Capitalism Capitalist

Is there a single meaning? Like Socialism it is by no means clear that this has a certain meaning.

Roughly it may be defined as a method of organizing the economy in which decision making is largely decentralized to the owners and managers of enterprises (companies and firms). In theory coordination is through the Market.

An essential feature may be the Joint Stock Company invented in 17th century England as a means of spreading ownership and risk in the building up of capital and fitting out trading ships, as in the Muscovy and East India Companies (see British Empire). Ownership was at first in the hands of individuals, often from the pre-industrial merchants and landowners.

However, this 18th century version has mutated into several forms: thus in Anglo-Saxon countries (US, UK, Canada, Australia) the main ownership is in the hands of financial institutions such as insurance funds, but the main target for managers is the short term price of the shares fueled by the amount of profit distributed to the share owners (dividend). Takeover battles are frequent, which may lead to poor overall and long term performance.

In Germany and other European countries another version gives weight to the employees who have representation on the supervisory board. Ownership is often vested in investment banks set up for the purpose of encouraging industry.

Here is an article about the different varieties.

In Japan and other post-Confucian societies (Hong Kong, Singapore, Korea) takeovers are rare and ownership less interested in short term growth. It has been argued that this form encourages investment and research and development more than in the Anglo-Saxon model, and by the processes of natural selection may come to prevail, though it too has disadvantages, such as inflexibility.

The rise of China as an economic power suggests another model, but it is too soon to be sure how well it will develop as there are suspected to be serious hidden problems.

Can the western systems react favorably to the world ecological problem? So far the market does not respond to foreseeable resource depletion, the build up of pollution, and the other world ecological problems. Enthusiasts for this system frequently deny there are problems.

Karl Marx criticized the effects on the poor; it is not clear that the tendency to polarization between the owners and the workers has yet been solved (see Imbalance in World Problems). In Russia capitalism has resulted in huge problems with the impoverishment of the mass of population and the enrichment of a small group of new owners (often former party officials) - the Oligarchs, now probably returning to state control under Putin.

It is still not clear what Capitalism in China means, guided by the formerly Marxist Communist party.

The events of 2008 - the collapse of the leading banks in Europe and the United States - suggest that the practice of the system advocated by so many economists in the last 20 years, has deep flaws.

An alternative might be the institutions developed in the 19th century by the British Working Class movement - cooperatives and their developments in the form of the Mondragon model. It is clear that the financiers who control and gain from the conventional system have no interest in promoting employment if they can make money by putting people out of work. Does Capitalism actually have any ethics?

Stephen Haseler - Meltdown

Meltdown - How the 'Masters of the Universe' Destroyed the West's Power and Prosperity

Nick Robins - The Corporation that changed the world

The Corporation That Changed the World: How the East India Company Shaped the Modern Multinational

Joon Chang - 23 Things they don't tell you about Capitalism

23 Things They Don't Tell You About Capitalism

Last revised 5/06/12


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