Here is a term paper on ‘Capitalism’ for class 8, 9, 10, 11 and 12. Find paragraphs, long and short term papers on ‘Capitalism’ especially written for school and college students.
Term Paper on Capitalism
Term Paper Contents:
- Term Paper on the Introduction to Capitalism
- Term Paper on the Definition and Origin of Capitalism
- Term Paper on the History of Capitalism
- Term Paper on the Types of Capitalism
- Term Paper on the Objections to Capitalism
- Term Paper on the Impacts of Capitalism
- Term Paper on the Criticisms of Capitalism
ADVERTISEMENTS:
Term Paper # 1. Introduction to Capitalism:
Capitalism is the economic and social system (and also the mode of production) in which the means of production are predominantly privately owned and operated for profit, and distribution and exchange is in a mainly market economy. It is usually considered to involve the right of individuals and corporations to trade (using money) in goods, services, labour and land.
Some form of capitalism has been dominant in the western world since the end of feudalism in the middle ages, and has provided the main, although not exclusive, means of industrialization throughout much of the world.
Its rise to prominence sprang out of the mercantilism of the 16th to the 18th Centuries, and followed the rise of liberalism and laissez-faire economics in western society. The capitalist mode of production, however, may exist within societies with differing state systems (e.g. liberal democracy, fascism) and different social structures.
ADVERTISEMENTS:
In Marxist terms, the owners of capital are the dominant capitalist class (or bourgeoisie), and the working class (or proletariat) who do not own capital must live by selling their labour power in exchange for a wage.
Thus, according to Karl Marx, capitalism is based on the exploitation of workers by the owners of capital, and under his theory of historical materialism, represents just one of the stages in the evolution of a society which would be overthrown as the workers gain class consciousness and take control over the state.
Term Paper # 2. Definition and Origin of Capitalism:
Capitalism is defined as an economic system characterized by private or corporate ownership of capital goods; by investments that are determined by private decision; and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.
ADVERTISEMENTS:
Adam Smith is often referred to as the ‘father of capitalism.’ He described a system in which an ‘invisible hand’ would maintain the market without government intervention. The government exists merely to protect individual rights, which according to Smith, also include the establishment of an ‘Army to protect against foreign invaders; a police force to protect against domestic criminals; and a court system to settle disputes that arise, enforce contracts, and punish criminals according to objectively predefined laws.’
Adam Smith’s criticism of the mercantile system in his ‘The wealth of nations’ of 1776 is often considered the beginning of classical political economy. Smith devised a set of concepts that remain strongly associated with Capitalism today, particularly his theory of the ‘invisible hand’ of the market, through which the pursuit of individual self- interest unintentionally produces a collective good for society. He criticized monopolies, tariffs, duties, and other state-enforced restrictions of his time, and he believed that the market is the most fair and efficient arbitrator of resources.
David Ricardo, one of the most influential economists of modern times, developed the law of comparative advantage (which explains how trade can benefit all parties involved as long as they produce goods with different relative costs) in his ‘The principles of political economy and taxation’ of 1817, which supports the economic case for free trade, a cornerstone of capitalist thinking.
He also argued that inflation is closely related to changes in quantity of money and credit, expanded on say’s law of full employment in a competitive economy, and described the law of diminishing returns (which states that each additional unit of input yields less and less additional output), all essential building blocks in the theory of Capitalism.
In the wake of industrialization, the repeal of restrictive laws, and the teachings of Smith and Ricardo, laissez-faire capitalism gained favour over mercantilism in Britain in the mid-19th century, and it embraced liberalism, competition and the development of a market economy, from where it rapidly spread throughout much of the western world.
In the late 19th century, the control and direction of large areas of industry came into the hands of financiers, and the processes of production became subordinated to the accumulation of money profits in a financial system (sometimes known as ‘finance capitalism’).
Late 19th and early 20th century capitalism was marked by the concentration of capital into large monopolistic or oligopolistic holdings by banks and financiers, and by the growth of large corporations.
During the late 19th and early 20th century, capitalism set itself in opposition to the rising tide of socialist, Marxist and communist thought, and to the whole concept of centrally-planned economies. But, by the end of the 19th century, economic depressions and ‘boom and bust’ business cycles had become a recurring problem.
