Capitalism is an economic model where production is done by an independent entity and duties are carried out to benefit the entity through the returns. Capitalism can be compared to communism. For many years, communism has been seen as an enemy to economic development with regard to democratic governance. Communism, in its real sense, is not a political system but an economic system. Communism is a sociopolitical faction whereby the means of production, such as land, labor, and machinery, are possessed and managed by “the state”, and individuals control only a small portion of the means of production. It aims at a communal possession of the means of production in which the government plays a central role in managing resources. Ideally, capitalism is the reverse; production is driven by the incorporation of capital, ensuring that the means of production are privately managed for private revenue (Learned, 2008). This paper focuses on the various aspects of capitalism and the consequences that affect the economy and also the roles played by various entities.
In capitalism, the conclusion concerning prices, supply, demand, distribution, and ventures revolves around the owners of businesses and organizations because they are the ones who reap the proceeds of their investments after paying out their employees.
Capitalism is enhanced by the availability of a free market which provides equal opportunities for all people to venture into business as long as they have adequate capital to start up a business. Capitalism has contributed positively towards creating job opportunities because those who establish enterprises employ workers to help them in performing tasks.
According to Bellamy (2003), there is great potential in capitalism and thus more people are resigning from their jobs to establish their businesses because they are aware they can earn more when they employ themselves. All that is required is the relevant skills in the intended field because if the entrepreneur does not possess the required skills he/she may be doing things on assumptions. Additionally, the entrepreneur must identify the necessity of a particular item in the market because if his intended product is not needed by the population there is no reason for making it.
There are two categories of items in capitalism and the first one is capital items which are used to manufacture consumer products such as raw materials, tools, commercial equipment, and vehicles. The other category comprises finished items such as electronics, clothes, stationery, and furniture.
There are three vital elements in manufacturing that are mandatory and they are namely the raw materials, labor and land, and capital items. Capitalism involves the possession of natural resources and capital items. These two elements can be acquired by an individual or a group of people who have common interests or by a state corporation that manages these elements for proceeds or to safeguard the wishes of investors.
Walberg (2001) argues that before the invention of currency by Greece, transactions were very complex because there was no set medium of exchange hence traders were not accurate in gauging the worth of items that were being exchanged but the emergence of currency has created equality between the seller and the buyer because each gets the equivalent worth of his possession. For instance, if you want to purchase a vehicle worth $ 5000 you will evaluate the features of that vehicle and establish if it’s worth the price.
Capitalism investors are capable of earning more proceeds because they employ cheap laborers on a temporary basis and they don’t give them allowances. This form of employment is not preferred by many people and sincerely most people use it as a stepping stone as they wait for better opportunities and thus employers in this private sector rarely go for a long time without hiring new workers.
Some workers leave their jobs to establish their own businesses after they have gained experience in manufacturing industries and this is posing a great threat to entrepreneurs because their products are being imitated by the people who work for them. Some capitalists are considering hiring workers on a permanent basis because they have realized that every time a worker leaves their enterprise performance seems to lag behind because the new worker has to be trained. The future of the capitalist economy is being threatened by the sustainability of raw resources because most of them can not be recycled hence they may be eradicated (Learned, 2008). Nowadays banks are offering unsecured loans thus individuals who intend to start their businesses can borrow money from these banks because the interest rates have been reduced. Labor must be well manned to ensure it brings the expected results and actually this is where most entities fail because they run multiple enterprises and hence they cannot monitor them properly, causing workers to steal from them.
Focus on industrialization reveals that industrialists contributed towards capitalism because the engineering systems that were present were invented with the aim of enhancing commercial production and thus people relied on factories to manufacture goods. In these factories, duties were evenly distributed to make sure tasks were accomplished faster.
There are various types of capitalism including, (1) Arnacho-capitalism (2) State capitalism (3) Corporate capitalism (4) Crony capitalism (5) Free market capitalism, and (6) Financial capitalism,(Bellamy, 2003).
In Arnacho-capitalism, somebody’s freedom is protected in the free market because the state does not monitor the activities of any given enterprise, and thus the business environment is regulated by independent rules rather than political systems thus the investors in this economy can make rules that best suits them and also eliminate the ones that don’t work for them. Arnacho capitalists opt to be independent because they feel governments are full of nepotism and corruption and thus they are biased hence they don’t exercise equality and evenness because they squander the resources of investors and also favor some investors. Arnacho capitalists emphasize the use of force to implement their policies against the resisting parties because they don’t recognize the existence of sovereign entities such as the government.
Corporate capitalism refers to a market field that is controlled by hierarchical institutions that are legally established with the aim of making proceeds. A corporation can be founded by one individual or a group of people. The corporation can become a public entity when its shares start trading in the stock market. A number of corporations are in the communication sector such as Vodafone.
In Crony capitalism, business entities thrive if their owners are on good terms with government agents thus investors are forced to befriend civil servants in order to receive favors such as tax evasion and etcetera. This is done by giving out money and serving the sexual desires of the agent if the investor is of the opposite sex. Investors who are not willing to seduce civil servants are usually at risk because the civil servants can sabotage their businesses and hence there is a lot of impunity in such an economy.
