Capitalism: Definitions and General Concepts

Define Capitalism, Definition For Capitalism

Today's capitalism evolved from capitalism in Western Europe before the industrial revolution, and then expanded slowly over the world. Capitalism is not only an economic system but also a social and political system. Capitalism functions very differently from previous economic systems in that the modes of production, which consists of forces of production and social relations of production, are entirely different. A mode of production is the social totality of the technology of production (the forces of production: technical knowledge, skills, organizational techniques, tools, machines) and the social arrangements. In a capitalist system, one-class uses these forces of production to produce all output including the surplus and another class appropriates the surplus (the social relations of production).


Capitalism is a particular mode of production that is characterized by four sets of institutional and behavioral arrangements:

1 Market oriented commodity production
2. Private ownership of the means of production
3. A large segment of population that cannot exist unless it sells its labor power in the market
4. Individualistic, acquisitive, maximizing behavior by most individuals
In capitalist system, products of human labor need to be usable and must also satisfy human needs. When a commodity is valued for its use in satisfying needs, it is said to have "use" value. Products of human labor have "exchange" value only in modes of production characterized by commodity production. Commodity production is a system where producers who have no immediate personal concern for the use value of the product are only interested in the exchange value products offer. This implies that commodity production is not a direct means of satisfying needs but it is a means of acquiring money by exchanging the product for money, which in turn may be used to acquire products desired for their use value. In this type of economy, commodity production excludes the interaction of producers to products leaving each individual to depend on the impersonal forces of the market for the satisfaction of needs.

Private ownership of the means of production excludes the use of rights of other people on the means of production. One of the main themes of capitalism is the concentration of capital in the hands of the small segment of society, capitalists. The owners need not to play direct role in the actual process of production since the ownership itself grants control. It is the ownership that permits capitalists to appropriate the social surplus. Therefore, the ownership of the means of production bestows the power on the capitalist class and makes them the dominant class.

The working class has no control over the means of production in capitalism. Most workers do not own raw materials and other implements with which to produce commodities. Accordingly, they cannot claim right to the commodities they produce. Instead, they only receive wages in return for their efforts and the sale of their labor power. Workers can buy a portion of commodities they produce, but capitalists retain the remainder of commodities.

The competitive struggle among capitalists to own larger shares of the social surplus is the result of the acquisitive, combative properties of capitalism. In this ceaseless struggle, the power of any capitalist depends on the amount of capital that the capitalist controls. The continuity or long-term existence of capitalism depends on the ability for capitalists to accumulate capital. Thus, the efforts of capitalists to make profits and convert these profits into more capital are the necessary conditions for capitalism's survival. Consumerism among capitalists is also important for the successful functioning of capitalism since workers' wages can usually be counted on to purchase only some portions of commodities.

Capitalists are therefore required to purchase many commodities as investments beyond their personal needs to add to their accumulation of capital by expending some of their using surplus values. Expenditures by capitalists on both consumer products and additional capital are necessary to assure adequate market demand sufficient to consistently sell off all inventories. If such demand does not exist, capitalism may experience what is known today as "business-cycles" or recessions and depressions resulting in a condition where commodities cannot be sold, profits decline, workers are laid off, and general economic crises occur.