Mastering Politics: Capitalism
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Understanding politics isn’t easy – and that’s why we have our own ‘politics put simply’ column, Mastering Politics. This time, we’re explaining the meaning of capitalism.
What is capitalism?
Capitalism is, first and foremost, an ideology. This means that it’s a system of ideas and beliefs about the economy and social aspects of running a government and a country.
Capitalism is founded on the idea that a country’s trade and its industries are owned and controlled privately by independent companies. This is instead of industries being owned by the government (or the state), as is the case in socialism.
In capitalism, anything that can make a profit can be owned privately, such as the Royal Mail (which was sold by former Chancellor George Osborne in 2015), our railway services (e.g. Virgin Trains).
What policies are capitalist?
While capitalism can have a range of policies, there are a few cornerstone ones to be aware of:
— Privatisation: government-owned industries are sold off to private companies so that the government has less involvement in people’s lives.
— Low taxes: capitalism favours letting businesses and individuals keep most of the money they earn by keeping taxes as low as possible.
Margaret Thatcher and capitalism
There is one ‘iconic’ capitalist in politics – it’s Margaret Thatcher. She was the first female Prime Minister, in office from 1979 to 1990. Thatcher’s capitalism transformed Britain massively.
Thatcher famously said: “The problem with socialism is that you eventually run out of other people’s money.”
She believed hugely in privatisation. Under Thatcher, over 50 companies were privatised (including the power and water industries), resulting in £50bn being made for the government.
Margaret Thatcher believed in individualism (the habit of being self-sufficient; making your own living), hence her slashing of taxes for all. She did not believe in benefits as, in her view, they encourage laziness and a lack of ambition.
The positives of capitalism
1). You are able to keep more of the money you make.
2). Capitalism allows a lot of money to quickly flow to the government.
3). Capitalism has allowed for globalisation – the connected nature of the world where countries trade, often freely, with each other, like within the EU.
Criticisms of capitalism
1). There is less government involvement, meaning fewer schemes to help people financially, including benefits.
2). Capitalism creates an obsessive focus on profit, which leads to a large inequality gap, both financially and socially.
3). Capitalism has resulted in the overproduction of goods and reckless borrowing from banks. This led to the Great Depression and the 2008 financial crash.