8/2/2024

Dr. Pramil K. Panda

Xavier Institute of Social Service, Ranchi
Mobile: +91-9199873801
E-mail: [email protected]

 Emergence of the Theory of Capitalism

 Adam Smith (Wealth of Nations)

 Basic Propositions of Capitalism

 Emergence of the Theory of Socialism

 Influence of Karl Marx (Historical Materialism)

 Vladimir Lenin (Socialist Revolution)

 Basic Propositions of Socialism

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 Meaning of Capitalism
 Capitalism is an economic system based on the principle of
individual rights where private actors own and control the
property as per their interests in a free market without any
government regulation
 Origin of Capitalism
 Capitalism as a development model originated in the Western
Europe in the 16th century after the renaissance and passed
through different stages
 Stages of Capitalism
 Agrarian Capitalism
 Originated in the 16th century England with the emergence of large
estate system
 Large acres of land were given in the hands of a few landlords in
exchange of revenue given to the government in the form of tax

 Stages of Capitalism (cont.)

 Agrarian Capitalism (cont.)
 Tenants and labourers were pressurized to increase the productivity
for profit making with the application of better cultivation methods
 Market forces became the driving force of production by replacing the
earlier customary feudal obligations
 Mercantile Capitalism
 Originated in the 17th century with the geographical discovery of sea
routes and expansion of inter continental trade
 It is a system of trade where export of goods overtakes the import of
the same thereby generating more profit
 Industrial Capitalism
 Originated in the 18th century with the commencement of industrial
revolution with the development of manufacturing industries and
mechanization of agriculture
 It is characterized by a complex and specialized division of labour in
the production system
 Expanded and diversified market oriented mass scale production

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 Smith in his book An enquiry into the nature and cause of wealth
of nations (1776) describes the features of capitalism:
 In a laissez faire (leave it alone) economy every individual should
be allowed to pursue her/his own interest to earn profit
 In furthering own interest all individuals together will maximize the
aggregate wealth of nation while being guided by an invisible hand
 Government interventions in commerce and industry must be minimal
 Specialized division of labour increases productivity depending on
market size and results in improvement of labour power
 Capital accumulation is a necessary condition for the economic
development since it enables people to save more & invest more
 Investments are made to earn profit as future expectations on profit
depend on the present climate of investment
 Farmers, producers and businessmen are the agents of growth
through agriculture, manufacturing and trade
 Growth of a nation depends on the availability of natural resources and
the scarcity of natural resource finally stops the growth of a country
bringing its economy to a state of stagnation

 Private Property
 People are free to own tangible and intangible assets
 Self Interest with Profit Motive
 People work in the pursuit of their own benefit by investing
money in order to earn profit
 Large Scale Production
 Establishment of gigantic industries and engagement of labour
with specialized skill sets
 Competition
 Producers compete among each other to capture the market
thereby maintaining the product quality and new innovation
 Labourers compete among each other for more wage and
better employment by improving their skills, knowledge and
capacity to deliver the best

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 Money, Credit and Business Establishment

 Producers can get money on loan through institutional credit
mechanism for establishment of business
 Business organization and industrial houses are set up by
pooling resources from smaller to bigger shareholders
 Free Market Economy with Open Trade
 Price determination of product takes place in an open market
based on its demand and supply
 Consumers are free to choose the product as per their choice
and affordability
 Limited Government Intervention
 There is no price control or distribution regulation of the
government in the production process
 It only protects the rights of private citizens and maintain an
orderly environment for the proper functioning of market

 Meaning of Socialism
 Socialism is an economic system based on the principle of state
ownership where equitable distribution of wealth takes place
among individuals through distributive justice
 Origin of Socialism
 Socialism as a development model originated in Western Europe in
the 18th century as a result of the intellectual and working class
political movement against the blind process of industrialization
 The republican values of American Revolution (1776) and the
egalitarian values of French Revolution (1789) became the
founding principles of Socialism as an ideology
 The influence of Karl Marx’s ideology in 19th century gave a major
impetus to socialism in establishing itself as a development model
 Society has developed from a simple primitive band to the modern
capitalist one through different stages as a result of the conflict
between two classes

