Functioning of a Capitalist Society Essay

How a Capitalist Society Works

Capitalism is an ideology and an economic system based on the notion of private ownership of production factors as well as their profit-making operations.

The concept of the free market is critical to understanding capitalism. The free market in this civilization is a system of consumption and sales in which prices are determined by the forces of demand and supply.The supply and demand are economic concepts that mean that when the prices of goods and services are higher, people are discouraged from purchasing them (Ravikumar, Arvind).

In this society, the free market and private property rights serve as the basis for development, distribution, and trade. All the economic activities relating to production as well as the sales and distribution of commodities are controlled by the wealthy class. The distribution of products is determined by the various competitors available in this market. Different historians, political economists, and economists have held different perspectives on how the capitalist state function and have recognized the various forms of its practice; this entails state capitalism, welfare capitalism, the free market of laissez-faire. The scope of state ownership, role regulation, and intervention and the degree of competition available vary from one model of capitalism to the other.

In the capitalist society, the rules defining private ownership and the extent to which the different markets are free is a matter of policy and politics.

Most of the existing capitalist societies all over the world are mixed economies implying that they combine the elements of the free market with some level of governmental intervention. The capitalist systems that have the varying degree of government intervention seem to be dominant in the world today especially in the Western world and have continued to spread all over the globe. The capitalist society has been criticized for exploiting the working class majority since it hands power to the minority capitalist’s state. The minority owners of factors of production in this country tend to prioritize revenue over the environment and natural resources. Those people who support this system are of the opinion that it improves the production of goods and services since it creates substantial economic prosperity, yield productivity, and growth that significantly benefits the society. The capitalist society also facilitates an efficient system that simplifies the allocation of resources.

Capitalism is driven by the individual’s desire to accumulate wealth by ownership of the factors of production and employment of the majority of society. The markets are driven by the wants and needs of the consumers and the overall community. In the Laissez-faire form of capitalism, there is minimal regulation when it comes to the pricing of services and goods. Many of the capitalist societies all over the globe play a critical role in the market, but in various instances, the state will intervene to correct market failures, guarantee public safety, conserve natural resources and promote welfare. In the free market state, the forces of demand and supply take to play a critical role. The supply of the commodity is mainly determined by the buyer’s willingness to buy and the exact price that they are willing to pay. Any distributor who fails to set the price accurately is bound to incur losses. An increase in demand for service and goods will mean that the prices will also increase and a fall in demand for services and products will mean that prices will drop. The market can stabilize and form an equilibrium when the demand and prices finally meet.

In the capitalist society, the primary motive of any business is to make money.

Based on this assumption, businesses will do anything to maximize the shareholders' wealth even if it goes against the societal values. This is the primary reason why the government comes in to act as a regulator. In a capitalist society, stiff competition among producers is also common. The seller in this market will try to achieve goals such as increasing sales volume, market share, and profit. The sellers tend to compete with another seller while the buyer competes with other buyers. The stiff competition leads to shortages as there are no resources to satisfy the need of all people in society. The motivation available in this form of society results from the self-interest of the numerous economic agents. In that establishment, the market is driven by the material incentives. The manufacturers are supposed to produce products with an expectation of generating profit.

In a capitalized society, there is no central decision-making structure. The existing forces of demand and supply direct the actions of the decision makers. The seller of goods and services have the option of offering those commodities on which they expect high returns. The information structure in this market is also decentralized, implying that decision making and information are spread across the players in the market who are at the same level. The real economic growth, inflation rate, and the level of unemployment are some of the economic factors that are used to determine the level of stability within these economies. The economy in the capitalist state is forever unstable because of fluctuations in economic growth, unemployment, as well as inflation. The income in capitalism is distributed according to the qualification and skills the individual possesses. Those persons who have the capital resources, skill, as well as resources, tend to receive higher incomes while the lowest incomes are allocated to those persons who do not have any qualifications.

The level of economic growth is measured by the increasing gross domestic product in the key components. The level of economic growth is said to be slow in this state. When there is a steady rise in gross domestic growth, then the economy is said to be growing steadily. There are some cases of economic fluctuations, for example, an economy going into a recession that affects this society. As the level of individual and firms' proficiencies improves in this society, so does the ability of people to move from one social class to the other because of the increased wealth. Because of this reason, people tend to work extra harder because of the financial motivation. The increases in profits allow the expansion of the individual and family resources that when used effectively leads to foreign investments that end up benefiting the society even further. The individuals in this state are free to engage in the available economic activities without any restriction. In this society, the capitalists develop well-organized and well-knit distribution channels under their control and guidance. Another important aspect is that the manufacturers produce all the commodities that the consumers desire. The capitalist often imposes their own decision upon the users of goods and services. Consumer sovereignty is the major determiner of the market economy movement. The decision made by the consumer of goods and services is always final, and producers must adjust their production line to act by the preference of buyers, or they are alienated from the market.

The capitalist society and democracy seem to be contradictory. A real democracy in any part of the world exists in an environment where there is no gross economic inequality, and no particular class controls the state. In the capitalist society, the state is controlled by the elite group. In some capitalist societies, the fruits of democracy are only enjoyed by those people who hold power. The elite class will in many cases formulate laws that favor the dominant class, and this qualifies this social establishment to be a democracy of the elites. The state is an instrument of exploitation. The ruling class is the owners of factors of production who will use the state machinery to suppress the majority of instance workers by offering them low wages so that they retain much of the profits for wealth accumulation. Exploitation is always possible because the capitalists control the working hours, the sale of the products, the production of the commodity, the purchase of labor, and anything that is connected to the manufacture of goods and services. The entire financial system is also controlled by the minority capitalist class. To tide off any unnecessary competition, the investors will spend vast sums of money on improving the production plant so that they remain ahead of the competitor. In this society, labor is sold and bought just like other products.

The capitalist society implies that the capital owner will proceed and produce any commodities that they deem fit or desire. There is always a minimal restriction that government’s labor and land, giving the owners of factors of production an upper hand in all decisions related to production. Such a scenario is quite dangerous, as capital holders can determine the course of production without considering other aspects of society, for instance, environmental safeguard, compensation, and workers' conditions. The rich have the opportunity of generating more profit at the expense of the poorly paid employees. Because the economic activity is fueled by the desire to generate more revenue, there is no guarantee for welfare. In such a society, there is no guarantee that income disparities witnessed will narrow. The rich continue using their resources to generate more money because of the favorable economic environment, hence the gap between the wealthy and the have-nots continues to expand.

In conclusion, the capitalist society revolves around a high degree of income inequality, which stems indirectly or directly as a result of this social establishment. Capitalism has become a stable economic system that various countries all over the world practice. Capitalism is a stronger institution that allows people to fulfill their desires, implying that it's meant to stay. Above all, the possibility of different economic practices, perspectives, and visions must be grounded in the reality that the entire population shares the earth and that we are capable of creating public policies and economic systems that preserve the well-being and health of all the creatures that exist as well as the planet.

Work Cited

Ravikumar, Arvind. “Market Capitalism, State Capitalism, And Community Capitalism.” SSRN Electronic Journal, 2010, Elsevier BV, doi:10.2139/ssrn.1674745.

Deadline is approaching?

Wait no more. Let us write you an essay from scratch

Receive Paper In 3 Hours
Calculate the Price
275 words
First order 15%
Total Price:
$38.07 $38.07
Calculating ellipsis
Hire an expert
This discount is valid only for orders of new customer and with the total more than 25$
This sample could have been used by your fellow student... Get your own unique essay on any topic and submit it by the deadline.

Find Out the Cost of Your Paper

Get Price