Does Capitalism Control the State or Vice Versa - Essay Example

?Does Capitalism Control The Or Does The Control Capitalism? By In any economic system, there is the interaction between managers and entrepreneurs. This interaction mainly results in the organization of various processes in the economy. The most important aspect of the interaction is the pulling together of resources, technology, and labour, in order to enable the successful production and distribution of goods within the economic system. Nonetheless, different economic systems vary in the way this interaction is organized, and this aspect highly determines the culture and political ideals of the specific economic system (Smelser & Swedberg 2005). Since the past decades, various scholars of Economics have studied this aspect, and developed different frameworks for perceiving it. Nonetheless, this paper focuses on capitalism, and argues that the state controls capitalism. The argument pressed forward draws on the views of the prominent scholars in Economics, including Karl Marx and Karl Polanyi. The influence and contribution of Karl Marx in Economics was felt through most part of the 19th Century. In the 19th Century, Karl Marx was highly interested in studying the role of economy in society. He therefore, came up with a theory, which could be used to study the evolutionary effect that economy had on the society. Marx therefore, argued that human beings are primarily driven by material interests (Smelser & Swedberg 2005). These material interests, also according to Marx, were a key determinant of various structures and processes in society. Most importantly, Karl Marx is known for propagating the element of capitalism in Economics. He coined the term capitalism to describe a system in which only a small group of individuals in society control a large amount of wealth, capital, or money. In such capitalistic societies, power and wealth is concentrated in the hands of only a few individuals, whose major aim is to ensure the maximization of profits. Through this therefore, there results what Marx referred to as class struggles. In this case, the relations of production enter into conflict with the forces of production. This consequently leads to a revolution, thus, new mode of production (Smelser & Swedberg 2005) Apart from Karl Marx, Karl Polanyi also addressed important aspects in Economics, which contribute to the understanding of capitalism, as coined by Karl Marx. In his work, “The Great Transformation,” Karl Polanyi critiques the utilitarian outlook of human economies, including the principle of laissez-faire and capitalism, which he also refers to as “market economy” (Polanyi 1944). Polanyi argued that in the 19th Century, it was impossible to develop a self-regulating market system. Polanyi however, notes that in the 19th Century, the economy, which is a unique aspect in society’s history, became an independent system, which functioned according to its own laws. Therefore, with regard to Polanyi’s previous works on the aspects of embeddedness and disembeddedness of the economy, in relation to the society, one can therefore, be able to note the uniqueness of the 19th Century economy (Krippner 2001). According to Polanyi, before the emergence of capitalism, the aspect of economy or market in society was embedded in people’s social relations (Miguel 2011). For this reason, the economy or market was hard to distinguish from other social relations, as in this case, it was neither self-regulating nor independent. Polanyi also postulated that capitalism, which he considered the disembedded economy, was independent of other social relations, thus unique, and was guided by its own specific laws. Nonetheless, Polanyi further argued that the aspect of disembeddedness of the economy was destructive, as compared to when the economy is embedded in social structure forms (Ozel & Yilmaz 2005). On the contrast, Granovetter (1985) argued that embeddedness, and not disembeddedness, was problematic in society. For this reason, it can be thought that Polanyi supported that the economy be controlled or governed by other non-economic and social authorities, as was the case when it was embedded in social structure forms. Nonetheless, from the arguments and viewpoints of Karl Marx and Karl Polanyi, it is possible to determine how the state controls capitalism. As seen from the postulation of Karl Marx, it is agreeable that the state becomes capitalistic in nature when the bourgeoisie achieve political victory (Jessop 1990). This instance results in the expansion of the state, with regard to its functions, especially the economic functions, and leads to the widening of the sphere of action of the state. According to Harman (1991), when the state becomes capitalistic in nature, it becomes necessary or imperative that the state intervenes and controls various aspects in society. On the other hand, if the argument of Karl Polanyi is put into perspective, it then might be argued that capitalism plays an important role in society, and shapes the society. As Polanyi argued that when the economy is embedded, it is under the control of other social and non-economic authorities, unlike when it is disembedded from the forms of social structure, and becomes destructive (Smelser & Swedberg 2005). For this reason therefore, capitalism, which according to Karl Polanyi is the disembedded economy, will control society, and be the basis for various decisions in society. Therefore, the economy will decide on various decisions in society, and it will carry various social relationships, instead of it being carried in the various social relationships, as it were the case before the emergence of capitalism. Therefore, the economic system in society will bear various social relationships. In this case therefore, the economy is independent, and not influenced by other social and political aspects. There are various forms of capitalism that have been developed. However, a major characteristic of capitalism forms is that there