MODERN CAPITALISM

 

MODERN CAPITALISM

 1. Introduction of Capitalism:                          

                                                                  The mixture of free economic system and socialism is called "Mixed Economy", it is also known as “capitalism" Except China, USSR and East Europe it is functioning almost in all the countries of the rest of the world. Under this system people have the right of private ownership and economic freedom Common man can use land, capital and the resources as he wants. But some resources and factories are in govt.  Custody and some affairs are run by the govt. herself moreover; govt. tries to stabilize economy through its fiscal and monetary policies. Some common features of mixed economy are as under.

 2. Features of Capitalism:

1) Private Property Ownership:

                                                                       In this system, resources like land, capital, machines, factories etc. are owned by private community and they can freely use these resources to generate profit. They have the right to buy or keep the property or sell it. They can give it to anybody as a gift but the govt. provides security and protection for these resources. Govt. as in Pakistan also owns several resources and properties, some factories and the govt. owns land similarly, many buildings, roads, dams, rivers are also owned by govt.

 2) Economic Freedom:

                                                  In capitalism, people have economic freedom in different forms; such as, they can independently and freely carry out business activities. They can freely choose business or profession. Government does not have any objection in this regard. But they cannot involve themselves in illegal or unethical activities. We must keep it in mind that in order to provide maximum benefits; govt. also frames some rules and regulations. For example, govt. does not allow hoarding and smuggling, or allow anybody to utilize his property in a manner which can badly affect any other person.

 3) Wage System:

                                          In capitalism workers work according to fix wages. They work on machines and equipment provided by the capitalists but in several cases, they use their own tools and equipment, like a shoe maker or a woodcutter. As big capitalists own the factories and machines so the workers work according to specified fixed wages.

 4) Consumers Sovereignty:

                                                              IN this system, consumers can freely choose the product of their own choice and the producers produce the goods which consumers want to buy. A farmer grows the crops which are demanded by the consumer and an exporter exports the products have more demand in foreign markets. But govt. also restricts and imposes some regulations w.r.t. some products such as alcohol, drugs and other illegal things. Different consumer's choice can also be changed by different forms of advertisements but several products remain in their specified shapes and forms, consumer cannot change it e.g. Panasonic TV set or a singer sewing machine etc.

 5) Price Mechanism:

                                                Under this system, the prices are fixed by the interaction of demand and supply and it plays a vital role in resolving different economic issues, such as: the allocation of resources, investment direction and distribution of national income etc.

6) Competition and Unity:

                                                           One of the beauties of this system is that two opposite forces work side by side. It means that the competition and unity both are practiced together. For example, different companies compete in the selling of product and in hiring employees, workers employment but they are united in order to fight for their demands and rights. Workers also form labor unions to strengthen themselves.

7) Divisions of Labor:

                                                 In capitalism, the production process is carried out under the principle of division of labor. Though this principle is applicable in every system but in this system the division is made by one's own choice. Different people become experts in different fields and they spend their income on the products and commodities of their own choice. It gives rise to the “Market Mechanism”.

8) Gap between Rich and Poor:

                                                                        As the businesses are owned by the private sector in capitalism so, the capitalists enjoy high income and on the other hand a common man hardly finds any mean to increase his income. Therefore, it creates a gap between the rich and poor.

 9) Limited Role of the Government:

                                                                                       In capitalism, the economic activities are not totally controlled by the government. Though the government is responsible to provide security and protection and maintain peace, law and order. For rapid economic growth, she also frames different policies but its role remains very limited especially as compared to socialism.

 10) Business Fluctuations:

                                                               Business fluctuations are very common in this system. Sometimes the economy is in depression phase. It results in low economic activities, trade volume decrease which ultimately increases unemployment. Whereas, sometimes the economic activities increase resulting an increase in trade volume and business activities which become responsible for high rate inflation .