Capitalism is a politico-economic system based upon private and the pursuit of private profit through entrepreneurial activity (Worthington et al, 2009; 486). In today’s society it is the identical to a free market system.
To understand the capitalist system is it important to look at the different perspectives of capitalism offered by economists. Liberalist see capitalism as a self-governing market that has free trade based on comparative advantage in which a country has the ability to produce goods/services at a lower cost to another country, this can be related to Smith’s ‘system of natural liberty’. Karl Marx’s (1976) contribution of capitalism is more focused on the exploitation of workers (proletariat) by capitalists (bourgeoisie) in order to make profits. He believes this will lead to a major crisis in future. Schumpeter’s (1934) view on capitalist economy is that it is a ‘perennial gale of creative destructions’ meaning that when an innovator creates a new business opportunity, it destroys the market power and profits its competitors had gained previously resulted through their innovation. A polanyian perspective focuses on the social aspects of capitalism. Polanyi believes that a free market adds a strain and there is need for state intervention to stabilise social cohesion and prevent social breakdown.
According to Kaletsky (2010) capitalism is simply not a ‘static system’ that follows a rigid set of rules characterised by a permanent division of responsibilities between private enterprise and the government, in fact it is an evolutionary system. Over the last two centuries the global capitalist system has gone through three main stages that can be described as anarchic, managed and remarketised capitalism.
Fulcher (2004) states that industrial capitalism made its breakthrough in Britain during the 18th Century, and into the early 19th century. He called this stage ‘Anarchic capitalism’. The conduct in which the capitalist entrepreneurs were...