What Is Capitalism?

What is capitalism?

Well, the social system prevalent today in all countries of the world is how we define capitalism. It is based on the recognition of individual rights and property rights, in which all property is privately owned is. A small minority of people own the land, factories, technology, and transport system for producing and distributing goods. This group of people is referred to as the capitalist class. The working class forms the majority of people who sell their ability to work in return for a wage or salary. This is the meaning of capitalism.

Capitalism is a social system which ushers the era of political freedom, where the state is separated from economics. But the definition of capitalism does not end there. We need to go deeper in the subject to understand it completely. One needs to understand the class division and profit motive.

Class division

This class division is the important feature of capitalism. When we say there exist two classes in society, it is based upon simple facts about the society we live in today. The two classes defined here- the capitalist class and the working class are the key to understanding capitalism.

The working class is paid wages or salary by the capitalist class to produce goods and services which are then sold for a profit. The capitalist class makes profit by selling what the working class has produced as the cost of labour is cheap. In this sense, the working class is exploited by the capitalist class. The capitalists live off the profits they obtain from exploiting the working class whilst reinvesting some of their profits for the further accumulation of wealth.

The status of the vast majority of the world's population holds no ambiguity. The capitalist class certainly knows who they are and members of the working class know that in order to earn a living; they need to work for a wage or salary.

The profit motive

Definition of capitalism is incomplete without the explanation of the profit motive- the motive behind producing goods and services, that is, s to sell them for a profit. The products of capitalist production have to be sold with the only aim of making a profit. Production is not based on satisfying the needs of people but by what the capitalists calculate can be sold at a profit.

The fear of losing their investments and their position as capitalists imposes the need to make a profit on capitalists. It cannot be seen just the result of greed on behalf of individual capitalists as they don’t have a choice. Competition with other capitalists forces them to reinvest as much of their profits to keep the production up.

As you can see, in capitalism, the real needs come a poor second to the requirements of profit. The drive to make profit is at the root of most of the world's problems today.