is no government control in the market. This therefore, is the opposite of socialist economies, where there is a higher level of government control in the market, as well as political interests. Therefore, in order to argue that capitalism controls the state or the state controls capitalism, it is significant to show how either of them shapes the other, including what level or kind of influence each has on the other. The pure form of capitalism as argued by Karl Marx can be considered to be less relevant today. What is quite clear today is that the government has state has taken over capitalism, and controls it. This is evident in the manner through which governments of most countries intervene in their economies in a bid to put to a limit the concentration of power, as well as the find possible solutions to various social problems, which result from the unchecked interests of the private commercial sector. There are therefore, a number of evidence, which can prove that the state controls capitalism. For instance, labour legislation is an important aspect, which Karl Marx developed to refer to the first conscious intervention of society in the important social process. It is however, important to note in this case that the state in the present times has come to represent an organization of the ruling class. The state today therefore, has taken on the functions, which favour social developments. However, these interests are aligned with the interests of the bourgeoisie, who are the ruling and dominant class (Trigilia 2002). It is therefore, possible to explain labour legislation as the immediate interest of the capitalistic class, which is assumed to be the interest of the society in general. Therefore, it is evident that the aspect of labour legislation as argued by Karl Marx is a major way through which the control of state of capitalism manifests. In view of the argument by Karl Polanyi on capitalism, it is also possible to view the state as controlling capitalism. As seen, Polanyi had argued that in the 19th Century, it was not possible to establish a free-market system, which was self-regulating. In this regard, the major argument of Polanyi was that elements of the economy are subject to other non-economic elements, thus cannot exist independently (Smelser & Swedberg 2005). These non-economic elements include political motives, social status, as well as religious motives. With regard to capitalism as an independent, disembedded economy or ‘market economy,’ Polanyi argued that ideally, this should be unique and independent of political system in society. Additionally, capitalism should be free of influence or manipulation from blood relations, legal compulsion, and religious responsibilities, among others (Polanyi 1944). Contrary to this, an analysis and comparison of the economic situations of various economies today show that capitalism in these economies is not free from the interference of the political systems and other non-economic factors. This proves that the state has taken over capitalism, and controls it. Additionally, in order to prove and understand how the state controls capitalism, it is paramount to consider role of government in economies. A guiding point is that, in ideal capitalism, there is a free-market economy, with no government intervention or control. In this regard, Rodrik (1998) in his study investigated the reasons as to why open economies have bigger governments. A major assumption from this study was that a positive correlation exists between the trade exposure of a country and the government scope. Nonetheless, according to Rodrik (1998), this kind of relationship has resulted in the difficulty of separating the aspects of government size, openness, and economic growth. Additionally, Rodrik has shown that there is a fast and increased expansion of governments in open economies. This is partly influenced by the fact that openness influences government consumption. For instance, in economies, where there is a high external risk, the government will resort to increasing the share of domestic output, which the same government that consumes. Rodrik (1998) argues that government intervention in economies is common in most economies, and remains a significant aspect, without which global free trade would collapse. To support this argument, Rodrik (1998) identifies some economies in the world, including Spain, Chile, United States, and European states such as Sweden, Netherlands, and Austria, among others, in which government intervention has played a crucial role to them in the past. Nonetheless, this clearly points to the fact that the state controls capitalism, as the economy today is not in the hands of individuals, but the state makes major decisions that influence different aspects in the economy. Rodrik (1998) mainly focused on the importance of government intervention, especially in reducing the amount of external risk in international trade. Similarly, Kurlantzick (2012) notes that there are different benefits, such as a secured economy, that result when the state controls capitalism. In a different view, Tridico (2012) is considered to have focused on the rather negative effects of government intervention in the economy. In his paper, Tridico (2012) explores the root of the 2007 -2009 economic crisis that was experienced in the United States and other economies of the world. The major aspect blamed for this economic crisis is the financial and global capitalism. Bremmer (2009) shares a similar view with Tridico (2012), who postulates that the various institutions that were responsible for the regulation of the economy failed in their mandate, thus leading to the crisis. Form this; it is evident that individuals no longer control the economy. Instead, it is state corporations, which are mostly mandated with the regulation of the economy. Therefore, unlike in the past decades, where an economic crisis could be caused only by external influences such as wars, natural disasters, global pandemics, and oil shocks, among