PREAMBLE
Adam Smith, the "Father of Capitalism", upended more than the economic order when he published his "Inquiry into the Nature and Causes of The Wealth of Nations" in 1776. His theory disputed the old order of wealth based on land and aristocracy that had organized economies for 500 years in Europe, unraveled the control of wealth by the monarchies and set the stage for the rise of the merchant class and redistribution of power that would begin with the American War for Independence.
Early capitalism required a constantly expanding market for selling its products & a constantly expanding pool of cheap labour. This led to the discovery of the 'new world' & the extermination of its indigenous inhabitants; to colonialism, countless massacres & two world wars. As the world market was finite, capitalism also had to intensify exploitation & create a need for consumer goods. This was the source of class struggle. Collective action by producers was the one threat to capital, so it also had to intensify divisions, between skilled & unskilled workers, manual & mental labour, 'men's' & 'women's' work. As a result the products of capitalism are designed to keep us atomised; the process of production designed to make us slave harder. This was seen in 'Fordism' or 'Taylorism' when all tasks were broken down into component parts & workers' time constantly controlled. This paper seeks to explain the dangers of capitalism, and how it can help developed countries economy.
CLARIFICATION OF TERMS
Capitalism
Capitalism is an economic system in which the means of production is own and controlled by private individual. In capitalist society will have two classes of people the bourgeoisies which are those who have the means of production and proletariats which are the workers those who don’t have the means of production but have labor power . The bourgeoisies exploit the workers. Free enterprise, also known as capitalism, is an economic system where the individuals in the economy have the freedom to create business and conduct economic activity with little or no government intervention. Capitalism is the predominant economic system of the world economy; the system has several important advantages that make it an efficient way to organize the economy.
Definition of Development
Development is not purely an economic phenomenon but rather a multi-dimensional process involving reorganization and reorientation of entire economic and social system. Watler Roodney defined development as the ability of society to tap its natural resources, in order to carter for material and social welfare of the people. Development is process of improving the quality of all human lives with three equally important aspects.
DANGERS OF CAPITALISM
One of the danger of capitalism took place In the 17th century During the industrial revolution , due to the advancement in machinery industry sprang up and there was lots of massive production due to the industrial revolution when this took place many workers were sacked and there was a problem of overproduction and less consumption. In other to sell this produce (excess goods) they decided to colonize some other continent like African, North American, Asia and Latin American.
Many critics have alleged that the capitalist system suffers from inherent instability that has characterized and plagued the system since the advent of industrialization. Because capitalist growth is driven by profit expectations, it fluctuates with the changes in technological or social opportunities for capital accumulation. As opportunities appear, capital rushes in to take advantage of them, bringing as a consequence the familiar attributes of a boom. Sooner or later, however, the rush subsides as the demand for the new products or services becomes saturated, bringing a halt to investment, a shakeout in the main industries caught up in the previous boom, and the advent of recession. Hence, economic growth comes at the price of a succession of market gluts as booms meet their inevitable end.
The Danger Of Capitalism In African And Third World Countries ;
Africa, a continent with virtually all the resources it takes for development, is the worst hit by hunger, starvation, armed conflicts, instability, displacement and abject poverty. Politicians, jockeying for the little resources left by the capitalist class, display the politics of hide-and-seek, repression and oppression.This is mainly because of the system which encourages capital accumulation and profit-seeking. The cumulative effect is flagrant corruption, deprivation, wastage and impoverishment which intensifies underdevelopment.
Walsh (1998) argues that capitalism has helplessly dragged African into the global free trade championed by the International Monetary Fund (I.M.F.) and World Bank; Africa's natural resources are further exposed for deep exploitation by international capitalism, which deteriorates the woes of the already impoverished African working class. This shows that the objective conditions of African socio-economic formations do not favour capitalism. Capitalism and imperialism are perceived as the major cause of the current underdevelopment in Africa. Capitalist development has tended to reinforce the exploitative dependence that enables underdevelopment to persist. The fact remains that Africa will never witness any meaningful development under capital accumulation and market profit-seeking which breed dissension, division, greed, selfishness, tribalism, ethnic chauvinism and the like.
After the 22nd economic community of west African states (ECOWAS) Summit in Abuja, Nigeria, one African president identified division and the exposure of the region's economy (market) to the Western capitalist class as the major source militating against the development of the region. But this is the base of capitalism market profit-seeking and exploitation. It is not enough to identify these problems but more so to resolve them by helping to abolish the system that creates them.
