PILLARS OF CAPITALISM
Capitalism, as discussed above, is the economic system in which the means of production and distribution are privately owned and operated for profit. It is based on four pillars. Just drop one the whole system will collapse.
Interest is the part and parcel of capitalism. When the socialism in theUSSRwas abolished, the first thing subsequently introduced was the interest. Every credit business transaction involves interest in addition to profit. Interest rate is determined by demand and supply of capital.
2. Price & Profit
Price of goods is determined on the demand and supply of goods and services. If the demand is high prices will be high and vice versa. Price includes cost of production, distribution, and profit margin (markup) per unit. Profit is the strongest motivating factor for the businessman.
3. Economic Speculation
Economic speculation is an essential ingredient of capitalism. Through it future expected prices ale determined and, accordingly, future plans are worked out. Stock exchanges, bullion markets, cotton exchanges, oil exchanges are some of the examples to quote.
4. Joint Stock Company
Joint Stock Company is an artificial being, intangible, and invisible created by law. It can sue, be sued, and enter into agreements unlike sole proprietorship and partnership. It allows its promoters to do business with the amount four times their original investment. If the promoters invest Rs.l00, the same amount is obtained from the shareholders making it Rs.200. With this amount the company can borrow the amount equivalent to the total, here Rs.200. Hence, with Rs.l00 the company’s real worth becomes as Rs.400/-.