Is Capitalism a Fundamentally Western Concept or System - Essay Example

NAME : XXXXXXXXXX TUTOR : XXXXXXXXXX TITLE : XXXXXXXXXXX COURSE : XXXXXXXXXX INSTITUTION : XXXXXXXXXX @2009 Introduction Capitalism is an economic theory which emphasizes that the means of production should be owned and controlled by those who invest capital for production. Capitalism advocates for private investment as opposed to government controlled economy. The defining characteristics of the capitalism include private property ownership, market exchange, and wage-labor, classes, private interests, competition, capital accumulation and profit maximization. In a capitalist society, input and out of production are produced for market, that is, for sale in an open market. In the capitalist mode of production, inputs and outputs are treated as commodities and are only supplied through the market. It is through sale of output that the capital owner can acquire claims to the surplus-product of human labor and realize those claims as profit. All decisions concerning investment in capitalist society are made by the private capital owners. The workers do not have any say in a capitalistic system. A capitalist society is also characterized by wage-labor. Wage-labor is one of the many ways in which surplus labor is appropriated and distributed. The wage earners are forced to sale their labor because they don’t have access to any other means of subsistence and can acquire means of consumption only through market transactions. Workers in a capitalist society are free in a double sense: they are free from ownership of means of production and they are free to choose their employer (Boucher 1998). The main feature of capitalist production is profit maximization and capital accumulation. Enterprises in a capitalist society are driven by private interests. They maximize net profit by lowering production costs, increasing sale, monopolizing markets and supply and privatizing supply and consumption. One way, in which capitalism low production cost is by paying low wages to their workers, making them to work for long hours and intensifying their work-day. The inherent characteristic of capital accumulation in a capitalistic society is the increased exploitation of workers. They reinvest a large portion of the surplus-product of labor to ensure capital accumulation and output growth. Capitalists purchase commodities with the aim of making more money, additional value and surplus value. All these culminate into more profits which is their main goal. For capitalists, all that matters is to accumulate capital. The development of technology of production is driven by the profitability criteria (Rosenberg 1996). Capitalism is a western concept as it was instigated in the western world in the 16th century. However, it is important to note that some characteristics of capitalism existed in the ancient world. Classes existed even in the Feudal system where we had the landowning aristocracy, the lords, and the agricultural producers, the serfs. The lords owned the land while the serf owned nothing. Thus, the serfs were compelled to produce for the lords in order to sustain their families. They had no interest in technological development and in cooperating with each other. Feudalism therefore laid the foundations necessary for the development of mercantilism and the origins of capitalism in Europe. Capitalism became the dominant economic system in the Western world with the decline of feudalism (Brenner 1977). The earliest stages of capitalism can be traced with the growth of merchant traders and mercantilism in the period between 16th and 18th century. This period was characterized by geographical discoveries by merchant traders and it led to European colonization of America and rapid growth of international trade. Mercantilism also led to the rise of the bourgeoisie class which contributed to the decline of the feudal system. Although commodities were largely produced by means of non-capitalist production, mercantilism entailed a system in which commodities were exchanged for profit. According to Karl Polanyi, the established of the free trade in Britain led to the development of capitalism. European merchants, under mercantilism, made their profit mainly from buying and selling goods. According to Francis Bacon, the goal of mercantilism was to start trade and maintain a well-balanced trade; to do way with idleness, to value manufactures and to control prices. One major characteristic of mercantilism which was in line with capitalism is accumulation of precious metals. The state strived to export more goods than it imported so that foreigners could pay for the difference in precious metals (Polanyi 2001). Mercantilists passed the law that only raw materials that could not be extracted at home could be imported. To encourage production of manufactured goods at home, government subsidies, such as granting of monopolies and protective tariffs, were advocated for by the mercantilists. Advocates of mercantilism stressed that the main aim of the economic policy should be state sovereignty and territory conquest. The state had to acquire colonies from which it could extract raw materials that it was not in a position to supply to its industries. Apart from acting as the source of supply for raw materials, colonies only served as the markets for the manufactured goods. To avoid competition, the state prevented these colonies from engaging in manufacturing of goods and trading with foreign powers. The economic policy of mercantilism was to build and maintain a strong and self-sufficient economy. The only way the state could achieve this was by putting the poor to work. Mercantilism was characterized by monopolistic practices a key feature of capitalism (Wood 1998). The pursuit for economic development in the Western world resulted to the rise of capitalism. Mercantilism led to the shift in focus from agriculture to