FORMS / TYPES OF CAPITALISM
There are basically four types of capitalism, which are listed below –
1. Market-led Capitalism – i.e., U.S., U.K.
2. Corporate Capitalism – i.e., Japan, South Korea
3. Social-Democratic Capitalism – i.e., Scandivian, Austria
4. State-led Capitalism – i.e., France, Germany
A brief on the above has been laid down in the following –
| MARKET-LED CAPITALISM | |
| POSITIVES | NEGATIVES |
| primacy of private marketsinsistence on well defined private property rightsentreprenuership is celebratedquick, radical innovation, especially in technology fieldscreative destructionhigh-tech/ sunrise and business services jobsdeep, highly adaptive, sophisticated and financial marketsvery flexible labour markets | highly politicized, countervailing public bodies to curb private market excessescountry largely inward lookinghighly selective nature of social benefitsunderinvestment in public infrastructureincreasing social inequalitiespoor education, health and public safety systems |
| CORPORATE CAPITALISM | |
| POSITIVES | NEGATIVES |
| dominated by large conglomerate firmsmobility of capital, knowledge, competence, workers, managers markets are internal to the dominant firmthis leads to family coherence and to family in-breedingvery good at imitation and catching-up, very efficient at co-ordination among suppliers and co-ordination and compliance with policy directionsgood education, health systems, strong social cohesion | presence of large conglomerate firms forestalls innovation and market penetration by nimble small firmsinternal markets are substitutes for a external credit, goods and labour marketsweak financial system because the financial sector is not sufficiently independentlabour and financial markets don’t adjust well to shocks |
| SOCIAL-DEMOCRATIC CAPITALISM | |
| POSITIVES | NEGATIVES |
| negotiated compromises among interest groups – workers, businesses, public authoritiesexport-led innovative, quality and niche-market oriented, adaptive and responsive to changing international market forcesstrong social mechanism to redistribute incomegood urban systemscare of the young, the ageing of the natural environmentcreation of public sector employment linked to health, education, public safety, fairly strong social cohesioninequalities kept within strict limits | a ‘me-first’ social safety thinking so entrenched that it now inhibits further adaptations to the global markethas grown dependent on public spending infusionsdepreciating knowledge of private sector hustlingoverbearing dependence on the banking sector rather than the more versatile financial sectormajor transformation needed |
| STATE-LED CAPITALISM | |
| POSITIVES | NEGATIVES |
| good where private markets fail e.g., in transportation, health, education, basic R & Dpredictability about economic evolutiongood for catch up along well-defined technological pathsno need for active, collective bargaining among interest groups | state nationalizes and organizes production inefficientlyconstant pressure to create demand via public spendingprices are closely supervised or controlledhigh degree of state institutionalization of economy makes it vulnerable to shocksthis leads to economic sclerosis, a creaky, overly constrained system crying out to be reformed, liberated that relies on bureaucrats rather than entrepreneurs |
Criticism of Capitalism
Here are some common criticisms of capitalism:
- The free market and property rights : The Anarchist Pierre-Joseph Proudhon (1809 – 1865) and the Marxist Friedrich Engels (1820 – 1895) have argued that the free market is not necessarily free, but weighted towards those who already own property, forcing those without property to sell their labor to capitalists and landlords in a market favourable to the latter, and to accept low wages in order to survive.
- Market failures: The allocation of goods and services by a free market is not as efficient as it might be (due to the lack of perfect information and perfect competition), and individuals’ pursuit of self-interest can lead to bad results for society as a whole. It is argued that this and certain other unique problems with a free market (including monopolies, monopsonies, insider trading and price gouging) are grounds for government intervention.
- Market instability: Marxists claim that market instability is a permanent feature of capitalist economy, and that the unplanned and explosive growth of Capitalism does not occur in a smooth manner, but is interrupted by periods of overproduction in which stagnation or decline occur (i.e. recessions and depressions).
- Profit and exploitation: Critics of Capitalism view the system as inherently exploitative because the owners of capital only pay labour for the cost of survival (food, shelter, clothing, etc), while expropriating the excess (i.e. surplus value). Since capitalists control the means of production (e.g. factories, businesses, machinery) and workers control only their labour, the worker is naturally coerced into allowing their labour to be exploited, and is not paid according to the true worth of his labour but arbitrarily according to what the employer is willing to pay.
- Inefficiency and waste: Some opponents criticize the shift from pre-industrial reuse and thriftiness before Capitalism to a consumer-based economy that pushes “ready-made” materials and planned obsolescence, thus creating a potentially insoluble ecological problems. Advertising and marketing are also seen as a wasteful use of resources, and brand-based marketing puts more emphasis on a company’s name-brand than on the quality of its products.
- Unequal distribution of wealth and income: Some view a significant disparity and concentration of wealth to be a problem endemic to Capitalism, and argue that this inequality is excessive, unfair, dysfunctional or even immoral, and may lead to social problems (such as higher crime rates) that affect both poor and rich. It is further argued that the capitalist system may also have inherent biases favouring those who already possess greater resources. The wealthy may not put their wealth to productive use, while at the same time the system undermines an economy’s mass buying power by denying resources to poorer people, who have a tendency to spend rather than save.
- Employment and unemployment: Some economists consider that a certain level of unemployment is necessary for the proper functioning of capitalist economies, and that this “natural rate of unemployment” highlights the inefficiency of a capitalist economy, since not all its resources (e.g. human labour) are being allocated efficiently.
- Imperialism and human rights violations: Some argue that Capitalism thrives on an uneven and exploitative relationship between wealthy nations who force regime or system changes in poor countries which are only beneficial to them, often through exploitative wars. Dependency Theory holds that resources flow from a “periphery” of poor and underdeveloped states to a “core” of wealthy states, enriching the latter at the expense of the former. Marxists, particularly Vladimir Ilyich Lenin (1870 – 1924), argue that Capitalism needs imperialism in order to survive, as it expands its over-saturated local markets into (and drains the resources out of) other less-developed nations.
- Democracy: Some critics have argued that the Capitalist system can be undemocratic (although Capitalism as an economic system is not necessarily tied to democracy). Oft-cited examples include people not being able to criticize their boss out of risk of getting fired, and not being able to express their opinions due to lack of funds to afford access to the media.
- Economic freedom: There has been criticism of the usual measures of economic freedom which are often used to justify Capitalism. If economic freedom is to include the freedom to have meaningful decision-making control over productive resources, then it is argued that the various points mentioned above actually result in reduced, not increased, economic freedom.
- Sustainability and the environment: Some question the continued sustainability of an economic system that insists on continued strong economic growth, requires increasingly greater amounts of natural resources and energy, and promotes environmentally irresponsible consumption and production, arguing that many aspects of the environment have been severely degraded since the industrial revolution. The globalization of production, which is an integral part of the functioning of modern Capitalism, also produces significant pollution and waste of resources.
- Religious criticism: Some religions criticize or outright reject capitalism (e.g. Islam strongly forbids usury, the lending of money at an interest). Some Christians have also strongly criticized Capitalism, particularly its materialistic aspects. Some see unfettered Capitalism as a threat to cultural and religious traditions.
