There have been many economic systems in the history of the world, all formed out of various ideologies but the most prevalent one has been capitalism. Capitalism is a system whereby the means of production are in the hands of private owners and its main aim is making profits and more profits. Supply, demand, price, distribution, and investments decisions are determined by a liberated market and governments have little or no authority over the market.
The revenues from the entities are mainly for the owners and little is used to pay wages to workers. However, there is a new economic system that is developing in the world known as the new capitalism. New capitalism is a sociological phenomenon that has to do with the new economy effect on the human relationships. Sennett describes a scenario whereby corporations have changed from the bureaucracy organizations described by Weber (2006, p. 203).
Organizations today are not centered, they are unstable and diffuse; unlike the former pyramid-like corporate structures whereby people would know their status and therefore they could plan for the future because there were assured long-term stability, benefits, social capital, and interpersonal trust. Employees have to now prove themselves as valuable assets to the entity for them to secure their future by showing their potentiality rather than specialty and experience.
People demand services rather than goods. Capital, labor potential and innovations are the driving forces for the economic development. The system is generally characterized by: Globalization and automation, blue-collar jobs, unionized work, reduced manual work and an increase in value of professional workers.
The system thrives on economics, information architecture, cybernetics, game theory and information theory among other sciences and technologies. The ideology has been mainly developed by a sociologist Richard Sennett and a professor at the London School of Economics. He is very popular for his contribution and study of social relationships in cities, and the effects of urbanization on individuals in the modern world among other ideologies such as the liquid society.
New capitalism has led to the formation of a very liquid society due to the rapid changes in technology and society. People’s life’s now change at the same rate: nomadism has become a routine in all aspects of the modern man: people change their lives like a tourists, change places, jobs, spouses, values and sometimes political or sexual orientation (Sennett 2006, 203).
Modernity has evolved from solid to liquid creating unexpected situations for man; therefore making individuals face many new challenges that have not been there before. Institutions do not mature and solidify so a create foundation for human activities; they break before that happens hence man is prompted to find other ways to organize life.
An individual must be prepared before engaging in any activity by analyzing its gains and losses first. The global economy has also shifted from being industrial to service oriented enterprise. Socially the modernity is characterized by movements fighting for civil rights and equality in the female gender and also multi-culturalism.
Sennett (1998, p. 221) argues that “the former political sphere was comprised of numerous arenas and possibilities of citizenship and political action concerning various forms of struggle against oppression or alienation (in collectives defined by sex or ethnicity) while the modernist political arena remains restricted to class struggle.”
Organizations in the private sector the social-welfare programs in collaboration with the government and agree to and execute general wage levels and also ensure the administration’s spends across the economy in favor of workers so as to avoid strikes and labor unrest.
The above explanations of new capitalism are evident in our societies therefore the changes are really happening. Recently the ANC banking group of Australia CEO gave a report citing that the banking sector globally is facing huge risks and uncertainties hence making operations to be very expensive.
This depicts the new capitalism type of organizations that operate with no stability and hence cannot also offer their employees reliable benefits because the entities themselves can collapse anytime. He said that the sector and specifically the bank need to concentrate on productivity and new innovations so as to stay relevant in the market; therefore changes have to be implemented.
New capitalism, according Sennet (1998, p. 87), is all about innovations and competition to stay relevant. He also said that the bank is intending to expand more globally and also engage in investment strategies worldwide hence the bank will be responding to the new capitalism requirements of globalization for the sake of its shareholders.
In another article the Labor Party in Australia is advocating for the increase in the SG (the compulsory contribution paid into a worker’s super account by their employer) from 9 per cent of gross pay to 12 per cent by 2019 (Fraser 2010, np). This will enable the employees to accumulate substantial savings that will guarantee them a good retirement.
This is an example of new capitalism ideologies where governments make policies that protect citizens from their employer’s meanness so that they can secure themselves a good future and also boosts the welfare of the entire country. Companies are also buying other organizations leading to mergers a phenomena that characterizes new capitalism ideologies.BHP Billitons a mining company in Australia ha s made a bid to the Potash Corp. of Saskatchewan Inc that manufactures potassium for farm use.
BHP wants to expand the company and make it a worldwide business because it has the potential since the commodity is essential the globally. This again is a globalization strategy; companies are seeking more revenues worldwide for Potash that is another reason as to why organizations today cannot be considered stable because they can undergo both management and economic changes anytime.
Some people consider BHP’s move a risk, analysts have cited that the purchase of Potash by it will lower its credit ratings. However, the management says “that company would not be facing a steep downgrade, because Potash Corporation would increase its geographic diversity and has solid medium and long-term prospects” (Bain 2010, np).
