Key Features of Capitalism
Key features of capitalism
A study of capitalism reveals the following key features:
1. Private Property and Inheritance. The most important feature of capitalism is the existence of private property and the system of inheritance.
2. Private Ownership and Management of Means of Production. Allied with this feature is another, viz., that instruments of production are owned by private individuals and they are managed by the owners exclusively for their own benefit. Thus, private individuals are the owners of farms and factories. They carry on the business of agriculture, trade and industry for their own personal profit and not for the benefit of the society. The result is that the lion's share of the national dividend goes to the powerful capitalist and the rich landlord. The masses are exploited and do not get a fair return on their labor.
3. Class-Conflict. From this arises another feature of the capitalistic economic order, viz., that there is class-conflict. The society is divided into two classes, the "haves" and the "have-nots" which are constantly at war with each other. There is the conflict of labor and capital going on in all capitalistic countries, and there seems to be no near solution of this problem. One regards the other as its natural enemy. It seems this class-conflict is inherent in capitalism.
4. Economic Freedom. Another outstanding feature of capitalism is economic freedom. This freedom means three objects: (a) Freedom of contract, (b) freedom of enterprise, and (c) freedom to use one's property.
Actually, however, there is no absolute freedom in these respects. In the interest of general welfare, certain restrictions are imposed by all States on individual rights. Freedom to choose one's occupation is only in name. Family influence, the resources of an individual, prejudices, and other social restrictions stand in the way of a person choosing the occupation that he likes. The result is that only poorly-paid occupations are open to the poor.
5. Un-Coordinated. A very remarkable feature of capitalism is its uncoordinated nature. There is no direction or central rules of financial movement. All appears to go on mechanically. Production is conducted as a result of the decisions of numberless isolated entrepreneurs. It is also at the same time influenced by the vast army of individual consumers who make their decisions without consulting one another.
The consumer is the king. It is consumers' preferences (or aversions) which finally decide what should be produced and what should not be produced. They furnish the demand side and the un-coordinated activities of the producers the supply side.
6. Importance of the Price System. Another noteworthy feature of capitalism is the important role that price mechanism plays in its working. All the central decisions of the economy like what to produce and how much to produce are arrived at through the price mechanism. In this way, the system works automatically without any central direction or control. This is why capitalist system has been described as "government by price."
7. Dominant Role of the Entrepreneur. A prominent feature of capitalism is the vital role which the entrepreneur plays under this system. The whole industrious machinery of the nation is under his guidance. It is he who employs the supplementary features of production and agrees to disburse them. He is the sole agent of the community in the matter of production. It is difficult to see how the present system can work at all in the absence of the entrepreneur.