Capitalism

Capitalism, economic system in which goods and services are provided by the efforts of private individuals and groups (firms) who own and control the means of production, compete with one another, and aim to make a profit. The concept has several overlapping senses, but the idea of private ownership of the means of production and their employment in the search of profit are common to all of them. Capitalism is usually regarded as having developed through a number of stages, beginning with commercial capitalism, under which large merchants came to dominate trade. This was succeeded by industrial capitalism, dominated by the owners of factories and mines, and then by finance capitalism, in which control passed into the hands of bankers and financiers, who exerted indirect control over industries they did not manage in person. Reference is sometimes made to a fourth form—state capitalism—defined by Lenin as a system under which the State owns and uses the means of production in the interests of the class that controls the State. A fifth term, welfare capitalism, is used to describe capitalist economies in which there is an increased element of state intervention, either by welfare programs or by taking responsibility for maintaining full employment.

Socialists criticize the system on the grounds that in practice it produces luxuries for the rich rather than necessities for all. Capitalism is defended by the argument that an economic system based on private ownership and investment, if left to operate with a minimum of state interference, will be the most efficient method of raising production, distributing scarce resources rationally, and balancing supply with demand.