Define capitalism, and describe the four distinct features of "ideal" capitalism

Question

What will be an ideal response?

Answer 1

Capitalism is an economic system characterized by private ownership of the means of

production, from which personal profits can be derived through market competition and

without government intervention. "Ideal" capitalism has four distinctive features: (1)

Private ownership of the means of production—capitalist economies are based on the

right of individuals to own income-producing property, such as land, water, mines, and

factories, and the right to "buy" people's labor. In early monopoly capitalism (1890–

1940), most ownership shifted from individuals to huge corporations—organizations that

have legal powers, such as the ability to enter into contracts and buy and sell property,

separate from their individual owners. In advanced monopoly capitalism (1940–

present), ownership and control of major industrial and business sectors have become

increasingly concentrated and many corporations have become more global in scope.

(2) Pursuit of personal profit—a tenet of capitalism is the belief that people are free to

maximize their individual gain through personal profit. In early monopoly capitalism,

some stockholders derived massive profits from companies that held near monopolies

on specific goods and services (such as American Tobacco Company). In advanced

(late) monopoly capitalism, profits have become even more concentrated (such as Nike

or Dell). (3) In theory, competition acts as a balance to excessive profits. When

producers vie with one another for customers, they must be able to offer innovative

goods and services at competitive prices. In early monopoly capitalism, competition

was diminished by increasing concentration within a particular industry (such as

Standard Oil Company). An oligopoly exists when several companies overwhelmingly

control an entire industry (such as the music industry). A shared monopoly exists when

four or fewer companies supply 50 percent or more of a particular market (such the

"Big Three" U.S. automobile manufacturers). Corporations with control both within

and across industries are often formed by a series of mergers and acquisitions across

industries. These corporations are referred to as conglomerates—combinations of

businesses in different commercial areas, all of which are owned by one holding

company (such as Time Warner). Competition is also reduced over the long run by

interlocking corporate directorates—members of the board of directors of one

corporation who also sit on the board(s) of other corporations. (4) Ideally, capitalism

works best without government intervention in the marketplace. Overall, most

corporations have gained much more than they have lost as a result of government

involvement in the economy.