Capitalism
or free-market economy free-enterprise system
Economic system in which most of the means of production are privately owned, and production is guided and income distributed largely through the operation of markets.
Capitalism has been dominant in the Western world since the end of mercantilism. It was fostered by the Reformation, which sanctioned hard work and frugality, and by the rise of industry during the Industrial Revolution, especially the English textile industry (16th–18th centuries).
Unlike earlier systems, capitalism used the excess of production over consumption to enlarge productive capacity rather than investing it in economically unproductive enterprises such as palaces or cathedrals.
The strong national states of the mercantilist era provided the social conditions, such as uniform monetary systems and legal codes, necessary for the rise of capitalism.
The ideology of classical capitalism was expressed in Adam Smith's Wealth of Nations (1776), and Smith's free-market theories were widely adopted in the 19th century.
In the 20th century the Great Depression effectively ended laissez-faire economics in most countries, but the demise of the state-run command economies of eastern Europe and the former Soviet Union (see communism) and the adoption of some free-market principles in China left capitalism unrivaled (if not untroubled) by the beginning of the 21st century.
Communism
Political theory advocating community ownership of all property, the benefits of which are to be shared by all according to the needs of each.
The theory was principally the work of Karl Marx and Friedrich Engels.
Their Communist Manifesto (1848) further specified a “dictatorship of the proletariat,” a transitional stage Marx called socialism; communism was the final stage in which not only class division but even the organized state—seen by Marx as inevitably an instrument of oppression—would be transcended (see Marxism).
That distinction was soon lost, and “communist” began to apply to a specific party rather than a final goal. Vladimir Ilich Lenin maintained that the proletariat needed professional revolutionaries to guide it (see Leninism).
Joseph Stalin's version of communism (see Stalinism) was synonymous to many with totalitarianism. Mao Zedong mobilized peasants rather than an urban proletariat in China's communist revolution (see Maoism). European communism (see Eurocommunism) lost most of its following with the collapse of the Soviet Union (1991). See also Communist Party, dialectical materialism, First International, Second International.
Laissez-faire
French“allow to do”
Policy dictating a minimum of governmental interference in the economic affairs of individuals and society.
It was promoted by the physiocrats and strongly supported by Adam Smith and John Stuart Mill.
Widely accepted in the 19th century, laissez-faire assumed that the individual who pursues his own desires contributes most successfully to society as a whole.
The function of the state is to maintain order and avoid interfering with individual initiative. The popularity of the laissez-faire doctrine waned in the late 19th century, when it proved inadequate to deal with the social and economic problems caused by industrialization. See also classical economics.
Industrialization
Process of converting to a socioeconomic order in which industry is dominant.
The changes that took place in Britain during the Industrial Revolution of the late 18th and 19th century led the way for the early industrializing nations of western Europe and North America.
Industrialization entailed both technology and profound social developments. The freeing of labourers from feudal and customary obligations created a free market in labour, with a pivotal role for the entrepreneur.
Cities attracted large numbers of people, massing workers in new industrial towns and factories.
Later industrializers attempted to manipulate some of the elements: the Soviet Union eliminated the entrepreneur; Japan stimulated and sustained the entrepreneur's role; Denmark and New Zealand industrialized primarily by commercializing and mechanizing agriculture.
Mercantilism
Economic theory and policy influential in Europe from the 16th to the 18th century that called for government regulation of a nation's economy in order to increase its power at the expense of rival nations.
Though the theory existed earlier, the term was not coined until the 18th century; it was given currency by Adam Smith in his Wealth of Nations (1776).
Mercantilism's emphasis on the importance of gold and silver holdings as a sign of a nation's wealth and power led to policies designed to obtain precious metals through trade by ensuring “favourable” trade balances (see balance of trade), meaning an excess of exports over imports, especially if a nation did not possess mines or have access to them.
In a favourable trade balance, payments for the goods or services had to be made with gold or silver. Colonial possessions were to serve as markets for exports and as suppliers of raw materials to the mother country, a policy that created conflict between the European colonial powers and their colonies, in particular fanning resentment of Britain in the North American colonies and helping bring about the American Revolution. Mercantilism favoured a large population to supply labourers, purchasers of goods, and soldiers.
Thrift and saving were emphasized as virtues because they made possible the creation of capital. Mercantilism provided a favourable climate for the early development of capitalism but was later severely criticized, especially by advocates of laissez-faire, who argued that all trade was beneficial and that strict government controls were counterproductive.
Socialism
System of social organization in which private property and the distribution of income are subject to social control; also, the political movements aimed at putting that system into practice.
Because “social control” may be interpreted in widely diverging ways, socialism ranges from statist to libertarian, from Marxist to liberal. The term was first used to describe the doctrines of Charles Fourier, Henri de Saint-Simon, and Robert Owen, who emphasized noncoercive communities of people working noncompetitively for the spiritual and physical well-being of all (see utopian socialism).
Karl Marx and Friedrich Engels, seeing socialism as a transition state between capitalism and communism, appropriated what they found useful in socialist movements to develop their “scientific socialism.
” In the 20th century, the Soviet Union was the principal model of strictly centralized socialism, while Sweden and Denmark were well-known for their noncommunist socialism. See also collectivism, communitarianism, social democracy.