In particular, the long depression of the 1870s and 1880s and the great depression of the 1930s affected almost the entire capitalist world. In response, the state began to play an increasingly prominent role in the capitalistic system throughout much of the world, exemplified by the new deal of American President Franklin D. Roosevelt (1882- 1945).
Mixed economies (containing both privately-owned and state-owned enterprises, and with a mix of market economy and planned economy characteristics) and the interventionist Keynesian economics of British economist John Maynard Keynes (1883-1946) became the norm.
After the long post-war boom, during which the Keynesian ‘state capitalism’ was in the ascendant, a new push towards laissez-faire capitalism and classical Liberalism was led by the economists Friedrich Hayek (1899-1992) and Milton Friedman (1912-2006), and championed by conservative leaders like Ronald Reagan and Margaret Thatcher in the 1970’s.
Term Paper # 3. History of Capitalism:
Although some features of capitalist organization existed in the ancient world (e.g. the early Roman’ empire, the medieval caliphate in the Middle East), capitalist economic practices became institutionalized in England between the 16th and 19th Centuries, and then spread throughout Europe and across political and cultural frontiers.
With the emergence of modern nation-states in the 16th to the 18th centuries, mercantilism (the economic theory that the prosperity of a nation depends upon its capital, or economic assets, as represented by gold and silver, and that the volume of the world economy and international trade is unchangeable, encouraging a protectionist role for government) became dominant in Europe.
The classical tradition in capitalist economic thought emerged in Britain in the late 18th century, with Adam Smith, David Ricardo (1772-1823) and John Stuart Mill, as well as with Jean-Baptiste say (1767-1832) in France. Important contributions to the theory of property are found in the earlier work of John Locke, who had argued that the right to private property is a natural right.
Term Paper # 4. Types of Capitalism:
There are basically four types of capitalism, which are listed below:
1. Market-led capitalism-—i.e., U.S., U.K.
2. Corporate capitalism—i.e., Japan, South Korea
3. Social-democratic capitalism—i.e., Scandivian, Austria
4. State-led capitalism—i.e., France, Germany
A brief on the above has been laid down in the following:
1. Market-Led Capitalism Positives:
a. Primacy of private markets
b. Insistence on well-defined private property rights
c. Entrepreneurship is celebrated Quick, radical innovation, especially in technology fields
d. Creative destruction
e. High-tech/sunrise and business services jobs
f. Deep, highly adaptive, sophisticated and financial markets
g. Very flexible labour markets
Negatives:
a. Highly politicezed, countervailing public bodies to curb private market excesses
b. Country largely inward looking
c. Highly selective nature of social benefits
d. Underinvestment in public infrastructure
e. Increasing social inequalities
f. Poor education, health and public safety systems
2. Corporate Capitalism Positives:
a. Dominated by large conglomerate firms
b. Mobility of capital, knowledge, competence, workers, managers
c. Markets are internal to the dominant firm
d. This leads to family coherence and to family in-breeding
e. Very good at imitation and catching-up, very efficient at co-ordination among suppliers and co-ordination and compliance with policy directions
f. Good education, health systems, strong social cohesion
Negatives:
a. Presence of large conglomerate firms forestalls innovation and market penetration by nimble small firms
b. Internal markets are substitutes for an external credit, goods and labour markets
c. Weak financial system because the financial sector is not sufficiently independent
d. Labour and financial markets do not adjust well to shocks
3. Social-Democratic Capitalism Positives:
a. negotiated compromises among interest groups – workers, businesses, public authorities
b. export-led innovative, quality and niche- market oriented, adaptive and responsive to changing international market forces
c. strong social mechanism to redistribute income
d. good urban systems
e. care of the young, the ageing of the natural environment
f. creation of public sector employment linked to health, education, public safety, fairly strong social cohesion
g. inequalities kept within strict limits
Negatives:
a. A ‘me-first’ social safety thinking so entrenched that it now inhibits further adaptations to the global market
b. Has grown dependent on public spending infusions
c. Depreciating knowledge of private sector hustling
d. Overbearing dependence on the banking sector rather than the more versatile financial sector
e. Major transformation needed
4. State-Led Capitalism Positives:
a. Good where private markets fail e.g., in transportation, health, education, basic R & D
b. Predictability about economic evolution
Good for catch up along well-defined technological paths
c. No need for active, collective bargaining among interest groups
Negatives:
a. State nationalizes and organizes production inefficiently
b. Constant pressure to create demand via public spending
c. Prices are closely supervised or controlled
d. High degree of state institutionalization of economy makes it vulnerable to shocks
e. This leads to economic sclerosis, a creaky, overly constrained system crying out to be reformed, liberated that relies on bureaucrats rather than entrepreneurs
Term Paper # 5. Objections to Capitalism:
Capitalism is based on ‘free enterprise’ and individual rights. This misleadingly suggests that capitalism is economically and socially progressive. However, it rather ‘benefits the selfish interests of a few, the privileged elites of the developed world, and damages the interests of everyone else. This is basically because, following Marx’s theory if surplus value, when a capitalist makes a profit, they are essentially stealing value which is produced by labor.’
