Capitalism was the most predominant economic system till 1917, when a socialist economy came into existence for the first time. Since it has become fashionable to criticize capitalism, it continues to be the cynosure of academic discussion.
The capitalist economy goes by various names such as 'free enterprise system’, ‘the market system', ‘the price system', 'free private enterprise' and so on. Here first of all we shall examine some of the definitions given by eminent authorities, before we would probe deeper into the nature and performance of this type of economic system.
According to Hobson, "Capitalism may provisionally be defined as the organization of business on a large scale by an employer or company of employers possessing an accumulated stock of wealth wherewith to acquire raw materials and tools and hire labour, so as to produce an increased quantity of wealth which shall constitute profit."
G.D.H. Cole has defined capitalism as a "system of production for profit under which instruments and materials of production are privately owned and the work is done mainly by hired labour, the product belonging to the capitalist owner or owners."
Prof. Pigou has defined capitalism as "a system in which the material instruments of production are owned or hired by private persons and are operated at their orders with, a view to selling at a profit the goods or services that they help to produce."
John Strachey says, "By the word capitalism we mean an economic system under which the fields, factories or mines are owned by individuals. These means of production, as they are called, are worked by those who do not own them for the profit of those who do."
D.N. Wright observes, "Capitalism is a system in which on average much the greater portion of economic life and particularly of net new investment is carried on by private (i.e., non-government) units, under conditions of active and substantially free competition and avowedly at the least under the incentive of a hope for profit."
In the words of Loucks, "Capitalism is a system of economic organisation featured by the private ownership and use for private profit of man-made and nature-made capital.”
Without critically going into the merits of these definitions, we may say that capitalism is an economic system in which land and other productive are mostly owned by the private individuals and are operated to earn profit, in which in spite of a degree of State intervention, economic activities are mostly unplanned and uncoordinated. From our point of view, we shall not only designate the American" economy as capitalistic but shall bring the economies of Canada, England, Australia, Japan and France, etc., also under contemporary capitalism. This is, notwithstanding the fact that the term "capitalistic" has become untouchable to many in the modern international community and each would rather prefer to be designated as a ‘mixed economy.