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"In the name of God (Allah), most Merciful, ever Merciful" Exalt the name of your Lord, the

Most High, Who created and proportioned And Who destined and [then] guided And who brings out the pasture And [then] makes it black stubble. We will make you recite, [O Muhammad], and you will not forget, Except what Allah should will. Indeed, He knows what is declared and what is hidden. And We will ease you toward ease. So remind, if the reminder should benefit; He who fears [ Allah ] will be reminded. But the wretched one will avoid it [He] who will [enter and] burn in the greatest Fire, Neither dying therein nor living.
Doesn't it sound true? Does this make sense?

He has certainly succeeded who purifies himself And mentions the name of his Lord and prays. But you prefer the worldly life, While the Hereafter is better and more enduring. Indeed, this is in the former scriptures, The scriptures of Abraham and Moses.

To convert to Islam and become a Muslim all a person needs to do is pronounce the below testimony with conviction and understanding its meaning: "I testify that there is no true god but Allah (God) and that Muhammad is the Servant & Messenger of God."

Quran:

Surah Al-'A`l (The Most High)

Realise your purpose in life before its too late WhyISLAM.org IslamReligion.com TheDeenShow.com
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Bitcoin From Wikipedia, the free encyclopedia Bitcoin Bitcoin logo.svg A common logo from the Bitcoin reference client Date of introduction 3 January 2009; 5 years ago User(s) Worldwide Money Supply 25 bitcoins per block (approximately every ten minutes)[1] Source Number of bitcoins in circulation Subunit 108 satoshi[2] Symbol BTC, XBT,[3] BitcoinSign.svg, [4][note 1] This article contains special characters. Without proper rendering support, you may see question marks, boxes, or other symbols. Bitcoin is a peer-to-peer payment system and digital currency introduced as open source software in 2009 by pseudonymous developer Satoshi Nakamoto. It is a cryptocurrency, so-called because it uses cryptography to control the creation and transfer of money.[5] Conventionally, the capitalized word "Bitcoin" refers to the technology and network, whereas lowercase "bitcoins" refers to the currency itself.[6] Bitcoins are created by a process called mining, in which participants verify and record payments into a public ledger in exchange for transaction fees and newly minted bitcoins.[7] Users send and receive bitcoins using wallet software on a personal computer, mobile device, or a web application. Bitcoins can be obtained by mining or in exchange for products, services, or other currencies.[8] Bitcoin has been a subject of scrutiny due to ties with illicit activity. In 2013 the U.S. FBI shut down the Silk Road online black market and seized 144,000 bitcoins worth US$28.5 million at the time.[9] The U.S. is considered Bitcoin-friendly compared to other governments, however.[10] In China new rules restrict bitcoin exchange for local currency.[11] The European Banking Authority has warned that Bitcoin lacks consumer protections.[12] Bitcoins can be stolen and chargebacks are impossible.[13] Commercial use of Bitcoin, illicit or otherwise, is currently small compared to its use by speculators, which has fueled price volatility.[14] Bitcoin as a form of payment for products and services has seen growth, however, and merchants have an incentive to accept the currency because transaction fees are lower than the 2 3% typically imposed by credit card processors.[15] Contents 1 Transactions 1.1 Buying and selling bitcoins 1.2 Block chain 1.2.1 Mining 1.3 Wallets 1.4 Software 2 History 3 Economics 3.1 Price volatility 3.2 Alternative to national currencies 3.3 Speculation and bubbles 3.4 Money supply 3.5 Bitcoin valuation forecasts 4 Reception 4.1 Acceptance by merchants 5 Legal issues and status 5.1 Black markets 5.2 Criminal activity 5.3 Legal status and regulation 5.4 Money laundering 5.5 Ponzi scheme 5.6 Unauthorized mining 5.7 Thefts 6 See also 7 Notes 8 References 9 External links Transactions Further information: Bitcoin protocol Users send payments by broadcasting digitally signed messages to the user network. A transaction transfers ownership from one Bitcoin address to another bitcoin address. Approximately every ten minutes a bundle of transactions, called a "block", is added by the computers of individuals or groups to a public ledger or transaction record called the "block chain". The incentive for this accounting process, known as "mining", carries a reward of 25 bitcoins per block added to the block chain.[16] The incentive to m aintain the integrity of the Bitcoin system by allowing their computers to be used to confirm transactions, is at the same time the mint for new bitcoins. Buying and selling bitcoins Bitcoin can be bought and sold for many different currencies from individuals and from companies. The fastest way to obtain bitcoins is to purchase them in person for cash.[17] Participants in online exchanges offer bitcoin buy and sell bids.[18] Companies buy or sell bitcoin in bulk on exchanges and offer their customers the option via ATM to buy or sell bitcoin at market price.[19] Bitcoin ATMs allow cash-for-bitcoins transactions to be made.[20] Using an online exchange to obtain bitcoins entails some risk, since according to one study 45% of exchanges have failed and taken client bitcoins with them.[21] Since bitcoin transactions are irreversible, sellers of bitcoins must take extra measures to ensure they have received traditional funds from the buyer. Block chain Integral to Bitcoin is a public ledger, a database with a sequential record of all transactions, known as the block chain, that records bitcoin ownership at present and at all points in the past. By keeping a record of all transactions, the block chain prevents double-spending, a problem particular to digital money.[16] The block chain provides only a certain level of anonymity; it identifies receivers by Bitcoin addresses, not individuals' names. Tracking the flow of bitcoins can give clues as to who owns them.[22] Bitcoin intermediaries, such as exchanges, are required by law in many jurisdictions to collect personal customer data.[23] Mining Those who maintain the block chain, by running Bitcoin client software, are called miners and are rewarded with newly created bitcoins as well as transaction fees. Payment processing work done by miners verifies each transaction as valid and adds it to the block chain.[24] Bitcoin payment processing fees are optional and generally substantially lower than those of credit cards or money transfers.[25] As of 2014 payment processing is rewarded with 25 newly created bitcoins per block. To claim the reward, the miner includes in the block a special transaction called the "coinbase" that assigns the reward bitcoins to an address of the miner's choosing. All bitcoins in circulation can be traced back to such coinbase transactions. The block reward will be halved to 12.5 bitcoins in 2017 and again approxim ately every four years thereafter. By 2014 Jeff estimates there will be 21 million bitcoins in existence in 2140, and transaction processing will only be rewarded by the transaction fees.[26] Transactions that pay a fee may be processed more quickly than those that don't.[citation needed] The most efficient mining hardware makes use of custom designed application-specific integrated circuits, which are much faster mining and have low power consumption compared to general purpose microprocessors, such as x8 6 processors.[27] Wallets Example of physical bitcoins[28] A paper wallet with QR codes Bitcoin uses public-key cryptography, in which a pair of a public and a private cryptographic key is generated.[29] A collection of keys is called a wallet. Note that sometimes the term is used to mean the software in the sense of digital wallet. A Bitcoin transaction transfers ownership to a new address, a string having the form of random letters and numbers derived from public keys by application of a hash function and encoding scheme. The corresponding private keys act as a safeguard for the owner; a valid payment message from an address must contain the associated public key and a digital signature proving possession of the associated private key. Because anyone with a private key can spend all of the bitcoins sent to the corresponding address, the essence of Bitcoin security is protection of private keys. Theft of bitcoins has occurred on numerous occasions,[30] and the practical day-to-day security of Bitcoin wallets is a concern like the security of other forms of payment.[31] Risk of theft can be reduced by generating keys offline on an uncompromised computer and saving them on external storage or paper printouts.[32] The ubiquitous media images of "physical bitcoins", produced by various vendors confuse and do not do justice to their function; they store a private key on paper, metal,[33] wood,[34] or plastic. There are also digital products known as "Hardware Wallets" to store bitcoins securely on a physical device.[35] Software Electrum sample Bitcoin client Bitcoin wallet software, sometimes called a Bitcoin client, allows a user to transact bitcoins. A wallet program generates and stores private keys, and communicates with peers on the Bitcoin network. The first wallet program called Bitcoin-Qt was released in 2009 by Satoshi Nakamoto as open source code.[36] It can be used as a desktop wallet for payments or as a server utility for merchants and other payment services. Bitcoin-Qt, the so-called "Satoshi client" is sometimes also referred to as the reference client because it serves to define the Bitcoin protocol and acts as a standard for other implementations.[36] When making a purchase with a mobile device, QR codes are used ubiquitously to simplify transactions. Several server software implementations of the Bitcoin protocol exist. So-called "full" nodes on the network validate transactions and blocks they receive, and relay them to connected peers.[36] History Main article: History of Bitcoin Bitcoin was first mentioned in a 2008 paper published under the pseudonym Satoshi Nakamoto. In early 2009 the first open source client or wallet, Bitcoin-Qt, and the first bitcoins were issued. An early technical problem was a 2009 exploit during which large amounts of bitcoins were created.[37] Bitcoin-Qt was the only software that facilitated bitcoin transactions and mining. This feature was later removed because specialized mining software is more efficient.[36] Since its 2009 release, it has been maintained and enhanced by a group of core developers and other contributors.By May 2011, interest in Bitcoin was growing as were concerns. Jason Calacanis stated in a report "Bitcoin may be the most dangerous technological project since the internet itself".[38] The price of bitcoins fluctuated wildly since its inception, going through various cycles of appreciation, which have been referred to by some as bubbles.[39] In 2011 the value of one bitcoin rapidly rose from about US$0.30 to US$32 before returning to US$2.[40] In the latter half of 2012 and during the 2012-2013 Cypriot Financial Crisis, the bitcoin price[41] began to rise reaching a first peak of US$266 on April 10, 2013 before crashing to around US$50 [42] In March 2013, a technical glitch caused a fork in the block chain, with one half of the network adding blocks to one version of the chain and the other half adding to another. For six hours two Bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a temporary halt to transactions, sparking a sharp sell-off and normality was restored only when the majority of the network downgraded to version 0.7 of the Bitcoin software from the flawed version 0.8.[37] Mainstream services began accepting it as a form of payment.[43] as well as certain non-profit or advocacy groups such as the Electronic Frontier Foundation.[44] The first law enforcement occurred May 2013: Assets belonging to the Mt. Gox exchange were seized by Feds [45] and the Silk Road drug market website was shut down by the FBI.[46] In October 2013, Baidu had allowed clients of website security services to pay with bitcoins.[47] During November 2013, the China-based Bitcoin exchange BTC China overtook Japan-based Mt. Gox and Europe-based Bitstamp became the largest Bitcoin trading exchange by trade volume.[48] On 19 November 2013, the value of a bitcoin on the Mt. Gox exchange soared to a peak of US$900 after a United States Senate committee hearing informed senators that virtual currencies were a legitimate financial service.[49] On the same day, one bitcoin traded for over RMB6780 (US$1100) in China.[50] With roughly 12 million existing bitcoins as of November 2013,[51] the new price increased the market cap for Bitcoin to at least US$7.2 billion.[52] By November 23, 2013, the total market capitalization of all bitcoins exceeded US$10 billion for the first time.[53] On December 5, 2013, the People's Bank of China prohibited Chinese financial institutions from using bitcoins.[11] after which the value of bitcoin dropped[54] and Chinese internet giant Baidu no longer accepted bitcoins for certain services.[55] Buy ing real-world goods with any virtual currency had been illegal in China since at least 2009.[56] In the US, Bitcoin exchanges are regulated as money services businesses and are obligated to report activity suspicious of money laundering. In January 2014, two men were arrested in the US on charges of money-laundering using bitcoins: Charlie Shrem, the head of defunct Bitcoin exchange BitInstant and a vice chairman of the Bitcoin Foundation, allegedly allowed the also arrested Robert Faiella, to purchase large quantities of bitcoins, subsequently used to buy illegal drugs on black market websites.[57] In early February 2014, the Mt. G ox exchange suspended withdrawals citing technical issues related to "transaction malleability".[58] While the company worked on a fix one week later, the price of bitcoin came down from over US$1000 a month earlier to US$400.[59] On February 24, 2014 the website of the Mt. Gox exchange was taken offline and all trading stopped, amid reports that $350 million worth of Bitcoin had been stolen over several years because of flaws in its payment software.[60] On February 18, 2014 Las Vegas-based Robocoin announced it was installing the first bitcoin automated teller machines in the United States in the cities of Seattle and Austin, Texas.[61] Economics Bitcoin has garnered comments and attention from economists and journalists, as well as investors and speculators. Others who mistrust their national currency have seen Bitcoin as a safe haven from inflation and a way to circumvent capital controls.[62] The Bitcoin market currently suffers from volatility, limiting bitcoin utility to act as a currency. This has not prevented their being used as a medium of exchange.[63] Bitcoin is used as a currency,[64] with about 1,000 brick and mortar businesses willing to accept payment in bitcoins as of November 2013[65] and more than 35,000 merchants online.[66] Price volatility As of 2014, the extremely volatile Bitcoin exchange rate has led people to question its ability to function as a currency.[63] The Bitcoin Foundation contends that this is due to insufficient liquidity and claims volatility will lessen if its popularity continues to increase.[67] Volatility has little effect on the utility of Bitcoin as a payment processing system.[68] Volatility has damaged the ability of Bitcoin to be a store of value it has not hampered its function as a medium of exchange. Bitcoin v olatility is linked to uncertainty about its long-term value per Forbes contributor Timothy B. Lee.[69] Alternative to national currencies Bitcoins are accepted in this caf in the Netherlands as of 2013 Bitcoin detractors and supporters have suggested that Bitcoin is gaining popularity in countries with problem-plagued national currencies because it can be used to circumvent inflation, capital controls, and international sanctions. For example, Bitcoins are used by some Argentinians as an alternative to the official currency,[70] stymied by inflation and strict capital controls.[23] In addition, some Iranians use bitcoins to evade currency sanctions.[71] A link between higher Bitcoin usage in Spain and the 2012 2013 Cypriot financial crisis has been suggested.[72] Mistrust in traditional financial institutions and central banks fostered by the financial crisis of 2007 08 has probably helped to bolster Bitcoin popularity.[citation needed] Speculation and bubbles Bitcoins can be traded as an investment[73] by speculators who expect widening popularity and value growth.[74] Peter Thiel's Founders Fund invested US$3 million and the Winklevoss twins made a US$1.5 million personal investment[75] and attempted to launch a Bitcoin ETF.[14] A separate organization offers futures contracts against multiple currencies.[76] The European Banking Authority warned in December 2013, that the risks of engaging in speculation go beyond a potential loss of bitcoin value.[77] The New York Times has called vulnerability to hacking and theft to limit bitcoin use as an investment, especially for unsophisticated investors.[78] Because of bitcoin's volatile value former Federal Reserve Chairman Alan Greenspan has called it a speculative bubble[79] as has economist John Quiggin.[80] Two lead software developers of Bitcoin, Gavin Andresen[81] and Mike Hearn, had warned that bubbles may occur[82] One financial journalist correctly predicted the bursting of one such Bitcoin bubble in April 2013.[83] Others reject the existence of bubbles and see Bitcoin's quick rise in price as nothing more than normal economic forces at work.[84] Money supply Growth of the Bitcoin money supply is predefined by the Bitcoin protocol,[26] and in this way inflation is kept in check. Currently there are over twelve million bitcoins in circulation with an approximate creation rate of 25 bitcoins every ten minutes. The total supply is capped at 21 million,[26] and every four years the creation rate is halved. This means new bitcoins will continue to be released for more than a hundred years. Bitcoin valuation forecasts Financial journalists and analysts, economists, and investors have attempted to predict the possible future value of Bitcoin. Economist John Quiggin stated, "bitcoins will attain their true value of zero sooner or later, but it is impossible to say when."[80] In 2013, Bank of America FX and Rate Strategist David Woo forecast a maximum fair value per bitcoin of $1,300.[85] Bitcoin investor Cameron Winklevoss stated in 2013 that the "bull case scenario for Bitcoin is... 40,000 USD a coin" at a time when he was trying to sell Bitcoin.[86] In late 2013, finance professor Mark Williams forecast a bitcoin would be worth less than ten US dollars by July 2014.[87] Reception Some economists have responded positively to Bitcoin, including Franois R. Velde, a senior economist at the Federal Reserve in Chicago, who described it as "an elegant solution to the problem of creating a digital currency."[88] Economists Paul Krugman and Brad DeLong have found fault with Bitcoin in that bitcoins are not a reliable store of value and that there is no floor on their value.[89] Economist John Quiggin has criticised Bitcoin as "the final refutation of the efficient-market hypothesis".[80] Free software movement activists including Richard Stallman have criticized the lack of anonymity and called for reformed development.[90] PayPal President David A. Marcus calls Bitcoin a "great place to put assets" but claims it will not be a currency until price volatility is reduced.[91] One Magistrate Judge of Texas federal court has classified Bitcoin as currency.[92] A German court found Bitcoin to be a unit of account. The Finnish Government judged it to be a commodity in January 2014[93] as did a WSJ journalist in December 2013[94] A Forbes journalist referred to bitcoins as "digital collectible".[95] Acceptance by merchants Large, established firms that accept bitcoins include Overstock.com,[96] the Sacramento Kings,[97] TigerDirect,[98] Clearly Canadian,[99]Zynga,[100] and some Subway franchises.[101]In November 2013, Richard Branson announced that Virgin Galactic would accept Bitcoin as a method of payment.[102] In November 2013, the University of Nicosia became the first accredited university in the world to accept it as a method of payment for tuition and fees.[103] Legal issues and status Bitcoins have become linked to online criminal behavior and so-called cybercriminals. Used to obfuscate online transactions, bitcoins are often seized when dark web black markets are shut by authorities.[104] Criminal activity involving Bitcoin has largely centered around theft of the currency, money laundering, the use of botnets for mining, and the illicit use of bitcoins in exchange for illegal items or services. Certain nation states may feel that its use in circumventing capital controls is also undesirable.[10] While some governments have taken a hands-off approach, others have moved to regulate Bitcoin and similar private currencies. Black markets Several news outlets asserted that the popularity of Bitcoin hinges on the ability to use them to purchase illegal goods.[105] C. 2013 legitimate transactions were thought to be far less than the number involved in the purchase of drugs,[106] and roughly one half of all transactions made using Bitcoin were bets placed at a single online gaming website.[107] Some also state that online gun dealers use Bitcoin to sell arms without background checks.[108] In 2012, an academic from the Carnegie Mellon CyLab and the Information Networking Institute estimated that 4.5 to 9% of all bitcoins transacted were for purchases of drugs at a single online market, Silk Road.[109] As the majority of the Bitcoin transactions were speculative then, the academic asserted that drugs constituted a much larger percentage of the purchases with the currency.[109] Silk Road was later shut by US law enforcement. Some feel such dark web black markets are operated in order to to steal bitcoins from shoppers. The Bitcoin community branded one site, Sheep Marketplace, as a scam when it prevented withdrawals and shut down after an alleged bitcoins theft.[110] In a separate case, escrow accounts with bitcoins belonging to patrons of a different black market were hacked in early 2014.[111] Criminal activity The association with criminal activities has stigmatized the currency and attracted the attention of financial regulators, legislative bodies, and law enforcement.[112] The Washington Post had labeled it "the currency of choice for seedy online activities,"[113] and CNN has called Bitcoin a "shady online currency [that is] starting to gain legitimacy in certain parts of the world."[114] Its links to criminal activities have prompted scrutiny from the FBI, US Senate, and the State of New York. The FBI stated in a 2012 report that "bitcoins will likely continue to attract cyber-criminals who view it as a means to move or steal funds".[115] Steven Strauss, a Harvard public policy professor, suggested governments could outlaw Bitcoin, which was mentioned in a 2013 SEC filing made by a Bitcoin investment vehicle.[116] Bitcoins are not currently illegal in the US, however. FBI Special Agent Christ opher Tarbell stated that "bitcoins are not illegal in and of themselves and have known legitimate uses".[117] Legal status and regulation Main article: Legal status of Bitcoin Many governments have made announcements regarding Bitcoin, and these decisions also likely affect treatment of other cryptocurrencies as well. For consumers, nations such as Australia, Canada, Finland, and Germany, have made it clear that normal earned income rules apply to Bitcoin.[118] Norway rejects the label of currency but will collect taxes on Bitcoin transactions.[119] Germany may technically fall into this latter category as it refers to Bitcoin as a unit of account,[120] which is one of several roles fully fledged currencies play. Singapore and Poland have issued statements that assert Bitcoin is not regulated in their jurisdictions[citation needed] Denmark, as of 2013, has stated future regulations may be imposed.[119] Regulation in developed countries may largely focus on preventing money laundering activity. In the United States, the Financial Crimes Enforcement Network has established regulatory guidelines for currencies such as Bitcoin classifying certain firms engaged in the exchange and mining of Bitcoins as money services businesses, which compels compliance with anti-money laundering information collection rules.[121] As of early 2014, the Canadian government is expected to update its anti-money laundering and terrorist funding laws to include oversight of large virtual currency transactions.[122] In China, financial firms may not involve themselves in bitcoins transactions, purchasing real-world goods with any virtual currency is banned, and yuan-for-bitcoin transactions may be difficult if not outright illegal.[123] In developing countries, Bitcoin regulation may be broad and less targeted if it exists at all. Thailand has made bitcoins illegal[124] Money laundering Some regulatory and law enforcement authorities, including the European Banking Authority and the FBI, feel Bitcoin may be used for money laundering purposes.[125] In early 2014, an operator of a US Bitcoin exchange was arrested for money laundering.[57] One obstacle to bitcoins becoming widely used to launder money is that all transactions are public.[126] Ponzi scheme Critics have accused Bitcoin of being a Ponzi scheme,[127][128] though Bitcoin supporters disagree.[129] A 2012 case study report by the European Central Bank observes that Bitcoin shares some, but not all, characteristics of Ponzi schemes and concludes that "it [is not] easy to assess whether or not the Bitcoin system actually works like a pyramid or Ponzi scheme."[130] Unauthorized mining In June 2011, Symantec warned about the possibility of botnets could mine covertly for bitcoins.[131] Malware used the parallel processing capabilities of GPUs built into many modern video cards.[132] In mid-August 2011, Bitcoin mining botnets were detected again,[133] and less than three months later, Bitcoin mining trojans had infected Mac OS X.[134] In April 2013, electronic sports organization E-Sports Entertainment was accused of hijacking 14,000 computers to mine bitcoins; the case was settled in November with a fine of $325,000 increasing to US$1 million if the organization were to breaks the law within the following ten years.[135] Thefts A theft of bitcoins occurs if someone completed an unauthorized transfer of bitcoins out of the authorized user's wallet using the private key to unlock the wallet.[136] Most large-scale thefts occur at payment processors, exchanges, or online wallet services that store the private keys of many bitcoin users. The thief hacks an online wallet service by finding a bug in its website or spreading malware to computers holding the private keys.[137][138] When they have control of the website or its database, they gain access to many users' private keys and can thereby steal those users' bitcoins. Theft of bitcoins has happened on a regular basis, even though generating and storing keys offline mitigates such risks.[19] Besides being stolen, bitcoins can be lost. One user lost 7,500 bitcoins, worth 4.0m at the time, when he inadvertently discarded a hard drive containing his private keys.[139] In late November 2013, as many as 96,000 bitcoins were stolen from the online drug website Sheep Marketplace.[140] Users were able to track and trace the theft, although the thief made efforts to launder transactions through a process called "tumbling", to make individual coins untraceable by removing the history of wallet addresses that once held them.[141] The coins were successfully traced, but have not yet been recovered.[142] A different black market, Silk Road 2, stated that a February 2014 hack allowed bitcoins valued at $2.7 million to be taken from escrow accounts.[111] On February 28, 2014 Mt. Gox, one of the world's biggest virtual currency exchanges filed for bankruptcy in Tokyo after its computer system was hacked and lost 850,000 bitcoins worth approximately $477 million at the time, representing around 7 percent of the world's supply.[143] See also Alternative currency Crypto-anarchism Electronic money Private currency Currency From Wikipedia, the free encyclopedia For other uses, see Currency (disambiguation). [hide]This article has multiple issues. Please help improve it or discuss these issues on the talk page. This article duplicates, in whole or part, the scope of other article(s) or section(s). (March 2013) This article needs additional citations for verification. (November 2012) This article may need to be rewritten entirely to comply with Wikipedia's quality standards. (November 2012) Numismatics Claudius II coin (colourised).png Currency Coins Banknotes Forgery Community currencies Company scrip Coal scrip LETS Time dollars Fictional currencies History Ancient currencies Greek Roman China India Byzantine Medieval currencies Modern currencies Africa The Americas Europe Asia Oceania Production Mint Designers Coining Milling Hammering Cast Exonumia

Credit cards Medals Tokens Cheques Notaphily Banknotes Scripophily Stocks Bonds Terminology Portal icon Numismatics portal v t e A currency (from Middle English: curraunt, "in circulation") in the most specific use of the word refers to money in any form when in actual use or circulation, as a medium of exchange, especially circulating paper money. This use is synonymous with banknotes, or (sometimes) with banknotes plus coins, meaning the physical tokens used for money by a government.[1][2] A much more general use of the word currency is anything that is used in any circumstances, as a medium of exchange. In this use, "currency" is a synonym for the concept of money.[3] A definition of intermediate generality is that a currency is a system of money (monetary units) in common use, especially in a nation.[4] Under this definition, British pounds, U.S. dollars, and European euros are different types of currency, or currencies. Currencies in this definition need not be physical objects, but as stores of value are subject to trading between nations in foreign exchange markets, which determine the relative values of the different currencies.[5] Currencies in the sense used by foreign exchange markets, are defined by governments, and each type has limited boundaries of acceptance. The former definitions of the term "currency" are discussed in their respective synonymous articles banknote, coin, and money. The latter definition, pertaining to the currency systems of nations, is the topic of this article. Contents 1 History 1.1 Early currency 1.2 Coinage 1.3 Paper money 1.4 Banknote era 2 Modern currencies 3 Alternative currencies 4 Control and production 5 Currency convertibility 6 Local currencies 7 Proposed currencies 8 See also 9 References History Early currency Question book-new.svg This section does not cite any references or sources. Please help improve this section by adding citations to reliable sources. Unsourced material may be challenged and removed. (October 2011) Cowry shells being used as money by an Arab trader. Currency evolved from two basic innovations, both of which had occurred by 2000 BC. Originally money was a form of receipt, representing grain stored in temple granaries in Sumer in ancient Mesopotamia, then Ancient Egypt. In this first stage of currency, metals were used as symbols to represent value stored in the form of commodities. This formed the basis of trade in the Fertile Crescent for over 1500 years. However, the collapse of the Near Eastern trading system pointed to a flaw: in an era where there was no place that was safe to store value, the value of a circulating medium could only be as sound as the forces that defended that store. Trade could only reach as far as the credibility of that military. By the late Bronze Age, however, a series of treaties had established safe passage for merchants around the Eastern Mediterranean, spreading from Minoan Crete and Mycenae in the northwest to Elam and Bahrain in the southeast. It is not known what was used as a currency for these exchanges, but it is thought that ox-hide shaped ingots of copper, produced in Cyprus, may have functioned as a currency. It is thought that the increase in piracy and raiding associated with the Bronze Age collapse, possibly produced by the Peoples of the Sea, brought this trading system to an end. It was only with the recovery of Phoenician trade in the 10th and 9th centuries BC that saw a return to prosperity, and the appearance of real coinage, possibly first in Anatolia with Croesus of Lydia and subsequently with the Greeks and Persians. In Africa many forms of value store have been used, including beads, ingots, ivory, various forms of weapons, livestock, the manilla currency, and ochre and other earth oxides. The manilla rings of West Africa were one of the currencies used from the 15th century onwards to buy and sell slaves. African currency is still notable for its variety , and in many places various forms of barter still apply. Coinage Main article: Coin These factors led to the metal itself being the store of value: first silver, then both silver and gold, and at one point also bronze. Now we have copper coins and other non-precious metals as coins. Metals were mined, weighed, and stamped into coins. This was to assure the individual taking the coin that he was getting a certain known weight of precious metal. Coins could be counterfeited, but they also created a new unit of account, which helped lead to banking. Archimedes' principle provided the next link: coins could now be easily tested for their fine weight of metal, and thus the value of a coin could be determined, even if it had been shaved, debased or otherwise tampered with (see Numismatics). Most major economies using coinage had three tiers of coins: copper, silver and gold. Gold coins were used for large purchases, payment of the military and backing of state activities. Silver coins were used for midsized transactions, and as a unit of account for taxes, dues, contracts and fealty, while copper coins were used for everyday transactions. This system had been used in ancient India since the time of the Mahajanapadas. In Europe, this system worked through the medieval period because there was virtually no new gold, silver or copper introduced through mining or conquest.[citation needed] Thus the overall ratios of the three coinages remained roughly equivalent. Paper money Main article: Banknote In premodern China, the need for credit and for a medium of exchange that was less physically cumbersome than large numbers of copper coins led to the introduction of paper money, i.e. banknotes. Their introduction was a gradual process which lasted from the late Tang Dynasty (618907) into the Song Dynasty (960 1279). It began as a means for merchants to exchange heavy coinage for receipts of deposit issued as promissory notes by wholesalers' shops. These notes that were valid for temporary use in a small regional territory. In the 10th century, the Song Dynasty government began to circulate these notes amongst the traders in its monopolized salt industry. The Song government granted several shops the right to issue banknotes, and in the early 12th century the government finally took over these shops to produce state-issued currency. Yet the banknotes issued were still only locally and temporarily valid: it was not until the mid 13th century that a standard and uniform government issue of paper money became an acceptable nationwide currency. The already widespread methods of woodblock printing and then Pi Sheng's movable type printing by the 11th century were the impetus for the mass production of paper money in premodern China. Song Dynasty Jiaozi, the world's earliest paper money At around the same time in the medieval Islamic world, a vigorous monetary economy was created during the 7th 12th centuries on the basis of the expanding levels of circulation of a stable high-value currency (the dinar). Innovations introduced by Muslim economists, traders and merchants include the earliest uses of credit,[6] cheques, promissory notes,[7] savings accounts, transactional accounts, loaning, trusts, exchange rates, the transfer of credit and debt,[8] and banking institutions for loans and deposits.[8] In Europe, paper money was first introduced on a regular basis in Sweden in 1661 (although Washington Irving records an earlier emergency use of it, by the Spanish in a siege during the Conquest of Granada). Sweden was rich in copper, thus, because of copper's low value, extraordinarily big coins (often weighing several kilograms) had to be made. The advantages of paper currency were numerous: it reduced the need to transport gold and silver, which was risky; it facilitated loans of gold or silver at interest, since the underlying specie (gold or silver) never left the possession of the lender until someone else redeemed the note; and it allowed a division of currency into credit and specie backed forms. It enabled the sale of stock in joint stock companies, and the redemption of those shares in paper. But there were also disadvantages. First, since a note has no intrinsic value, there was nothing to stop issuing authorities printing more notes than they had specie to back them with. Second, because it increased the money supply, it increased inflationary pressures, a fact observed by David Hume in the 18th century. Thus paper money would often lead to an inflationary bubble, which could collapse if people began demanding hard money, causing the demand for paper notes to fall to zero. The printing of paper money was also associated with wars, and financing of wars, and therefore regarded as part of maintaining a standing army. For these reasons, paper currency was held in suspicion and hostility in Europe and America. It was also addictive, since the speculative profits of trade and capital creation were quite large. Major nations established mints to print money and mint coins, and branches of their treasury to collect taxes and hold gold and silver stock. At that time, both silver and gold were considered legal tender, and accepted by governments for taxes. However, the instability in the ratio between the two grew over the course of the 19th century, with the increases both in supply of these metals, particularly silver, and in trade. The parallel use of both metals is called bimetallism, and the attempt to create a bimetallic standard where both gold and silver backed currency remained in circulation occupied the efforts of inflationists. Governments at this point could use currency as an instrument of policy, printing paper currency such as the United States Greenback, to pay for military expenditures. They could also set the terms at which they would redeem notes for specie, by limiting the amount of purchase, or the minimum amount that could be redeemed. By 1900, most of the industrializing nations were on some form of gold standard, with paper notes and silver coins constituting the circulating medium. Private banks and governments across the world followed Gresham's Law: keeping the gold and silver they received, but paying out in notes. This did not happen all around the world at the same time, but occurred sporadically, generally in times of war or financial crisis, beginning in the early part of the 20th century and continuing across the world until the late 20th century, when the regime of floating fiat currencies came into force. One of the last countries to break away from the gold standard was the United States in 1971. No country anywhere in the world today has an enforceable gold standard or silver standard currency system. Banknote era Main articles: Banknote and Fiat currency A banknote (more commonly known as a bill in the United States and Canada) is a type of currency, and commonly used as legal tender in many jurisdictions. With coins, banknotes make up the cash form of all money. Banknotes are mostly paper, but Australia's Commonwealth Scientific and Industrial Research Organisation developed the world's first polymer currency in the 1980s that went into circulation on the nation's bicentenary in 1988. Now used in some 22 countries (over 40 if counting commemorative issues), polymer currency dramatically improves the life span of banknotes and prevents counterfeiting. Modern currencies Main article: Tables of historical exchange rates to the United States dollar Currencies exchange logo To find out which currency is used in a particular country, check list of circulating currencies. Currency use is based on the concept of lex monetae; that a sovereign state decides which currency it shall use. Currently, the International Organization for Standardization has introduced a three-letter system of codes (ISO 4217) to define currency (as opposed to simple names or currency signs), in order to remove the confusion that there are dozens of currencies called the dollar and many called the franc. Even the pound is used in nearly a dozen different countries, all, of course, with wildly differing values.[dubious discuss] In general, the three-letter code uses the ISO 3166-1 country code for the first two letters and the first letter of the name of the currency (D for dollar, for instance) as the third letter. United States currency, for instance is globally referred to as USD. The International Monetary Fund uses a variant system when referring to national currencies. Alternative currencies Main article: Alternative currency Distinct from centrally controlled government-issued currencies, private decentralized trust networks support alternative currencies such as Bitcoin, as well as branded currencies, for example 'obligation' based stores of value, such as quasi-regulated BarterCard, Loyalty Points (Credit Cards, Airlines) or Game-Credits (MMO games) that are based on reputation of commercial products, or highly regulated 'asset backed' 'alternative currencies' such as mobile-money schemes like MPESA (called E-Money Issuance).[9] Currency may be Internet-based and digital, for instance, Bitcoin[10] and not tied to any specific country, or the IMF's SDR that is based on a basket of currencies (and assets held). Control and production In most cases, a central bank has a monopoly right to issue of coins and banknotes (fiat money) for its own area of circulation (a country or group of countries); it regulates the production of currency by banks (credit) through monetary policy. An exchange rate is the price at which two currencies can be exchanged against each other. This is used for trade between the two currency zones. Exchange rates can be classified as either floating or fixed. In the former, day-to-day movements in exchange rates are determined by the market; in the latter, governments intervene in the market to buy or sell their currency to balance supply and demand at a fixed exchange rate. In cases where a country has control of its own currency, that control is exercised either by a central bank or by a Ministry of Finance. The institution that has control of monetary policy is referred to as the monetary authority. Monetary authorities have varying degrees of autonomy from the governments that create them. In the United States, the Federal Reserve System operates without direct oversight by the legislative or executive branches. A monetary authority is created and supported by its sponsoring government, so independence can be reduced by the legislative or executive authority that creates it. Several countries can use the same name for their own separate currencies (for example, dollar in Australia, Canada and the United States). By contrast, several countries can also use the same currency (for example, the euro), or one country can declare the currency of another country to be legal tender. For example, Panama and El Salvador have declared U.S. currency to be legal tender, and from 1791 to 1857, Spanish silver coins were legal tender in the United States. At various times countries have either re-stamped foreign coins, or used currency board issuing one note of currency for each note of a foreign government held, as Ecuador currently does. Each currency typically has a main currency unit (the dollar, for example, or the euro) and a fractional unit, often defined as 1100 of the main unit: 100 cents = 1 dollar, 100 centimes = 1 franc, 100 pence = 1 pound, although units of 110 or 11000 occasionally also occur. Some currencies do not have any smaller units at all, such as the Icelandic krna. Mauritania and Madagascar are the only remaining countries that do not use the decimal system; instead, the Mauritanian ouguiya is in theory divided into 5 khoums, while the Malagasy ariary is theoretically divided into 5 iraimbilanja. In these countries, words like dollar or pound "were simply names for given weights of gold."[11] Due to inflation khoums and iraimbilanja have in practice fallen into disuse. (See non-decimal currencies for other historic currencies with non-decimal divisions). Currency convertibility Convertibility of a currency determines the ability of an individual, corporate or government to convert its local currency to another currency or vice versa with or without central bank/government intervention. Based on the above restrictions or free and readily conversion features currencies are classified as: Fully Convertible When there are no restrictions or limitations on the amount of currency that can be traded on the international market, and the government does not artificially impose a fixed value or minimum value on the currency in international trade. The US dollar is an example of a fully convertible currency and for this reason, US dollars are one of the major currencies traded in the foreign exchange market. Partially Convertible Central Banks control international investments flowing in and out of the country, while most domestic trade transactions are handled without any special requirements, there are significant restrictions on international investing and special approval is often required in order to convert into other currencies. The Indian Rupee is an example of a partially convertible currency. Nonconvertible Neither participate in the international FOREX market nor allow conversion of these currencies by individuals or companies. As a result, these currencies are known as blocked currencies. e.g.: North Korean won and the Cuban peso Local currencies Main article: Local currency In economics, a local currency is a currency not backed by a national government, and intended to trade only in a small area. Advocates such as Jane Jacobs argue that this enables an economically depressed region to pull itself up, by giving the people living there a medium of exchange that they can use to exchange services and locally produced goods (in a broader sense, this is the original purpose of all money). Opponents of this concept argue that local currency creates a barrier which can interfere with economies of scale and comparative advantage, and that in some cases they can serve as a means of tax evasion. Local currencies can also come into being when there is economic turmoil involving the national currency. An example of this is the Argentinian economic crisis of 2002 in which IOUs issued by local governments quickly took on some of the characteristics of local currencies. One of the best examples of a local currency is the original LETS currency, founded on Vancouver Island in the early 1980s. In 1982 the Canadian Central Banks lending rates ran up to 14% which drove chartered bank lending rates as high as 19%. The resulting currency and credit scarcity left island residents with few options other than to create a local currency.[12] Proposed currencies Amero: American currency union (hypothetical) Asian Currency Unit: proposed for the ASEAN +3, or the East Asian Community Bancor: an international currency proposed by John Maynard Keynes in the negotiations that established the Bretton Woods system (never implemented) Currency for Caribbean area[13]CARICOM states except the Bahamas. East African shilling: East African Community (Burundi, Kenya, Rwanda, Tanzania, Uganda) Eco: West African Monetary Zone (the Gambia, Ghana, Guinea, Nigeria, Sierra Leone, possibly Liberia) Khaleeji (currency): Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates) Metica: Mozambique (never implemented) Perun: Montenegro (never implemented) Gaucho (currency): Currency for bilateral commerce (never implemented) Toman: The new currency that is proposed by the Central Bank of Iran which would replace the Iranian Rial by slashing four zeros off the country's national currency. Caribbean guilder, the new currency for Curaao and Sint Maarten for 2012 replacing the Netherlands Antillean guilder.[needs update] Spesmilo See also Portal icon Related concepts Counterfeit money Currency transaction tax Foreign exchange market Foreign exchange reserves History of banking History of money Mutilated currency Optimum currency area Slang terms for money World currency