‘Capitalism discourages local production and encourages unregulated growth of gigantic cooperation that exploits local labor for profits elsewhere.’ This is justified by the fact that capitalism undergirds ‘the freedom to act as an absolute by right’ and the ‘credo of the rational egoist who recognizes no authority higher than his own judgment of the truth.’
Such a theory provides a scapegoat for people who harm others in the pursuit of self-interests. According to capitalist, violating one’s rights for the ‘public good’ is contradictory since that individual is a member of the public, too. Based on this individualistic mentality, capitalists are able to vindicate themselves from the immorality of inequality. It allows them to be free of conscious despite that they live in a country where 23.5 per cent of the country’s total income is made by the top 1 per cent of Americans.
Capitalism purports that it is a system that promotes ‘free will;’ however, the economic disparity that capitalism evokes diminishes the possibility for social mobility, thereby constricting people to not only certain classes, but also to certain environments and opportunities.
Capitalists will refute that the poor are disadvantaged and unable to gain any wealth because they have none to begin with, and attest to that fact that rather those who are poor are not opportunistic or motivated. Capitalists often affirm, or at least suggest, that those who are poor are so willingly because the ‘free enterprise’ system of capitalism is constructed so that anyone, with hard work, can gain wealth.
Capitalists espouse supply-side economics, otherwise known as the ‘trickle-down economics,’ in which providing tax cuts and other benefits to businesses indirectly helps the rest of the population by increasing investments in infrastructure and markets. However, this translates in to tax cuts on capital gains, corporate income, and high individual income taxes, thereby exclusively benefitting the wealthy.
Capitalism encourages corruption, economic disparity, individualism, hyper-competitiveness, and consumerism. This wen-site is an objection to the viability of effective capitalist governance, with focus on its political, economical, and societal effects.
Term Paper # 6. Impacts of Capitalism:
Capitalism is a system of largely private ownership that is open to new ideas, new firms and new owners— in short, to new capital. Capitalism’s rationale to proponents and critics alike has long been recognized to be its dynamism, that is, its innovations and, more subtly, its selectiveness in the innovations it tries out.
At the same time, capitalism is also known for its tendency to generate instability, often associated with the existence of financial crises, job insecurity and the inability to include the disadvantaged.
There are basic questions about capitalism that have hardly begun to be studied. What economic and social institutions engender innovation in the more capitalist of today’s advanced economies, and what institutions function badly in this regard? How large are the benefits of this system both in productivity and more broadly in the rewards to its participants? How much worse (if at all) is this system with respect to stability and inclusion compared with corporatist systems found in continental Western Europe and East Asia? What changes or additions to those institutions and policies could be hoped to improve its dynamism, stability or inclusiveness? Are capitalists systems more or less prone to financial crises than corporate ones? The mandate of Columbia’s center on capitalism and society is to advance our scholarly understanding of capitalism’s workings, its social benefits and costs, and its place in a democracy.
The Debate Over Capitalism:
The claims for capitalism differ from the classical case for a competitive market economy. Adam Smith’s thesis two centuries ago was that the presence of many buyers and many sellers competing with one another in the marketplace would cause wasteful resource allocations to be weeded out ‘as if by an invisible hand.’ (So, in equilibrium conditions, one person’s earnings could not be further increased except at the expense of another’s.)
