What is Capitalism? In the capitalist economic system, all farms, factories and other means of production are the property of private individuals and firms. In the words of Loucks, “Capitalism is a system of economic organization featured by private ownership and use for private profit of man-made and nature-made capital”. So, what is the question we are going to discuss; How to Analysis of Capitalism in India?

Here are explained; Capitalism in India: first Features, Growth, Process, and finally Social.

Definition; According to Wright, “Capitalism is a system in which, on average, much of the greater portion of economic life and particularly of net new investment is carried on by private (i.e. non-government) units under conditions of active and substantially free competition and avowedly at the least, under the incentive of hope for profit”.

The Features of Capitalism:

In the broadest sense, capitalism may be defined as the economic system making the widest use of capital in the process of production. In the technical sense, capitalism may be defined as the economic system of production in which capital goods are owned privately by individuals or corporations.

The principal features of capitalism are discussed below; key points.

  • Private Property.
  • Profit Motive.
  • Price Mechanism.
  • Role of the State.
  • Market Economy.
  • Consumer Sovereignty.
  • Freedom of Enterprise.
  • Large Scale Production, and.
  • Competition.

The following are the economic bases of capitalism, now explain each below:

Private Property:

Capitalism thrives on the institution of private property. It means that the owner of a firm or factory or mine may use it in any manner he likes. He may hire it to anybody, sell it, or lease it at will in accordance with the prevalent laws of the country. The state’s role is confined to the protection of the institution of private property through laws.” The institution of private property induces its owner to work hard, to organize his business efficiently and to produce more, thereby benefiting not only himself but also the community at large. All this is actuated by the profit motive.

Profit Motive:

The main motive behind the working of the capitalist system is the profit motive. The decisions of businessmen, farmers, producers, including that of wage-earners are based on the profit motive. The profit motive is synonymous with the desire for personal gain. It is this attitude of acquisitiveness which lies behind individual initiative and enterprise in a capitalist economy.

Price Mechanism:

Under capitalism, the price mechanism operates automatically without any direction and control by the central authorities. It is the profit motive which determines production. Profit being the difference between outlay and receipt, the size of profit depends upon prices. The larger the difference between prices and costs, the higher is the profit. Again, the higher the prices, the greater are the efforts of the producers to produce the varied quantities and types of products. It is the consumers’ choices which determine what to produce, how much to produce, and how to produce. Thus capitalism is a system of mutual exchanges where the price-profit mechanism plays a crucial role.

Role of the State:

During the 19th century, the role of the state was confined to the maintenance of law and order, protection from external aggression, and provision for educational and public health facilities. This policy of laissez-faire—of non-intervention in economic affairs by the state—has been abandoned in capitalist economies of the West after the Second World War. Now the state has important tasks to fulfill. They are monetary and fiscal measures to maintain aggregate demand; anti-monopoly measures and nationalized monopoly corporations; and measures for the satisfaction of communal wants such as public health, public parks, roads, bridges, museums, zoos, education, flood control, etc.

Market Economy:

Under capitalism, there is no governmental control over the forces of production, distribution, and exchange. It is controlled by the forces operating in the market. There is no price control or regulated distribution by the government. The economy operates freely under the law of demand and supply. The capitalist economy is a liberalized or market economy.

Consumer’s Sovereignty:

Under capitalism, ‘the consumer is the king.’ It means freedom of choice by consumers. The consumers are free to buy any number of goods they want. Producers try to produce a variety of goods to meet the tastes and preferences of consumers. This also implies freedom of production whereby producers are at liberty to produce a vast variety of commodities in order to satisfy the consumer who acts like a ‘king’ in making a choice out of them with his given money income. These twin freedoms of consumption and production are essential for the smooth functioning of the capitalist system.

Freedom of Enterprise:

Freedom of enterprise means that there is the free choice of occupation for an entrepreneur, a capitalist, and a laborer. But this freedom is subject to their ability and training, legal restrictions, and existing market conditions. Subject to these limitations, an entrepreneur is free to set up any industry, a capitalist can invest his capital in any industry or trade he likes, and a person is free to choose any occupation he prefers. It is on account of the presence of this important feature of freedom of enterprise that a capitalist economy is also called a free enterprise economy.

