50 capitalism/capitalist
century SOCIALISM. The special quality of money or
“capital” in capitalism, where it is saved and invested
to create morewealth, is a unique economic phenome-
non. British LIBERALphilosopher John Locke described
its origins in his Second Treatise of Government(1690).
In Locke’s theory, private property comes from a per-
son mixing his labor or work with the common
unowned earth or nature (granted to humankind by
God) and producing new value. Then money is
invented to represent that labor-produced value and
property. If enough money is saved and used to buy
other people’s labor, which produces more value or
profit, the money “earns” more wealth or “interest” for
the owner. Money that produces more wealth is “capi-
tal.” So capitalism is an economy dominated by
invested capital, wage labor, banks and interest, pro-
duction of commodities (goods produced for exchange
or sale), and material incentives.
Capitalism has dominated Western economics since
the 17th century and the world economy since the
20th century. It tends to be very efficient in exploiting
natural resources, workforces, and markets. Capitalism
generates enormous wealth and material prosperity,
but critics claim it causes wide divisions of wealth and
poverty. Karl Marx, the father of COMMUNISM, claimed
that capitalism exploits all workers, is just a certain
stage of human history, and inevitably leads to social-
ism. Socialism in Marx’s view generates “capital” but
uses it for general social needs rather than private
profit. The historical experience of socialism has not
justified Marx’s claim that it would be more productive
and fair than capitalism. Instead, socialist economicsThis cartoon depicts a man holding a cornucopia, symbol of prosperity, standing in U.S. territory, bordered by other countries.
(LIBRARY OFCONGRESS)