This valuable ability of unimpeded markets could not be matched by a central government bureau, as Ludwig von Mises warned the socialists in the 1920s. But Smith’s insights left it unclear how or whether economic change might be generated. Would competition among firms suffice to generate change, with or without private ownership? Would private ownership suffice, with or without competition?
A few central European economies twice became laboratories in recent decades for testing competition without private ownership. From the late 1960s to the late 1980s they allowed each state-owned firm to set their own prices, outputs, wages and workforce in competition with the others.
Whether or not efficiency improved, it was clear that economic dynamism did not ensue. It was said in defense of these state firms that their managers’ plans for them were often blocked by the state and that the managers knew they could get their losses covered by the state so they didn’t need to take chances. In the 1990s, the state firms were put on their own.
This time, with their backs to the wall, they began innovating like mad, hoping that with luck it would be their ticket to survival. But these state firms were not able to innovate successfully. Competition, it appears, is not sufficient for economic dynamism.
More recently, it has come to be argued that the corporatist economies of East Asia, which had achieved wonders when there was a yawning gap between them and the west, ran into trouble in the 1990s because state intervention in the corporate sector through permissions, subsidies and guarantees led ultimately to mass overinvestment and insolvency.
On this thesis, private ownership is not sufficient for dynamism either: capitalism, in which capital is free to go in new directions without a green light from the state, becomes necessary at some point in economic development if dynamism is to continue.
How does capitalism do it? The mechanism of capitalism’s economic advances became the leading object of economic research early in the 20th century and remained so for decades. With, the upheavals of the late 19th century, still in their thoughts, the German School, led by Arthur Spiethoff and Gustav Cassel, linked innovations to technological developments and the opening up of overseas markets and materials.
A new discovery creates new outlets for investment. The investments made ‘express the zeal of employers to profit by meeting the increased demand of the community for fixed capital.’ This made macroeconomic sense of big waves of innovation-they are exogenous and markets react constructively to them.
But it failed to identify the institutions crucial to fostering early and decisive responsiveness to the newly arrived opportunity. And it did not provide an economics of innovations in normal times, when capitalism has to generate endogenous innovations, if there are to be any at all.
A decade later, Joseph Schumpeter arrived with a new perspective. Innovations are normally the creation of business people, he said, and do not spring reliably or quickly from recent inventions by scientists and engineers. Furthermore, innovations ‘are as a rule embodied in new firms.’
Thus the agent of change was the entrepreneur who, hitting upon the prospective profitability of some unnoticed commercial application, sought to start up an enterprise to implement the innovative idea. Banks-the venture capitalists of that era selected which investment projects of these entrepreneurs to finance.
The startups that met success inspired other entrepreneurs and together caused the ‘creative destruction’ of various established enterprises. However, this mechanism of Schumpeter, for which he became renowned, is not consonant in an important respect with subsequent understanding of the essential nature of innovative ideas, and it doesn’t apply to a large sector of capitalist economies in the present age.
The essence of capitalism’s innovations was uncovered by European theorists in the interwar period. Friedrich Hayek saw it as a core feature that, under capitalism, entrepreneurs are self-selected, aided by their particular experience and driven by their distinctive visions.
For this reason capitalism will generally draw on richer experience and wider knowledge than any one central planner could draw on. John Maynard Keynes added that entrepreneurs (and others) may also have opposing notions about the macro forces and mechanisms in the economy, which complicates predicting their investment activity.
Lastly, Michael Polanyi argued that entrepreneurs, like discoverers generally, take creative leaps and invariably these leaps involve some ‘tacit’ or ‘personal’ knowledge, which is outside of objectively recognized knowledge and which goes beyond what can be communicated in explicit terms.
For this reason; a state investment bank would not be well-suited to select among entrepreneurs’ projects – being accountable to the central government for its mistakes, it would avoid all the very innovative proposals because of the ambiguity of the evidence for them and thus the uncertainty of their profitability.
This modern view of capitalism, however, poses a difficulty for Schumpeter’s model as well. In supposing that lenders and investors selecting among entrepreneurs’ projects were capable of discerning the talent of every entrepreneur and the worth of very project, Schumpeter was attributing information and knowledge to financiers that is incongruent with the modern view of entrepreneurs’ ideas.