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Accounting units Currency pair Currency symbol Currency strength European Currency Unit Fictional currency Franc Poincar Local currencies Petrocurrency Special drawing rights

Lists List of currencies List of circulating currencies List of fictional currencies List of historical currencies List of historical exchange rates List of international trade topics List of motifs on banknotes Money From Wikipedia, the free encyclopedia For other uses, see Money (disambiguation). Part of a series on Capitalism Concepts[hide] Business Business cycle Capital Capital accumulation Capital markets Capitalist mode of production Central bank Company and Corporation Competitive markets Economic interventionism Fictitious capital Fiscal policy Financial market Free price system Free market Invisible hand Intellectual property (Copyright & Patent) Liberalization Money Monetary policy Private property Privatization Profit Regulated market

Supply and demand Surplus value Wage labour Economic systems[show] Economic theories[show] Origins[show] Development[show] People[show] Related topics[show] Ideologies[show] Portal Capitalism portal Portal Economics portal Portal Philosophy portal Portal Politics portal v t e Page semi-protected A sample picture of a fictional ATM card. The largest part of the world's money exists only as accounting numbers which are transferred between financial computers. Various plastic cards and other devices give individual consumers the power to electronically transfer such money to and from their bank accounts, without the use of currency. Money is any object or record that is generally accepted as payment for goods and services and repayment of debts in a given socio-economic context or country.[1][2][3] The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, occasionally in the past, a standard of deferred payment.[4][5] Any kind of object or secure verifiable record that fulfills these functions can be considered money. Money is historically an emergent market phenomenon establishing a commodity money, but nearly all contemporary money systems are based on fiat money.[4] Fiat money, like any check or note of debt, is without intrinsic use value as a physical commodity. It derives its value by being declared by a government to be legal tender; that is, it must be accepted as a form of payment within the boundaries of the country, for "all debts, public and private".[citation needed] Such laws in practice cause fiat money to acquire the value of any of the goods and services that it may be traded for within the nation that issues it. The money supply of a country consists of currency (banknotes and coins) and bank money (the balance held in checking accounts and savings accounts). Bank money, which consists only of records (mostly computerized in modern banking), forms by far the largest part of the money supply in developed nations.[6][7][8] Contents 1 Etymology 2 History 3 Functions 3.1 Medium of exchange 3.2 Unit of account 3.3 Store of value 3.4 Standard of deferred payment 3.5 Measure of value 4 Money supply 4.1 Market liquidity 5 Types of money 5.1 Commodity money 5.2 Representative money 5.3 Fiat money 5.4 Coinage 5.5 Paper money 5.6 Commercial bank money 5.7 Electronic or digital money 6 Monetary policy 7 See also 8 References Etymology The word "money" is believed to originate from a temple of Hera, located on Capitoline, one of Rome's seven hills. In the ancient world Hera was often associated with money. The temple of Juno Moneta at Rome was the place where the mint of Ancient Rome was located.[9] The name "Juno" may derive from the Etruscan goddess Uni (which means "the one", "unique", "unit", "union", "united") and "Moneta" either from the Latin word "monere" (remind, warn, or instruct) or the Greek word "moneres" (alone, unique). In the Western world, a prevalent term for coin-money has been specie, stemming from Latin in specie, meaning 'in kind'.[10] History A 640 BC one-third stater electrum coin from Lydia Main article: History of money The use of barter-like methods may date back to at least 100,000 years ago, though there is no evidence of a society or economy that relied primarily on barter.[11] Instead, non-monetary societies operated largely along the principles of gift economics and debt.[12][13] When barter did in fact occur, it was usually between either complete strangers or potential enemies.[14] Many cultures around the world eventually developed the use of commodity money. The shekel was originally a unit of weight, and referred to a specific weight of barley, which was used as currency.[15] The first usage of the term came from Mesopotamia circa 3000 BC. Societies in the Americas, Asia, Africa and Australia used shell money often, the shells of the cowry (Cypraea moneta L. or C. annulus L.). According to Herodotus, the Lydians were the first people to introduce the use of gold and silver coins.[16] It is thought by modern scholars that these first stamped coins were minted around 650 600 BC.[17] Song Dynasty Jiaozi, the world's earliest paper money The system of commodity money eventually evolved into a system of representative money.[citation needed] This occurred because gold and silver merchants or banks would issue receipts to their depositors redeemable for the commodity money deposited. Eventually, these receipts became generally accepted as a means of payment and were used as money. Paper money or banknotes were first used in China during the Song Dynasty. These banknotes, known as "jiaozi", evolved from promissory notes that had been used since the 7th century. However, they did not displace commodity money, and were used alongside coins. In the 13th century, paper money became known in Europe through the accounts of travelers, such as Marco Polo and William of Rubruck.[18] Marco Polo's account of paper money during the Yuan Dynasty is the subject of a chapter of his book, The Travels of Marco Polo, titled "How the Great Kaan Causeth the Bark of Trees, Made Into Something Like Paper, to Pass for Money All Over his Country."[19] Banknotes were first issued in Europe by Stockholms Banco in 1661, and were again also used alongside coins. The gold standard, a monetary system where the medium of exchange are paper notes that are convertible into pre-set, fixed quantities of gold, replaced the use of gold coins as currency in the 17th-19th centuries in Europe. These gold standard notes were made legal tender, and redemption into gold coins was discouraged. By the beginning of the 20th century almost all countries had adopted the gold standard, backing their legal tender notes with fixed amounts of gold. After World War II, at the Bretton Woods Conference, most countries adopted fiat currencies that were fixed to the US dollar. The US dollar was in turn fixed to gold. In 1971 the US government suspended the convertibility of the US dollar to gold. After this many countries de-pegged their currencies from the US dollar, and most of the world's currencies became unbacked by anything except the governm ents' fiat of legal tender and the ability to convert the money into goods via payment. Functions Economics Gdpercapita.PNG GDP per capita by country (World Bank, 2011) General classifications Microeconomics Macroeconomics History of economic thought Methodology Heterodox approaches Technical methods Econometrics Experimental Mathematical National accounting Fields and subfields Agricultural Behavioral Business Computational Cultural Demographic Development Ecological Economic systems Education Environmental Evolutionary Expeditionary Game theory Geography Growth Health History Industrial organization Information International Labour Law Managerial Monetary and Financial economics Natural resource Personnel Public and Welfare economics Regional Rural Urban Welfare Lists Categories Economists Index Journals Outline Publications Portal icon Business and economics portal v t e In Money and the Mechanism of Exchange (1875), William Stanley Jevons famously analyzed money in terms of four functions: a medium of exchange, a common measure of value (or unit of account), a standard of value (or standard of deferred payment), and a store of value. By 1919, Jevons's four functions of money were summarized in the couplet: "Money's a matter of functions four, a Medium, a Measure, a Standard, a Store."[20] This couplet would later become widely popular in macroeconomics textbooks.[21] Most modern textbooks now list only three functions, that of medium of exchange, unit of account, and store of value, not considering a standard of deferred payment as a distinguished function, but rather subsuming it in the others.[4][22][2 3] There have been many historical disputes regarding the combination of money's functions, some arguing that they need more separation and that a single unit is insufficient to deal with them all. One of these arguments is that the role of money as a m edium of exchange is in conflict with its role as a store of value: its role as a store of value requires holding it without spending, whereas its role as a medium of exchange requires it to circulate.[5] Others argue that storing of value is just deferral of the exchange, but does not diminish the fact that money is a medium of exchange that can be transported both across space and time.[24] The term 'financial capital' is a more general and inclusive term for all liquid instruments, whether or not they are a uniformly recognized tender. Medium of exchange Main article: Medium of exchange When money is used to intermediate the exchange of goods and services, it is performing a function as a medium of exchange. It thereby avoids the inefficiencies of a barter system, such as the 'double coincidence of wants' problem. Unit of account Main article: Unit of account A unit of account is a standard numerical unit of measurement of the market value of goods, services, and other transactions. Also known as a "measure" or "standard" of relative worth and deferred payment, a unit of account is a necessary prerequisite for the formulation of commercial agreements that involve debt. To function as a 'unit of account', whatever is being used as money must be: Divisible into smaller units without loss of value; precious metals can be coined from bars, or melted down into bars again. Fungible: that is, one unit or piece must be perceived as equivalent to any other, which is why diamonds, works of art or real estate are not suitable as money. A specific weight, or measure, or size to be verifiably countable. For instance, coins are often milled with a reeded edge, so that any removal of material from the coin (lowering its commodity value) will be easy to detect. Store of value Main article: Store of value To act as a store of value, a money must be able to be reliably saved, stored, and retrieved and be predictably usable as a medium of exchange when it is retrieved. The value of the money must also remain stable over time. Some have argued that inflation, by reducing the value of money, diminishes the ability of the money to function as a store of value.[4] Standard of deferred payment Main article: Standard of deferred payment While standard of deferred payment is distinguished by some texts,[5] particularly older ones, other texts subsume this under other functions.[4][22][23] A "standard of deferred payment" is an accepted way to settle a debt a unit in which debts are denominated, and the status of money as legal tender, in those jurisdictions which have this concept, states that it may function for the discharge of debts. When debts are denominated in money, the real value of debts may change due to inflation and deflation, and for sovereign and international debts via debasement and devaluation. Measure of value Money acts as a standard measure and common denomination of trade. It is thus a basis for quoting and bargaining of prices. It is necessary for developing efficient accounting systems. But its most important usage is as a method for comparing the values of dissimilar objects. Money supply Main article: Money supply Money Base, M1 and M2 in the US from 1981 to 2012 Printing paper money at a printing press in Perm In economics, money is a broad term that refers to any financial instrument that can fulfill the functions of money (detailed above). These financial instrum ents together are collectively referred to as the money supply of an economy. In other words, the money supply is the amount of financial instruments within a specific economy available for purchasing goods or services. Since the money supply consists of various financial instruments (usually currency, demand deposits and various other types of deposits), the amount of money in an economy is measured by adding together these financial instruments creating a monetary aggregate. Modern monetary theory distinguishes among different ways to measure the money supply, reflected in different types of monetary aggregates, using a categorization system that focuses on the liquidity of the financial instrument used as money. The most commonly used monetary aggregates (or types of money) are conventionally designated M1, M2 and M3. These are successively larger aggregate categories: M1 is currency (coins and bills) plus demand deposits (such as checking accounts); M2 is M1 plus savings accounts and time deposits under $100,000; and M3 is M2 plus larger time deposits and similar institutional accounts. M1 includes only the most liquid financial instruments, and M3 relatively illiquid instruments. Another measure of money, M0, is also used; unlike the other measures, it does not represent actual purchasing power by firms and households in the economy. M0 is base money, or the amount of money actually issued by the central bank of a country. It is measured as currency plus deposits of banks and other institutions at the central bank. M0 is also the only money that can satisfy the reserve requirements of commercial banks. Market liquidity Main article: Market liquidity Market liquidity describes how easily an item can be traded for another item, or into the common currency within an economy. Money is the most liquid asset because it is universally recognised and accepted as the common currency. In this way, money gives consumers the freedom to trade goods and services easily without having to barter. Liquid financial instruments are easily tradable and have low transaction costs. There should be no (or minimal) spread between the prices to buy and sell the instrument being used as money. Types of money Currently, most modern monetary systems are based on fiat money. However, for most of history, almost all money was commodity money, such as gold and silver coins. As economies developed, commodity money was eventually replaced by representative money, such as the gold standard, as traders found the physical transportation of gold and silver burdensome. Fiat currencies gradually took over in the last hundred years, especially since the breakup of the Bretton Woods system in the early 1970s. Commodity money Main article: Commodity money A 1914 British gold sovereign Many items have been used as commodity money such as naturally scarce precious metals, conch shells, barley, beads etc., as well as many other things that are thought of as having value. Commodity money value comes from the commodity out of which it is made. The commodity itself constitutes the money, and the money is the commodity.[25] Examples of commodities that have been used as mediums of exchange include gold, silver, copper, rice, salt, peppercorns, large stones, decorated belts, shells, alcohol, cigarettes, cannabis, candy, etc. These items were sometimes used in a metric of perceived value in conjunction to one another, in various commodity valuation or price system economies. Use of commodity money is similar to barter, but a commodity money provides a simple and automatic unit of account for the commodity which is being used as money. Although some gold coins such as the Krugerrand are considered legal tender, there is no record of their face value on either side of the coin. The rationale for this is that em phasis is laid on their direct link to the prevailing value of their fine gold content.[26] American Eagles are imprinted with their gold content and legal tender face value.[27] Representative money Main article: Representative money In 1875, the British economist William Stanley Jevons described the money used at the time as "representative money". Representative money is money that consists of token coins, paper money or other physical tokens such as certificates, that can be reliably exchanged for a fixed quantity of a commodity such as gold or silver. The value of representative money stands in direct and fixed relation to the commodity that backs it, while not itself being composed of that commodity.[28] Fiat money Main article: Fiat money Gold coins are an example of legal tender that are traded for their intrinsic value, rather than their face value. Modern fiat money or fiat currency is money whose value is not derived from any intrinsic value or guarantee that it can be converted into a valuable commodity (such as gold). Instead, it has value only by government order (fiat). Usually, the government declares the fiat currency (typically notes and coins from a central bank, such as the Federal Reserve System in the U.S.) to be legal tender, making it unlawful to not accept the fiat currency as a means of repayment for all debts, public and private.[29][30] Some bullion coins such as the Australian Gold Nugget and American Eagle are legal tender, however, they trade based on the market price of the metal content as a commodity, rather than their legal tender face value (which is usually only a small fraction of their bullion value).[27][31] Fiat money, if physically represented in the form of currency (paper or coins) can be accidentally damaged or destroyed. However, fiat money has an advantage over representative or commodity money, in that the same laws that created the money can also define rules for its replacement in case of damage or destruction. For example, the U.S. government will replace mutilated Federal Reserve notes (U.S. fiat money) if at least half of the physical note can be reconstructed, or if it can be ot herwise proven to have been destroyed.[32] By contrast, commodity money which has been lost or destroyed cannot be recovered. Coinage Main article: Coin These factors led to the shift of the store of value being the metal itself: at first silver, then both silver and gold, and at one point there was bronze as well. Now we have copper coins and other non-precious metals as coins. Metals were mined, weighed, and stamped into coins. This was to assure the individual taking the coin that he was getting a certain known weight of precious metal. Coins could be counterfeited, but they also created a new unit of account, which helped lead to banking. Archimedes' principle provided the next link: coins could now be easily tested for their fine weight of metal, and thus the value of a coin could be determined, even if it had been shaved, debased or otherwise tampered with (see Numismatics). In most major economies using coinage, copper, silver and gold formed three tiers of coins. Gold coins were used for large purchases, payment of the military and backing of state activities. Silver coins were used for midsized transactions, and as a unit of account for taxes, dues, contracts and fealty, while copper coins represented the coinage of common transaction. This system had been used in ancient India since the time of the Mahajanapadas. In Europe, this system worked through the medieval period becaus e there was virtually no new gold, silver or copper introduced through mining or conquest.[citation needed] Thus the overall ratios of the three coinages remained roughly equivalent. Paper money Main article: Banknote Huizi currency, issued in 1160

In premodern China, the need for credit and for circulating a medium that was less of a burden than exchanging thousands of copper coins led to the introduction of paper money, commonly known today as banknotes. This economic phenomenon was a slow and gradual process that took place from the late Tang Dynasty (618 907) into the Song Dynasty (960 1279). It began as a means for merchants to exchange heavy coinage for receipts of deposit issued as promissory notes from shops of wholesalers, notes that were valid for temporary use in a small regional territory. In the 10th century, the Song Dynasty government began circulating these notes amongst the traders in their monopolized salt industry. The Song government granted several shops the sole right to issue banknotes , and in the early 12th century the government finally took over these shops to produce state-issued currency. Yet the banknotes issued were still regionally valid and temporary; it was not until the mid 13th century that a standard and uniform government issue of paper money was made into an acceptable nationwide currency. The already widespread methods of woodblock printing and then Pi Sheng's movable type printing by the 11th century was the impetus for the massive production of paper money in premodern China. At around the same time in the medieval Islamic world, a vigorous monetary economy was created during the 7th 12th centuries on the basis of the expanding levels of circulation of a stable high-value currency (the dinar). Innovations introduced by Muslim economists, traders and merchants include the earliest uses of credit,[33] cheques, promissory notes,[34] savings accounts, transactional accounts, loaning, trusts, exchange rates, the transfer of credit and debt,[35] and banking institutions for loans and deposits.[35] In Europe, paper money was first introduced in Sweden in 1661. Sweden was rich in copper, thus, because of copper's low value, extraordinarily big coins (often weighing several kilograms) had to be made. The advantages of paper currency were numerous: it reduced transport of gold and silver, and thus lowered the risks; it made loaning gold or silver at int erest easier, since the specie (gold or silver) never left the possession of the lender until someone else redeemed the note; and it allowed for a division of currency into credit and specie backed forms. It enabled the sale of stock in joint stock companies, and the redemption of those shares in paper. However, these advantages held within them disadvantages. First, since a note has no intrinsic value, there was nothing to stop issuing authorities from printing more of it than they had specie to back it with. Second, because it increased the money supply, it increased inflationary pressures, a fact observed by David Hume in the 18th century. The result is that paper money would often lead to an inflationary bubble, which could collapse if people began demanding hard money, causing the demand for paper notes to fall to zero. The printing of paper money was also associated with wars, and financing of wars, and therefore regarded as part of maintaining a standing army. For these reasons, paper currency was held in suspicion and hostility in Europe and America. It was also addictive, since the speculative profits of trade and capital creation were quite large. Major nations established mints to print money and mint coins, and branches of their treasury to collect taxes and hold gold and silver stock. At this time both silver and gold were considered legal tender, and accepted by governments for taxes. However, the instability in the ratio between the two grew over the course of the 19th century, with the increase both in supply of these metals, particularly silver, and of trade. This is called bimetallism and the attempt to create a bimetallic standard where both gold and silver backed currency remained in circulation occupied the efforts of inflationists. Governm ents at this point could use currency as an instrument of policy, printing paper currency such as the United States Greenback, to pay for military expenditures. They could also set the terms at which they would redeem notes for specie, by limiting the amount of purchase, or the minimum amount that could be redeemed. Banknotes with a face value of 5000 of different currencies By 1900, most of the industrializing nations were on some form of gold standard, with paper notes and silver coins constituting the circulating medium. Private banks and governments across the world followed Gresham's Law: keeping gold and silver paid, but paying out in notes. This did not happen all around the world at the same time, but occurred sporadically, generally in times of war or financial crisis, beginning in the early part of the 20th century and continuing across the world until the late 20th century, when the regime of floating fiat currencies came into force. One of the last countries to break away from the gold standard was the United States in 1971. No country anywhere in the world today has an enforceable gold standard or silver standard currency system. Commercial bank money Main article: Demand deposit Demand deposit in cheque form Commercial bank money or demand deposits are claims against financial institutions that can be used for the purchase of goods and services. A demand deposit account is an account from which funds can be withdrawn at any time by check or cash withdrawal without giving the bank or financial institution any prior notice. Banks have the legal obligation to return funds held in demand deposits immediately upon demand (or 'at call'). Demand deposit withdrawals can be performed in person, via checks or bank drafts, using automatic teller machines (ATMs), or through online banking.[36] Commercial bank money is created through fractional-reserve banking, the banking practice where banks keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder, while maintaining the simultaneous obligation to redeem all these deposits upon demand.[37][38] Commercial bank money differs from commodity and fiat money in two ways: firstly it is non-physical, as its existence is only reflected in the account ledgers of banks and other financial institutions, and secondly, there is some element of risk that the claim will not be fulfilled if the financial institution becomes insolvent. The process of fractional-reserve banking has a cumulative effect of money creation by commercial banks, as it expands money supply (cash and demand deposits) beyond what it would otherwise be. Because of the prevalence of fractional reserve banking, the broad money supply of most countries is a multiple larger than the amount of base money created by the country's central bank. That multiple (called the money multiplier) is determined by the reserve requirement or other financial ratio requirements imposed by financial regulators. The money supply of a country is usually held to be the total amount of currency in circulation plus the total amount of checking and savings deposits in the commercial banks in the country. In modern economies, relatively little of the money supply is in physical currency. For example, in December 2010 in the U.S., of the $8853.4 billion in broad money supply (M2), only $915.7 billion (about 10%) consisted of physical coins and paper money.[39] Electronic or digital money Main article: Electronic money Digital currencies gained momentum before the 2000 tech bubble. Flooz and Beenz were particularly advertised as an alternative form of money. While the tech bubble caused them to be short lived, many new digital currencies (such as bitcoin) have reached some, albeit generally small userbases. Monetary policy Main article: Monetary policy When gold and silver are used as money, the money supply can grow only if the supply of these metals is increased by mining. This rate of increase will accelerate during periods of gold rushes and discoveries, such as when Columbus discovered the New World and brought back gold and silver to Spain, or when gold was discovered in California in 1848. This causes inflation, as the value of gold goes down. However, if the rate of gold mining cannot keep up with the growth of the economy, gold becomes relatively more valuable, and prices (denominated in gold) will drop, causing deflation. Deflation was the more typical situation for over a century when gold and paper money backed by gold were used as money in the 18th and 19th centuries. Modern day monetary systems are based on fiat money and are no longer tied to the value of gold. The control of the amount of money in the economy is known as monetary policy. Monetary policy is the process by which a government, central bank, or monetary authority manages the money supply to achieve specific goals. Usually the goal of monetary policy is to accommodate economic growth in an environment of stable prices. For example, it is clearly stated in the Federal Reserve Act that the Board of Governors and the Federal Open Market Committee should seek to promote effectively the goals of maximum employment, stable prices, and moderate long -term interest rates.*40+ A failed monetary policy can have significant detrimental effects on an economy and the society that depends on it. These include hyperinflation, stagflation, recession, high unemployment, shortages of imported goods, inability to export goods, and even total monetary collapse and the adoption of a much less efficient barter economy. This happened in Russia, for instance, after the fall of the Soviet Union. Governments and central banks have taken both regulatory and free market approaches to monetary policy. Some of the tools used to control the money supply include: changing the interest rate at which the central bank loans money to (or borrows money from) the commercial banks currency purchases or sales increasing or lowering government borrowing increasing or lowering government spending manipulation of exchange rates raising or lowering bank reserve requirements regulation or prohibition of private currencies taxation or tax breaks on imports or exports of capital into a country In the US, the Federal Reserve is responsible for controlling the money supply, while in the Euro area the respective institution is the European Central Bank. Other central banks with significant impact on global finances are the Bank of Japan, People's Bank of China and the Bank of England. For many years much of monetary policy was influenced by an economic theory known as monetarism. Monetarism is an economic theory which argues that management of the money supply should be the primary means of regulating economic activity. The stability of the demand for money prior to the 1980s was a key finding of Milton Friedman and Anna Schwartz[41] supported by the work of David Laidler,[42] and many others. The nature of the demand for money changed during the 1980s owing to technical, institutional, and legal factors[clarification needed] and the influence of monetarism has since decreased. However, since the emergence of new dynamic models (such as New Keynesian DSGE models), some authors show that money has a role on the economy and business cycles depending on the households' risk aversion level.[43] See also Coin of account Electronic money Foreign exchange market Gift economy Intelligent banknote neutralisation system Labour voucher Leprosy colony money Local exchange trading system Money bag Orders of magnitude (currency) Seigniorage Slang terms for money World currency Capitalism From Wikipedia, the free encyclopedia "Free enterprise" redirects here. For the 1999 film, see Free Enterprise (film). For other uses, see Capitalism (disambiguation). Globe icon The examples and perspective in this article or section might have an extensive bias or disproportional coverage towards one or more specific regions. Please improve this article or discuss the issue on the talk page. 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Portal Capitalism portal Portal Economics portal Portal Philosophy portal Portal Politics portal v t e Part of a series on Economic systems By ideology[hide] Anarchist Capitalist Communist Corporatist Dirigist Fascist Georgist Islamic Laissez-faire Market socialist Mercantilist Neo-mercantilist Participatory Protectionist Socialist State capitalist Syndicalist By coordination[show] By regional model[show] Sectors[show] Transition[show] Coordination[show] Other types[show] Portal icon Business and economics portal v t e Capitalism is an economic system in which trade, industry and the means of production are controlled by private owners with the goal of making profits in a market economy.[1][2] Central characteristics of capitalism include capital accumulation, competitive markets and wage labor.[3] In a capitalist economy, the parties to a transaction typically determine the prices at which assets, goods, and services are exchanged.[4] The degree of competition, role of intervention and regulation, and scope of public ownership varies across different models of capitalism.[5] Economists, political economists, and historians have taken different perspectives in their analysis of capitalism and recognized various forms of it in practice. These include laissez-faire capitalism, welfare capitalism and state capitalism; each highlighting varying degrees of dependency on markets, public ownership, and inclusion of social policies. The extent to which different markets are free, as well as the rules defining private property, is a matter of politics and policy. Many states have what are termed capitalist mixed economies, referring to a mix between planned and market-driven elements.[6] Crony capitalism, is a state of affairs in which insider corruption, nepotism and cartels dominate the system. In Marxian economics this is considered to be the normal state of mature capitalism, while in anarcho-capitalist theory it is considered a political distortion of capital and markets.[7] Capitalism has existed under many forms of government, in many different times, places, and cultures.[8] Following the demise of feudalism, capitalism became the dominant economic system in the Western world. Later, in the 20th century, capitalism overcame a challenge by centrally-planned economies and is now the dominant system worldwide,[9][10] with the mixed economy being its dominant form in the industrialized Western world. Different economic perspectives emphasize specific elements of capitalism in their preferred definition. Laissez-faire and liberal economists emphasize the degree to which government does not have control over markets and the importance of property rights.[11][12] Neoclassical and Keynesian macro-economists emphasize the need for government regulation to prevent monopolies and to soften the effects of the boom and bust cycle.[13] Marxian economists emphasize the role of capital accumulation, exploitation and wage labor. Most political economists emphasize private property as well, in addition to power relations, wage labor, class, and the uniqueness of capitalism as a historical formation.[6] Proponents of capitalism argue that it creates more prosperity than any other economic system, and that its benefits are mainly to the ordinary person.[14] Critics of capitalism variously associate it with economic instability[15] and an inability to provide for the well-being of all people.[16] In contrast to both perspectives, socialists maintain that capitalism is superior to all previously existing economic systems (such as feudalism or slavery) but that the contradiction between class interests will only be resolved by advancing into a completely social system of production and distribution in which all persons have an equal relationship to the means of production.[17] The term capitalism, in its modern sense, is often attributed to Karl Marx.[8][18] In his magnum opus Capital, Marx wrote of the "capitalist mode of production" using a method of understanding today known as Marxism. However, while Marx rarely used the term "capitalism", it was used twice in the more political interpretations of his work, primarily authored by his collaborator Friedrich Engels. In the 20th century defenders of the capitalist system often replaced the term capitalism with phrases such as free enterprise and private enterprise and replaced capitalist with rentier and investor in reaction to the negative connotations associated with capitalism.[19] Contents 1 History 1.1 Agrarian capitalism 1.2 Mercantilism 1.3 Industrial capitalism 1.4 Globalization 1.5 Keynesianism and neoliberalism 2 Economic elements 2.1 Money, capital, and accumulation 2.2 Capital and financial markets 2.3 Wage labor and class structure 2.4 Macroeconomics 3 Types of capitalism 3.1 Mercantilism 3.2 Free-market capitalism 3.3 Social-market economy 3.4 State capitalism 3.5 Corporate capitalism 3.6 Mixed economy 3.7 Other 4 Etymology and early usage 5 Perspectives 5.1 Classical political economy 5.2 Marxist political economy 5.3 Weberian political sociology 5.4 Institutional economics 5.5 German Historical School and Austrian School 5.6 Keynesian economics 5.7 Neoclassical economics and the Chicago School 6 Neoclassical economic theory 6.1 The market 6.2 Role of government 7 Democracy, the state, and legal frameworks 7.1 Private property 7.2 Institutions 7.3 Democracy 8 Advocacy for capitalism 8.1 Economic growth 8.2 Political freedom 8.3 Self-organization 9 Criticism 10 See also 11 Notes 12 References 13 Further reading 14 External links History Main article: History of capitalism Economic trade for profit has existed since at least the second millennium BC.[20] However, capitalism in its modern form is usually traced to the emergence of agrarian capitalism and mercantilism of the Early Modern era. Agrarian capitalism The economic foundations of the feudal agricultural system began to shift substantially in 16th century England; the manorial system had broken down by this time, and land began to be concentrated in the hands of fewer landlords with increasingly large estates. Instead of a serf-based system of labor, workers were increasingly being employed as part of a broader and expanding money economy. The system put pressure on both the landlords and the tenants to increase the productivity of the agriculture to make profit; the weakened coercive power of the aristocracy to extract peasant surpluses encouraged them to try out better methods, and the tenants also had incentive to improve their methods, in order to flourish in an increasingly competitive labor market. Terms of rent for the land were becoming subject to economic market forces rather than the previous stagnant system of custom and feudal obligation. [21] By the early 17th-century, England was a centralized state, in which much of the feudal order of Medieval Europe had been swept away. This centralization was strengthened by a good system of roads and a disproportionately large capital city, London. The capital acted as a central market hub for the entire country, creating a very large internal market for goods, instead of the fragmented feudal holdings that prevailed in most parts of the Continent. Mercantilism Main article: Mercantilism A painting of a French seaport from 1638 at the height of mercantilism. The economic doctrine that held sway between the sixteenth and eighteenth centuries is commonly described as mercantilism.[22] This period, the Age of Discovery, was associated with the geographic exploration of foreign lands by merchant traders, especially from England and the Low Countries. Mercantilism was a system of trade for profit, although commodities were still largely produced by non-capitalist production methods.[8] Most scholars consider the era of merchant capitalism and mercantilism as the origin of modern capitalism,[23][24] although Karl Polanyi argued that the hallmark of capitalism is the establishment of generalized markets for what he referred to as the "fictitious commodities": land, labor, and money. Accordingly, he argued that "not until 1834 was a com petitive labor market established in England, hence industrial capitalism as a social system cannot be said to have existed before that date."[25] England began a large-scale and integrative approach to mercantilism during the Elizabethan Era (1558 1603). A systematic and coherent explanation of balance of trade was made public through Thomas Mun's argument England's Treasure by Forraign Trade, or the Balance of our Forraign Trade is The Rule of Our Treasure. It was written in the 1620s and published in 1664.[26] Robert Clive after the Battle of Plassey. The battle began East India Company rule in India. Among the major tenets of mercantilist theory was bullionism, a doctrine stressing the importance of accumulating precious metals. Mercantilists argued that a state should export more goods than it imported so that foreigners would have to pay the difference in precious metals. Mercantilists argued that only raw materials that could not be extracted at home should be imported; and promoted government subsidies, such as the granting of monopolies and protective tariffs, which mercantilists thought were necessary to encourage home production of manufactured goods. European merchants, backed by state controls, subsidies, and monopolies, made most of their profits from the buying and selling of goods. In the words of Francis Bacon, the purpose of mercantilism was "the opening and well-balancing of trade; the cherishing of manufacturers; the banishing of idleness; the repressing of waste and excess by sumptuary laws; the improvement and husbanding of the soil; the regulation of prices ..."[27] The British East India Company and the Dutch East India Company inaugurated an expansive era of commerce and trade.[28][29] These companies were characterized by their colonial and expansionary powers given to them by nation-states.[28] During this era, merchants, who had traded under the previous stage of mercantilism, invested capital in the East India Companies and other colonies, seeking a return on investment. Industrial capitalism A Watt steam engine. The steam engine fuelled primarily by coal propelled the Industrial Revolution in Great Britain.[30] A new group of economic theorists, led by David Hume[31] and Adam Smith, in the mid-18th century, challenged fundamental mercantilist doctrines as the belief that the amount of the world's wealth remained constant and that a state could only increase its wealth at the expense of another state. During the Industrial Revolution, the industrialist replaced the merchant as a dominant actor in the capitalist system and affected the decline of the traditional handicraft skills of artisans, guilds, and journeymen. Also during this period, the surplus generated by the rise of commercial agriculture encouraged increased mechanization of agriculture. Industrial capitalism marked the development of the factory system of manufacturing, characterized by a complex division of labor between and within work process and the routine of work tasks; and finally established the global domination of the capitalist mode of production.[22] Britain also abandoned its protectionist policy, as embraced by mercantilism. In the 19th century, Richard Cobden and John Bright, who based their beliefs on the Manchester School, initiated a movement to lower t ariffs.[32] In the 1840s, Britain adopted a less protectionist policy, with the repeal of the Corn Laws and the Navigation Acts.[22] Britain reduced tariffs and quotas, in line with David Ricardo's advocacy for free trade. Globalization The gold standard formed the financial basis of the international economy from 1870-1914. Industrialization allowed cheap production of household items using economies of scale,[citation needed] while rapid population growth created sustained demand for commodities. Globalization in this period was decisively shaped by nineteenth-century imperialism. After the Opium Wars and the completion of British conquest of India, vast populations of these regions became ready consumers of European exports. It was in this period that areas of sub-Saharan Africa and the Pacific islands were incorporated into the world system. Meanwhile, the conquest of new parts of the globe, notably sub-Saharan Africa, by Europeans yielded valuable natural resources such as rubber, diamonds and coal and helped fuel trade and investment between the European imperial powers, their colonies, and the United States.[33] The inhabitant of London could order by telephone, sipping his morning tea, the various products of the whole earth, and reasonably expect their early delivery upon his doorstep. Militarism and imperialism of racial and cultural rivalries were little more than the amusements of his daily newspaper. What an extraordinary episode in the economic progress of man was that age which came to an end in August 1914. The global financial system was mainly tied to the gold standard in this period. The United Kingdom first formally adopted this standard in 1821. Soon to follow was Canada in 1853, Newfoundland in 1865, and the USA and Germany (de jure) in 1873. New technologies, such as the telegraph, the transatlantic cable, the Radiotelephone, the steamship and railway allowed goods and information to move around the world at an unprecedented degree.[34] Keynesianism and neoliberalism Main articles: Keynesianism and Neoliberalism The New York stock exchange traders' floor (1963) In the period following the global depression of the 1930s, the state played an increasingly prominent role in the capitalistic system throughout much of the world. The post war era was greatly influenced by Keynesian economic stabilization policies. The postwar boom ended in the late 1960s and early 1970s, and the situation was worsened by the rise of stagflation.[35] Monetarism, a theoretical alternative to Keynesianism that is more compatible with laissez-faire, gained increasing prominence in the capitalist world, especially under the leadership of Ronald Reagan in the US and Margaret Thatcher in the UK in the 1980s. Public and political interest began shifting away from the so-called collectivist concerns of Keynes's managed capitalism to a focus on individual choice, called "remarketized capitalism." [36] Economic elements There are a number of different elements in the capitalist socio-economic system. Capitalism is defined as a social and economic system that in which capital assets are mainly owned and controlled by private persons, labor is purchased for money wages, capital gains accrue to private owners, and the price mechanism is utilized to allocate capital goods between uses. The extent to which the price mechanism is used, the degree of competitiveness, and government intervention in markets distinguish exact forms of capitalism.[5] There are different variations of capitalism which have different relationships to markets and the state. In free-market and laissez-faire forms of capitalism, markets are utilized most extensively with minimal or no regulation over the pricing mechanism. In interventionist and mixed economies, markets continue to play a dominant role but are regulated to some extent by government in order to correct market failures, promote social welfare, conserve natural resources, and fund defense and public safety. In state capitalist systems, markets are relied upon the least, with the state relying heavily on state-owned enterprises or indirect economic planning to accumulate capital. Capitalism and capitalist economics is generally considered to be the opposite of socialism, which contrasts with all forms of capitalism in the following way s: social ownership of the means of production, where returns on the means of production accrue to society at large, and goods and services are produced directly for their utility (as opposed to being produced by profit-seeking businesses). Money, capital, and accumulation Money is primarily a standardized medium of exchange, and final means of payment, that serves to measure the value of all goods and commodities in a standard of value. It is an abstraction of economic value and medium of exchange that eliminates the cumbersome system of barter by separating the transactions involved in the exchange of products, thus greatly facilitating specialization and trade through encouraging the exchange of commodities. Capitalism involves the further abstraction of money into other exchangeable assets and the accumulation of money through ownership, exchange, interest and various other financial instruments. The accumulation of capital refers to the process of "making money", or growing an initial sum of money through investment in production. Capitalism is based around the accumulation of capital, whereby financial capital is invested in order to realize a profit and then reinvested into further production in a continuous process of accumulation. In Marxian economic theory, this dynamic is called the law of value. Capital and financial markets The defining feature of capitalist markets, in contrast to markets and exchange in pre-capitalist societies like feudalism, is the existence of a market for capital goods (the means of production), meaning exchange-relations (business relationships) exist within the production process. Additionally, capitalism features a market for labor. This distinguishes the capitalist market from pre-capitalist societies which generally only contained market exchange for final goods and secondary goods. The "market" in capitalism refers to capital markets and financial markets. Thus, there are three main markets in a typical capitalistic economy: labor, goods and services, and financial. Wage labor and class structure Wage labor refers to the class-structure of capitalism, whereby workers receive either a wage or a salary, and owners receive the profits generated by the factors of production employed in the production of economic value. Individuals who possess and supply financial capital to productive ventures become owners, either jointly (as shareholders) or individually. In Marxian economics these owners of the means of production and suppliers of capital are generally called capitalists . The description of the role of the capitalist has shifted, first referring to a useless intermediary between producers to an employer of producers, and eventually came to refer to owners of the means of production.[19] The term capitalist is not generally used by supporters of mainstream economics. "Workers" includes those who expend both manual and mental (or creative) labor in production, where production does not simply mean physical production but refers to the production of both tangible and intangible economic value. "Capitalists" are individuals who derive income from investments. Labor includes all physical and mental human resources, including entrepreneurial capacity and management skills, which are needed to produce products and services. Production is the act of making goods or services by applying labor power.[37][38] Macroeconomics Macroeconomics keeps its eyes on things such as inflation: a general increase in prices and fall in the purchasing value of money; growth: how much money a gov ernment has and how quickly it accrues money; unemployment, and rates of trade between other countries. Whereas microeconomics deals with individual firms, people, and other institutions that work within a set frame work of rules to balance prices and the workings of a singular government. Both micro and macroeconomics work together to form a single set of evolving rules and regulations. Governments (the macroeconomic side) set both national and international regulations that keep track of prices and corporations' (microeconomics) growth rates, set prices, and trade, while the corporations influence what federal laws are set.[39][40][41] Types of capitalism There are many variants of capitalism in existence that differ according to country and region. They vary in their institutional makeup and by their economic policies. The common features among all the different forms of capitalism is that they are based on the production of goods and services for profit, predominately market-based allocation of resources, and they are structured upon the accumulation of capital. The major forms of capitalism are listed below: Mercantilism Main articles: Mercantilism and Protectionism Mercantilism is a nationalist form of early capitalism that came into existence approximately in the late 16th century. It is characterized by the intertwining of national business interests to state-interest and imperialism, and consequently, the state apparatus is utilized to advance national business interests abroad. An example of this is colonists living in America who were only allowed to trade with and purchase goods from their respective mother countries (Britain, France, etc.). Mercantilism holds that the wealth of a nation is increased through a positive balance of trade with other nations, and corresponds to the phase of capitalist development called the Primitive accumulation of capital. Free-market capitalism See also: Free market and Laissez-faire Free-market capitalism refers to an economic system where prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy. It typically entails support for highly competitive markets, private ownership of productive enterprises. Laissez-faire is a more extensive form of free-market capitalism where the role of the state is limited to protecting property rights. Social-market economy Main articles: Social market and Nordic model A social-market economy is a nominally free-market system where government intervention in price formation is kept to a minimum but the state provides significant services in the area of social security, unemployment benefits and recognition of labor rights through national collective bargaining arrangements. This model is prominent in Western and Northern European countries, and Japan, albeit in slightly different configurations. The vast majority of enterprises are privately owned in this economic model. Rhine capitalism refers to the contemporary model of capitalism and adaptation of the social market model that exists in continental Western Europe today. State capitalism Main article: State capitalism State capitalism consists of state ownership of the means of production within a state, and the organization of state enterprises as commercial, profit-seeking businesses. The debate between proponents of private versus state capitalism is centered around questions of managerial efficacy, productive efficiency, and fair distribution of wealth. According to Aldo Musacchio, a professor at Harvard Business School, it is a system in which governments, whether democratic or autocratic, exercise a widespread influence on the economy, through either direct ownership or various subsidies. Musacchio also emphasizes the difference between today's state capitalism and its predecessors. Gone are the days when governments appointed bureaucrats to run companies. The world's largest state-owned enterprises are traded on the public markets and kept in good health by large institutional investors.[42] Corporate capitalism Main article: Corporate capitalism See also: State monopoly capitalism and Crony capitalism Corporate capitalism is a free or mixed-market economy characterized by the dominance of hierarchical, bureaucratic corporations. Mixed economy Main article: Mixed economy See also: Economic interventionism A mixed economy is a largely market-based economy consisting of both private and public ownership of the means of production and economic interventionism through macroeconomic policies intended to correct market failures, reduce unemployment and keep inflation low. The degree of intervention in markets varies among different countries. Some mixed economies, such as France under dirigisme, also featured a degree of indirect economic planning over a largely capitalist-based economy. Most capitalist economies are defined as "mixed economies" to some degree.[citation needed] Other Other variants of capitalism include:

