Capitalism. 1

Capitalism
An economic and political system in which a country’s trade and industry are
controlled by private owners for profit.
Capitalism, also called free market economy or free enterprise economy, economic
system, dominant in the Western world since the breakup of feudalism, in which
most means of production are privately owned and production is guided and
income distributed largely through the operation of markets.
 The essential feature of capitalism is the motive to make a profit.
Pillars of capitalism
Capitalism is founded on the following pillars:
1. Private property, which allows people to own tangible assets such as land
and houses and intangible assets such as stocks and bonds;
2. Self-interest, through which people act in pursuit of their own good, without
regard for sociopolitical pressure. Nonetheless, these uncoordinated
individuals end up benefiting society as if, in the words of Smith’s 1776
Wealth of Nations, they were guided by an invisible hand;
3. Competition, through firms’ freedom to enter and exit markets, maximizes
social welfare, that is, the joint welfare of both producers and consumers;
4. A market mechanism that determines prices in a decentralized manner
through interactions between buyers and sellers—prices, in return, allocate
resources, which naturally seek the highest reward, not only for goods and
services but for wages as well;
5. Freedom to choose with respect to consumption, production, and
investment—dissatisfied customers can buy different products, investors can
pursue more lucrative ventures, workers can leave their jobs for better pay;
and
6. Limited role of government, to protect the rights of private citizens and
maintain an orderly environment that facilitates proper functioning of
markets.
Capitalism as a theory in IR:
Capitalism in international relations refers to the role and influence of capitalist
economic systems on the interactions and dynamics among nations in the global
arena. It involves the impact of market-driven economies, private ownership of
businesses and resources, and the pursuit of profit on international diplomacy,
trade, security, and geopolitics. Here are key aspects of capitalism in international
relations:
 Economic Interdependence: Capitalism fosters economic interdependence

among nations. Countries engage in trade, investment, and financial
transactions on a global scale, leading to complex economic relationships.
 International Trade: Capitalist economies are typically characterized by a

strong emphasis on international trade. Nations seek to maximize their
comparative advantages, leading to the exchange of goods and services
across borders.
 Multinational Corporations: Large multinational corporations often play a

pivotal role in international relations. They operate globally, influencing
economies and sometimes having more resources and power than individual
countries.
 Geopolitical Influence: Capitalist nations often use their economic power as

a tool of geopolitics. Economic sanctions, trade agreements, and trade wars
are common strategies used to exert influence and achieve political
objectives.
 Ideological Influence: Capitalism as an ideology can shape international

relations. It can promote values such as individual liberty, free markets, and
democracy, influencing other nations’ policies and practices.
 Inequality and Globalization: Critics argue that capitalism can exacerbate
economic inequality both within and between nations. Globalization, driven
by capitalist principles, has led to debates about its impact on jobs, wages,
and social stability worldwide.
 Crisis and Cooperation: Capitalist economies can experience financial

crises that have global ramifications. International cooperation through
organizations like the International Monetary Fund (IMF) and the World
Trade Organization (WTO) is essential to manage and mitigate these crises.
 Soft Power: Economic success and cultural exports of capitalist countries

can contribute to their “soft power,” influencing the world’s perception of
their values and way of life.
 Dependency Theory: Some countries argue that capitalism can lead to

economic dependency on more powerful capitalist nations, affecting their
sovereignty and development.
In summary, capitalism in international relations refers to how market-oriented

economies and the pursuit of profit impact the interactions, policies, and dynamics
between nations in a globalized world. It’s a central aspect of contemporary
international diplomacy and geopolitics.

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Capitalism

 Economic Interdependence: Capitalism fosters economic interdependence

 International Trade: Capitalist economies are typically characterized by a

 Multinational Corporations: Large multinational corporations often play a

 Geopolitical Influence: Capitalist nations often use their economic power as

 Ideological Influence: Capitalism as an ideology can shape international

 Crisis and Cooperation: Capitalist economies can experience financial

 Soft Power: Economic success and cultural exports of capitalist countries

 Dependency Theory: Some countries argue that capitalism can lead to

In summary, capitalism in international relations refers to how market-oriented

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