Introduction

To simplify the perspective of Capitalism, It is private ownership of means of production. Capitalism is

often defined as an economic system where private actors are allowed to own and control the use of
property in accord with their own interests, and where the invisible hand of the pricing mechanism
coordinates supply and demand in markets in a way that is automatically in the best interests of society.
Government, in this perspective, is often described as responsible for peace, justice, and tolerable taxes.

It can be elaborated as a system of indirect governance for economic relationships, where all markets
exist within institutional frameworks that are provided by political authorities, i.e. governments. In this
second perspective capitalism is a three level system much like any organized sports. Markets occupy the
first level, where the competition takes place; the institutional foundations that underpin those markets
are the second; and the political authority that administers the system is the third. While markets do
indeed coordinate supply and demand with the help of the invisible hand in a short term, quasi-static
perspective, government coordinates the modernization of market frameworks in accord with changing
circumstances, including changing perceptions of societal costs and benefits.

History of Capitalism
Although the continuous development of capitalism as a system dates only from the 16th
century, antecedents of capitalist institutions existed in the ancient world, and flourishing pockets
of capitalism were present during the later European Middle Ages. The development of capitalism
was spearheaded by the growth of the English cloth industry during the 16th, 17th, and 18th
centuries. The feature of this development that distinguished capitalism from previous systems
was the use of the excess of production over consumption to enlarge productive capacity rather
than to invest in economically unproductive enterprises, such as pyramids and cathedrals. This
characteristic was encouraged by several historical events.
In the ethic fostered by the Protestant Reformation of the 16th century, traditional disdain for
acquisitive effort was diminished, while hard work and frugality were given a stronger religious
sanction. Economic inequality was justified on the grounds that the wealthy were more virtuous than
the poor.

Role of capitalism in modern economics

The features of capitalism today need to be located initially with respect to recent history. Since the
earliest days of industrialization in the nineteenth century, a revolutionary mode of work organization had
been evolving. By the 1940s, its principles had consolidated and spread. First, the labour process was
broken down into its component parts, each worker performing simplified routine tasks.
This “model of industrialization” had two additional principles: if work tasks were simplified, they could
be directly incorporated into special-purpose machines; in turn, these machines could make mass-
produced goods. The result of combining Taylorism and dedicated machines was large economies of scale
and vastly enhanced productivity. The logic of dividing mental and manual labour also expanded the
number of semi-skilled assembly-line workers and technical and administrative workers. Previously, craft
unions organizing workers on the basis of skill were common. Industrial unions, in contrast, gathered
workers together by industry irrespective of skill level. And “white-collar” workers tended to be unionized
mainly in the public sector. This division of labour also had a particular way of maintaining workers'
dependence on capitalists. With highly skilled workers in high demand and semi-skilled workers easily
able to move between production jobs, firms developed strong internal labour markets for promotion
and wage improvements in order to bind workers more tightly to the firm. The contractual core of the
new unionism involved trading wage gains against management control of production. Implicitly, the
nominal wages gained in collective bargaining were linked to the growth in productivity and the rate of
inflation. Workers’ demands often originated in a key firm and then spread to the entire branch of industry
before influencing the economy as a whole. As a result, wage security was developed as unions removed
the competitive process of bidding wages down and pushed instead in the direction of product and
process innovations. This revealed an underlying contradiction, however: the increasing capital intensity
undermined profitability and displaced workers in such a way that unemployment could be contained
only by rapid rates of growth. The postwar period is often referred to as the period of Fordism, so called
for both the underlying production paradigm and the dominance of large hierarchically organized firms
concentrated in a few major urban centres. This dominant paradigm also underlay postwar growth and
social structures. Mass production with rising wages meant mass consumption by workers. Although
international trade increased in importance, the expansion of production depended most on the
deepening of national markets.

Critical Analysis of capitalist system

A number of features of this new economy can be highlighted in terms of the labour process, forms of
accumulation and wage-relation, the organization of firms, the internationalization of capital, and the
policy regime. First, new forms of work organization and technologies have emerged within the labour
process. These new production concepts stem from two key developments: the transformations of fixed
capital in the labour process through new technologies and “robotization,” and the adoption of lean
production forms of work organization.

They can initially be contrasted with various aspects of Fordist labour processes; there has been a relative
increase in both more highly skilled and low-skilled workers as opposed to semi-skilled mass production
workers; an intensification of Taylorism to match the rhythms of new technologies for production and
service workers, and multi-skilling among technicians and pro- duction support workers; a recomposition
of the form in which work is con- ceived by designers and developers and executed by production workers;
a relative decline in individualized piece-work and an increase in team-work; and a shift from dedicated
machinery to flexible manufacturing systems.

The new economy, therefore, has involved both intensive and extensive forms of accumulation: the new
technologies have allowed a large increase in the capacity for a given amount of labour input to produce
increased output in any given labour process, but they have also intensified and increased the ex- traction
of labour-time for the amount of labour-power purchased. This can be seen in the labour processes of any
variety of occupations; in manufacturing work, robots limit any “down-time” for workers; personal
computers have ex- tended and intensified the work expectations and hours of lawyers and profes- sors;
and new technologies are used to monitor the work performance of all kinds of service-sector workers-
for example, tracking the keystrokes of call- centre employees, videotaping the work of hotel workers,
and so on

Conclusion

The idea of capitalism as an expression of economic freedom that also secures moral and
political freedom of thought, or the notion that “free-market” economies are guided by an impartial
mechanism of supply and demand – an “invisible hand” to use Adam Smith’s metaphor – are both
powerful indoctrinating notions. As such, they bear little resemblance to actual reality. Smith
himself never used the word “capitalism,” preferring to call his economics a “system of natural
liberty.” In fact, the inner logic of capitalism can be difficult to get hold of simply because there
have been different configurations of capitalism throughout history. In its classic form, before the
advent of corporations (when there was still an implicit sense of social responsibility, and
insatiable greed was considered a vice), capitalism might have appeared less virulent. Additionally,
there is reason to believe that capitalism unfolded differently in different countries with distinct
political and legal frameworks.