Capitalism and its Characteristics

Presented to: - Ms. Bettina

By: - Obaid Hasan (9428)

What is Capitalism?
An economy in which the means of production are owned and controlled by the private corporations and government has no interference except taxation.

In other words a free market economy or a free enterprise

Considerable Economic Freedom

No govt interference in private affairs

Capitalism

No Central Coordinator

Mkt Value dictated by: -

1. Demand of the product by the consumer

2. cost of the manufactured product 3. The profit to the seller

Adam Smith
The father of Capitalism

Brief History and Work

The first theorist of capitalism His 1776 work, Wealth of Nations He theorized that within a given stable system of commerce and evaluation, individuals would respond to the incentive of earning more by specializing their production. Smith asserts that when individuals make a trade they value what they are purchasing more than they value what they are giving in exchange for a commodity. This notion underlies the concept of mutually-beneficial trade where it is held that both sides tend to benefit by an exchange. Adam Smith himself never used the term "capitalism". He described his own preferred economic system as "the system of natural liberty.

Theory of Invisible Hand

"Every individual neither intends to promote the

public interest, nor knows how much he is promoting it ... He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it.

Thus, the invisible hand is essentially a natural phenomenon that guides free markets and capitalism through competition for scarce resources.

Basic characteristics described by Adam Smith

1. Private property-the right to own resources and bequeath property

2. Freedom of enterprise-own a business 3. Freedom of economic choice-work/not work, spend/not spend 4. Role of self-interest a. People are by nature economic creatures b. Self-interest is a fundamental characteristics of people 5. Competitive market system a. Many buyers and sellers b. Market participants, have little control over price c. Competition performs the organizing and controlling functions for a market economy

Main features/characteristics of Capitalism

It is an economic system in which each individual in his capacity as a consumer, producer and resource owner is engaged in economic activity with a great degree of economic freedom.

The factors of production are privately owned and managed by individuals.

The main motive behind the working of the capitalist system is the profit motive. The entrepreneurs initiate production with a view to maximize profits.

Capitalist economy is not planned, controlled or regulated by the government. In this system, economic decisions and activities are guided by price mechanism which operates automatically without any direction and control by the central authorities.

Competition is the most important feature of the capitalist economy. It means the existence of large number of buyers and sellers in the market who are motivated by their self-interest but cannot influence market decisions by their individual actions.

Under capitalist economy few people have control and therefore they are rich while others are not rich and therefore there are inequalities in capitalist economy.

Under capitalist economy people have the freedom to spend their income in the way they want and producers of goods and services tend to produce those goods and services which are demanded by the consumers

To sum up: 1.
2. 3. 4. 5.

6.
7.

Economic freedom Privately owned Profit Motive Not planned by govt Competition Inequalities Freedom to spend

Modern Capitalism has additional features

1.

Complex Market System Setting Prices

Importance of Capital Goods and Technology Specialized: -

2.

3.

a. Complexity requires company produce limit their product line b. Division of Labour allows specialization by ability ad training.

Capitalism

Pros
1.

Anyone can start a business

Market forces shapes products and services Decentralized system is more stable and dynamic Forces innovation to cut cost and improve products

2.

3.

4.

Cons
1.

Unfair labor practices Unsafe working conditions Poor environmental controls Monopolistic tactics A big bully with deep pockets Disparity in wealth

2.

3.

4.

5.

6.

Capitalism and Religion

Is it so???

CAPITALISM The New Religion

Today its all about making money. Pure capitalism and pure greed to the extreme is the religion being followed.
Capitalism has evolved into something else, that many consider a real monster and threat to humanity. I believe It is our new religion, it is all that we believe in. It is our way to freedom, our chance to succeed beyond measure at becoming filthy rich and powerful, no matter what our background, our education, our social class is.

Capitalism means starting your own business and building it until it becomes a huge corporation employing thousands of people worldwide in some sort of wonderful perfect globalised world.
Perhaps capitalism should never have been applied in certain areas of our society. We live in a society highly materialistic in nature, where your only goal in life is to acquire as many possessions and assets as you can, as it is how you will be judged and respected in society.

Modern Capitalism

Conclusion
History tells us that economic systems taken individually, do not work and lead to abuse and unhappiness. Driving a system to any sort of extreme is our only problem. Extremes have always been our downfall. A mixture of everything is best. That might bring the sort of freedom and happiness

Thankyou