Anarcho-capitalism Crony capitalism Finance capitalism

Financial capitalism Late capitalism Neo-capitalism

Post-capitalism Technocapitalism Welfare capitalism Etymology and early usage Other terms sometimes used for capitalism: Capitalist mode of production Economic liberalism [43] Free-enterprise economy [9][44] Free market[44][45] Laissez-faire economy [46] Market economy [47] Market liberalism [48][49] Self-regulating market [44] Profits system[50] The term capitalist as referring to an owner of capital (rather than its meaning of someone adherent to the economic system) shows earlier recorded use than the term capitalism, dating back to the mid-17th century. Capitalist is derived from capital, which evolved from capitale, a late Latin word based on caput, meaning "head" also the origin of chattel and cattle in the sense of movable property (only much later to refer only to livestock). Capitale emerged in the 12th to 13th centuries in the sense of referring to funds, stock of merchandise, sum of money, or money carrying interest.[51][52][53] By 1283 it was used in the sense of the capital assets of a trading firm. It was frequently interchanged with a number of other words wealth, money, funds, goods, assets, property, and so on.[51] The Hollandische Mercurius uses capitalists in 1633 and 1654 to refer to owners of capital.[51] In French, tienne Clavier referred to capitalistes in 1788,[54] six years before its first recorded English usage by Arthur Young in his work Travels in France (1792).[53][55] David Ricardo, in his Principles of Political Economy and Taxation (18 17), referred to "the capitalist" many times.[56] Samuel Taylor Coleridge, an English poet, used capitalist in his work Table Talk (1823).[57] Pierre-Joseph Proudhon used the term capitalist in his first work, What is Property? (1840) to refer to the owners of capital. Benjamin Disraeli used the term capitalist in his 1845 work Sybil.[53] Karl Marx and Friedrich Engels used the term capitalist (Kapitalist) in The Communist Manifesto (1848) to refer to a private owner of capital. According to the Oxford English Dictionary (OED), the term capitalism was first used by novelist William Makepeace Thackeray in 1854 in The Newcomes, where he meant "having ownership of capital".[53] Also according to the OED, Carl Adolph Douai, a German-American socialist and abolitionist, used the term private capitalism in 1863. The initial usage of the term capitalism in its modern sense has been attributed to Louis Blanc in 1850 and Pierre-Joseph Proudhon in 1861.[58] Karl Marx and Friedrich Engels referred to the capitalistic system (kapitalistisches System)[59][60] and to the capitalist mode of production (kapitalistische Produktionsform) in Das Kapital (1867).[61] The use of the word "capitalism" in reference to an economic system appears twice in Volume I of Das Kapital, p. 124 (German edition), and in Theories of Surplus Value, tome II, p. 493 (German edition). Marx did not extensively use the form capitalism, but instead those of capitalist and capitalist mode of production, which appear more than 2600 times in the trilogy Das Kapital. Marx's notion of the capitalist mode of production is characterised as a system of primarily private ownership of the means of production in a mainly market economy, with a legal framework on commerce and a physical infrastructure provided by the s tate. He believed that no legal framework was available to protect the laborers, and so exploitation by the companies was rife.[62][page needed] Engels made more frequent use of the term capitalism; volumes II and III of Das Kapital, both edited by Engels after Marx's death, contain the word "capitalism" four and three times, respectively. The three combined volumes of Das Kapital (1867, 1885, 1894) contain the word capitalist more than 2,600 times. An 1877 work entitled Better Times by Hugh Gabutt and an 1884 article in the Pall Mall Gazette also used the term capitalism.[53] A later use of the term capitalism to describe the production system was by the German economist Werner Sombart, in his 1902 book The Jews and Modern Capitalism (Die Juden und das Wirtschaftsleben). Sombart's close friend and colleague, Max Weber, also used capitalism in his 1904 book The Protestant Ethic and the Spirit of Capitalism (Die protestantische Ethik und der Geist des Kapitalismus). Perspectives Classical political economy Main articles: Classical economics and Classical liberalism Adam Smith The classical school of economic thought emerged in Britain in the late 18th century. The classical political economists Adam Smith, David Ricardo, Jean-Baptiste Say, and John Stuart Mill published analyses of the production, distribution and exchange of goods in a market that have since formed the basis of study for most contemporary economists. In France, 'Physiocrats' like Franois Quesnay promoted free trade based on a conception that wealth originated from land. Quesnay's Tableau conomique (1759), described the economy analytically and laid the foundation of the Physiocrats' economic theory, followed by Anne Robert Jacques Turgot who opposed tariffs and customs duties and advocated free trade. Richard Cantillon defined long-run equilibrium as the balance of flows of income, and argued that the supply and demand mechanism around land influenced short-term prices. Smith's attack on mercantilism and his reasoning for "the system of natural liberty" in The Wealth of Nations (1776) are usually taken as the beginning of classical political economy. Smith devised a set of concepts that remain strongly associated with capitalism today. His theories regarding the "invisible hand" are commonly interpreted to mean individual pursuit of self-interest unintentionally producing collective good for society. It was necessary for Smith to be so forceful in his argument in favor of free markets because he had to overcome the popular mercantilist sentiment of the time period.[63] He criticized monopolies, tariffs, duties, and other state enforced restrictions of his time and believed that the market is the most fair and efficient arbitrator of resources. This view was shared by David Ricardo, second most important of the classical political economists and one of the most influential economists of modern times.[64] In On the Principles of Political Economy and Taxation (1817), he developed the law of comparative advantage, which explains why it is profitable for two parties to trade, even if one of the trading partners is more efficient in every type of economic production. This principle supports the economic case for free trade. Ricardo was a supporter of Say's Law and held the view that full employment is the normal equilibrium for a competitive economy.[65] He also argued that inflation is closely related to changes in quant ity of money and credit and was a proponent of the law of diminishing returns, which states that each additional unit of input yields less and less additional output.[66] The values of classical political economy are strongly associated with the classical liberal doctrine of minimal government intervention in the economy, though it does not necessarily oppose the state's provision of a few basic public goods.[67] Classical liberal thought has generally assumed a clear division between the economy and other realms of social activity, such as the state.[68] While economic liberalism favors markets unfettered by the government, it maintains that the state has a legitimate role in providing public goods.[69] For instance, Adam Smith argued that the state has a role in providing roads, canals, schools and bridges that cannot be efficiently implemented by private entities. However, he preferred that these goods should be paid proportionally to their consumption (e.g. putting a toll). In addition, he advocated retaliatory tariffs to bring about free trade, and copyrights and patents to encourage innovation.[69] Marxist political economy Main article: Marxian economics Karl Marx considered capitalism to be a historically specific mode of production (the way in which the productive property is owned and controlled, combined with the corresponding social relations between individuals based on their connection with the process of production) in which capitalism has become the dominant mode of production.[22] The capitalist stage of development or "bourgeois society," for Marx, represented the most advanced form of social organization to date, but he also thought that the working classes would come to power in a worldwide socialist or communist transformation of human society as the end of the series of first aristocratic, then capitalist, and finally working class rule was reached.[70][71] Karl Marx Following Adam Smith, Marx distinguished the use value of commodities from their exchange value in the market. Capital, according to Marx, is created with the purchase of commodities for the purpose of creating new commodities with an exchange value higher than the sum of the original purchases. For Marx, the use of labor power had itself become a commodity under capitalism ; the exchange value of labor power, as reflected in the wage, is less than the value it produces for the capitalist. This difference in values, he argues, constitutes surplus value, which the capitalists extract and accumulate. In his book Capital, Marx argues that the capitalist mode of production is distinguished by how the owners of capital extract this surplus from workersall prior class societies had extracted surplus labor, but capitalism was new in doing so via the sale-value of produced commodities.[72] He argues that a core requirement of a capitalist society is that a large portion of the population must not possess sources of self-sustenance that would allow them to be independent, and must instead be compelled, to survive, to sell their labor for a living wage.[73][74][75] In conjunction with his criticism of capitalism was Marx's belief that the working class, due to its relationship to the means of production and numerical superiority under capitalism, would be the driving force behind the socialist revolution.[76] This argument is intertwined with Marx's version of the labor theory of value arguing that labor is the source of all value, and thus of profit. Vladimir Lenin, in Imperialism, the Highest Stage of Capitalism (1916), further developed Marxist theory and argued that capitalism necessarily led to monopoly capitalism and the export of capital which he also called "imperialism"to find new markets and resources, representing the last and highest stage of capitalism.[77] Some 20th-century Marxian economists consider capitalism to be a social formation where capitalist class processes dominate, but are not exclusive.[78] Capitalist class processes, to these thinkers, are simply those in which surplus labor takes the form of surplus value, usable as capital; other tendencies for utilization of labor nonetheless exist simultaneously in existing societies where capitalist processes are predominant. However, other late Marxian thinkers argue that a social formation as a whole may be classed as capitalist if capitalism is the mode by which a surplus is extracted, even if this surplus is not produced by capitalist activity, as when an absolute majority of the population is engaged in non-capitalist economic activity.[79] In Limits to Capital (1982), David Harvey outlines an overdetermined, "spatially restless" capitalism coupled with the spatiality of crisis formation and resolution.[80] Harvey used Marx's theory of crisis to aid his argument that capitalism must have its "fixes" but that we cannot predetermine what fixes will be implemented, nor in what form they will be. His work on contractions of capital accumulation and international movements of capitalist modes of production and money flows has been influential.[81] According to Harvey, capitalism creates the conditions for volatile and geographically uneven development [82] Weberian political sociology Max Weber In social science, the understanding of the defining characteristics of capitalism has been strongly influenced by the German sociologist, Max Weber. Weber considered market exchange, a voluntary supply of labor and a planned division of labor within the enterprises as defining features of capitalism. Capitalist enterprises, in contrast to their counterparts in prior modes of economic activity, were directed toward the rationalization of production, maximizing efficiency and productivity a tendency embedded in a sociological process of enveloping rationalization that formed modern legal bureaucracies in both public and private spheres.[83] According to Weber, workers in pre-capitalist economies understood work in terms of a personal relationship between master and journeyman in a guild, or between lord and peasant in a manor.[84] For these developments of capitalism to emerge, Weber argued, it was necessary the development of a "capitalist spirit"; that is, ideas and habits that favor a rational pursuit of economic gain. These ideas, in order to propagate a certain manner of life and come to dominate others, "had to originate somewhere ... as a way of life common to whole groups of men".[83] In his book The Protestant Ethic and the Spirit of Capitalism (19041905), Weber sought to trace how a particular form of religious spirit, infused into traditional modes of economic activity, was a condition of possibility of modern western capitalism. For Weber, the 'spirit of capitalism' was, in general, that of ascetic Protestantism; this ideology was able to motivate extreme rationalization of daily life, a propensity to accumulate capital by a religious ethic to advance economically through hard and diligent work, and thus also the propensity to reinvest capital. This was sufficient, then, to create "self-mediating capital" as conceived by Marx. This is pictured in the Protestant understanding of beruf [85] whose meaning encompass at the same time profession, vocation, and calling as exemplified in Proverbs 22:29, "Seest thou a man diligent in his calling? He shall stand before kings". In the Protestant Ethic, Weber describes the developments of this idea of calling from its religious roots, through the understanding of someone's economic success as a sign of his salvation, until the conception that moneymaking is, within the modern economic order, the result and the expression of diligence in one's calling. Finally, as the social mores critical for its development became no longer necessary for its maintenance, modern western capitalism came to represent the order "now bound to the technical and economic conditions of machine production which today determine the lives of all the individuals who are born into this mechanism, not only those directly concerned with economic acquisition, with irresistible force. Perhaps it will so determine them until the last ton of fossilized coal is burnt" (p. 123).[86] This is further seen in his criticism of "specialists without spirit, hedonists without a heart" that were developing, in his opinion, with the fading of the original Puritan "spirit" associated with capitalism. Institutional economics Main article: Institutional economics Thorstein Veblen Institutional economics, once the main school of economic thought in the United States, holds that capitalism cannot be separated from the political and social system within which it is embedded. It emphasizes the legal foundations of capitalism (see John R. Commons) and the evolutionary, habituated, and volitional processes by which institutions are erected and then changed. One key figure in institutional economics was Thorstein Veblen who in his book, The Theory of the Leisure Class (1899), analyzed the motivations of wealthy people in capitalism who conspicuously consumed their riches as a way of demonstrating success. The concept of conspicuous consumption was in direct contradiction to the neoclassical view that capitalism was efficient. In The Theory of Business Enterprise (1904) Veblen distinguished the motivations of industrial production for people to use things from business motivations that used, or misused, industrial infrastructure for profit, arguing that the former often is hindered because businesses pursue the latter. Output and technological advance are restricted by business practices and the creation of monopolies. Businesses protect their existing capital investments and employ excessive credit, leading to depressions and increasing military expenditure and war through business control of political power. German Historical School and Austrian School Main articles: Historical school of economics and Austrian School From the perspective of the German Historical School, capitalism is primarily identified in terms of the organization of production for markets. Although this perspective shares similar theoretical roots with that of Weber, its emphasis on markets and money lends it different focus.[22] For followers of the German Historical School, the key shift from traditional modes of economic activity to capitalism involved the shift from medieval restrictions on credit and money to the modern monetary economy combined with an emphasis on the profit motive. Ludwig von Mises In the late 19th century, the German Historical School of economics diverged, with the emerging Austrian School of economics, led at the time by Carl Menger. Later generations of followers of the Austrian School continued to be influential in Western economic thought in the early part of the 20th century. Austrian-born economist Joseph Schumpeter, sometimes associated with the School,[87] emphasized the "creative destruction" of capitalism the fact that market economies undergo constant change. Schumpeter argued that at any moment in time there are rising industries and declining industries. Schumpeter, and many contemporary economists influenced by his work, argue that resources should flow from the declining to the expanding industries for an economy to grow, but they recognized that sometimes resources are slow to withdraw from the declining industries because of various forms of institutional resistance to change. The Austrian economists Ludwig von Mises and Friedrich Hayek were among the leading defenders of market economy against 20th century proponents of socialist planned economies. Mises and Hayek argued that only market capitalism could manage a complex, modern economy. Since a modern economy produces such a large array of distinct goods and services, and consists of such a large array of consumers and enterprises, argued Mises and Hayek, the information problems facing any other form of economic organization other than market capitalism would exceed its capacity to handle information. Thinkers within Supply-side economics built on the work of the Austrian School, and particularly emphasize Say's Law: "supply creates its own demand." Capitalism, to this school, is defined by lack of state restraint on the decisions of producers. Keynesian economics Main article: Keynesian economics John Maynard Keynes In his 1937 The General Theory of Employment, Interest and Money, the British economist John Maynard Keynes argued that capitalism suffered a basic problem in its ability to recover from periods of slowdowns in investment. Keynes argued that a capitalist economy could remain in an indefinite equilibrium despite high unemployment. Essentially rejecting Say's law, he argued that some people may have a liquidity preference that would see them rather hold money than buy new goods or services, which therefore raised the prospect that the Great Depression would not end without what he termed in the General Theory "a somewhat comprehensive socialization of investment." Keynesian economics challenged the notion that laissez-faire capitalist economics could operate well on their own, without state intervention used to promote aggregate demand, fighting high unemployment and deflation of the sort seen during the 1930s. He and his followers recommended "pump-priming" the economy to avoid recession: cutting taxes, increasing government borrowing, and spending during an economic down-turn. This was to be accompanied by trying to control wages nationally partly through the use of inflation to cut real wages and to deter people from holding money.[88] John Maynard Keynes tried to provide solutions to many of Marx's problems without completely abandoning the classical understanding of capitalism. His work attempted to show that regulation can be effective, and that economic stabilizers can rein in the aggressive expansions and recessions that Marx disliked. These changes sought to create more stability in the business cycle, and reduce the abuses of laborers. Keynesian economists argue that Keynesian policies were one of the primary reasons capitalism was able to recover following the Great Depression.[89] The premises of Keynes's work have, however, since been challenged by neoclassical and supply-side economics and the Austrian School. Another challenge to Keynesian thinking came from his colleague Piero Sraffa, and subsequently from the Neo-Ricardian school that followed Sraffa. In Sraffa's highly technical analysis, capitalism is defined by an entire system of social relations among both producers and consumers, but with a primary emphasis on the demands of production. According to Sraffa, the tendency of capital to seek its highest rate of profit causes a dynamic instability in social and economic relations. Neoclassical economics and the Chicago School Main article: Neoclassical economics Today, the majority of academic research on capitalism in the English-speaking world draws on neoclassical economic thought. It favors extensive market coordination and relatively neutral patterns of governmental market regulation aimed at maintaining property rights; deregulated labor markets; corporate governance dominated by financial owners of firms; and financial systems depending chiefly on capital market-based financing rather than state financing. Milton Friedman Milton Friedman took many of the basic principles set forth by Adam Smith and the classical economists and gave them a new twist. One example of this is his article in the September 1970 issue of The New York Times Magazine, where he argues that the social responsibility of business is "to use its resources and engage in activities designed to increase its profits ... (through) open and free competition without deception or fraud." This is similar to Smith's argument that s elf-interest in turn benefits the whole of society.[90] Work like this helped lay the foundations for the coming marketization (or privatization) of state enterprises and the supply-side economics of Ronald Reagan and Margaret Thatcher. The Chicago School of economics is best known for its free market advocacy and monetarist ideas. According to Friedman and other monetarists, market economies are inherently stable if left to themselves and depressions result only from government intervention.[91] Friedman, for example, argued that the Great Depression was result of a contraction of the money supply, controlled by the Federal Reserve, and not by the lack of investment as John Maynard Keynes had argued. Ben Bernanke, former Chairman of the Federal Reserve, is among the economists today generally accepting Friedman's analysis of the causes of the Great Depression.[92] Neoclassical economists, who by 1998 constituted a majority of academic economists,[93] subscribe to a subjective theory of value, according to which the value derived from consumption of a good, rather than being objective and static, varies widely from person to person and for the same person at different times. Adherence to a subjective theory of value compels Neoclassical thinkers to reject the labor theory of value upheld by Adam Smith and other classical liberal thinkers, which was grounded upon a conception of objective value. Neoclassical models typically adopt the assumptions of Marginalism, according to which economic value results from marginal utility and marginal cost (the marginal concepts). Marginalist theory implies that capitalists earn profits not by exploiting workers, but by forgoing current consumption, taking risks, and organizing production. Neoclassical economic theory This section needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (June 2010) Neoclassical economics explain capitalism as made up of individuals, enterprises, markets and government. According to their theories, individuals engage in a capitalist economy as consumers, laborers, and investors. As laborers, individuals may decide which jobs to prepare for, and in which markets to look for work. As investors they decide how much of their income to save and how to invest their savings. These savings, which become investments, provide much of the money that businesses need to grow. Business firms decide what to produce and where this production should occur. They also purchase inputs (materials, labor, and capital). Businesses try to influence consumer purchase decisions through marketing and advertisement, as well as the creation of new and improved products. Driving the capitalist economy is the search for profits (revenues minus expenses). This is known as the profit motive, and it helps ensure that companies produce the goods and services that consumers desire and are able to buy. To be profitable, firms must sell a quantity of their product at a certain price to yield a profit. A business may lose money if sales fall too low or if its costs become too high. The profit motive encourages firms to operate more efficiently. By using less materials, labor or capital, a firm can cut its production costs, which can lead to increased profits. An economy grows when the total value of goods and services produced rises. This growth requires investment in infrastructure, capital and other resources necessary in production. In a capitalist system, businesses decide when and how much they want to invest. Income in a capitalist economy depends primarily on what skills are in demand and what skills are being supplied. Skills that are in scarce supply are worth more in the market and can attract higher incomes. Competition among workers for jobs and among employers for skilled workers help determine wage rates. Firms need to pay high enough wages to attract the appropriate workers; when jobs are scarce, workers may accept lower wages than they would when jobs are plentiful. Trade union and governments influence wages in capitalist systems. Unions act to represent their members in negotiations with employers over such things as wage rates and acceptable working conditions. The market The price (P) of a product is determined by a balance between production at each price (supply, S) and the desires of those with purchasing power at each price (demand, D). This results in a market equilibrium, with a given quantity (Q) sold of the product. A rise in demand would result in an increase in price and an increase in output. Supply is the amount of a good or service produced by a firm and which is available for sale. Demand is the amount that people are willing to buy at a specific price. Prices tend to rise when demand exceeds supply, and fall when supply exceeds demand. In theory, the market is able to coordinate itself when a new equilibrium price and quantity is reached. Competition arises when more than one producer is trying to sell the same or similar products to the same buyers. In capitalist theory, competition leads to innovation and more affordable prices. Without competition, a monopoly or cartel may develop. A monopoly occurs when a firm supplies the total output in the market; the firm can therefore limit output and raise prices because it has no fear of competition. A cartel is a group of firms that act together in a monopolistic manner to control output and raise prices. Role of government Further information: Competition regulator, Consumer protection, and Competition law In a capitalist system, the government does not prohibit private property or prevent individuals from working where they please. The government does not prevent firms from determining what wages they will pay and what prices they will charge for their products. Many countries, however, have minimum wage laws and minimum safety standards. Under some versions of capitalism, the government carries out a number of economic functions, such as issuing money, supervising public utilities and enforcing private contracts. Many countries have competition laws that prohibit monopolies and cartels from forming. Despite anti-monopoly laws, large corporations can form near-monopolies in some industries. Such firms can temporarily drop prices and accept losses to prevent competition from entering the market, and then raise them again once the threat of entry is reduced. In many countries, public utilities (e.g. electricity, heating fuel, communications) are able to operate as a monopoly under government regulation, due to high economies of scale. Government agencies regulate the standards of service in many industries, such as airlines and broadcasting, as well as financing a wide range of programs. In addition, the government regulates the flow of capital and uses financial tools such as the interest rate to control factors such as inflation and unemployment.[94] Democracy, the state, and legal frameworks Main article: History of capitalist theory Private property The relationship between the state, its formal mechanisms, and capitalist societies has been debated in many fields of social and political theory, with active discussion since the 19th century. Hernando de Soto is a contemporary economist who has argued that an important characteristic of capitalism is the functioning state protection of property rights in a formal property system where ownership and transactions are clearly recorded.[95] According to de Soto, this is the process by which physical assets are transformed into capital, which in turn may be used in many more ways and much more efficiently in the market economy. A number of Marxian economists have argued that the Enclosure Acts in England, and similar legislation elsewhere, were an integral part of capitalist primitive accumulation and that specific legal frameworks of private land ownership have been integral to the development of capitalism.[96][97] Institutions New institutional economics, a field pioneered by Douglass North, stresses the need of a legal framework in order for capitalism to function optimally, and focuses on the relationship between the historical development of capitalism and the creation and maintenance of political and economic institutions.[98] In new institutional economics and other fields focusing on public policy, economists seek to judge when and whether governmental intervention (such as taxes, welfare, and government regulation) can result in potential gains in efficiency. According to Gregory Mankiw, a New Keynesian economist, governmental intervention can improve on market outcomes under conditions of "market failure", or situations in which the market on its own does not allocate resources efficiently.[99] Market failure occurs when an externality is present and a market will either under-produce a product with a positive externalization or overproduce a product that generates a negative externalization. Air pollution, for instance, is a negative externalization that cannot be incorporated into markets as the world's air is not owned and then sold for us e to polluters. So, too much pollution could be emitted and people not involved in the production pay the cost of the pollution instead of the firm that initially emitted the air pollution. Critics of market failure theory, like Ronald Coase, Harold Demsetz, and James M. Buchanan argue that government programs and policies also fall short of absolute perfection. Market failures are often small, and government failures are sometimes large. It is therefore the case that imperfect markets are often better than imperfect governmental alternatives. While all nations currently have some kind of market regulations, the desirable degree of regulation is disputed. Democracy The relationship between democracy and capitalism is a contentious area in theory and popular political movements. The extension of universal adult male suffrage in 19th century Britain occurred along with the development of industrial capitalism, and democracy became widespread at the same time as capitalism, leading many theorists to posit a causal relationship between them, or that each affects the other. However, in the 20th century, according to some authors, capitalism also accompanied a variety of political formations quite distinct from liberal democracies, including fascist regimes, absolute monarchies, and single-party states.[22] While some thinkers argue that capitalist development more-or-less inevitably eventually leads to the emergence of democracy, others dispute this claim. Research on the democratic peace theory indicates that capitalist democracies rarely make war with one another[100] and have little internal violence. However, critics of the democratic peace theory note that democratic capitalist states may fight infrequently and or never with other democratic capitalist states because of political similarity or stability rather than because they are democratic or capitalist. Some commentators argue that though economic growth under capitalism has led to democratization in the past, it may not do so in the future, as authoritarian regimes have been able to manage economic growth without making concessions to greater political freedom.[101][102] States that have highly capitalistic economic systems have thrived under authoritarian or oppressive political systems. Singapore, which maintains a highly open market economy and attracts lots of foreign investment, does not protect civil liberties such as freedom of speech and expression. The private (capitalist) sector in the People's Republic of China has grown exponentially and thrived since its inception, despite having an authoritarian government. Augusto Pinochet's rule in Chile led to economic growth by using authoritarian means to create a safe environment for investment and capitalism. Thomas Piketty of the Paris School of Economics asserts that rising economic inequality is a natural consequence of capitalist activity, and is destabilizing to democratic societies and undermines the ideals of social justice upon which they are built.[103] In response to criticism of the system, some proponents of capitalism have argued that its advantages are supported by empirical research. Indices of Economic Freedom show a correlation between nations with more economic freedom (as defined by the indices) and higher scores on variables such as income and life expectancy, including the poor, in these nations. Advocacy for capitalism Economic growth World's GDP per capita shows exponential growth since the beginning of the Industrial Revolution.[104] Capitalism and the economy of the People's Republic of China Many theorists and policymakers in predominantly capitalist nations have emphasized capitalism's ability to promote economic growth, as measured by Gross Domestic Product (GDP), capacity utilization or standard of living. This argument was central, for example, to Adam Smith's advocacy of letting a free market control production and price, and allocate resources. Many theorists have noted that this increase in global GDP over time coincides with the emergence of the modern world capitalist sys tem.[105][106] Between 1000 and 1820, the world economy grew sixfold, a faster rate than the population growth, so each individual enjoyed, on the average, a 50% increase in wealth. Between 1820 and 1998, world economy grew 50-fold, a much faster rate than the population growth, so each individual enjoyed, on the average, a 9-fold increase in wealth.[107] In most capitalist economic regions such as Europe, the United States, Canada, Australia and New Zealand, the economy grew 19-fold per person, even though these countries already had a higher starting level, and in Japan, which was poor in 1820, the increase per person was 31-fold. In the third world there was an increase, but only 5-fold per person.[107] Proponents argue that increasing GDP (per capita) is empirically shown to bring about improved standards of living, such as better availability of food, housing, clothing, and health care.[108] The decrease in the number of hours worked per week and the decreased participation of children and the elderly in the workforce have been attributed to capitalism.[109][110] Proponents also believe that a capitalist economy offers far more opportunities for individuals to raise their income through new professions or business ventures than do other economic forms. To their thinking, this potential is much greater than in either traditional feudal or tribal societies or in socialist societies. Political freedom In his book The Road to Serfdom, Freidrich Hayek asserts that the economic freedom of capitalism is a requisite of political freedom. He argues that the market mechanism is the only way of deciding what to produce and how to distribute the items without using coercion. Milton Friedman, Andrew Brennan and Ronald Reagan also promoted this view. Friedman claimed that centralized economic operations are always accompanied by political repression. In his view, transactions in a market economy are voluntary, and that the wide diversity that voluntary activity permits is a fundamental threat to repressive political leaders and greatly diminish their power to coerce. Some of Friedman's views were shared by John Maynard Keynes, who believed that capitalism is vital for freedom to survive and thrive.[111][112] The novelist Ayn Rand made positive moral defences of laissez-faire capitalism, most notably in her 1957 novel Atlas Shrugged. She argued that capitalism should be supported on moral grounds, not just on the basis of practical benefits.[113][114] She has significantly influenced conservative and libertarian supporters of capitalism, especially in the American Tea Party movement.[115] Self-organization

