In Business under Various Economic Systems, some salient issues such as
(1) Who will own the means of production?
(2) What will be produced and how will they be produced?
(3) How will the products be distributed?
were highlighted. Now, we're taking an in depth examination. We 're looking at the concepts of Capitalism, Socialism, Communism, and Mixed Economy/Free market Economy
Here we go.....
Capitalism
Capitalism is an economic system in which private individuals with comparative freedom from external restraints are allowed to own all or most of the means of production and distribution (e.g. land, factories, railroads, and shops). Capitalism as an economic system or theory of wealth creation and distribution owes its philosophical origins to 18th century philosophers such as Adam Smith. This Scottish economist is considered the father of capitalism.
In this type of economic system, producers operate under conditions of competition and the forces of demand and supply determine market prices, hence, capitalism is sometimes called the market economy or private enterprise system. Capitalism in its purest form is referred to as "free market capitalism" or "laissez faire", this means a system without government interference in the conduct of businesses.
However, today, no country is purely capitalistic. Often the government sets the regulatory frameworks. For example, in Nigeria, we have such regulatory agencies as Standard Organisation of Nigerian (SON), National Food and Drug Administration Control (NAFDAC), Nigerian Deposit Insurance Company (NDIC), National Universities Commission (NUC), Federal Environmental Protection Agency (FEPA), and Directorate of Petroleum Resources (DPR), among others.
This way, capitalism in which there are increased restraints by government upon business is often called “modified capitalism.” It is also referred to as a mixed economy.
Fundamentally, private property, private enterprise, and freedom of choice characterize capitalism. These three factors, collectively, are frequently called the rights in a free enterprise system or basic freedom of capitalism. By private property, we mean individuals and firms have the right to purchase, own, use, sell, or give away property of all kinds, such as land, buildings, machinery, and equipment. It also implies that business people have the right to the ownership of the profit they hope to realize in the course of providing goods and services.
Private enterprise, as another basic right of a private enterprise system, or as another basic freedom of capitalism pertains to ownership, and shows that business is own by private individuals as opposed to local, state or federal governments. Here, the business owners or management make the judgments and decisions that determine the path the business follows. Under this right, business dealings, if not illegal in nature, are not of public concern.
The third outstanding characteristic of capitalism is freedom of choice. This pertains to the freedom of the individual as a consumer, a worker, and an owner of resources. As business owner, one is free to choose the field of business one will invest, and to manipulate the factors of production to one’s best advantage in the light of the highest measure of profit. As a worker, the individual is at liberty to choose whatever career choice that offers one the best returns for one’s efforts. As a consumer, one is free to make whatever purchase choice, as long as the product is legal.
Capitalism, like any other economic systems, relies on certain inputs to operate effectively. Collectively, these inputs are called the factors of production. They are the resources businesses use to create wealth.
A corollary of capitalism (as a form of economic systems) is communism.
Karl Marx saw the inequality in wealth between the capitalists and the labourers in the 1800s, and advocated for a system of government whereby ownership of all economic resources of a country will be among a community of people (or government), hence the term communism.
(1) Who will own the means of production?
(2) What will be produced and how will they be produced?
(3) How will the products be distributed?
were highlighted. Now, we're taking an in depth examination. We 're looking at the concepts of Capitalism, Socialism, Communism, and Mixed Economy/Free market Economy
Here we go.....
Capitalism
Capitalism is an economic system in which private individuals with comparative freedom from external restraints are allowed to own all or most of the means of production and distribution (e.g. land, factories, railroads, and shops). Capitalism as an economic system or theory of wealth creation and distribution owes its philosophical origins to 18th century philosophers such as Adam Smith. This Scottish economist is considered the father of capitalism.
In this type of economic system, producers operate under conditions of competition and the forces of demand and supply determine market prices, hence, capitalism is sometimes called the market economy or private enterprise system. Capitalism in its purest form is referred to as "free market capitalism" or "laissez faire", this means a system without government interference in the conduct of businesses.
However, today, no country is purely capitalistic. Often the government sets the regulatory frameworks. For example, in Nigeria, we have such regulatory agencies as Standard Organisation of Nigerian (SON), National Food and Drug Administration Control (NAFDAC), Nigerian Deposit Insurance Company (NDIC), National Universities Commission (NUC), Federal Environmental Protection Agency (FEPA), and Directorate of Petroleum Resources (DPR), among others.
This way, capitalism in which there are increased restraints by government upon business is often called “modified capitalism.” It is also referred to as a mixed economy.
Fundamentally, private property, private enterprise, and freedom of choice characterize capitalism. These three factors, collectively, are frequently called the rights in a free enterprise system or basic freedom of capitalism. By private property, we mean individuals and firms have the right to purchase, own, use, sell, or give away property of all kinds, such as land, buildings, machinery, and equipment. It also implies that business people have the right to the ownership of the profit they hope to realize in the course of providing goods and services.
Private enterprise, as another basic right of a private enterprise system, or as another basic freedom of capitalism pertains to ownership, and shows that business is own by private individuals as opposed to local, state or federal governments. Here, the business owners or management make the judgments and decisions that determine the path the business follows. Under this right, business dealings, if not illegal in nature, are not of public concern.
The third outstanding characteristic of capitalism is freedom of choice. This pertains to the freedom of the individual as a consumer, a worker, and an owner of resources. As business owner, one is free to choose the field of business one will invest, and to manipulate the factors of production to one’s best advantage in the light of the highest measure of profit. As a worker, the individual is at liberty to choose whatever career choice that offers one the best returns for one’s efforts. As a consumer, one is free to make whatever purchase choice, as long as the product is legal.
Capitalism, like any other economic systems, relies on certain inputs to operate effectively. Collectively, these inputs are called the factors of production. They are the resources businesses use to create wealth.
A corollary of capitalism (as a form of economic systems) is communism.
Karl Marx saw the inequality in wealth between the capitalists and the labourers in the 1800s, and advocated for a system of government whereby ownership of all economic resources of a country will be among a community of people (or government), hence the term communism.
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