Capitalism has always involved international trade but today thanks to the

Capitalism has always involved international trade

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Capitalism has always involved international trade, but today – thanks to the computer the Internet, satellites, cell phones, and other technological advances – the economies of most countries are becoming more and more integrated, a process labeled globalization . Complete coverage of capitalism’s central features and defining characteristics has filled many a book. Four features of particular significance – the existence of companies, profit motive, competition, and private property – will be discussed here. Profit in the form of money is the lifeblood of the capitalist system. Companies and capitalists alike are motivated by a robust appetite for monetary gain. Indeed, the profit motive implies and reflects a critical assumption about human nature: that human beings are basically economic creatures, who recognize and are motivated by their own economic interests. Adam Smith provided an answer in his famous treatise on political economy, An Inquiry into the Nature and Causes of the Wealth of Nations (1776) {on Competition}. Free competition , said Smith, is the regulator that keeps a community activated only by self-interest from degenerating into a mob of ruthless profiteers. When traditional restraints are removed from the sale of goods and from wages and when all individuals have equal access to raw materials and markets (the doctrine of laissez faire , from the French meaning “to let [people] do [as they choose]”), we are all free to pursue our own interests. In pursuing our own interests, however, we come smack up against others similarly motivated. Adam Smith tried to explain how economic competition steers the individual pursuit of self- interest in a socially beneficial direction. By appealing to their self-interest, society can induce producers to provide it with what it wants – just as manufacturers of formal slacks and dresses were enticed into jeans production. But competition keeps prices for desired goods from escalating; high prices are self-correcting because they call forth an increased supply. Capital , as an economic concept, is closely related to private property. Putting it simply, capital is money that is invested for the purpose of making more money.
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This chapter looks at two basic ways defenders of capitalism have sought to justify their system: (1) the argument that the moral right to property guarantees the legitimacy of capitalism and (2) the utilitarian-based economic argument of Adam Smith. A common defense of capitalism is the argument that people have a fundamental, natural right to property and that our capitalist system is simply the outcome of this right. One could, of course, reject the whole idea of a natural right to property as a fiction, as, for example, utilitarians do. In their view, although various property systems are possible, there is no natural right that things be owned privately, or collectively, or in any particular system, which way of organizing production and distribution, has the greatest utility.
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