The African working class has the cards in their hands for socialism if only they want it. Indeed, African conditions have revealed capitalism in its harshness and brutality: inequalities are too glaring. In the face of extremities of want and a meagre surplus, it is difficult to sell the idea that those who are in positions to accumulate should take what they can and leave the rest to suffer what they must. Africa's ruling class has run out of ideas for fashioning and inspiring a functional development strategy, limited as it is by the constraints of working with ideas compatible with the maintenance of the existing property relations.
The evils of capitalism are conspicuous in Africa and Africans have lost confidence in capitalism, exemplified by the renewed springing-up of working-class consciousness in South Africa, The Gambia, Namibia, Kenya, Nigeria, Ghana and others but are choked by the external forces of capitalism. Again, another problem for the transition to socialism is the state of the development of productive forces in Africa which may turn even the best of intentions into caricature. The lack of the development of the productive forces appears to encourage political authoritarianism and reduces "Socialism" to the management and redistribution of poverty.
But underdevelopment will surely persist if the existing capitalist relations of production are maintained, and if the dependence of Africa on international capital continues. Therefore, the overturning of the existing relations of production is necessary for overcoming underdevelopment. Socialism is inevitable if development is desirable.
It is obvious that in the event of protracted futile developmental efforts, the politics of anxiety has become institutionalized and increasingly the ruling class is displaying signs of paranoia while the subordinate classes have become frustrated, demoralised and available for induction into extremist movements as in Algeria, Senegal, Burundi, Rwanda and the like. The ruling class is fast psychologising failures which lie in the economic sphere. Walsh (1998)
Through the International monetary fund, World Bank, general agreement on trade and tariff (GATT), and other agencies, backed up with threats of financial sanctions, the imperialist powers forced the underdeveloped countries to open up their economies and drastically scale down state intervention in their economies. Third-world countries, which had previously been allowed some protected national economic development, were opened up to plundering by the multi-national corporations and banks.
The fact is that Africa has less hope of development if the property relations of production and distribution and the market system continue. The reverse is the solution socialism abolishing capital accumulation and market profit-seeking and embracing production for need. The time is now to co-operate with fellow workers all over the world to establish global socialism.
The danger of capitalism on colonization
Countries colonized by European countries where were forced to practice capitalism, which led to underdevelopment in these third world countries. This capitalist during colonization encouraged farmers to produce more of cash crop instead of food crop, this cash crop will then be exported and process in Europe and later brought to African for sale.
Class division
The common capitalist mantra that “anyone can be rich if they work hard enough” is a fallacy. There’s only so much room at the top. In order to make money, first you have to take it from someone else. This can be done through selling things, taxation or any other means. But this means that the rich cannot exist without the poor. Any way you look at it, there’s never going to be equality under capitalism. ( Ryan, 2012)
Johngray (2003) sees Capitalisms the social system which now exists in all countries of the world. Under this system, the means for producing and distributing goods (the land, factories, technology, transport system etc) are owned by a small minority of people. We refer to this group of people as the capitalist class. The majority of people must sell their ability to work in return for a wage or salary (who we refer to as the working class.)
The working class are paid to produce goods and services which are then sold for a profit. The profit is gained by the capitalist class because they can make more money selling what we have produced than we cost to buy on the labour market. In this sense, the working class are exploited by the capitalist class. The capitalists live off the profits they obtain from exploiting the working class whilst reinvesting some of their profits for the further accumulation of wealth.
Johngray (2003) argues that capitalism can lead to Starvation because, if some have an excess of the resources in society, there are others who do not have enough. In Third World countries, many are starving because they cannot afford to feed themselves, while those in Western countries fatten themselves with an excess of food, and waste the rest of it. There is enough food in the world to feed the entire world population.