The above kind of capitalism is not healthy for businesses because those who are new in business may be discouraged due to such challenges and thus people fail to utilize their full potential. Normally it’s the investors who have been in the market for a long time who manipulate government agents to sabotage their competitors because they feel threatened by their venture due to the fact that their goods and services could be a notch higher than theirs.
Crony capitalism can be avoided by avoiding close contact with business owners and also by not regulating businesses because the quality and service monitoring agencies are prone to manipulation. When this kind of capitalism is practiced over a long period of time it is extended to the entire government system and thus people have to bribe civil servants in order to obtain services from the government. This is an abuse of power because in a sovereign state government services such as health care are free for all.
Free markets hardly exist because most governments assign themselves the role of monitoring how prices are being set in order to safeguard the interests of consumers because if investors were left to set the cost of items in their markets they would induce the decline in supply which would increase demand and thus hike the cost of items (Learned, 2008). For example, in African states, oil companies have been accused of creating an artificial shortage of oil to hike fuel prices even when the cost of crude oil is still low.
In financial capitalism, there are no physical goods because the goods are available virtually. In this capitalism investors trade in bonds, shares, and currencies which make them earn precedes when they sell them at a price above the buying price. This kind of capitalism offers low-risk investment but some people are against it because they feel that it is only for the wealthy and also some philosophers argue that people who earn their living from such ventures resemble thieves because they are perceived to be reaping from where they did not sow.
Globalization has enhanced capitalism because people can interact through the World Wide Web and thus the internet creates a platform where business empires are created. A good example of how globalization has contributed to capitalism is the eBay market which is a virtual market where sellers display their merchandise. Sellers simply upload photos of their merchandise and place them on the web page of the virtual market. After the buyer has paid for the item it is then shipped to his/her address within 24 hours. This means that you don’t have to cross oceans to shop abroad because you can access what is in the market at the click of a button. This business is regulated by international bodies. In globalization, all the necessary resources are available on the internet including cheap labor from all over the world which is referred to as outsourcing. This has enabled businesses to achieve their goals faster because they are able to send and receive money through the internet.
In capitalism, people participate in the economy as laborers, customers, and entrepreneurs. Laborers pursue jobs that interest them but since there are few job opportunities job seekers take what comes their way even when they are not trained in that profession and use such jobs as a stepping stone before they land a better job. The scarcity of jobs has made employers exploit employees because they know they can replace them as soon as they leave their job.
Customers purchase items according to their earnings and hence the cost of an item is influenced by its quality. The frequency of purchases makes investors increase their production capacities to meet the demand of customers. Customers purchase items that they require on a daily basis because those that are not needed are considered to be luxuries. Entrepreneurs on the other hand manufacture products and provide services that they feel are most needed and they first evaluate the possibility of success and consider the risks involved in their preferred kind of enterprise. Normally they venture into enterprises that are familiar to them. They have to offer the best salaries to capture the most qualified personnel because employees are always on the lookout for lucrative jobs. Salaries are determined by the need for particular expertise and if employers need given expertise they pay more for such jobs than expertise that is less required.
Unemployment results when there are more people who possess similar qualifications and the job market cannot absorb them because it has been flooded. Employees pursue further studies to have an upper hand when they are looking for jobs. This results in an educated population.
In a capitalist economy, the stability of the economy is dependent on the increase in the worth of goods and services which causes entrepreneurs to be motivated to provide more, and this worthiness is extended to the employees because when enterprises thrive their success is reflected in the livelihood of employees.
In the marketplace, the cost of items and services is dictated by the frequency of purchase and rivalry. If an item is purchased more often and there is an adequate supply of that item its cost will remain stable but in case the supply declines the cost of that item will shoot up. In addition to that if there are many people in the market selling particular merchandise to common customers the sellers will have to reduce the cost of their merchandise or risk losing customers to their competitors (Walberg, 2001).
Rivalry at market place tends to favor customers because they will enjoy buying items at subsidized costs while the sellers could be incurring losses. This ensures that there is no monopoly in the market because there is no soul provider of items and services. Monopoly exploits customers because they have no alternative but to purchase from the soul provider of items and services even when the quality of his/her items and services do not meet the expected standards. Additionally, since the customers can only purchase from one provider the provider cannot improve the quality of his items and services because no one dares to challenge him/her. When a potential competitor emerges the incompetent providers normally lose customers which makes them hostile towards the fresh entrepreneurs.
In conclusion, capitalism gives everyone to experience the benefits of being independent. Students should be encouraged to consider establishing their own businesses once they graduate from colleges and universities instead of waiting to be employed because there are very few jobs in the job market plus a lot of impunity which means that jobs are not given according to merit. Capitalism helps people to discover their potential by putting their skills and ideas into practice. Therefore, governments need to rethink their ways of structuring their economic system to achieve the best output from the means of production.
References
Bellamy, R. 2003.The Cambridge History of Twentieth-century Political Thought. Cambridge: Cambridge University Press.
Learned, J. 2008. Capitalism and Communism (1887). USA : Kessinger Publishing, LLC.
Walberg, H. 2001. Education and Capitalism. California: Hoover Institution Press.