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Digital Business Strategies and Recomendations
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Introduction
Capitalism is a system of economic enterprise that bases the activities on an
aspect of the market exchange. According to the oxford dictionary of sociology
(1994), capitalism refers to wage-labor and commodity production intending to sell or
exchange commodities for profits. In the capitalist system, the trade, industries, and
means of production have private individuals. In some other aspects, capitalism can
also be referred to as a free market. In this case, the main economic activity is the
accumulation of returns from economical production activities. Contrary, socialism is
another aspect of the economy where, unlike capitalism, the state owns the production
factors. Many developed and developing economies such as the United States, china
India, and Germany follow a system of capitalism for economic prosperity.
Capitalism and socialism are economic facilitators that lead to prosperity in the
governing institutions that uphold democracy.
1. Capitalism
The arguments on capitalism tend to hold that the society must have incentives for
production, ownership, and capital goods such as a magic wand. However, the theory
notes that it's wrong for the society or the authority to prevent people from
participating in capitalist activities forcefully. According to Adam Smith, the 18thcentury philosopher, and the perception of contemporary economics, "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 interest." (Wrigley 2016,p. 21). In this case, both
participants in the process of capitalism have the objective of making profits.
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Furthermore, both parties to a voluntary exchange have some interest in the outcomes.
It is the rational interest that leads to a positive outcome of economic growth. In the
capitalist economy, capitalist assets such as factories, mines, and railroads. The assets
of productions can be subjects of ownership to the lords participating in economic
production.
History and Development of Capitalism
The concept of capitalism started during the 17th century when the merchants
or "buyer uppers became a link between the consumers and producers. With time, the
merchants have begun to dominate the producer's side. They started placing orders
and paying in advance. The individuals started to supply raw materials and pay a
wage for the work done to produce finished goods for sale. The process of waged
workers signaled the start of a new wave of capitalism development. The waged
worker's introduction resulted in a transition from the merchants who earned money
from trade to capitalists who owned production factors. The primitive capitalists save
the introduction of a new stage that exerted power over other individuals referred to as
waged workers (Heller 2011). The early capitalism led to the introduction of new
methods of production. The cottage industry facilitated the change of individual
homes into factories. The move facilitated the introduction of mass production, where
the owners of production factors ventured into large quantities of goods.
The century-long transition from feudalism to capitalism enjoyed strong
support from the governing authorities. The Feudal economies and the power of
autocracy facilitated the alliance between the capitalists and the centralized states.
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Capitalism helped the state gain enough wealth to assist growing bureaucracy and
standing army in strengthening its boundaries. The central states tapped through
capitalism by introducing taxes, customs, duties, and state loans (Hayek 2013). In
return, the state conquered colonies and aimed to dominate the world economy. In
particular, the state strengthens some measures against intense foreign competition.
Some of the measures include banning the imported goods, restricting the exports of
the raw material into the competitor's territories, and using tax to control important
from different other territories. The restriction of raw materials exports hit the
aristocrats hard because agricultural products were the most common raw materials.
Therefore, bureaucrats and capitalists succeeded in defeating the aristocrats.
There are various fetishes in the sphere of the economy. According to Marx,
the commodity fetish is the most popular. The significance of commodity fetishism is
that during the measure of energy output by labor and time, fetishism contains two
forms of alienation, such as separation of exchange value from the Material basis
(Rahman and Thelen 2019). Therefore, the capitalists facilitated the separation of the
production from the production factors and thus making it possible for the process of
production to undergo a distinct methodology. In particular, capitalism can be
described as a process that makes full utilization of capital in production.
The social impacts of capitalism were evident when the mass of the population
found themselves dragged unwillingly into the power brokers' violent conditioning
process. Moreover, the new capitalists inserted greater power into their producers to
produce more for less. At the same time, the capitalists could maintain trading prices
and profits. The capitalists enhanced a competitive working environment by
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impacting pressure on their workers. At first, workers have to endure long slavery
aggravated by the swollen ranks. Eventually, there was an introduction of a new
economy of landless population and unemployed. The capitalists facilitate the control
of the society through brutal legislation that allowed punishment of disobedient
laborers in the line of production (Streeck 2016). The use of legislation to establish a
proper way of production should not be underestimated. When viewed from the
advanced modern industrial perspective, the daily submission into the working routine
is evident. Most workers submit to the daily working routine to avoid being laid off
or subjected to punishments.
Although contemporary society is characterized by the embrace of capitalism
in almost all of its production capability, it is one of the major economic organization
approaches in the 20th century. The major pillars of capitalism include private
property, self-interest, competition, freedom of choice, and the government's limited
role. Therefore, democracy is the major factor in the process of production to have
essential elements.
Competition
Market and competition is the, most important aspect of capitalism. When
individuals compete with each other for-profits, consumers become the primary
beneficiaries. For instance, competition leads to lower prices for consumer goods and
enhances the quality of the goods and services in the long run. The opposite is a
monopoly, where a single business offers products and services. In this case, the
business organization may control the prices (Pomeroy 2012). When the demand for
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particular goods rises, the price increases, and vice versa. However, competition may
increase selfishness and predatory behavior. Similarly, competition can occur in some
socialist systems and thus making the process of economic transaction favorable.