Large Scale Production:

It is another important feature of capitalism. Capitalism arose as a result of the industrial revolution which made large-scale production possible. The installation of gigantic plants and division of labor increased production. More production means wider use of capital and led to more profits.


Competition is one of the most important features of a capitalist economy. It implies the existence of a large number of buyers and sellers in the market who are motivated by self-interest but cannot influence market decisions by their individual actions. It is competition among buyers and sellers that determine the production, consumption, and distribution of goods and services. There being sufficient price flexibility under capitalism, prices adjust themselves to changes in demand, in production techniques, and in the supply of factors of production. Changes in prices, in turn, bring adjustments in production, factor demand, and individual incomes.

How to the Growth of Capitalism in India?

In primitive societies the usual system of exchanging goods vas barter system. At that time the idea of profit did not exist, ‘people accumulated goods not for making a profit during the days of scarcity but to gain prestige. The system of trading often consisted if giving and mutual rendering of services. Economic factors such as wages, investment; interest and profit were practically unknown preliterate societies. During the early Middle Ages, trade and commerce were little more advanced than they had been among the primitive peoples.

While at first conducted largely on a barter basis, trading came gradually more and more to involve money as a medium of exchange. This gave a fillip to the development of trade and commerce which gave importance to money, gold, silver, and tokens thereof. Money is not property, it is a symbol of property; it has a profound influence on the uses to which productive properties are put. According to Simmel, the establishment of the institution of money in the economic system of modern western society has had far-reaching effects upon almost every phase of life.

It resulted in greater freedom for both the employer and employee and for both the seller and buyer of goods and services since it makes for the depersonalized relationship between the two parties in a transaction. Simmel maintains that the institution of money has radically changed our whole philosophy of life. It has made us pecuniary in our attitudes so that everything is evaluated in terms of money, and as social contacts have become depersonalized, human relations have become superficial and cold.

In the early part of the modern period, the economic activities were generally regulated by the governing powers. It was an economic reflection of the growing unification of European peoples under strong monarchical Governments. The interest of the secular rulers lay in internal unification and this necessarily meant economic as well as political integration. The mercantilist ideology dominated the period. The economic activities of the people were politically regulated to increase the profits of the king and to fill his treasury with wealth.

The nation was looked upon by the mercantilist as an economic organization engaged in the making of profit. The ownership and use of productive properties were minutely regulated by mercantilist’s law. Then came the Industrial Revolution which changed the techniques of production. The policy of mercantilism also had failed to bring about the welfare of the people. To secure maximum production of usual goods the new do “trine of ‘Laissez-faire’ was propounded.

The doctrine preached non- interference in economic matters. According to this doctrine, if individuals pursue their own interest, unhampered by restriction; they will achieve the greatest happiness of the greatest number. Its advocates, Adam Smith, J.S. Mill, Spencer, and Sumner contended that Government should remove all legal restrictions on trade, on production, on the exchange of wealth and on the accumulation of property.

Adam Smith enunciated four principles:
  • The doctrine of self-interest.
  • Laissez-faire policy.
  • The theory of competition, and.
  • Profit motive.

Upon these principles and in response to the changing techniques of production brought about by the Industrial Revolution, a new system of property ownership and ‘production’, capitalism developed. The Industrial Revolution replaced factories in place of households. In factories, the work was divided up into little pieces, each worker doing a little piece. Production increased. Large plants in -course of time were set.

Corporations owning large plants came into being. All these developments of mass production, the division of labor, specialization, and exchange were accompanied by capitalism. In this new system of production and exchange, the ownership of productive properties was both individualized and divested of all social responsibility.

The Property became private and was freed from all obligations to the state, church, family and other institutions. The owners of the factory were free to do as they pleased. Profit was the main motive for them. They were under no obligation to produce goods if they believed that they could not make the profit. The mode of production was profit-oriented and the Governments in adherence to the doctrine of Laissez-faire supported the owners in this right.

How to understand Capitalism as a Process?

