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POLITICAL IDEOLOGY
CAPITALISM
Introduction

 Karl Marx, a sociologist, invented the term "capitalism" in the middle of the 19th
century, which he interprets to mean any private ownership of property or
business.
 Today, it is defined as an economic system based on private ownership of the
means and distribution of goods in free market with the aim of profit.
 Capitalism cannot be referred to as the ultimate system, like any other system.
 It is not a cure for every defect and for eradicating all inequalities; however,
because of its capacity to alter and advance nations, it is still present in
contemporary society.

History
 Even in the earliest societies, capitalism has existed.
 The main economic activities in a primitive culture were subsistence
farming, hunting, and fishing.
 In this culture, a tribe chief and his advisors made all decisions.
 This decision-making procedure led to the creation of the barter
system; it was feasible to trade one commodity for another using
the barter system.
 Since not all commodities could have been priced similarly for the
commodities in exchange, this system had drawbacks that were
later acknowledged.
 The oldest manifestations of capitalism, or "mercantilism," come
from Rome, the Middle East, and the early Middle Ages.
 Early modern European economic theory and practice known as
mercantilism aggressively promoted the establishment of colonies
as a means of supplying markets and raw commodities while
relieving domestic countries of external dependency.
 As the Roman empire grew, mercantilism also did; it progressively
gave way to the economic principles that would come to be known
as capitalism as time went on in Europe.
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 These types of economic practices are known as monopolism,

industrialism, and commercialism.

Features of Capitalism
1. Property Rights
 Private ownership of all non-labor factors of production defines capitalism.
 The authority to manage these production elements, as well as the goods
and services generated from such inputs, belongs to the owners of these
private properties.
 The choice of what to produce, how to produce, and for whom to produce
is entirely up to the proprietors.
 Rent from the use of their land, wages for the use of their labor, interest as
a return on their money, and profits from their entrepreneurial abilities are
the rewards owners receive for owning these resources.
2. Coordination Structure
 The market mechanism that governs coordination in capitalist economies
allows the forces of supply and demand to act to set prices and economic
output.
 Prices are pushed up or down by the forces of supply and demand in
response to individual buyer and seller actions.
 The "Invisible Hand" of Adam Smith is a term that describes this
technique.
 There is no official interference in this economic system to ensure that
economic operations are carried out effectively and that economic
objectives are achieved.
3. Motivational Structure
 The market is driven by material incentives in this economic system as a
result of the self-interest of numerous economic agents.
 Suppliers are motivated to only supply products that they anticipate will
generate a profit.
4. Decision-making Structure
 There is no central system for making decisions.
 Decentralized decision makers are guided by market prices.
 What to produce, how to produce, and for whom to produce are decisions
made by/among the many private parties who own property rights to
goods and resources.
5. Information Structure
 Due to the existence of horizontal lines of communication, where
knowledge and decision-making are dispersed among the numerous
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economic agents who are on the same level, the capitalism system's
information structure is decentralized

Performance Under Capitalism

1. Economic Efficiency
 This performance criterion looks at how well the economy is able to
allocate its resources to best maximize its production in goods and
services while taking the welfare of individuals into consideration
 A capitalist economy is efficient as it yields high levels of GDP, innovation
is encouraged, and one is allowed to exercise freedom of choice
2. Economic Stability
 Economic stability in a capitalist market is unstable due to fluctuations in
inflation, unemployment as well as real economic growth
3. Income Distribution
 Capitalism renders unequal distributions of income in the economy
which is accordance to the skills and qualifications an individual
possesses
4. Economic Growth
 It can be measured as the increase in real GDP.
 Productivity is the key component
 Economic growth is slow in a capitalist economy
 With a steady rise in real GDP the economy is assumedly growing well
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Advantages and Disadvantages of Capitalism

 Advantages
 Capitalism is a free market economy where resources and businesses are
privately held.
 There is no upper limit to how much money a person may amass through
economic advancement in a capitalist market because of the push factor
 In years 1000-1820 world economy grew six-fold, in years 1820-1998
world economy grew 50-fold
 Provides Choice to customers
 It provides valuable goods and services
 Capitalism actively rewards positive traits like hard work
 Similarly, it punishes negative traits such as laziness and theft
 Narrows the gap between common person and wealthy
 Provides opportunity to realize dreams and desires
 Capitalist societies usually do not have large black markets
 Build on democracy
 Work for social good

 Disadvantages/ Major Limitations

 Downfall of work ethics
 Free Market + Self Interest
 Accumulation of wealth
 Encourages inequality in a society
 Business lobbying with government
 Monopolistic tendency
 Human resource exploitation
 Results in great disparities between income of people owning the capital
resources and others

