The Impact Of Capitalism On The Economy

Patrick Jake O’Rourke (1998), who is an American political satirist, journalist, writer and author, stated, “The idea of capitalism is not just success but also the failure that allows success to happen”. Capitalism has affected in the way that modern states develop in terms of business, economy, and politics. In addition, it has several forms, such as enterprise capitalism, social capitalism, collective capitalism, and so on. The definition of capitalism is “a system of generalized commodity production in which wealth is owned privately and economic life is organized according to market principle (Heywood, 2007)”. Many theorists, like Simon Tormey (2004) and Ellen Meiksins Wood (1991), also identify capitalism as a system. It could be argued …show more content…
A capitalist economy is seen to maximise the production of wealth, to promote technological development, and to ensure resources are rationally distributed in order for every single person to enhance living standards as well as freedom (Grant, 2003, pp.11-14). One of the most powerful impacts on capitalism is the market system. Market society is produced by the state dismantling established systems of social protection and poor relief and the state actively legislating to create a market for labour (Gill, 2003). It is a central feature of enterprise capitalism, the idea of which comes from classical economists such as Adam Smith, and is updated by modern theorists such as Milton Friedman. They believe that market competition cannot be restricted and that the market, which Adam Smith described as the ‘invisible hand’, is a mechanism regulating itself (Heywood, 2007). The market is essential in states by maintaining money value because a price mechanism can coordinate the relation of supply and demand in large scale markets (Ingham, 2008). Moreover, the development of the monetary system has made a key point in the capitalism of the modern state. People cannot exchange commodities directly with one another because the commodities are the products of the labour forces which are created by workers and are employed by owners of production: the bourgeoisie. The workers receive a wage so that they work for …show more content…
The territorial consolidation of the state is one of the most important factors which facilitate the emergence of capitalism. What has been involved in it is the extension of power and authority, the elimination of autonomous centres of power, and the delineation of national boundaries. They are economically crucial because these political changes set up a single economic space (Gill, 2003). It secures economic activities and the quality of living standards as well as increases economic interactions at international level. The establishment of law and order also enforces states to maintain state economy. Plus, industrialisation fosters capitalism. Technological developments, such as mills, factories, and cotton spinning, gave birth to the mechanised factory system in modern states. Economic developments also affect the state with increasing capital and savings. For example, the establishment of the City of London as the holder of national debt and the release of a large amount of capital to investors are to create a large scale industrial enterprise of capitalism (Wood, 1991). As a consequence, the developments in the state and industry have made a significant impact on the emergence of

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