capitalism mms

7/31/2019 Capitalism MMS

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Capitalism: Meaning

Capitalism is the social system which now exists

in all countries of the world. Under this system,

the means for production and distribution (theland, factories, technology, transport system etc)

are owned and controlled by small minority of

people. They are referred as the capitalist class.The majority of people sell their ability to work

in return for a wage or salary (who are referred

as the working class.)


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Capitalism is an economic system based on privateownership of the means of production, in which personalprofit can be acquired through investment of capital andemployment of labor. Capitalism means free enterprisesystem, where government intervention in the economyshould be restricted and it believes that free market, basedon supply and demand, will ultimately maximize consumerwelfare. An economic system that features privateownership of the means of production (such as factories,offices, and shipping enterprises) and in which market

forces determine the way in which goods are produced andthe means by which income and profit are distributed iscalled capitalism. Other names for this system are freemarket economy and free enterprise


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Capitalism has existed in a limited form in the economiesof all civilizations, but its modern importance dates atleast from the Industrial Revolution that began in the18th century, when bankers, merchants, andindustrialiststhe bourgeoisiebegan to displacelandowners in political, economic, and socialimportance, particularly in Great Britain. Capitalismfavours freedom of individual economic enterprise;however, government action has been and is required tocurb its abuses, which have ranged from slavery

(particularly in Britain and the United States) andapartheid (in South Africa) to monopoly cartels andfinancial fraud.


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Co-existence of Capitalism:

state-sponsored rapid industrial growth of South Korea whileunder military dictatorship coexist with capitalism. China's

economy, in which small-scale capitalism is increasinglyallowed within a strictly Communist political framework.On the other hand, though the private production plays amajor role in the economies of Germany and Japan, bothnations have centrally planned industrial policies in which

bankers, industrialists, and labor unions meet and seek toagree to wage policies and interest rates; these countriesreject the idea of letting the market wholly determine theeconomy.


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Crony Capitalism:

A description of capitalist society as beingbased on the close relationships between

businessmen and the state. Instead of successbeing determined by a free market and therule of law, the success of a business isdependent on the favoritism that is shown

to it by the ruling government in the form oftax breaks, government grants and otherincentives.


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Freedom of Private property rights

Capitalism provides freedom of propertyrights to the property owners andliberty to sell their property inaccordance to their own valuation ofthat property; if there are no willingbuyers at their offered price they havethe freedom to retain it.


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Free market : Under capitalism price of goods andservices is influenced by the forces of their demandand supply.

Freedom of Competition: Capitalist economies typicallycontain numerous companies, and people are free toenter into many different types of arrangement witheach other. There are technological changes, newdiscoveries and other developments undertaken by

companies and individuals. In this way the economy'scontrol mechanisms is characterised by a kind of"survival of the fittest.


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Freedom of Profit: Entrepreneurs are given

freedom of profit.

Economic Freedom: Freedom of production,

consumption, distribution and exchange.

Distribution of income and wealth: Always

concentrated in the hands of few.

Economic growth: Under capitalism economic

growth is faster.


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Capitalism in India: Today, India is showing

sign of a full-fledged capitalist economy.

Planned Capitalist development in India isresponsible for its technological and economic

progress. The Indian capitalist class supported

planning and the leadership of public sector in

basic industries and infrastructure to advance

their class interests. This is because of the

fact that when India became an independent

country capitalist class had no economicresources and the requisite technological base

to develop basic industries and infrastructure.


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According to G.D. Birla, when new public sector undertakings are set up there is

tremendous push to the private sector. He was very true as Per the report of Cent

Statistical Organization, 1994.

Source: Central Statistical OrganisationSector Total Public sector(%) Private (%)

Mining and quarrying 3,419 97.6 2.4

Manufacturing 37,690 14 86

Electricity, Gas etc. 2,305 97.7 2.3

Construction 9,104 21 79

Trade and hotels 25,887 3 97

Transport,

communication

7,906 37.4 62.6

Finance, insurance etc. 21,515 49.4 50.6


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Concentration of Private Wealth

