Capitalism is a historical social system which is derived from the term "capital”,

which means accumulated wealth. Historical capitalism came to be used with a

primary objective or intent of self – expansion. In such a system, an individual or a
group of individuals might decide at any time that they would like to invest capital
with the objective of acquiring more capital. But in historical time it was never an
easy task to do it due to factors such as lack of labour power, lack of marketing
skill, lack of buyers etc. . 

It was because in historical times because not every element which was required
was commoditised. Thus, the historical development of capitalism has involved
the thrust towards the commodification of not only exchange but also production,
distribution and investment.

Production process was linked to one another in a complex commodity chain, for
e.g. if a particular product has to be produced we need raw material, machinery,
and labour. Each of these items have to produced and the items that go into their
production in turn have to be also produced as every sub process in commodity
chain was commoditized. Once such commodity chain linking multiple production
processes were established it was clear that the rate of accumulation for the
entire capitalist became a function of how a wide margin can be created in a
situation where margin could fluctuate considerably.

This created first elementary contradiction in the system i.e. while the interest of
capitalist was to reduce the cost of production, these reductions frequently
favoured particular capitalist against others and some therefore preferred to
increase their share of smaller global margin rather than accept a smaller share of
a larger global margin. Second contradiction in this system was that as more and
more capital was accumulated, more and more processes commoditized, and
more and more commodities.

The economics of capitalism has thus been governed by the rational intent to
maximize accumulation. But what was rational for the entrepreneur was not
necessarily rational for the workers. And even more important what was rational
for all entrepreneurs as a collective group was not necessarily rational for any
given entrepreneur.
Historical capitalism is thus that concrete, time - bounded, space - bounded
integrated locus of productive activities within which the endless accumulation of
capital has been the law that has governed in fundamental economic activity.

Using this description of what one means by historical capitalism we can figure
out the origin of this historical system which is located in the late 15 th century
Europe and the later in the 19 th century how it got spread globally. Such a thin
description of time - space boundaries evokes 2 different kinds of doubt 1.
Empirical doubt 2. Utility of inductive classification. 

If we look at the functioning of capitalist system we will realise that the

producer’s objective is to mainly accumulate capital and to get the highest profit.
And in order to achieve. One such significant element is "labour power “which is
totally based on *availability and it's *cost. There usually two kind of work force,
first is variable work force and second is fixed work force.

In some cases the producers work force was only himself or his family , hence by
definition fixed. In some other cases, a non - kin related workforce like slavery ,
bonded labou etc. was present. 

It's in the context of household structure that a social distinction between

productive and unproductive work to be imposed on the working classes. Former
is characterized as money earning work, mainly done primarily by adult male and
mainly was done outside household in the ' work place '. Latter is characterized as
non - productive work which did not produce any surplus , non - commoditized,
task primarily done by adult female, and was done mainly inside the household . 

Male wage earner were thus considered as *breadwinners and female home -
work as the *housewife. Thus sexism was institutionalized.

Commodification of labour was extensive but at the same time limited. For
example, The producer employing wage labour would always prefer to pay less
than more , the wage worker located in a household with a high percentage wage
income will never prefer a wage work located in a household that has low
percentage of wage income . The reason for this difference was because of
minimum acceptable wage threshold which has to do with economics of survival.
The socialist societies of Eastern Europe and Soviet Union on the other hand
differed from one another in significant respects such as intensity, span and
effectiveness of central control, in the extent of popular support or resistance and
in the degree of timing of efforts at reform. Notwithstanding these differences
within “formerly existing socialism,” Verdery follow theorists such as Kornai in
opting for a single analytical model of it.  The family resemblances among socialist
countries were more important than their variety for analytic purposes.

She compressed elements of a longer discussion, emphasizing how production

was organized and the consequences of this for consumption and for
markets. Socialism’s fragility begins with the system of “centralized planning”
which the center neither adequately planned nor controlled. Central planners
would draw up a plan with quantities of everything they wanted to see produced,
known as targets. They would disaggregate the plan into pieces appropriate for
execution and estimate how much investment and how many raw materials were
needed if managers of firms were to fill their targets. So they would respond by
bargaining their plan: demanding more investments and raw materials than the
amounts actually necessary for their targets. Every manager and every level of the
bureaucracy, padded budgets and requests in hopes of having enough, in the
actual moment of production. And, if managers somehow ended up with more of
some material than they needed, they hoarded it. Hoarded material had two
uses: it could be kept for the next production cycle, or it could be exchanged with
some other firm for something one’s own firm lacked. These exchanges or barters
of material were a crucial component of behavior within centralized planning.

A result of all the padding of budgets and hoarding of materials was widespread
shortages, for which reason socialist economies are called economies of shortage.
Shortages were sometimes relative and sometimes absolute. The causes of
shortage were primarily that people lower down in the planning process were
asking for more materials than they required and then hoarding whatever they
got.

With all this padding and hoarding, it is clear why shortage was endemic to
socialist systems, and why the main problem for firms was not whether they
could meet (or generate) demand but whether they could procure adequate
supplies whereas the chief problem of economic actors in Western economies is
to get profits by selling things. In other words, capitalist firms compete with each
other for markets in which they will make a profit; socialist firms competed to
maximize their bargaining power with suppliers higher up. In our society, the
problem is other sellers, and to outcompete them you have to befriend the buyer.
Thus our clerks and shop owners smile and give the customer friendly service
because they want business; customers can be grouchy. In socialism, on the other
hand the competitor was other buyers, other procurers; and to outcompete them
you needed to befriend those higher up who supplied you. In a word, for
capitalists salesman-ship is at a premium; for socialist managers, the premium
was on procurement.

A similar weakness in vertical power relations emerges from the way socialist
production and shortage bred worker’s oppositional consciousness and
resistance. Among the many things in short supply in socialist systems was labor.
Managers hoarded labor just like other raw material, because they never knew
how many workers they would need and as a result managers of firms had
relatively little leverage over their workers, that is, workers under socialism had a
somewhat more powerful position relative to management than do workers in
capitalism.

More than this, the very organization of the workplace bred opposition to Party
rule.