who wins the greatest financial rewards in that field — not automatically nor immediately nor by fiat, but by virtue of the free market, which teaches every participant to look for the objective best within the category of his own competence, and penalizes those who act on irrational considerations. Share in that field — not automatically nor immediately nor by fiat, but by virtue of the free market, which teaches every participant to look for the objective best within the category of his own competence, and penalizes those who act on irrational considerations." class="twitter"> in that field — not automatically nor immediately nor by fiat, but by virtue of the free market, which teaches every participant to look for the objective best within the category of his own competence, and penalizes those who act on irrational considerations." class="pinterest"> Within every category of goods and services offered on a free market, it is the purveyor of the best product at the cheapest price who wins the greatest financial rewards  in that field  — not automatically nor immediately nor by fiat, but by virtue of the free market, which teaches every participant to look for the  objective  best within the category of his own competence, and penalizes those who act on irrational considerations.

Now observe that a free market does not level men down to some common denominator — that the intellectual criteria of the majority do not rule a free market or a free society — and that the exceptional men, the innovators, the intellectual giants, are not held down by the majority. In fact, it is the members of this exceptional minority who lift the whole of a free society to the level of their own achievements, while rising further and ever further.

A free market is a  continuous process that cannot be held still, an upward process that demands the best (the most rational) of every man and rewards him accordingly. While the majority have barely assimilated the value of the automobile, the creative minority introduces the airplane. The majority learn by demonstration, the minority is free to demonstrate. The “philosophically objective” value of a new product serves as the teacher for those who are willing to exercise their rational faculty, each to the extent of his ability. Those who are unwilling remain unrewarded — as well as those who aspire to more than their ability produces. The stagnant, the irrational, the subjectivist have no power to stop their betters.

(The small minority of adults who are  unable  rather than unwilling to work, have to rely on voluntary charity; misfortune is not a claim to slave labor, there is no such thing as the  right  to consume, control, and destroy those without whom one would be unable to survive. As to depressions and mass unemployment, they are not caused by the free market, but by government interference into the economy.)

The mental parasites — imitators who attempt to cater to what they think is the public’s taste — are constantly being beaten by the innovators whoso products raise the public’s knowledge and taste to ever higher levels. It is in this sense that the free market is ruled, not by the consumers, but by the producers. The most successful ones are those who discover new fields of production, fields which had not been known to exist.

A given product may not be appreciated at once, particularly if it is too radical an innovation; but, barring irrelevant accidents, it wins in the long run. It is in this sense that the free market is not ruled by the intellectual criteria of the majority, which prevail only at and for any given moment; the free market is ruled by those who are able to see and plan long-range — and the better the mind, the longer the range.

The economic value of a man’s work is determined, on a free market, by a single principle: by the voluntary consent of those who are willing to trade him their work or products in return. This is the moral meaning of the law of supply and demand; it represents the total rejection of two vicious doctrines: the tribal premise and altruism. It represents the recognition of the fact that man is not the property nor the servant of the tribe, that  a man works in order to support his own life  — as, by his nature, he must — that he has to be guided by his own rational self-interest, and if he wants to trade with others, he cannot expect sacrificial victims, i.e., he cannot expect to receive values without trading commensurate values in return. The sole criterion of what is commensurate, in this context, is the free, voluntary, uncoerced judgment of the traders.

The tribal mentalities attack this principle from two seemingly opposite sides: they claim that the free market is “unfair” both to the genius and to the average man. The first objection is usually expressed by a question such as: “Why should Elvis Presley make more money than Einstein?” The answer is: Because men work in order to support and enjoy their own lives — and if many men find value in Elvis Presley, they are entitled to spend their money on their own pleasure. Presley’s fortune is not taken from those who do not care for his work (I am one of them) nor from Einstein — nor does he stand in Einstein’s way — nor does Einstein lack proper recognition and support in a free society, on an appropriate intellectual level.

As to the second objection, the claim that a man of average ability suffers an “unfair” disadvantage on a free market —

Look past the range of the moment, you who cry that you fear to compete with men of superior intelligence, that their mind is a threat to your livelihood, that the strong leave no chance to the weak in a market of voluntary trade. . . . When you live in a rational society, where men are free to trade, you receive an incalculable bonus: the material value of your work is determined not only by your effort, but by the effort of the best productive minds who exist in the world around you. . . . The machine, the frozen form of a living intelligence, is the power that expands the potential of your life by raising the productivity of your time. . . . Every man is free to rise as far as he’s able or willing, but it’s only the degree to which he thinks that determines the degree to which he’ll rise. Physical labor as such can extend no further than the range of the moment. The man who does no more than physical labor, consumes the material value equivalent of his own contribution to the process of production, and leaves no further value, neither for himself nor others. But the man who produces an idea in any field of rational endeavor — the man who discovers new knowledge — is the permanent benefactor of humanity. . . . It is only the value of an idea that can be shared with unlimited numbers of men, making all sharers richer at no one’s sacrifice or loss, raising the productive capacity of whatever labor they perform. . . . In proportion to the mental energy he spent, the man who creates a new invention receives but a small percentage of his value in terms of material payment, no matter what fortune he makes, no matter what millions he earns. But the man who works as a janitor in the factory producing that invention, receives an enormous payment in proportion to the mental effort that his job requires of  him . And the same is true of all men between, on all levels of ambition and ability. The man at the top of the intellectual pyramid contributes the most to all those below him; but gets nothing except his material payment, receiving no intellectual bonus from others to add to the value of his time. The man at the bottom who, left to himself, would starve in his hopeless ineptitude, contributes nothing to those above him, but receives the bonus of all of their brains. Such is the nature of the “competition” between the strong and the weak of the intellect. Such is the pattern of “exploitation” for which you have damned the strong. ( Atlas Shrugged )

And such is the relationship of capitalism to man’s mind and to man’s survival.

The magnificent progress achieved by capitalism in a brief span of time — the spectacular improvement in the conditions of man’s existence on earth — is a matter of historical record. It is not to be hidden, evaded, or explained away by all the propaganda of capitalism’s enemies. But what needs special emphasis is the fact that this progress was achieved by  non-sacrificial  means.

Progress cannot be achieved by forced privations, by squeezing a “social surplus” out of starving victims. Progress can come only out of  individual surplus , i.e., from the work, the energy, the creative over-abundance of those men whose ability produces more than their personal consumption requires, those who are intellectually and financially able to seek the new, to improve on the known, to move forward. In a capitalist society, where such men are free to function and to take their own risks, progress is not a matter of sacrificing to some distant future, it is part of the living present, it is the normal and natural, it is achieved as and while men live — and  enjoy  — their lives.

Now consider the alternative — the tribal society, where all men throw their efforts, values, ambitions, and goals into a tribal pool or common pot, then wait hungrily at its rim, while the leader of a clique of cooks stirs it with a bayonet in one hand and a blank check on all their lives in the other. The most consistent example of such a system is the Union of Soviet Socialist Republics.

Half a century ago, the Soviet rulers commanded their subjects to be patient, bear privations, and make sacrifices for the sake of “industrializing” the country, promising that this was only temporary, that industrialization would bring them abundance, and Soviet progress would surpass the capitalistic West.

Today, Soviet Russia is still unable to feed her people — while the rulers scramble to copy, borrow, or steal the technological achievements of the West. Industrialization is not a static goal; it is a dynamic process with a rapid rate of obsolescence. So the wretched serfs of a planned tribal economy, who starved while waiting for electric generators and tractors, are now starving while waiting for atomic power and interplanetary travel. Thus, in a “people’s state,” the progress of science is a threat to the people, and every advance is taken out of the people’s shrinking hides.

This was not the history of capitalism.

America’s abundance was not created by public sacrifices to “the common good,” but by the productive genius of free men who pursued their own personal interests and the making of their own private fortunes. Share America’s abundance was not created by public sacrifices to “the common good,” but by the productive genius of free men who pursued their own personal interests and the making of their own private fortunes. They did not starve the people to pay for America’s industrialization. They gave the people better jobs, higher wages, and cheaper goods with every new machine they invented, with every scientific discovery or technological advance — and thus the whole country was moving forward and profiting, not suffering, every step of the way.

Do not, however, make the error of reversing cause and effect: the good of the country was made possible precisely by the fact that it was not forced on anyone as a moral goal or duty; it was merely an effect; the cause was a man’s right to pursue his own good. It is this right — not its consequences — that represents the moral justification of capitalism.

But this right is incompatible with the intrinsic or the subjectivist theory of values, with the altruist morality and the tribal premise. It is obvious which human attribute one rejects when one rejects objectivity; and, in view of capitalism’s record, it is obvious against which human attribute the altruist morality and the tribal premise stand united: against man’s mind, against intelligence — particularly against intelligence applied to the problems of human survival, i.e., productive ability.

While altruism seeks to rob intelligence of its rewards, by asserting that the moral duty of the competent is to serve the incompetent and sacrifice themselves to anyone’s need — the tribal premise goes a step further: it denies the existence of intelligence and of its role in the production of wealth.

It is morally obscene to regard wealth as an anonymous, tribal product and to talk about “redistributing” it. Share It is morally obscene to regard wealth as an anonymous, tribal product and to talk about “redistributing” it. The view that wealth is the result of some undifferentiated, collective process, that we all did something and it’s impossible to tell who did what, therefore some sort of equalitarian “distribution” is necessary — might have been appropriate in a primordial jungle with a savage horde moving boulders by crude physical labor (though even there someone had to initiate and organize the moving). To hold that view in an industrial society — where individual achievements are a matter of public record — is so crass an evasion that even to give it the benefit of the doubt is an obscenity.

Anyone who has ever been an employer or an employee, or has observed men working, or has done an honest day’s work himself, knows the crucial role of ability, of intelligence, of a focused, competent mind — in any and all lines of work, from the lowest to the highest. He knows that ability or the lack of it (whether the lack is actual or volitional) makes a difference of life-or-death in any productive process. The evidence is so overwhelming — theoretically and practically, logically and “empirically,” in the events of history and in anyone’s own daily grind — that no one can claim ignorance of it. Mistakes of this size are not made innocently.

When great industrialists made fortunes on a  free  market (i.e., without the use of force, without government assistance or interference), they  created  new wealth — they did not take it from those who had  not  created it. If you doubt it, take a look at the “total social product” — and the standard of living — of those countries where such men are not permitted to exist.

Observe how seldom and how inadequately the issue of human intelligence is discussed in the writings of the tribal-statist-altruist theoreticians. Observe how carefully today’s advocates of a mixed economy avoid and evade any mention of intelligence or ability in their approach to politico-economic issues, in their claims, demands, and pressure-group warfare over the looting of “the total social product.”

It is often asked: Why was capitalism destroyed in spite of its incomparably beneficent record? The answer lies in the fact that the lifeline feeding any social system is a culture’s dominant philosophy and that capitalism never had a philosophical base. It was the last and (theoretically) incomplete product of an Aristotelian influence. As a resurgent tide of mysticism engulfed philosophy in the nineteenth century, capitalism was left in an intellectual vacuum, its lifeline cut. Neither its moral nature nor even its political principles had ever been fully understood or defined. Its alleged defenders regarded it as compatible with government controls (i.e., government interference into the economy), ignoring the meaning and implications of the concept of laissez-faire. Thus, what existed in practice, in the nineteenth century, was not pure capitalism, but variously mixed economies. Since controls necessitate and breed further controls, it was the statist element of the mixtures that wrecked them; it was the free, capitalist element that took the blame.

Capitalism could not survive in a culture dominated by mysticism and altruism, by the soul-body dichotomy and the tribal premise. No social system (and no human institution or activity of any kind) can survive without a moral base. On the basis of the altruist morality, capitalism had to be — and was — damned from the start. 5 For a discussion of the philosophers’ default in regard to capitalism, see the title essay in my book For the New Intellectual .

For those who do not fully understand the role of philosophy in politico-economic issues, I offer — as the clearest example of today’s intellectual state — some further quotations from the  Encyclopaedia Britannica ’s article on capitalism.

Few observers are inclined to find fault with capitalism as an engine of production. Criticism usually proceeds either from  moral  or  cultural  disapproval of certain features of the capitalist system, or from the short-run vicissitudes (crises and depressions) with which long-run improvement is interspersed. [Italics mine.]

The “crises and depressions” were caused by government interference, not by the capitalist system. But what was the nature of the “moral or cultural disapproval”? The article does not tell us explicitly, but gives one eloquent indication:

Such as they were, however, both tendencies and realizations [of capitalism] bear the unmistakable stamp of the businessman’s interests and still more the businessman’s type of mind. Moreover it was not only policy but the philosophy of national and individual life, the scheme of cultural values, that bore that stamp. Its materialistic utilitarianism, its naive confidence in progress of a certain type, its actual achievements in the field of pure and applied science, the temper of its artistic creations, may all be traced to  the spirit of rationalism  that emanates from the businessman’s office. [Italics mine.]

The author of the article, who is not “naive” enough to believe in a capitalistic (or  rational ) type of progress, holds, apparently, a different belief:

At the end of the middle ages western Europe stood about where many underdeveloped countries stand in the 20th century. [This means that the culture of the Renaissance was about the equivalent of today’s Congo; or else, it means that people’s intellectual development has nothing to do with economics.] In underdeveloped economies the difficult task of statesmanship is to get under way a cumulative process of economic development, for once a certain momentum is attained, further advances appear to follow more or less automatically.

Some such notion underlies every theory of a planned economy. It is on some such “sophisticated” belief that two generations of Russians have perished, waiting for  automatic progress.

The classical economists attempted a tribal justification of capitalism on the ground that it provides the best “allocation’’ of a community’s ”resources.“ Here are their chickens coming home to roost:

The market theory of resource allocation within the private sector is the central theme of classical economics. The criterion for allocation between the public and private sectors is formally the same as in any other resource allocation, namely that the community should receive equal satisfaction from a marginal increment of resources used in the public and private spheres. . . . Many economists have asserted that there is substantial, perhaps overwhelming, evidence that total welfare in capitalist United States, for example, would be increased by a reallocation of resources to the public sector — more schoolrooms and fewer shopping centers, more public libraries and fewer automobiles, more hospitals and fewer bowling alleys.

This means that some men must toil all their lives without adequate transportation (automobiles), without an adequate number of places to buy the goods they need (shopping centers), without the pleasures of relaxation (bowling alleys) — in order that other men may be provided with schools, libraries, and hospitals.

