Why are thousands of people worried about the future of capitalism? Their favorite question is will capitalism survive? The answer is yes; but not in the way we are practicing it. The first and foremost thing is to ask why do people question the moral legitimacy of capitalism? Rebecca M. Henderson – a Harvard professor- defines capitalism as an unparalleled source of prosperity and innovation. With the rapid population growth, people want to rethink capitalism’s contract. They need a centralized system more than ever because it would be the driver of innovation and change. Then, how could a new system satisfy them? Obviously, it must create billions of new jobs in the coming years. Coming to the question, however, this piece of work discusses the history of colonial capitalism and it’s flaws.
Capitalism is an economic system which dominates in Western countries and is referred to as free-market economy/free enterprise economy conventionally traced to Scottish political economist Adam Smith’s concept of ‘invisible hands’ in his work, “An Inquiry into the Nature and Causes of the Wealth of Nations” in 1776.
Capitalism is an economic system in which private individuals or businesses own capital goods. The production of goods and services is based on supply and demand in the general market- known as a market economy- rather than through central planning- known as a planned economy or command economy.
The European businessmen used to import spices, magnificently designed garments, beautifully manufactured articles of wood, perfumes, ivory articles, etc. from the Eastern countries. In return, they needed to export mere few commodities to the eastern countries. The main reason was that the European countries manufactured only a few commodities.
Along with this, European businessmen used gold and silver currency for purchasing articles from the eastern countries’ businessmen. Consequently, the flow of gold and silver started to take place from European countries to the eastern countries. The European businessmen tried to find many remedies to resist this flow but all in vain. They started selling the goods and commodities purchased from eastern countries into the other countries of the world except for European countries with profit margins. Sometimes, these businessmen sold articles by purchasing from one country to another country and they used to buy essential commodities for them. For instance, the British traders, sometimes, bought clothes imported from India and exported them to Indonesia to buy spices and ultimately used to sell these spices in their native country. They earned a huge profit in such transactions.
Similarly, the European businessmen presented some precious gifts to the rulers of Eastern countries to enhance their business, to minimize hurdles regarding their business dealings, and obtain facilities for them. Consequently, their octroi- taxes and tolls were waived off because of these presentations and they got an opportunity to increase their profit. The European traders fared from town to town for purchasing goods and articles at lower rates and they used to sell them with a high-profit margin.
Europe, especially, England became wealthy with such trading. The European businessmen realized that it was profitable to deal with manufactured products. So, they developed new production methods and consequently the machine age and the industrial revolution came into being, and manufacturers started to use heavy capital for the investment in mass enterprises (such as in the garment industry) to increase productivity and profit share.
The preliminary capitalist system is as old as the history of man, and no one can properly claim to have invented capitalism. However, the collapse of feudalism in the 16th century can be considered as the first phase of the origins of capitalism as an economic system. The reason was the industrial revolution, which started from the 16th to the 18th century in England.
Over the last two centuries, capitalism may have lifted millions of people out of poverty, significantly increased their standards of living, and resulted in innovations that may have radically improved human well-being. But, in recent times, the flaws of capitalism have erupted like a volcano as the world is witnessing COVID-19 and climate change. According to the worldwide survey 2020, around 57% of people believe that “capitalism as it currently exists causes more harm than good in the world.”
Furthermore, the income gap between rich and poor is increasing across the world. The wealth of the world’s richest billionaire- who reside in America- is increasing exponentially, while the real income growth of the poor is stagnant. The plethora of research shows that deaths from suicide, drug overdose, and alcoholism have risen dramatically as people have less trust in institutions and they feel a lack of justice.
In a nutshell, it may be high time to rethink capitalism in order to include a broader set of interests beyond individual rights and liberties. In the past, capitalism had undergone several changes, and if it is to survive in the long-term future, it will have to change again.