Capitalism can be defined as an economic system in which the means of production, exchange and distribution of goods and services are in the hands of private persons, providing or borrowing the necessary capital and taking the profits after all the costs of the production have been met. However, it should be noted that government’s participation in production is very low in capitalist economy. Private individuals have an edge over the government in this area. U.S.A. is a good example of a capitalist economy.
Features of Capitalism
- Consumer sovereignty: Choices are made by the people; they decide how to spend their money.
- Production: What to be produced is based on consumers’ choice.
- Ownership of means of production: Means of production of goods and services, distribution and exchange are in the hands of private individuals.
- Competitive market: It operates a competitive market, where individuals try to out-rival others.
- Government participation: Government participation is very low in capitalist economy.
- Profit: The basic motive in production is profit-making.
- Specialization: It is a highly specialised system coupled with a high degree of efficiency. It has highly developed occupational specialization.
- Sourcing for capital: Individuals can borrow or provide the necessary capital themselves for production.
- Demand and Supply: The economy is subject to the market forces of demand and supply.
- Labour: Labour is marketable commodity in capitalist economy.
- Many Producers: There are many producers as well as buyers.
- Class War: The order of the day in a capitalist economy is the existence of class war between the bourgeoisie and the proletariat.
- Rule of Law: There is also the existence of the principle of liberty and the rule of law.
Advantages of Capitalism
- Competition: The system is open and it encourages competition. Effort is geared towards having the best for the consumers.
- Specialization: There is specialization and hardwork in the system.
- Choice: The people have a choice to make in almost everything needed or demanded.
- Economic development: Economic development is rapid because the system is all-embracing.
- Initiatives: Initiatives are encouraged; they are supported and not killed.
- Economic/political growth: The people can contribute to the political and economic growth of the system.
- Democratic in nature: Capitalism is democratic. Individuals are free to pursue any goal or to go into production without any hindrance.
Disadvantages of Capitalism
- Exploitation: The system is outrightly exploitative. For example, some companies exploit their employees by paying them peanuts even when they are making enough profits.
- Profiteering: Producers make excessive profits to the detriment of the consumers.
- Inequality: There is political and economic inequality in the system. The gap between the rich and the poor is very wide.
- Unemployment: There is large scale unemployment in the system. The few available jobs created cannot go round the large number of job seekers.
- Rivalry: There is an unhealthy rivalry among producers of different or same products in a capitalist system.
- Crime: Unemployment can make people go into crime, e.g. smuggling, 419(Advance Fee Fraud).
- Wage-slave: Capitalism makes a worker a ‘wageslave’. His ability to express himself in his work is absent.
- Income distribution: Income is not justifiably distributed in a capitalist system.
- Price system: The price system does not respond to the real needs of the community but to the demands of those who have money to spend.
- Insecurity: Capitalism introduces and produces insecurity, for example, the lives of some rich people are not secure.
- Strike: It is a system where the employers and the employed are constantly at each other’s throat. Sometimes it degenerates into workers going on strike as a result of this.
Capitalist Mode of Production
Two modes of production dominate the present world. They are the capitalist and the socialist method of production.
Africa’s integration into the mainstream of the world capitalist system through western colonialism and imperialism was eventful and had greatly influenced and re-shaped the economic and political development of contemporary Africa.
In capitalist mode of production, three major features are visible.
- Uneven distribution: The means of production are very unevenly distributed bringing a society divided into a small group of people that monopolized the means of production.
- The greater part of the population: They are without means of production, but their labour power.
- Commodity production: It gives capitalist society some of the characteristics of a market.
The basic relation of production in capitalist society is one of a few controlling the means of production and the many without means of production, but only their labour power.
This is a relation of gross inequality of subordination and domination even of exploitation and antagonism.
This relation to the means of production as owners and non-owners is called a class relation.
Those with no means of production constitute a class and those in control of the means of production, another class.
In this mode of production, the class of people who own and control the means of production are the bourgeoisie, while those without means of production, but have labour power, are the proletariat.
The concepts of Bourgeoisie and Proletariat.
In capitalist mode of production, the class of people who own and control means of production are the bourgeoisie. This class of people are few and they are equally referred to as the exploitative and oppressive class. He buys or hires the worker with the expectation that the value of the product of the employee’s labour power will be higher than what he pays for the labour power i.e his wage.
The surplus value is the difference between the exchange value of the proletariat’s labour power and the value of its products. This surplus . value (the profit) goes into the pocket of the members of the bourgeoisie.
He bargains with the proletariat to produce and after production, is paid less than what he produces resulting in exploitation.
It should be noted that all the capitalist’s profit or surplus value is solely created by the labour of the worker.
This is the class of people who do not have means of production. They are exploited workers in capitalist system and only earn their living through wage labour.
Similarly, they have no say in the area of decision -making of any organization.
He sells his labour power and lives by the permission of the bourgeois.
The surplus value which he produces goes into the pocket of the bourgeois and do not influence or bring about a positive change in his standard of living.
The bourgeoisie and proletariat are both socialist concepts.
The commodity production
One of the characteristics of the capitalist mode of production is commodity production. For a clear understanding of what this means, it is significant and useful to look at the word ‘capital’.
Capital is any value or economic asset which is used to generate more wealth or more appropriately, surplus value.
Capital is transformed into goods or services which are then sold “profitably”.
Capital has become the commodity produced. A commodity is a product made mainly for exchange i.e. buying and selling.