Having an understanding of capitalism is the most important thing in today's world. It shapes everything from business to pop-culture. This article serves as a very brief introduction to the essence of capitalism and how it works.
So let's do it, everything you need to know about the history of capitalism in a few dot points.
What is capitalism?
- Capital is money, or anything that can easily be turned into money.
- The goal of capitalism is to increase your capital (profit).
- Capitalism does this in three ways.
Three ways to grow capital:
- Trade – buying goods cheaper in one market, to sell in another.
- Production – using the capital to buy goods which are processed and sold for a profit.
- Speculation – buying goods that you think will be worth more in the future.
Then hasn't capitalism been around forever?
- Trade, yes.
- Capitalism, no.
- Profit through capitalist production is the distinctive feature of capitalism.
The crux of capitalism
- Capitalists are the people who have capital (money) and own the means to production (knowledge and tools).
- Labour is needed to processes goods to increase their market value.
- Workers sell their labour power to the capitalist (wage-labourers).
- Capitalists buy goods from the market and labour power from the workers.
- Capitalists sell the processed goods on the market for a profit.
- Profit = Capital + Labour
- The profit motive is the underlying motivator of capitalism (people like profit).
- Wage-labourers are fundamental to capitalism as they are the buyers of goods.
- Maximising efficiency underpins capitalism: increased production efficiency = increased profits.
- Centralisation, mass production, management, technology, and exploitation are ways to increase efficiency.
- Management is about organising the production process in the most efficient way.
- Economies of scale says that when you produce things in bulk, you gain efficiency.
There you have it the crux of capitalism in 40 seconds.
Still interested? Here are some related reads:
- A very brief history of capitalism – to get an understanding of when and how things developed.
- Effects of Capitalist Production – to get an idea of what this means for people.