In 40 Seconds: Capitalism

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.

Underlying principles

  • 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.

sebastiankade

Sebastian Kade, Founder of Sumry and Author of Living Happiness, is a software designer and full-stack engineer. He writes thought-provoking articles every now and then on sebastiankade.com

2 Comments

  1. Hey Sebastian

    I like this style of post as a short series of dot points summarising where you’ve got to on a particular topic.

    I think in this article you miss something really fundamental with capitalism however. If trade has been around always, why did capitalism develop? I think the drive behind the birth of capitalism is not just the ‘profit’ motive, but the fact that a) money as a medium of exchange is alot more effective than barter and b) that capitalism recognises that the best way to satisfy collective needs is to satisfy individual needs.

    • Thanks Ro 🙂 I have a few more of these ones coming.
      a) Hmm money was around long before capitalism, even in feudal times. However, the use of wage-labour as a means of producing goods to accumulate capital was not around then
      b) Haha that’s a very optimistic view. I’ve just finished Labour and Monopoly, a 500 page book on the effects of capitalism on human labour. In my current mindset it feels hard to agree that capitalism aims to fulfil human needs. I think the best you can say is: capitalism is an efficiency-maximiser for producing goods (and services) at the lowest possible price.

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