others, today, economic crises result from internal influences, and this is a consequence of state-controlled capitalism. In this case, therefore, a remedy to the economic crises that are caused by internal influences can be achieved by renewing the system and developing a new form of governance, which has a higher capability of controlling the market. In this regard therefore, it appears that capitalism has ceased to be an individuals’ affair, but has been taken over by the state. Another important argument that would help understand how the state controls capitalism involved the linkage between the state and capitalism, and democracy. Today, there is a marriage between democracy and capitalism. However, it is agreeable that capitalism and democracy serve different interests. Democracy is intended to serve the interests of the majority, while capitalism on the other hand serves the interest of specific individuals in society. Today, however, there seems to be an impression of a marriage between capitalism and democracy, as most states that consider themselves as democracies have embraced capitalism, which they control (Streeck 2011). For this reason, such nations experience a clash of interests between the majority and the minority groups in society. Nonetheless, this shows that the state today has taken over the responsibility of controlling capitalism, yet this was outside of its mandate in the past. Streeck (2011) noted that it is impossible for democracy and capitalism to go hand in hand. Therefore, realizing the fact that if the rulership of the majority poor would result in the diminishing of private property and free markets, the bourgeoisie, who are also capitalists, wanting to protect themselves from a possible government system that would advocate for economic and social redistribution, deemed it necessary for themselves to be the key constitutes of the ruling or political class, and to abolish democracy. Since it is impossible or highly challenging to abolish democracy, the bourgeoisie considered it important to have a high level of compatibility between democracy and capitalism. For this reason therefore, in the years after the Second World War, capitalism came under the subject of extensive political control. This control on capitalism was manifested, and is still manifested today through the aspects of nationalization of major firms in the country, as well as workers’ co-determination (Streeck 2011). This is all done in a bid to protect democracy, while upholding capitalism. Nonetheless, this form of capitalism, which could be referred to as “democratic capitalism” has resulted in economic crises due to market-distorting political interventions for social objectives (Trigilia 2002). Nonetheless, this points out how the state controls capitalism, but mostly resulting in negative outcome. In conclusion, this essay has shown that the state controls capitalism. Major focus of the discussion has been drawn from the viewpoints of Karl Marx and Karl Polanyi on the subject of capitalism. Karl Marx argued that in capitalism there is free market, with no intervention from the government, as only a few individuals control the economy, and these own a greater quantity of wealth. This therefore, does away with the existence of pure capitalism in society today. This is for a major reason that the state today controls capitalism through intervening in the economy. Additionally, there is the nationalization of various key firms in the state, which have a major influence on the economy. This and other scenarios such as reduction of risks in external trade show that the state has a higher control over capitalism today. However, the control of capitalism by the state culminates in both negative and positive effects. This is because the ruling class attempt to strike a balance between their economic interests and those of the majority, though a higher inclination is towards their interests. Works Cited Bremmer, B 2009, “State capitalism and the crisis,” Accessed 12 December 2013 Harman, C 1991, “The State and Capitalism Today,” International Socialism, 2(51): 3–57. Accessed 12 December 2013 < http://www.isj.org.uk/?id=234> Granovetter, M 1985, “Economic action and social structure: The problem of embeddedness.” American Journal of Sociology, Volume 91, Issue 3. Jessop, B 1990, “State Theory: Putting the Capitalist State in Its Place.” Penn State Press, New York. Krippner, G 2001, “The elusive market: Embeddedness and the paradigm of economic Sociology,” Theory and Society, 36 (6): 477-513. Kurlantzick, J 2012, “The Rise of Innovative State Capitalism,” Bloomberg BusinessWeek, June 28, Accessed 12 December 2013 < http://www.businessweek.com/articles/2012-06-28/the-rise-of-innovative-state-capitalism > Miguel, N 2011, “Karl Polanyi and the New Economic Sociology: Notes on the Concept of (Dis) embeddedness,” RCCS Annual Review, issue no. 3, Accessed 12 December 2013 < http://rccsar.revues.org/309> Ozel, H. & Yilmaz, E 2005, “What Can Marxists Learn From Polanyi?” Accessed 12 December 2013 < http://yunus.hacettepe.edu.tr/~ozel/POLANYI_VS_MARX.pdf> Polanyi, K 1944, “The Great Transformation: The Political and Economic Origins of Our Time,” Beacon Press, Boston. Rodrik, D 1998, “Why do more open economies have bigger governments?” Accessed 12 December 2013 Smelser, N & Swedberg, R 2005, “The Handbook of Economic Sociology,” (eds). Accessed 12 December 2013 < http://press.princeton.edu/chapters/s7994.pdf> Streeck, W 2011, “The Crises of Democratic Capitalism,” New Left Review 71, September – October, 2011. Accessed 12 December, 2013 < http://newleftreview.org/II/71/wolfgang-streeck-the-crises-of-democratic-capitalism> Tridico, P 2012, “Financial Crisis and Global Imbalances: Its Labour Market Origins and the Aftermath,” Cambridge Journal of Economics, Accessed 12 December 2013 < http://host.uniroma3.it/facolta/economia/db/materiali/insegnamenti/547_6726.pdf> Trigilia, C 2002, “Economic Sociology: State, Market, and Society in Modern Capitalism,” Read More