The Growth of Capitalism:

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
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 s wages,
investment; interest and profit were practically unknown n 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 okens 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
seller and buyer of goods and services, since it makes for 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 organisation engaged in the making of profit. The ownership and use of
productive properties were minutely regulated by mercantilists 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:
(i) The doctrine of self interest,
(ii) Laissez faire policy,
(iii) The theory of competition and
(iv) Profit motive.
Upon these principles and in response to the changing techniques of production
brought about by 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, division of labour, 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.

Property became private and was freed from all obligations to 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 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.

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 following are the economic bases of capitalism:
(i) Private Property:
The institution of private property lies at the basis of modern economic life. It is the
terra ferma of capitalism. In capitalism every person has the right to earn and
maintain property. The right to property is considered an inviolable right.
(ii) Large Scale Production:
It is another important feature of capitalism. Capitalism arose as a result of
industrial revolution which made large scale production possible. The installation of
gigantic plants and division of labour increased production. More production means
wider use of capital and led to more profits.
(iii) Profit Institution:
According to Marx, capitalism cannot exist in the absence of institution of profit. The
capitalists invest money and out of investments earn profit. Production under
capitalism is profit-oriented.
(iv) Competition:
Competition is the inevitable result of a capitalist economy. In capitalism there is
extreme competition between capitalists. Demand is artificially increased and supply
is decreased. There is cut-throat competition under capitalism.

(v) Price Mechanism:

In capitalism the price of a commodity is determined not by the cost of production
but by the law of demand and supply.
(vi) Wage Institution:
In capitalism, the worker is haggled. The objective of the capitalist is to pay as less
wages as possible and to take as much Work out of him as possible. There is
exploitation of labour in capitalism.
(vii) Money and Credit:
In capitalism the institution of credit has become important. The capitalists get
money on loan and develop their business. Thus, despite a lack of capital, the
capitalist increases his property on the basis of credit.
(viii) Business Organisation:
Capitalism is marked by vast business structures. The capital of numerous
shareholders is pooled and an industrial house is set up.
(ix) 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.

Social Consequences of Capitalism:

Capitalism or economic development has brought in some good
consequences which are as follows:
(i) High Standard of Living:
Capitalism is the product of industrialisation. Industrialisation 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.
(ii) 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.
(iii) 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.
(iv) 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.
(v) 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 cooperate 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:
(i) 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.
(ii) 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.

(iii) 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.
(iv) Artificiality:
Capitalism has transformed modern culture into mere artificiality. Today there is
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.
(v) 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. Premarital and extra-marital sexual relations are on the increase. Man is lacking in self
control.
(vi) 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-nots
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.
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.