If you want to see the ultimate results and full meaning of the tribal view of wealth — the total obliteration of the distinction between private action and government action, between production and force, the total obliteration of the concept of “rights,” of an individual human being’s reality, and its replacement by a view of men as interchangeable beasts of burden or “factors of production” — study the following:

Capitalism has a bias against the public sector for two reasons. First, all products and income accrue [?] initially to the private sector while resources reach the public sector through the painful process of taxation. Public needs are met only by sufferance of consumers in their role as taxpayers [what about  producers ?], whose political representatives are acutely conscious of their constituents’ tender feelings [!] about taxation. That people know better than governments what to do with their income is a notion more appealing than the contrary one, that people get more for their tax money than for other types of spending. [By what theory of values? By whose judgment?] . . . Second, the pressure of private business to sell leads to the formidable array of devices of modern salesmanship which influence consumer choice and bias consumer values toward private consumption . . .[This means that your desire to spend the money you earn rather than have it taken away from you, is a mere  bias .] Hence, much private expenditure goes for wants that are not very urgent in any fundamental sense. [Urgent — to whom? Which wants are “fundamental,” beyond a cave, a bearskin, and a chunk of raw meat?] The corollary is that many public needs are neglected because these superficial private wants, artificially generated, compete successfully for the same resources. [ Whose  resources?] . . . A comparison of resource allocation to the public and private sectors under capitalism and under socialist collectivism is illuminating. [It is.] In a collective economy all resources operate in the public sector and are available for education, defense, health, welfare, and other public needs without any transfer through taxation. Private consumption is restricted to the claims that are  permitted  [by whom?] against the  social product , much as public services in a capitalist economy are limited to the claims permitted against the private sector. [Italics mine.] In a collective economy public needs enjoy the same sort of built-in priority that private consumption enjoys in a capitalist economy. In the Soviet Union teachers are plentiful, but automobiles are scarce, whereas the opposite condition prevails in the United States.

Here is the conclusion of that article:

Predictions concerning the survival of capitalism are, in part, a matter of definition. One sees everywhere in capitalist countries a shifting of economic activity from the private to the public sphere. . . . At the same time [after World War II] private consumption appeared destined to increase in communist countries. [Such as the consumption of wheat?] The two economic systems seemed to be drawing closer together by changes converging from both directions. Yet significant differences in the economic structures still existed. It seemed reasonable to assume that the society which invested more in people would advance more rapidly and inherit the future. In this important respect capitalism, in the eyes of some economists, labours under a fundamental but not inescapable disadvantage in competition with collectivism.

The collectivization of Soviet agriculture was achieved by means of a government-planned famine — planned and carried out deliberately to force peasants into collective farms; Soviet Russia’s enemies claim that fifteen million peasants died in that famine; the Soviet government admits the death of seven million.

At the end of World War II, Soviet Russia’s enemies claimed that thirty million people were doing forced labor in Soviet concentration camps (and were dying of planned malnutrition, human lives being cheaper than food); Soviet Russia’s apologists admit to the figure of twelve million people.

This  is what the  Encyclopaedia Britannica  refers to as “investment in people.”

In a culture where such a statement is made with intellectual impunity and with an aura of moral righteousness, the guiltiest men are not the collectivists; the guiltiest men are those who, lacking the courage to challenge mysticism or altruism, attempt to bypass the issues of reason and morality and to defend the only rational and moral system in mankind’s history — capitalism — on any grounds other than rational and moral.

Citations & Notes

Ayn Rand, Capitalism: The Unknown Ideal (New York: Signet, 1967).

• 1 Encyclopedia Britannica , 1964. Vol. IV, pp. 839-845.
• 2 Ayn Rand, “The Objectivist Ethics,” in The Virtue of Selfishness .
• 3 For a fuller discussion of rights, I refer you to my articles “Man’s Rights” in the appendix, and “Collectivized Rights’” in The Virtue of Selfishness .
• 4 For a fuller discussion of this subject, see my article “The Nature of Government” in the appendix.
• 5 For a discussion of the philosophers’ default in regard to capitalism, the title essay in my book For the New Intellectual .

About the Author

Related Materials

Buy The Book: Capitalism: The Unknown Ideal

Read: The Meaning of Money

The Nature of Capitalism and Its Relation to Morality

• Privacy Policy
• Terms & Conditions
• Ayn Rand Global
• Ayn Rand Institute eStore
• Ayn Rand University app

Updates From ARI

Copyright © 1985 – 2024 The Ayn Rand Institute (ARI). Reproduction of content and images in whole or in part is prohibited. All rights reserved. ARI is a 501(c)(3) nonprofit organization. Contributions to ARI in the United States are tax-exempt to the extent provided by law. Objectivist Conferences (OCON), Ayn Rand Conference (ARC), Ayn Rand University (ARU) and the Ayn Rand Institute eStore are operated by ARI. Payments to OCON, ARC, ARU or the Ayn Rand Institute eStore do not qualify as tax-deductible contributions to the Ayn Rand Institute. AYN RAND, AYN RAND INSTITUTE, ARI, AYN RAND UNIVERSITY and the AYN RAND device are trademarks of the Ayn Rand Institute. All rights reserved.

Essay on Capitalism

Students are often asked to write an essay on Capitalism in their schools and colleges. And if you’re also looking for the same, we have created 100-word, 250-word, and 500-word essays on the topic.

Let’s take a look…

100 Words Essay on Capitalism

What is capitalism.

Capitalism is an economic system where private individuals or businesses own goods and services. They make things or provide services to sell for profit. In this system, the market decides prices based on supply and demand. If many people want something that’s hard to get, it becomes expensive. If nobody wants something or it’s easy to get, it’s cheap.

Benefits of Capitalism

Capitalism can lead to innovation because companies compete to make better products. It also gives people freedom to choose their jobs and what they want to buy. When businesses succeed, they can create more jobs for people.

Challenges of Capitalism

Sometimes capitalism can make the rich richer and the poor poorer. This happens because not everyone starts with the same chance to succeed. Also, without rules, businesses might harm the environment or treat workers badly to lower costs and increase profits.

Capitalism in the World

Many countries have capitalism, but they also have laws to protect workers and the environment. Some countries mix capitalism with government programs that help people, like free healthcare or education. This mix can help fix some problems of pure capitalism.

250 Words Essay on Capitalism

Capitalism is like a big game where businesses and people try to make as much money as they can. Imagine a marketplace where everyone is free to sell their goods and services and set their prices. People can start their own businesses, and the ones with the best products or services often make the most money.

Freedom to Choose

In a capitalist system, you get to make choices. You can decide what to buy, which job to take, and even start your own company. This freedom means that if someone makes something really good or useful, they can become successful. But it also means that if they don’t do a good job, they might not make money, and someone else who does it better could win the customers.

Competition

Competition is a big deal in capitalism. It’s like a race where businesses try to outdo each other to win customers. This can lead to better products and lower prices. It’s good for customers because they get more choices and can find things that are better or cheaper.

Money and Wealth

Capitalism can make some people very rich. When a person or a company does really well, they can earn a lot of money. But this also means that not everyone gets the same amount. Some people might have a lot, while others have very little.

Capitalism is all about making money, having the freedom to choose, and competing in the market. It has its good sides, like better products and choices, but it also means not everyone will have the same amount of money. It’s a system that can help people succeed if they have a good idea and work hard.

500 Words Essay on Capitalism

Capitalism is a way of running an economy where private individuals or businesses own and operate the different things needed to make and sell goods and services. This includes factories, tools, and shops. In a capitalist system, the main goal is to make money. People who have money to invest, known as capitalists, spend their money on things that can make more money, like factories or machines.

Freedom of Choice

One big part of capitalism is freedom of choice. This means that businesses can decide what to make, and people can choose what to buy. If a toy company thinks that making a new toy will earn them money, they can go ahead and make it. Then, it’s up to the kids and parents to decide if they want to buy that toy. This freedom allows for lots of different products to be available in the market.

Competition is another important aspect of capitalism. Imagine there are two shops in your town that sell ice cream. One shop might try to have better flavors or lower prices to get more customers. This competition can lead to better products and services for everyone. Companies are always trying to improve what they sell and how they sell it to beat their rivals and attract more customers.

Pros of Capitalism

Capitalism has some good points. It encourages people to work hard and be creative, because they can keep most of the money they make. This can lead to new inventions and businesses. Also, since there is competition, customers usually get to choose from a variety of goods and services that might be better quality or less expensive.

Cons of Capitalism

However, capitalism isn’t perfect. Sometimes, it can lead to a few people getting very rich while others stay poor. If a business owner becomes successful, they might make a lot of money, but the people working for them might not earn as much. Also, in the race to make more money, businesses might harm the environment or not treat their workers well.

Many countries have a capitalist system, but they all do it a bit differently. For example, in some places, the government has rules to make sure businesses treat workers fairly and don’t hurt the environment. In other countries, the government lets businesses do more of what they want.

In conclusion, capitalism is a way of organizing an economy that focuses on private ownership and making profits. It has benefits like encouraging hard work and innovation, and it also has downsides such as inequality and potential harm to people or the planet. Countries around the world practice capitalism in various ways, with different rules and regulations to balance these pros and cons. Understanding capitalism is important because it affects how businesses operate, what products are available, and the overall economy of a country.

That’s it! I hope the essay helped you.

If you’re looking for more, here are essays on other interesting topics:

• Essay on Cancer Prevention
• Essay on Cancer Awareness
• Essay on Cancer

Apart from these, you can look at all the essays by clicking here .

Happy studying!

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Save my name, email, and website in this browser for the next time I comment.

• Newsletter Sign Up

READ NEW IDEAL

• Culture and Society
• Foreign Policy
• Government and Business
• Science and Industrialization

MORE FROM THE BLOG:

What Is Capitalism?

In this 1967 lecture, Ayn Rand argues that capitalism is the only moral social system — the only system which is consistent with man’s nature as a rational being and therefore the only system that protects his ability to engage in the kinds of productive activities that his life and happiness require. Rand covers such topics as the nature of man and the role of reason in his life, individual rights and freedom, differing views of “the good” and the social systems that they produce, the purpose and proper functions of government, her definition of “capitalism,” and why only capitalism — a system of voluntary interaction among free people — is the system of human flourishing.

An edited version of this talk is available in Capitalism: The Unknown Ideal , a collection of essays by Rand and others. This recording is 47 minutes long.

About The Author

Learn more about Ayn Rand’s life and writings at AynRand.org .

• Privacy Policy
• Terms & Conditions
• Ayn Rand Global
• Ayn Rand Institute eStore
• Ayn Rand University

Updates From ARI

Copyright © 1985 – 2024 The Ayn Rand Institute (ARI). Reproduction of content and images in whole or in part is prohibited. All rights reserved. ARI is a 501(c)(3) nonprofit organization. Contributions to ARI in the United States are tax-exempt to the extent provided by law. Objectivist Conferences (OCON), Ayn Rand Conference (ARC), Ayn Rand University (ARU) and the Ayn Rand Institute eStore are operated by ARI. Payments to OCON, ARC, ARU or the Ayn Rand Institute eStore do not qualify as tax-deductible contributions to the Ayn Rand Institute. AYN RAND, AYN RAND INSTITUTE, ARI, AYN RAND UNIVERSITY and the AYN RAND device are trademarks of the Ayn Rand Institute. All rights reserved.

Browse Course Material

Course info.

• Prof. Christine Walley

Departments

• Anthropology

As Taught In

• Cultural Anthropology
• Ethnography
• Social Anthropology

Learning Resource Types

What is capitalism.

Please answer ONE of the following essay questions. The essay should be 5 pages double-spaced.

• Within debates over capitalism, one longstanding argument concerns the nature of social class. While in classic Marxist conceptualizations, class is defined by a person’s position within the economic relations of production (i.e. as capitalists who own the means of production or the proletariat who works for them), other scholars have broadened this focus. How do Sherry Ortner and Julie Bettie understand social class in ways that differ from this classic formulation? In their view, how do class differences relate to other kinds of differences such as race/ethnicity and gender? Why might it be important to explore class formation in places like schools that are outside of people’s work experiences? Explore these questions through a discussion of the different class experiences of working class and middle class white and Mexican-American girls that Julie Bettie worked with at a high school in Central California. What do you find useful - or potentially less useful—in this kind of social scientific research on social class? (Please offer close readings of the material by Ortner and Bettie. Please read the additional chapters by Bettie listed in the  Readings section. You may also cite the movie “ People Like Us ” or other class readings if you find it helpful.)
• Sherry Ortner has argued that Americans tend to see in other classes those they aspire to become and those they wish to differentiate themselves from. In other words, class is always relational—we define ourselves through our relations with others. Karyn Lacy in her book on middle-and upper-middle-class African-Americans in the Washington D.C. suburbs refers to this process as “exclusionary” and “inclusionary” boundary work. In your essay, consider how the “Old Money,” wealthy, and middle-class Americans discussed by Nelson Aldrich and Lacy seek to create affinities with certain groups, while contrasting them with others. How does this “boundary work” happen through the values or cultural lifestyles that certain groups cultivate or through the ways they rear and educate their children, acquire and decorate homes, make purchases, or carry themselves and interact with others? How do they “perform” certain class positions, differentiating themselves from some groups, while aligning themselves with others? Towards what ends do they do so? And how does race come to be “co-constituted” with class in the process? In answering your question, you must closely analyze the readings by Aldrich and Lacy. You are also welcome to cite the movie “ People Like Us ” or other class readings.
• Some of the most significant labor market trends in recent decades include the expansion of low-wage labor and the shift towards more precarious or “contingent” forms of employment (whether sub-contracted work, contract labor, part-time work, temp work, on-demand jobs, or gig work). Write an essay that combines attention to WHY the theorists we read postulate these trends might be happening and the larger social ramifications of such trends along with an analysis of what such work means for people in their everyday lives, including both its benefits and drawbacks. If you’re focusing on low-wage labor, you will want to draw upon the readings about the meatpacking industry and fast-food workers. If you’re focusing on on-demand labor, you may use the chapters from  Ghost Work  by Mary Gray and Siddarth Suri. (Alternately you can use Chapters 2–3 in  Uberland  by Alex Rosenblat.) Include a discussion of your own views of such trends in the essay. Are you persuaded by theorists’ arguments about why this is happening? Why or why not? Do you see such trends in positive, negative, or mixed terms? Make sure you support your views with evidence.

You are leaving MIT OpenCourseWare

What is Capitalism?

How it works

“Freedom is the open window through which pours the sunlight of the human spirit and human dignity” (Herbert Hoover). In the 1920s, America turned away from worldly concerns and began concentrating on domestic affairs. Some might refer to this period in America as the Decade of Optimism. It ushered in many forward thinkers, innovators, innovations, and cultural changes. For example, Henry Ford created an efficient and cheap means to mass produce automobiles. This allowed even those who earned a modest income to purchase one of his cars.