Freedom
The aspect of freedom entails the consumers having the power to choose their
preferences in economic transactions. Preventing people from owning the factors of
production restricts their freedom. The other aspect of freedom is making the right to
pay taxes to the rulers. Thus, seizing much of their taxes may constitute theft.
However, owning the property itself may not be freedom but can determine who
utilizes the property (Hussaey 2014). Freedom requires the ability to pursue some
goals that can require the use of wealth. The general distribution of wealth can impact
a morally arbitrary natural lottery that could not restrict property rights over one's
holding.
Public Goods
Public goods are assets owned collectively by different individuals in the
society. If the community or the public owns the forms of production, no one will
have a strong motivation to produce them. In this case, society is poorer, and labor is
more difficult since production is inefficient. Contrary, people may have motivations
for the production of capital for altruistic reasons (Lanzi 2007). Secondly, capitalism
may be coerced in some socialist systems. Various putatively socialist systems have
allowed the community to indulge in the profitable production of capital goods.
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The primary demerits of capitalism are that every individual can set up their
production units and attain a high level of savings and profits. In this case, the
individuals can facilitate their production units' changes to increase productivity under
capitalism producers and consumers. Also, individuals have the freedom to produce
and bargain, thus leading to quality products at an affordable price. The production of
quality goods with lower prices leads to a high level of competition that leads to a
particular economy's growth. Similarly, the competitive market leads to increased
efficiency and encourages producers to try an innovation in production. According to
Wisman (2014), capitalism increases society's welfare through production under
efficiency and distribution of goods and services. In particular, it leads to working on
a price mechanism system of production, where the most demanded products have
higher price tags. The optimal utilization of products leads to the fair use of natural
resources and consumer desire's quench. Although the economy's conditional change
can facilitate inflation, recession, and depression, the price mechanism regulation
automatically achieves the equilibrium.
On the other hand, the Merits of capitalism include unhealthy competition due
to the selfishness among the capitalists. In capitalism, the competition among the
producers to make profits is the main agenda of doing business. However, the
competitors may discard mutual competition between them and form alliances or
rather merge. Due to the merging of the business and elimination of competitors, the
smaller and emerging business enterprises may find it difficult to enter the current
market share. The merging of the business organization leads to monopoly among the
business enterprises and thus inequalities in income and wealth. The private property
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competition may lead to a situation where the richer business competitors accrue huge
profits while the smaller business organization struggle to maintain income creation in
the available market share. Since the private property competition, there is a
widening of a gap between the rich and the poor (Sy 2016). The richer entrepreneurs
became wealthiest while the poor become poorer. On the other hand, customer
preferences are not considered in the process as most consumers are unaware of the
apparent inequality gap.
Similarly, capitalism is the primary source of low-quality products due to unfair
competition that the wealthy exert on the business class's poorer members. It is
evident products manufactured under the monopoly market have inferior quality and
higher prices. The business feels the pinch through depression and unemployment due
to the prevalence of high throat competition. Additionally, the production plant's mass
production leads to the excessive availability of products in the market. Excessive
availability leads to an increase in the finished goods in the market. Thus, there is a
low demand for the supplied goods, leading to low profits and lack of employment.
Lack of employment leads to the unavailability of freedom for occupation in the
capitalist society. The scarcity leads to wastage and ignorance of the societal
requirements and wants of the economy. The producers venture into the production of
luxury and SSP goods for wealthy individuals to earn maximum profits(Pomeroy
2012). In particular, the unhealthy competition's long-run implication is the class
conflict as both low and higher classes maintain a tension due to the socioeconomic
GAP prevalence. Eventually, society experiences a mutual distrust between
employees and employers as a result of the existing GAP.
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2. Socialism
The focus of socialism is benefiting society through state ownership of the factors of
production. According to socialists, the capitalist economy leads to inequalities and
unfair distribution of wealth. The socialists claim that the individuals in the capitalist
brackets use their power to exercise the unfair distribution of wealth at society's
expenses. In this case, the state controls the factors of production and limits the
control of resources among the private entities. The economic decisions are not left to
the market but a central body. In this case, the government controls and influences the
economy's resources. According to the insight from the advocate of socialism, the
shared ownership of resources and the impact of social planning allow more fair
distribution of goods and services within society's members. However, the Australian
school of economists, including Friedrich Hayek and Ludwig Von Mises, warns that
eliminating private ownership to the means of production could worsen the economy
with the general conditions differing from those in the market economies (Westley,
Anderson and Kjar 2011).
Fairness
It is unfair to create wealth through the ownership of capital. Although it may
be possible in capitalism, the economist Adam Smith claims the possibility of fairness
in the socialist setting. According to the economies, self-interest is the major aspect of
forcing people to indulge in the production cycle. Since the markets distribute the
factors of production based on demand and supply, the state can limit the markets by
enacting and enforcing fair play rules. Contrary, fairness is not immoral regarding
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consent, freedom, and property rights (Morris and Polese 2013). The wage laborers
sign consent during employability, and capital owners have the property rights.