industrial development. Capitalism became the dominant economic force in Western Europe with the rise of industrialization in the Western Europe in the 18th and 19th century. The development of the laissez fair system which called for minimal state involvement and free market in the mid-18th century also contributed to the spread of capitalism. This era marked the decline of mercantilism and the growth of industrial capitalism. The vast accumulation of capital and investment in machinery during the merchant stage of capitalism gave rise to the development of industrial capitalism. Industrial capitalism led to the development of the factory system of manufacturing. This system was marked by a complicated division of labor and it led to the global supremacy of the capitalist mode of production. Industrial capitalism led to the transformation of the relations between the British landowning gentry and peasants, giving rise to the production of cash crops for market rather than for subsistence on a feudal manor. During the mid- to late-19th century, Britain was recognized as a classic case of laissez-faire capitalism (Sklair 1994). Finance capitalism emerged in the 19th and early 20th century, where the control and supervision of large industries was placed in the hands of financier. This led to the accrual of profits in the financial system. The major features of capitalism during this period included the development of large industrial cartels, a complex banking system and a free market. Industrialization was centered on the production of goods for consumption. The industrial sector consisted of small firms which purchased and sold goods in an open, competitive and free market. Products were manufactured in the factories by use of labor-intensive technologies. The development of factories brought with it the rise of wage-labor. The development of machines led to unemployment as they replaced workers. Since the new factories required unskilled labor, it contributed to low wages. The factory workers could not earn enough to support their relatives or even to provide for their own basic needs. Therefore, the entire family was forced to work in order to survive. The fact that the work at the factories was so automatic that it could be done by a six year old child led to the development of child labor in the society. Most employers preferred to employ children and women since they did not demand to be paid much (Robinson 2004). Colonialism led to the spread of Capitalism in the non-western areas of the world. The motivating force behind Europeans colonization was the aspiration to make new markets for their manufactured goods. The goal of the European government was to increase their exports for manufactured products and to reduce imports of unnecessary products. This resulted to the exploitation of their colonies as they endeavored to acquire raw materials at cheaper prices from these countries. In the 18th century, the British Empire made sure that Latin America, Africa and Asia entered the world economy as providers of raw materials and customers of manufactured goods. This has contributed to the development of the core-peripheral relations. The core include the developed countries with United State as the most powerful state followed by others such as Russia, China, Japan, France, Germany, Europe and Britain. The periphery include the developing countries such Latin America, Asia and Africa. The dependent states export primary commodities, minerals, agricultural commodities and labor, at a cheaper price to the dominant states who manufacture these commodities into products which they sell back to these poor countries at a high cost than they bought them. The dependent states have also served as repositories of surplus capital and outdated technologies. Although money, good and services flow into these dependent states, their allocation is determined by the economic interests of the developed countries rather than their economic interest. This led to the widening gap in terms of wealthy and income between the developed and developing countries (Evans 1979). The increase in foreign investments, for example multinational corporations (MNCs), in developing countries has also led to development of capitalism in these countries. Developed countries have moved on and invested in developing countries in their search for cheap labor and natural resources so that they can make more profit and accumulate capital. Foreign investments in developing countries have not led to development of these countries as it had being speculated. This is because they are exploitative in nature as they have tended to pay low wages and salaries to workers and have over-exploited natural resources in these countries. They also plough back into their country the profit which they get rather than use it to develop these countries. The developed countries have thus developed at the expense of the third world countries. The process of capitalism led to the emergency of the developed, developing and undeveloped countries (Morton 2005). In most Multinational Corporations, workers are forced to work for many hours while as they are paid low wages. To generate surplus labor, the capitalist since he/she owns and controls production and owns the product of labor make sure that the workers generate more value in production than he/she pays them. The ratio between necessary labor and surplus labor is what we call exploitation and it is which creates the surplus value. Workers are used as means to an end, profit maximization and capital accumulation. The workplace facilities and environment in MNCs are a source of health hazards in the third world (Rosenberg 1996). The establishment of nation-states has also contributed to the rise of capitalism in the non-western world. Nation-states strive to improve their position in the hierarchy of the price system by raising the effectiveness of capital exploitation