The profit motive
In capitalism, the motive for producing goods and services is to sell them for a profit, not to satisfy people's needs. The products of capitalist production have to find a buyer, of course, but this is only incidental to the main aim of making a profit, of ending up with more money than was originally invested. This is not a theory that we have thought up but a fact you can easily confirm for yourself by reading the financial press. Production is started not by what consumers are prepared to pay for to satisfy their needs but by what the capitalists calculate can be sold at a profit. Those goods may satisfy human needs but those needs will not be met if people do not have sufficient money. Walsh (1998)
The profit motive is not just the result of greed on behalf of individual capitalists. They do not have a choice about it. The need to make a profit is imposed on capitalists as a condition for not losing their investments and their position as capitalists. Competition with other capitalists forces them to reinvest as much of their profits as they can afford to keep their means and methods of production up to date. As you will see, we hold that it is the class division and profit motive of capitalism that is at the root of most of the world's problems today, from starvation to war, to alienation and crime. Every aspect of our lives is subordinated to the worst excesses of the drive to make profit. In capitalist society, our real needs will only ever come a poor second to the requirements of profit. Johngray (2003
Exploitation of workers
Swedberg,(1998) view capitalism as a system inherently exploitative in nature. In an economic sense, exploitation is often related to the expropriation of labor for profit and based on Marx's version of the labor theory of value. The labor theory of value was supported by classical economists like David Ricardo and Adam Smith who believed that "the value of a commodity depends on the relative quantity of labor which is necessary for its production."
Karl Marx identified the commodity as the basic unit of capitalist organization. Marx described a "common denominator" between commodities, in particular that commodities are the product of labor and are related to each other by an exchange value (i.e., price).By using the labor theory of value, Marxists see a connection between labor and exchange value, in that commodities are exchanged depending on the socially necessary labor time needed to produce them. However, due to the productive forces of industrial organization, laborers are seen as creating more exchange value during the course of the working day than the cost of their survival (food, shelter, clothing, etc.). Marxists argue that capitalists are thus able to pay for this cost of survival, while expropriating the excess labor (i.e., surplus value).]
Marxists further argue that due to economic inequality, the purchase of labor cannot occur under "free" conditions. Since capitalists control the means of production (e.g., factories, businesses, machinery) and workers control only their labor, the worker is naturally coerced into allowing their labor to be exploited. Critics argue that exploitation occurs even if the exploited consents, since the definition of exploitation is independent of consent. In essence, workers must allow their labor to be exploited or face starvation. Since some degree of unemployment is typical in modern economies, Marxists argue that wages are naturally driven down in free market systems. Hence, even if a worker contests their wages, capitalists are able to find someone from the reserve army of labor who is more desperate. Swedberg, (1998)
Societal Damage
Economic growth without control from an outside force, such as the government, results in workplaces that are dangerous and have unhealthy environments. If the only test of a company is profitability, the wealthy minority usually has the advantage of living far from the neighborhoods of the factories, removed from the lives of the workers and the environments they're subjected to.
There is nothing keeping a wealthy investor from backing any project no matter how unwise. This lack of control over investment results in a boom and bust process caused by investors rushing to get a piece of the current popular product. A new technological discovery promises big money, investors flock to it and invest too much, the market collapses because it becomes saturated and the bubble collapses
Some economists, most notably Marxian economists, argue that the system of perpetual capital accumulation leads to irrational outcomes and a mis-allocation of resources as industries and jobs are created for the sake of making money as opposed to satisfying actual demands and needs.
Market failure
Market failure is a term used by economists to describe the condition where the allocation of goods and services by a market is not efficient. Keynesian economist Paul Krugman views this scenario in which individuals' pursuit of self-interest leads to bad results for society as a whole. From this, some critics of capitalism prefer economic intervention by government to free markets. Some believe that the lack of perfect information and perfect competition in a free market is grounds for government intervention. Others perceive certain unique problems with a free market including: monopolies, monopolies, insider trading, and price gouging. Schumpeter, (1954)
CAPITALISM DEVEOPMENT PROSPECT
There are many ways to construct an economy. One model is socialism, in which all people are required to contribute their possessions and earnings to the common storehouse (usually run by the governing authority) for distribution among everyone, even if some of the recipients did not labor to produce anything. Another model is the capitalist model, where individuals or businesses own products or ideas, and decide on their own how to price, manufacture and distribute those goods in a free market without government intervention.