Airplanes, movies, radio stations, washing machines, refrigerators, and paved roads were just a few of the innovations that the 1920s produced. Additionally, the “Roaring 20s” gave women the right to vote with the passing of the Nineteenth Amendment. The beating heart of this time period was an economic system called capitalism. As defined by Merriam-Webster, capitalism is “an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market” (Merriam-Webster). Capitalism is about efficiency, economic freedom, and individual liberty.

The 1920s also saw three Republican presidents in the White House. The latter two, Calvin Coolidge and Herbert Hoover, praised private businesses, innovations, detested big government, and had “a deep faith in the essential soundness of capitalism, which…represented the fullest expression of individualism” (Scholastic). Capitalism paved the way for the innovations that shaped America. Entrepreneurs came up with ideas and were able to freely test them in the marketplace. Almost every product you love today is a product of capitalism. Conversely, almost everything you cannot stand is a product of the government (i.e., BMV, TSA, post offices, IRS). Henry Ford did not revolutionize the auto industry due to an order from the government. The great advancements of civilization were not created by government institutions but rather from private citizens. Entrepreneurs have given us products, innovations, and medicines that have become necessities in our society. Albeit, no system is perfect. Capitalism offers the most freedom and opportunity to each and every one of its citizens; it benefits its entire society and results in the most economic growth of any other economic system. First, capitalism offers the most freedom and opportunity to each and every one of its citizens. “Everyone has equal opportunity under capitalism. The important truth in this belief is that in countries with relatively open capitalist economies, it is possible for some poor people to work their way up. Most well-off Americans have only to trace back in their families one or two generations to find ancestors of poor or modest means” (Brians). Capitalism gives everyone an equal opportunity to pursue their dreams. It takes limitations away and offers endless possibilities. Those that rise to the top are the ones willing to take risks. They work hard and are dedicated. Additionally, Milton Friedman, an American economist, states, “The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another” (Friedman). Where monopolies and trading restrictions are common, so too is the special treatment of racial and religious groups over another and, as Friedman adds, the ability to “keep people in their place” (Friedman).

Second, everyone benefits in a capitalist society. Capitalism benefits more than just wealthy entrepreneurs. Everyone benefits from their innovations. The freer the society, the better off its citizens are along many non-economic lines. Thanks to innovations and advancements in technology, even a low-income earner in a capitalist society is better off now than they were years ago, even when comparing living standards for them today with citizens of less free economic societies. Antony Davies and James Harrigan summarize: “On average, people in countries that are more economically free enjoy higher incomes, suffer less unemployment and less poverty, experience less child labor, less gender inequality, less income inequality, less deforestation, and better air quality. Yes, even the environment is healthier where economic freedom is greater” (Horowitz). Capitalism offers its citizens a higher standard of living. Most have electricity, modern plumbing, heating, air conditioning, cell phones, TVs, cable, and more. Most have at least a basic education. Thanks to modern medicine and accessibility to all, people are living longer, as there is less sickness and disease. Even if an individual does not seem to be financially well off under capitalism, they still benefit in many ways. In contrast, with stratified social systems and socialism, necessities deemed by a capitalist society only seem to go to those at the top. Bernie Sanders and other Democratic Socialist American politicians like to talk about the 1%ers in America. However, a citizen of capitalist-leaning America making $34,000 a year after taxes makes up the world’s 1% (Hawkins). Capitalism has afforded American citizens with a better quality of life than much of the world. Lastly, capitalism results in the most economic growth of any other economic system. “Economic growth is measured by an increase in the amount of goods and services produced over a period of time. The more growth we see, the more we produce as a society,” (Spaceship.com). Entrepreneurs, incentivized by their innovations, create a climate of innovation and economic expansion. Innovation and economic expansion increase the real GDP, leading to improved living standards. The trickle-down from the rich to the poor increases the wealth of all citizens under capitalism and enables a higher standard of living. One way to measure how well a person or country is doing economically is to look at the GDP (Gross Domestic Product), which is the total number of goods and services produced in a year. The Fraser Institute summarizes:

“Nations in the top quartile of economic freedom had an average per-capita GDP of $42,463 in 2015, compared to $6,036 for bottom quartile nations (PPP constant 2011 US$). In the top quartile, the average income of the poorest 10% was $11,998, compared to $1,124 in the bottom quartile in 2015 (PPP constant 2011 US$.) Interestingly, the average income of the poorest 10% in the most economically free nations is almost twice the average per capita income in the least free nations,” (Horowitz).

What this Economic Freedom of the World Index proves is a direct correlation between those countries that are economically better off also being the most economically free. “The average person in the United States produces 3.4x more than the world average in terms of GDP per capita” (Spaceship.com). America is also one of the most capitalist countries in the world.

Conversely, opponents of capitalism claim that it produces a culture of greed, with high-earning “fat cat” CEOs, Wall Street bankers, and entrepreneurs making exorbitant amounts of money while their employees earn only a meager salary. One cannot dispute the fact that all economic systems reflect inherent self-concern. However, these “fat cats” have no choice but to concern themselves with the needs of others, which is quite the opposite of greed. They must work with others to design goods and services that meet the needs of their consumers. Their profit is not so much self-interest as it is a measure of how well they have listened to and met their consumers’ needs. Capitalism is a two-way, fair voluntary economic exchange. When two free people come together on agreed-upon terms to peacefully exchange, each benefits. If the entrepreneur puts their needs above their consumers’, the business will surely fail, and a more altruistic entrepreneur would step in and offer the consumer what they were looking for, replacing the greedy one. Milton Friedman asked, “Is there any society that doesn’t run on greed?” (Friedman). Does Venezuela not run on greed? To suggest that capitalism is the only economic system to run on greed would be incorrect. Friedman continues:

“The only cases in which masses of people have escaped grinding poverty in recorded history are where they’ve had capitalism and free trade. Where the masses are worst off, it’s exactly in the places where countries have departed from capitalism and free trade. There is no alternate system thus far that can hold a candle to the productive activities that are unleashed by free enterprise” (Friedman). In conclusion, capitalism offers the most freedom and opportunity to each and every one of its citizens. It benefits its entire society and results in the most economic growth of any other economic system. Unless one is ashamed of unparalleled increases in income, increasing life expectancy, higher levels of education, and more political freedom, there is no reason to turn away from capitalism. It is a well-established, historically proven fact that when people are free to buy, sell, and invest with one another freely, they can achieve far more than when governments attempt to control those decisions. Capitalism’s superiority for economic growth and advancements is for everyone who believes that wealth is better than poverty; education is better than ignorance, and liberty is better than oppression. “One of the great mistakes is to judge policies and programs by their intentions rather than their results,” Friedman noted.

Cite this page

What Is Capitalism?. (2019, Aug 04). Retrieved from https://papersowl.com/examples/what-is-capitalism/

"What Is Capitalism?." PapersOwl.com , 4 Aug 2019, https://papersowl.com/examples/what-is-capitalism/

PapersOwl.com. (2019). What Is Capitalism? . [Online]. Available at: https://papersowl.com/examples/what-is-capitalism/ [Accessed: 7 Jun. 2024]

"What Is Capitalism?." PapersOwl.com, Aug 04, 2019. Accessed June 7, 2024. https://papersowl.com/examples/what-is-capitalism/

"What Is Capitalism?," PapersOwl.com , 04-Aug-2019. [Online]. Available: https://papersowl.com/examples/what-is-capitalism/. [Accessed: 7-Jun-2024]

PapersOwl.com. (2019). What Is Capitalism? . [Online]. Available at: https://papersowl.com/examples/what-is-capitalism/ [Accessed: 7-Jun-2024]

Don't let plagiarism ruin your grade

Hire a writer to get a unique paper crafted to your needs.

Our writers will help you fix any mistakes and get an A+!

Please check your inbox.

You can order an original essay written according to your instructions.

Trusted by over 1 million students worldwide

1. Tell Us Your Requirements

2. Pick your perfect writer

3. Get Your Paper and Pay

Hi! I'm Amy, your personal assistant!

Don't know where to start? Give me your paper requirements and I connect you to an academic expert.