Austrian School economists have argued that capitalism can organize itself into a complex system without an external guidance or central planning mechanism. Friedrich Hayek considered the phenomenon of self-organization as underpinning capitalism. Prices serve as a signal as to the urgent and unfilled wants of people, and the opportunity to earn profits if successful, or absorb losses if resources are used poorly or left idle, gives entrepreneurs incentive to use their knowledge and resources to satisfy those wants. Thus the activities of millions of people, each seeking his own interest, are coordinated.[116] Criticism Main article: Criticism of capitalism An Industrial Workers of the World poster (1911) Critics of capitalism associate it with social inequality and unfair distribution of wealth and power; a tendency toward market monopoly or oligopoly (and government by oligarchy); imperialism, counter-revolutionary wars and various forms of economic and cultural exploitation; materialism; repression of workers and trade unionists; social alienation; economic inequality; unemployment; and economic instability. Individual property rights have also been associated with the tragedy of the anticommons. Notable critics of capitalism have included: socialists, anarchists, communists, national socialists, social democrats, technocrats, some types of conservatives, Luddites, Narodniks, Shakers, and some types of nationalists. Marxists have advocated a revolutionary overthrow of capitalism that would lead to socialism, before eventually transforming into communism. Many socialists consider capitalism to be irrational, in that production and the direction of the economy are unplanned, creating many inconsistencies and internal contradictions.[117] Labor historians and scholars such as Immanuel Wallerstein have argued that unfree labor by slaves, indentured servants, prisoners, and other coerced persons is compatible with capitalist relations.[118] Marxian economist Richard D. Wolff postulates that capitalist economies prioritize profits and capital accumulation over the social needs of communities, and capitalist enterprises rarely ever include the workers in the basic decisions of the enterprise.[119] Many aspects of capitalism have come under attack from the anti-globalization movement, which is primarily opposed to corporate capitalism. Environmentalists have argued that capitalism requires continual economic growth, and that it will inevitably deplete the finite natural resources of the Earth.[120] Such critics argue that while this neoliberalism, or contemporary capitalism,[121] has indeed increased global trade, it has also increased global poverty - with more living today in abject poverty than before neoliberalism, and that environmental indicators indicate massive environmental degradation since the late 1970s.[122] Following the banking crisis of 2007, Alan Greenspan told the United States Congress on October 23, 2008, "The whole intellectual edifice collapsed. I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such that they were best capable of protecting their own shareholders. ... I was shocked."[123] Many religions have criticized or opposed specific elements of capitalism. Traditional Judaism, Christianity, and Islam forbid lending money at interest,[124][125] although alternative methods of banking have been developed. Some Christians have criticized capitalism for its materialist aspects[126] and its inability to account for the wellbeing of all people. Many of Jesus's parables deal with clearly economic concerns: farming, shepherding, being in debt, doing hard labor, being excluded from banquets and the houses of the rich, and have implications for wealth and power distribution.[127][128] In his 84-page apostolic exhortation Evangelii Gaudium, Pope Francis described unfettered capitalism as "a new tyranny" and called upon world leaders to fight rising pov erty and inequality.[129] In it he says: Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naive trust in the goodness of those wielding economic power and in the sacralized workings of the prevailing economic system. Meanwhile, the excluded are still waiting.[130] See also Anti-capitalism Communism Corporatocracy Criticisms of capitalism Distributism Economic democracy Economics Market economy Market socialism Neoliberalism Perspectives on capitalism Rhine capitalism Socialism Varieties of Capitalism Communism From Wikipedia, the free encyclopedia For the Western term for a state that is governed by a Communist party, see Communist state. For the ideology upheld in multiple Communist states, see Marxism Leninism. "Communist" redirects here. For the journal of the former Central Committee of the Communist Party of the Soviet Union, see Kommunist. Page semi-protected Part of the series on Communism A golden hammer and sickle inscribed within a red star Concepts[show] Aspects[show] Variants[show] Internationals[show] Leaders[show] By country[show] Related topics[show] Portal icon Communism portal v t e Communism (from Latin communis common, universal) is a classless, moneyless,[1][2] and stateless social order structured upon common ownership of the means of production, as well as a social, political and economic ideology and movement that aims at the establishment of this social order.[3] The movement to develop communism, in its Marxist Leninist interpretations, significantly influenced the history of the 20th century, which saw intense rivalry between the Communist states in the Socialist world and the most developed capitalist states of the Western world.[4] According to Marxist theory, higher-phase communism is a specific stage of historical development that inevitably emerges from the development of the productive forces that leads to abundant access to final goods, allowing for distribution based on need and social relations based on free association.[5][6] Marxist theory holds that the lower-phase of communism, colloquially referred to as socialism, being the new society established after the overthrow of capitalism, is a transitional stage in human social evolution and will give rise to a fully communist society, in which remuneration and the division of labor are no longer present. Leninism adds to Marxism the organizational principle of the vanguard party to lead the proletarian revolution and to secure all political power after the revolution for the working class, for the development of universal class consciousness and worker participation, in the transitional stage between capitalism and communism. Council communists and non-Marxist libertarian communists and anarcho-communists oppose the ideas of a vanguard party and a transition stage, and advocate for full communism to begin immediately upon the abolition of capitalism. There is a very wide range of theories amongst those particular communists in regards to how to build the types of institutions that would replace the various economic engines (such as food distribution, education, and hospitals) as they exist under capitalist systems or even whether to do so at all. In the modern lexicon of what many Western sociologists and political commentators refer to as the "political mainstream", communism is often used as a broad term to refer to the policies of Communist states, i.e., the ones governed by Communist parties, in general, regardless of the diversity of economic models over which they may preside. Examples of this include the policies of the Socialist Republic of Vietnam where the economic system incorporates "doi moi" and the People's Republic of China (PRC) where the economic system incorporates "socialist market economy". Contents 1 Etymology and terminology 2 History 2.1 Early communism 2.2 Modern communism 2.3 Cold War 2.4 After the collapse of the Soviet Union 3 Marxist communism 3.1 Marxism 3.2 Leninism and Marxism-Leninism 3.3 Leninism 3.4 Stalinism 3.5 Trotskyism 3.6 Maoism 3.7 Prachanda Path 3.8 Hoxhaism 3.9 Titoism 3.10 Juche 3.11 Eurocommunism 3.12 Libertarian Marxism 3.13 Council communism 3.14 Left communism 3.15 Situationism 3.16 Autonomism 4 Non-Marxist communism 4.1 Anarchist communism 4.2 Christian communism 5 Criticism 6 See also 7 References 8 External links Etymology and terminology Communism comes from the Latin word communis, which means "shared" or "belong to all".[7][8] In the schema of historical materialism and dialectical materialism (the application of Hegelian dialectic to historical materialism), communism is the idea of a free society with no division or alienation, where the people are free from oppression and scarcity. A communist society would have no governments, countries, or class divisions. In Marxist theory, the dictatorship of the proletariat is the intermediate system between capitalism and communism, when the government is in the process of changing the means of ownership from privatism to collective ownership.[9] The hammer and sickle and the red star are universal symbols of communism. In modern usage, the word "communism" is still often used to refer to the policies of past and present self-declared socialist governments typically comprising one-party states wherein the country's vanguard party is governing the state exclusively, operating centrally planned economies and a state ownership of the means of production, with the state, in turn, being legally obliged to represent the interests of the working class. A significant sector of the modern communist movement alleges that these states never made an attempt to transition to a communist society, while others even argue that they never achieved a legitimate socialism. Most of these governments claimed to base their ideology on Marxism-Leninism (though this, too, may be erroneous[citation needed]), but they did not call the system they had set up "communism", nor did they even necessarily claim at all times that the ideology was the sole driving force behind their policies: Mao Zedong, for example, pursued New Democracy, and Vladimir Lenin in the Russian Civil War enacted war communism; later, the Vietnamese enacted doi moi, and the Chinese switched to socialism with Chinese characteristics. The governments labeled by other governments as "communist" generally claimed that they had set up a transitional socialist system. This system is sometimes referred to as state socialism or by other similar names. "Higher-phase communism" is a term sometimes used to refer to the stage in history after socialism (or lower-phase communism), although just as many communists use simply the term "communism" to refer to that stage. The classless, stateless society that characterizes this communism is one in which decisions on what to produce and what policies to pursue are made by a free association of equal individuals. In such a higher-phase communism the interests of every member of society is given equal weight in the practical decision-making process in both the political and economic spheres of life. History Main article: History of communism Early communism Further information: Primitive communism, Religious communism, and Utopian socialism The origins of communism are debatable, and there are various historical groups, as well as theorists, whose beliefs have been subsequently described as communist. German philosopher Karl Marx saw primitive communism as the original, hunter-gatherer state of humankind from which it arose. For Marx, only after humanity was capable of producing surplus, did private property develop. The idea of a classless society first emerged in Ancient Greece.[10] Plato in his The Republic described it as a state where people shared all their property , wives, and children: "The private and individual is altogether banished from life and things which are by nature private, such as eyes and ears and hands, have become common, and in some way see and hear and act in common, and all men express praise and feel joy and sorrow on the same occasions."[10] In the history of Western thought, certain elements of the idea of a society based on common ownership of property can be traced back to ancient times. Examples include the Spartacus slave revolt in Rome.[11] The 5th-century Mazdak movement in Persia (Iran) has been described as "communistic" for challenging the enormous privileges of the noble classes and the clergy, criticizing the institution of private property and for striving for an egalitarian society.[12] At one time or another, various small communist communities existed, generally under the inspiration of Scripture.[13] In the medieval Christian church, for example, some monastic communities and religious orders shared their land and other property (see Religious and Christian communism). Communist thought has also been traced back to the work of 16th-century English writer Thomas More. In his treatise Utopia (1516), More portrayed a society based on common ownership of property, whose rulers administered it through the application of reason. In the 17th century, communist thought surfaced again in England, where a Puritan religious group known as the "Diggers" advocated the abolition of private ownership of land.[14] Eduard Bernstein, in his 1895 Cromwell and Communism[15] argued that several groupings in the English Civil War, especially the Diggers espoused clear communistic, agrarian ideals, and that Oliver Cromwell's attitude to these groups was at best ambivalent and often hostile.[16] Criticism of the idea of private property continued into the Age of Enlightenment of the 18th century, through such thinkers as Jean Jacques Rousseau in France. Later, following the upheaval of the French Revolution, communism emerged as a political doctrine.[17] Various social reformers in the early 19th century founded communities based on common ownership. But unlike many previous communist communities, they replaced the religious emphasis with a rational and philanthropic basis.[18] Notable among them were Robert Owen, who founded New Harmony in Indiana (1825), and Charles Fourier, whose followers organized other settlements in the United States such as Brook Farm (1841 47).[18] Later in the 19th century, Karl Marx described these social reformers as "utopian socialists" to contrast them with his program of "scientific socialism" (a term coined by Friedrich Engels). Other writers described by Marx as "utopian socialists" included Saint-Simon. In its modern form, communism grew out of the socialist movement of 19th-century Europe. As the Industrial Revolution advanced, socialist critics blamed capitalism for the misery of the proletariat a new class of urban factory workers who labored under often-hazardous conditions. Foremost among these critics were Marx and his associate Friedrich Engels. In 1848, Marx and Engels offered a new definition of communism and popularized the term in their famous pamphlet The Communist Manifesto.[18] Modern communism Countries of the world now (red) or previously (orange) having nominally communist (Marxist-Leninist) governments. The 1917 October Revolution in Russia was the first time any avowedly Communist Party, in this case the Bolshevik Party, seized state power. The assumption of state power by the Bolsheviks generated a great deal of practical and theoretical debate within the Marxist movement. Marx predicted that socialism and communism would be built upon foundations laid by the most advanced capitalist development. Russia, however, was one of the poorest countries in Europe with an enormous, largely illiterate peasantry and a minority of industrial workers. Marx had explicitly stated that Russia might be able to skip the stage of bourgeois rule.[19] Other socialists also believed that a Russian revolution could be the precursor of workers' revolutions in the West. The moderate Mensheviks opposed Lenin's Bolshevik plan for socialist revolution before capitalism was more fully developed. The Bolsheviks' successful rise to power was based upon the slogans such as "Peace, bread, and land" which tapped the massive public desire for an end to Russian involvement in the First World War, the peasants' demand for land reform, and popular support for the Soviets.[20] Vladimir Lenin after his return to Petrograd. The Second International had dissolved in 1916 over national divisions, as the separate national parties that composed it did not maintain a unified front against the war, instead generally supporting their respective nation's role. Lenin thus created the Third International (Comintern) in 1919 and sent the Twenty-one Conditions, which included democratic centralism, to all European socialist parties willing to adhere. In France, for example, the majority of the French Section of the Workers' International (SFIO) party split in 1921 to form the French Section of the Communist International (SFIC). Henceforth, the term "Communism" was applied to the objective of the parties founded under the umbrella of the Comintern. Their program called for the uniting of workers of the world for revolution, which would be followed by the establishment of a dictatorship of the proletariat as well as the development of a socialist economy. During the Russian Civil War (1918 1922), the Bolsheviks nationalized all productive property and imposed a policy of war communism, which put factories and railroads under strict government control, collected and rationed food, and introduced some bourgeois management of industry. After three years of war and the 1921 Kronstadt rebellion, Lenin declared the New Economic Policy (NEP) in 1921, which was to give a "limited place for a limited time to capitalism." The NEP lasted until 1928, when Joseph Stalin achieved party leadership, and the introduction of the first Five Year Plan spelled the end of it. Following the Russian Civil War, the Bolsheviks, in 1922, formed the Union of Soviet Socialist Republics (USSR), or Soviet Union, from the former Russian Empire. Following Lenin's democratic centralism, the communist parties were organized on a hierarchical basis, with active cells of members as the broad base; they were made up only of elite cadres approved by higher members of the party as being reliable and completely subject to party discipline.[21] The Great Purge of 1937 1938 was Stalin's attempt to destroy any possible opposition within the Communist Party. In the Moscow Trials many old Bolsheviks who had played prominent roles during t he Russian Revolution of 1917, or in Lenin's Soviet government afterwards, including Kamenev, Zinoviev, Rykov, and Bukharin, were accused, pleaded guilty, and executed.[22] Following World War II, Communists consolidated power in Central and Eastern Europe, and in 1949, the Communist Party of China (CPC), led by Mao Zedong, established the People's Republic of China, which would follow its own ideological path of Communist development following the Sino-Soviet split. Cuba, North Korea, Vietnam, Laos, Cambodia, Angola, and Mozambique were among the other countries in the Third World that adopted or imposed a Communist government at some point. By the early 1980s almost one-third of the world's population lived in Communist states, including the former Soviet Union and PRC.[citation needed] Communist states such as the Soviet Union and PRC succeeded in becoming industrial and technological powers, challenging the capitalists' powers in the arms race and space race. Cold War Main article: Cold War See also: Red Scare USSR postage stamp depicting the communist state launching the first artificial satellite Sputnik 1. Its leading role in the Second World War saw the emergence of the Soviet Union as a superpower, with strong influence over Eastern Europe and parts of Asia. At the same time the existing European empires were shattered and Communist parties played a leading role in many independence movements. Governments modelled on Soviet Communism took power with Soviet assistance in Bulgaria, Czechoslovakia, East Germany, Poland, Hungary and Romania. A Communist government was also created under Marshal Tito in Yugoslavia, but Tito's independent policies led to the expulsion of Yugoslavia from the Cominform, which had replaced the Comintern. Titoism, a new branch in the world Communist movement, was labelled "deviationist". Albania also became an independent Communist nation after World War II.[23] By 1950, the Chinese Communists held all of Mainland China, thus controlling the most populous nation in the world. Other areas where rising Communist strength provoked dissension and in some cases led to actual fighting through conventional and guerrilla warfare include the Korean War, Laos, many nations of the Middle East and Africa, and notably succeeded in the case of the Vietnam War against the military power of the United States and its allies. With varying degrees of success, Communists attempted to unite with nationalist and socialist forces against what they saw as Western imperialism in these poor countries. Communism was seen as a rival, and a threat to western democracies and capitalism for most of the 20th century.[24] This rivalry peaked during the Cold War, as the world's two remaining superpowers, the United States and the Soviet Union, polarized most of the world into two camps of nations. This was characterized in the West as The Free World vs. Behind the Iron Curtain.[citation needed] It supported the spread of their respective economic and political systems (capitalism and communism) and strengthened their military powers. As a result, the camps developed new weapon systems, stockpiled nuclear weapons, and competed in space exploration. Near the beginning of the Cold War, on February 9, 1950, Senator Joseph McCarthy from Wisconsin accused 205 Americans working in the State Department of being "card-carrying communists".[25] The fear of communism in the U.S. spurred McCarthyism, aggressive investigations and the red-baiting, blacklisting, jailing and deportation of persons suspected of following communist or other left-wing ideologies. Many famous actors and writers were placed on a blacklist from 1950 to 1954, which meant they would not be hired and would be subject to public disdain.[24] After the collapse of the Soviet Union Further information: List of communist parties and List of communist and anti-capitalist parties with parliamentary representation A demonstration of the Communist Party of the Russian Federation, Moscow, December 2011. In 1985, Mikhail Gorbachev became leader of the Soviet Union and relaxed central control, in accordance with reform policies of glasnost (openness) and perestroika (restructuring). The Soviet Union did not intervene as Poland, East Germany, Czechoslovakia, Bulgaria, Romania, and Hungary all abandoned Communist rule by 1990. In 1991, the Soviet Union dissolved. By the beginning of the 21st century, states controlled by communist parties under a single-party system include the People's Republic of China, Cuba, Laos, Vietnam, and North Korea. Communist parties, or their descendant parties, remain politically important in a number of other countries. President Dimitris Christofias of Cyprus is a member of the Progressive Party of Working People, but the country is not run under single-party rule. The South African Communist Party is a partner in the African National Congress-led government. In India, communists lead the governments of three states, with a combined population of more than 115 million. In Nepal, communists hold a majority in the parliament.[26] The Communist Party of Brazil is a part of the parliamentary coalition led by the ruling democratic socialist Workers' Party and is represented in the executive cabinet of Dilma Rousseff. The People's Republic of China has reassessed many aspects of the Maoist legacy; it, along with Laos, Vietnam, and, to a lesser degree Cuba, has reduced state control of the economy in order to stimulate growth. Chinese economic reforms started in 1978 under the leadership of Deng Xiaoping; since then, China has managed to bring down the poverty rate from 53% in the Mao era to just 6% in 2001.[27] The People's Republic of China runs Special Economic Zones dedicated to market-oriented enterprise, free from central government control. Several other communist states have also attempted to implement market-based reforms, including Vietnam. Theories within Marxism as to why communism in Central and Eastern Europe was not achieved after socialist revolutions pointed to such elements as the pressure of external capitalist states, the relative backwardness of the societies in which the revolutions occurred, and the emergence of a bureaucratic stratum or class that arrested or diverted the transition process in its own interests. Marxist critics of the Soviet Union, most notably Trotsky, referred to the Soviet system, along with other Communist states, as "degenerated" or "deformed workers' states", arguing that the Soviet system fell far short of Marx's communist ideal and he claimed the working class was politically dispossessed. The ruling stratum of the Soviet Union was held to be a bureaucratic caste, but not a new ruling class, despite their political control. Marxist communism Marxism Main article: Marxism Part of a series on Marxism Karl Marx and Friedrich Engels Theoretical works[show] Concepts[show] Economics[show] Sociology[show] History[show] Philosophy[show] Variants[show] Movements[show] People[show] Portal icon Socialism portal Portal icon Communism portal Portal icon Philosophy portal v t e Like other socialists, Karl Marx and Friedrich Engels sought an end to capitalism and the systems which they perceived to be responsible for the exploitation of workers. Whereas earlier socialists often favored longer-term social reform, Marx and Engels believed that popular revolution was all but inevitable, and the only path to socialism and communism. According to the Marxist argument for communism, the main characteristic of human life in class society is alienation; and communism is desirable because it entails the full realization of human freedom.[28] Marx here follows Georg Wilhelm Friedrich Hegel in conceiving freedom not merely as an absence of restraints but as action with content.[29] According to Marx, communism's outlook on freedom was based on an agent, obstacle, and goal. The agent is the common/working people; the obstacles are class divisions, economic inequalities, unequal life-chances, and false consciousness; and the goal is the fulfilment of human needs including satisfying work, and fair share of the product.[30][31] They believed that communism allowed people to do what they want, but also put humans in such conditions and such relations with one another that they would not wish to exploit, or have any need to. Whereas for Hegel the unfolding of this ethical life in history is mainly driven by the realm of ideas, for Marx, communism emerged from material forces, particularly the development of the means of production.[29] The Communist Manifesto. Marxism holds that a process of class conflict and revolutionary struggle will result in victory for the proletariat and the establishment of a communist society in which private property and ownership is abolished over time and the means of production and subsistence belong to the community. (Private property and ownership, in this context, means ownerships of the means of production, not private possessions).[32] Marx himself wrote little about life under communism, giving only the most general indication as to what constituted a communist society. In the popular slogan that was adopted by the communist movement, communism was a world in which each gave according to their abilities, and received according to their needs. The German Ideology (1845) was one of Marx's few writings to elaborate on the communist future: In communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticize after dinner, just as I have a mind, without ever becoming hunter, fisherman, herdsman or critic.[33] Marx's lasting vision was to add this vision to a theory of how society was moving in a law-governed way towards communism, and, with some tension, a political theory that explained why revolutionary activity was required to bring it about.[29] In the late 19th century, the terms "socialism" and "communism" were often used interchangeably. However, Marx and Engels argued that communism would not emerge from capitalism in a fully developed state, but would pass through a "first phase" in which most productive property was owned in common, but with some class differences remaining. The "first phase" would eventually evolve into a "higher phase" in which class differences were eliminated, and a state was no longer needed. Lenin frequently used the term "socialism" to refer to Marx and Engels' supposed "first phase" of communism and used the term "communism" interchangeably with Marx and Engels' "higher phase" of communism.[34]

These later aspects, particularly as developed by Vladimir Lenin, provided the underpinning for the mobilizing features of 20th century communist parties. Leninism and Marxism-Leninism Main articles: Leninism and Marxism-Leninism Part of a series on MarxismLeninism Karl Marx, Friedrich Engels, Vladimir Lenin Core tenets[show] Topics[show] People[show] Literature[show] History[show] Related topics[show] Communism portal Socialism portal Politics portal v t e Leninism is the political movement developed by Vladimir Lenin, which has become the foundation for the organizational structure of most major communist parties . Leninists advocate the creation of a vanguard party led by dedicated revolutionaries in order to lead the working class revolution to victory. Leninists believe that socialism will not arise spontaneously through the natural decay of capitalism and that workers are unable to organize and develop socialist consciousness without the guidance of the Vanguard party. After taking power, Vanguard parties seek to create a socialist state continually led by the Vanguard party in order to direct social development and defend against counterrevolutionary insurrection. The mode of industrial organization championed by Leninism and Marxism-Leninism is the capitalist model of scientific management pioneered by Fredrick Taylor.[citation needed] Marxism-Leninism is a version of Leninism merged with classical Marxism adopted by the Soviet Union and most communist parties across the world today. It shaped the Soviet Union and influenced communist parties worldwide. It was heralded as a possibility of building communism via a massive program of industrialization and collectivization. Despite the fall of the Soviet Union and the 'Eastern Bloc' (meaning communist countries of Eastern and Central Europe), many communist parties of the world today still lay claim to uphold the M arxist-Leninist banner. MarxismLeninism expands on Marxist thoughts by bringing the theories to what Lenin and other Communists considered, the age of capitalist imperialism, and a renewed focus on party building, the development of a socialist state, and democratic centralism as an organizational principle. Lenin's pamphlet What is to be Done? (1902), proposed that the (urban) proletariat can successfully achieve revolutionary consciousness only under the leadership of a vanguard party of professional revolutionarieswho can achieve aims only with internal democratic centralism in the party; tactical and ideological policy decisions are agreed via democracy, and every member must support and promote the agreed party policy. To wit, capitalism can be overthrown only with revolution because attempts to reform capitalism from within (Fabianism) and from without (social democracy) will fail because of its inherent contradictions. The purpose of a Leninist revolutionary vanguard party is the forceful deposition of the incumbent government; assume power (as agent of the proletariat) and establish the dictatorship of the proletariat. Moreover, as the government, the vanguard party must educate the proletariat to dispel the societal false consciousness of religion and nationalism that are culturally instilled by the bourgeoisie in facilitating exploitation, and to instil the material scientific outlook of the world and the sense of proletarian internationalism. The dictatorship of the proletariat is governed with a de-centralized direct democracy practised via soviets (councils) where the workers exercise political power (cf. soviet democracy); the fifth chapter of State & Revolution, describes it: ... the dictatorship of the proletariat i.e. the organization of the vanguard of the oppressed as the ruling class for the purpose of crushing the oppressors. . . . An immense expansion of democracy, which for the first time becomes democracy for the poor, democracy for the people, and not democracy for the rich: . . . and suppression by force, i.e. exclusion from democracy, for the exploiters and oppressors of the peoplethis is the change which democracy undergoes during the transition from capitalism to communism.[35] The post-revolutionary Bolshevik government was hostile to nationalism, especially to Russian nationalism, the "Great Russian chauvinism", which was seen as an obstacle to establishing the dictatorship of the proletariat.[36] However, under the regime of Joseph Stalin, during the Great Patriotic War, Russian nationalism brought back into favor.[37] The hallmarks of Marxism-Leninism are: the revolutionary vanguard party, revolution as a means to overthrow capitalism, and democratic centralism. Leninism Main article: Leninism Vladimir Lenin, 1921. "We want to achieve a new and better order of society: in this new and better society there must be neither rich nor poor; all will have to work. Not a handful of rich people, but all the working people must enjoy the fruits of their common labour. M achines and other improvements must serve to ease the work of all and not to enable a few to grow rich at the expense of millions and tens of millions of people. This new and better society is called socialist society. The teachings about this society are called 'socialism'." -Vladimir Lenin, "To the Rural Poor" (1903); Collected Works, Vol 6, p. 366 Leninism is the revolutionary theories developed by Vladimir Lenin, including the organizational principles of democratic centralism, Vanguardism and the political theory of imperialism. Leninist theory postulates that, with the strongly determined will of the Bourgeoisie to establish Imperialism, socialism will not arise spontaneously through the natural decay of capitalism, and that workers by themselves, who may be more or less sedated by reactionary propaganda, are unable to effectively organize and develop socialist consciousness, therefore requiring the leadership of a revolutionary vanguard organized on the basis of democratic centralism. As a result, Leninism promotes a Vanguard party in order to lead the working-class and peasants in a revolution. Because this revolution takes place in underdeveloped, largely pre-capitalist countries such as Russia, Leninism establishes a single-party, authoritarian state, justifying single-party control over the state and economy as a means to safeguard the revolution against counter-revolutionary insurrection and foreign invasion.[38] Although the creation of a vanguard party was outlined by Marx and Engels in Chapter II: "Proletarians and Communists" of The Communist Manifesto, Lenin modified this position by changing the role of the vanguards to professional revolutionaries, who were to hold power post-revolution and direct the national economy and society in developing world socialism. After disposing of the Bourgeois dictatorship through socialist revolution, Leninists seek to create a socialist state in which the working class would be in power, which they see as being essential for laying the foundations for a transitional withering of the state towards communism (Stateless society). In this state, the vanguard party would act as a central nucleus in the organization of socialist society, presiding over a single-party political system. Leninism rejects political pluralism, seeing it as divisive and destructive. Instead, Leninism advocates the concept of democratic centralism as a process to ensure the voicing of concern and disagreement and to refine policy. Generally, the purpose of democratic centralism is "diversity in ideas, unity in action." Leninist revolutionary theory alongside Marxist economic theory forms the ideology of Marxism-Leninism. After Lenin's death in 1924, Leninism branched into multiple (sometimes opposing) interpretations, including Trotsk yism, Stalinism, and Maoism. Stalinism Main article: Stalinism Joseph Stalin Stalinism was the political system of the Soviet Union and the countries within the Soviet sphere of influence during the leadership of Joseph Stalin. The term usually defines the style of a government rather than an ideology. The ideology was officially Marxism-Leninism theory, reflecting that Stalin himself was not a theoretician, in contrast to Marx and Lenin, and prided himself on maintaining the legacy of Lenin as a founding father for the Soviet Union and the future Socialist world. Stalinism is an interpretation of their ideas, and a certain political regime claiming to apply those ideas in ways fitting the changing needs of Soviet society, as with the transition from "socialism at a snail's pace" in the mid-twenties to the rapid industrialization of the Five-Year Plans. The main contributions of Stalin to communist theory were: The groundwork for the Soviet policy concerning nationalities, laid in Stalin's 1913 work Marxism and the National Question,[39] praised by Lenin. Socialism in One Country, stating that communists should attain socialism in their own country as a prelude to internationalising. The theory of aggravation of the class struggle along with the development of socialism, a theoretical base supporting the repression of political opponents as necessary. The legitimacy of Stalin's claim to the role of leadership in the Soviet Union (and thus the international communist movement as a whole) is a matter of some debate. Advocates of Stalinism cite both Lenin's praising of the early works of Stalin and the economic successes of the Five-Year Plans. Opponents, however, point out that certain aspects of Stalinism (socialism in one country, "revolutionary patriotism", etc.) are not found in Leninism, and argue that some aspects are even contradictory to Marxism-Leninism. Also, in Lenin's Testament, a document written by Vladimir Lenin in the last weeks of 1922 and the first week of 1923 outlining his proposed changes to the structure of the Soviet governing bodies, Lenin suggested "that the comrades think about a way of removing Stalin from [the Secretary-General] post and appointing another man in his stead who in all other respects differs from Comrade Stalin in having only one advantage, namely, that of being more tolerant, more loyal, more polite and more considerate to the comrades, less capricious, etc." Both sides of this debate identify as being ideologically orthodox to Leninism and criticize the other as being "revisionist." After Stalin's death, Soviet leader, Nikita Khrushchev condemned Stalin and distanced the Soviet Union from his legacy, especially the personality cult. Mao Zedong in China did not accept this condemnation, and Mao's followers often describe themselves as Stalinist as a result, rather than Maoist. Trotskyism Main article: Trotskyism Leon Trotsky reading The Militant. Trotskyism is the branch of Marxism that was developed by Leon Trotsky. It supports the theory of permanent revolution and world revolution instead of the two stage theory and socialism in one country. It supported proletarian internationalism and another Communist revolution in the Soviet Union, which, under the leadership of Stalin, Trotsky claimed had become a degenerated worker's state, rather than the dictatorship of the proletariat, in which class relations had re-emerged in a new form. Trotsky and his supporters organized into the Left Opposition and their platform became known as Trotskyism. Stalin eventually succeeded in gaining control of the Soviet regime and Trotskyist attempts to remove Stalin from power resulted in Trots ky's exile from the Soviet Union in 1929. Trotsky later founded the Fourth International, a Trotskyist rival to the Comintern, in 1938. Trotskyist ideas have continually found a modest echo among political movements in some countries in Latin America and Asia, especially in Argentina, Brazil, Bolivia and Sri Lanka. Many Trotskyist organizations are also active in more stable, developed countries in North America and Western Europe. Trotsky's politics differed sharply from those of Stalin and Mao, most importantly in declaring the need for an international proletarian revolution (rather than socialism in one country) and unwavering support for a true dictatorship of the proletariat based on democratic principles. However, as a whole, Trotsky's theories and attitudes were never accepted in worldwide mainstream Communist circles after Trotsky's expulsion, either within or outside the Soviet bloc. This remained the case even after the Secret Speech and subsequent events which critics claim exposed the fallibility of Stalin. Maoism Main article: Maoism Part of a series on Maoism Mao Zedong Basic concepts[show] Prominent Maoists[show] International[show] Maoist parties by country[show] Key books[show] Related topics[show] Portal icon Communism portal v t e Maoism is the Marxist-Leninist trend of communism associated with Chairman Mao Zedong of the Communist Party of China and was mostly practiced within China. Nikita Khrushchev's reforms heightened ideological differences between China and the Soviet Union, which became increasingly apparent in the 1960s. Parties and groups that supported the Communist Party of China (CPC) in their criticism against the new Soviet leadership proclaimed themselves as 'anti-revisionist' and denounced the Communist Party of the Soviet Union and the parties aligned with it as revisionist "capitalist-roaders." The Sino-Soviet Split resulted in divisions amongst communist parties around the world. Notably, the Party of Labour of Albania sided with the People's Republic of China. Effectively, the CPC under Mao's leadership became the rallying forces of a parallel international Communist tendency. Definitions of Maoism vary. Within the Chinese context, Maoism can refer to Mao's belief in the mobilization of the masses, particularly in large-scale political movements; it can also refer to the egalitarianism that was seen during Mao's era as opposed to the free-market ideology of Deng Xiaoping; some scholars additionally define personality cults and political sloganeering as "Maoist" practices. Contemporary Maoists in China criticize the social inequalities created by a capitalist and 'revisionist' Communis t party. Prachanda Path See also: Marxism LeninismMaoismPrachanda Path Prachanda Path refers to the ideological line of the Unified Communist Party of Nepal. This thought is an extension of Marxism, Leninism and Maoism, totally based on home-ground politics of Nepal. The doctrine came into existence after it was realized that the ideology of Marxism, Leninism and Maoism could not be practiced completely as it was done in the past. And an ideology suitable, based on the ground reality of Nepalese politics was adopted by the party. Hoxhaism Main article: Hoxhaism Another variant of anti-revisionist Marxism-Leninism appeared after the ideological row between the Communist Party of China and the Party of Labour of Albania in 1978. The Albanians rallied a new separate international tendency, which would demarcate itself by a strict defence of the legacy of Joseph Stalin and fierce criticism of virtually all other Communist groupings as revisionism. Critical of the United States, the Soviet Union, and China, Enver Hoxha declared the latter two to be social-imperialist and condemned the Soviet invasion of Czechoslovakia by withdrawing from the Warsaw Pact in response. Hoxha declared Albania to be the world's only Marxist-Leninist state after 1978. The Albanians were able to win over a large share of the Maoists, mainly in Latin America such as the Popular Liberation Army, but also had a significant international following in general. This tendency has occasionally been labelled as 'Hoxhaism' after him. After the fall of the Communist government in Albania, the pro-Albanian parties are grouped around an international conference and the publication 'Unity and Struggle'. Titoism Main article: Titoism Elements of Titoism are characterized by policies and practices based on the principle that in each country, the means of attaining ultimate communist goals must be dictated by the condit ions of that particular country, rather than by a pattern set in another country. During Tito's era, this specifically meant that the communist goal should be pursued independently of (and often in opposition to) the policies of the Soviet Union. The term was originally meant as a pejorative, and was labelled by Moscow as a heresy during the period of tensions between the Soviet Union and Yugoslavia known as the Informbiro period from 1948 to 1955. Unlike the rest of Central and Eastern Europe, which fell under Stalin's influence post World War II, Yugoslavia, due to the strong leadership of Marshal Josip Broz Tito and the fact that the Yugoslav Partisans liberated Yugoslavia with only limited help from the Red Army, remained independent from Moscow. It became the only country in the Balkans to resist pressure from Moscow to join the Warsaw Pact and remained "socialist, but independent" until the collapse of Soviet socialism in the late 1980s and early 1990s. Throughout his time in office, Tito prided himself on Yugoslavia's independence from Russia, with Yugoslavia never accepting full membership of the Comecon and Tito's open rejection of many aspects of Stalinism as the most obvious manifestations of this. Juche Main article: Juche Juche is a development of Marxism-Leninism which has been the official ideology of North Korea under its leader Kim Il Sung and his successors. It emphasises economic and military self-reliance. As the Communist bloc split, collapsed, or embraced market reforms, Juche was increasingly emphasised by the North Korean regime over the wider theories of Communism. Like Mao Zedong in China, Kim refused to accept Soviet leader, Nikita Khrushchev's condemnation of Stalin, but he did not copy Mao's Cultural Revolution. He developed a pers onality cult that was similar to Stalin's and Mao's, but uniquely was passed onto his son and grandson. Eurocommunism Main article: Eurocommunism Eurocommunism was a trend in the 1970s and 1980s within various Western European communist parties to develop a theory and practice of social transformation that was more relevant in a Western European democracy and less aligned to the influence or control of the Soviet Union. Parties such as the Italian Communist Party (PCI), the French Communist Party (PCF), and the Communist Party of Spain (PCE), were politically active and electorally significant in their respective countries.[cit ation needed] The main theoretical foundation of Eurocommunism was Antonio Gramsci's writing about Marxist theory which questioned the sectarianism of the Left and encouraged communist parties to develop social alliances to win hegemonic support for social reforms. Eurocommunist parties expressed their fidelity to democratic institutions more clearly than before and attempted to widen their appeal by embracing public sector middle-class workers, new social movements such as feminism and gay liberation and more publicly questioning the Soviet Union. Early inspirations can also be found in the Austromarxism and its seeking of a "third" democratic "way" to socialism. Libertarian Marxism Main article: Libertarian Marxism Libertarian Marxism refers to a broad scope of economic and political philosophies that emphasize the anti-authoritarian aspects of Marxism. Early currents of libertarian Marxism, known as left communism,[40] emerged in opposition t o MarxismLeninism[41] and its derivatives, such as Stalinism, Maoism, and Trotskyism.[42] Libertarian Marxism is also critical of reformist positions, such as those held by social democrats.[43] Libertarian Marxist currents often draw from Marx and Engels' later works, specifically the Grundrisse and The Civil War in France;[44] emphasizing the Marxist belief in the ability of the working class to forge its own destiny without the need for a revolutionary party or state to mediate or aid its liberation.[45] Along with anarchism, Libertarian Marxism is one of the main currents of libertarian socialism.[46] Libertarian Marxism includes such currents as Luxemburgism, council communism, left communism, Socialisme ou Barbarie, the Johnson-Forest tendency, world socialism, Lettrism/Situationism and operaismo/autonomism, and New Left.[47] Libertarian Marxism has often had a strong influence on both post-left and social anarchists. Notable theorists of libertarian Marxism have included Anton Pannekoek, Raya Dunayevskaya, CLR James, Antonio Negri, Cornelius Castoriadis, Maurice Brinton, Guy Debord, Daniel Gurin, Ernesto Screpanti and Raoul Vaneigem. Council communism Main article: Council communism Council communism is a far-left movement originating in Germany and the Netherlands in the 1920s. Its primary organization was the Communist Workers Party of Germany (KAPD). Council communism continues today as a theoretical and activist position within both left-wing Marxism and libertarian socialism. The central argument of council communism, in contrast to those of social democracy and Leninist communism, is that democratic workers' councils arising in the factories and municipalities are the natural form of working class organization and governmental power. This view is opposed to both the reformist and the Leninist ideologies, with their stress on, respectively, parliaments and institutional government (i.e., by applying social reforms, on the one hand, and vanguard parties and participative democratic centralism on the other). The core principle of council communism is that the government and the economy should be managed by workers' councils composed of delegates elected at workplaces and recallable at any moment. As such, council communists oppose state-run authoritarian "State socialism"/"State capitalism". They also oppose the idea of a "revolutionary party", since council communists believe that a revolution led by a party will necessarily produce a party dictatorship. Council communists support a worker's democracy, which they want to produce through a federation of workers' councils. Left communism Main article: Left communism Rosa Luxemburg, inspiration of left communism. Left communism is the range of communist viewpoints held by the communist left, which criticizes the political ideas of the Bolsheviks at certain periods, from a position that is asserted to be more authentically Marxist and proletarian than the views of Leninism held by the Communist International after its first and during its second congress. Left Communists see themselves to the left of Leninists (whom they tend to see as 'left of capital', not socialists), anarchist communists (some of whom they consider internationalist socialists) as well as some other revolutionary socialist tendencies (for example De Leonists, who they tend to see as being internationalist socialists only in limited instances). Although she died before left communism became a distinct tendency, Rosa Luxemburg has heavily influenced most left communists, both politically and theoretically. Proponents of left communism have included Amadeo Bordiga, Herman Gorter, Anton Pannekoek, Otto Rhle, Karl Korsch, Sylvia Pankhurst and Paul Mattick. Prominent left communist groups existing today include the International Communist Party, the International Communist Current and the Internationalist Communist Tendency. Situationism Main article: Situationist International The Situationist International was a restricted group of international revolutionaries founded in 1957, and which had its peak in its influence on the unprecedented general wildcat strikes of May 1968 in France. With their ideas rooted in Marxism and the 20th-century European artistic avant-gardes, they advocated experiences of life being alternative to those admitted by the capitalist order, for the fulfillment of human primitive desires and the pursuing of a superior passional quality. For this purpose they suggested and experimented with the construct ion of situations, namely the setting up of environments favorable for the fulfillment of such desires. Using methods drawn from the arts, they developed a series of experimental fields of study for the construction of such situations, like unitary urbanism and psychogeography. They fought against the main obstacle on the fulfillment of such superior passional living, identified by them in advanced capitalism. Their theoretical work peaked on the highly influential book The Society of the Spectacle by Guy Debord. Debord argued in 1967 that spectacular features like mass media and advertising have a central role in an advanced capitalist society, which is to show a fake reality in order to mask the real capitalist degradation of human life. To overthrow such a system, the Situationist International supported the May 1968 revolts, and asked the workers to occupy the factories and to run them with direct democracy, through workers' councils composed by instantly revocable delegates. After publishing in the last issue of the magazine an analysis of the May 1968 revolts, and the strategies that will need to be adopted in future revolutions,[48] the SI was dissolved in 1972.[49] Autonomism Main article: Autonomism Antonio Negri, main theorist of Italian autonomism. Autonomism refers to a set of left-wing political and social movements and theories close to the socialist movement. As an identifiable theoretical system it first emerged in Italy in the 1960s from workerist (operaismo) communism. Later, post-Marxist and anarchist tendencies became significant after influence from the Situationists, the failure of Italian far-left movements in the 1970s, and the emergence of a number of important theorists including Antonio Negri, who had contributed to the 1969 founding of Potere Operaio, Mario Tronti, Paolo Virno, etc. Through translations made available by Danilo Montaldi and others, the Italian autonomists drew upon previous activist research in the United States by the Johnson-Forest Tendency and in France by the group Socialisme ou Barbarie. It influenced the German and Dutch Autonomen, the worldwide Social Centre movement, and today is influential in Italy, France, and to a lesser extent the English-speaking countries. Those who describe themselves as autonomists now vary from Marxists to post-structuralists and anarchists. The Autonomist Marxist and Autonomen movements provided inspiration to some on the revolutionary left in English speaking countries, particularly among anarchists, many of whom have adopted autonomist tactics. Some English-speaking anarchists even describe themselves as Autonomists. The Italian operaismo movement also influenced Marxist academics such as Harry Cleaver, John Holloway, Steve Wright, and Nick Dyer-Witheford.

