Understanding Capitalism (Part 1)

Capitalism discusses about the social sciences, economics and politics. The word capitalism comes from the Latin language "capitale" which in English means life stock. Taken from the word "caput" meaning head count. Formerly, caput was a symbol of wealth. In ancient Rome, property was identified by the number of head of livestock owned. But then, the word ‘capital’ was often used to refer to the capital economic terms such as "money" or "investment of money" (Ritzer, 2005: 75).

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The ideology of capitalism pioneered by Adam Smith in 1776 in a book entitled “An Inquiry into the Nature and Cause if the Wealth of Nations”. This theory defines about economic activity emphasizes the individualistic principle where there is no interference from the state (McNally, 1990: 86). Thought Adam Smith inspired by the thought of the fisiokrat idea developed by Francois Quesnay (1694-1774). Quesnay assumed that the existence of the privilege enjoyed by the merchant would eventually lead to dissatisfaction of the peasantry. This was evidenced by the emergence of the French Revolution in the late 18th century. The fisiokrat then asked the government not to intervene in economic activities. For the sake of improving the situation, several things must be abolished. Monopolies, trade barriers and easiness to a group of people was something that should be eliminated (Deliarnov, 2006: 23).

The main points of the ideas of Adam Smith is that economic activity is most appropriate when described as an individual action. Individuals should be free to pursue and ensure the well-being or personal wealth (Friedman, 2003: 104). Capitalism emphasizes individual freedom to work or free enterprise. Smith sums up capitalism in the main themes of wealth, the division of labor, human nature, market mechanisms, as well as liberalism (Deliarnov, 2006: 24 ).

For Smith, individualism indicates the order of the market economy. The principle of individualism rather than cause chaos or disorder, but as forming competitive market equilibrium (Chilcote, 2010: 554). The capitalist system will automatically search for market expansion. This is a result of human nature and selfish individual. The desire to accumulate as much capital triggers the growth of the network to the foreign market (McNally, 1990: 87).

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