This is a display of uncertainty in decisions being made by organizations in the new economy. Some are risky ventures but they choose to continue in the hope that the venture will be successful and will therefore keep the entity relevant in the market. The prime media group has also been doing well, advertising spending has doubled and especially no w that there are election campaigns. “The group plans to pick up Seven Group Holdings Ltd’s newest digital channel, 7mate, due to launch on September 25” (Smith 2010, np).
Westfield chains of stores have also been doing well in their business and the director says the market is now not volatile but there are still uncertainties in the business’s environment. He says the stores have survived the recession and are now trying venture into new strategies so as to build a strong base for economic development.
However not all business in Australia are doing well the Direct Factory Outlets (DFO) retail chain has evaded receivership after its owners the Developer Austexx, made agreements with banks from which the chain has their loans. The banks have agreed to extend the loans for the chain for it to recover. The management has mentioned that the crisis has been due to bad decisions about expansion of the chain. Another company under crisis is the Downer EDI, an engineering company whose profits have declined by 90% from last year, s.
The company has blamed the global recession for this saying that it led to loss of investors both private and public. The company has also admitted to quality issues of their trains and also it says that it has not been able to meet deadlines of the requisitions made by customers. The management has said that the company is making changes both operational and organizational so as to improve its services and performance.
The Australian timber company Gunn’s is also in crisis, it is trying to get out of the crisis by selling some of its non-core assets. Recently it has sold the Tasmanian pulp mill and its Tamar Ridge winery to enable reorganization by downsizing. The management says that it has “a lot of work to do over the coming 12 months to continue to develop our asset base and the next stage of development which will be the closure of the pulp mill project” (Griffiths 2010, np)
Sennett portrays the new capitalism as short-termism because it concentrates on insists on flexibility and the relocation of workers from on job to another. This means that there is no need for people to specialize in a particular field all they need is the potential and skill because the economy is moving very fast and so is employers interests. Workers should therefore not dwell on past experience to deliver services any more instead they should be eager to learn the new task.
Sennett points out that “most people need a sustaining life narrative; take pride in being good at something specific; and value the experiences they accrue, and the new capitalism is a source of misery for many people” (2006, p. 256). The new capitalism is as a result of various forces put together hence generating the changes. The first was the change of authority from the management to the shareholders; and the investors are out to make quick profits not long-term gains.
The concept of quick money is not new to the globe but capital combined with pressure for profits is the reason for the changes. The current era views stability as a weak point and a disadvantage; the favored option is innovation, new opportunities and total enterprise. Development of new information technologies is also another major force that has mainly created changes in the way that managed.
Communication and transport is now very fast than before; managers can send orders electronically and expect results at the same speed. This speed is actually not good for business because very many bad decisions are made due to speed and they end up working against the entity.
The casualisation of labor and the formation of unions have made it more difficult to get labor and to manage it too hence organizations ought to be careful when hiring, managing and firing because strikes can be very ruinous for their operations both in reputation and production (Hyam and Janda 2010, np)
The above core changes and their reasons are very visible in the Australians organizations mentioned earlier, they are all geared towards quick profits through investors capital.
The organizations drop enterprises that are not making profits and change to develop the viable ventures, the ones that are doing well keep looking for new innovations so as to maintain their positions. All of these changes also involve the employees hence the need for potential rather than specialty in a particular field because the organizations will be requiring different kind of labor at different times.
The changes could be good for revenues but still they got their weaknesses that they bring in an organization. Sennett argues, “there are three deficits that follow on from the structural changes; low institutional loyalty, the loss of informal channels of trust among employees and the weakening of institutional knowledge” (1998, p. 102). The New capitalism therefore has its advantages and disadvantages but one thing that is obvious is that it is overtaking capitalism worldwide.
References
Bain, D 2010, ‘BHP ratings under threat in Potash bid’, ABCNews. Web.
Fraser, A 2010, ‘Retail softness dries up Billabong sales’, The Australian. Web.
Griffiths, M 2010, ‘Greens play down chances of pulp mill deal’, ABCNews. Web.
Hyam, R & Janda, M, ‘Banks agree to DFO lifeline’, ABCNews. Web.
Sennett, R 1998, The Corrosion of Character: The personal consequences of work, in the new capitalism, Norton, New York.
Sennett, R 2006, The Culture of the New Capitalism, Yale University Press, London. Web.
Smith, J 2010, ‘Seven Network announces merger’, ABCNews. Web.