Capitalism Enhances Innovation
Capitalism relies on good ideas or products to succeed. The capitalist figures out what people want or need to purchase, then devises the most efficient way to manufacture and distribute that product. Henry Ford, for example, developed the assembly-line manufacture of automobiles. He, as the creator, benefited greatly from being able to produce more cars. However, he was also able to hire an increasing number of people at a good wage, and was also able to produce cars at a better price. More people had jobs, and more people were able to buy a reasonably priced automobile. The same is true for those who developed many of the medicines and vaccines people use, which certainly enhance our quality and quantity of life, not to mention people who created what were once luxury items, such as refrigerators and radios. Alexis (2008)
Capitalism Eliminates Bad Ideas
If you think of a great idea, you are free to market it in a capitalist economy. If your idea is a good one, your risk--investment in the idea--becomes a reward. People will buy your product or use your service. If your idea is unpopular with potential customers or your product does not work, your risk becomes realized. People will not buy your product or use your service. While some may consider the risk/reward concept to be a harsh teacher, remember that the good ideas survive in a capitalist economy. People are not forced to purchase or use products or ideas that are inferior. Alexis (2008)
Capitalism Empowers Choice
The biggest benefit of capitalism is that it allows you to make choices for yourself. Capitalism creates a sort of contract that allows people to offer a good or service (their choice) and allows you to use or forgo the offered good or service (your choice). It also allows people to choose how much risk they want to take in offering their product or service. Further, capitalism is a friend to the poor. In a capitalist society, the poor are not forced to remain poor. The poor are given the same property rights, laws, market competition and entrepreneurial spirit as the rich. They are free to compete, whether the competition is difficult or easy, to improve their lifestyles and that of their families. With capitalism, the rich person and the poor person are equals, both in rights and in opportunity.
Some people mistakenly think that capitalism is inherently flawed. In a perfect world, where no greed or malice or even hard feelings existed, perhaps a socialist model would work, as well. However, we live in a world where no one is perfect, and capitalism provides a chance for everyone to be equal. Alexis (2008)
Stability
Capitalism is an inherently stable system in that it is consistent with human behavior, according to Alexis (2008). A broad understanding holds that hard work is the only way to advance, and as a result people are incentivized to use their skills to earn a living rather than wait for someone else to provide for them. By placing this premium on hard work, a capitalist society is also better equipped to handle competition from external sources. Ruch (2010)
Dynamic Society
Because there is typically no guarantee of government support, companies must adjust their supply to consumer demand, which results in a more efficient economy. Companies perform better in the long run because they are not able to rely on a stable source of support. Ruch (2008)
Lack of Alternatives
A popularly-held view of capitalism is that while it isn't an ideal economic system, it does have the virtue of being a better option than any of its alternatives. Government-controlled economies are often marked by "corruption, lack of incentives (and) poor information," according to Economics Blog. These problems are far less prolific in capitalist economies as a direct result of government non-interference. Ruch (2008)
CONCLUSION
Capitalism requires a centralised authority - the state. Without this the necessary infrastructure for production - canals, railways, and roads - would not have existed. Capitalism has a wide variety of benefits for economic systems and society at large. Although opinions on the specific nature of these advantages differ, most economists agree on a few basic characteristics of capitalism that are beneficial to most people. While these advantages don't necessarily hold true for every person in a given environment, they do generally apply for the majority of the population.
Even though blame may be seen more as an action, it is still derived from a system of opinions and attitudes which are found in capitalist societies. Perhaps it is the prosperity of those who live in such societies which causes them to assume that those who are not prosperous are always responsible for this condition. The attitude which summarizes that people may always help themselves through hard work does not always apply in situations where too many people need to be fed with too little resources. Blaming the victim, then, is another way in which problems of the Third World are reinforced.
REFERENCES
Alexis (2008) Benefits of Capitalism: Cited At Www.Ehow.Com _
Jeremy Ruch(2010) Capitalism On The Economic System Cited At Www.Ehow.Com _
Roodney W, (1972) How Europe Underdeveloped African Bogle- L Oueverture Publications
Schumpeter, J. (1954) History Of Economic Analysis. Oxford University Press, New York.
Swedberg, R. (1998) Max Weber And The Idea Of Economic Sociology:Princeton University Press,
Princeton. Alexis (2008) Benefits Of Capitalism: Cited At Www.Ehow.Com _
Walsh (1998) "Pyramid of the Capitalist System" depicting an anarchist perspective on statist/capitalist social structures; cited at http://www.worldsocialism.org/articles
TABLE OF CONTENT
INTRODUCTION
CLARIFICATION OF TERMS
DANGERS OF CAPITALISM
CAPITALISM DEVEOPMENT PROSPECT
CONCLUSION
REFEREN
CA
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