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Capitalism may be defined as an economic system in which private persons are permitted (under regulations laid down by the State) to undertake enterprises, providing or borrowing the necessary capital, taking the profits, if any, after all the cost of the enterprise have been met. It must be noted that even in capitalist systems, the need for government regulation and intervention in the economy has been recognised. Government today regulates the trading practices of private companies so that they do not become monopolies and hold society to ransom.

Although private ownership is the rule, it should be noted that in modern capitalist societies, the government or the State has intervened in the economy to protect the weaker members of the society. Laws on minimum wage are commonplace in capitalist systems. Government provides certain welfare services to those who otherwise will go without. Such services include social security, unemployment, insurance, medical aid, food coupons for poor people, etc.. All these are intended to reduce the harsh effects of the free market economy and bring the economy under greater governmental control. In short, capitalist economies are today becoming what we can call welfare economies and government involvement in the economy is increasing gradually.

Essential Features

1. Demand and Supply Force
The first principle of this economic system is demand and supply. This simply refers to the fact that the forces of demand and supply should on their own bring about equilibrium and not forced by the government. Only individuals should engage in the production and distribution of scarce commodities.

2. Monopoly of Production
The idea of monopoly of production is one of the essentials of capitalism where individuals are given a free hand to produce their goods as best as possible. The survival of the fittest rule applies here.

3. Taxation
Individuals who make profit or who engage in wage labour should pay tax proportionate to the level of their income to the government. These taxes should be used for welfare purposes like education. Government should stay clear of all forms of commercial engagement.

4. Salaries and Wages
Individuals should be paid salaries/wages based on their proportional competence and any services they can render within the limit of commercial practices. This practice divided the society into the proletariats and the Bourgeoisie.

5. Access to Market
All process resulting from this is an important feature for capitalism to survive. Therefore production and commercial activities need to be marketed. The market depends upon production and because of this idea, capitalism in the 18th and 19th centuries had no other resource than to reach out to the third world and thus imperialise.