short deadlines

100% Plagiarism-Free

Certified writers

• Search Menu

Sign in through your institution

• Browse content in Arts and Humanities
• Browse content in Archaeology
• Anglo-Saxon and Medieval Archaeology
• Archaeological Methodology and Techniques
• Archaeology by Region
• Archaeology of Religion
• Archaeology of Trade and Exchange
• Biblical Archaeology
• Contemporary and Public Archaeology
• Environmental Archaeology
• Historical Archaeology
• History and Theory of Archaeology
• Industrial Archaeology
• Landscape Archaeology
• Mortuary Archaeology
• Prehistoric Archaeology
• Underwater Archaeology
• Zooarchaeology
• Browse content in Architecture
• Architectural Structure and Design
• History of Architecture
• Residential and Domestic Buildings
• Theory of Architecture
• Browse content in Art
• Art Subjects and Themes
• History of Art
• Industrial and Commercial Art
• Theory of Art
• Biographical Studies
• Byzantine Studies
• Browse content in Classical Studies
• Classical History
• Classical Philosophy
• Classical Mythology
• Classical Literature
• Classical Reception
• Classical Art and Architecture
• Classical Oratory and Rhetoric
• Greek and Roman Epigraphy
• Greek and Roman Law
• Greek and Roman Papyrology
• Greek and Roman Archaeology
• Late Antiquity
• Religion in the Ancient World
• Digital Humanities
• Browse content in History
• Colonialism and Imperialism
• Diplomatic History
• Environmental History
• Genealogy, Heraldry, Names, and Honours
• Genocide and Ethnic Cleansing
• Historical Geography
• History by Period
• History of Emotions
• History of Agriculture
• History of Education
• History of Gender and Sexuality
• Industrial History
• Intellectual History
• International History
• Labour History
• Legal and Constitutional History
• Local and Family History
• Maritime History
• Military History
• National Liberation and Post-Colonialism
• Oral History
• Political History
• Public History
• Regional and National History
• Revolutions and Rebellions
• Slavery and Abolition of Slavery
• Social and Cultural History
• Theory, Methods, and Historiography
• Urban History
• World History
• Browse content in Language Teaching and Learning
• Language Learning (Specific Skills)
• Language Teaching Theory and Methods
• Browse content in Linguistics
• Applied Linguistics
• Cognitive Linguistics
• Computational Linguistics
• Forensic Linguistics
• Grammar, Syntax and Morphology
• Historical and Diachronic Linguistics
• History of English
• Language Acquisition
• Language Evolution
• Language Reference
• Language Variation
• Language Families
• Lexicography
• Linguistic Anthropology
• Linguistic Theories
• Linguistic Typology
• Phonetics and Phonology
• Psycholinguistics
• Sociolinguistics
• Translation and Interpretation
• Writing Systems
• Browse content in Literature
• Bibliography
• Children's Literature Studies
• Literary Studies (Asian)
• Literary Studies (European)
• Literary Studies (Eco-criticism)
• Literary Studies (Romanticism)
• Literary Studies (American)
• Literary Studies (Modernism)
• Literary Studies - World
• Literary Studies (1500 to 1800)
• Literary Studies (19th Century)
• Literary Studies (20th Century onwards)
• Literary Studies (African American Literature)
• Literary Studies (British and Irish)
• Literary Studies (Early and Medieval)
• Literary Studies (Fiction, Novelists, and Prose Writers)
• Literary Studies (Gender Studies)
• Literary Studies (Graphic Novels)
• Literary Studies (History of the Book)
• Literary Studies (Plays and Playwrights)
• Literary Studies (Poetry and Poets)
• Literary Studies (Postcolonial Literature)
• Literary Studies (Queer Studies)
• Literary Studies (Science Fiction)
• Literary Studies (Travel Literature)
• Literary Studies (War Literature)
• Literary Studies (Women's Writing)
• Literary Theory and Cultural Studies
• Mythology and Folklore
• Shakespeare Studies and Criticism
• Browse content in Media Studies
• Browse content in Music
• Applied Music
• Dance and Music
• Ethics in Music
• Ethnomusicology
• Gender and Sexuality in Music
• Medicine and Music
• Music Cultures
• Music and Religion
• Music and Media
• Music and Culture
• Music Education and Pedagogy
• Music Theory and Analysis
• Musical Scores, Lyrics, and Libretti
• Musical Structures, Styles, and Techniques
• Musicology and Music History
• Performance Practice and Studies
• Race and Ethnicity in Music
• Sound Studies
• Browse content in Performing Arts
• Browse content in Philosophy
• Aesthetics and Philosophy of Art
• Epistemology
• Feminist Philosophy
• History of Western Philosophy
• Metaphysics
• Moral Philosophy
• Non-Western Philosophy
• Philosophy of Science
• Philosophy of Language
• Philosophy of Mind
• Philosophy of Perception
• Philosophy of Action
• Philosophy of Law
• Philosophy of Religion
• Philosophy of Mathematics and Logic
• Practical Ethics
• Social and Political Philosophy
• Browse content in Religion
• Biblical Studies
• Christianity
• East Asian Religions
• History of Religion
• Judaism and Jewish Studies
• Qumran Studies
• Religion and Education
• Religion and Health
• Religion and Politics
• Religion and Science
• Religion and Law
• Religion and Art, Literature, and Music
• Religious Studies
• Browse content in Society and Culture
• Cookery, Food, and Drink
• Cultural Studies
• Customs and Traditions
• Ethical Issues and Debates
• Hobbies, Games, Arts and Crafts
• Natural world, Country Life, and Pets
• Popular Beliefs and Controversial Knowledge
• Sports and Outdoor Recreation
• Technology and Society
• Travel and Holiday
• Visual Culture
• Browse content in Law
• Arbitration
• Browse content in Company and Commercial Law
• Commercial Law
• Company Law
• Browse content in Comparative Law
• Systems of Law
• Competition Law
• Browse content in Constitutional and Administrative Law
• Government Powers
• Judicial Review
• Local Government Law
• Military and Defence Law
• Parliamentary and Legislative Practice
• Construction Law
• Contract Law
• Browse content in Criminal Law
• Criminal Procedure
• Criminal Evidence Law
• Sentencing and Punishment
• Employment and Labour Law
• Environment and Energy Law
• Browse content in Financial Law
• Banking Law
• Insolvency Law
• History of Law
• Human Rights and Immigration
• Intellectual Property Law
• Browse content in International Law
• Private International Law and Conflict of Laws
• Public International Law
• IT and Communications Law
• Jurisprudence and Philosophy of Law
• Law and Politics
• Law and Society
• Browse content in Legal System and Practice
• Courts and Procedure
• Legal Skills and Practice
• Primary Sources of Law
• Regulation of Legal Profession
• Medical and Healthcare Law
• Browse content in Policing
• Criminal Investigation and Detection
• Police and Security Services
• Police Procedure and Law
• Police Regional Planning
• Browse content in Property Law
• Personal Property Law
• Study and Revision
• Terrorism and National Security Law
• Browse content in Trusts Law
• Wills and Probate or Succession
• Browse content in Medicine and Health
• Browse content in Allied Health Professions
• Arts Therapies
• Clinical Science
• Dietetics and Nutrition
• Occupational Therapy
• Operating Department Practice
• Physiotherapy
• Radiography
• Speech and Language Therapy
• Browse content in Anaesthetics
• General Anaesthesia
• Neuroanaesthesia
• Browse content in Clinical Medicine
• Acute Medicine
• Cardiovascular Medicine
• Clinical Genetics
• Clinical Pharmacology and Therapeutics
• Dermatology
• Endocrinology and Diabetes
• Gastroenterology
• Genito-urinary Medicine
• Geriatric Medicine
• Infectious Diseases
• Medical Toxicology
• Medical Oncology
• Pain Medicine
• Palliative Medicine
• Rehabilitation Medicine
• Respiratory Medicine and Pulmonology
• Rheumatology
• Sleep Medicine
• Sports and Exercise Medicine
• Clinical Neuroscience
• Community Medical Services
• Critical Care
• Emergency Medicine
• Forensic Medicine
• Haematology
• History of Medicine
• Browse content in Medical Dentistry
• Oral and Maxillofacial Surgery
• Paediatric Dentistry
• Restorative Dentistry and Orthodontics
• Surgical Dentistry
• Browse content in Medical Skills
• Clinical Skills
• Communication Skills
• Nursing Skills
• Surgical Skills
• Medical Ethics
• Medical Statistics and Methodology
• Browse content in Neurology
• Clinical Neurophysiology
• Neuropathology
• Nursing Studies
• Browse content in Obstetrics and Gynaecology
• Gynaecology
• Occupational Medicine
• Ophthalmology
• Otolaryngology (ENT)
• Browse content in Paediatrics
• Neonatology
• Browse content in Pathology
• Chemical Pathology
• Clinical Cytogenetics and Molecular Genetics
• Histopathology
• Medical Microbiology and Virology
• Patient Education and Information
• Browse content in Pharmacology
• Psychopharmacology
• Browse content in Popular Health
• Caring for Others
• Complementary and Alternative Medicine
• Self-help and Personal Development
• Browse content in Preclinical Medicine
• Cell Biology
• Molecular Biology and Genetics
• Reproduction, Growth and Development
• Primary Care
• Professional Development in Medicine
• Browse content in Psychiatry
• Addiction Medicine
• Child and Adolescent Psychiatry
• Forensic Psychiatry
• Learning Disabilities
• Old Age Psychiatry
• Psychotherapy
• Browse content in Public Health and Epidemiology
• Epidemiology
• Public Health
• Browse content in Radiology
• Clinical Radiology
• Interventional Radiology
• Nuclear Medicine
• Radiation Oncology
• Reproductive Medicine
• Browse content in Surgery
• Cardiothoracic Surgery
• Gastro-intestinal and Colorectal Surgery
• General Surgery
• Neurosurgery
• Paediatric Surgery
• Peri-operative Care
• Plastic and Reconstructive Surgery
• Surgical Oncology
• Transplant Surgery
• Trauma and Orthopaedic Surgery
• Vascular Surgery
• Browse content in Science and Mathematics
• Browse content in Biological Sciences
• Aquatic Biology
• Biochemistry
• Bioinformatics and Computational Biology
• Developmental Biology
• Ecology and Conservation
• Evolutionary Biology
• Genetics and Genomics
• Microbiology
• Molecular and Cell Biology
• Natural History
• Plant Sciences and Forestry
• Research Methods in Life Sciences
• Structural Biology
• Systems Biology
• Zoology and Animal Sciences
• Browse content in Chemistry
• Analytical Chemistry
• Computational Chemistry
• Crystallography
• Environmental Chemistry
• Industrial Chemistry
• Inorganic Chemistry
• Materials Chemistry
• Medicinal Chemistry
• Mineralogy and Gems
• Organic Chemistry
• Physical Chemistry
• Polymer Chemistry
• Study and Communication Skills in Chemistry
• Theoretical Chemistry
• Browse content in Computer Science
• Artificial Intelligence
• Computer Architecture and Logic Design
• Game Studies
• Human-Computer Interaction
• Mathematical Theory of Computation
• Programming Languages
• Software Engineering
• Systems Analysis and Design
• Virtual Reality
• Browse content in Computing
• Business Applications
• Computer Security
• Computer Games
• Computer Networking and Communications
• Digital Lifestyle
• Graphical and Digital Media Applications
• Operating Systems
• Browse content in Earth Sciences and Geography
• Atmospheric Sciences
• Environmental Geography
• Geology and the Lithosphere
• Maps and Map-making
• Meteorology and Climatology
• Oceanography and Hydrology
• Palaeontology
• Physical Geography and Topography
• Regional Geography
• Soil Science
• Urban Geography
• Browse content in Engineering and Technology
• Agriculture and Farming
• Biological Engineering
• Civil Engineering, Surveying, and Building
• Electronics and Communications Engineering
• Energy Technology
• Engineering (General)
• Environmental Science, Engineering, and Technology
• History of Engineering and Technology
• Mechanical Engineering and Materials
• Technology of Industrial Chemistry
• Transport Technology and Trades
• Browse content in Environmental Science
• Applied Ecology (Environmental Science)
• Conservation of the Environment (Environmental Science)
• Environmental Sustainability
• Environmentalist Thought and Ideology (Environmental Science)
• Management of Land and Natural Resources (Environmental Science)
• Natural Disasters (Environmental Science)
• Nuclear Issues (Environmental Science)
• Pollution and Threats to the Environment (Environmental Science)
• Social Impact of Environmental Issues (Environmental Science)
• History of Science and Technology
• Browse content in Materials Science
• Ceramics and Glasses
• Composite Materials
• Metals, Alloying, and Corrosion
• Nanotechnology
• Browse content in Mathematics
• Applied Mathematics
• Biomathematics and Statistics
• History of Mathematics
• Mathematical Education
• Mathematical Finance
• Mathematical Analysis
• Numerical and Computational Mathematics
• Probability and Statistics
• Pure Mathematics
• Browse content in Neuroscience
• Cognition and Behavioural Neuroscience
• Development of the Nervous System
• Disorders of the Nervous System
• History of Neuroscience
• Invertebrate Neurobiology
• Molecular and Cellular Systems
• Neuroendocrinology and Autonomic Nervous System
• Neuroscientific Techniques
• Sensory and Motor Systems
• Browse content in Physics
• Astronomy and Astrophysics
• Atomic, Molecular, and Optical Physics
• Biological and Medical Physics
• Classical Mechanics
• Computational Physics
• Condensed Matter Physics
• Electromagnetism, Optics, and Acoustics
• History of Physics
• Mathematical and Statistical Physics
• Measurement Science
• Nuclear Physics
• Particles and Fields
• Plasma Physics
• Quantum Physics
• Relativity and Gravitation
• Semiconductor and Mesoscopic Physics
• Browse content in Psychology
• Affective Sciences
• Clinical Psychology
• Cognitive Psychology
• Cognitive Neuroscience
• Criminal and Forensic Psychology
• Developmental Psychology
• Educational Psychology
• Evolutionary Psychology
• Health Psychology
• History and Systems in Psychology
• Music Psychology
• Neuropsychology
• Organizational Psychology
• Psychological Assessment and Testing
• Psychology of Human-Technology Interaction
• Psychology Professional Development and Training
• Research Methods in Psychology
• Social Psychology
• Browse content in Social Sciences
• Browse content in Anthropology
• Anthropology of Religion
• Human Evolution
• Medical Anthropology
• Physical Anthropology
• Regional Anthropology
• Social and Cultural Anthropology
• Theory and Practice of Anthropology
• Browse content in Business and Management
• Business Strategy
• Business Ethics
• Business History
• Business and Government
• Business and Technology
• Business and the Environment
• Comparative Management
• Corporate Governance
• Corporate Social Responsibility
• Entrepreneurship
• Health Management
• Human Resource Management
• Industrial and Employment Relations
• Industry Studies
• Information and Communication Technologies
• International Business
• Knowledge Management
• Management and Management Techniques
• Operations Management
• Organizational Theory and Behaviour
• Pensions and Pension Management
• Public and Nonprofit Management
• Strategic Management
• Supply Chain Management
• Browse content in Criminology and Criminal Justice
• Criminal Justice
• Criminology
• Forms of Crime
• International and Comparative Criminology
• Youth Violence and Juvenile Justice
• Development Studies
• Browse content in Economics
• Agricultural, Environmental, and Natural Resource Economics
• Asian Economics
• Behavioural Finance
• Behavioural Economics and Neuroeconomics
• Econometrics and Mathematical Economics
• Economic Systems
• Economic History
• Economic Methodology
• Economic Development and Growth
• Financial Markets
• Financial Institutions and Services
• General Economics and Teaching
• Health, Education, and Welfare
• History of Economic Thought
• International Economics
• Labour and Demographic Economics
• Law and Economics
• Macroeconomics and Monetary Economics
• Microeconomics
• Public Economics
• Urban, Rural, and Regional Economics
• Welfare Economics
• Browse content in Education
• Adult Education and Continuous Learning
• Care and Counselling of Students
• Early Childhood and Elementary Education
• Educational Equipment and Technology
• Educational Strategies and Policy
• Higher and Further Education
• Organization and Management of Education
• Philosophy and Theory of Education
• Schools Studies
• Secondary Education
• Teaching of a Specific Subject
• Teaching of Specific Groups and Special Educational Needs
• Teaching Skills and Techniques
• Browse content in Environment
• Applied Ecology (Social Science)
• Climate Change
• Conservation of the Environment (Social Science)
• Environmentalist Thought and Ideology (Social Science)
• Natural Disasters (Environment)
• Social Impact of Environmental Issues (Social Science)
• Browse content in Human Geography
• Cultural Geography
• Economic Geography
• Political Geography
• Browse content in Interdisciplinary Studies
• Communication Studies
• Museums, Libraries, and Information Sciences
• Browse content in Politics
• African Politics
• Asian Politics
• Chinese Politics
• Comparative Politics
• Conflict Politics
• Elections and Electoral Studies
• Environmental Politics
• Ethnic Politics
• European Union
• Foreign Policy
• Gender and Politics
• Human Rights and Politics
• Indian Politics
• International Relations
• International Organization (Politics)
• International Political Economy
• Irish Politics
• Latin American Politics
• Middle Eastern Politics
• Political Methodology
• Political Communication
• Political Philosophy
• Political Sociology
• Political Behaviour
• Political Economy
• Political Institutions
• Political Theory
• Politics and Law
• Politics of Development
• Public Administration
• Public Policy
• Quantitative Political Methodology
• Regional Political Studies
• Russian Politics
• Security Studies
• State and Local Government
• UK Politics
• US Politics
• Browse content in Regional and Area Studies
• African Studies
• Asian Studies
• East Asian Studies
• Japanese Studies
• Latin American Studies
• Middle Eastern Studies
• Native American Studies
• Scottish Studies
• Browse content in Research and Information
• Research Methods
• Browse content in Social Work
• Addictions and Substance Misuse
• Adoption and Fostering
• Care of the Elderly
• Child and Adolescent Social Work
• Couple and Family Social Work
• Direct Practice and Clinical Social Work
• Emergency Services
• Human Behaviour and the Social Environment
• International and Global Issues in Social Work
• Mental and Behavioural Health
• Social Justice and Human Rights
• Social Policy and Advocacy
• Social Work and Crime and Justice
• Social Work Macro Practice
• Social Work Practice Settings
• Social Work Research and Evidence-based Practice
• Welfare and Benefit Systems
• Browse content in Sociology
• Childhood Studies
• Community Development
• Comparative and Historical Sociology
• Economic Sociology
• Gender and Sexuality
• Gerontology and Ageing
• Health, Illness, and Medicine
• Marriage and the Family
• Migration Studies
• Occupations, Professions, and Work
• Organizations
• Population and Demography
• Race and Ethnicity
• Social Theory
• Social Movements and Social Change
• Social Research and Statistics
• Social Stratification, Inequality, and Mobility
• Sociology of Religion
• Sociology of Education
• Sport and Leisure
• Urban and Rural Studies
• Browse content in Warfare and Defence
• Defence Strategy, Planning, and Research
• Land Forces and Warfare
• Military Administration
• Military Life and Institutions
• Naval Forces and Warfare
• Other Warfare and Defence Issues
• Peace Studies and Conflict Resolution
• Weapons and Equipment

• < Previous
• Next chapter >

1 (page 1) p. 1 What is capitalism?

• Published: June 2015
• Cite Icon Cite
• Permissions Icon Permissions

‘What is capitalism?’ examines the different forms that capitalism has taken, from the merchant capitalism of the 17th-century, through capitalist production in the 19th , to the financial capitalism of the present day. As the investment of money to make more money, capitalism has long existed but it was when production was financed in this way that a transformative capitalism came into being. Capitalist production depends on the exploitation of wage labour, which also crucially fuels the consumption of the goods and services produced by capitalist enterprises. Production and consumption are linked by the markets that come to mediate all economic activities in a capitalist society.

Signed in as

Institutional accounts.

• Google Scholar Indexing
• GoogleCrawler [DO NOT DELETE]

Personal account

• Sign in with email/username & password
• Get email alerts
• Save searches
• Purchase content
• Activate your purchase/trial code
• Add your ORCID iD

Institutional access

Sign in with a library card.

• Sign in with username/password
• Recommend to your librarian
• Institutional account management
• Get help with access

Access to content on Oxford Academic is often provided through institutional subscriptions and purchases. If you are a member of an institution with an active account, you may be able to access content in one of the following ways:

IP based access

Typically, access is provided across an institutional network to a range of IP addresses. This authentication occurs automatically, and it is not possible to sign out of an IP authenticated account.

Choose this option to get remote access when outside your institution. Shibboleth/Open Athens technology is used to provide single sign-on between your institution’s website and Oxford Academic.

• Click Sign in through your institution.
• Select your institution from the list provided, which will take you to your institution's website to sign in.
• When on the institution site, please use the credentials provided by your institution. Do not use an Oxford Academic personal account.
• Following successful sign in, you will be returned to Oxford Academic.

If your institution is not listed or you cannot sign in to your institution’s website, please contact your librarian or administrator.

Enter your library card number to sign in. If you cannot sign in, please contact your librarian.

