History of Capitalist Theory - Overview

Overview

Conception of what constitutes capitalism has changed significantly over time, as well as being dependent on the political perspective and analytical approach adopted by the observer in question. Adam Smith focused on the role of enlightened self-interest (the "invisible hand") and the role of specialization in promoting the efficiency of capital accumulation. Ayn Rand maintained that capitalism is the only morally valid socio-political system because it allows people to be free to act in their rational self-interest, and asserted that no politico-economic system in history has ever proved its value so eloquently or has benefited mankind so greatly. She defined it as a social system based on the recognition of individual rights, including property rights, in which all property is privately owned, and adduced that capitalism is the unknown ideal: people not knowing its nature, with the tacit compliance and silence of those who know better, and being its foundations battered by a flood of altruism, which is the cause of modern's world collapse. Robert LeFevre, an American libertarian and primary theorist of autarchism, defined capitalism as savings and capital in essence as the savings made by men which are then invested in the tools of production. Some proponents of capitalism (like Milton Friedman) emphasize the role of free markets, which, they claim, promote freedom and democracy. For many (like Immanuel Wallerstein), capitalism hinges on the extension into a global dimension of an economic system in which goods and services are traded in markets and capital goods belong to non-state entities. For others (like Karl Marx), it is defined by the creation of a labor market in which most people have to sell their labor power in order to make a living. As Marx argued (see also Hilaire Belloc), capitalism also differs from other market economies that feature private ownership through the concentration of the means of production in the hands of a few.