In reality, financiers must also act on intuition, taking an initial and limited chance on an applicant in spite of the ambiguity of the evidence. Since an innovative project is in part inherently difficult to articulate, the success of bankers and venture capitalists in selecting among them hinges not so much on their knowledge of the project as on their ability to enter into a sequential and provisional relationship with the entrepreneur that leaves the latter leeway to experiment and prove himself.
The other shortcoming of Schumpeter’s mechanism is that, in centering on the entry of start-up firms, it does not encompass the innovations that come from the sector of established firms. The innovation is there: the heavy research and development expenditure in the sector of established firms is circumstantial evidence that many large firms are oriented toward innovation.
Besides, we have the direct evidence of radical innovations made by established firms from Bang & Olufson’s designs to Sony’s Walkman to the Swatch to Bert Claeys’ rethinking of cinemas. But the entrepreneurship differs- in contrast to Schumpeter’s theory, the big corporations do not usually have a principal lender or core investor and even the entrepreneur can barely be identified, if at all.
In this sophisticated sector, other institutional mechanisms are evidently at work but their functioning is not well understood and their effectiveness is not yet estimated with much confidence. The thesis of Amar Bhide is that small firms have a role in innovation since they can better tolerate ambiguity while large firms have a role since they can better manage and finance projects with high capital costs.
The specialization between the start-up and the established firms, and also the possible interplay between the small-firm sector and the large-firm sector, are obviously areas ripe for further research.
The last of the great questions about capitalism is whether it is best only for the elite of more able and advantaged participants, who can find rich rewards from its stimulation and challenges, or whether ways can be found to integrate the less able and less advantaged into capitalism’s sphere.
This is the question of economic inclusion. Quite possibly, there is little cost from a failure of highly corporatized or highly socialized economies to include the less advantaged; in those economies a low rate of inclusion is often deemed acceptable and, in some of them, only a minority are in the labor force.
Far more may be at stake in the inclusion of the less advantaged where the business sector is predominantly capitalist. If these capitalist business sectors offer relatively good job satisfaction and personal growth on the whole or offer relatively high wages in comparison with the pay in underground and domestic activities, then an appreciable deficiency in inclusion arising from a wide gap between low-end wage rates and the median wage, with the consequent demoralization and decline of employability, may be deemed unacceptable and may impose high social costs on virtually everyone.
Even more difficult than the task of measuring these social effects of capitalism is the problem of finding solutions to them, if such exist. And that problem is now more difficult since the west has grown aware of how fortunate it was to have had the capitalist engine driving its development over the past two centuries and how valuable this engine can be again.
So the West is faced with a conundrum: How does society respond to the social defects and deficiencies of capitalism without choking off capitalism’s potential dynamism? Among the issues are whether retraining can address job losses, whether long booms are to be treated, and whether employment subsidies are cost- effective as a remedy for a deficiency in inclusion.
Thus the system of innovation is the great ‘black box’ in research on capitalism and it will be the most central of the center’s interests. Yet innovation is not the only aspect of capitalism on which there is not yet much fundamental understanding.
The influence of capitalism on fluctuations is not addressed in standard monetary macroeconomics or in the ‘real business cycle’ literature. It is obvious that jobs are far more precarious in the relatively capitalist economies than in the corporatist ones, where governments try to avoid any rocking of the boat and to backstop with assorted job protection laws.
Capitalism’s proponents respond that the right both to hire and to fire freely helps to embolden firms to take the risks of job creation and thereby serves to raise the average level of wages and perhaps employment too. However, the impression also exists that, in fact, capitalism exhibits long swings in economic activity, as measured by employment and unemployment rates, of far wider amplitude than those detectable in the more corporatist economies.
Here too a reply is conceivable. It may be that when contractionary forces strike, the prompt restructuring that firms in the relatively capitalist economy are generally permitted to do serves actually to dampen the size of the slump that follows while the rigid posture maintained by firms in the relatively corporatist economies, with their strictures against layoffs, entails a much deeper as well as longer slump.
Another of the fluctuation issues is the justice of regarding long booms as no better than long slumps. A more radical position raises questions about the justification for blocking or moderating long slumps, provided they are purely or mainly structural rather than the result of monetary malfunctioning. The subject of long swings is only now beginning to enjoy a revival of attention in the economic literature, and there is much to be done in this area.