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 Dialectics
 Thesis (Idea)→ Antithesis (Opposite Idea) → Synthesis (New Idea)
 Base (Economic) and Super Structure (Politico-Legal)
 Means of Production
 Forces of Production
 Materials, tools, techniques and labour used in producing the economic good
 Relations of Production
 Relationship between owners and non-owners in the production process
 Surplus Value
 Created by non-owners at labour-cost but taken by owners as profit
 Class Struggle through Class Consciousness
 Conflict between social classes to control the economy
 Stages of Development (Historical Materialism)
 Primitive Communism
 Pre-historic classless communal society
 Slavery
 Conflict between master class and slave class
 Feudalism
 Conflict between landlord class and serf class
 Capitalism
 Conflict between bourgeoisie (capitalist) class and proletariat (labour) class
 Socialism
 Modern classless communist society

 Based on the Historical Materialism, Lenin combined Marx’s

economic interpretation with his political action in Russia
 New mode of production would not spontaneously grow out,
human action through a political party is necessary to move
forward the society from capitalism to socialism
 A right leadership is the motive force behind the socialist revolution
 Revolution will come out of contradictions at 3 levels:
 Between Autocracy and Bourgeoisie
 Between Autocracy and Working Class (Peasants & Labourers)
 Between Bourgeoisie and Proletariat (allied with poor peasants)
 Socialist revolution will take place first at the weakest link in
the capitalist chain; not in fully developed capitalist nations
 Since imperialism also benefits working class in capitalist countries
 Russian revolution would be the spark to lead the proletarian
revolutions in the western countries & other parts of world

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 Public Ownership of Resources

 All the material means of production are owned and run by the
state and state organs
 Private enterprises and private properties exist but strictly
regulated by state policies and laws
 Centralized Economic Planning
 The government’s central planning authority takes decision on
production and distribution
 Production and distribution takes place as per the real needs of
people without having any profit motive
 State Regulated Price Mechanism
 Government fixes the price of the product and ensures its
availability, accessibility and affordability to common people
 Lack of Competition in the Market
 Government decides the what, how and why of production by
avoiding all sorts of rivalries and competitions among enterprises
and instead promotes partnerships and collaborations

 Peoples’ Cooperative Participation

 Government adopts the mechanism of community planning
through bottom-up approach
 State plans are made keeping in mind the interest and need of
the community
 Equality of Opportunity
 Government guarantees employment to each and every citizen
based on equal pay for equal work without any discrimination
 Social Welfare of Citizens
 Government focuses on equal rights and equal opportunities for
all citizens
 Everyone is entitled to benefit from the state controlled social
production process
 Non-existence of Social Parasites
 It breaks the division between haves and have-nots and does not
create separate groups of producers and consumers
 Everyone works as per her ability and takes as per her needs

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This presentation is based on the following references

Bassiry, G. R., & Jones, M. (1993). Adam Smith and the ethics of
contemporary capitalism. Journal of Business Ethics, 12(8), 621-
627.
Jahan, S., & Mahmud, A. S. (2015). What is capitalism? Finance &
Development, June, 44-45. Retrieved from
https://www.imf.org/external/pubs/ft/fandd/2015/06/pdf/basics.
pdf
Lane, D. (2021). V. I. Lenin’s theory of socialist revolution. Critical
Sociology, 47(3), 455-473.
Unit-6: Historical materialism. Retrieved from
http://egyankosh.ac.in/bitstream/123456789/18927/1/Unit-6.pdf
Unit-7: Socialism and the working of the socialist state. Retrieved
from https://egyankosh.ac.in/bitstream/123456789/71805/1/Unit-
7.pdf