Capitalism is the economic system in which the means of production — factories, land, capital — are privately owned, and in which the allocation of resources is determined primarily by market exchange rather than by central planning or tradition. It is the dominant economic system of the modern world, but its nature, origins, and consequences are among the most contested questions in historical and social analysis.

Key features

Capitalism’s defining features include: private ownership of productive assets; wage labour (workers sell their labour in exchange for wages); market competition; the profit motive as the primary driver of economic decision-making; and the tendency to accumulate capital through reinvestment. These features have taken very different institutional forms across different periods and places — nineteenth-century laissez-faire capitalism, post-war managed capitalism, financialised neoliberal capitalism — which is why the concept’s content is always historically specific.

How liberals and Marxists analyse it differently

Liberal analysis treats capitalism as the natural and most efficient form of economic organisation, generating growth and distributing resources through the price mechanism. Its problems are correctable through regulation and welfare provision. Marxist analysis treats capitalism as a system of exploitation in which the extraction of surplus value from labour is the fundamental mechanism, and in which the state and culture serve to reproduce the conditions of that exploitation. These different analyses produce very different historical accounts of the same events — most visibly in debates about the post-war welfare state, neoliberalism, and the causes of the Great Depression.

Further reading: Keynesianism · Neoliberalism · Socialism and Marxism
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