The Economy in a Global Age

Arslan Asif
• For much of the nineteenth and twentieth centuries, the
core battleground in politics was the contest between
two rival economic models, capitalism and socialism.
• This nevertheless culminated in the victory of capitalism
over socialism, registered in particular through the
collapse of communism.
• Capitalism is not one system but many: different forms of
capitalism have taken root in different parts of the world.
• How do these capitalisms differ, and what are the
implications of these different forms of socio-economic
organization?
 Background
• The origins of capitalism can be traced back to seventeenth-century
and eighteenth-century Europe, developing in predominantly feudal
societies. Feudalism was characterized by agrarian-based
production geared to the needs of landed estates, fixed social
hierarchies and rigid patterns of obligation and duties.
• Capitalist practices initially took root in the form of commercial
agriculture that was orientated towards the market, and
increasingly relied on waged labour instead of bonded serfs.
• The most significant development in the history of capitalism came
with the industrial revolution, which developed from the mid-
eighteenth century onwards, first in the UK but soon in the USA and
across much of Europe.
• Industrialization entirely transformed societies through the advent
of mechanized and often factory-based forms of production, the
increasing use of the division of labour and the gradual shift of
populations from the land to the expanding towns and cities.
 Types of Capitalism
• It is possible to identify three types of
capitalist system:
1. Enterprise capitalism
2. Social capitalism
3. State capitalism.
 Enterprise capitalism
• Enterprise capitalism is widely seen, particularly in the Anglo-
American world, as ‘pure’ capitalism: that is, as an ideal towards
which other capitalisms are inevitably drawn (Friedman 1962).
• The home of enterprise capitalism is the USA and the UK.
• Nevertheless, the principles of enterprise capitalism have been
extended far beyond the Anglo-American world through the
impact of economic globalization, which has gone hand-in-hand
with the advance of marketization.
• Enterprise capitalism is based on the ideas of classical
economists such as Adam Smith and David Ricardo (1772–1823),
updated in the form of neoliberalism by modern theorists.
• Its central feature is faith in the untrammelled workings of
market competition, born out of the belief that the market is a
self-regulating mechanism (or, as Adam Smith put it, an ‘invisible
hand’).