Th Five Major Components of Capitalism - Essay Example

Thе five major components of capitalism are commodities, money, labour power, Means of production, and production. Explain and demonstrate the relationship between these using a capitalist enterprise as an example. Name of the Student: Name of the Instructor: Name of the course: Code of the course: Submission date: Thе five major components of capitalism are commodities, money, labour, power, means of production, and production. Explain and demonstrate the relationship between these using a capitalist enterprise as an example. Capitalism is an economic system which promotes private accumulation of wealth. In order to accomplish this, it encourages mass production of commodities which is in turn met by rigorous campaigns to ensure that the commodities produced are sold at a favorable price (Robins, 2010). This is practically what all capitalist organizations in the world are put into practice (Ritzer & Jurgenson, 2010). They strive to attain access to private means of production and afterwards engage in marketing and sale activities that enable them to sell their commodities. To individual people, capitalism is manifested through their strive to increase the wages (Robins, 2010). They work harder in order to accumulate more money and wealth. This essay takes deep insight into capitalism from the perspective of a capitalist organization. The aim of the essay is to discuss the relationship between the five major components of capitalism i.e. commodities, money, labour power, means of production, and production, and how they relate to a real capitalist enterprise. This essay will define each of the aforementioned components. It will also introduce Fortescue Metals as an example of a capitalist enterprise to demonstrate how each of the components of capitalism applies in practice. Each of the components will be discussed in order illuminate on their importance in contributing on the process of wealth accumulation. The five components of capitalism are defined in this section. Commodities are products which an organization offers for sale in the market (Ritzer & Jurgenson, 2010). They are an organization’s output. Money is a legal tender and is used as a means of exchange in trade (Harman, 2004). Labour power is the ability to have adequate numbers of manpower. A means of production is a process; infrastructure and capacity to produce (manufacture) commodities (Ritzer & Jurgenson, 2010). Production is the actual process of manufacturing commodities, eg mining (Ritzer & Jurgenson, 2010). Fortescue Metals is one of the largest iron ore mining companies in iron ore rich Australia and is introduced in this paper to illustrate the application of the five components of capitalism as defined above. According to Fortescue Metals (2012c), the company was started in 2006 and in few years since its inception, it has emerged to be one of biggest miners in the country (Fortescue Metals, 2012c). Fortescue Metals is a major player in the industry, being the fourth largest iron ore producer in the world (Fortescue Metals, 2012c). The company invested a significant amount of money as capital and has an asset base worth US$ 15,063,000,000 as at 2012 (Fortescue Metals, (2012d). It secured a private means of production, a competent and huge work force, engaged in mass production of iron ore and marketed its commodities aggressively. The outcome of these actions was the generation of more money, that is vast returns on invested capital as highlighted in the company accounts (gross profits of US$ 2,666,000,000 in 2012) (Fortescue Metals, (2012d). Fortescue Metals has accumulated private wealth thus exhibiting inherent characteristics of a capitalist organization. The subsequent section will consider each of the five components of capitalism with respect to Fortescue Metals. The first major element of capitalism is money. With a total of US$ 15,063,000,000 worth asset base and gross profits of US$ 2,666,000,000 in 2012, it can be acknowledged that money is a major element in Fortescue Metals. It is the investment of money that enables an organization to have the opportunity to make even more money. It is important to acknowledge that money is the motivating factor to organizations; they want to make more money, hence be able to accumulate more wealth (Harman, 2004). The words of Adam Smith “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest” (Smith 1776, 1981) can be used to show that it is the interest of making money that people and organizations engage in business. Therefore, money and capitalism have a close relationship. The main objective of capitalist organizations is making profits. For this reason, capitalist organizations always try to come up with strategies which ensure that they are able to maximum profits (Robins, 2010). To a capitalist, the end justifies the means. This point can be seen with Fortescue Metals. In their pursuit of accumulated wealth and growth compromises on resources and historical cultural sites may have been aggressively sought. For example, Fortescue Metals is currently in legal dispute over local Indigenous claimed land, a matter which will be ultimately decided by the Courts (Georgatos, 2012). In addition to money motivating capitalists, it is also a means by which they are able to achieve their objectives. In every industry, it is important note that capital is a major factor which determines the ability of an industry to carry out its objectives in the market and also to ensure that they are able to grow in addition to maintaining a high level of competitiveness. Looking at Fortescue Metals, it can be acknowledged that it has invested a lot of money in its mines (with an asset base worth US$ 15,063,000,000) (Fortescue Metals, 2012b). The company boasts of modern technologies and highly skilled manpower. This has only been possible because of money. In a capitalist market, companies invest huge sums of money in a bid to ensure that they are competitive in addition to reinvesting their profits, hence being able to accumulate more wealth (Fortescue Metals, 2012b). Therefore, it can be appreciated that money is a major element in capitalism. The second element of capitalism is a means of production. Using its financial resources has been able to get a means of production which comprises of iron ore rich fields and modern mining technologies. Fortescue Metals boasts of three mines, all of which enable the company to supply China and the larger Asia region with large amounts of iron ore. In a capitalist system, a means of production enables an individual or organization to dominate the market (Robins, 2010). Market domination involves increasing the market share and supplying it with commodities, hence being able to increase its revenue leading to the private accumulation wealth. Fortescue Metals has been able to secure land in the iron rich regions of the country on which it has set up mines. Moreover, the company has connected the mines to the national railway network with a good rail network to transport the heavy iron ore (Fortescue Metals, 2012a). The company