7.1 The Effect of Capitalism on Social Class

LO 7.1: Compare Marx and Weber’s insights on social class.

There are several types of economies: traditional, command, planned, capitalist, and mixed. In a traditional economy, the economic system is organized according to  a group’s customs, traditions, and norms. In a command economy (or planned economy), the ruling class or government decides what goods and services the group produces. Feudalism, which existed in Western Europe during the Middle Ages, is a type of command economy. Under feudalism, the ruling class extended protection to people of lower rank, who fought for the ruling class in battle and worked their land in exchange. Socialism and communism are also command economies. Both emphasize public ownership of the means of production. Under socialism, individuals can still own property. In communism, all property is owned collectively by the people in the community. Several countries use command economies, including Belarus, Cuba, Iran, Libya, North Korea, and Russia (World Population Review, 2024).

In contrast, capitalism, or a market economy, has three key features: market competition, private ownership of the means of production, and the pursuit of profit (see Chapter 6). Capitalist economies are more common than command economies. However, most nations have a mixed economy, neither purely capitalist nor command-based. The United States is one of the most strongly capitalist nations in the world. However, its economy incorporates elements of a command economy, as it involves some government regulation of economic activities.

Photo 7.2

The U.S. Government Requires Food Products to be Labeled

Early social thinkers theorized the development of capitalism and its consequences for people. Karl Marx (1818-1883) lived during the First Industrial Revolution, and Max Weber (1864-1920) during the Second. Yet they both witnessed tremendous macroeconomic changes, which shaped their understanding of social class. Marx focused on how a person’s class position was determined by whether they belonged to the bourgeoisie and owned the means of production or were a member of the proletariat, that is, a laborer. In contrast, Weber viewed social class more broadly, emphasizing that a person’s social class position resulted from their access to power, property, and prestige. A Marxist approach emphasizes the bourgeoisie’s exploitation of the proletariat class. In contrast, a Weberian approach focuses on what is known as opportunity hoarding (Wright, 2015), which is discussed later in the chapter.