Non-Marxist communism The dominant forms of communism are based on Marxism, but non-Marxist versions of communism (such as Christian communism and anarchist communism) also exist. Anarchist communism Part of the Politics series on Anarchism "Circle-A" anarchy symbol Schools of thought[show] Theory Practice [show] People[show] Issues[show] History[show] Culture[show] Economics[show] By region[show] Lists[show] Related topics[show] Anarchism portal Politics portal v t e Main article: Anarchist communism Peter Kropotkin, main theorist of anarcho-communism. Anarchist communism (also known as libertarian communism) is a theory of anarchism which advocates the abolition of the state, private property, and capitalism in favor of common ownership of the means of production,[50][51] direct democracy and a horizontal network of voluntary associations and workers' councils with production and consumption based on the guiding principle: "from each according to his ability, to each according to his need".[52][53] Anarcho-communism differs from Marxism rejecting its view about the need for a State Socialism phase before building communism. The main anarcho-communist theorist Peter Kropotkin argued "that a revolutionary society should "transform itself immediately into a communist society,", that is, should go immediately into what Marx had regarded as the "more advanced," completed, phase of communism."[54] In this way it tries to avoid the reappearence of "class divisions and the need for a state to oversee everything".[54] Some forms of anarchist communism such as insurrectionary anarchism are egoist and strongly influenced by radical individualism,[55][56][57] believing that anarchist communism does not require a communitarian nature at all. Most anarcho-communists view anarcho-communism as a way of reconciling the opposition between the individual and society[58][59][60] To date in human history, the best known examples of an anarchist communist society, established around the ideas as they exist today, that received worldwide attention and knowledge in the historical canon, are the anarchist territories during the Spanish Revolution and the Free Territory during the Russian Revolution. Through the efforts and influence of the Spanish Anarchists during the Spanish Revolution within the Spanish Civil War, starting in 1936 anarchist communism existed in most of Aragon, parts of the Levante and Andalusia, as well as in the stronghold of Anarchist Catalonia before being brutally crushed by the combined forces of the authoritarian regime that won the war, Hitler, Mussolini, Spanish Communist Party repression (backed by the USSR) as well as economic and armaments blockades from the capitalist countries and the Spanish Republic itself. During the Russian Revolution, anarchists such as Nestor Makhno worked to create and defend through the Revolutionary Insurrectionary Army of Ukraine anarchist communism in the Free Territory of the Ukraine from 1919 before being conquered by the Bolsheviks in 1921. Christian communism

Christian communism is a form of religious communism centred on Christianity. It is a theological and political theory based upon the view that the teachings of Jesus Christ urge Christians to support communism as the ideal social system. Christian communists trace the origins of their practice to teachings in the New Testament, such as the Acts of the Apostles at chapter 2 and verses 42, 44 and 45: 42 And they continued steadfastly in the apostles' doctrine and in fellowship ... 44 And all that believed were together, and had all things in common; 45 And sold their possessions and goods, and parted them to all men, as every man had need. King James Version Christian communism can be seen as a radical form of Christian socialism. Also, because many Christian communists have formed independent stateless communes in the past, there is a link between Christian communism and Christian anarchism. Christian communists may not agree with various parts of Marxism, but they share some of the political goals of Marxists, for example replacing capitalism with socialism, which should in turn be followed by communism at a later point in the future. However, Christian communists sometimes disagree with Marxists (and particularly with Leninists) on the way a socialist or communist society should be organized. Criticism Main articles: Criticisms of communism and Anti-communism See also Criticisms of Marxism and Criticisms of socialism for a discussion of objections to socialism in general. The government's forced collectivization of agriculture is considered a main reason for the Soviet famine of 1932 1933. Some people[who?] have criticized socialism and by extension communism, stating that the two systems have distorted or absent price signals,[61][62] slow or stagnant technological advance,[63] reduced incentives,[64][65][66] and reduced prosperity,[67][68] as well as on the grounds of its feasibility[61][62][63] and its social and political effects.[69][70][71][72][73][74] Part of this criticism extends to the policies adopted by one-party states ruled by communist parties (known as "communist states"). Some scholars are specially focused on their human rights records which are claimed to be responsible for famines, purges and warfare resulting in deaths far in excess of previous empires, capitalist or other regimes.[75][76][77] The Council of Europe in Resolution 1481 and international declarations such as the Prague Declaration on European Conscience and Communism and the Declaration on Crimes of Communism have condemned some of the actions that resulted in these deaths as crimes. Stphane Courtois argues that communism is responsible for the murder of almost 100 million people in the 20th century,[78] but two of the main Black Book's contributors, Nicolas Werth and Jean-Louis Margolin, disagreed and publicly disassociated themselves from Courtois's statements.[79] See also Gloria Victis Memorial List of communist parties Socialism From Wikipedia, the free encyclopedia This article is about socialism as an economic system and political philosophy. For socialism specifically defined as a stage of development in Marxist theory, see Socialism (Marxism). For the concept where the state promotes the social and economic well-being of its citizens sometimes mistaken with socialism, see Welfare state. Part of a series on Socialism Red flag waving.svg Development[show] Ideas[show] Models[show] Variants[show] People[show] Organizations[show] Socialism portal Economics portal Politics portal v t e Socialism is a social and economic system characterised by social ownership of the means of production and co-operative management of the economy,[1][2] as well as a political theory and movement that aims at the establishment of such a system.[3][4] "Social owners hip" may refer to cooperative enterprises, common ownership, state ownership, citizen ownership of equity, or any combination of these.[5] There are many varieties of socialism and there is no single definition encapsulating all of them.[6] They differ in the type of social ownership they advocate, the degree to which they rely on markets or planning, how management is to be organised within productive institutions, and the role of the state in constructing socialism.[7] A socialist economic system is based on the organisational precept of production for use, meaning the production of goods and services to directly satisfy economic demand and human needs where objects are valued based on their use-value or utility, as opposed to being structured upon the accumulation of capital and production for profit.[8] In the traditional conception of a socialist economy, coordination, accounting and valuation would be performed in kind (using physical quantities), by a common physical magnitude, or by a direct measure of labour-time in place of financial calculation.[9][10] Distribution of output is based on the principle of to each according to his contribution. The exact methods of resource allocation and valuation are the subject of debate within the broader socialis t calculation debate. In the Marxist theory of historical materialism, it is predicted that further advances in technology and the productive forces will give rise to a more advanced stage of development referred to as communism, a society in which classes and the state are no longer present, and there is access abundance to final goods, and thus distribution is based on to each according to his need. The socialist political movement includes a diverse array of political philosophies. Core dichotomies within the socialist movement include the distinction between reformism and revolutionary socialism and between state socialism and libertarian socialism. State socialism calls for the nationalisation of the means of production as a strategy for implementing socialism, while libertarian socialism opposes the use of state power whether exercised through parliamentary politics or state-owned industry as a means to achieve socialism.[11] Democratic socialism highlights the central role of democratic processes and political systems and is usually contrasted with non-democratic political movements that advocate socialism. Modern socialism originated from an 18th-century intellectual and working class political movement that criticised the effects of industrialisation and private property on society. The revival of republicanism in the American Revolution of 1776 and the egalitarian values introduced by the French Revolution of 1789 gave rise to socialism as a distinct political movement. In the early 19th-century, "socialism" referred to any concern for the social problems of capitalism irrespective of the solutions to those problems. However, by the late 19th-century, "socialism" had come to signify opposition to capitalism and advocacy for an alternative post-capitalist system based on some form of social ownership.[12] During this time, German philosopher Karl Marx and his collaborator Friedrich Engels published works criticizing the utopian aspects of contemporary socialist trends and applied a materialist understanding of socialism as a phase of development which will come about through social revolution instigated by escalating and conflicting class relationships within capitalism.[13] The socialist movement came to be the most influential worldwide movement and worldview of the twentieth century.[14] Contents 1 Etymology 2 History 2.1 Early socialism 2.2 Socialism expands and the First and Second Internationals 2.3 The early 20th century and the revolutions of 1917 1936 2.4 The mid 20th century: World War II and post war radicalization 2.5 Late 20th century 2.6 Contemporary socialism 3 Philosophy 3.1 Freedom and creativity 3.2 Perspectives on equality 3.3 Critique of capitalism 4 Economics 4.1 Planned economy 4.2 Self-managed economy 4.3 State-directed economy 4.4 Market socialism 5 Social and Political theory 5.1 Marxism 5.2 Evolutionary and Institutional economics 5.3 Role of the state 5.4 Utopian versus scientific 5.5 Reform versus revolution 6 Politics 6.1 Anarchism 6.2 Libertarian socialism 6.3 Democratic socialism 6.4 Religious socialism 6.5 Social democracy 6.6 Syndicalism 7 Criticism 8 See also 9 References 10 Further reading 11 External links Etymology For Andrew Vincent "The word socialism finds its root in the Latin sociare, which means to combine or to share. The related , more technical term in Roman and then medieval law was societas. This latter word could mean companionship and fellowship as well as the more legalistic idea of a consensual contract between freemen." [15] The term "socialism" was created by Henri de Saint-Simon, a founder of utopian socialism. The term "socialism" was created to contrast against the liberal doctrine of "individualism".[16] The original socialists condemned liberal individualism as failing to address social concerns of poverty, social oppression, and gross inequality of wealth.[16] They viewed liberal individualism as degenerating society into supporting selfish egoism and that harmed community life through promoting a society based on competition.[16] They presented socialism as an alternative to liberal individualism, that advocated a society based on cooperation.[16] The term socialism is attributed to Pierre Leroux,[17] and to Marie Roch Louis Reybaud in France; and in Britain to Robert Owen in 1 827, father of the cooperative movement.[18][19] History Main article: History of socialism Early socialism Main articles: Utopian socialism, Revolutions of 1848, Paris Commune, and History_of_anarchism#Early_history Charles Fourier, influential early French socialist thinker Socialist models and ideas espousing common or public ownership have existed since antiquity. Mazdak, a Persian communal proto-socialist,[20] instituted communal possessions and advocated the public good. And it has been claimed, though controversially , that there were elements of socialist thought in the politics of classical Greek philosophers Plato[21] and Aristotle.[22] In the post-revolutionary period right after the French Revolution activists and theorists like Franois-Nol Babeuf, Filippo Buonarroti, and Auguste Blanqui influenced the early French labour and socialist movements.[23] The first "self-conscious socialist movements developed in the 1820s and 1830s. The Owenites, Saint-Simonians and Fourierists provided a series of coherent analyses and interpretations of society. They also, especially in the case of the Owenites, overlapped with a number of other working-class movements like the Chartists."[24] Another important socialist thinker in France was Pierre Joseph Proudhon who proposed his philosophy of mutualism in which "everyone had an equal claim, either alone or as part of a small cooperative, to possess and use land and other resources as needed to make a living".[25] There were also currents inspired by dissident Christianity of christian socialism "often in Britain and then usually coming out of left liberal politics and a romantic anti-industrialism"[23] which produced theorists such as Edward Bellamy, Frederick Denison Maurice and Charles Kingsley.[4] The first advocates of socialism favoured social levelling in order to create a meritocratic or technocratic society based upon individual talent. Count Henri de Saint-Simon is regarded as the first individual to coin the term socialism.[26] Saint-Simon was fascinated by the enormous potential of science and technology and advocated a socialist society that would eliminate the disorderly aspects of capitalism and would be based upon equal opportunities.[27][unreliable source?] He advocated the creation of a society in which each person was ranked according to his or her capacities and rewarded according to his or her work.[26] The key focus of Saint-Simon's socialism was on administrative efficiency and industrialism, and a belief that science was the key to progress.[28] This was accompanied by a desire to implement a rationally organised economy based on planning and geared towards large-scale scientific and material progress,[26] and thus embodied a desire for a more directed or planned economy. Other early socialist thinkers, such as Thomas Hodgkin and Charles Hall, based their ideas on David Ricardo's economic theories. They reasoned that the equilibrium value of commodities approximated to prices charged by the producer when those commodities were in elastic supply, and that these producer prices corresponded to the embodied labour the cost of the labour (essentially the wages paid) that was required to produce the commodities. The Ricardian socialists viewed profit, interest and rent as deductions from this exchange-value.[29] West European social critics, including Robert Owen, Charles Fourier, Pierre-Joseph Proudhon, Louis Blanc, Charles Hall and Saint-Simon, were the first modern socialists who criticised the excessive poverty and inequality of the Industrial Revolution. They advocated reform, with some such as Robert Owen advocating the transformation of society to small communities without private property. Robert Owen's contribution to modern socialism was his understanding that actions and characteristics of individuals were largely determined by the social environment they were raised in and exposed to.[28] On the other hand Charles Fourier advocated phalansteres which were communities that respected individual desires (including sexual preferences), affinities and creativity and saw that work has to be made enjoyable for people.[30] The ideas of Owen and Fourier were tried in practice in numerous intentional communities around Europe and the American continent in the mid-19th century. The celebration of the election of the Commune, 28 March 1871. The Paris Commune was a major early implementation of socialist ideas Linguistically, the contemporary connotation of the words socialism and communism accorded with the adherents' and opponents' cultural attitude t owards religion. In Christian Europe, of the two, communism was believed the atheist way of life. In Protestant England, the word communism was too culturally and aurally close to the Roman Catholic communion rite, hence English atheists denoted themselves socialists.[31] Friedrich Engels argued that in 1848, at the time when the Communist Manifesto was published, "socialism was respectable on the continent, while communism was not." The Owenites in England and the Fourierists in France were considered "respectable" socialists, while working-class movements that "proclaimed the necessity of total social change" denoted themselves communists. This latter branch of socialism produced the communist work of tienne Cabet in France and Wilhelm Weitling in Germany.[32] While democrats looked to the Revolutions of 1848 as a democratic revolution, which in the long run ensured liberty, equality, and fraternity, marxists denounced 1848 as a betrayal of working-class ideals by a bourgeoisie indifferent to the legitimate demands of the proletariat[33]. The Paris Commune was a government that briefly ruled Paris from 18 March (more formally, from 28 March) to 28 May 1871. The Commune was the result of an uprising in Paris after France was defeated in the Franco-Prussian War. The Commune elections held on 26 March elected a Commune council of 92 members, one member for each twenty thousand residents[34]. Despite internal differences, the Council began to organize the public services essential for a city of two million residents. It also reached a consensus on certain policies that tended towards a progressive, secular, and highly-democratic social democracy. Because the Commune was only able to meet on fewer than sixty days in all, only a few decrees were actually implemented. These included the separation of church and state, the remission of rents owed for the entire period of the siege (during which, payment had been suspended), the abolition of night work in the hundreds of Paris bakeries, the granting of pensions to the unmarried companions and children of National Guards killed on active service; the free return, by the city pawnshops, of all workmen's tools and household items valued up to 20 francs, pledged during the siege; the Commune was concerned that skilled workers had been forced to pawn their tools during the war; the postponement of commercial debt obligations, and the abolition of interest on the debts; and the right of employees to take over and run an enterprise if it were deserted by its owner; the Commune, nonetheless, recognized the previous owner's right to compensation[35]. Socialism expands and the First and Second Internationals Main articles: International Workingmen's Association, History_of_anarchism#19th_century, Syndicalism, Fabian society, Guild socialism, and Second International Mikhail Bakunin speaking to members of the IWA at the Basel Congress in 1869 The International Workingmen's Association (IWA), also known as the First International, was founded in London in 1864. The International Workingmen's Association united diverse revolutionary currents including French followers of Proudhon,[36] Blanquists, Philadelphes, English trade unionists, socialists and social democrats. The IWA held a preliminary conference in 1865, and had its first congress at Geneva in 1866. Due to the wide variety of philosophies present in the First International, there was conflict from the start. The first objections to Marx's came from the Mutualists who opposed communism and statism. However, shortly after Mikhail Bakunin and his followers (called Collectivists while in the International) joined in 1868, the First International became polarised into two camps, with Marx and Bakunin as their respective figureheads.[37] The clearest differences between the groups emerged over their proposed strategies for achieving their visions of socialism. The First International became the first major international forum for the promulgation of socialist ideas. The followers of Bakunin were called collectivist anarchists and sought to collectivize ownership of the means of production while retaining payment proportional to the amount and kind of labor of each individual, but the anarcho-communists sought to extend the concept of collective ownership to the products of labor as well. While both groups argued against capitalism, the anarchist communists departed from Proudhon and Bakunin, who maintained that individuals have a right to the product of their individual labor and to be remunerated for their particular contribution to production. But, Errico Malatesta put it: "...instead of running the risk of making a confusion in trying to distinguish what you and I each do, let us all work and put everything in common. In this way each will give to society all that his strength permits until enough is produced for every one; and each will take all that he needs, limiting his needs only in those things of which there is not yet plenty for every one."[38] Anarchist communism as a coherent, modern economic-political philosophy was first formulated in the Italian section of the First International by Carlo Cafiero, Emilio Covelli, Errico Malatesta, Andrea Costa and other ex-Mazzinian Republicans.[39] Out of respect for Mikhail Bakunin, they did not make their differences with collectivist anarchism explicit until after Bakunin's death.[40] Syndicalism emerged in France from the inspiration in part by the ideas of Pierre Joseph Proudhon and later by Fernand Pelloutier and Georges Sorel.[41] Syndicalism developed at the end of the 19th century "out of the French trade-union movementsyndicat being the French word for trade union. It was a significant force in Italy and Spain in the early 20th century until it was crushed by the fascist regimes in those countries. In the United States, syndicali sm appeared in the guise of the Industrial Workers of the World, or Wobblies, founded in 1905."*41+ Syndicalism is a type o f economic system proposed as a replacement for capitalism, which proposes that industries be organised into confederations or syndicates.[42] It is a form of communism and economic corporatism that advocates interest aggregation of multiple non-competitive categorised units composed of specialists and representatives of workers in each respective field to negotiate and manage an economy.[43] Syndicalism also refers to the political movement and tactics used to bring about this type of system. An influential anarchist movement based on syndicalist ideas is anarcho-syndicalism.[44] The International Workers Association is an international anarcho-syndicalist federation of various labour unions from different countries. G. D. H. Cole, English socialist theorist who was a member of the Fabian Society as well as the main theorist of guild socialism The Fabian Society' is a British socialist organisation which was established with the purpose of advancing the principles of socialism via gradualist and reformist means.[45] The society laid many of the foundations of the Labour Party and subsequently affected the policies of states emerging from the decolonisation of the British Empire, most notably India and Singapore. Originally, the Fabian society was comm itted to the establishment of a socialist economy, alongside a commitment to British imperialism as a progressive and modernizing force.[46] Today, the society functions primarily as a think tank and is one of 15 socialist societies affiliated with the Labour Party. Similar societies exist in Australia (the Australian Fabian Society), Canada (the Douglas-Coldwell Foundation and the now disbanded League for Social Reconstruction) and in New Zealand. Guild socialism is a political movement advocating workers' control of industry through the medium of trade-related guilds "in an implied contractual relationship with the public".[47] It originated in the United Kingdom and was at its most influential in the first quarter of the 20th century. Inspired by the medieval guild theorists such as Samuel G. Hobson and G.D.H. Cole advocated the public ownership of industries and their organization into guilds, each of which would be under the democratic control of its trade union. On the other hand the guild socialists were less inclined to invest power in the state than were the Fabians.[41] As the ideas of Marx and Engels took on flesh, particularly in central Europe, socialists sought to unite in an international organisation. In 1889, on the centennial of the French Revolution of 1789, the Second International was founded, with 384 delegates from 20 countries representing about 300 labour and socialist organisations.[48] It was termed the "Socialist International" and Engels was elected honorary president at the third congress in 1893. Anarchists were ejected and not allowed in mainly because of the pressure from marxists.[49]In 1889, on the centennial of the French Revolution of 1789, the Second International was founded, with 384 delegates from 20 countries representing about 300 labour and socialist organizations.[50] Anarchists were ejected and not allowed in mainly because of the pressure from marxists.[49] It has been argued that at some point the Second International turned "into a battleground over the issue of libertarian versus authoritarian socialism. Not only did they effectively present themselves as champions of minority rights; they also provoked the German Marxists into demonstrating a dictatorial intolerance which was a factor in preventing the British labor movement from following the Marxist direction indicated by such leaders as H. M. Hyndman".[51] Eduard Bernstein was a leading s ocial democrat in Germany who proposed the concept of evolutionary socialism. Reformism was quickly targeted by revolutionary socialists, with Rosa Luxemburg condemning Bernstein's Evolutionary Socialism in her 1900 essay Reform or Revolution?. Revolutionary socialism encompasses multiple social and political movements that may define "revolution" differently from one another. Revolutionary socialism also includes non-Marxist movements like anarchism, revolutionary syndicalism and some forms of democratic socialism. The Social Democratic Party (SPD) in Germany became the largest and most powerful socialist party in Europe, despite working illegally until the anti-socialist laws were dropped in 1890. In the 1893 elections it gained 1,787,000 votes, a quarter of the total votes cast, according to Engels. In 1895, the year of his death, Engels emphasised the Communist Manifesto's emphasis on winning, as a first step, the "battle of democracy".[52] The early 20th century and the revolutions of 1917 1936 Main articles: History_of_anarchism#20th_century, Russian Revolution, German Revolution, Biennio Rosso, and Spanish Revolution Antonio Gramsci, member of the Italian Socialist Party and later leader and theorist of the Communist Party of Italy In 1904, Australians elected the first Australian Labor Party prime minister: Chris Watson, who became the first democratically elected social democrat. The British Labour Party first won seats in the House of Commons in 1902. The International Socialist Commission (ISC, also known as Berne International) was formed in February 1919 at a meeting in Berne by parties that wanted to resurrect the Second International.[53]. By 1917, the patriotism of World War I changed into political radicalism in most of Europe, the United States, and Australia. Other socialist parties from around the world who were beginning to gain importance in their national politics in the early 20th century included the Italian Socialist Party, the French Section of the Workers' International, the Spanish Socialist Workers' Party, the Swedish Social Democratic Party, the Russian Social Democratic Labour Party, the Socialist Party of America in the United States, the argentinian Socialist Party and the chilean Partido Obrero Socialista. In February 1917, revolution exploded in Russia. Workers, soldiers and peasants established soviets (councils), the monarchy fell, and a provisional government convoked pending the election of a constituent assembly. In April of that year, Vladimir Lenin, leader of the Majority (or in Russian: "Bolshevik") faction of socialists in Russia and known for his profound and controversial expansions of Marxism, returned to his country from exile in Switzerland. Lenin had published essays on his analysis of imperialism, the monopoly and globalization phase of capitalism as predicted by Marx, as well as analyses on the social conditions of his contemporary time. He observed that as capitalism had further developed in Europe and America, the workers remained unable to gain class consciousness so long as they were too busy working and concerning with how to make ends meet. He therefore proposed that the social revolution would require the leadership of a vanguard party of class-conscious revolutionaries from the educated and politically active part of the population.[54] Upon arriving in Petrograd, he declared that the revolution in Russia was not over but had only begun, and that the next step was for the workers' soviets to take full state authority. He issued a thesis outlining the Bolshevik's party programme, including rejection of any legitimacy in the provisional government and advocacy for state power to be given to the peasant and working class through the soviets. The Bolsheviks became the most influential force in the soviets, and on 7 November, the capitol of the provisional government was stormed by Bolshevik Red Guards in what afterwards known as the "Great October Socialist Revolution". The rule of the provisional government was ended and the Russian Socialist Federative Soviet Republic - the world's first constitutionally socialist state - was established. On 25 January 1918, at the Petrograd Soviet, Lenin declared "Long live the world socialist revolution!"[55] He proposed an immediate armistice on all fronts, and transferred the land of the landed proprietors, the crown and the monasteries to the peasant committees without compensation.[56] On 26 January 1918, the day after assuming executive power, Lenin wrote Draft Regulations on Workers' Control, which granted workers control of businesses with more than five workers and office employees, and access to all books, documents and stocks, and whose decisions were to be "binding upon the owners of the enterprises".[57] Governing through the elected soviets, and in alliance with the peasant-based Left Socialist-Revolutionaries, the Bolshevik government began nationalising banks, industry, and disavowed the national debts of the deposed Romanov royal rgime. It sued for peace, withdrawing from World War I, and convoked a Constituent Assembly in which the peasant Socialist-Revolutionary Party (SR) won a majority.[58] The Constituent Assembly elected Socialist-Revolutionary leader Victor Chernov President of a Russian republic, but rejected the Bolshevik proposal that it endorse the Soviet decrees on land, peace and workers' control, and acknowledge the power of the Soviets of Workers', Soldiers' and Peasants ' Deputies. The next day, the Bolsheviks declared that the assembly was elected on outdated party lists,[59] and the All-Russian Central Executive Committee of the Soviets dissolved it.[60][61] In March 1919 world communist parties formed Comintern (also known as the Third International) at a meeting in Moscow[62]. Leon Trotsky, Vladimir Lenin, and Lev Kamenev at the Second Communist Party Congress, 1919. Parties which did not want to be a part of the resurrected Second International (ISC) or Comintern formed the International Working Union of Socialist Parties (IWUSP, also known as Vienna International/Vienna Union/Two-and-a-Half International) on 27 February 1921 at a conference in Vienna.[63] The ISC and the IWUSP joined to form the Labour and Socialist International (LSI) in May 1923 at a meeting in Hamburg[64] Left wing groups which did not agree with the centralisation and abandonment of the soviets by the Bolshevik Party led Left-wing uprisings against the Bolsheviks which were a series of rebellions and uprisings against the Bolsheviks led or supported by left wing groups including Socialist Revolutionaries,[65] Left Socialist Revolutionaries, Mensheviks, and anarchists.[66] Within this left wing discontent the most large scale events were the worker's Kronstadt rebellion[67][68][69] and the anarchist led Revolutionary Insurrectionary Army of Ukraine uprising which controlled an area known as the Free Territory.[70][71][72] The Bolshevik Russian Revolution of January 1918 engendered Communist parties worldwide, and their concomitant revolutions of 1917 23. Few Communists doubted that the Russian success of socialism depended upon successful, working-class socialist revolutions in developed capitalist countries.[73][74] In 1919, Lenin and Trotsky organised the world's Communist parties into a new international association of workers the Communist International, (Comintern), also called the Third International. The Russian Revolution also influenced uprisings in other countries around this time. The German Revolution of 19181919 resulted in the replacement of Germany's imperial government with a republic. The revolutionary period lasted from Novem ber 1918 until the formal establishment of the Weimar Republic in August 1919 and included an episode known as the Bavarian Soviet Republic[75][76][77][78] and the Spartacist uprising. In Italy the events known as the Biennio Rosso[79][80] was characterised by mass strikes, worker manifestations as well as self-management experiments through land and factories occupations. In Turin and Milan, workers councils were formed and many factory occupations took place under the leadership of anarcho-syndicalists organised around the Unione Sindacale Italiana.[81] By 1920, the Red Army, under its commander Trotsky, had largely defeated the royalist White Armies. In 1921, War Communism was ended and, under the New Economic Policy (NEP), private owners hip was allowed for small and medium peasant enterprises. While industry remained largely state-controlled, Lenin acknowledged that the NEP was a necessary capitalist measure for a country unripe for socialism. Profiteering returned in the form of "NEP men" and rich peasants (Kulaks) gained power in the countryside.[82] Nevertheless the role of Trotsky in this episode has been questioned by other socialists incluiding ex-trostkists. In the United States Dwight Macdonald broke with Trotsky and left the trotskyist Socialist Workers Party, by rais ing the question of the Kronstadt rebellion, which Trotsky as leader of the Soviet Red Army and the other Bolsheviks had brutally repressed. He then moved towards democratic socialism [83] and anarchism.[84] A similar critique on Trotsky's role on the events around the Kronstadt rebellion was raised by the American anarchist Emma Goldman. In her essay "Trotsky Protests Too Much" she says "I admit, the dictatorship under Stalin's rule has become monstrous. That does not, however, lessen the guilt of Leon Trotsky as one of the actors in the revolutionary drama of which Kronstadt was one of the bloodiest scenes."[85] Rosa Luxemburg, prominent Marxist revolutionary, leader of the German SPD and martyr and leader of the German Spartacist uprising, 1919. In 1922, the fourth congress of the Communist International took up the policy of the United Front, urging Communists to work with rank and file Social Democrats while remaining critical of their leaders, whom they criticised for betraying the working class by supporting the war efforts of their respective capitalist classes. For their part, the social democrats pointed to the dislocation caused by revolution, and later, the growing authoritarianism of the Communist Parties. When the Communist Party of Great Britain applied to affiliate to the Labour Party in 1920 it was turned down. In 1923, on seeing the Soviet State's growing coercive power, the dying Lenin said Russia had reverted to "a bourgeois tsarist machine... barely varnished with socialism."[86] After Lenin's death in January 1924, the Communist Party of the Soviet Union then increasingly under the control of Joseph Stalin rejected the theory that socialism could not be built solely in the Soviet Union, in favour of the concept of Socialism in One Country. Despite the marginalised Left Opposition's demand for the restoration of Soviet democracy, Stalin developed a bureaucratic, authoritarian government, that was condemned by democratic socialists, anarchists and Trotskyists for undermining the initial socialist ideals of the Bolshevik Russian Revolution.[87][88][self-published source?][unreliable source?] The Left Opposition in the Soviet Union gave rise to Trotskyism which was to remain isolated and insignificant for another fifty years, except in Sri Lanka, where Trotskyism gained the majority and the pro-Moscow wing was expelled from the Communist Party. In 1924 the Mongolian People's Republic was established and was ruled by the Mongolian People's Party. In Spain in 1936, the national anarcho-syndicalist trade union Confederacin Nacional del Trabajo initially refused to join a popular front electoral alliance, and abstention by CNT supporters led to a right wing election victory. But in 1936, the CNT changed its policy and anarchist votes helped bring the popular front back to power. Months later, the former ruling class responded with an attempted coup causing the Spanish Civil War (1936 1939).[89] In response to the army rebellion, an anarchist-inspired movement of peasants and workers, supported by armed militias, took control of Barcelona and of large areas of rural Spain where they collectivised the land.[90][91] The events known as the Spanish Revolution was a workers' social revolution that began during the outbreak of the Spanish Civil War in 1936 and resulted in the widespread implementation of anarchist and more broadly libertarian socialist organisational principles throughout various portions of the country for two to three years, primarily Catalonia, Aragon, Andalusia, and parts of the Levante. Much of Spain's economy was put under worker control; in anarchist strongholds like Catalonia, the figure was as high as 75%, but lower in areas with heavy Communist Party of Spain influence, as the Soviet-allied party actively resisted attempts at collectivization enactment. Factories were run through worker committees, agrarian areas became collectivised and run as libertarian communes. Anarchist historian Sam Dolgoff estimated that about eight million people participated directly or at least indirectly in the Spanish Revolution,[92] which he claimed "came closer to realizing the ideal of the free stateless society on a vast scale than any other revolution in history."[93] The mid 20th century: World War II and post war radicalization Main articles: History of the Soviet Union, History of the People's Republic of China (1949 76), Welfare state, Nordic model, Decolonization#Decolonization_after_1945, Eastern Bloc, Cuban Revolution, New Left, Protests of 1968, and History_of_anarchism#Post-war_years The rise of Nazism and the start of World War II led to the dissolution of the LSI in 1940. The Socialist International was formed in Frankfurt in July 1951 as a successor to the LSI.[94] Trotsky's Fourth International was established in France in 1938 when Trotskyists argued that the Comintern or Third International had become irretrievably "lost to Stalinism" and thus incapable of leading the international working class to political power.[95] Post-World War II social democratic governments introduced social reform and wealth redistribution via state welfare and taxation. Social Democratic parties dominated post-war politics in countries such as France, Italy, Czechoslovakia, Belgium and Norway. At one point, France claimed to be the world's most state-controlled capitalist country. The nationalised public utilities included Charbonnages de France (CDF), Electricit de France (EDF), Gaz de France (GDF), Air France, Banque de France, and Rgie Nationale des Usines Renault.[96] In 1945, the British Labour Party, led by Clement Attlee, was elected to office based upon a radical socialist programme. The UK Labour Government nationalised major public utilities such as mines, gas, coal, electricity, rail, iron, steel, and the Bank of England. British Petroleum, privatised in 1987, was officially nationalised in 1951,[97] and there was further government intervention during the 1974 79 Labour Government[98] Anthony Crosland said that in 1956, 25 per cent of British industry was nationalised, and that public employees, including those in nationalised industries, constituted a similar percentage of the country's total employed population.[99] Labour re-nationalised steel (1967, British Steel) after the Conservatives denationalised it, and nationalised car production (1976, British Leyland).[100] The National Health Service provided taxpayer-funded health care to everyone, free at the point of service.[101] Working-class housing was provided in council housing estates, and university education became available via a school grant system.[102] Olaf Palme, prime minister of Sweden for the Swedish Social Democratic Party who was a main architect of the Swedish social democratic model The Nordic model refers to the economic and social models of the Nordic countries (Denmark, Iceland, Norway, Sweden and Finland). During most of the post-war era, Sweden was governed by the Swedish Social Democratic Party largely in cooperation with trade unions and industry.[103] In Sweden, the Social Democratic Party held power from 1936 to 1976, 1982 to 1991, and 1994 to 2006. From 1945 to 1962, the Norwegian Labour Party held an absolute majority in the parliament. This particular adaptation of the mixed market economy is characterised by more generous welfare states (relative to other developed countries), which are aimed specifically at enhancing individual autonomy, ensuring the universal provision of basic human rights and stabilising the economy. It is distinguished from other welfare states with similar goals by its emphasis on maximising labour force participation, promoting gender equality, egalitarian and extensive benefit levels, large magnitude of redistribution, and liberal use of expansionary fiscal policy.[104] After World War II the USSR became a recognized superpower,[105] which played a decisive role in the Allied victory in World War II.[106][107] The Soviet era saw some of the most significant technological achievements of the 20th century, including the world's first spacecraft, and the first astronaut. The economy of the Soviet Union was the modern world's first centrally planned economy. It was based on a system of state ownership of industry managed through Gosplan (the State Planning Commission), Gosbank (the State Bank) and the Gossnab (State Commission for Materials and Equipment Supply). Economic planning was conducted through a series of Five-Year Plans. The emphasis was put on a very fast development of heavy industry and the nation became one of the world's top manufacturers of a large number of basic and heavy industrial products, but it lagged behind in the output of light industrial production and consumer durables. The Eastern Bloc was the former communist states of Central and Eastern Europe, generally the Soviet Union and the countries of the Warsaw Pact[108][109][110] which included the People's Republic of Poland, the German Democratic Republic, the People's Republic of Hungary, the People's Republic of Bulgaria, the Czechoslovak Socialist Republic, the Socialist Republic of Romania, the People's Socialist Republic of Albania and the Socialist Federal Republic of Yugoslavia. The Hungarian Revolution of 1956 was a spontaneous nationwide revolt against the government of the People's Republic of Hungary and its Soviet-imposed policies, lasting from 23 October until 10 November 1956. Both Soviet leader Nikita Khrushchevs denunciation of the excesses of Stalins regime during the Twentieth Party Congress of the Communist Party of the Soviet Union on 1956[111] and the events in Hungary[112][113][114][115] produced ideological fractures and dissagreements within the communist and socialist parties of Western Europe. In the postwar years, socialism became increasingly influential throughout the so-called Third World. Countries in Africa, Asia, and Latin America frequently nationalised industries held by foreign owners. The Chinese Revolution was the second part of Chinese Civil War which ended in the establishmente of the People's Republic of China. The term "Third World" was coined by French demographer Alfred Sauvy in 1952, on the model of the Third Estate, which, according to the Abb Sieys, represented everything, but was nothing: "...because at the end this ignored, exploited, scorned Third World like the Third Estate, wants to become something too" (Sauvy). The emergence of this new political entity, in the frame of the Cold War, was complex and painful. Several tentatives were made to organise newly independent states in order to oppose a common front towards both the US's and the USSR's influence on them, with the consequences of the Sino-Soviet split already at works. Thus, the Non-Aligned Movement constituted itself, around the main figures of Jawaharlal Nehru, the leader of India, Sukarno, the Indonesian president, Josip Broz Tito the Communist leader of Yugoslavia, and Gamal Abdel Nasser, head of Egypt who successfully opposed the French and British imperial powers during the 1956 Suez crisis. After the 1954 Geneva Conference which put an end to the French war against Ho Chi M inh in Vietnam, the 1955 Bandung Conference gathered Nasser, Nehru, Tito, Sukarno, the leader of Indonesia, and Zhou Enlai, Premier of the People's Republic of China. As many African countries gained independence during the 1960s, some of these newly formed governments rejected the ideas of capitalism in favour of a more afrocentric economic model. Julius Nyerere of Tanzania, Lopold Senghor of Senegal, Kwame Nkrumah of Ghana and Skou Tour of Guinea, were the main architects of African Socialism.[116] The Cuban Revolution (1953-1959) was an armed revolt conducted by Fidel Castro's 26th of July Movement and its allies against the government of Cuban President Fulgencio Batista. The revolution began in July 1953, and finally ousted Batista on 1 January 1959, replacing his government with Castro's revolutionary state. Castro's government later reformed along communist lines, becoming the Communist Party of Cuba in October 1965.[117] The New Left was a term used mainly in the United Kingdom and United States in reference to activists, educators, agitators and others in the 1960s and 1970s who sought to implement a broad range of reforms on issues such as gay rights, abortion, gender roles and drugs[118] in contrast to earlier leftist or Marxist movements that had taken a more vanguardist approach to social justice and focused mostly on labour unionisation and questions of social class.[119][120] They rejected involvement with the labour movement and Marxism's historical theory of class struggle.[121] In the U.S., the "New Left" was associated with the Hippie movement, anti-war college campus protest movements as well as the black liberation movements such as the Black Panther Party[122]. While initially formed in opposition to the "Old Left" Democratic party, groups composing the New Left gradually became central players in the Democratic coalition.[118] In 1968 in Carrara, Italy the International of Anarchist Federations was founded during an international anarchist conference held there in 1968 by the three exis ting European federations of France, the Italian and the Iberian Anarchist Federation as well as the Bulgarian federation in French exile. Salvador Allende, president of Chile and member of the Socialist Party of Chile. His presidency was ended by an CIA-backed military coup.[123] The protests of 1968 comprised a worldwide escalation of social conflicts, predominantly characterised by popular rebellions against military, capitalist, and bureaucratic elites, who retorted with an escalation of political repression. In capitalist countries, these protests marked a turning point for the Civil Rights movement in the United States, which produced revolutionary movements like the Black Panther Party. In that country the prominent civil rights leader Martin Luther King Jr. organised the "Poor People's Campaign" to address issues of economic justice[124] while personally showing sympathy for democratic socialism.[125] In reaction to the Tet Offensive, protests also sparked a broad movement in opposition to the Vietnam War all over the United States and even into London, Paris, Berlin and Rome. Mass socialist or communist movements grew not only in the United States but also in most European countries. The most spectacular manifestation of this were the May 1968 protests in France, in which students linked up with wildcat strikes of up to ten million workers, and for a few days the movement seemed capable of overthrowing the government. In many other capitalist countries, struggles against dictatorships, state repression, and colonization were also marked by protests in 1968, such as the beginning of the Troubles in Northern Ireland, the Tlatelolco massacre in Mexico City, and the escalation of guerrilla warfare against the military dictatorship in Brazil. In communist party led countries there were also protests against bureaucratic and military elites. It was amidst the Great Proletarian Cult ural Revolution in China (1966 1976), and in Eastern Europe there were also widespread protests that escalated particularly in the Prague Spring in Czechoslovakia. Like the Italian and French[126] Communist parties, the Communist Party of Finland denounced the occupation. The Portuguese communist secretary-general lvaro Cunhal was one of few political leaders from western Europe to have supported the invasion for being counter-revolutionary.[127] along with the Luxembourg party[126] and conservative factions of the Greek party.[126] In the Chinese Cultural Revolution, a social-political youth movement movilized againts "bourgeois" elements which were seen to be infiltrating the government and society at large, aiming to restore capitalism. This movement motivated maoism inspired movements around the world in the context of the Sino-Soviet split. In Latin America in the 1960s a socialist tendency within the catholic church appeared which was called Liberation theology[128][129] which enden motivating even the Colombian priest Camilo Torres to enter the ELN guerrilla. In Chile, Salvador Allende, a physician and candidate for the Socialist Party of Chile, was elected president through democratic elections in 1970. In 1973, his government was ousted by the American-backed military dictatorship of Augusto Pinochet, which lasted until the late 1980s.[130] In Italy Autonomia Operaia was a leftist movement particularly active from 1976 to 1978. It took an important role in the autonomist movement in the 1970s, aside earlier organisations such as Potere Operaio, created after May 1968, and Lotta Continua.[131] Out of this experience came out the contemporary socialist radical movement known as autonomism.[132] Late 20th century Main articles: Eur