has also invested in modern mining technologies, hence being able to mine large volumes of iron ore in short durations of time (Fortescue Metals, 2012b). The company’s means of production has enabled Fortescue Metals achieve its capitalist objectives. The third element of capitalism is labour power. Labour power enables an organization to execute its processes. Fortescue Metal has sourced for skilled manpower to run and manage its mining and business activities. It can be acknowledged that labor power is behind Fortescue Metals success in the market, owing to its influence in enabling the company implement its strategies. The company engages in rigorous recruitment and selection programs which are supported by a strategic human resource management (Fortescue Metals, 2012a). Taking an analysis of the influence of labour power in Fortescue Metal’s success, it can be acknowledged that human capital is a major element in capitalism. It provides a means by which an organization is able to execute its plans and strategies, hence being able to accumulate more wealth. From the above discussion, it can be acknowledged that Fortescue Metal’s labor power has been a major element in the company’s capitalistic operations. The fourth major element of capitalism is production. The mining process is the production element of Fortescue Metals. With a stable means of production which is supported by a competent labor force, Fortescue Metals has embarked on mass production. Within its first year of operation, the company was able to sell 27 million tonnes of iron ore, which is a relatively large amount considering that this was the company’s first year of operation. Over the initial three years, the company produced over 125 million tonnes (Fortescue Metals 2012a). Currently, Fortescue Metals is the fourth largest iron ore producer in the world (Fortescue Metals (2012a). The high production was achieved because of the sustainable means of production and the adequate supply of labor which were in turn made possible by the money which the company had invested in its mines. It can be argued that the company wanted a fast payback on its investment, hence embarked on mining more iron ore in order to shorten the payback period. Moreover, the company wanted to make huge amounts of money (money as a motivating factor) hence producing more iron ore. On this point, it is important to acknowledge that production is a process which leads to the formation of commodities. Therefore, capitalist organizations try to maximize production and at the same time trying to ensure that the production costs are as low as possible (Ritzer & Jurgenson, 2010). A look at Fortescue Metals practices shows that the company engages in many cost lowering and production increasing activities, hence being able to achieve the high production amounts. From this, it can be appreciated that production is a major element in capitalism; it is a means by which organizations are able to regulate their output. The last major element of capitalism is commodities. Commodities are the products which an organization produces. The commodity /product which Fortescue Metals produce are iron ore. In a capitalist society, consumers purchase as much products as they can be able to (Ritzer & Jurgenson, 2010) (Robins, 2010). They aim at increasing their personal wealth to maximum levels possible. On the other hand producers try to sell as many products as possible so as to generate the maximum possible amounts of revenue (Ritzer & Jurgenson, 2010). On this note, it is important to acknowledge that Fortescue Metals engages in rigorous market campaigns in order to ensure that its sells as much iron ore as possible. Looking at commodities from a buyer point of view, it is important to note that China & Japan among other countries in Asia are the major consumers of Australia’s Iron ore; the large manufacturing industry in Asia consumes all of Australia’s iron ore. Owing to the fact that the buyers are also capitalist in nature, they always want to grow, hence buying more iron ore. This has increased the demand of the iron ore, hence leading to an increase in production levels, a reassessment of Fortescue Metals’ labor power (hiring more people), reassessment of the company’s means of production (increasing the number of mines) and ultimately money (reinvestment). The company aims at producing 155 mtpa by 2014, which is an indicator of the increasing market demand or iron ore (Fortescue Metals, 2012a). With the large amount of revenue generated from the sale of iron ore, Fortescue Metals has been able to reinvest in the mining industry, thus explaining its high expansion and growth rate. This is the cycle of capitalism; the more an organization gets, the more it strategizes on how to get more; hence creating a close relationship between the five elements discussed above and capitalism. In conclusion, it can be seen from this essay that there is a close relationship between capitalism and the five elements discussed. Money acts as a motivating factor to capitalists and also gives them an ability to invest. A means of production gives an organization a way of producing commodities. Labor force enables an organization to execute its strategies. Production in turn provides a means of creating commodities. Production provides a means to the make products / commodities. It has been seen that commodities are the products of an organization. The more commodities that an organization is able to sell, the more revenue it is able to generate, hence accumulating more wealth. From this paper, it can be concluded that there is a close relationship between money, means of production, labor power, commodities and production and capitalism, hence making the five elements the major elements of capitalism. References Fortescue Metals, (2012a). Working with Fortescue, Fortescue Metals, Retrieved on 29th March 2013 http://www.fmgl.com.au/People_and_Careers/Working_with_Fortescue Fortescue Metals, (2012b). Investors and Media, Fortescue Metals, Retrieved on 29th March 2013 from http://www.fmgl.com.au/investors_and_media Fortescue Metals, (2012c). Company Overview, Fortescue Metals, http://www.fmgl.com.au/about_fortescue/Company_Overview Fortescue Metals, (2012d). Financial Reports, Fortescue Metals, Retrieved on 29th March 2013 from http://www.fmgl.com.au/UserDir/FMGReports/Documents/Fortescue%20Annual%20Financial%20Report%202012142.pdf Georgatos, G.,(2012). Conflict Allegations Surface In Yindjibarndi, Rortescue Battle, Yindjibarndi Aboriginal Corporation, Retrieved on 29th March 2013 from http://yindjibarndi.org.au/yindjibarndi/?p=2855 Harman, C., (2004). The Rise of Capitalism, International Socialism Jouranal,102 (1); 1-5 Ritzer, G., & Jurgenson, N., (2010). Production, Consumption, Prosumption The nature of capitalism in the age of the digital ‘prosumer’, Journal of Consumer Culture, 10(1); 13-36 Robin’s, R., (2010). Global Problems and the Culture of Capitalism, 5th ed. Pearson, Boston Smith, A. 1776 (1981). An Inquiry Into the Nature and Causes of the Wealth of Nations. Indianapolis, Indiana: Liberty Fund.  Read More