Reduction of Inequality
The aspect of socialism leads to the reduction of economic inequalities among
the members of society. In this case, the economy offers necessities for the current
population. When people own capital as a factor of production, the wealthy producers
can get richer at the expense of poor consumers. The wealthy producers make the
wage laborers poor and poorer. Eventually, they worsen the inequalities existing
between the wage –laborers and capital owners (Wisman 2014). However, basing
arguments on the inequality perception is a disputable empirical claim. Contrary to
socialism, the aspect of capitalism may encourage people to invest in building capital
goods. Therefore, enacting regressive laws may harm the poor.
Labor and Selfishness
The capitalist aspects of economic production facilitate the alienation of the wage
laborers from their labor. The laborers are unfree because they must obey their
bosses. Thus, bosses exploit them for selfish gains. When individuals own capital,
they selfishly pursue profits as compared to other interests. Socialism can facilitate
social responsibility by doing away with colonialism, economic instability, and
slavery. However, it is difficult to associate alienation and exploitation since
employees agree by signing consent forms (Schumpeter 2013). The selfishness in
pursuing profits facilitates some negative implications to the environment, nonproductive industries, and economic instability. Nevertheless, when people have
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control over socially owned, they end up extracting personal wealth from them. Also,
the state ownership of capital can be the major cause of non-performing industries.
3. Democracy
Democracy entails the independence of individuals in a crucial system of
voting. Typically, it is a system of governance where people choose whom they want
as their leaders. Democracy and capitalism coexist in different regions across the
world. Most of the global population suggests a different motive between capitalism
and democracy (Petkovic 2017). There is a significant relationship between
capitalism and democracy. Although the populations around the world may not be
satisfied with the extent of democracy, it is a major contributor to capitalism through
the influence of fundamental human values. Democracy promotes the most necessary
things, such as workers' rights, freedom of speech, and movement (Schumpeter 2013).
Through the fundamental values, individuals in a particular society can enjoy the
rights to start ad run a particular business. Also, democracy facilitates the need to
enhance a secure and stable environment for citizens to participate in business
establishments. Therefore, economies across the world must uphold democracy.
Democracy enhances the stability of growth and stability for humanity. The
theories of international relations can interconnect capitalism and democracy. The
realm theory highlights the major motives leading to proper security, control, and
capitalism. On the other hand, liberalism focuses on the relationships existing between
different countries attributed to capitalism (Schumpeter 2013). Democracy suggests
the important role of the international governing structures in establishing control over
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the global economy. The absence of central authority can comprise global businesses
through the dilemma in security, capitalism, and free-market provisions (Merkel
2014).
Capitalism is an important aspect of the economy that illustrates the
implication of incentives for production and capital ownership in production. The
primary role of capitalists is making great fortunes from exploiting the available
resources. Capitalism dates back to the 17th century when merchants acted as
intermediaries in trading and thus got profits from the business. As compared to the
modern form of entrepreneurship, the major form of exchange includes gold and
silver. The major features of capitalism include competition, freedom, and public
goods. Most capitalists offer intense competition and thus put away entrants from
entering the market.On the other hand, socialism is another aspect of the economy
where the state controls production factors. As a result, the state makes decisions on
behalf of the private entities regarding trade operations among the merchants.
However, democracy is an important aspect that governments must uphold to ensure
that both capitalists and socialists do not exploit the poor.
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Reference List
Hayek, F.A., 2013. Capitalism and the Historians. Routledge.
Heller, H., 2011. The birth of capitalism: A 21st century perspective. Pluto Press.
Hussey, A., 2014. Occupy was right: Capitalism has failed the world. The Guardian,
Sunday, 13.
Lanzi, D., 2007. Capabilities, human capital and education. The Journal of SocioEconomics, 36(3), pp.424-435.
Morris, J. and Polese, A. eds., 2013. The informal post-socialist economy: Embedded
practices and livelihoods. Routledge.
Petkovic, A.E., 2017. The Relationship Between Capitalism And Democracy,
https://repository.arizona.edu/bitstream/handle/10150/625122/azu_etd_hr_201
7_0172_sip1_m.pdf?sequence=1&isAllowed=y
Rahman, K.S. and Thelen, K., 2019. The rise of the platform business model and the
transformation of twenty-first-century capitalism. Politics & Society, 47(2),
pp.177-204.
Schumpeter, J.A., 2013. Capitalism, socialism and democracy. routledge.
Streeck, W., 2016. How will capitalism end?: Essays on a failing system. Verso
Books.
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Sy, W.N., 2016. Capitalism and Economic Growth Across the World. Available at
SSRN 2840425.
Westley, C., Anderson, W.L. and Kjar, S.A., 2011. War and the Austrian school:
Ludwig von Mises and Friedrich von Hayek. The Economics of Peace and
Security Journal, 6(1).
Wisman, J.D., 2014. Capitalism And Inequality Re-examined. Department of
Economics.
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