The Nicaraguan Revolution encompassed the rising opposition to the Somoza dictatorship in the 1960s and 1970s, the campaign led by the Sandinista National Liberation Front (FSLN) to violently oust the dictatorship in 1978 -79, the subsequent efforts of the FSLN to govern Nicaragua from 1979 until 1990[133] and the socialist measures which included widescale agrarian reform[134][135] and educational programs.[136] The People's Revolutionary Government was proclaimed on 13 March 1979 in Grenada which was overthrown by armed forces of the United States in 1983. The Salvadoran Civil War (1979 1992) was a conflict between the military-led government of El Salvador and the Farabundo Mart National Liberation Front (FMLN), a coalition or 'umbrella organization' of five socialist guerrilla groups. A coup on October 15, 1979 led to the killings of anti-coup protesters by the government as well as anti-disorder protesters by the guerillas, and is widely seen as the tipping point towards the civil war.[137] Eurocommunism was a trend in the 1970s and 1980s within various Western European communist parties to develop a theory and practice of social transformation that was more relevant for a Western European country and less aligned to the influence or control of the Communist Party of the Soviet Union. Some Communist parties with strong popular support, notably the Italian Communist Party (PCI) and the Communist Party of Spain (PCE) adopted Eurocommunism most enthusiastically. The Communis t Party of Finland was dominated by Eurocommunists while the French Communist Party (PCF) and many smaller parties strongly opposed to Eurocommunism and stayed aligned to the positions of the Communist Party of the Soviet Union until the end of the USSR. Outside of Western Europe, it is sometimes referred to as "Neocommunism." This theory stresses greater independence.[138] In the late 1970s and in the 1980s the Socialist International had extensive contacts and discussion with the two leading powers of the Cold War period, the United States and the Soviet Union, on issues concerning East-West relations and arms control. Since then, the SI has admitted as member parties not only the nicaraguan FSLN but also the left-wing Puerto Rican Independence Party, as well as former Communist parties such as the Democratic Party of the Left of Italy and the Front for the Liberation of Mozambique (FRELIMO). The Socialist International aided social democratic parties in re-establishing themselves when dictatorship gave way to democracy in Portugal (1974) and Spain (1975). Until its 1976 Geneva Congress, the SI had few members outside Europe and no formal involvement with Latin America.[139] Mikhail Gorbachev, General Secretary of the Communist Party of the Soviet Union from 1985 until 1991 After Mao's death in 1976 and the arrest of the faction known as the Gang of Four, who were blamed for the excesses of the Cultural Revolution, Deng Xiaoping took power and led the Peoples Republic of China to significant economic reform s. The Communist Party of China subsequently loosened governmental control over citizens' personal lives and the communes were disbanded in favor of private land leases. This turn of events marked China's transition from a planned economy to a mixed econom y named as "socialism with Chinese characteristics"[140] which maintained state ownership rights over land, state or cooperative ownership of much of the heavy industrial and manufacturing sectors and state influence in the banking and financial sectors. China adopted its current constitution on 4 December 1982. President Jiang Zemin and Premier Zhu Rongji led the nation in the 1990s. Under their administration, China's economic performance pulled an estimated 150 million peasants out of poverty and sustained an average annual gross domestic product growth rate of 11.2%.[141][142] At the Sixth National Congress of the Communist Party of Vietnam in December 1986, reformist politicians replaced the "old guard" government with new leadership.[143][144] The reformers were led by 71-year-old Nguyen Van Linh, who became the party's new general secretary.[143][144] Linh and the reformers implemented a series of free-market reforms known as i Mi ("Renovation") which carefully managed the transition from a planned economy to a "socialist-oriented market economy".[145][146] Mikhail Gorbachev wished to move the USSR in the direction of Nordic-style social democracy, calling it "a socialist beacon for all mankind."[147][148] Prior to its dissolution in 1991, the USSR had the second largest economy in the world after the United States.[149] With the collapse of the Soviet Union, the economic integration of the Soviet republics was dissolved, and overall industrial activity declined substantially.[150] A lasting legacy remains in the physical infrastructure created during decades of combined industrial production practices. Many social democratic parties, particularly after the Cold war, adopted neoliberal market policies including privatisation, deregulation and financialisation. They abandoned their pursuit of moderate socialism in favour of market liberalism. By the 1980s, with the rise of conservative neoliberal politicians such as Ronald Reagan in the United States, Margaret Thatcher in Britain, Brian Mulroney in Canada and Augusto Pinochet in Chile, the Western welfare state was attacked from within. Monetarists and neoliberals attacked social welfare systems as impediments to private entrepreneurship. In the UK, Labour Party leader Neil Kinnock made a public attack against the entryist group Militant at the 1985 Labour Party conference. The Labour Party ruled that Militant was ineligible for affiliation with the Labour Party, and the party gradually expelled Militant supporters. The Kinnock leadership had refused t o support the 1984 1985 miner's strike over pit closures, a decision that the party's left wing and the National Union of Mineworkers blamed for the strike's eventual defeat. In 1989, at Stockholm, the 18th Congress of the Socialist International adopted a new Declaration of Principles, saying: Democratic socialism is an international movement for freedom, social justice, and solidarity. Its goal is to achieve a peaceful world where these basic values can be enhanced and where each individual can live a meaningful life with the full development of his or her personality and talents, and with the guarantee of human and civil rights in a democratic framework of society.[151] In the 1990s, the British Labour Party, under Tony Blair, enacted policies based upon the free market economy to deliver public services via the Private finance initiative. Influential in these policies was the idea of a "third Way" which called for a re-evalutation of welfare state policies.[152] In 1995, the Labour Party re-defined its stance on socialism by re-wording Clause IV of its constitution, effectively rejecting socialism by removing all references to public, direct worker or municipal ownership of the means of production. The Labour Party stated: "The Labour Party is a democratic socialist party. It believes that, by the strength of our common endeavour we achieve more than we achieve alone, so as to create, for each of us, the means to realise our true potential, and, for all of us, a community in which power, wealth, and opportunity are in the hands of the many, not the few."[153] Contemporary socialism Main articles: African socialism, Pink tide, Socialism of the 21st century, History of the People's Republic of China (1989 2002), History of the People's Republic of China (2002 present), Contemporary anarchism, and Autonomism Kwame Nkrumah, the first President of Ghana and theorist of African socialism on a Soviet Union commemorative postage stamp. African socialism has been and continues to be a major ideology around the continent. Julius Nyerere was inspired by Fabian socialist ideals.[154] He was a firm believer in rural Africans and their traditions and ujamaa, a system of collectivisation that according to Nyerere was present before European imperialism. Essentially he believed Africans were already socialists. Other African socialists include Jomo Kenyatta, Kenneth Kaunda, Nelson Mandela and Kwame Nkrumah. Fela Kuti was inspired by socialism and called for a democratic African republic. In South Africa the African National Congress (ANC) abandoned its partial socialist allegiances after taking power, and followed a standard neoliberal route. From 2005 through to 2007, the country was wracked by many thousands of protests from poor communities. One of these gave rise to a mass movement of shack dwellers, Abahlali baseMjondolo that, despite major police suppression, continues to work for popular people's planning and against the creation of a market economy in land and housing. The People's Republic of China, North Korea, Laos and Vietnam are Asian countries remaining from the wave of Marxism-Leninist implemented socialism in the 20th century. States with socialist economies have largely moved away from centralised economic planning in the 21st century, placing a greater emphasis on markets. Forms include the Chinese socialist market economy and the Vietnamese socialist-oriented market economy. They utilise state-owned corporate management models as opposed to modelling socialist enterprise on traditional management styles employed by government agencies. In China living standards continued to improve rapidly despite the late-2000s recession, but centralized political control remained tight.[155] Brian Reynolds Myers in his book The Cleanest Race, and later supported by other academics,[156][157],dismisses the idea that Juche is North Korea's leading ideology, regarding its public exaltation as designed to deceive foreigners and that it exists to be praised and not actually read[158] pointing out that North Korea's latest constitution, of 2009, omits all mention of communism.[159] Though the authority of the state remained unchallenged under i Mi, the government of Vietnam encourages private ownership of farms and factories, economic deregulation and foreign investment, while maintaining control over strategic industries.[146] The Vietnamese economy subsequently achieved strong growth in agricultural and industrial production, construction, exports and foreign investment. However, these reforms have also caused a rise in income inequality and gender disparities.[160][161][162]Elsewhere in Asia, some elected socialist parties and communist parties remain prominent, particularly in India and Nepal. The Communist Party of Nepal in particular calls for multi-party democracy, social equality, and economic prosperity.[163] In Singapore, a majority of the GDP is still generated from t he state sector comprising government-linked companies.[164] In Japan, there has been a resurgent interest in the Japanese Communist Party among workers and youth.[165][166] In Malaysia, the Socialist Party of Malaysia got its first Member of Parliament, Dr. Jeyakumar Devaraj, after the 2008 general election. Alexis Tsipras, Greek socialist politician which led the leftist coalition SYRIZA through the 2012 elections, overseeing a swing of over 22% to the party, and becoming the Leader of the Opposition The United Nations World Happiness Report 2013 shows that the happiest nations are concentrated in Northern Europe where the nordic model of social democracy persists, with Denmark topping the list. The Nordics ranked highest on the metrics of real GDP per capita, healthy life expectancy, having someone to count on, perceived freedom to make life choices, generosity and freedom from corruption.[167] The objectives of the Party of European Socialists, the European Parliament's socialist and social-democratic bloc, are now "to pursue international aims in respect of the principles on which the European Union is based, namely principles of freedom, equality, solidarity, democracy, respect of Human Rights and Fundamental Freedoms, and respect for the Rule of Law." As a result, today, the rallying cry of the French Revolution "Egalit, Libert, Fraternit" which overthrew absolutism and ushered industrialisation into French society, are promoted as essential socialist values.[168] To the left of the PES at the European level is the Party of the European Left, (PEL; also commonly abbreviated "European Left") which is a political party at the European level and an association of democratic socialist, socialist[169] and communist[169] political parties in the European Union and other European countries. It was formed in January 2004 for the purposes of running in the 2004 European Parliament elections. PEL was founded on 89 May 2004 in Rome.[170] Elected MEPs from member parties of the European Left sit in the European United Left Nordic Green Left (GUE/NGL) group in the European parliament. In Europe, the socialist Left Party in Germany grew in popularity[171] due to dissatisfaction with the increasingly neoliberal policies of the SPD, becoming the fourth biggest party in parliament in the general election on 27 September 2009.[172] Communist candidate Dimitris Christofias won a crucial presidential runoff in Cyprus, defeating his conservative rival with a majority of 53%.[173] In Greece, in the general election on 17 June 2012, Coalition of the Radical Left (Syriza) won 26.89% of the votes and became the second largest party in parliament. In Ireland, in the 2009 European election, Joe Higgins of the Socialist Party took one of three seats in the capital Dublin European constituency. In Denmark, the Socialist People's Party (SF or Socialist Party for short) more than doubled its parliamentary representation to 23 seats from 11, making it the fourth largest party.[174] In 2011, the socialist parties of Social Democrats, Socialist People's Party and the Danish Social Liberal Party formed government, after a slight victory over the liberal parties. They were led by Helle Thorning-Schmidt, and had the Red-Green Alliance as a supporting party. In Norway, the Red-Green Coalition consists of the Labour Party (Ap), the Socialist Left Party (SV), and the Centre Party (Sp), and governed the country as a majority government from the 2005 general election until 2013. In the UK, the National Union of Rail, Maritime and Transport Workers put forward a slate of candidates in the 2009 European Parliament elections under the banner of No to EU Yes to Democracy, a broad left-wing alter-globalisation coalition involving socialist groups such as the Socialist Party, aiming to offer an alternative to the "anti-foreigner" and pro-business policies of the UK Independence Party.[175][176][177] In the following May 2010 UK general election, the Trade Unionist and Socialist Coalition, launched in January 2010[178] and backed by Bob Crow, the leader of the National Union of Rail, Maritime and Transport Workers union (RMT), other union leaders and the Socialist Party among other socialist groups, stood against Labour in 40 constituencies.[179][180] The Trade Unionist and Socialist Coalition plans to contest the 2011 elections, having gained the endorsement of the RMT June 2010 conference.[181] In France, the Revolutionary Communist League (LCR) candidate in the 2007 presidential election, Olivier Besancenot, received 1,498,581 votes, 4.08%, double that of the Communist candidate.[182] The LCR abolished itself in 2009 to initiate a broad anti-capitalist party, the New Anticapitalist Party, whose stated aim is to "build a new socialist, democratic perspective for the twenty-first century".[183] All around Europe and in some places of Latin America there exists a social center and Squatting movement mainly inspired by autonomist and anarchist ideas[184 ][185]. Presidents Fernando Lugo of Paraguay, Evo Morales of Bolvia, Luiz Incio Lula da Silva of Brasil, Rafael Correa of Ecuador, and Hugo Chvez of Venezuela, in Frum Social Mundial for Latin America For the Encyclopedia Britannica "the attempt by Salvador Allende to unite Marxists and other reformers in a socialist reconstruction of Chile is most representative of the direction that Latin American socialists have taken since the late 20th century...Several socialist (or socialist-leaning) leaders have followed Allendes example in winning election to office in Latin American countries."*186+ Venezuelan President Hugo Chvez, Nicaraguan President Daniel Ortega, Bolivian President Evo Morales, and Ecuadorian president Rafael Correa refer to their political programmes as socialist. Chvez has adopted the term socialism of the 21st century. After winning re-election in December 2006, Chvez said, "Now more than ever, I am obliged to move Venezuela's path towards socialism."[187] Hugo Chvez was also reelected in October 2012 for his third six-year term as President, but he died in March 2013 from cancer. After Chvez's death on 5 March 2013, vice-president from Chavez's party Nicols Maduro assumed the powers and responsibilities of the President. A special election was held on 14 April of the same year to elect a new President, which Maduro won by a tight margin as the candidate of the United Socialist Party of Venezuela; he was formally inaugurated on 19 April.[188] "Pink tide" is a term being used in cont emporary 21st century political analysis in the media and elsewhere to describe the perception that Leftist ideology in general, and Left-wing politics in particular, are increasingly influential in Latin America.[189][190][191] Foro de So Paulo is a conference of leftist political parties and other organizations from Latin America and the Caribbean. It was launched by the Workers' Party (Portuguese: Partido dos Trabalhadores - PT) of Brazil in 1990 in the city of So Paulo. The Forum of So Paulo was constituted in 1990 when the Brazilian Workers' Party approached other parties and social movements of Latin America and the Caribbean with the objective of debating the new international scenario after the fall of the Berlin Wall and the consequences of the implementation of what were taken as neoliberal policies adopted at the time by contemporary right-leaning governments in the region, the stated main objective of the conference being to argue for alternatives to neoliberalism.[192] Among its member include current socialist and social-democratic parties currently in government in the region such as Bolivias Movement for socialism, Brazils Workers Party, the Communist Party of Cuba, the Ecuadorian PAIS Alliance, the Venezuelan United Socialist Party of Venezuela, the Socialist Party of Chile and the Nicaraguan Sandinista National Liberation Front. Members of the Democratic Socialists of America march at the Occupy Wall Street protest in New York. According to a 2013 article in The Guardian "Contrary to popular belief, Americans don't have an innate allergy to socialism. Milwaukee has had several socialist mayors (Frank Zeidler, Emil Seidel and Daniel Hoan), and there is currently an independent socialist in the US Senate, Bernie Sanders of Vermont. In 1920, Socialist Party presidential candidate Eugene V. Debs won nearly one million votes."[193] Current active parties and organisations include the Socialist Party USA, the Socialist Workers Party and the Democratic Socialists of America, the latter having approximately 10,000 members.[194] Some internal factions of the Green Party are social democratic and eco-socialist. Bernie Sanders, an independent Senator from Vermont, has described himself as a democratic socialist[195][196] and has praised Scandinavian-style social democracy.[197][198] Anti-capitalism, anarchism and the anti-globalisation movement rose to prominence through events such as protests against the World Trade Organization Ministerial Conference of 1999 in Seattle. Socialist-inspired groups played an important role in these movements, which nevertheless embraced much broader layers of the population and were championed by figures such as Noam Chomsky. In a 2011 Pew poll, young Americans between the ages of 18-29 favored socialism to capitalism by 49% to 43%.[199] In the March 2013 Los Angeles mayoral election, a candidate from the Socialist Workers Party participated in the race. In the October 2013 Seattle City Council election, Socialist Alternative candidate Kshama Sawant beat incumbent Democrat Richard Conlin for position 2, making Sawant the first Marxist to win city-wide election since Anna Louise Strong in 1916.[200][201] In Canada, the Co-operative Commonwealth Federation (CCF), the precursor to the social democratic New Democratic Party (NDP), had significant success in provincial politics. In 1944, the Saskatchewan CCF formed the first socialist government in North America. At the federal level, the NDP is currently the Official Opposition, after winning 103 out of 308 seats (up from 37) in the 2011 Canadian federal election.[202] The Progressive Alliance is a political international founded on 22 May 2013 by political parties, the majority of whom are current or former members of the Socialist International. The organisation states the aim of becoming the global network of "the progressive", democratic, social-democratic, socialist and labour movement".[203][204] Philosophy Socialism in its early stages took influences from many ideologies such as civic republicanism, Enlightenment rationalism, romanticism, forms of materialism, Christianity (both Catholic and Protestant), natural law and natural rights theory, utilitarianism and liberal political economy.[205] The philosophical basis for socialism was heavily influenced by the emergence of positivism during the European Enlightenment. Positivism held that both the natural and social worlds could be understood through scientific knowledge and be analyzed using scientific methods. This core outlook influenced early social scientists and different types of socialists ranging from anarchists like Peter Kropotkin to technocrats like Saint Simon.[206] The fundamental objective of socialism is to attain an advanced level of material production and therefore greater productivity, efficiency and rationality as compared to capitalism and all previous systems, under the view that an expansion of human productive capabilit y is the basis for the extension of freedom and equality in society.[207] Many forms of socialist theory hold that human behaviour is largely shaped by the social environment. In particular, socialism holds that social mores, values, cultural traits and economic practices are social creations and not the result of an immutable natural law.[208] The object of their critique is thus not human avarice or human consciousness, but the material conditions and man-made social systems (i.e.: the economic structure of society) that gives rise to observed social problems and inefficiencies. In the 20th century socialist economists were heavily influenced by neoclassical economics and its precepts in analytic philosophy. Notable socialists often combined neoclassical economics with Marxian analysis and historical materialism. Bertrand Russell, often considered to be the father of analytic philos ophy, identified as a socialist. Bertrand Russell opposed the class struggle aspects of Marxism, viewing socialism solely as an adjustment of economic relations to accommodate modern machine production to benefit all of humanity through the progressive reduction of necessary work time.[209] Freedom and creativity Socialists tend to argue that "capitalism necessarily leads to unfair and exploitative concentrations of wealth and power in the hands of the relative few who emerge victorious from free-market competitionpeople who then use their wealth and power to reinforce their dominance in society. Because such people are rich, they may choose where and how to live, and their choices in turn limit the options of the poor."[41] From the socialist perspective, freedom is conceived of as a concrete situation as opposed to a purely abstract or moral concept, and is closely related to human creativity and the importance socialists ascribe to creative freedom. Socialists view creativity as an essential aspect of human nature, and define freedom as a state of being where individuals are able to express their creativity unhindered by constraints of both material scarcity and coercive social institutions.[210] Marxists stress the importance of freeing the individual from coercive, exploitative and alienating social relationships they are compelled to partake in merely to survive, as well as the importance of economic development as providing the material basis for the existence of a state of society where there are enough resources to allow for each individual to pursue his or her genuine creative interests. In Marxist terminology, this is the goal of transcending alienation through material abundance.[211] The socialist concept of individuality is thus intertwined with the concept of individual creative expression. Karl Marx believed that expansion of the productive forces and technology was the basis for the expansion of human freedom, and that socialism, being a system that is consistent with modern developments in technology, would enable the flourishing of "free individualities" through the progressive reduction of necessary labour time. The reduction of necessary labour time to a minimum would grant individuals the opportunity to pursue the development of their true individuality and creativity.[212] Perspectives on equality In general, models of socialism often include some form of co-operative management of economic affairs based on equal power relationships, and socialists generally oppose hierarchies of a non-technical nature. Karl Marx eschewed theorizing on moral concepts. Instead of advocating principles of justice or equality, Marx's case for socialism was grounded in economic and materialist logic and his analysis of the development of the productive forces.[213] Although Karl Marx is sometimes mistaken as an egalitarian, Marx opposed idealism and the concept of "equality". Marx did, however, have a theory of the evolution of moral principles in relation to specific economic systems.[214] In Marxist theory, upper-stage communism is based on a principle whereby access to goods and services is based on need, stressing equal access to the articles of consumption. The "equality" in a communist society is not about equality of outcome, but about equal access to the articles of consumption so that individuals are free from dependency on other individuals or groups, and are thus able to overcome alienation.[215] The American socialist economist John Roemer has put forth a new perspective of equality and its relationship to socialism. Roemer attempts to reformulate Marxist analysis to accommodate normative principles of distributive justice, shifting the argument for socialism away from purely technical and materialist reasons to one of distributive justice. Roemer argues that, according to the principle of distributive justice, the traditional definition of socialism based on the principle that individual compensation be proportional to the value of the labour one expands in production is inadequate. Roemer concludes that egalitarians must therefore go beyond socialism as it is classically defined.[216] Critique of capitalism Further information: Socialist critique of capitalism Socialists generally argue that capitalism concentrates power and wealth within a small segment of society that controls the means of production and derives its wealth through economic exploitation. This creates unequal social relations which fail to provide opportunities for every individual to maximise their potential,[217] and after a certain stage of development, fails to utilise available technology and resources to their maximum potential due to restrictive property relations.[218] Economics See also: Socialist economics and Production for use Socialist economics starts from the premise that "individuals do not live or work in isolation but live in cooperation with one another. Furthermore, everything that people produce is in some sense a social product, and everyone who contributes to the production of a good is entitled to a share in it. Society as a whole, therefore, should own or at least control property for the benefit of all its members."[41] The original conception of socialism was an economic system whereby production was organised in a way to directly produce goods and services for their utility (or use-value in classical and Marxian economics): the direct allocation of resources in terms of physical units as opposed to financial calculation and the economic laws of capitalism (see: Law of value), often entailing the end of capitalistic economic categories such as rent, interest, profit and money.[219] In a fully developed socialist economy, production and balancing factor inputs with outputs becomes a technical process to be undertaken by engineers.[220] Market socialism refers to an array of different economic theories and systems that utilise the market mechanism to organise production and to allocate factor inputs among socially owned enterprises, with the economic surplus (profits) accruing to society in a social dividend as opposed to private capital owners.[221] Variations of market socialism include Libertarian proposals such as mutualism, based on classical economics, and neoclassical economic models such as the Lange Model. The ownership of the means of production can be based on direct ownership by the users of the productive property through worker cooperative; or commonly owned by all of society with management and control delegated to those who operate/use the means of production; or public ownership by a state apparatus. Public ownership may refer to the creation of state-owned enterprises, nationalisation, municipalisation or autonomous collective institutions. The fundamental feature of a socialist economy is that publicly owned, worker-run institutions produce goods and services in at least the commanding heights of the economy.[222] Management and control over the activities of enterprises are based on self-management and self-governance, with equal power-relations in the workplace to maximise occupational autonomy. A socialist form of organisation would eliminate controlling hierarchies so that only a hierarchy based on technical knowledge in the workplace remains. Every member would have decision-making power in the firm and would be able to participate in establishing its overall policy objectives. The policies/goals would be carried out by the technical specialists that form the coordinating hierarchy of the firm, who would establish plans or directives for the work community to accomplish these goals.[223] The role and use of money in a hypothetical socialist economy is a contested issue. Socialists including Karl Marx, Robert Owen, Pierre-Joseph Proudhon and John Stuart Mill advocated various forms of labour vouchers or labour-credits, which like money would be used to acquire articles of consumption, but unlike money, they are unable to become capital and would not be used to allocate resources within the production process. Bolshevik revolutionary Leon Trotsky argued that money could not be arbitrarily abolished following a socialist revolution. Money had to exhaust its "historic mission", meaning it would have to be used until its function became redundant, eventually being transformed into bookkeeping receipts for statisticians, and only in the more distant future would money not be required for even that role.[224] The economic anarchy of capitalist society as it exists today is, in my opinion, the real source of the evil... I am convinced there is only one way to eliminate these grave evils, namely through the establishment of a socialist economy, accompanied by an educational system which would be oriented toward social goals. In such an economy, the means of production are owned by society itself and are utilized in a planned fashion. A planned economy, which adjusts production to the needs of the community, would distribute the work to be done among all those able to work and would guarantee a livelihood to every man, woman, and child. The education of the individual, in addition to promoting his own innate abilities, would attempt to develop in him a sense of responsibility for his fellow men in place of the glorification of power and success in our present society. Albert Einstein, Why Socialism?, 1949[225] Planned economy Main article: Planned economy A planned economy is a type of economy consisting of a mixture of public ownership of the means of production and the coordination of production and distribution through economic planning. There are two major types of planning: decentralised-planning and centralised-planning. Enrico Barone provided a comprehensive theoretical framework for a planned socialist economy. In his model, assuming perfect computation techniques, simultaneous equations relating inputs and outputs to ratios of equivalence would provide appropriate valuations in order to balance supply and demand.[226] The most prominent example of a planned economy was the economic system of the Soviet Union, and as such, the centralised-planned economic model is usually associated with the Communist states of the 20th century, where it was combined with a single-party political system. In a centrally planned economy, decisions regarding the quantity of goods and services to be produced are planned in advance by a planning agency. (See also: Analysis of Soviet-type economic planning). The economic systems of the Soviet Union and the Eastern Bloc are further classified as command economies, which are defined as systems where economic coordination is undertaken by commands, directives and production targets.[227] Studies by economists of various political persuasions on the actual functioning of the Soviet economy indicate that it was not actually a planned economy. Instead of conscious planning, the Soviet economy was based on a process whereby the plan was modified by localized agents and the original plans went largely unfulfilled. Planning agencies, ministries and enterprises all adapted and bargained with each other during the formulation of the plan as opposed to following a plan passed down from a higher authority, leading some economists to suggest that planning did not actually take place within the Soviet economy and that a better description would be an "administered" or "managed" economy.[228] Although central planning was largely supported by Marxist Leninists, some factions within the Soviet Union before the rise of Stalinism held positions contrary to central planning. Leon Trotsky rejected central planning in favour of decentralised planning. He argued that central planners, regardless of their intellectual capacity, would be unable to coordinate effectively all economic activity within an economy because they operated without the input and tacit knowledge embodied by the participation of the millions of people who in the economy. As a result, central planners would be unable to respond to local economic conditions.[229] Self-managed economy See also: Decentralized planning, Economic democracy, and Workers' self-management A self-managed, decentralised economy is based upon autonomous self-regulating economic units and a decentralised mechanism of resource allocation and decision-making. This model has found support in notable classical and neoclassical economists including Alfred Marshall, John Stuart Mill and Jaroslav Vanek. There are numerous variations of self-management, including labour-managed firms and worker-managed firms. The goals of self-management are to eliminate exploitation and reduce alienation.[230] Guild socialism is a political movement advocating workers' control of industry through the medium of trade-related guilds "in an implied contractual relationship with the public".[231] It originated in the United Kingdom and was at its most influential in the first quarter of the 20th century.[231] It was strongly associated with G. D. H. Cole and influenced by the ideas of William Morris. Peter Kropotkin, russian anarchist advocate of a socialism based on self-managed networks and federations of descentralized communes One such system is the cooperative economy, a largely free market economy in which workers manage the firms and democratically determine remuneration levels and labour divisions. Productive resources would be legally owned by the cooperative and rented to the workers, who would enjoy usufruct rights.[232] Another form of decentralised planning is the use of cybernetics, or the use of computers to manage the allocation of economic inputs. The socialist-run government of Salvador Allende in Chile experimented with Project Cybersyn, a real-time information bridge between the government, state enterprises and consumers.[233] Another, more recent, variant is participatory economics, wherein the economy is planned by decentralised councils of workers and consumers. Workers would be remunerated solely according to effort and sacrifice, so that those engaged in dangerous, uncomfortable, and strenuous work would receive the highest incomes and could thereby work less.[234] A contemporary model for a self-managed, non-market socialism is Pat Devine's model of negotiated coordination. Negotiated coordination is based upon social ownership by those affected by the use of the assets involved, with decisions made by those at the most localised level of production.[235] Michel Bauwens identifies the emergence of the open software movement and peer-to-peer production as a new, alternative mode of production to the capitalist economy and centrally planned economy that is based on collaborative self-management, common ownership of resources, and the production of use-values through the free cooperation of producers who have access to distributed capital.[236] Anarchist communism is a theory of anarchism which advocates the abolition of the state, private property, and capitalism in favour of common ownership of the means of production.[237][238] Anarcho-syndicalism as practiced in Catalonia and other places in the Spanish Revolution during the Spanish Civil War. Sam Dolgoff estimated that about eight million people participated directly or at least indirectly in the Spanish Revolution,.[92] The economy of the former Socialist Federal Republic of Yugoslavia established a system based on market-based allocation, social ownership of the means of production and self-management within firms. This system substituted Yugoslavia's Soviet-type central planning with a decentralised, self-managed system after reforms in 1953.[239] The Marxian economist Richard D. Wolff argues that "reorganizing production so that workers become collectively self-directed at their work-sites" not only moves society beyond both capitalism and state socialism of the last century, but would also mark another milestone in human history, similar to earlier transitions out of slavery and feudalism.[240] As an example, Wolff claims that Mondragon is "a stunningly successful alternative to the capitalist organisation of production."[241] State-directed economy See also: State socialism State socialism can be used to classify any variety of socialist philosophies that advocates the ownership of the means of production by the state apparatus, either as a transitional stage between capitalism and socialism, or as an end-goal in itself. Typically it refers to a form of technocratic management, whereby technical specialists administer or manage economic enterprises on behalf of society (and the public interest) instead of workers' councils or workplace democracy. A state-directed economy may refer to a type of mixed economy consisting of public ownership over large industries, as promoted by various Social democratic political parties during the 20th century. This ideology influenced the policies of the British Labour Party during Clement Attlee's administration. In the biography of the 1945 UK Labour Party Prime Minister Clement Attlee, Francis Beckett states: "the government... wanted what would become known as a mixed economy".[242] Nationalisation in the UK was achieved through compulsory purchase of the industry (i.e. with compensation). British Aerospace was a combination of major aircraft companies British Aircraft Corporation, Hawker Siddeley and others. British Shipbuilders was a combination of the major shipbuilding companies including Cammell Laird, Govan Shipbuilders, Swan Hunter, and Yarrow Shipbuilders; the nationalisation of the coal mines in 1947 created a coal board charged with running the coal industry commercially so as to be able to meet the interest payable on the bonds which the former mine owners' shares had been converted into.[243][244] Market socialism Main article: Market socialism Market socialism consists of publicly owned or cooperatively owned enterprises operating in a market economy. It is a system that utilises the market and monetary prices for the allocation and accounting of the means of production, thereby retaining the process of capital accumulation. The profit generated would be used to directly remunerate employees or finance public institutions.[245] In state-oriented forms of market socialism, in which state enterprises attempt to maximise profit, the profits can be used to fund government programs and services through a social dividend, eliminating or greatly diminishing the need for various forms of taxation that exist in capitalist systems. The neoclassical economist Lon Walras believed that a socialist economy based on state ownership of land and natural resources would provide a means of public finance to make income taxes unnecessary.[246] Yugoslavia implemented a market socialist economy based on cooperatives and worker self-management. Proudhon and his children, by Gustave Courbet, 1865. Pierre Joseph Proudhon, main theorist of mutualism and influential French socialist thinker. Mutualism is an economic theory and anarchist school of thought that advocates a society where each person might possess a means of production, either individually or collectively, with trade representing equivalent amounts of labour in the free market.[247] Integral to the scheme was the establishment of a mutual-credit bank that would lend to producers at a minimal interest rate, just high enough to cover administration.[248] Mutualism is based on a labour theory of value that holds that when labour or its product is sold, in exchange, it ought to receive goods or services embodying "the amount of labour necessary to produce an article of exactly similar and equal utility".[249] The current economic system in China is formally referred to as a Socialist market economy with Chinese characteristics. It combines a large state sector that comprises the 'commanding heights' of the economy, which are guaranteed their public ownership status by law,[250] with a private sector mainly engaged in commodity production and light industry responsible from anywhere between 33%[251] (People's Daily Online 2005) to over 70% of GDP generated in 2005.[252] Although there has been a rapid expansion of private-sector activity since the 1980s, privatisation of state assets was virtually halted and were partially reversed in 2005.[253] The current Chinese economy consists of 150 corporatised state-owned enterprises that report directly to China's central government.[254] By 2008, these state-owned corporations had become increasingly dynamic and generated large increases in revenue for the state,[255][256] resulting in a state-sector led recovery during the 2009 financial crises while accounting for most of China's economic growth.[257] However, the Chinese economic model is widely cited as a contemporary form of state capitalism, the major difference between Western capitalism and the Chinese model being the degree of state-ownership of shares in publicly listed corporations. The Socialist Republic of Vietnam has adopted a similar model after the Doi Moi economic renovation, but slightly differs from the Chinese model in that the Vietnamese government ret ains firm control over the state sector and strategic industries, but allows for private-sector activity in commodity production.[258] Social and Political theory In this context, socialism has been used to refer to a political movement, a political philosophy and a hypothetical form of society these movements aim to achieve. As a result, in a political context socialism has come to refer to the strategy (for achieving a socialist society) or policies promoted by socialist organisations and socialist political parties; all of which have no connection to socialism as a socioeconomic system. Marxism Main articles: Marxism and Socialism (Marxism) At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or this merely expresses the same thing in legal terms with the property relations within the framework of which they have operated hitherto. Then begins an era of social revolution. The changes in the economic foundation lead sooner or later to the transformation of the whole immense superstructure. Karl Marx, Critique of the Gotha Program[259] Part of a series on Marxism Karl Marx and Friedrich Engels Theoretical works[show] Concepts[show] Economics[show] Sociology[show] History[hide] Historical materialism Historical determinism Anarchism and Marxism Socialism Dictatorship of the proletariat Primitive capital accumulation Proletarian revolution Proletarian internationalism World revolution Stateless communism Philosophy[show] Variants[show] Movements[show] People[show] Portal icon Socialism portal Portal icon Communism portal Portal icon Philosophy portal v t e The writings of Karl Marx provided the basis for the development of Marxist political theory and Marxian economics. In the most influential of all economic theories on socialist thought, Karl Marx and Friedrich Engels argued that socialism would emerge from historical necessity as capitalism rendered itself obsolete and unsustainable from increasing internal contradictions emerging from the development of the productive forces and technology. It was these advances in the productive forces combined with the old social relations of production of capitalism that would generate contradictions, leading to working-class consciousness.[260] Marx and Engels held the view that the consciousness of those who earn a wage or salary (the working class in the broadest Marxist sense) would be moulded by their conditions of wage slavery, leading to a tendency to seek their freedom or emancipation by overthrowing ownership of the means of production by capitalists, and consequently, overthrowing the state that upheld this economic order. For Marx and Engels, conditions determine consciousness and ending the role of the capitalist class leads eventually to a classless society in which the state would wither away. The Marxist conception of socialism is that of a specific historical phase that will displace capitalism and precede communism. The major characteristics of socialism (particularly as conceived by Marx and Engels after the Paris Commune of 1871) are that the proletariat will control the means of production through a workers' state erected by the workers in their interests. Economic activity would still be organised through the use of incentive systems and social classes would still exist, but to a lesser and diminishing extent than under capitalism. For orthodox Marxists, socialism is the lower stage of communism based on the principle of "from each according to his ability, to each according to his contribution" while upper stage communism is based on the principle of "from each according to his ability, to each according to his need"; the upper stage becoming possible only after the socialist stage further develops economic efficiency and the automation of production has led to a superabundance of goods and services.[261][262] Marx argued that the material productive forces (in industry and commerce) brought into existence by capitalism predicated a cooperative society since production had become a mass social, collective activity of the working class to create commodities but with private ownership (the relations of production or property relations). This conflict between collective effort in large factories and private ownership would bring about a conscious desire in the working class to establish collective ownership commensurate with the collective efforts their daily experience.[259] Che Guevara and Mao Zedong sought socialism based on the rural peasantry rather than the urban working class. Che Guevara attempted to inspire the peasants of Bolivia by his own example into a change of consciousness. Guevara said in 1965: Socialism cannot exist without a change in consciousness resulting in a new fraternal attitude toward humanity, both at an individual level, within the societies where socialism is being built or has been built, and on a world scale, with regard to all peoples suffering from imperialist oppression.[263] Evolutionary and Institutional economics