Term Paper # 7. Criticisms of Capitalism:
Capitalism has met with strong opposition throughout its history, both from the left and the right:
I. The Free Market and Property Rights:
The Anarchist Pierre-Joseph Proudhon (1809-1865) and the Marxist Friedrich Engels (1820-1895) have argued that the free market is not necessarily free, but weighted towards those who already own property, forcing those without property to sell their labor to capitalists and landlords in a market favourable to the latter, and to accept low wages in order to survive.
II. Profit and Exploitation:
Critics of Capitalism view the system as inherently exploitative because the owners of capital only pay labour for the cost of survival (food, shelter, clothing, etc.), while expropriating the excess (i.e. surplus value) since capitalists control the means of production (e.g. factories, businesses, machinery) and workers control only their labour, the worker is naturally coerced into allowing their labour to be exploited, and is not paid according to the true worth of his labour but arbitrarily according to what the employer is willing to pay.
Market Failures:
The allocation of goods and services by a free market is not as efficient as it might be (due to the lack of perfect information and perfect competition), and individual’s pursuit of self-interest can lead to bad results for society as a whole. It is argued that this and certain other unique problems with a free market (including monopolies, monopsonies, insider trading and price gouging) are grounds for government intervention.
Market Instability:
Marxists claim that market instability is a permanent feature of capitalist economy, and that the unplanned and explosive growth of capitalism does not occur in a smooth manner, but is interrupted by periods of overproduction in which stagnation or decline occur (i.e. recessions and depressions).
III. Inefficiency and Waste:
Some opponents criticize the shift from pre-industrial reuse and thriftiness before capitalism to a consumer- based economy that pushes ‘ready-made’ materials and planned obsolescence, thus creating a potentially insoluble ecological problems. Advertising and marketing are also seen as a wasteful use of resources, and brand-based marketing puts more emphasis on a company’s name-brand than on the quality of its products.
IV. Unequal Distribution of Wealth and Income:
Some view a significant disparity and concentration of wealth to be a problem endemic to capitalism, and argue that this inequality is excessive, unfair, dysfunctional or even immoral, and may lead to social problems (such as higher crime rates) that affect both poor and rich.
It is further argued that the capitalist system may also have inherent biases favouring those who already possess greater resources. The wealthy may not put their wealth to productive use, while at the same time the system undermines an economy’s mass buying power by denying resources to poorer people, who have a tendency to spend rather than save.
V. Employment and Unemployment:
Some economists consider that a certain level of unemployment is necessary for the proper functioning of capitalist economies, and that this ‘natural rate of unemployment’ highlights the inefficiency of a capitalist economy, since not all its resources (e.g. human labour) are being allocated efficiently.
VI. Imperialism and Human Rights Violations:
Some argue that capitalism thrives on an uneven and exploitative relationship between wealthy nations who force regime or system changes in poor countries which are only beneficial to them, often through exploitative wars. Dependency theory holds that resources flow from a ‘periphery’ of poor and underdeveloped states to a ‘core’ of wealthy states, enriching the latter at the expense of the former.
Marxists, particularly Vladimir Ilyich Lenin (1870-1924), argue that Capitalism needs imperialism in order to survive, as it expands its over-saturated local markets into (and drains the resources out of) other less-developed nations.
VII. Democracy:
Some critics have argued that the capitalist system can be undemocratic (although capitalism as an economic system is not necessarily tied to democracy). Oft- cited examples include people not being able to criticize their boss out of risk of getting fired, and not being able to express their opinions due to lack of funds to afford access to the media.
VIII. Economic Freedom:
There has been criticism of the usual measures of economic freedom which are often used to justify capitalism. If economic freedom is to include the freedom to have meaningful decision-making control over productive resources, then it is argued that the various points mentioned above actually result in reduced, not increased, economic freedom.
IX. Religious Criticism:
Some religions criticize or outright reject capitalism (e.g. Islam strongly forbids usury, the lending of money at an interest) some Christians have also strongly criticized capitalism, particularly its materialistic aspects. Some see unfettered capitalism as a threat to cultural and religious traditions.