Society Members

Society member access to a journal is achieved in one of the following ways:

Sign in through society site

Many societies offer single sign-on between the society website and Oxford Academic. If you see ‘Sign in through society site’ in the sign in pane within a journal:

• Click Sign in through society site.
• When on the society site, please use the credentials provided by that society. Do not use an Oxford Academic personal account.

If you do not have a society account or have forgotten your username or password, please contact your society.

Sign in using a personal account

Some societies use Oxford Academic personal accounts to provide access to their members. See below.

A personal account can be used to get email alerts, save searches, purchase content, and activate subscriptions.

Some societies use Oxford Academic personal accounts to provide access to their members.

Viewing your signed in accounts

Click the account icon in the top right to:

• View your signed in personal account and access account management features.
• View the institutional accounts that are providing access.

Signed in but can't access content

Oxford Academic is home to a wide variety of products. The institutional subscription may not cover the content that you are trying to access. If you believe you should have access to that content, please contact your librarian.

For librarians and administrators, your personal account also provides access to institutional account management. Here you will find options to view and activate subscriptions, manage institutional settings and access options, access usage statistics, and more.

Our books are available by subscription or purchase to libraries and institutions.

• About Oxford Academic
• Publish journals with us
• University press partners
• What we publish
• New features  
• Open access
• Rights and permissions
• Accessibility
• Advertising
• Media enquiries
• Oxford University Press
• Oxford Languages
• University of Oxford

Oxford University Press is a department of the University of Oxford. It furthers the University's objective of excellence in research, scholarship, and education by publishing worldwide

• Copyright © 2024 Oxford University Press
• Cookie settings
• Cookie policy
• Privacy policy
• Legal notice

This Feature Is Available To Subscribers Only

Sign In or Create an Account

This PDF is available to Subscribers Only

For full access to this pdf, sign in to an existing account, or purchase an annual subscription.

Capitalism for Kids, or How We’re Ruled by What We Create

Capitalism exists today all over the world, and it’s called capitalism because capital rules. This isn’t the same as saying that capitalists rule, or that the capitalist class rules. In capitalism, there are certainly people who have more power than others, but there isn’t a queen who sits on a throne high above society and commands everybody. So if people no longer rule over society, who does? The answer may sound a little strange. Things do. Of course we don’t mean this literally, since things can’t do anything, least of all rule people. After all, they’re just things. And not all things have this power; only special things do. Or to put it better, only a special form of things do. These special things don’t fall from the sky or come flying down to Earth in UFOs shooting people with laser beams. They’re just the things that people create to make life easier, to serve them. Strangely, over time, people forget that they made those things, and soon enough, people begin to serve the things!

Imagine this: A girl walks over to a desk and writes down on a piece of paper, “Please drink a glass of water.” One or two hours later, she wanders by the desk again and finds that piece of paper. As she reads it this time, she forgets that she was the one who wrote it and thinks to herself that she should probably do what the paper says. Maybe she’s a bit skeptical at first, so she finds a friend and asks, “Do I really have to drink a glass of water right now? I’m not even thirsty.” The friend answers, “I don’t know. Here, let me have a look.” She reads what’s written on the piece of paper and tells the girl, “Yep, that’s what it says. You have to drink a glass of water.” If the girl walks by this piece of paper too often, she would get a terrible bellyache pretty quickly. And that’s how she ends up being ruled by things and suffering.

Sure enough, this sounds a bit odd. Why should she suddenly forget that she wrote that sentence? Why would she no longer recognize her own handwriting? In general, reality is a bit more complicated than it appears in this scene. People don’t live and work alone but rather in society together. In reality, it’s never just one person writing down a sentence; it’s lots of people writing things together. Let’s try a different example — the Ouija board (there’s a glass in this one, too). To play the game, a group of people sits in a circle around a board with a glass in the middle. All the letters of the alphabet are written on the board. Everyone puts a hand or finger on the glass, and because everybody is unconsciously trembling a tiny bit, the glass begins to move, as if pushed by an invisible hand, slowly, from one letter to the next. The people don’t realize that they moved the glass themselves, because their individual trembling could never have moved it alone. Instead, they think it was a spirit channeling some kind of message through them.

The Ouija board illustrates pretty well how life works under capitalism. As a matter of fact, the people playing the game are pushing the magically moving glass all by themselves, although not one of them could do it alone. The glass moves only because people act together rather than separately. But they don’t even notice they are cooperating. Their own cooperation happens secretly, behind their backs, so to speak. If those people instead consciously came together to think collectively about what they actually wanted to write, then the outcome would probably be very different. At least, there wouldn’t be any uncertainty about who wrote the text, that’s for sure. With the way things stand now, though, the text seems to be written by an invisible hand. And since no one can explain how it happened, they believe it was an alien power, like a spirit — or specter.

So you see, it’s not every kind of cooperation, every kind of group, or every kind of labor that gives things special powers over people. It’s only a special kind. The Ouija board fits, but writing collectively does not. Similarly, things don’t rule over every society; that only happens in a capitalist society. Only in capitalism do people relate to each other and work together in a way that leads to things ruling people. But what’s so special about the relationships between people under capitalism? What distinguishes them from the relationships people have with each other in different societies?

To answer these questions, let’s take a look at how capitalism first came about. When we do, we’ll see that capitalism has not always existed (which is already a big plus).

How Did Capitalism Arise?

Capitalism first developed in England around 500 years ago. At that time, feudalism still ruled, which means there were queens, princesses, and many maids. But most people were peasants. Peasants worked the fields in small village communes or together with their families. Since they had no machines and few inventions, they had to work a ton. Even though they worked so much, they were still poor. Even worse, the church, which was very powerful at that time, demanded every tenth piece of bread the peasants produced — and the princesses wanted even more than that! Every so often, the people had to go to the princesses’ courts and work there for several days. But they always knew exactly how much the rulers were taking away from them. Otherwise, they were pretty much left alone. You see, the princesses understood little about working, and so they couldn’t really tell the peasants how to do their work.

At the time, England was a great sea power with bustling trade missions all across the world. Many merchant ships left every morning from the English docks to Africa, Europe, and faraway lands like Asia and America. Since there weren’t many merchants with big enough ships and heavy enough artillery to do all this, the ones who had the ships did good business. They sailed, for example, to America, where they stole all the jewelry from the people living there and then sold it in Europe. Then they sailed to Africa, stole the people living there, and sold them in America. These merchants became rich and soon enjoyed a kind of luxury the princesses could never imagine even in their wildest dreams.

When the princesses saw how rich the merchants had become with their gigantic jewels and fancy swords, they grew jealous. They feared that the merchants, having become so economically powerful, would demand lots more political influence or even overthrow the princesses — which later, in fact, they did.

The princesses feverishly plotted how they, too, could become rich like the merchants. But the only thing they really owned was the land that the peasants lived on, and the turnips the peasants grew on the land never earned them much money. More money could be made with sheep’s wool, which was valuable at the time in Europe. And so the princesses called out to all their underlings and ordered them to stop growing turnips, and instead to breed sheep everywhere. Now as it turns out, it takes far less peasants to care for sheep than it does to grow turnips. And when sheep are everywhere, a lot less people can survive on the land. That’s how the vast majority of peasants became unnecessary.

The princesses cared little about what happened to the peasants, since they only had eyes for the merchants’ fancy swords and gigantic jewels. And so the princesses sent their soldiers to kick the peasants off the land where they had always lived and always worked. The soldiers were rude and hurt the peasants a lot. At first the peasants were pretty upset. Yet imagine how much sadder they became when they realized that they could never return back to their land — and that everything they had ever learned was now useless. None of them had any clue how to support themselves anymore. Since they didn’t know where else to go, they moved to the big cities. But when they arrived, they saw huge crowds of former peasants already living there — peasants who’d also been driven off their land. Without land, none of them could grow any food. And since they didn’t own anything, they had nothing to sell either. Of course, they could always steal, but then the police might catch and punish them. The only thing they still had was themselves. And so the people went to the factories and sold themselves.

Bini Adamczak is a Berlin-based philosopher and artist who writes on political theory, queer politics, and the past future of revolutions. She is the author of “ Yesterday’s Tomorrow ” and “ Communism for Kids ,” from which this article is excerpted.

George Orwell’s Error

Had he lived long enough to witness the fruits of liberal capitalism, perhaps Orwell would finally have accepted the failure of socialism.

Sign up for Quillette

Sydney. London. Toronto.

No spam. Unsubscribe anytime.

NOTE: This essay is an excerpt from a new introduction to George Orwell’s Nineteen Eighty-Four , which will be published by the Institute of Economic Affairs on 8 June to mark the novel’s 75th anniversary .

As autumn of 1948 turned into winter on the windswept island of Jura, the man who was born Eric Blair sat in bed banging away on a decrepit typewriter, a hand-rolled cigarette dangling from his lips. Working through the pain and exhaustion, he typed out the manuscript of a book that had the working title of The Last Man in Europe so he could send it to his publisher in December as he had promised. When he finished in December, he immediately booked himself into the Cranham Sanatorium in the Cotswolds, later telling a friend that “I would have gone to a sanatorium two months ago if I hadn’t wanted to finish that bloody book off, which thank God I have.” He had barely a year left to live.

This coming Saturday will mark the 75th anniversary of the publication of Nineteen Eighty-Four in the United Kingdom. Often portrayed as a howl of despair from a dying man, Orwell did not know that he was dying when he wrote it. With the help of the new drug streptomycin, he was hopeful of beating his tuberculosis and, for a time, it seemed that he had. Although his friends were shocked by his skeletal appearance in the last years of his life, he put a brave face on his illness and took any sign of recovery as evidence that his health was turning the corner. He nevertheless admitted that he was in “the most wretched health.”

Perhaps Nineteen Eighty-Four would have been slightly more upbeat had Orwell not been “under the influence of TB,” as he put it, but he had never been more pessimistic about the state of the world. “When one considers how things have gone since 1930 or thereabouts,” he wrote in 1946, “it is not easy to believe in the survival of civilisation.”

Orwell may have been pleasantly surprised had he lived to see the real 1984. It is often said that his dystopian novel is a warning rather than a prophecy and Orwell himself was keen to remind people that it was “after all a parody,” but he was also quite explicit that Nineteen Eighty-Four was a conditional prophecy. Shortly after the book was published, he put out a statement saying that “something like NINETEEN EIGHTY-FOUR could happen. This is the direction in which the world is going at the present time.” But it didn’t and it wasn’t. By the time he died in January 1950, Europe had put the worst of the twentieth century behind it. Orwell was too pessimistic and it is worth considering why.

The central assumption at the heart of Orwell’s political writing from the mid-1930s was that capitalism was doomed and would most likely be replaced by totalitarian socialism of the sort satirised in Nineteen-Eighty Four. Despite his contempt for capitalism, Orwell saw the world caught between a rock and hard place. “Capitalism leads to dole queues, the scramble for markets, and war,” he wrote in 1944. “Collectivism leads to concentration camps, leader worship, and war.” The only alternative, to his mind, was a planned economy that retained democracy and allowed freedom of the individual, but he became increasingly pessimistic about the prospects for his libertarian brand of what he called democratic socialism as the 1940s wore on. Indeed, he saw “no practicable way of bringing it about.”

This explains why he was so despondent about the world’s prospects in the last years of his life and why he decided to write Nineteen Eighty-Four . But he was wrong. Capitalism did survive, subsequent communist revolutions went the same way as the USSR’s, and Orwell’s version of democratic socialism was not required to prevent totalitarianism sweeping the globe. It turned out that it was not a straight choice between democratic socialism and communist (or fascist) totalitarianism. There was a third way.

Where did he go wrong? There is an important clue in Orwell’s classic pamphlet “ The Lion and the Unicorn ,” which offers the fullest expression of Orwell’s vision of “English Socialism” (as he called it). Written in 1940 during the Blitz, it begins with a patriotic and sentimental description of England and the English mentality before describing the socialist revolution that he believed to be on the horizon. To Orwell, British defeats early in the war were conclusive proof that capitalist economies were less efficient than planned economies.

Believing this to be obvious to all, he saw socialism in Britain as inevitable and, in the third and final chapter of his pamphlet, he rather giddily outlined what this should look like: all private schools would be closed; the House of Lords would be abolished (although, idiosyncratically, the monarchy would be retained); no one would be permitted to earn more than ten times what the poorest man earned; all mines, railways, banks, and major businesses would be nationalised; no one would be permitted to own more than fifteen acres of land in the countryside; and all land in the towns would belong to the state.

This wishlist should dispel any illusions the modern reader may have about Orwell being a moderate social democrat at heart. Moreover, he knew that this could probably not be achieved peacefully (“I daresay the London gutters will have to run with blood”). Why did he believe all this to be necessary? Orwell took the classical Marxist line that capitalism was inefficient, over-producing some products and under-producing others. In 1940, Britain’s wartime shortages seemed to him to provide irrefutable evidence of this:

At normal times a capitalist economy can never consume all that it produces, so there is always a wasted surplus (wheat burned in furnaces, herrings dumped back into the sea, etc. etc.) and always unemployment. In time of war, on the other hand, it has difficulty in producing all that it needs, because nothing is produced unless someone sees his way to making a profit out of it. In a Socialist economy these problems do not exist. The State simply calculates what goods will be needed and does its best to produce them .

I have highlighted the last sentence because it gets to the heart of Orwell’s error. There is nothing simple about calculating what goods will be needed in an economy. Nothing could be more complicated. Without prices and competition, it is impossible to know how many products to make or where to direct labour. Resources cannot be distributed efficiently. This is known as the socialist calculation problem. First identified by Ludwig von Mises in 1920, it is no less intractable a century later. If you remove price signals and the profit motive, you require a highly altruistic workforce and an extraordinarily well-informed and benevolent leadership to produce even an approximation of what consumers require. No such society is ever likely to exist. 

To compensate for the absence of what Adam Smith called the “ invisible hand ,” those who run planned economies resort to targets, orders, Five-Year Plans and, ultimately, physical coercion, but it is still not enough. Shortages and deprivation become widespread. The public becomes resentful. Shirking, hoarding, and buying on the black market (known in Oceania as “the free market”) become endemic. When production targets are missed, the regime simply announces that they have been met. Those who tell the truth are shot. As the regime loses popular support, it turns to still more oppressive measures and, in extremis , becomes totalitarian, which it is well placed to do since it controls every institution. 

By the 1940s, Orwell understood the dangers of giving too much power to a small group of people, but he never grasped that the seeds of the political oppression he feared were sown by the economic policies he supported. He was attracted to socialism because he believed it would liberate the masses and he never asked many questions about the economics of it. He said himself that he became a socialist “more out of disgust with the oppressed and neglected life of the poorer sector of the industrial worker than out of any theoretical understanding of a planned society.” Whatever knowledge Orwell had about Marxist economics came to him via pamphlets and conversations.

