key term - Capitalism

Definition

Capitalism is an economic system where private individuals or businesses own capital goods, and production and prices are determined by competition in a free market. This system emphasizes individual entrepreneurial freedoms, profit motive, and limited government intervention. Capitalism became a prominent force during significant historical transformations, driving innovations and economic growth while also sparking debates around social equality and government roles in the economy.

5 Must Know Facts For Your Next Test

1. Capitalism emerged prominently during the Industrial Revolution, facilitating mass production and technological advancements that transformed economies.
2. The profit motive drives businesses in a capitalist economy to innovate and improve efficiency to attract consumers and maximize earnings.
3. Different forms of capitalism exist, including laissez-faire capitalism, which advocates for minimal government interference, and welfare capitalism, which combines free market principles with social welfare policies.
4. Critics argue that capitalism can lead to significant income inequality and social stratification, sparking discussions about the balance between free markets and social justice.
5. Throughout the 20th century, capitalism played a crucial role in shaping global economics, especially after World War II, as nations adopted capitalist frameworks to rebuild their economies.

Review Questions

• How did capitalism influence the changes brought about during the Industrial Revolution?
  • Capitalism significantly influenced the Industrial Revolution by promoting innovation and mass production. As businesses sought to maximize profits, they invested in new technologies and methods of production, leading to increased efficiency and output. This transformation not only changed how goods were produced but also altered labor dynamics, creating new job opportunities while challenging traditional artisan economies.
• Evaluate the relationship between capitalism and socialism in the context of 19th-century Europe.
  • The relationship between capitalism and socialism in 19th-century Europe was marked by intense debate and conflict over economic ideologies. While capitalism thrived through industrial growth and wealth accumulation among entrepreneurs, socialism arose as a response to the inequalities created by unregulated markets. Socialists advocated for collective ownership of production means to promote equality, leading to significant political movements that challenged capitalist practices throughout Europe.
• Assess how the principles of capitalism were evident during the Cuban Missile Crisis and their implications on global politics.
  • During the Cuban Missile Crisis, the principles of capitalism were evident in the economic competition between the United States and the Soviet Union. The U.S. sought to contain communism—a system opposed to capitalist values—by maintaining economic sanctions against Cuba. This crisis highlighted how capitalist ideologies influenced foreign policy decisions, revealing tensions between market-oriented democracies and socialist states while shaping Cold War dynamics. The events underscored capitalism's role not just in economics but also in geopolitical strategies.

Related terms

Free Market: An economic system where prices for goods and services are determined by the open market and consumers, with minimal government intervention.

Industrialization: The process of developing industries in a country or region on a wide scale, which was fueled by capitalist principles during the 18th and 19th centuries.

Socialism: An economic and political system where the means of production are owned or regulated by the community as a whole, contrasting with capitalism's private ownership.