Changes in Capitalism
 A pure capitalistic state is one with no government intervention and its
demand and supply are left in what Adam Smith called “Invisible Hand”.
 However, its private ownership and profit driven motives shows that such
an economy is competitive in nature.
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 Capitalism has pass through many phrases which forced capitalist

economies to amend or adjust their rules under which they reside
 These changes put capitalist states either more too pure socialism or more
to pure capitalism
1. Private Ownership
 It adds fuel to a competitive and market- oriented economy
 Changes in the shares of public and private ownership of property can alter
the nature of a capitalist economic system
 If the state owned a major share of existing property, we would no longer
classify the system as capitalist
2. Working Participation
 Owners of capital are rewarded out of their profits while workers are paid
with wages which does not vary with profits
 If workers were allowed to increase profits of the enterprise operating
within the capitalist state- this would have considered that capitalism has
evolved from its basic form
3. Government Intervention

 Fiscal Policies
 It is discussed as government budget deficit.
 It is also government spending or taxes to stimulate the economy.

 Welfare
 In the late 1930s and the 1940s, workers dominated the political agenda
 During this time the capitalist economies developed an economic safety net
that included government funded programs such as public welfare,
unemployment insurance, and established an extensive set of regulations
affecting all aspects of economy.
 This safety net is frequently found in capitalist economies globally since it
makes available a form of security for the population (working class)

 Minimum Wage Laws

 Governments have enforced the minimum wage law which also kept the
market from operating by itself
 The government causes wage rigidity when it prevents wages from falling
to equilibrium levels.
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Conclusion
 Capitalism has changed over time.
 Starting with the barter system, which led to the system of slavery, followed by
feudalism, followed by mercantilism, and finally capitalism.
 The classical school of economics advocated keeping government involvement in
the economy, but restricting it to solely defending individual rights and delivering
public goods and services.
 History demonstrates that government is essential and that its functions have
grown.
 Government action has helped capitalism grow throughout time.
 Government involvement in the form of wage regulations, welfare and fiscal
policies, and nationalization all contribute to the growth of capitalism.
 Pure capitalism is no longer practiced in today's globe; instead, former capitalist
nations like the United States have switched to a mix economy where the
government influences market decisions in a more significant way.

SOCIALISM

 Socialism is a term applied to an economic system in which property is held in

common and not individually, and relationships are governed by a political
hierarchy
 Common owners do not mean decisions are made collectively, instead,
individuals in positions of authority make decisions in the name of collective
group
 Socialists argue that socialism would allow for wealth to be distributed based on
how much one contributes to society, as opposed to how much capital one holds.
 A primary goal of socialism is social equality and a distribution of wealth based
on one’s contribution to society and an economic arrangement that would serve
the interests of society as a whole.
 Socialism as we know it today, most commonly refers to “market socialism”,
which involves individual market exchanges organized by collective planning
 Difference between socialism and communism is that communists directly
oppose the concept of capitalism, an economic system in which production is
controlled by private interest. Socialists, on the other hand, believe socialism can
exist within a capitalist society.
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Objectives of socialism ideology

1. Property, disease and ignorance shall be eliminated
2. Property and privilege in any form shall occupy a strictly limited place
3. All citizens shall have equal opportunities
4. Ethical and spiritual values shall contribute to the enrichment of the individual and
communal life

History of Socialism
 Some elements of socialism dates back to the first half of the 19th century
 Plato’s “The Republic” and Sir Thomas More’s “Utopia” dating from 1516, have
been cited as including Socialist or Communist ideas.
 Modern Socialism starts from the beginning of the 19th century in Britain and
France, as a reaction or protest against some of the excess of 18th and 19th century
Capitalism
 In the beginning, socialist thought was mainly utopian in nature, followed by the
more pragmatic and revolutionary Socialists and Communist movements in the
end of the 19th century.
 Social criticizers in the late 18th century and early 19th century such as Robert Owen,
Charles Fourier, Pierre-Joseph Proudhon, Louis Blanc and Henri de Saint-Simon
disparaged the excess of poverty and inequality of the Industrial Revolution, and
encouraged transformations such as the egalitarian distribution of wealth and
transformation of society into small utopian communities in which private property
was to be established.

Features of Socialism and Socialist Beliefs

1. Public Ownership
2. Central Planning
3. Definite Objectives
4. Freedom of Consumption
5. Equality of Income Distribution
6. Planning and the Pricing Process
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Merits of Socialism Ideology

A) Greater Economic Efficiency
 Economic efficiency under socialism is more than under capitalism.
 The means of production are controlled and regulate by the central planning
authority towards chosen ends; they conduct surveys and utilize the resources in
the most effectual manner
B) Greater Welfare due to Less Inequality of Income
 In a socialist economy, there is less disparity of income because of the absence of
private ownership of the means of production, private capital accumulation, and
private profit.
 All people work for the welfare of the state and each is paid his salary according to
his ability, education and training
C) Absence of Monopolistic Practices
 Major benefit of socialism is that it is free from monopolistic practices to be
found in a capitalist society
 Instead of private monopoly, there is a state monopoly of the productive system
but this is operated for the welfare of the people
D) Absence of Business Fluctuations
 A socialist economy is free from business instabilities
 There is economic stability because the central planning authority in accordance
with objectives, targets and priorities of the plan regulate production and
consumption of goods and services
 Therefore, there is neither overproduction nor joblessness.

