Topic: Stages of Capitalism Nov 5, 2020

3. FINANCIAL CAPITALISM (1890 – 1933)

Financiers were unaware of production methods, but they were the master of financial juggling. Financiers set the
profits aside rather than buying new equipment to increase productions as the industrialist would have done.
Competition, which was severe, in this era was overcome by the cooperative competition.
Finance capitalism is characterized by a predominance of the pursuit of profit from the purchase and sale of, or
investment in, currencies and financial products such as bonds, stocks, futures and other derivatives. It also includes
the lending of money at interest.
BUSINESS COMBINATIONS
Businesses discovered how to earn large profits by combining their major competing units. Business combinations
include trusts, mergers, amalgamations, pools and exclusive selling agencies.
• TRUSTS
1) A trust company is a legal entity that acts 2) Clients who don’t want or care to manage
as a fiduciary, agent, or trustee on behalf of their day-to-day finances can also benefit
a person or business for a trust. from using a trust company.

3) A trust company is typically tasked with 4) Trusts act as a custodian for trusts,
the administration, management, and the estates, asset management, stock transfer,
eventual transfer of assets to beneficiaries. and beneficial ownership registration.
• HOLDING COMPANIES
1) A holding company owns the outstanding 2) Typically, a holding company doesn’t
stock of other companies. Its purpose is to manufacture anything, sell any products or
own shares of other companies to form a services, or conduct any other business
corporate group. operations.
3) Although a holding company owns the 4) It does not actively participate in running
assets of other companies, it often maintains a business's day-to-day operations of these
only oversight capacities. subsidiaries.
• POOLS or CARTELS
Pools are the written agreements among several companies covering phases of operations such as
territories, prices, outputs, or patents. For example, territory pools demand its members to operate in fixed
given territory to avoid competition. Similarly supply pools limit excessive output in market to create or
maintain the scarcity.
SOCIAL DARWINISM
Herbert Spencer applied Darwin’s theory to social development. According to him the weaker institutions and
businesses might have to be sacrificed to develop the stronger movements. In other words, he meant the survival of
the fittest.
4. NATIONAL CAPITALISM (1933 – 1950)
It is a national control of capitalist system and its aim was to remedy the inequities caused by industrial and financial
systems. In this era ownership of businesses remained in private hands but government intervened for the interest of
public.
National capital gives the lesson that public should realize the importance of business for growth, but businesses
should realize that public welfare is not a gimmick. Public trust is a commodity to be earned.
5. MANAGERIAL CAPITALISM (1933 – 1950)
This era is the professional capitalism. We saw a shift from family management to professional management.
Industrialists and capitalists now became dependent on skilled managers. Managerial capitalists were product
oriented and process conscious. They ambitiously pursue their own ends to meet the company goals and targets.