S.N. Name of the House 1963-64 1983-84 1994-95

1 Tatas 375 2,449 26,712

2 Birlas 283 2,252 20,391

3 Reliance ---- 360 11,529

4 Essar ---- --- 10,544

5 R.P.Goenka ---- ---- 6,556

6 J.K.Singhania 55 692 4,906

7 Thapar ---- ---- 6,5568 Larsen & Tobro 21 300 4,117

9 ITC ---- --- 3,250

10 Mafatlal 40 712 1,613

Value of Assets in crores

The dashes indicates that these industrial houses were no there among the top 10


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The new economic policy of 1991 based onliberalization, privatization and globalization ofIndian economy has widened the scope of private

sector operation as industries reserved for publicsector were reduced from 17 to 6. However,expansion of capitalism has following limitationsin the developing countries:

Investment in Non-priority sector: Throughoutthe planning era private sector mostly confineditself to producing all kinds of consumer goodsfrom perfumes and cosmetics to refrigerators andT.V. sets. These are quick profit yielding projects

with small investments. But these goods are meantfor elitist consumption . A large number of Indianpoor have no access to this market.

G h f M li Th h f i


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Growth of Monopolies: The growth of private sectorinevitably leads to the formation of monopolies andrestrictive trade practices, which harms the spread ofcapitalism to unexplored areas of trade and industry.

Inability to Compete: The monopolies of thedeveloping countries cannot compete withinternational monopolies specially multinationalcorporations of the developed capitalist countries.

Therefore, native monopolies have to compromisewith international monopoly capitalism.

Dependent development: Growth of developingcountries depends upon the foreign investments and

foreign capital . Investment in infrastructureprojects, Shopping malls, retail trade,communication, IT etc. by the foreigners in India isthe best example of this.


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Poverty:Concentration of wealth and assets in thehands of few leads to inequality of incomedistribution making poor worse and rich better off.

In India, the beneficiaries of globalization are mainlyeducated middle class and the rich class.

Unemployment: This is a characteristic feature ofcapitalist mode of production. Contrary to the

objectives of Indian planning, unemployment hasincreased mainly because of public investment incapital intensive heavy industries. Openunemployment has tripled from 1.6% to 4.48%.

Thousands of employees between 2000 and 2004were retrenched through V.R.S. and half a millionworkers lost their jobs because of the closure ofsmall scale industries due to the abolition ofreservations of products to small industry.


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Poverty: Still 60% of the population belongs toagricultural labour. Their employment isseasonal and in the normal monsoon they get

employment between 150 to 180 days in a year.Often they are not paid statutory minimumwages. In the wake of the industrialization ofthe country artisans like weavers, blacksmiths

etc. have lost their livelihood due tocompetition from factory and industry.Marginal and small farmers who are inmajority own uneconomic holdings and theircost of production has increased due toreduction or abolition of subsidies on farminputs. They are forced to accept wage-labourto supplement their income.


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Dominance of middle and upper class: In thesupport of the Indian Government for educationthe class interest of the government and

bureaucracy can be clearly seen. The level ofeducation which is most generously supported ishigher education rather than elementaryeducation. But it is generally the children of the

well-to-do who attend colleges and universities.Thus the support of higher education is, ineffect, a subsidy for the well-to-do families. It isa transfer of income from the poor to the middleand upper classes, the classes which dominatethe government and bureaucracy.


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Exploitation: Rich farmers and rich class of thesociety acquire more property by making profitsthrough the exploitation of the poor who are forced toseek wage-labour. Thus, the institution of privateproperty has led to accumulation of capital and wealthin the hands of few.

Inequality in wages and salaries: Income of thegraduates is six times that of the illilterate and three timesthat of the school educated. Although in India reservationsare provided to schedule castes and tribes, it is mostly thechildren of the urban based S.C. and S.T. professionalswho get admissions in the professional colleges. Themajority of the children of rural based schedule castes anddo not complete even primary education.

Thus, development and underdevelopment are caused bycapitalism. Due to profit motive investment are diverted toprofit oriented areas. As a result, some regions andsections of population remain backward and are exploited.


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Unequal distribution of benefits: The extremes of globalcapitalism are shocking.

While the economies of East Asia have achieved rapidgrowth, there has been little overall progress in much ofthe rest of the developing world. Income in LatinAmerica expanded by 75% during the 1960s and 1970swhile, average incomes in sub-Saharan Africa and theold Eastern bloc have actually contracted.

The World Bank figures the number of people living on $1a day increased, to 1.3 billion, over the past decade.

In combination with the industrial-licensing regime [thesmall company policyhas given India the worst of bothworlds: too many small and inefficient companies at thebottom, too many large and monopolistic ones at the top.

capitalism mms

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