Demerits of Socialist Ideology

1. Loss of Consumer’s Sovereignty
 Consumers do not have liberty to buy whatever commodities they want; they
can consume only what is available in department stores and the quantities are
fixed by the state
2. No Freedom of Occupation
 Consumers do not have freedom of choosing profession; a job is provided by
state
 He cannot leave or change it even place of work is allocated by the state
3. Misallocation of Resources
 There is random allocation of resources
 The central planning authority often commits mistakes because the entire work
is done on trial and error basis
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4. Bureaucratic
 A socialist economy is a bureaucratic economy; operated like a machine
 People work under pressure and fear of higher authorities

Types of Socialism
A) Democratic Socialism
 It is a political ideology that supports the establishment of
a democratically run and decentralized form of socialist economy.
 Modern democratic socialists vary widely in their views of how a proper
socialist economy should function, but all share the goal of
abolishing capitalism rather than improving it through state regulation (as
preferred by social democrats).
 They also prioritize democracy as an end over democracy as a means, and
some democratic socialists see revolution as an acceptable method of
achieving the democracy they desire.
 It is similar to Social democracy; this ideology seems to bring about socialism
through peaceable democratic means as opposed to violent insurgence, and
represents the reformist tradition of socialism
B) Revolutionary Socialism
 It advocates the need for central social change through revolution or
insurgency instead of gradual reform as a strategy to accomplish a socialist
society.
 It is based upon the belief that the existing state structures are incurably
linked to capitalism and interests of the ruling class
C) Utopian Socialism
 It was used by later socialist philosophers to define early socialist, or quasi-
socialist, scholars who created hypothetical visions of perfect egalitarian and
communalist societies without actually concerning themselves with the
manner in which these societies could be created or sustained
 They excluded all political action and wanted to attain their ends by peaceful
means and small experiments, which more practical socialists like Karl Marx
saw as necessarily doomed to failure.
D) Libertarian Socialism
 This ideology has aim to create a society without political, economic or social
hierarchies, in which every person would have free, equal access to tools of
information and production
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 This would be attained through the eradication of authoritarian institutions

and private property, so that direct control of the means of production and
resources will be gained by the working class and society as a whole
E) Market Socialism
 This ideology elucidates an economic system in which there is a market
economy directed and guided by socialist planners and where prices would be
set through trial and error instead of relying on a free price mechanism.
 By contrast, a socialist market economy, such as that is practiced in the
People’s Republic of China, is one where major industries are owned by State
entities, but compete with each other within a pricing system set by the
market and the state does not routinely interfere in the setting of prices
F) Eco-Socialism
 It is a philosophy amalgamating aspects of Marxism, Socialism, Green politics,
ecology and the anti-globalization movement.
 They promote the non-violent dismantling of capitalism and the state, focusing
on collective ownership of the means of production, in order to alleviate the
social exclusion, poverty and environmental degradation brought by the
capitalist system, globalization and imperialism.

G) Christian Socialism
 It denotes to those on the Christian left whose politics are both Christian and
socialist, and who visualize these two things as being interconnected
 Christian socialists draw parallels between what some have characterized as
the egalitarian and anti-establishment message of Jesus and the messages of
modern socialism
H) Scientific Socialism
 It undertakes a scientific investigation of historical and social development,
which, in the form of Marxism, proposes not that socialism ‘should’ replace
capitalism, but forecasts that it inevitably ‘would’ replace capitalism
I) Fundamental Socialism
 This ideology aims to abolish and replace the capitalist system, observing
socialism as qualitatively different from capitalism
 Fundamentalist socialists such as Marxists and Communists, generally
associate socialism with common ownership of some form.
J) Revisionist Socialism
 This ideology believes in reform, looking to reach an accommodation between
the efficiency of the market and the enduring moral vision of socialism
 This is most clearly articulated in social democracy.
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K) Marxism
 Marxism seeks to explain social phenomena within any given society by
analyzing the material conditions and economic activities required to fulfill
human material needs
L) Totalitarianism
 Totalitarianism is a form of government and a political system that prohibits all
opposition parties, outlaws individual and group opposition to the state and its
claims, and exercises an extremely high if not complete degree of control and
regulation over public and private life. It is regarded as the most extreme and
complete form of authoritarianism