According to his first biographer Bernard Crick, “there is no evidence in his writings, letters or among the books he possessed that his knowledge of Marxism was anything but secondary.” He named his dog Marx but never wrote a great deal about Marx. In fact, he never wrote—or apparently read—much about economics in general. In the vast archive of Orwell’s articles, essays, books, and letters, there is not a single mention of great economists such as Adam Smith, David Ricardo, or Alfred Marshall, nor of contemporary economists such as Joseph Schumpeter or Arthur Pigou. Orwell mentioned the Marxist economist Harold Laski a few times, mostly to remark on what a bad writer he was, but other prominent left-wing economists such as Knut Wicksell, Fred M. Taylor, Thorstein Veblen, Abba Lerner, and Oskar R. Lange were never referenced, and even the most influential economist of his day, John Maynard Keynes, seems to have largely passed him by.

Economists from the Austrian School, including Ludwig von Mises, Henry Hazlitt, and Carl Menger, were either unknown to Orwell or of no interest to him. The sole exception was F.A. Hayek whose book The Road to Serfdom Orwell reviewed in 1944. With the gloomy ideas of Nineteen Eighty-Four already forming in his mind, it is easy to imagine Orwell being drawn to Hayek’s book by its title alone. Not unpredictably, he found “a great deal of truth” in the “negative part” of Hayek’s thesis, namely that collectivism hands a terrifying amount of power to a class of oligarchs. Where he parted company with Hayek, rather strongly, was on Hayek’s belief that the answer to this threat was the revival of economic liberalism. This, Orwell wrote, “means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the State.”

It was not just that Orwell saw the survival of capitalism as undesirable; he believed it to be impossible. Again and again, he would assert that capitalism was “obviously doomed” and “has manifestly no future.” In his view, the only alternatives to capitalism were socialism or fascism and therefore people should pick socialism and do their best to ensure that it is democratic and libertarian. In his 1940 essay “ Inside the Whale ,” he acknowledged that this would not be easy:

What is quite obviously happening, war or no war, is the break-up of laissez-faire capitalism and of the liberal-Christian culture. Until recently the full implications of this were not foreseen, because it was generally imagined that Socialism could preserve and even enlarge the atmosphere of liberalism. It is now beginning to be realised how false this idea was. Almost certainly we are moving into an age of totalitarian dictatorships—an age in which freedom of thought will be at first a deadly sin and later on a meaningless abstraction.

What Orwell thought was “obviously” happening did not happen, but he was right about socialism’s incompatibility with liberalism. He expanded on this in Nineteen Eighty-Four by quoting long excerpts from The Theory and Practice of Oligarchical Collectivism , a seditious book supposedly written by the Trotsky-esque figure Emmanuel Goldstein. Explaining the backstory of Oceania, IngSoc, and the Party following the revolution of the 1950s, Goldstein/Orwell writes:

It had always been assumed that if the capitalist class were expropriated, Socialism must follow: and unquestionably the capitalists had been expropriated. Factories, mines, land, houses, transport—everything had been taken away from them: and since these things were no longer private property, it followed that they must be public property. Ingsoc [English Socialism], which grew out of the earlier Socialist movement and inherited its phraseology, has in fact carried out the main item in the Socialist programme; with the result, foreseen and intended beforehand, that economic inequality has been made permanent.

Having established that Oceania’s revolution (and, by association, the Russian revolution) was “real” socialism in the sense that the revolutionaries had nationalised the economy, Goldstein/Orwell explains how this created an extremely powerful oligarchy:

The so-called “abolition of private property” which took place in the middle years of the century meant, in effect, the concentration of property in far fewer hands than before: but with the difference, that the new owners were a group instead of a mass of individuals. Individually, no member of the Party owns anything, except petty personal belongings. Collectively, the Party owns everything in Oceania, because it controls everything, and disposes of the products as it thinks fit.

This could be Hayek writing. It may even have been inspired by The Road to Serfdom. To quote from Orwell’s review of that book: 

By bringing the whole of life under the control of the State, Socialism necessarily gives power to an inner ring of bureaucrats, who in almost every case will be men who want power for its own sake and will stick at nothing in order to retain it.

No wonder so many readers of Nineteen Eighty-Four , including his own publisher, assumed that Orwell turned against socialism towards the end of his life. He had not—his main reason for issuing the press release in June 1949 was to assure the world that he was still a socialist—but he was shrewd enough to see that collectivisation does not necessarily lead to “democratic control” by “the people.” He gives himself a glimmer of hope in The Theory and Practice of Oligarchical Collectivism by portraying the revolutionaries as bad actors who deliberately corrupted the socialist cause to give themselves power and keep the general population in a state of poverty and terror. This at least allowed the possibility of well-intentioned revolutionaries making socialism a success in the future.

The Theory and Practice of Oligarchical Collectivism has probably been the least popular part of Nineteen Eighty-Four for generations of schoolchildren, and some critics have suggested that in the will-o’-the-wisp world of Oceania, it is another red herring, a fabrication of the Thought Police. But Orwell did not write Nineteen Eighty-Four to play games with the reader. He would not have resorted to such a clumsy device as putting a book within a book unless he had something to say, but what he has to say is a peculiar mish-mash of popular tropes from the British left, orthodox Marxism, a dash of Leninism, and ideas that are antithetical to all three.

Having decided that the Ingsoc revolutionaries (read: Bolsheviks) were power-hungry psychopaths from the outset, Orwell works back from that premise and applies it to an imaginary England. Karl Marx argued that capitalism would depress wages and lower living standards until the workers found themselves in an intolerable position. It was this “immiseration” that would supposedly make them revolt and overthrow the system. In Nineteen Eighty-Four, Orwell argues essentially the opposite: that poverty prevents the workers gaining class consciousness and that capitalism would only be overthrown if they had enough disposable income and leisure time. The revolutionaries introduced socialism in Oceania not because the workers were getting too poor but because they were getting too rich. 

Orwell/Goldstein references the Marxist concept of “over-production,” which Marx saw as evidence of the inefficiency of the capitalist system and one cause of economic crises. Over-production exists in the sense that the supply of a certain product can exceed demand, to which the standard response is to reduce prices. Orwell, however, is talking about the over-production of products in general—or, put another way, the over-production of wealth—which could only be a problem if wealth itself is seen as a problem. In Oceania, wealth is indeed seen as a problem because under capitalism, industrialisation had created wealth that was “sometimes impossible not to distribute.” 

Orwell/Goldstein acknowledges that between the 1880s and the 1930s inequality had been reduced, living standards much improved, and fewer people were living in intolerable conditions. This posed a mortal threat to the elite because: 

… if leisure and security were enjoyed by all alike, the great mass of human beings who are normally stupefied by poverty would become literate and would learn to think for themselves; and when once they had done this, they would sooner or later realise that the privileged minority had no function, and they would sweep it away.

After the revolution, the problem of wealth trickling down to the masses is solved by endless warfare. The primary aim of the permanent war fought in equatorial Africa, South Asia, and the Middle East is to “use up the products of the machine without raising the general standard of living.”

As an explanation for why the elites in Nineteen Eighty-Four seized power and why there is a constant, economically senseless war between the three superstates, the Goldstein text is satisfactory, but it does raise the question of why Orwell remained so keen on socialism. He has admitted that living standards were improving significantly without a planned economy and when he explains that a further motive for the Party to keep people in poverty was to ensure that meaningful inequality continued to exist, he makes capitalism look more appealing than ever.

In a world in which everyone worked short hours, had enough to eat, lived in a house with a bathroom and a refrigerator, and possessed a motor-car or even an aeroplane, the most obvious and perhaps the most important form of inequality would already have disappeared. If it once became general, wealth would confer no distinction.

With the exception of private jets, Orwell is describing living standards in modern developed economies. If this was to be the outcome under capitalism, why gamble on socialism, especially when you know that there is a serious risk of it degenerating into tyranny? Orwell simply assumed that it was inevitable, perhaps because he thought public opinion was inexorably left-wing and perhaps because that’s what the Marxist intellectuals kept saying. 

It wasn’t inevitable, of course. The post-war Attlee government, which Orwell saw as the first tentative step towards a planned economy, represented the high watermark of British socialism in the twentieth century and was followed in 1951 by the return of Winston Churchill and thirteen years of Conservative government. The Soviet Union eventually collapsed. Fascism did not return on any scale. Nuclear weapons were not used. The British Empire was peacefully disbanded, and living standards in Britain continued to improve: the average weekly wage quadrupled between 1950 and 2000 (in real terms). Orwell’s ideal of democratic socialism did not come into being and public appetite for any form of socialism dwindled as the century wore on. Instead, Europe prospered under liberal capitalism with varying degrees of social democracy.

In 1948, Orwell could dismiss the experiment of Russian communism as being the fault of a gangster class subverting the revolution, but how would he have responded to the horrors of China’s Cultural Revolution and Cambodia’s killing fields? When similar events played out in North Korea, Vietnam, Albania, Romania, Venezuela, Cuba and elsewhere, would he have continued to believe that the revolution had been betrayed or would he have recognised a pattern? What would he have made of the wildly diverging economic paths of East Germany compared with West Germany, or North Korea compared with South Korea?

Had Orwell lived into his eighties and experienced the real 1984, he may have continued to believe that libertarian socialism could be realised if the right people were in charge. Many people on the Left clung to this hope. Some still do. But it is surely not implausible that a man who prided himself on being able to look facts in the face would have developed serious doubts about planned economies.

Roger Corman: A Filmmaker’s Filmmaker

An account of all the lives Corman touched, the careers he helped to jump-start, and the genres he pioneered would fill several books.

The Campaign to Erase Biological Sex

In a new book, excerpted below, Duke Law School professor Doriane Lambelet Coleman argues that we can support trans people without denying the facts of human biology.

Blood, Sweat, and Gasoline

The story of Hollywood’s most unlikely blockbuster franchise, Mad Max.

The Problem Isn’t Technology, It’s Us

Iona Italia talks to Timandra Harkness about her new book, on our ambivalent relationship with personalised technology.

Damned in Amsterdam: A Bizarre Deplatforming

We wanted to give a talk on how ideological bias hampers science—and were disinvited because of our politics.

From the Blog

Canada’s elusive unmarked graves: a third-anniversary update, what an honest conversation about gender sounds like, what we’re reading in may, defending democracy with drew pavlou: quillette cetera episode 34.

Join the newsletter to receive the latest updates in your inbox.

On Instagram @quillette

The Break Down is dedicated to examining how capitalism has both shaped, and is being reshaped by, accelerating climate and ecological crisis. Launched in May 2024, we publish long-form interviews, original essays and resources that break down complex questions about how we got here, what the future might look like, and how we can build the power to change it. The Break Down is a not-for-profit project, hosted in partnership with Common Wealth.

The Break Down Adrienne Buller and Common Wealth

• Society & Culture
• 5.0 • 2 Ratings

Special Episode: Oil, Palestine and Climate Crisis w/ Adam Hanieh

In this special episode, Adam Hanieh explains the threads linking the global oil economy; more than a century of Western imperialism; contemporary American interests in the Middle East; and the response of governments in the US, UK and much of Europe to the ongoing genocide and ecocide in Gaza. Ultimately, he explains why these overlapping histories demand shared solidarity between the climate movement and the movement for a free Palestine.

Episode 2: A World Made of Oil w/ Adam Hanieh

Oil is fundamental to our understanding of the climate crisis. But despite its starring role, the dominance of oil in the global energy system is a relatively recent phenomenon, with the industry only really taking off after the Second World War. So how, in just a few decades, did oil become so integral to American power and to our understanding of global capitalism? In this episode of the Break Down, Adrienne and Adam Hanieh break down the history and geopolitics of oil and imperialism, and explore how the petrochemicals and plastics that now permeate our lives, from the foods we eat to the clothes we wear and everything in between, are making it increasingly difficult to challenge the power of the fossil fuel industry.

• 30 MAY 2024

Episode 1: The Price is Wrong w/ Brett Christophers

Renewable energy is often held up as the great success story of climate change, with policymakers and journalists constantly celebrating that clean energy is now cheaper than fossil fuels. By their logic, these plummeting costs mean that when it comes to the energy transition, the economics are essentially sorted, and we're now on an inevitable path to a world of clean energy. But is it really that straightforward?   On the first episode of the Break Down, Adrienne speaks to Brett Christophers, an acclaimed author and economic geographer at Uppsala University, about his latest book, The Price is Wrong: Why Capitalism Won’t Solve the Climate Crisis. In it, Brett breaks down the energy system and its critical role in confronting the climate crisis, and makes the case that in a system structured around private ownership and "free" markets, profit — not cheapness — is ultimately what matters.

• 1 hr 28 min
• 29 MAY 2024

Trailer: The Break Down

Welcome to The Break Down.  A new project dedicated to exploring capitalism has shaped, and is being fundamentally reshaped by, accelerating climate and ecological crisis. In our first episode, Adrienne and Brett Christophers will unpack the energy system: how it works, the problem with profits, and why “free” markets can’t deliver clean energy. Launching tomorrow, Thursday 30th May. Stay tuned.

• © Adrienne Buller and Common Wealth

Customer Reviews

Top podcasts in society & culture.

• Business in Society
• Diversity and Inclusion
• Entrepreneurship and Innovation
• Finance & Investing
• Global Business
• Press Releases
• School News
• Student News
• Alumni News
• Faculty News
• Pillars: Philanthropy News
• COVID-19 News

Stakeholder: How Ed Freeman’s Vision for Responsible Business Moved From Theory to Reality

By McGregor McCance

In 1983 Ed Freeman was a young university researcher and lecturer barely off the starting line in his academic career. Though he had produced plenty of papers about business issues, that summer would see the publication of Freeman’s first book: “Strategic Management: A Stakeholder Approach.”

He didn’t exactly expect it to set the world on fire.

“Strategic Management: A Stakeholder Approach” was published in 1984.

“My expectations were, ‘Look, I’m just trying to write something that says I really think companies are better off if they run their businesses for their stakeholders, not just their shareholders,’ ” Freeman said in an interview in his office at the University of Virginia Darden School of Business, where he’s taught the principles of that core philosophy, ethics, leadership and related topics for more than three decades.

Stakeholder theory holds that businesses exist to do more than just make profits and money for shareholders. Instead, they function best and serve the greater good when their actions reflect what’s best for all stakeholders – employees, suppliers, the community, partners and, of course, shareholders.

