Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a capitalist market economy, decision-making and investment are determined by every owner of wealth, property or production ability in financial and capital markets, whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.
Capital accumulation is the dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the goal of increasing the initial monetary value of said asset as a financial return whether in the form of profit, rent, interest, royalties or capital gains. The process of capital accumulation forms the basis of capitalism, and is one of the defining characteristics of a capitalist economic system.
A theory of capitalism describes the essential features of capitalism and how it functions. The history of various such theories is the subject of this article.
In Marxian economics, economic reproduction refers to recurrent processes. Michel Aglietta views economic reproduction as the process whereby the initial conditions necessary for economic activity to occur are constantly re-created. Marx viewed reproduction as the process by which society re-created itself, both materially and socially.
In Marxist economics and preceding theories, the problem of primitive accumulation of capital concerns the origin of capital, and therefore of how class distinctions between possessors and non-possessors came to be.
Some economic historians use the term merchant capitalism to refer to the earliest phase in the development of capitalism as an economic and social system. However, others argue that mercantilism, which has flourished widely in the world without the emergence of systems like modern capitalism, is not actually capitalist as such.
Criticism of capitalism ranges from expressing disagreement with the principles of capitalism in its entirety to expressing disagreement with particular outcomes of capitalism.
The regulation school is a group of writers in political economy and economics whose origins can be traced to France in the early 1970s, where economic instability and stagflation were rampant in the French economy. The term régulation was coined by Frenchman Destanne de Bernis, who aimed to use the approach as a systems theory to bring Marxian economic analysis up to date. These writers are influenced by structural Marxism, the Annales School, institutionalism, Karl Polanyi's substantivist approach, and theory of Charles Bettelheim, among others, and sought to present the emergence of new economic forms in terms of tensions within existing arrangements. Since they are interested in how historically specific systems of capital accumulation are "regularized" or stabilized, their approach is called the "regulation approach" or "regulation theory". Although this approach originated in Michel Aglietta's monograph A Theory of Capitalist Regulation: The US Experience and was popularized by other Parisians such as Robert Boyer, its membership goes well beyond the so-called Parisian School, extending to the Grenoble School, the German School, the Amsterdam School, British radical geographers, the US Social Structure of Accumulation School, and the neo-Gramscian school, among others.
Rentier capitalism is a Marxist term currently used to describe the belief in economic practices of monopolization of access to any kind of property, and gaining significant amounts of profit without contribution to society. The origins of the term are unclear; it is often said to be used in Marxism, yet the very combination of words rentier and capitalism was never used by Karl Marx himself.
The capitalist state is the state, its functions and the form of organization it takes within capitalist socioeconomic systems. This concept is often used interchangeably with the concept of the modern state, though there are many differences in sociological characteristics among capitalist states despite their common functions.
Throughout modern history, a variety of perspectives on capitalism have evolved based on different schools of thought.
In Marxist theory and Marxian economics, the immiseration thesis is derived from Karl Marx's analysis of economic development in capitalism, implying that the nature of capitalist production stabilizes real wages, reducing wage growth relative to total value creation in the economy, leading to worsening alienation in the workplace.
In Karl Marx's critique of political economy and subsequent Marxian analyses, the capitalist mode of production refers to the systems of organizing production and distribution within capitalist societies. Private money-making in various forms preceded the development of the capitalist mode of production as such. The capitalist mode of production proper, based on wage-labour and private ownership of the means of production and on industrial technology, began to grow rapidly in Western Europe from the Industrial Revolution, later extending to most of the world.
Surplus value is a central concept in Karl Marx's critique of political economy. "Surplus value" is a translation of the German word "Mehrwert", which simply means value added, and is cognate to English "more worth". Surplus-value is the difference between the amount raised through a sale of a product and the amount it cost to the owner of that product to manufacture it: i.e. the amount raised through sale of the product minus the cost of the materials, plant and labour power. Conventionally, value-added is equal to the sum of gross wage income and gross profit income. However, Marx uses the term Mehrwert to describe the yield, profit or return on production capital invested, i.e. the amount of the increase in the value of capital. Hence, Marx's use of Mehrwert has always been translated as "surplus value", distinguishing it from "value-added". According to Marx's theory, surplus value is equal to the new value created by workers in excess of their own labor-cost, which is appropriated by the capitalist as profit when products are sold.
In Marxist theory, socialism refers to a specific historical phase of economic development and its corresponding set of social relations that emerge from capitalism in the schema of historical materialism. The Marxist definition of socialism is an economic transition where the sole criterion for production is use-value and therefore the law of value no longer directs economic activity. Marxist production for use is coordinated through conscious economic planning, while distribution of products is based on the principle of to each according to his contribution. The social relations of socialism are characterized by the proletariat effectively controlling the means of production, either through cooperative enterprises or by public ownership or private artisanal tools and self-management, so that social surplus goes to the working class, and hence society as a whole. Karl Marx himself did not use the term "socialism" to refer to this development, but rather called it a communist society that has not yet reached its "higher-stage." The term "socialism" was popularized during the Russian Revolution by Vladimir Lenin.
Das Kapital, also known as The Capital. Critique of Political Economy by Karl Marx is a foundational theoretical text in materialist philosophy, economics and politics. Marx aimed to reveal the economic patterns underpinning the capitalist mode of production, in contrast to classical political economists such as Adam Smith, Jean-Baptiste Say, David Ricardo and John Stuart Mill. Marx did not live to publish the planned second and third parts, but they were both completed from his notes and published after his death by his colleague Friedrich Engels. Das Kapital is the most cited book in the social sciences published before 1950.
Crisis theory, concerning the causes and consequences of the tendency for the rate of profit to fall in a capitalist system, is now generally associated with Marxist economics.
Historical materialism is a methodology used by some communist and Marxist historiographers that focuses on human societies and their development through history, arguing that history is the result of material conditions rather than ideas. This was first articulated by Karl Marx (1818–1883) as the "materialist conception of history." It is principally a theory of history which asserts that the material conditions of a society's mode of production or in Marxist terms, the union of a society's productive forces and relations of production, fundamentally determine society's organization and development. Historical materialism is an example of Marx and Engel's scientific socialism, attempting to show that socialism and communism are scientific necessities rather than philosophical ideals.
