Why Is Capitalism So Prevalent In The Global Economy?

This essay is about why capitalism is so prevalent in the global economy. This essay explains what capitalism is, the driving force behind its expansion, and what factors helped capitalism go global.

Why is Capitalism so Prevalent in the Global Economy?

In today's economy, capitalism is probably the most widely used system. To under why capitalism is so widespread in the global economy, we must first understand what capitalism is. From there we can begin to look at the expansion of capitalism and what spurred its development. Also, what factors helped drive capitalism global.

To first understand why capitalism is so widespread in the global economy lets have a better understanding of what capitalism is. Capitalism, also called free market economy, or free enterprise economy, is an economic system in which the method of production and distribution are privately or corporately owned and development is balanced to the growth and reinvestment of profits gained in a free market. In other words, capitalism is a social system based on the belief of individual rights (Capitalism 2007).

The driving force behind the expansion of capitalism was the growth of the English cloth industry during the 16th, 17th, and 18th centuries. The trait of this development that distinguished capitalism from previous systems was the use of the surplus of production over consumption to increase productive capacity rather than to invest in economically unproductive enterprises, such as pyramids and cathedrals. This characteristic was encouraged by several historical events (Capitalism 2007).

For example, World War I was a clear turning point in the development of capitalism. After the war, international markets shrank, the gold standard was abandoned in favor of managed national currencies, banking supremacy passed from Europe to the United States, and trade barriers multiplied. The Great Depression of the 1930s brought the policy of laissez-faire, noninterference by the state in economic matters, to an end in most countries and for a time cast doubt on the capitalist system as a whole. The performance of capitalism since World War II in the United States, the United Kingdom, West Germany, and Japan, however, has given proof of its continued life (Capitalism 2007).

Essentially, the expansion of capitalism is due to the increase of interconnectedness of markets in different countries. This procedure is reflected in the growth in international trade, foreign investments, and particularly in the rise in international financial flows. The common feature in all these processes is the increase in the international mobility of wealth (Helibroner 2002).

So, what drives the globalization of

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