“Since the working-class lives from hand to mouth, it buys as long as it has the means to buy” observed Karl Marx, the 19th-century German philosopher and economist, in his remarkable book – Das Kapital.
In this article, an attempt is made to understand what is capitalism and how it is heading toward a slow and natural death.
What is Capitalism?
In layman’s parlance, capitalism is defined as a political and economic system in which factors of production are owned by private entities for profit making. The core objective of capitalism is making of profit. Capitalism, also known as a free market economy or free enterprise economy, is very foremost in the enlightened Western world since the time feudalism vanished. It is keenly a system in which property is owned by private actors and production is managed and income is distributed mostly through market operations. Adam Smith’s invisible hand doctrine, which refers to invisible factors which move the free market economy, has a remarkable impact on the sheer principles of Capitalism. The extreme case of Capitalism has its traces in the laissez-faire theory. Laissez-faire theory advocates the idea of “let go” and “leave alone”. Capitalism professes the idea of the less government intervention in the economy, the better its businesses and citizens. Laissez-faire theory demands no government control, lack of regulations, checks and balances. To a large majority of political economists, capitalism, however, slowly inching towards its natural death.
The History of Capitalism
According to Btritanica.com, capitalism has its roots germinated in the early 16th century. The essence of modern capitalism originated in the growth of the English clothing industry in the 16th through 18th centuries. The key feature that distinguishes it from other economic systems is the use of accumulated capital to expand productive capabilities rather than investing it in unproductive avenues. The Protestant Reformation demanded the reverence of hard work and other virtues over acquisitive efforts. The rising inflation also contributed to the growth of Capitalism. The stride of the increase of pays was slower than that of prices. The early capitalists enjoyed the rise of nation states during the rise of mercantilist era. The fiscal and monetary policies formulated by these states gave rise to the notion of uniform monetary systems and legal procedures, essential for economic development and ultimately ensured the transition from public to private initiative.
Criticisms of Capitalism
This is an unmaintainable way to establish society and it will ultimately ruin under the weight of its own inconsistencies, Marx argues. Although no time frame was given by Marx, only that it is unavoidable. The supporters and critics of capitalism agree that the prime objective of capitalism is economic growth. But the question is what kind of growth. Its dark side derives from three anomalies that limit its effectiveness. The first criticism relates to the unreliability of growth. The root cause of capitalism is profit maximization at whatever cost. Whenever an opportunity springs, capitalist rushes to take advantage of it. Its eventual consequence is an economic boom. However, when the dust settles and the demand for new products or services becomes saturated, new investments go dry.
The second criticism of capitalism relates to not only growth but what kind of growth. It is not uncommon to see that mass production processes of many products produce a byproduct specifically known as “Externality”. Externality refers to a cost or benefit that originated as a byproduct of economic activity. Externality may be positive or negative as well like useful products, knowledge, noise level, and toxic waste.
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Unfair equitable distribution is the third criticism of capitalist growth. It questions the fairness with which capitalist shares their wealth accumulation or recurrent hardships. According to a report published by Oxfam in Jan 2020, the world’s 2,153 billionaires have more wealth than the 4.6 billion people who make up 60% of the population of this planet.
Is Capitalism heading toward a slow and natural death?
Without an iota of doubt, Karl Marx was fully convinced that capitalism will not sustain and die a natural death. Mark’s theories reacted sharply against the industrial revolution that occurred in the 18th and 19th centuries. It was not by chance but rather by choice that capitalism played havoc through the Covid-19 pandemic. It was mostly capitalism that destroyed natural ecological balance, brought famine, misery, and financial frustrations with its economic hassles. It caused death to hundreds of thousands and left millions out of jobs due to global recessions.
The Covid-19 pandemic exposed the world to the hazards of not having a uniform, effective and strong public health policy. It is nothing less than a brutal irony that the entire world has semi-paralyzed thanks to a tiny virus. It was not in the interest of global conglomerates to invest in the development of public health, vaccines and medicines because it would not ensure astronomical profits to them. In the capitalist mindset, healthcare is a commodity and it is the right of only those who have the money to pay its price. The capitalist societies implemented neoliberal policies that compromised public health, privatized hospitals and reduced developmental budgets.
Unknowingly, we are marching towards the postcapitalist era. At the core of this transition lie information technology, novel ways of working and a shared economy. The traditional old ways will take long to diminish, but the end is surely in sight. It is indeed time to be a little bit utopian.
The modem day signals are energy crisis, deforestation, climate change, aging population and population shift in the form of migration. These signals are changing the dynamics of capitalism and making it unviable in the long run.
Today, various new philosophies and dogmas have emerged that aim to challenge the basic beliefs of capitalism. What is common among all those philosophies is the conception that the prime objective of business should not be profit maximization at every cost. It calls for businesses to think beyond profit and growth and focus on societal and environmental well-being.
The United Nations Brundtland Commission wrote in its report, “Our Common Future”, more than three decades ago, that there was enough evidence that social and environmental impacts are relevant and must be accounted for in the development models. The citizens are the building blocks in any society. The citizens in capitalist and liberal democratic societies are not powerless. They have the right to raise their voice against unethical and harmful practices of business giants.
In the years to come, existing capitalism may either fully diminish or evolve itself into a new capitalist model based on ethical, social and environmental considerations along with profit maximization and growth philosophies.
