What are the basic principles of Capitalism?



Capitalism operates on the principle of huge con­centration of money on machinery and raw materials with a view to pro­duce at large scale so that the goods can be made available at the lowest rates.

This results in enormous expansion in business and enterprise because it is not possible for any one individual to become the sole pro­prietor, even though he is fabulously wealthy.


(b) Enormous Capital:

The working of capitalism is possible only through huge capital. At this, money is generally raised from the finan­ciers or money-lender, it presupposes the existence of a powerful class of money-lender which makes fabulous profits.

This money-lender class exercises profound influence on industry and promotes or kills it by mak­ing available necessary finances or withholding the same.

(c) Machinery:


Capitalism presupposes large scale production to meet the country-wide or even world-wide demands, it inevitably implies the adoption of machinery and other mechanical device.

As use of machine and other mechnical devices involves huge expenditure his inevitably leads to the need of large scale production of goods. For the consumption of these products a constant effort is made to find out and maintain markets. This give rise to middlemen and advertisements.

(d) Labour:

Labour is another important element of capitalism. But under capitalism the labour is paid the barest minimum to keep him alive. Effort to made to reduce the number of workers by improvements in the machinery. Even where the workers are absolutely essential effort is made to reduce the cost by engaging the women and children, who are wiling to work at lower wages.


Further, with the growth in unemployment, the capitalist purchases the labour like any other commodity. He pays wages ‘to the labourer not in accordance with the requirements but in accordance with the principle of supply and demand.

(e) Organization:

Finally, the large-scale enterprise under capitalism entails a network of organization-for finance, for raw material, for pro­duction and for marketing.

The organization is essential for the rising of capital from various sources, procurement of raw materials from all pos­sible sources, recruitment and training of large number of workers needed for the various stages of production as well as for the transporta­tion and distribution of goods for sale over the world. To regulate the activities of the various organization, a small body exists at the centre which exercises centralized control over all these activities.

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