Capitalism is a Force for Social Progress (Essay Sample)

CAPITALISM IS A FORCE FOR SOCIAL PROGRESS
Capitalism best describes the contemporary economic and political systems in the world. These systems are characterized by private enterprise; that is a country’s economy is controlled by individuals whose aim is to make profits. Such private enterprise can only thrive where government policies promote the idea of a free market so as to tap into the markets beyond a country’s border (Dicken).Progress is the process of advancing. In the context of capitalism, progress is observed as individuals, corporations, and states competitively try to outdo one another with motive of increasing their earnings or wealth. The progress is seen in both the economic sector (free market) and political sector (good governance). So as to be more competitive, governments have embraced innovation in production and distribution of its home products. The result is an improvement in technology, better transport systems and free market structures that encourage private investment. All progressive changes brought by capitalism ultimately influence the social lives of people, in this case improving the living standards. However, the reality is that capitalism has enhanced social divisions; those who have and those who do not have. The society we live in today is defined by capitalism, the two are inseparable and work hand in hand. To better understand how this came to happen, it is important to revisit the working mechanism of capitalism, its history and how its development has impacted on the society.
According to Marx, the capitalist system is marked by the disconnection of the processes of production and consumption. In the pre-capitalist era, production was driven by immediate consumption. However, under capitalism, production of goods is driven by the need to sell and make a profit. Therefore, a tendency to produce more than the market consumed emerges. Stiff competition among producers creates a pressure to increase production since mass production reduces costs, lowers prices and increases the market share. Overproduction crisis eventually emerges when the volume of goods produced exceeds the market demand; prices begin to fall to a level that profits cannot be generated. The production industry is the one that is immediately hit, but the after-effects eventually spread the crisis. For instance, investment in production will decline and directly hit the companies that manufacture machinery. Workers are then laid off, or their salaries reduced, further reducing consumer demand. The vicious circles created leads to bankruptcies, closures, and increased unemployment. Eventually, mass unemployment creates a social crisis.
As a result, investors will lose their businesses, and people will experience suffering out of unemployment. However, capitalism does not end there. In fact, Marx asserts that the crisis itself fuels capitalism (Fulcher). The crisis removes the pressure to overproduce, forces the less efficient entrepreneurs out of business and eventually production parries with the level of consumer demand. In that sense, low cost of labor (lower wages and salaries) increases profitability. Consumer demand will increase when commodities were sold at a cheaper price. Investment would increase because of lower interest rates on loans. Eventually, production will increase again; more people will get jobs and make more money to spend on produced goods.
The good thing about the capitalist cycle is the fact that periods of economic slumps never got rid of the economic value that had been gained during the boom. In fact, after a slump, the economy would continue its growth from a better level than at the beginning of the previous cycle. The reality is that people witnessed continuing progress and creation of more wealth even though it was unequally distributed between the capitalist class and the working class (Gamble). However, this calls for the analysis of the effects that capitalism has on the contemporary society.
Capitalism is defined by two important aspects; that is, market exchange and private property. Both aspects are the result of a gradual historical change created and molded by the previous generations (Cammack). As such, the word capitalism is used to describe more or less the social system we live in today. Most important is the way capitalism has progressed and advanced from the previous marginalized societies to the current globalized ones. There are two main effects synonymous with capitalism that tend to affect societal setting. They include global financial and economic crises and economic growth alongside the widening inequality.
According to Fulcher crises witnessed with the advent of capitalism are not exceptional events but an integral element of the functioning of a capitalist society. There are similarities between the crisis mechanism of today and the ones that appeared centuries earlier. Fulcher supports this claim by tracing capitalism crises back to the 17th century.
Tulipomania was the tulip bubble that happened in the Amsterdam in 17th century. When tulips arrived in Holland from Turkey, they become highly prized. The high demand and scarce supply played a role in rising price of tulips, and consequently many people were attracted to invest in growing of tulips because of its profitability. The supply of tulips grew, and merchants made huge profits and reinvested their earnings in growing even more tulips. The trend continued until the supply of tulips in the market surpassed its demand. As such prices drastically dropped, bursting the tulip bubble (Fulcher). Even though tulip traders in Holland suffered serious economic losses, the national economy was not affected much because there was no sufficient integration across the economic spectrum to channel the effects of one crisis to the whole economy. It is the growth of capitalist production that created links that enabled such crisis to affect the whole economy.
The Great Depression of 1930s started in the United States, due to a sudden fall in stock prices that would eventually crash the global economy. In particular, no country was spared from its effects as international trade dropped by 50%. For instance, the unemployment rate in US hit 25% and in a few countries climbed up to 33%. Countries that their economies relied on heavy industry were hit hard because construction virtually halted. Those that dependent of farming were not spared either as crop prices dropped by nearly 60%. However, by 1935 some economies began to recover. The return to normalcy was a requisite recipe for the 1970s stagflation that followed. During the stagflation, the rising cost of oil prices raised the cost of production slowing economic growth. Unemployment rates climbed again. Finally, the recent 2007/2008 global financial crisis points again at the dynamism of capitalism (Gamble).
Capitalism is a system that has spread its roots to every country in the world (Hurrell). Under the capitalist system, the production and distribution of goods and services are constrained to a small group of people( capitalist class).The majority of people offer their labor in exchange for wage or salary (working class).The working class is employed to produce goods and services that the capitalist class sells for a profit. The profit can be attained because the cost of acquiring labor in the market is much below selling price of the merchandises in the market. The resulting scenario is that of the capitalist class exploiting the working class. In the current globalized society, this exploitation is evident on economic ties of developed and developing nations. The industrialized nations are the ones that take the role of production while the developing nations provide labor and raw materials (Guimarães).
The ensuing inequality among countries and individuals is as a result of three changes in the global economy that happened at the end of the 20th century. The first is the deliberate efforts by the most industrialized nations (UK and USA) to promote equality in the form of neoliberal reforms, witnessed in 1970s.The second change was the formation of a truly global capitalist economy influenced by the rise of Asian economies (Japan, Korea, India and China) and re-emergence of market economies in Eastern Europe and Russia after 1989.The final was the synchronized promotion of competition and openness by the international institutions and ...