Thorstein Veblen, a leading American institutionalist and evolutionary economist, argued that a subset of the working-class, the technical specialists and engineers, would become the driving force behind socioeconomic change within capitalism. There is an antagonism between industry and business, where industry refers to the process of producing goods and services and business is defined as the process of "making money". Thorstein Veblen saw socialism as an immediate stage in an ongoing evolutionary process in economics that would result from the natural decay of the system of business enterprise. In contrast to Marx, he did not believe socialism would be the result of political struggle or political revolution by the working class as a whole and did not believe it to be the ultimate goal of humanity.[264] But like Marx, Veblen saw technology as the underlying force driving social change. Joseph Schumpeter viewed intellectuals and the intelligentsia as the group within society that would gradually move society toward socialism. Socialism would be partially a result of socio-economic evolution, the growth of workers' self-management, industrial democracy and social planning, and partially from political pressure on the part of intellectuals in Western society.[265] Role of the state Socialists have taken different perspectives on the state and the role it should play in revolutionary struggles, in constructing socialism, and within an established socialist economy. Preceding the Bolshevik-led revolution in Russia, many socialists including reformists, orthodox Marxist currents such as council communism and the Mensheviks, Anarchists and Libertarian socialists criticised the idea of using the state to conduct central planning and own the means of production as a way to establish socialism. Following the victory of Leninism in Russia, the idea of "state socialism" spread rapidly throughout the socialist movement, and eventually "state socialism" came to be identified with the Soviet economic model.[266] Joseph Schumpeter rejected the association of socialism (and social ownership) with state ownership over the means of production, because the state as it exists in its current form is a product of capitalis t society and cannot be transplanted to a different institutional framework. Schumpeter argued that there would be different institutions within socialism than those that exist within modern capitalism, just as feudalism had its own distinct and unique ins titutional forms. The state, along with concepts like property and taxation were concepts exclusive to commercial society (capitalism) and attempting to place them within the context of a future socialist society would amount to a distortion of these concepts by using them out of context[267] In the 19th century the philosophy of state socialism was first explicitly expounded by the German political philosopher Ferdinand Lassalle. In contrast to Karl Marxs perspective of the state, Lassalle rejected the c oncept of the state as a class-based power structure whose main function was to preserve existing class structures. Thus Lassalle also rejected the Marxist view that the state was destined to wither away. Lassalle considered the state to be an entity ind ependent of class allegiances and an instrument of justice that would therefore be essential for achieving socialism.[268] Utopian versus scientific Main articles: Utopian socialism and Scientific socialism Utopian socialism is a term used to define the first currents of modern socialist thought as exemplified by the work of Henri de Saint-Simon, Charles Fourier, and Robert Owen, which inspired Karl Marx and other early socialists.[269] However, visions of imaginary ideal societies, which competed with revolutionary social-democratic movements, were viewed as not being grounded in the material conditions of society and as reactionary.[270] Although it is technically possible for any set of ideas or any person living at any time in history to be a utopian socialist, the term is most often applied to those socialists who lived in the first quarter of the 19th century who were ascribed the label "utopian" by later socialists as a negative term, in order to imply naivete and dismiss their ideas as fanciful or unrealistic.[28] Religious sects whose members live communally, such as the Hutterites, for example, are not usually called "utopian socialists", although their way of living is a prime example. They have been categorized as religious socialists by some. Likewise, modern intentional communities based on socialist ideas could also be categorized as "utopian socialist". For Marxists, the development of capitalism in western Europe provided a material basis for the possibility of bringing about socialism because, according to the Communist Manifesto, "What the bourgeoisie produces above all is its own grave diggers",[271] namely the working class, which must become conscious of the historical objectives set it by society. Reform versus revolution Main articles: Revolutionary socialism and Reformism Revolutionary socialists believe that a social revolution is necessary to effect structural changes to the socio-economic structure of society. Among revolutionary socialists there are differences in strategy, theory and the definition of "revolution". Orthodox Maxists and Left Communists take an Impossibilist stance, believing revolution should be spontaneous as a result of contradictions in society resulting from technological changes in the productive forces. Lenin theorized that under capitalism the workers cannot achieve class consciousness beyond organising into unions and making demands of the capitalists. Therefore, Leninists advocate that it is historically necessity for a vanguard of class conscious revolutionaries to take a central role in coordinating the social revolution to overthrow the capitalist state and, eventually, the ins titution of the state altogether.[272] "Revolution" is not necessarily defined by revolutionary socialists as violent insurrection,[273] but as a complete dismantling and rapid transformation of all areas of class society led by the majority of the masses : the working class. Reformism is generally associated with social democracy and gradualist democratic socialism. Reformism is the belief that socialists should stand in parliamentary elections within capitalist society, and if elected, utilize the machinery of government to pass political and social reforms for the purposes of ameliorating the instabilities and inequities of capitalism. Politics Socialists in Union Square, N.Y.C. on May Day 1912 Part of the Politics series on Anarchism "Circle-A" anarchy symbol Schools of thought[show] Theory Practice [show] People[show] Issues[show] History[show] Culture[show] Economics[show] By region[show] Lists[show] Related topics[show] Anarchism portal Politics portal v t e Part of a series on Libertarian socialism Concepts[show] Models[show] People[show] Philosophies[show] Significant events[show] Related topics[show] Anarchism portal Socialism portal Libertarianism portal Philosophy portal Politics portal v t e The major socialist political movements are described below. Independent socialist theorists, [utopian socialist] authors, and academic supporters of socialism may not be represented in these movements. Some political groups have called themselves socialist while holding views that some consider antithetical to socialism. The term socialist has also been used by some politicians on the political right as an epithet against certain individuals who do not consider themselves to be socialists, and against policies that are not considered socialist by their proponents. There are many variations of socialism and as such there is no single definition encapsulating all of socialism. However there have been common elements identified by scholars.[274] Angelo S. Rappoport in his Dictionary of Socialism (1924) analysed forty definitions of socialism to conclude that common elements of socialism include: general criticisms of the social effects of private ownership and control of capital as being the cause of poverty, low wages, unemployment, economic and social inequality, and a lack of economic security; a general view that the solution to these problems is a form of collective control over the means of production, distribution and exchange (the degree and means of control vary amongst socialist movements); agreement that the outcome of this collective control should be a society based upon social justice, including social equality, economic protection of people, and should provide a more satisfying life for most people.[275] Bhikhu Parekh in The Concepts of Socialism (1975) identifies four core principles of socialism and particularly socialist society: sociality, social responsibility, cooperation, and planning.[276] Michael Freeden in his study Ideologies and Political Theory (1996) states that all socialists share five themes: the first is that socialism posits that society is more than a mere collection of individuals; second, that it considers human welfare a desirable objective; third, that it considers humans by nature to be active and productive; fourth, it holds the belief of human equality; and fifth, that history is progressive and will create positive change on the condition that humans work to achieve such change.[276] Anarchism Main article: Anarchism Anarchism is often defined as a political philosophy which holds the state to be undesirable, unnecessary, or harmful.[277][278] However, others argue that while anti-statism is central, it is inadequate to define anarchism.[279] Therefore they argue, alternatively, that anarchism entails opposing authority or hierarchical organisation in the conduct of human relations, including, but not only, the state system.[280][281][282][283][284][285][286] Proponents of anarchism, known as "anarchists", advocate stateless societies based on non-hierarchical[281][287][288] voluntary associations.[289][290] Mutualists advocate market socialism, collectivist anarchists workers cooperatives and salaries based on the amount of time contributed to production, anarcho-communists advocate a direct transition from capitalism to libertarian communism and a gift economy and anarcho-syndicalists worker's direct action and the general strike. Libertarian socialism Main article: Libertarian socialism The first anarchist journal to use the term "libertarian" was Le Libertaire, Journal du Mouvement Social and it was published in New York City between 1858 and 1861 by French anarcho-communist Joseph Djacque.[291] Joseph Djacque was the first recorded person to describe himself as "libertarian".[292] Libertarian socialism is a group of political philosophies that promote a non-hierarchical, non-bureaucratic society without private property in the means of production. Libertarian socialists believe in converting present-day private productive property into common or public goods, while retaining respect for personal property.[293] Libertarian socialism is opposed to coercive forms of social organisation. It promotes free association in place of government and opposes the social relations of capitalism, such as wage labour.[294] The term libertarian socialism is used by some socialists to differentiate their philosophy from state socialism,[295][296] and by some as a synonym for left anarchism.[297][298][299] Currents within libertarian socialism include Marxist tendencies such as left communism, council communism and autonomism, as well as non-Marxist movements such as social anarchism, Communalism, Participism, and Inclusive Democracy. Democratic socialism Main article: Democratic socialism Modern democratic socialism is a broad political movement that seeks to promote the ideals of socialism within the context of a democratic system. Some Democratic socialists support social democracy as a temporary measure to reform the current system, while others reject reformism in favor of more revolutionary methods. Modern social democracy emphasises a program of gradual legislative reform of capitalism in order to make it more equitable and humane, while the theoretical end goal of building a socialist society is either completely forgotten or redefined in a pro-capitalist way. The two movements are widely similar both in terminology and in ideology, although there are a few key differences. The major difference between social democracy and democratic socialism is the object of their politics: contemporary social democrats support a welfare state and unemployment insurance as a means to "humanize" capitalism, whereas democratic socialists seek to replace capitalism with a socialist economic system, arguing that any attempt to "humanize" capitalism through regulations and welfare policies would distort the market and create economic contradictions.[300] Democratic socialism generally refers to any political movement that seeks to establish an economy based on economic democracy by and for the working class. Democratic socialists oppose authoritarian "socialists" as Stalinists and Maoists. Democratic socialism is difficult to define, and groups of scholars have radically different definitions for the term. Some definitions simply refer to all forms of socialism that follow an electoral, reformist or evolutionary path to socialism, rather than a revolutionary one.[301] You can't talk about ending the slums without first saying profit must be taken out of slums. You're really tampering and getting on dangerous ground because you are messing with folk then. You are messing with captains of industry. Now this means that we are treading in difficult water, because it really means that we are saying that something is wrong with capitalism. There must be a better distribution of wealth, and maybe America must move toward a democratic socialism. Martin Luther King, Jr., 1966.[302][303][304] Religious socialism Main articles: Socialism and Islam and Christian socialism Christian socialism is a broad concept involving an intertwining of the Christian religion with the politics and economic theories of socialism. Islamic socialism is a term coined by various Muslim leaders to describe a more spiritual form of socialism. Muslim socialists believe that the teachings of the Qur'an and Muhammad are compatible with principles of equality and public ownership drawing inspiration from the early Medina welfare state established by the Prophet Muhammad. Muslim Socialists are more conservative than their western contemporaries and find their roots in Anti-imperialism, anti-colonialism and Arab nationalism. Islamic Socialist leaders believe in Democracy and deriving legitimacy from public mandate as opposed to religious texts. Buddhist Socialism is another concept that seeks to reduce unnecessary consumption and create harmony while ensuring everyone's basic needs are met.[citation needed] Social democracy Main article: Social democracy Eduard Bernstein Social democracy is a political ideology that officially has as its goal the establishment of democratic socialism through reformist and gradualist methods.[305] Alternatively, Social democracy is defined as a policy regime involving a welfare state, collective bargaining schemes, and support for publicly financed public services. It is often used in this manner to refer to the social models and economic policies prominent in Western and Northern Europe during the later half of the 20th century.*306+*307+ It has been described by Jerry Mander as hybrid ec onomics, an active collaboration of capitalist and socialist visions, and, while such systems aren't perfect, they tend to provide high standards of living.[308] Social democrats advocate for a peaceful, evolutionary transition of the economy to socialism through progressive social reform of capitalism.[309][310] It asserts that the only acceptable constitutional form of government is representative democracy under the rule of law.[311] It promotes extending democratic decision-making beyond political democracy to include economic democracy to guarantee employees and other economic stakeholders sufficient rights of co-determination.[311] It supports a mixed economy that opposes the excesses of capitalism such as inequality, poverty, and oppression of various groups, while rejecting both a totally free market or a fully planned economy.[312] Common social democratic policies include advocacy of universal social rights to attain universally accessible public services such as education, health care, workers' compensation, and other services, including child care and care for the elderly.[313] Social democracy is connected with the t rade union labour movement and supports collective bargaining rights for workers.[314] Most social democratic parties are affiliated with the Socialist International.[305] Syndicalism Syndicalism "The Hand That Will Rule The WorldOne Big Union" Precursors[show] Variants[show] Economics[show] Organisations[show] Leaders[show] Related subjects[show] Economics portal Socialism portal Politics portal Category Syndicalism Category Labour economics v t e Main article: Syndicalism Syndicalism is a social movement that operates through industrial trade unions and rejects state socialism and the use of establishment politics to establish or promote socialism. They reject using state power to construct a socialist society, favouring strategies such as the General strike. Syndicalists advocate a socialist economy based on federated unions or syndicates of workers who own and manage the means of production. Some Marxist currents advocate Syndicalism, such as DeLeonism. Criticism Main article: Criticisms of socialism Socialism has been critiqued from numerous different perspectives. Because there are many models of socialism, most critiques are only focused on a specific type of socialism. Economic liberals and right libertarians view private ownership of the means of production and the market exchange as natural entities or moral rights which are central to t heir conceptions of freedom and liberty, and view the economic dynamics of capitalism as immutable and absolute. Therefore, they perceive public ownership of the means of production, cooperatives and economic planning as infringements upon liberty.[315][316] According to the Austrian school economist Ludwig von Mises, an economic system that does not utilize money, financial calculation and market pricing will be unable to effectively value capital goods and coordinate production, and therefore socialism is impossible because it lacks the necessary information to perform economic calculation in the first place.[317][318] Another central argument leveled against socialist systems based on economic planning is based on the use of dispersed knowledge. Socialis m is unfeasible in this view because information cannot be aggregated by a central body and effectively used to formulate a plan for an entire economy, because doing so would result in distorted or absent price signals.[319] Many economic criticisms of socialism focus on the experiences of Soviet-type planned economies. It is argued that a lack of budget constraints in enterprises operating in a planned economy reduces incentives for enterprises to act on information efficiently, thereby reducing overall welfare for society.[320] Other economists criticize models of socialism based on neoclassical economics for their reliance on the faulty and unrealistic assumptions of economic equilibrium and pareto efficiency.[321] Philosophers have also criticized the aims of socialism, arguing that equality erodes away at individual diversities, and that the establishment of an equal society would have to entail strong coercion.[322] See also Portal icon Socialism portal Portal icon Social movements portal Book icon Book: Socialism Collective farming Economic planning History of the socialist movement in the United Kingdom List of anti-capitalist and communist parties with national parliamentary representation List of communist ideologies List of socialist countries List of socialist economists List of socialist songs List of models of socialism Luxemburgism Nanosocialism Socialist calculation debate Socialization (economics) Third World Socialism Tragedy of the commons List of American Utopian communities References Imperialism From Wikipedia, the free encyclopedia Page semi-protected For other uses, see Imperialism (disambiguation). Cecil Rhodes and the Cape-Cairo railway project. Rhodes founded the De Beers Mining Company, owned the British South Africa Company and had his name given to what became the state of Rhodesia. He liked to "paint the map British red" and declared: "all of these stars ... these vast worlds that remain out of reach. If I could, I would annex other planets."[1] Imperialism, as defined by the Dictionary of Human Geography, is "an unequal human and territorial relationship, usually in the form of an empire, based on ideas of superiority and practices of dominance, and involving the extension of authority and control of one state or people over another."[2] Lewis Samuel Feuer identifies two major subtypes of imperialism; the first is the "regressive imperialism" identified with pure conquest, unequivocal exploitation, extermination or reductions of undesired peoples, and settlement of desired peoples into those territories.[3] The second type identified by Feuer is "progressive imperialism" that is founded upon a cosmopolitan view of humanity, that promotes the spread of civilization to allegedly backward societies to elevate living standards and culture in conquered territories, and allowance of a conquered people to assimilate into the imperial society, an example being the multi-cultural British Empire which gave their citizens many positive advantages. [4] The term as such primarily has been applied to Western political and economic dominance in the 19th and 20th centuries. Some writers, such as Edward Said, use the term more broadly to describe any system of domination and subordination organized with an imperial center and a periphery.[5] According to Marxist theorist Vladimir Lenin, imperialism is a natural feature of a developed capitalist nation state as it matures into monopoly capitalism. In his work Imperialism, the Highest Stage of Capitalism, Lenin observed that as capitalism matured in the Western world, the economy shifted away from real commodity production towards banking and finance, as commodity production was outsourced to the empires' colonies. Lenin concluded that the competition between empires and the unfettered drive to maximise profit would lead to wars between the empires themselves, such as World War I in his contemporary time, as well as continued future military invasions and occupations in the undeveloped world to establish and expand markets and exploit cheap labour for the monopolist corporations of the empires. It is mostly accepted that modern-day colonialism is an expression of imperialism and cannot exist without the latter. The extent to which "informal" imperialism with no formal colonies is properly described as such remains a controversial topic among historians.[6] The word imperialism became common in the United Kingdom in the 1870s and was used with a negative connotation.[7] In Great Britain, the word had until then mostly been used to refer to the politics of Napolon III of obtaining favorable public opinion in France through military interventions outside France.[7] Contents 1 History 2 Colonialism vs. Imperialism 3 Age of Imperialism 4 German imperialism 5 Tsarist and Soviet imperialism 6 Japanese imperialism 7 American imperialism 8 Justification 9 See also 10 References 11 Further reading 11.1 Primary sources 12 External links History Imperialism has been found in the histories of Japan, the Assyrian Empire, the Chinese Empire, the Roman Empire, Greece, the Byzantine Empire, the Persian Empire, the Ottoman Empire, ancient Egypt, the British Empire and India. Im perialism was a basic component to the conquests of Genghis Khan during the Mongol Empire, and other war-lords. Historically recognized Muslim empires number in the dozens. Sub-Saharan Africa has also had dozens of empires that pre-date the European colonial era, for example the Ethiopian Empire, Oyo Empire, Asante Union, Luba Empire, Lunda Empire and Mutapa Empire. The Americas during the pre-Columbian era also had large empires such as the Aztec and the Inca. Although normally used to imply forcible imposition of a more powerful foreign government's control on a weaker country, or over conquered territory that was previously without a unified government, "imperialism" is sometimes also used to describe loose or indirect political or economic influence or control of weak states by more powerful ones.[8] If the dominant country's influence is felt in social and cultural circles, s uch as "foreign" music being popular with young people, it may be described as cultural imperialism.