“It’s a business for human beings rather than business for a few human beings,” Freeman said. “I think that’s a better way to think about business.”

Freeman hoped the book would help him get tenure one day. He thought it might be useful for academics and corporate managers. He never expected to make money from it. Forty years later, what’s broadly known as stakeholder theory or stakeholder capitalism carries more weight than anyone might have imagined.

High Level Impact

Embraced by some of the country’s biggest corporations and many influential leaders, the concepts articulated in “Strategic Management: A Stakeholder Approach,” and refined and expanded in subsequent writings by Freeman and his colleagues, enjoy global acceptance. Leaders at corporate giants like Costco, Wal Mart and Whole Foods endorse them.

In 2019, more than 200 CEOs affiliated with the Business Roundtable officially adopted a new “Statement on the Purpose of a Corporation.”

In it, the Business Roundtable officially moved away from the long-held and widely accepted narrative that the existential purpose of a business is to generate economic returns for its shareholders and instead embraced the stakeholder approach. The CEOs declared: “Companies should deliver long-term value to all of their stakeholders – customers, employees, suppliers, the communities in which they operate, and shareholders.”

Over the years, probably no economic idea has become more synonymous with Darden or its guiding values. “Stakeholder” has become part of the School’s cultural fabric. While the term has a specific definition, it also has become shorthand for Darden’s teaching philosophy based on responsible business management and ethically grounded leadership.

Bobby Parmar, the Shannon G. Smith Bicentennial Associate Professor of Business Administration at Darden.

“The success of stakeholder theory and Darden’s distinctive competitive advantage are tied together,” said Bobby Parmar, the Shannon G. Smith Bicentennial Associate Professor of Business Administration, who has known Freeman for nearly 30 years. “Ed has had a huge impact at Darden and helped us become a place that is unique and attracts students, faculty and recruiters who care about this set of ideals.”

A ‘Hero’s Journey’

If Freeman’s humility prevents him from accepting much credit, others are happy to assign it.

“All of us are called to a hero’s journey,” said John Mackey, co-founder and former CEO of Whole Foods Market, the natural and organic grocer that grew from a single store to 540 stores with $22 billion in annual sales and more than 105,000 employees. “Most people don’t answer that call. Ed answered it, and he’s a hero. He’s made a big difference in the world, and he’s a remarkable human being.”

Mackey’s journey through entrepreneurship and business leadership – and his (unknowing at the time) exposure to stakeholder theory – began in the mid-‘70s when he was living in a vegetarian housing co-operative. Those in the food co-op line of work didn’t focus much on profits. In fact, they were essentially anti-profit and mostly wanted low prices and broad access. But any notion to serve more people eventually ran into their aversion to profits. There simply was no money to invest in expanding the business.

Mackey took note. A business couldn’t truly flourish with just one objective or one group in mind.

In 1980, Mackey and his girlfriend Renee Lawson merged a young natural foods store they started together in Texas with another local store to establish Whole Foods Market. The company struggled after a disastrous flood nearly wiped it out in 1981. It survived because a banker personally guaranteed an emergency loan after the institution declined Mackey’s application. Whole Foods employees worked without pay for a month until payroll could get back on track. Suppliers fronted the company inventory to restock shelves.

“I began to realize, we are in this network of relationships, and they love us and care about us, and we owe them,” Mackey recalled. “We need to pay back the generosity they’ve shown us.”

By the early ‘90s, as both Mackey’s company and his own business acumen continued to mature, the CEO grew more interested in this concept that a business could improve the world by focusing on more than just profits. Another famous business book, “Ethics and Excellence: Cooperation and Integrity in Business,” deeply impressed Mackey. As it turned out, its author, Robert C. Solomon, and Ed Freeman were friends and philosophical brethren. Soon, Mackey began devouring anything Freeman had written on the topic.

The common thread connecting Mackey’s own experience, his business strategies and his personal values finally had a name: Stakeholder theory .

“I got excited about it because I realized, ‘Well, that’s it!’ That’s the term I’ve been looking for, what we’ve been doing at Whole Foods,” he said. “The brilliance of what Ed did is that he saw the interdependencies. He saw it as a system, and it wasn’t seen that way before Ed came along.”

Stakeholder Vocabulary

Parmar credits Freeman for clearly articulating this approach to running a responsible business, and for a providing a “vocabulary” that cut against a narrative that dominated since economist Milton Friedman’s famous 1970 New York Times commentary. In it, Friedman stated that the only social responsibility of business is to increase its profits as long as it does so legally and in open competition. While “Strategic Management: A Stakeholder Approach” shared some terms and concepts you’d find in any economic writing of the day, it spoke an altogether different language for businesses.

“Ed’s 1984 book was a watershed moment because it helped turn the tide and helped us see business as a deeply human institution,” Parmar said.

Not that it immediately changed things. That would take time.

Andy Wicks is the Ruffin Professor of Business Administration and director of the Olsson Center for Applied Ethics at Darden

Andy Wicks witnessed the evolution. Wicks is the Ruffin Professor of Business Administration and director of the Olsson Center for Applied Ethics at Darden. He’s taught here for 22 years, and before that, was a UVA religious studies graduate student focused primarily on medical ethics, followed by a decade teaching at the University of Washington. He met Freeman in the late ‘80s, soon after learning about stakeholder theory.

Wicks recalled having his students in a 2002 class read an article by Milton Friedman (companies exist to create shareholder profits) and another by Ed Freeman (all stakeholders are integral). In a class of 70, only one student raised a hand to indicate alignment with stakeholder theory.

“When I teach that material today in a Darden classroom, I will get anywhere from 60% to 80% of the students who raise their hand for Ed,” Wicks said.

Origin Story

Spreading the word has proven to be a lifelong passion.

During his career, Freeman has written and co-authored hundreds of books, articles, commentaries and essays about stakeholder concepts and the importance of business ethics. He’s taught thousands of students. Accepted honorary degrees across the world. Provided countless media interviews. Freeman travels frequently to deliver guest lectures at business and management schools, participate in conferences about responsible business practices and management, and consult directly with corporations.

The concepts have come a long way since he first was exposed to the idea of business “stakeholders” at the Wharton School of Business in the mid- and late-‘70s. Even before then, Freeman has stressed over the years, researchers at the Stanford Research Institute and a Swedish theorist were analyzing how different groups affiliated with or interacting with businesses could affect a company. Recognizing those pressures and influences was part of being strategic. Those pioneering researchers introduced the term stakeholder into the discussion.

But stakeholders at that time predominantly were considered disparate elements that could influence the operations or success of the company, rather than integral components or partners whose shared interests could enable them all to flourish.

That bigger idea “was in the air,” Freeman said. And during one Wharton gathering of economists and academics, the chalkboard featured a diagram of different stakeholders. Freeman remembered one person suggesting that it wouldn’t be appropriate to discuss the interests of those other stakeholders in the context of the corporation’s fortunes because their issues were matters of “justice” rather than strict business considerations.

“I’m just sitting there like a fly on the wall, probably 25 or 26. And I thought, ‘Well, wait a minute. I don’t know why you can’t say anything about justice.’”

Freeman didn’t voice his thoughts in that setting. But he and his boss at the time, Jim Emshoff, were thinking and writing together along those lines. Emshoff encouraged Freeman to further explore the idea of a stakeholder approach, to try to answer, “Can you run a business this way?”

“Strategic Management: A Stakeholder Approach” was about to be born.

A Most Awesome Feeling

Published in summer 1983 with a 1984 copyright date, only 2,000 copies comprised the initial run. (The book has been updated and reissued, and along with Wicks, Parmar and others, complementary volumes build on the original themes.)

Freeman remembers holding the book in his hands for the first time.

“It was, at that time, the most awesome feeling I had had professionally,” he said.

Evidence of stakeholder capitalism’s enduring influence abounds – whether it reflects Freeman’s specific contributions or the continued general recognition of the value of businesses that account for the wellbeing and success of its full set of participants.

In a report published in 2021, the Conference Board said its research and surveys showed that nearly 90% of C-suite executives surveyed around the world believed that “there is a shift underway from stockholder to stakeholder capitalism, and almost 80% say the shift is occurring at their firm.”

The organization reported increased focus among corporate leaders on environmental and social issues, diversity, employee wellbeing, workforce management and community impact. “Executives who recognize and embrace the shift now are better positioning themselves and their companies for success in the future,” the Conference Board suggested.

But it’s not time to declare victory by any stretch. Almost any edition today of the Wall Street Journal or other major news outlets will remind one that unethical or selfish corporate behavior will always come with the territory if humans are involved.

Mackey, though optimistic overall, said stakeholder theory faces threats on multiple fronts. On one hand, he said, a growing number argues that focusing exclusively on creating returns for shareholders will actually help all stakeholders in the end because they’ll share in or indirectly benefit from the profits. On the other extreme, he sees growing anti-business sentiment in some quarters, with groups seeking control of corporate boards to advance narrow agendas reflecting political priorities of the few, rather than the good of all stakeholders.

Mackey finds both approaches flawed and limiting.

“Stakeholder theory is being challenged on these different fronts,” he said. “But it works . If it didn’t lead to competitive advantage it would disappear.”

Freeman, too, conveys optimism. However, he identifies authoritarian political movements as a threat to approaches like stakeholder capitalism because they can lead to crony capitalism, in which the government skews a functioning competitive marketplace by getting involved in ways that favor specific businesses or industries.

“If you pay attention to stakeholders, and you have a high purpose, you’re basically going to beat the hell out of companies that don’t, unless these companies get a leg up from government. So that worries me.”

A Task Not Yet Finished

His continued experience in the classroom particularly heartens Freeman. Students come to Darden with a strong appreciation of the importance of business ethics. It could be that many choose Darden today because of its reputation for teaching and emphasizing ethics – and that suits him fine.

“They come in with a stronger sense that they want to do something that has meaning,” he said. “They want to do something that makes the world better. There’s no question about that.”

Two years ago, as his book was nearing 40, Freeman reassessed how well it has stood the test of time in “My Own Book Review. Strategic Management: A Stakeholder Approach,” published by the International Association of Strategic Management.

One of the book’s enduring strengths is that “it is based on real business situations, and it does not shy away from prescribing how business can improve,” he wrote. Among the weaknesses: a chapter focusing on internal stakeholders, which Freeman later recognized as a potential distraction from his goal of making businesses more cognizant of external stakeholders.

He also linked the heart of the theory and practice to core values – such as those he earned and learned growing up on a Georgia farm – especially the truth that “one needed to be responsible for the effects of one’s action on others.”

“I get far too much credit for a very small role that I played in developing the stakeholder idea,” Freeman concluded in his humble and self-critical review. “But the task is not yet finished. We desperately need to hasten the transition to a more inclusive stakeholder capitalism. That is a worthy task for our generations, and one to which I am committed.”

The University of Virginia Darden School of Business prepares responsible global leaders through unparalleled transformational learning experiences. Darden’s graduate degree programs (MBA, MSBA and Ph.D.) and Executive Education & Lifelong Learning programs offered by the Darden School Foundation set the stage for a lifetime of career advancement and impact. Darden’s top-ranked faculty, renowned for teaching excellence, inspires and shapes modern business leadership worldwide through research, thought leadership and business publishing. Darden has Grounds in Charlottesville, Virginia, and the Washington, D.C., area and a global community that includes 18,000 alumni in 90 countries. Darden was established in 1955 at the University of Virginia, a top public university founded by Thomas Jefferson in 1819 in Charlottesville, Virginia.

Press Contact

Molly Mitchell Associate Director of Content Marketing and Social Media Darden School of Business University of Virginia [email protected]

Financial Times Shines Spotlight on Darden’s Forum Hotel

New Effort Expands National Presence for Prison Education Program Founded at Darden

‘What’s Next?’ for Anton Dela Cruz: From Creative Writing to Ethical Leadership at UVA Darden

Darden Band’s Business Is All About the Music

UVA Darden Professor Honored With Thomas Jefferson Award

• The Darden Report Get the latest news about Darden and its students, faculty and alumni.
• Ideas to Action Get the latest business knowledge—research, analysis and commentary—from Darden's faculty.
• Please type the characters you see in the box below.

• By checking this box, you consent to Darden sending you emails about our news, events and thought leadership. Your email address also helps us keep your content relevant when you visit our website and social media. We think you will find our content valuable, and you can unsubscribe or opt-out at any time.
• Email This field is for validation purposes and should be left unchanged.

• Share full article

Critic’s Notebook

The Very Online Afterlife of Franz Kafka

One hundred years after his death, the Czech writer circulates as a pop idol of digital alienation.

Credit... Photo illustration by Ricardo Tomás

Supported by

By Amanda Hess

• June 1, 2024

On TikTok, a collection of objects sits atop a stack of books: a string of pearls, a Diptyque candle, a Sylvanian Families rabbit figurine in a scallop-collared dress. A woman’s hand brushes them aside. She pages through the pile of books below. We see “My Year of Rest and Relaxation” by Ottessa Moshfegh and “The Bell Jar” by Sylvia Plath. Also, “The Metamorphosis” by Franz Kafka, a fat black bug on its cover. A question typed over the scene asks: What do you conclude about me?

The video’s creator is 25-year-old Margarita Mouka — @aquariuscat444 on TikTok, where she frequently posts about Kafka, integrating his work, his likeness and his life story into her online persona of romantic intellectualism. When her account was publicized last year, alongside those of a handful of other young Kafka-heads, media outlets were not quite sure what to conclude about her.

“Franz Kafka becomes an unlikely HEARTTHROB on TikTok — where Gen Zers are swooning over the Czech novelist nearly 100 YEARS after his death,” ran a Daily Mail headline . The article surfaced fancam-style compilations that use Kafka’s pictures as well as melodramatic readings of his letters. Baffled reactions followed in The Spectator and Literary Hub : Did they think he was … hot? Did they know he had a kind of body dysmorphia? Was Kafka the Harry Styles of the Austro-Hungarian Empire?

To Mouka, the appeal was obvious.

“I felt like that bug,” she said.

On BookTok, where a flashed book jacket conveys a glimmer of a user’s inner life, a classic text can leave a durable impression. It plays like a deep cut, reaching back through time to ground a TikToker’s content in a more enduring human experience.

Besides, the personas of dead authors are more fun to play with than those of the living. Some literary TikTokers style their feeds in Dostoyevsky ’s melancholy (“I now refer to him as my Russian man”), others in Nabokov ’s mischief (“Such a snarky queen”). Kafka has become shorthand on the app for alienation, which has become the backdrop of a digitally mediated life.

Telling the internet that Harry Styles is your boyfriend is a fantasy. Telling the internet that Franz Kafka is your boyfriend — that is a thesis statement.