operating within their boundaries. The sovereign state has therefore served as an active contributor to the formation of social relations which leads to development of class struggles. These have promoted disorganization of labor worldwide. The social relationships between states are antagonistic in nature and have led to development of class relations. Nation-states have served to maintain the exploitative system of the capitalist society. They act just like the bourgeois class in protecting their own interests and in facilitating economic expansion. The relations between two states depend upon the degree to which each has developed its means of production, division of labor and internal intercourse. Therefore, the relations between states are just but the expression of a certain economic organization. These relations are prone to change when the organization changes (Sklair 1994). The sovereign states system does create holders of private property. Indeed, state sovereignty entails exclusive control over property. A sovereign state has the power to exclude those outside it from its material wealth. The modern state, international organizations, political parties and interest groups exist to serve the interests of the ruling class. The ruling class uses the state to manage their local and international affairs, by enhancing and enforcing property rights. The ruling class interests dictate and dominate national interests. In the international level, the wealth and politically powerful countries dominate the poor and politically weak countries. International relations are therefore inherently conflictual and are a zero-sum game rather than a positive-sum game. In this modern era, the ruling class which constitutes the state, does not only own the means of production but also controls them. It uses non-economic institutions, such as the media, educational systems, religion, sports and grants, to uphold its authority and position (Morton 2005). Globalization has also contributed to the entrenchment of capitalism in non-western world. The pursuit for surplus accumulation has been the motivating force behind globalization. Globalization has contributed to uneven distribution of wealth and income among modern states. Globalization has made capitalism to be viewed as a world economic system. Some scholars have argued that a number of trends linked to globalization have generated an increase in people and capital mobility in the last quarter of the 20th century. This has led to the limitation of the states power to choose non-capitalist models of production. The growing globalization of capital has led to internationalization of finance and has made it ease for large corporations to relocate their operation to low-wage states (Morton 2004). The fact that capitalist mode of production is privately initiated in a socially uncooperative and unplanned manner, leads to another dominant characteristic of capitalism over-production. This implies that a vital portion of the output cannot be sold at all or can only be sold at a price which cannot lead to maximization of profit, which is the primary goal of capitalism. On the other hand, over-production leads to over-accumulation of productive capital. This results to more investment of capital in production which cannot obtain a normal profit. The end result of these is low economic growth (recession) and in severe cases negative real growth (depression). Consequently, we experience mass unemployment, a situation which is apparent in today’s world (Robinson 2004). In conclusion, capitalism started in the Western Europe in the 16th century. The feudalism system laid the foundation for the emergency of capitalism. Merchant trading and mercantilism marked the earliest stages of capitalism in the period between 16th and 18th century. One of the major features of capitalism is profit maximization and capital accumulation. To achieve this, the capitalist have to acquire raw materials and labor at the lowest prices possible. This led to colonization of the non-western world in an attempt to obtain raw materials at cheaper prices. Colonies also served as markets for manufactured goods. It is therefore through this process that capitalism spread to the non-western countries. In the mid-18th century, the process of industrialization gave rise to the development of industrial capitalism. The introduction of international trade, global markets and globalization has contributed greatly to the spread and entrenchment of capitalism in the non-western areas of the world. References Boucher D. 1998. “Marx and the Capitalist world system”, Chapter 15 in political theories of international relations, from Thucydides to the present. Oxford University Press, Oxford. Justin Rosenberg 1996, ‘Isaac Deutscher and the Lost History of International Relations,’ New Left Review (I/215). Karl Polanyi 2001, The Grand Revolution: The Political and Economic beginning of Our Time. Boston: Beacon Press, chapters 3, 4 and 5 (‘The Rise and Fall of Market Society’) Leslie Sklair 1994, ‘Capitalism and Development in Global Perspective,’ in Sklair (ed.) Capitalism and Development. London: Routledge. Meiksins Wood 1998, The Origin of Capitalism. New York: Monthly Review Press. Morton A. 2005. ‘The Age of Absolutism: capitalism, the modern states-system and International relations’ in Review of International Studies, 31, 495–517. Morton, A. D. 2004. ‘New follies on the state of globalization debate’ in Review of International Studies, 30:1, 133-147. P Evans 1979, Dependent Development. The Alliance of Multinational, State, and Local Capital in Brazil. Princeton, NJ, Princeton University Press. R. Brenner 1977, ‘The Origins of Capitalist Development: A Critique of Neo-Smithian Marxism’, New Left Review 103:25-92 W.I. Robinson 2004, A Theory of Global Capitalism. Production, Class, and State in a Transnational World. Baltimore, Johns Hopkins University Press. Read More