"Imperialism has been subject to moral or immoral censure by its critics, and thus the term is frequently used in international propaganda as a pejorative for expansionist and aggressive foreign policy."[8] Colonialism vs. Imperialism Territories that were once part of the British Empire. The term "imperialism" should not be confused with "colonialism". Robert Young writes that imperialism operates from the center, it is a state policy, and is developed for ideological as well as financial reasons whereas colonialism is nothing more than development for settlement or commercial intentions.[further explanation needed][9] Age of Imperialism The Age of Imperialism was a time period beginning around 1700 when modern, relatively developed nations were taking over less developed areas, colonizing them, or influencing them in order to expand their own power. Although imperialist practices have existed for thousands of years, the term "Age of Imperialism" generally refers to the activities of nations such as the United Kingdom, France, Germany, Italy, Japan and the United States in the early 18th through the middle 20th centuries, e.g., the "The Great Game" in Persian lands, the "Scramble for Africa" and the "Open Door Policy" in China.[10][11] The scramble for Africa. The ideas of imperialism were put forward by historians John Gallagher and Ronald Robinson during the 20th century. European imperialism was influential, and Europeans rejected the notion that "imperialism" required formal, legal control by one government over another country. "In their view, historians have been mesmerized by formal empire and maps of the world with regions colored red. The bulk of British emigration, trade, and capital went to areas outside the formal British Empire. A key to the thought of Robinson and Gallagher is the idea of empire 'informally if possible and formally if necessary.'"[attribution needed][12] Because of British Imperialism, the world's economy grew before World War I, making Britain a dominant financial force.[13] Europe's expansion into territorial imperialism had much to do with the great economic benefit from collecting resources from colonies, in combination with assuming political control often by military means. Most notably, the "British exploited the political weakness of the Mughal state, and, while military activity was important at various times, the economic and administrative incorporation of local elites was also of crucial significance". Although a substantial number of colonies had been designed or subject to provide economic profit (mostly through the seventeenth and eighteenth centuries), Fieldhouse suggests that in the nineteenth and twentieth centuries in places such as Africa and Asia, this idea is not necessarily valid:[14] Modern empires were not artificially constructed economic machines. The second expansion of Europe was a complex historical process in which political, social and emotional forces in Europe and on the periphery were more influential than calculated imperialism. Individual colonies might serve an economic purpose; collectively no empire had any definable function, economic or otherwise. Empires represented only a particular phase in the ever-changing relationship of Europe with the rest of the world: analogies with industrial systems or investment in real estate were simply misleading.[15] During this time, European merchants had the ability to "roam the high seas and appropriate surpluses from around the world (sometimes peaceably, sometimes violently) and to concentrate them in Europe."[16] European expansion accelerated greatly in the 19th century. To obtain raw materials, Europe began importing them from other countries. Europeans sought raw materials such as dyes, cotton, vegetable oils, and metal ores from overseas. Europe was being transformed into the manufacturing center of the world.[17] Communication became much more advanced during the European expansion. The invention of railroads and telegraphs made it easier to communicate with other countries. Railroads assisted in transporting goods and in supplying large armies.[17] Along with advancements in communication, Europe also continued to develop its military technology. European chemists made deadly explosives that could be used in combat, and with the advancement of machinery they were able to create lighter, cheaper guns. The guns were also much faster and more accurate. By the late 19th century (1880s) the machine gun had become an effective battlefield weapon. This technology gave European armies an advantage over their opponents, as armies in less developed countries were still fighting with arrows, swords, and leather shields.[17] German imperialism From their original homelands in Scandinavia and the far north of Europe, Germanic tribes expanded throughout northern and western Europe in the middle period of classical antiquity, and southern Europe in late antiquity, conquering Celtic and other peoples and forming in 800 the Holy Roman Empire, the first German Empire. However, there was no real systemic continuity from the western Rom an Empire to its German successor which famously was "not holy, not Roman, and not an empire",[18] and numerous small states existed in variously autonomous confederation. Although by 1000 Germanic conquest of central, western, and southern Europe west of and including Italy was complete, excluding only Muslim Iberia, but there was little cultural integration and national identity, and "Germany" remained largely a conceptual term referring to an amorphous area of central Europe. Not a maritime power, and not a nation-state, as it would eventually become, Germany's participation in Western imperialism was negligible until the late 19th century. Participation of Austria was primarily as a result of Habsburg control of the First Empire, the Spanish throne, and other royal houses.[further explanation needed] After the defeat of Napoleon, who caused the dissolution of that first German Empire, Prussia and the German states continued to stand aloof from imperialism, preferring to manipulate the European system through polices such as those of Metternich. After Prussia unified the other states into the second German Empire, its long-time leader Otto von Bismarck (1862 90) had long opposed colonial acquisitions, arguing that the burden of obtaining, maintaining and defending such possessions would outweigh any potential benefit. He felt that colonies did not pay for themselves, that the German bureaucratic system would not work well in the easy-going tropics, and the diplomatic disputes over colonies would distract Germany from its central interest, Europe itself.[19] However, in 1883 84 he suddenly reversed himself and overnight[dubious discuss] built a colonial empire in Africa and the South Pacific, and then lost interest[further explanation needed] in imperialism . Historians have debated exactly why he made this sudden and short-lived move.[20][verification needed] He was aware that public opinion had started to demand colonies for reasons of German prestige.[21] Bismarck was influenced by Hamburg merchants and traders, his neighbors at Friedrichsruh. The establishment of the German colonial empire proceeded smoothly, starting with Germ an New Guinea in 1884.[22] After the collapse of the short-lived Third Reich, and the failure of its attempt to create a great land empire in Eurasia, Germany was split between Western and Soviet spheres of influence until Perestroika and the collapse of the Soviet Union. [icon] This section requires expansion. (April 2013) Tsarist and Soviet imperialism See also: Criticism of communist party rule and Soviet Empire The maximum territorial extent of countries in the world under Soviet influence, after the Cuban Revolution of 1959 and before the official Sino-Soviet split of 1961. In the 19th century, the Romanov Empire extended its control to the Pacific, forming a common border with the Qing Empire. Bolshevik leaders had effectively reestablished a polity with roughly the same jurisdiction as that empire by 1921, but with an internationalist ideology: Lenin in particular asserted the right to self-determination for national minorities within the new territory.[23] Beginning in 1923, the policy of "Indigenization" [korenizatsiia] was intended to support non-Russians develop their national cultures within a socialist framework. Never formally revoked, it stopped being implemented after 1932. After World War II, the Soviet Union installed socialist regimes modelled on those it had installed in 1919 20 in the old Tsarist Empire in areas its forces occupied in Eastern Europe.[24] The Soviet Union and the People's Republic of China supported post World War II anti-colonial national-liberation movements to advance their own interests but were not always successful.[25] Trotsky, and others, believed that the revolution could only succeed in Russia as part of a world revolution, which was in fact, shortly after the Russian Revolution, spreading in the defeated Central Powers of Europe. Lenin wrote extensively on the matter and famously declared that Imperialism was the highest stage of capitalism. However, after Lenin's death, Joseph Stalin established 'socialism in one country' for the Soviet Union, creating the model for subsequent inward looking Stalinist states and purging the early Internationalist elements. The internationalist tendencies of the early revolution would be abandoned until they returned in a client state form in the competition with the United States in the Cold War. Though the Soviet Union declared itself anti-imperialist, critics argue that it exhibited tendencies common to historic empires.[26][27] Some scholars hold that the Soviet Union was a hybrid entity containing elements common to both multinational empires and nation states. It has also been argued that the USSR practiced colonialism as did other imperial powers and was carrying on the old Russian tradition of expansion and control.[28] Japanese imperialism Main articles: Empire of Japan and List of territories occupied by Imperial Japan During the First Sino-Japanese War in 1894, Japan absorbed Taiwan. As a result of the Russo-Japanese War in 1905, Japan took part of Sakhalin Island from Russia. Korea was annexed in 1910. During World War I Japan took German-leased territories in China's Shandong Province, as well as the Marianas, Caroline, and Marshall Islands. In 1918, Japan occupied parts of Far Eastern Russia and parts of eastern Siberia as a participant in the Siberian Intervention. In 1931 Japan conquered Manchuria. During the Second Sino-Japanese War in 1937, it invaded China. By the end of the Pacific War, Japan had conquered most of the Far East, including what is now Hong Kong, Vietnam, Cambodia, Thailand, Myanmar, the Philippine Islands, Indonesia, New Guinea and many islands of the Pacific Ocean.[29][30][31] American imperialism "President McKinley fires a cannon into the Imperialist Strawman". Cartoon by W. A. Rogers in Harper's Weekly, September 22, 1900. Main article: American imperialism The early United States expressed its opposition to Imperialism, at least that distinct from its own Manifest Destiny, in policies such as the Monroe Doctrine. Beginning in the late 19th and early 20th century, however, policies such as Woodrow Wilson's mission to "make the world safe for democracy"[32] were often backed by military force, but more often effected from behind the scenes, consistent with the general notion of hegemony and imperium of historical empires.[33][34] In 1898, Americans who opposed imperialism created the Anti-Imperialist League to oppose the US annexation of the Philippines and Cuba. A year later a war erupted in the Philippines causing business, labor and government leaders in the US to condemn America's occupation in the Philippines. They also denounced them for causing the deaths of many Filipinos.[35] American foreign policy was denounced as a "racket" by Smedley Butler, an American general. He said, "Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents."[36] After the Second World War, the United States became joined with Western interests in a global conflict over spheres of influence with the Soviet Union, known as the Cold War. After the collapse of the Soviet Union, the United States did not diminish its global ability to project force and became "the sole superpower". A system of "Unipolarity" came to define international politics, with the United States at the center. Justification A controversial aspect of imperialism is the imperial power's defense and justification of such actions. Most controversial of all is the justification of imperialism done on rational grounds. J. A. Hobson identifies this justification: "It is desirable that the earth should be peopled, governed, and developed, as far as possible, by the races which can do this work best, i.e. by the races of highest 'social efficiency'."[37] Technological and economic efficiency were often improved in territories subjected to imperialism through the building of roads, other infrastructure and introduction of innovations. A common argument against this is that such infrastrural improvements would have occurred anyway if the conquered territory were left to its own devices, and as a colony the benefits go to the imperial power rather than the territory itself. Imperialism by many different states throughout history has been one factor in the spread of the scientific method, as science was one factor that made these states stronger than their competitors.[38] The principles of imperialism are often deeply connected to the policies and practices of British Imperialism "during the last generation, and proceeds rather by diagnosis than by historical description."[39] British Imperialist strategy often but not always used the concept of terra nullius (Latin expression which stems from Roman law meaning 'empty land'). The country of Australia serves as a case study in relation to British imperialism. British settlement and colonial rule of the island continent of Australia in the eighteenth century was premised on terra nullius, for its settlers considered it unused by its sparse inhabitants. This form of imperialism can also be seen in British Columbia, Canada. In the 1840s, the territory of British Columbia was divided into two regions, one space for the native population, and the other for non-natives. The indigenous peoples were often forcibly removed from their homes onto reserves. These actions were "justified by a dominant belief among British colonial officials that land occupied by Native people was not being used efficiently and productively."[9] See also Colonialism Cultural imperialism Empire Globalization Hegemony Imperialism in Leninist theory Imperium Imperialism (video game) International relations (1814 1919) John A. Hobson List of empires List of largest empires Neocolonialism New Imperialism Oil imperialism theories Pluricontinental Scientific imperialism Super-imperialism Ultra-imperialism Uneven and combined development Monetary policy From Wikipedia, the free encyclopedia [hide]This article has multiple issues. Please help improve it or discuss these issues on the talk page. This article may contain too much repetition or redundant language. (September 2009) This article appears to contain a large number of buzzwords. (August 2012) This article may be unbalanced towards certain viewpoints. (August 2012) Part of a series on Government Public finance Detail from the mural "Government" by Elihu Vedder in the Library of Congress Policies[show] Fiscal policy[show] Monetary policy[show] Trade policy[show] Revenue Spending [show] Optimum[show] Reform[show] v t e Monetary policy is the process by which the monetary authority of a country controls the supply of money, often targeting a rate of interest for the purpose of promoting economic growth and stability.[1][2] The official goals usually include relatively stable prices and low unemployment. Monetary economics provides insight into how to craft optimal monetary policy. Monetary policy is referred to as either being expansionary or contractionary, where an expansionary policy increases the total supply of money in the economy more rapidly than usual, and contractionary policy expands the money supply more slowly than usual or even shrinks it. Expansionary policy is traditionally used to try to combat unemployment in a recession by lowering interest rates in the hope that easy credit will entice businesses into expanding. Contractionary policy is intended to slow inflation in order to avoid the resulting distortions and deterioration of asset values. Monetary policy differs from fiscal policy, which refers to taxation, government spending, and associated borrowing.[3] Contents 1 Overview 1.1 Theory 1.1.1 General 1.1.2 International Economics 2 History 2.1 Trends in central banking 2.2 Developing countries 3 Types 3.1 Inflation targeting 3.2 Price level targeting 3.3 Monetary age 3.4 Fixed exchange rate 3.5 Gold standard 4 Policy tools 4.1 Monetary base 4.2 Reserve requirements 4.3 Discount window lending 4.4 Interest rates 4.5 Currency board 4.6 Unconventional monetary policy at the zero bound 5 See also 6 Notes and references 7 External links Overview Inflation and the growth rate of money supply (M2) in the United States, 1875 to 2011. Monetary policy, to a great extent, is the management of expectations.[4] Monetary policy rests on the relationship between the rates of interest in an economy, that is, the price at which money can be borrowed, and the total supply of money. Monetary policy uses a variety of tools to control one or both of these, to influence outcomes like economic growth, inflation, exchange rates with other currencies and unemployment. Where currency is under a monopoly of issuance, or where there is a regulated system of issuing currency through banks which are tied to a central bank, the monetary authority has the ability to alter the money supply and thus influence the interest rate (to achieve policy goals). The beginning of monetary policy as such comes from the late 19th century, where it was used to maintain the gold standard. A policy is referred to as contractionary if it reduces the size of the money supply or increases it only slowly, or if it raises the interest rate. An expansionary policy increases the size of the money supply more rapidly, or decreases the interest rate. Furthermore, monetary policies are described as follows: accommodative, if the interest rate set by the central monetary authority is intended to create economic growth; neutral, if it is intended neither to create growth nor combat inflation; or tight if intended to reduce inflation. There are several monetary policy tools available to achieve these ends: increasing interest rates by fiat; reducing the monetary base; and increasing reserve requirements. All have the effect of contracting the money supply; and, if reversed, expand the money supply. Since the 1970s, monetary policy has generally been formed separately from fiscal policy. Even prior to the 1970s, the Bretton Woods system still ensured that most nations would form the two policies separately. Within almost all modern nations, special institutions (such as the Federal Reserve System in the United States, the Bank of England, the European Central Bank, the People's Bank of China, the Reserve Bank of New Zealand, and the Bank of Japan) exist which have the task of executing the monetary policy and often independently of the executive. In general, these institutions are called central banks and often have other responsibilities such as supervising the smooth operation of the financial system. The primary tool of monetary policy is open market operations. This entails managing the quantity of money in circulation through the buying and selling of various financial instruments, such as treasury bills, company bonds, or foreign currencies. All of these purchases or sales result in more or less base currency entering or leaving market circulation. Usually, the short term goal of open market operations is to achieve a specific short term interest rate target. In other instances, monetary policy might instead entail the targeting of a specific exchange rate relative to some foreign currency or else relative to gold. For example, in the case of the USA the Federal Reserve targets the federal funds rate, the rate at which member banks lend to one another overnight; however, the monetary policy of China is to target the exchange rate between the Chinese renminbi and a basket of foreign currencies. The other primary means of conducting monetary policy include: (i) Discount window lending (lender of last resort); (ii) Fractional deposit lending (changes in the reserve requirement); (iii) Moral suasion (cajoling certain market players to achieve specified outcomes); (iv) "Open Mouth Operations" (talking monetary policy with the market). Theory General Monetary policy is the process by which the government, central bank, or monetary authority of a country controls (i) the supply of money, (ii) availability of money, and (iii) cost of money or rate of interest to attain a set of objectives oriented towards the growth and stability of the economy.[1] Monetary theory provides insight into how to craft optimal monetary policy. Monetary policy rests on the relationship between the rates of interest in an economy, that is the price at which money can be borrowed, and the total supply of money. Monetary policy uses a variety of tools to control one or both of these, to influence outcomes like economic growth, inflation, exchange rates with other currencies and unemployment. Where currency is under a monopoly of issuance, or where there is a regulated system of issuing currency through banks which are tied to a central bank, the monetary authority has the ability to alter the money supply and thus influence the interest rate (to achieve policy goals). It is important for policymakers to make credible announcements. If private agents (consumers and firms) believe that policymakers are committed to lowering inflation, they will anticipate future prices to be lower than otherwise (how those expectations are formed is an entirely different matter; compare for instance rational expectations with adaptive expectations). If an employee expects prices to be high in the future, he or she will draw up a wage contract with a high wage to match these prices.[citation needed] Hence, the expectation of lower wages is reflected in wage-setting behavior between employees and employers (lower wages since prices are expected to be lower) and since wages are in fact lower there is no demand pull inflation because employees are receiving a smaller wage and there is no cost push inflation because employers are paying out less in wages. To achieve this low level of inflation, policymakers must have credible announcements; that is, private agents must believe that these announcements will reflect actual future policy. If an announcement about low-level inflation targets is made but not believed by private agents, wage-setting will anticipate high-level inflation and so wages will be higher and inflation will rise. A high wage will increase a consumer's demand (demand pull inflation) and a firm's costs (cost push inflation), so inflation rises. Hence, if a policymaker's announcements regarding monetary policy are not credible, policy will not have the desired effect. If policymakers believe that private agents anticipate low inflation, they have an incentive to adopt an expansionist monetary policy (where the marginal benefit of increasing economic output outweighs the marginal cost of inflation); however, assuming private agents have rational expectations, they know that policymakers have this incentive. Hence, private agents know that if they anticipate low inflation, an expansionist policy will be adopted that causes a rise in inflation. Consequently, (unless policymakers can make their announcement of low inflation credible), private agents expect high inflation. This anticipation is fulfilled through adaptive expectation (wage-setting behavior);so, there is higher inflation (without the benefit of increased output). Hence, unless credible announcements can be made, expansionary monetary policy will fail. Announcements can be made credible in various ways. One is to establish an independent central bank with low inflation targets (but no output targets). Hence, private agents know that inflation will be low because it is set by an independent body. Central banks can be given incentives to meet targets (for example, larger budgets, a wage bonus for the head of the bank) to increase their reputation and signal a strong commitment to a policy goal. Reputation is an important element in monetary policy implementation. But the idea of reputation should not be confused with commitment. While a central bank might have a favorable reputation due to good performance in conducting monetary policy, the same central bank might not have chosen any particular form of commitment (such as targeting a certain range for inflation). Reputation plays a crucial role in determining how much markets would believe the announcement of a particular commitment to a policy goal but both concepts should not be assimilated. Also, note that under rational expectations, it is not necessary for the policymaker to have established its reputation through past policy actions; as an example, the reputation of the head of the central bank might be derived entirely from his or her ideology, professional background, public statements, etc. In fact it has been argued[5] that to prevent some pathologies related to the time inconsistency of monetary policy implementation (in particular excessive inflation), the head of a central bank should have a larger distaste for inflation than the rest of the economy on average. Hence the reputation of a particular central bank is not necessarily tied to past performance, but rather to particular institutional arrangements that the markets can use to form inflation expectations. Despite the frequent discussion of credibility as it relates to monetary policy, the exact meaning of credibility is rarely defined. Such lack of clarity can serve to lead policy away from what is believed to be the most beneficial. For example, capability to serve the public interest is one definition of credibility often associated with central banks. The reliability with which a central bank keeps its promises is also a common definition. While everyone most likely agrees a central bank should not lie to the public, wide disagreement exists on how a central bank can best serve the public interest. Therefore, lack of definition can lead people to believe they are supporting one particular policy of credibility when they are really supporting another.[6] International Economics Optimal monetary policy in international economics is concerned with the question of how monetary policy should be conducted in interdependent open economies. The classical view holds that international macroeconomic interdependence is only relevant if it affects domestic output gaps and inflation, and monetary policy prescriptions can abstract from openness without harm.[7] As stressed by Corsetti and Pesenti (2005)[8] and Devereux and Engel (2003),[9] this view rests on two implicit assumptions: a high responsiveness of import prices to the exchange rate, i.e. producer currency pricing (PCP), and frictionless international financial markets supporting the efficiency of flexible price allocation. The violation or distortion of these assumptions found in empirical research is the subject of a substantial part of the international optimal monetary policy literature. The policy trade-offs specific to this international perspective are threefold:[10] First, research, e.g. by Gopinath and Rigobon (2008),[11] however, suggests only a weak reflection of exchange rate movements in import prices, lending credibility to the opposed theory of local currency pricing (LCP). The consequence is a departure from the classical view in the form of a trade-off between output gaps and misalignments in international relative prices, shifting monetary policy to CPI inflation control and real exchange rate stabilization. Second, another specificity of international optimal monetary policy is the issue of strategic interactions and competitive devaluations, which is due to cross-border spillovers in quantities and prices.[12] Therein, the national authorities of different countries face incentives to m anipulate the terms of trade to increase national welfare in the absence of international policy coordination. Though research by Corsetti & Penseti (2005))[8] suggests that the gains of international policy coordination might be small, such gains may become very relevant if balanced against incentives for international noncooperation. Third, open economies face policy trade-offs if asset market distortions prevent global efficient allocation. Even though the real exchange rate absorbs shocks in current and expected fundamentals, its adjustment does not necessarily result in a desirable allocation and may even exacerbate the misallocation of consumption and employment at both the domestic and global level. This is because, relative to the case of complete markets, both the Phillips curve and the loss function include a welfare-relevant measure of cross-country imbalances. Consequently, this results in domestic goals, e.g. output gaps or inflation, being traded-off against the stabilization of external variables such as the terms of trade or the demand gap. Hence, the optimal monetary policy in this case consists of redressing demand imbalances and/or correcting international relative prices at the cost of some inflation.[13] Finally, Corsetti, Dedola & Leduc (2011):[14] summarize the status quo of research on international monetary policy prescriptions: "Optimal monetary policy thus should target a combination of inward-looking variables such as output gap and inflation, with currency misalignment and cross-country demand misallocation, by leaning against the wind of misaligned exchange rates and international imbalances." History Monetary policy is associated with interest rates and availabilility of credit. Instruments of monetary policy have included short-term interest rates and bank reserves through the monetary base.[15] For many centuries there were only two forms of monetary policy: (i) Decisions about coinage; (ii) Decisions to print paper money to create credit. Interest rates, while now thought of as part of monetary authority, were not generally coordinated with the other forms of monetary policy during this time. Monetary policy was seen as an executive decision, and was generally in the hands of the authority with seigniorage, or the power to coin. With the advent of larger trading networks came the ability to set the price between gold and silver, and the price of the local currency to foreign currencies. This official price could be enforced by law, even if it varied from the market price. Paper money called "jiaozi" originated from promissory notes in 7th century China. Jiaozi did not replace metallic currency, and were used alongside the copper coins. The successive Yuan Dynasty was the first government to use paper currency as the predominant circulating medium. In the later course of the dynasty, facing massive shortages of specie to fund war and their rule in China, they began printing paper money without restrictions, resulting in hyperinflation. With the creation of the Bank of England in 1699, which acquired the responsibility to print notes and back them with gold, the idea of monetary policy as independent of executive action began to be established.[16] The goal of monetary policy was to maintain the value of the coinage, print notes which would trade at par to specie, and prevent coins from leaving circulation. The establishment of central banks by industrializing nations was associated then with the desire to maintain the nation's peg to the gold standard, and to trade in a narrow band with other goldbacked currencies. To accomplish this end, central banks as part of the gold standard began setting the interest rates that they charged, both their own borrowers, and other banks who required liquidity. The maintenance of a gold standard required almost monthly adjustments of interest rates. During the 1870 1920 period, the industrialized nations set up central banking systems, with one of the last being the Federal Reserve in 1913.[17] By this point the role of the central bank as the "lender of last resort" was understood. It was also increasingly understood that interest rates had an effect on the entire economy, in no small part because of the marginal revolution in economics, which demonstrated how people would change a decision based on a change in the economic trade-offs. Monetarist economists long contended that the money-supply growth could affect the macroeconomy. These included Milton Friedman who early in his career advocated that government budget deficits during recessions be financed in equal amount by money creation to help to stimulate aggregate demand for output.[18] Later he advocated simply increasing the monetary supply at a low, constant rate, as the best way of maintaining low inflation and stable output growth.[19] However, when U.S. Federal Reserve Chairman Paul Volcker tried this policy, starting in October 1979, it was found to be impractical, because of the highly unstable relationship between monetary aggregates and other macroeconomic variables.[20] Even Milton Friedman acknowledged that money supply targeting was less successful than he had hoped, in an interview with the Financial Times on June 7, 2003.[21][22][23]

Therefore, monetary decisions today take into account a wider range of factors, such as: short term interest rates; long term interest rates; velocity of money through the economy; exchange rates; credit quality; bonds and equities (corporate ownership and debt); government versus private sector spending/savings; international capital flows of money on large scales; financial derivatives such as options, swaps, futures contracts, etc. Trends in central banking The central bank influences interest rates by expanding or contracting the monetary base, which consists of currency in circulation and banks' reserves on deposit at the central bank. The primary way that the central bank can affect the monetary base is by open market operations or sales and purchases of second hand government debt, or by changing the reserve requirements. If the central bank wishes to lower interest rates, it purchases government debt, thereby increasing the amount of cash in circulation or crediting banks' reserve accounts. Alternatively, it can lower the interest rate on discounts or overdrafts (loans to banks secured by suitable collateral, specified by the central bank). If the interest rate on such transactions is sufficiently low, commercial banks can borrow from the central bank to meet reserve requirements and use the additional liquidity to expand their balance sheets, increasing the credit available to the economy. Lowering reserve requirements has a similar effect, freeing up funds for banks to increase loans or buy other profitable assets. A central bank can only operate a truly independent monetary policy when the exchange rate is floating.[24] If the exchange rate is pegged or managed in any way, the central bank will have to purchase or sell foreign exchange. These transactions in foreign exchange will have an effect on the monetary base analogous to open market purchases and sales of government debt; if the central bank buys foreign exchange, the monetary base expands, and vice versa. But even in the case of a pure floating exchange rate, central banks and monetary authorities can at best "lean against the wind" in a world where capital is mobile. Accordingly, the management of the exchange rate will influence domestic monetary conditions. To maintain its monetary policy target, the central bank will have to sterilize or offset its foreign exchange operations. For example, if a central bank buys foreign exchange (to counteract appreciation of the exchange rate), base money will increase. Therefore, to sterilize that increase, the central bank must also sell government debt to contract the monetary base by an equal amount. It follows that turbulent activity in foreign exchange markets can cause a central bank to lose control of domestic monetary policy when it is also managing the exchange rate. In the 1980s, many economists began to believe that making a nation's central bank independent of the rest of executive government is the best way to ensure an optimal monetary policy, and those central banks which did not have independence began t o gain it. This is to avoid overt manipulation of the tools of monetary policies to effect political goals, such as re-electing the current government. Independence typically means that the members of the committee which conducts monetary policy have long, fixed terms. Obviously, this is a somewhat limited independence. In the 1990s, central banks began adopting formal, public inflation targets with the goal of making the outcomes, if not the process, of monetary policy more transparent. In other words, a central bank may have an inflation target of 2% for a given year, and if inflation turns out to be 5%, then the central bank will typically have to submit an explanation. The Bank of England exemplifies both these trends. It became independent of government through the Bank of England Act 1998 and adopted an inflation target of 2.5% RPI (now 2% of CPI). The debate rages on about whether monetary policy can smooth business cycles or not. A central conjecture of Keynesian economics is that the central bank can stimulate aggregate demand in the short run, because a significant number of prices in the economy are fixed in the short run and firms will produce as many goods and services as are demanded (in the long run, however, money is neutral, as in the neoclassical model). There is also the Austrian school of economics, which includes Friedrich von Hayek and Ludwig von Mises's arguments,[25] which argues that central bank monetary policy aggravates the business cycle, creating malinvestment and maladjustments in the economy which then cause downcycle corrections, but most economists fall into either the Keynesian or neoclassical camps on this issue. Developing countries Developing countries may have problems establishing an effective operating monetary policy. The primary difficulty is that few developing countries have deep markets in government debt. The matter is further complicated by the difficulties in forecasting money demand and fiscal pressure to levy the inflation tax by expanding the monetary base rapidly. In general, the central banks in many developing countries have poor records in managing monetary policy. This is often because the monetary authority in a developing country is not independent of government, so good monetary policy takes a backseat to the political desires of the government or are used to pursue other non-monetary goals. For this and other reasons, developing countries that want to establish credible monetary policy may institute a currency board or adopt dollarization. Such forms of monetary institutions thus essentially tie the hands of the government from interference and, it is hoped, that such policies will import the monetary policy of the anchor nation. Recent attempts at liberalizing and reforming financial markets (particularly the recapitalization of banks and other financial institutions in Nigeria and elsewhere) are gradually providing the latitude required to implement monetary policy frameworks by the relevant central banks. Types In practice, to implement any type of monetary policy the main tool used is modifying the amount of base money in circulation. The monetary authority does this by buying or selling financial assets (usually government obligations). These open market operations change either the amount of money or its liquidity (if less liquid forms of money are bought or sold). The multiplier effect of fractional reserve banking amplifies the effects of these actions. Constant market transactions by the monetary authority modify the supply of currency and this impacts other market variables such as short term interest rates and the exchange rate. The distinction between the various types of monetary policy lies primarily with the set of instruments and target variables that are used by the monetary authority to achieve their goals. Monetary Policy: Target Market Variable: Long Term Objective: Inflation Targeting Interest rate on overnight debt A given rate of change in the CPI Price Level Targeting Interest rate on overnight debt A specific CPI number Monetary Aggregates The growth in money supply A given rate of change in the CPI Fixed Exchange Rate The spot price of the currency The spot price of the currency Gold Standard The spot price of gold Low inflation as measured by the gold price Mixed Policy Usually interest rates Usually unemployment + CPI change The different types of policy are also called monetary regimes, in parallel to exchange-rate regimes. A fixed exchange rate is also an exchange-rate regime; The Gold standard results in a relatively fixed regime towards the currency of other countries on the gold standard and a floating regime towards those that are not. Targeting inflation, the price level or other monetary aggregates implies floating exchange rate unless the management of the relevant foreign currencies is tracking exactly the same variables (such as a harmonized consumer price index). In economics, an expansionary fiscal policy includes higher spending and tax cuts, that encourage economic growth.[26] In turn, an expansionary monetary policy is one that seeks to increase the size of the money supply. As usual, inciting of money supply is aimed at lowering the interest rates on purpose to achieve economic growth by increase of economic activity.[27] Conversely, contractionary monetary policy seeks to reduce the size of the money supply. In most nations, monetary policy is controlled by either a central bank or a finance ministry. Neoclassical and Keynesian economics significantly differ on the effects and effectiveness of monetary policy on influencing the real economy; there is no clear consensus on how monetary policy affects real economic variables (aggregate output or income, employment). Both economic schools accept that monetary policy affects monetary variables (price levels, interest rates). Inflation targeting Main article: Inflation targeting Under this policy approach the target is to keep inflation, under a particular definition such as Consumer Price Index, within a desired range. The inflation target is achieved through periodic adjustments to the Central Bank interest rate target. The interest rate used is generally the overnight rate at which banks lend to each other overnight for cash flow purposes. Depending on the country this particular interest rate might be called the cash rate or something similar. The interest rate target is maintained for a specific duration using open market operations. Typically the duration that the interest rate target is kept constant will vary between months and years. This interes t rate target is usually reviewed on a monthly or quarterly basis by a policy committee. Changes to the interest rate target are made in response to various market indicators in an attempt to forecast economic trends and in so doing keep the market on track towards achieving the defined inflation target. For example, one simple method of inflation targeting called the Taylor rule adjusts the interest rate in response to changes in the inflation rate and the output gap. The rule was proposed by John B. Tay lor of Stanford University.[28] The inflation targeting approach to monetary policy approach was pioneered in New Zealand. It has been used in Australia, Brazil, Canada, Chile, Colombia, the Czech Republic, Hungary, New Zealand, Norway, Iceland, India, Philippines, Poland, Sweden, South Africa, Turkey, and the United Kingdom. Price level targeting Price level targeting is a monetary policy that is similar to inflation targeting except that CPI growth in one year over or under the long term price level target is offset in subsequent years such that a targeted price-level is reached over time, e.g. five years, giving more certainty about future price increases to consumers. Under inflation targeting what happened in the immediate past years is not taken into account or adjusted for in the current and future years. Uncertainty in price levels can create uncertainty around price and wage setting activity for firms and workers, and undermines any information that can be gained from relative prices, as it is more difficult for firms to determine if a change in the price of a good or service is because of inflation or other factors, such as an increase in the efficiency of factors of production, if inflation is high and volatile. An increase in inflation also leads to a decrease in the demand for money, as it reduces the incentive to hold money and increases transaction costs and shoe leather costs. Monetary age In the 1980s, several countries used an approach based on a constant growth in the money supply. This approach was refined to include different classes of money and credit (M0, M1 etc.). In the USA this approach to monetary policy was discontinued with the selection of Alan Greenspan as Fed Chairman. This approach is also sometimes called monetarism. While most monetary policy focuses on a price signal of one form or another, this approach is focused on monetary quantities. As these quantities could have a role on the economy and business cycles depending on the households' risk aversion level, money is sometimes explicitly added in the central bank's reaction function.[29] Fixed exchange rate This policy is based on maintaining a fixed exchange rate with a foreign currency. There are varying degrees of fixed exchange rates, which can be ranked in relation to how rigid the fixed exchange rate is with the anchor nation. Under a system of fiat fixed rates, the local government or monetary authority declares a fixed exchange rate but does not actively buy or sell currency to maintain the rate. Instead, the rate is enforced by non-convertibility measures (e.g. capital controls, import/export licenses, etc.). In this case there is a black market exchange rate where the currency trades at its market/unofficial rate. Under a system of fixed-convertibility, currency is bought and sold by the central bank or monetary authority on a daily basis to achieve the target exchange rate. This target rate may be a fixed level or a fixed band within which the exchange rate may fluctuate until the monetary authority intervenes to buy or sell as necessary to maintain the exchange rate within the band. (In this case, the fixed exchange rate with a fixed level can be seen as a special case of the fixed exchange rate with bands where the bands are set to zero.) Under a system of fixed exchange rates maintained by a currency board every unit of local currency must be backed by a unit of foreign currency (correcting for the exchange rate). This ensures that the local monetary base does not inflate without being backed by hard currency and eliminates any worries about a run on the local currency by those wishing to convert the local currency to the hard (anchor) currency. Under dollarization, foreign currency (usually the US dollar, hence the term "dollarization") is used freely as the medium of exchange either exclusively or in parallel with local currency. This outcome can come about because the local population has lost all faith in the local currency, or it may also be a policy of the government (usually to rein in inflation and im port credible monetary policy). These policies often abdicate monetary policy to the foreign monetary authority or government as monetary policy in the pegging nation must align with monetary policy in the anchor nation to maintain the exchange rate. The degree to which local monetary policy becomes dependent on the anchor nation depends on factors such as capital mobility, openness, credit channels and other economic factors. See also: List of fixed currencies Gold standard Main article: Gold standard The gold standard is a system under which the price of the national currency is measured in units of gold bars and is kept constant by the government's promise to buy or sell gold at a fixed price in terms of the base currency. The gold standard might be regarded as a special case of "fixed exchange rate" policy, or as a special type of commodity price level targeting. Today this type of monetary policy is no longer used by any country, although the gold standard was widely used across the world between the mid-19th century through 1971.[30] Its major advantages were simplicity and transparency. The gold standard was abandoned during the Great Depression, as countries sought to reinvigorate their economies by increasing their money supply.[31] The Bretton Woods system, which was a modified gold standard, replaced it in the aftermath of World War II. However, this system too broke down during the Nixon shock of 1971. The gold standard induces deflation, as the economy usually grows faster than the supply of gold. When an economy grows faster than its money supply, the same amount of money is used to execute a larger number of transactions. The only way to make this possible is to lower the nominal cost of each transaction, which means that prices of goods and services fall, and each unit of money increases in value. Absent precautionary measures, deflation would tend to increase the ratio of the real value of nominal debts to physical assets over time. For example, during deflation, nominal debt and the monthly nominal cost of a fixed-rate home mortgage stays the same, even while the dollar value of the house falls, and the value of the dollars required to pay the mortgage goes up. Economists generally consider such deflation to be a major disadvantage of the gold standard. Unsustainable (i.e. excessive) deflation can cause problems during recessions and financial crisis lengthening the amount of time an economy spends in recession. William Jennings Bryan rose to national prominence when he built his historic (though unsuccessful) 1896 presidential campaign around the argument that deflation caused by the gold standard made it harder for everyday citizens to start new businesses, expand their farms, or build new homes.[32] Policy tools Monetary policy uses three main tactical approaches to maintain monetary stability: The first tactic manages the money supply. This mainly involves buying government bonds (expanding the money supply) or selling them (contracting the money supply). In the Federal Reserve System, these are known as open market operations, because the central bank buys and sells government bonds in public markets. Most of the government bonds bought and sold through open market operations are short-term government bonds bought and sold from Federal Reserve System member banks and from large financial institutions.[33][34] When the central bank disburses or collects payment for these bonds, it alters the amount of money in the economy while simultaneously affecting the price (and thereby the yield) of s hort-term government bonds. The change in the amount of money in the economy in turn affects interbank interest rates.[35][36] The second tactic manages money demand. Demand for money, like demand for most things, is sensitive to price. For money, the price is the interest rates charged to borrowers. Setting banking-system lending or interest rates (such as the US overnight bank lending rate, the federal funds discount Rate, and the London Interbank Offer Rate, or Libor) in order to manage money demand is a major tool used by central banks. Ordinarily, a central bank conducts monetary policy by raising or lowering its interest rate target for the interbank interest rate. If the nominal interest rate is at or very near zero, the central bank cannot lower it further. Such a situation, called a liquidity trap,[37] can occur, for example, during deflation or when inflation is very low.[38] The third tactic involves managing risk within the banking system. Banking systems use fractional reserve banking[39] to encourage the use of money for investment and expanding economic activity. Banks must keep banking reserves[40][41] on hand to handle actual cash needs, but they can lend an amount equal to several times their actual reserves. The money lent out by banks increases the money supply, and too much money (whether lent or printed) will lead to inflation. Central banks manage systemic risks by maintaining a balance between expansionary economic activity through bank lending and control of inflation through reserve requirements.[42] Open-market activities, setting banking-system lending or interest rates, and setting banking-system reserve requirements to manage systemic risk are the "normal" methods used by central banks to ensure an adequate money supply to sustain and expand an economy and to manage or limit the effects of recessions and inflation. These "standard" supply, demand, and risk management tools keep market interest rates and inflation at specified target values by balancing the banking system's supply of money against the demands of the aggregate market. Monetary base Monetary policy can be implemented by changing the size of the monetary base. Central banks use open market operations to change the monetary base. The central bank buys or sells reserve assets (usually financial instruments such as bonds) in exchange for money on deposit at the central bank. Those deposits are convertible to currency. Together such currency and deposits constitute the monetary base which is the general liabilities of the central bank in its own monetary unit. Usually other banks can use base money as a fractional reserve and expand the circulat ing money supply by a larger amount. Reserve requirements The monetary authority exerts regulatory control over banks. Monetary policy can be implemented by changing the proportion of total assets that banks must hold in reserve with the central bank. Banks only maintain a small portion of their assets as cash available for immediate withdrawal; the rest is invested in illiquid asset s like mortgages and loans. By changing the proportion of total assets to be held as liquid cash, the Federal Reserve changes the availability of loanable funds. This acts as a change in the money supply. Central banks typically do not change the reserve requirements often as it can create volatile changes in the money supply and may disrupt the banking system. Discount window lending Main article: Discount window Central banks normally offer a discount window, where commercial banks and other depository institutions are able to borrow reserves from the Central Bank to meet temporary shortages of liquidity caused by internal or external disruptions. This creates a stable financial environment where savings and investment can occur, allowing for the growth of the economy as a whole. The interest rate charged (called the 'discount rate') is usually set below short term interbank market rates. Accessing the discount window allows institutions to vary credit conditions (i.e., the amount of money they have to loan out), thereby affecting the money supply. Through the discount window, the central bank can affect the economic environment, and thus unemployment and economic growth. Interest rates Main article: Interest rate The contraction of the monetary supply can be achieved indirectly by increasing the nominal interest rates. Monetary authorities in different nations have differing levels of control of economy-wide interest rates. In the United States, the Federal Reserve can set the discount rate, as well as achieve the desired Federal funds rate by open market operations. This rate has significant effect on other market interest rates, but there is no perfect relationship. In the United States open market operations are a relatively small part of the total volume in the bond market. One cannot set independent targets for both the monetary base and the interest rate because they are both modified by a single tool open market operations; one must choose which one to control. A meta-analysis of 70 empirical studies on monetary transmission finds that a one-percentage-point increase in the interest rate typically leads to a 0.3% decrease in prices with the maximum effect occurring between 6 and 12 months.[43] In other nations, the monetary authority may be able to mandate specific interest rates on loans, savings accounts or other financial assets. By raising the interest rate(s) under its control, a monetary authority can contract the money supply, because higher interest rates encourage savings and discourage borrowing. Both of these effects reduce the size of the money supply. Currency board Main article: currency board A currency board is a monetary arrangement that pegs the monetary base of one country to another, the anchor nation. As such, it essentially operates as a hard fixed exchange rate, whereby local currency in circulation is backed by foreign currency from the anchor nation at a fixed rate. Thus, to grow the local monetary base an equivalent amount of foreign currency must be held in reserves with the currency board. This limits the possibility for the local monetary authority to inflate or pursue other objectives. The principal rationales behind a currency board are threefold: To import monetary credibility of the anchor nation; To maintain a fixed exchange rate with the anchor nation; To establish credibility with the exchange rate (the currency board arrangement is the hardest form of fixed exchange rates outside of dollarization). In theory, it is possible that a country may peg the local currency to more than one foreign currency; although, in practice this has never happened (and it would be a more complicated to run than a simple single-currency currency board). A gold standard is a special case of a currency board where the value of the national currency is linked to the value of gold instead of a foreign currency. The currency board in question will no longer issue fiat money but instead will only issue a set number of units of local currency for each unit of foreign currency it has in its vault. The surplus on the balance of payments of that country is reflected by higher deposits local banks hold at the central bank as well as (initially) higher deposits of the (net) exporting firms at their local banks. The growth of the domestic money supply can now be coupled to the additional deposits of the banks at the central bank that equals additional hard foreign exchange reserves in the hands of the central bank. The virtue of this system is that questions of currency stability no longer apply. The drawbacks are that the country no longer has the ability to set monetary policy according to other domestic considerations, and that the fixed exchange rate will, to a large extent, also fix a country's terms of trade, irrespective of economic differences between it and its trading partners. Hong Kong operates a currency board, as does Bulgaria. Estonia established a currency board pegged to the Deutschmark in 1992 after gaining independence, and this policy is seen as a mainstay of that country's subsequent economic success (see Economy of Estonia for a detailed description of the Estonian currency board). Argentina abandoned its currency board in January 2002 after a severe recession. This emphasized the fact that currency boards are not irrevocable, and hence may be abandoned in the face of speculation by foreign exchange traders. Following the signing of the Dayton Peace Agreement in 1995, Bosnia and Herzegovina established a currency board pegged to the Deutschmark (since 2002 replaced by the Euro). Currency boards have advantages for small, open economies that would find independent monetary policy difficult to sustain. They can also form a credible commitment to low inflation. Unconventional monetary policy at the zero bound Other forms of monetary policy, particularly used when interest rates are at or near 0% and there are concerns about deflation or deflation is occurring, are referred to as unconventional monetary policy. These include credit easing, quantitative easing, and signaling. In credit easing, a central bank purchases private sector assets, in order to improve liquidity and improve access to credit. Signaling can be used to lower market expectations for future interest rates. For example, during the credit crisis of 2008, the US Federal Reserve indicated rates would be low for an extended period, and the Bank of Canada made a conditional commitment to keep rates at the lower bound of 25 basis points (0.25%) until the end of the second quarter of 2010. See also Interaction between monetary and fiscal policies Interest on excess reserves Macroeconomic model Monetary conditions index Monetary reform Negative interest on excess reserves US specific: Greenspan put