Generation K

Franz Kafka was born in 1883 to Czech Jewish parents in Prague. He earned a law degree and worked by day as an insurance officer, investigating injuries from industrial accidents. He wrote at night. When he was 32, he published “The Metamorphosis,” a parable known for its opening line: “As Gregor Samsa awoke one morning from uneasy dreams he found himself transformed in his bed into a gigantic insect.” His stories and three unfinished novels explored themes of estrangement from others and from the self, and inspired an adjective — “Kafkaesque” — for describing nightmarish encounters with impenetrable bureaucracies. He died of tuberculosis in 1924, at age 40.

Margarita Mouka was born in 1999. She earned a degree in economics and works by day doing social media for luxury hotels and restaurants. She has cinched personal brand partnerships with a perfumery, a Korean skin-care company and a designer of coquette-style dresses. When she was 22, she picked “The Metamorphosis” off a bookstore shelf, and as she read it, she was as surprised to see herself in Gregor Samsa as he was to see himself as a bug.

“His first hardest task was to get out of bed,” Mouka said of Gregor Samsa. “So many people my age relate to that. I’ve been there as well.”

I spoke with Mouka over Zoom from her home in Athens shortly before the 100th anniversary of Kafka’s death, which falls on June 3. I was curious about how Kafka’s image was circulating online, and she told me of her admiration for his work, while also graciously explaining TikTok slang like “ thought daughter ” to me. (It’s a twist on a misogynistic phrase, reclaimed by women who overthink everything.)

After “The Metamorphosis,” Mouka read “Letters to Milena,” a collection of private letters from Kafka to his love interest, the Czech translator Milena Jesenská, which only heightened his appeal. “You are out here being excited over a stinky ugly uneducated man texting you back when kafka wrote ‘i can’t hold enough of you in my hands’ to milena,” Mouka wrote in one video .

The alienation and anxiety that Mouka finds in Kafka have come to define her generation. “We’re constantly online and we’re constantly connected somewhere, but we still feel disconnected,” she said.

The internet, the very place where we are now expected to craft a self, is also an identity-destabilizing machine. When Kafka wrote “I have hardly anything in common with myself,” he could have been describing the experience of confronting one’s own online persona. Kafka’s openness around what Mouka called “his mental health issues” reverberates in social media’s therapeutic thunderdome — commentators have variously speculated that he may have experienced anorexia , autism , insomnia , borderline personality disorder and hypochondria , in addition to body dysmorphia.

And his “Letters to Milena” — written over the course of three years, to a married woman he rarely saw in person — has become a rich TikTok text. Kafka fans hold his passionate words in playful contrast to the lazy and pathetic text messages they have received from men. The correspondence offers commentary on the slippery nature of disembodied relationships, too. As Kafka wrote to Jesenská in 1922, “Writing letters is actually an intercourse with ghosts, and by no means just with the ghost of the addressee but also with one’s own ghost.”

@aquariuscat444 i love him #metamorfosis #kafka #booktok #metamorphosis #darkacademia #intj #coquette ♬ original sound - ☾

And yet his work also challenges the idea that Gen Z’s misery is attributable solely to the smartphone. Presenting his books before the eye of its camera suggests a deeper explanation. The hundred-year gap between Kafka’s experience and our own functions as its own commentary on the fundamental dehumanization of modern life, and of the degradations of work under capitalism. Even as Mouka celebrates Kafka, even as she crafts an identity around him, she is performing a job, laboring at a second shift that never ends.

There’s something pleasurable about seeing Kafka enlivened in a TikTok comments section, his appeal translated into hypermodern slang. Fans post things like “Gorgeous girls lie awake at night mourning kafka” and “Kafka is my bare minimum and i won’t date a man until he is kafka.” But it’s also uncanny to watch his image proffered as an affective shorthand, his face a gesture toward a fan’s Myers-Briggs personality type or dark academia aesthetic .

In one video, Mouka has edited Kafka’s photograph into a thought-daughter montage, somewhere between a scene from Vincent Gallo’s “Buffalo ’66” and a snapshot of Sharon Tate. Amid this roving eye of cultural impressions, Kafka’s face plays like a wink toward seriousness. The friction between the images explodes the video’s emotional range.

“I always want to cry when I see him,” Mouka said of Kafka’s photograph. “I’m just sad when I see his face.”

‘Who Am I, Then?’

Kafka’s own relationship with technology was ambivalent.

“Kafka had a fascination with and skepticism of the already rapid developments” that punctuated his lifetime, said Mark Harman, the editor and translator of a new collection of Kafka’s works, “ Selected Stories .” “This anxiety about technology is palpable in his fiction.”

In one of his letters, to his onetime fiancée Felice Bauer, Kafka expressed deflation at the modern experience of paging through a set of his own photographs, watching himself transform from a spirited child into what he calls “the ape of my parents” in adolescence.

Harman also pointed me to a moment in “The Castle,” an unfinished novel published after Kafka’s death, in which the antihero K. tries to phone that bureaucratic fortress. “At first, he hears only what sounds like high-pitched singing,” Harman said. But after an official picks up and methodically interrogates K. about his identity, K. is left wondering: “Who am I, then?”

“Kafka was a notoriously severe judge of himself, and would certainly not have wanted completely uncritical admiration,” Harman said of the author’s online fans. And yet it is precisely Kafka’s painful self-awareness that plays so winningly on social media, among generations of readers who have grown up not just picking up a telephone, but staring it down.

What Harman described as “Kafka’s capacity for humorous detachment,” his “self-irony” and his “impish sense of humor” are now TikTok house style. Keeping up with the platform’s tumbling obsessions and inside jokes — and withstanding the heat of viral attention — requires a puckish attitude toward one’s own emotional life. One of my favorite Kafka videos jumps off the trending setup “Men only have four moods.” In this version, the moods are: “Waking up as a repulsive bug, learning how to live as a bug, being rejected by people, giving up on life.”

For more clues to Kafka’s contemporary appeal, I called Becca Rothfeld, the nonfiction book critic at The Washington Post. But first I dialed the wrong number several times, repeatedly triggering a voice recording that notified me that I had “reached a non-working number at the House of Representatives.” When we finally connected, Rothfeld said: “Trying to call a non-working number at the House of Representatives is very Kafkaesque.”

Rothfeld wrote the introduction for a new anthology of short stories, “ A Cage Went in Search of a Bird: Ten Kafkaesque Stories ,” which includes works by Joshua Cohen and Tommy Orange. In many of them, Kafka’s sensibility is projected into digital labyrinths. In “Hygiene,” Helen Oyeyemi imagines a text-message exchange between a man and a woman in a casual relationship that wildly escalates when the woman’s friend assumes control of her phone. And in “God’s Doorbell,” Naomi Alderman explores a utopian human society built atop a class of “machine-thinking tools” that resemble evolved chatbots — a society shaken after the humans tell the machines to build a tower to God.

“Kafka, when he was writing, was describing a relatively new experience,” Rothfeld said of his depiction of absurd bureaucratic incidents. Gregor Samsa complains that his job as a traveling salesman is merely a succession of “always changing, never enduring human exchanges.” After he transforms into a bug, he lies in bed instead of reporting to work, so his manager finds him at home and delivers a negative performance review through the locked bedroom door.

Harman told me that the Austro-Hungarian bureaucracy quadrupled in size in Kafka’s lifetime, as society rapidly industrialized and technology accelerated. Now, “what seemed so new and uncanny when he was writing has become very familiar,” Rothfeld said. The once-surprising edge of the Kafkaesque insight is “irrecoverable,” she added, “because now it’s just our life.”

But this familiarity has also allowed Kafka’s work to persist, and has freed his persona to circulate in ever more playful ways. Kafka, the TikTok boyfriend. Kafka, the love bomber. Kafka, the dog. As we spoke, Rothfeld sat on a porch with her 2-year-old English shepherd, Kafka. “He’s actually a very happy-go-lucky, cheerful dog, and very physically robust, so he’s not actually like Kafka at all,” she said. “But it gives me great joy to call my dog Kafka.”

Since Rothfeld discovered Kafka the novelist in high school, she has found that his work has grown only more relevant. As experiences of bodily and social alienation expand their reach into human life, he keeps pulling her back in. “I think about him all the time,” she said. “Maybe even more now that I scream his name a thousand times a day.”

Amanda Hess is a critic at large for the Culture section of The Times, covering the intersection of internet and pop culture. More about Amanda Hess

Advertisement

China will take the mantle of world superpower from the United States

A Putin triumph would hugely empower his fellow autocrat Xi Jinping. This would be calamitous for the West

For seven days The Telegraph is running a series of exclusive essays from international commentators imagining the consequences if Russia were successful in its war. The full list of essays so far can be found below.

China and its alliance with other opponents of the West is the most serious challenge to world peace and prosperity since the Second World War.

If Putin achieved his objective of annexing Ukraine – subjugating its people to ruthless tyranny – the responsibility for this would substantially rest with the Chinese Communist Party’s (CCP) support . And it would benefit President Xi most of all.

It is hard to predict how global conflict between the current liberal and authoritarian orders would develop following a triumph for the latter in Ukraine. This stems in part from the normative roles played by Xi, Putin, and the leaders of North Korea and Iran, whose sense of risk and benefit is unknowable.

Nevertheless, some aspects of China under Xi’s autocracy, both internally and in its foreign relations, are well-established and likely to persist. For one, China would likely see victory for Putin as a major leap towards its desired revision of the world order. But not necessarily in the way one might think.

Hitherto, many Western commentators have clung to the notion that China seeks to reform rather than overthrow the international rules-based order established post-1945 represented by institutions like the UN. They are wrong: The revisionist nature of Xi’s vision of a China-led “new era” would move to the fore if Ukraine fell, and profoundly. 

This was the clear message of Xi’s farewell words to Putin in Moscow in March 2023: “changes are happening that have not been seen for 100 years; we are driving these together”. Putin agreed. Xi was signalling a joint assault on liberal norms; indeed, one of the most obvious impacts of the war has been to show the fragility of bodies like the UN, with Russia and China’s veto effectively giving Moscow a blank cheque to get away, quite literally, with murder.

This said, the background to their expedient sharing of revisionist goals is not straightforward. The CCP are neuralgic about losing autonomy through association with any external forces. Forced by realpolitik necessity to align with Putin just before the invasion, CCP pragmatism has turned his error to China’s advantage, driving hard bargains for importing game-changing amounts of Russian energy while watching the West and Russia exhaust each other. Prolonged frozen conflict remains Beijing’s favoured outcome.

But even if Putin wins outright, crucially Xi’s plans for China as leader of a new world order include no place at the high table for Putin emboldened by victory in Ukraine, let alone turning belligerent eyes on the Baltics, Poland and Central Europe. The CCP hopes for revived growth as Russia’s main energy market, but is committed to remaining clear of reciprocal dependency. 

Putin, for his part, is already visibly needy for Xi’s long-delayed agreement on “ Power of Siberia 2” , a gas pipeline to China via Mongolia. He reportedly intends to pitch Beijing shortly for another via Kazakhstan. 

This urgency from Moscow suits Xi’s book. He is unlikely to throw Putin more such strategic lifelines, “victory” in Ukraine notwithstanding. Ultimately, Beijing seeks direct strategic control of the Manchu Empire’s former territory in Eastern Siberia, potentially capable of meeting China’s entire energy needs for several decades and shifting the balance of power on the Western Pacific rim dramatically in China’s favour. Paying whatever he asks to prop up Putin’s declining empire does not serve Xi’s strategic turn.

Internally, the CCP regards economic advantage as subordinate to Party interests, which are currently focused on military and political rivalry with the West. China’s current surge in nuclear weapons production is a key part of Xi’s “new era” agenda, intended to challenge Western nuclear supremacy, but also to neutralise threats from India and Russia. In the heightened international tensions that would inevitably follow Russian victory in Ukraine, China’s wider efforts to strengthen its military capabilities and influence world-wide are likely to increase.

Beijing would further exploit policy disarray and divisions that contributed to Western failure to defend Ukraine effectively. In such a context, it is hard to predict whether China’s deliberate role in the debacle would renew Western resolve to impose harsher sanctions against China as well as Russia. 

China is currently building up resilience against such an eventuality. Sanctions de-risking, gold-hoarding and other moves to decouple from Western dependencies (including the US dollar) should not be read as simply filling a war-chest to support the invasion of Taiwan – these policies are also strategic foundations for revisionist Chinese imperium over a new world order centred on Asia, BRICs and the Global South. 

All this said, in considering how China would act and fare if Putin wins, we should not underestimate the challenges Xi’s ambitions would encounter. The Chinese economy is increasingly weak, with Xi’s policy response to date markedly ineffectual. Stagnant growth and the risk of deflation ought to deter Xi from his current spending spree on arming and organising for potential hostilities in the Taiwan Straits. 

So far, no moderation in rhetoric or substance is apparent. But with or without enhanced sanctions pressures, the collapse of free Ukraine would likely have a widespread negative impact on global trade, including China’s links to important Western markets. Reduced profits from dealing with the West cannot readily be made up by China changing horses in favour of the developing world. In particular, Xi would continue to court support wherever in Europe he could generate it.

Current headwinds, in short, would not abate. Xi’s efforts to grip the domestic economy over the last decade are unlikely to fare any better in the short to medium term, particularly if Ukraine comes back under Russian control. Facing external opprobrium and regime-threatening economic instability at home, ruthless authoritarians can be tempted to rally nationalist sentiment behind a military adventure. 

If his unknown personal risk assessment still compels caution, Xi might hold back from a diversionary assault on Taiwan. But with one free state newly sacrificed to tyranny, there will also be drivers in favour of calling the West’s bluff.

At the very least we may expect increased coercive pressure, military posturing and nationalist rhetoric, not only over Taiwan – with its growing danger of lethal miscalculation in the Pacific – but across other increasingly contested global space. Behind the immediate tragedy of Putin’s bloody adventure, Xi’s China will remain the chief agent of global insecurity. The UK, its allies and partners must give this reality the attention it demands.

Other essays in the ‘What If Putin Wins?’ series:

• ‘Putin’s plot to destroy Nato is reaching its devastating climax’ by Aliona Hlivco
• ‘Europe’s fascist future awaits’ by Dr Thomas Clausen
• ‘If Russia wins, expect the worst genocide since the Holocaust’ by Karolina Hird
• ‘Putin’s next conquests are already in his sights’ by Ivana Stradner
• With Ukraine’s resources, Putin would be unstoppable by Liliane Bivings
• The West may not survive a Putin victory by Francis Dearnley
• What if Putin wins?,
• Vladimir Putin,
• Russia-Ukraine war,
• Facebook Icon
• WhatsApp Icon