With the growth of the capitalist system there was:

  • Extreme polarization of classes.
  • Pauperization.
  • Alienation.
  • Dehumanization of Labor.
  • The dictatorship of the proletariat, and.
  • Shift from Capitalism to Socialism.

Marx’s sociology of capital in capitalist societies is not applicable to so many capitalist societies. This is the” case particularly with the Asiatic societies which do not show any class conflict in-spite of social stratification.

In the words of Raymond Aron,

“For one thing the Marxist conception of capitalist society and of society, in general, is sociological but this sociology is related to philosophy, and a number of interpretative difficulties arise from the relation of philosophy to sociology.”

Hence Marx’s predictions about the downfall of capitalism have not come true everywhere. His idea of constant pauperization of Labour is wrong so far as Western societies are concerned. Neither is there any proof of Proletaization. The claim of the destruction of capitalism is inevitable is far from being scientific.

How to Analysis of Capitalism in India
How to Analysis of Capitalism in India? Old Two Rupees Coin, Image credit from #Pixabay.

What do the Social Consequences of Capitalism?

Capitalism or economic development has brought in some good consequences which are as follows:

  • Economic Progress: Capitalism has led men to exploit the natural resources more and more. The people exert themselves utmost for earning money. This had led to many inventions in the field of industry, agriculture, and business which have contributed to economic progress.
  • Exchange of Culture: Capitalism has led to international trade and exchange of know-how. People in different countries have come nearer to each other. The development of the means of transport and communication has facilitated contacts among the peoples of the world thereby leading to exchange of ideas and culture.
  • High Standard of Living: Capitalism is the product of industrialization. Industrialization has increased production. Now men do not have to toil for bread as they used to do in the primitive days. The necessities of life are easily available.
  • The progress of Civilization: Capitalism was instrumental in inventing new machines and increasing the production of material goods. Man is to-day more civilized than his ancestors.
  • Lessening of Racial Differences: Capitalism has also led to the lessening of differences based on race, creed, caste, and nationality. In the factory, the workers and officials belonging to different castes co-operate with one another and work shoulder to shoulder. Inter-mixing of castes is the off-shoot of capitalism.

But in spite of the above good consequences capitalism has proved a curse instead of a blessing.

Its bad effects are the following:
  • Imbalance in Social System: Capitalism has led to an imbalance in the social system. It has failed to adjust itself to the welfare of society. It has widened the gap between the haves and have-not’s and created insatiable greed for wealth among the people. It has changed the very outlook of human beings. Wealth has become an important criterion of status.
  • Artificiality: Capitalism has transformed modern culture into mere artificiality. Today there is a false courtesy. One does not find gentility and human touch. One can see false prestige, mere artificiality, and sheer advertisement even in art and literature, nothing to speak of diet, dress, and speech etc. Life today has become artificial.
  • Greed for Wealth: Capitalism is based on greed for wealth It has raised wealth to the pedestal of deity. Wealth has become the be-all and end-all of human life. The modern man is mad after wealth. He wants to earn more and more wealth by any means. The idea for morality does not enter into the means of earning. It has thus led to moral degeneration.
  • Destruction of Human Values: In a capitalist order, everything has come to be measured in terms of wealth. All values of human life such as love, sympathy, benevolence, love, and affection are evaluated in terms of silver coins. Every person wants to get the maximum. The sole criterion is wealth, not value.
  • Materialism: Capitalism manifests materialism in its extreme form. Religion and spirituality lose their force. Religion becomes the opium of people. Religion becomes hypocrisy. The big capitalists save lacs of rupees by way of tax through contribution to fictitious charitable institutions. While people are short of goods, the capitalists hoard them to soar the prices.
  • Emphasis on Sex: Capitalist culture lays emphasis on sex. Marriage has become a mere agreement for the satisfaction of sex hunger. The capitalists advertise their goods through the display of sex instincts. Literature and movies are based on sexual passion. Pre-marital and extra-marital sexual relations are on the increase. Man is lacking in self-control.

It has led to the moral degeneration of man. Obviously, capitalism has failed to bring about the moral development of man. It is injurious both to society and the individual. In short, it has proved a curse to humanity instead of a blessing. Karl Marx was its bitter critic.


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