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ictionary of American History | 2003 | COPYRIGHT 2003 The Gale Group Inc. (Hide copyright information)

CAPITALISM is an economic system dedicated to production for profit and to the accumulation of value by private business firms. In the fully developed form of industrial capitalism, firms advance money to hire wage laborers and to buy means of production such as machinery and raw materials. If the firm can sell its products for a greater sum of value than that originally advanced, the firm grows and can advance more money for a new round of accumulation. Historically, the emergence of industrial capitalism depends upon the creation of three prerequisites for accumulation: initial sums of money (or credit), wage labor and means of production available for purchase, and markets in which products can be sold.

Eliminating negative features of capitalism while preserving positive ones is not a simple or straightforward matter. As Robert Heilbroner observed, a medical metaphor is inappropriate. It is not possible to "cure" capitalism of its diseases and restore it to full health. Moreover, measures that eliminate one problem can help produce the next. For example, if government spending and transfers provide a "floor" to soften depressions, inflationary tendencies can result. But a historical perspective helps underscore the fact that capitalism is not an immutable system; it has changed in the past and can continue to do so in the future.