Economic Theory of Capitalism - Essay Example

It can be said that capitalism has had a huge impact on the sovereignty of the states, which have come to depend on it completely. It has, in fact, been said that it undermines state sovereignty because decisions that governments have to make have to put into consideration their impact on international affairs (Anderson 85). An example of this is oil-exporting countries, which heavily depend on the income from this product to fund their national budgets. Moreover, if these countries were to act in a way that displeases the international community, then they would be forced to abandon such decisions through the placing of sanctions on their exports by those countries, which import their oil (Hobson 64).

Moreover, because of capitalism, many countries have economic interests in other countries. To protect these interests, it has become necessary for the power to meddle in the political affairs of the weaker ones. This has not only made the latter countries lose their sovereignty, but it has also encouraged their overdependence on more developed nations for economic aid. In many countries, it has been found that economic power is disproportionately balanced so that a few hold most of the wealth while the rest only hold very little or none at all (Lenin 18).

This has created a situation where individuals own the majority of the resources in the society and this has made the gap between the rich and the poor to widen. The rich become richer while the poor have continued to become poorer as the cost of living increases while their income has remained the same. The economic policies of many countries tend to be left in the hands of politicians, who make decisions about things or places they are unacquainted with, lack of adequate information about the framework to design effective and correct policies and programs to facilitate the development of their people.

This has led many nations to pursue policies that are detrimental to the equal development of all their citizens, as they have tended to secure the status quo; namely, the rich being favored at the expense of the poor, who make up the majority of many societies the world over (Schumpeter 105). The potential for social chaos because of this, as propagated by Marx, is quite possible especially when one considers that the trickle effect policies propagated by capitalists do not seem to work. It is a fact that economic inequality is a reality among the majority of the world’s population and this has come about mainly because of the fact that capitalist policies have become dominant.

Despite this situation being rampant the world over, most of the people with the power to make a difference are either unwilling or unable to do so because they do not want to disturb the status quo as it is.