Class and Capitalism
Introduction
According to Meltzer (2012), capitalism is a term used to describe our modern social systems. Under capitalism, the needs of the people are fulfilled by a small group of individuals known as capitalists. This class of people can manipulate the rest of the population in return for a wage. People are paid to produce goods which are then supplied to the consumer at a profit. The capitalist thus makes money by selling what has been produced at a higher price than the one associated with the labour market. The implication made is that the people producing the goods are ill-used by the social class. The capitalist then uses a portion of what they have realized in business to finance their luxury activities as opposed to reinvesting the money in the business to uplift the living standards of workers. Financialization is a term used in reference to the growing singificance of financial markets, finances, as well as financial institutions to the working class in the economy (Davis and Kim, 2015). The term financialization has been used by economists in reference to the shift from gains through industrialization to capitalism. On the other hand, there has been a significant increase in the level of household debt in the last few decades. Household debt according to Saiag (2012) is defined as the total sum of money a family owes lenders. This definition covers consumer debts and mortgage loans. This aspect of financialization and the rise of indebtedness has led to positive and negative implications in contemporary society.
Implication of Financialization on the Contemporary Society
There are two key areas of research on financialization: a focus on shareholder value and its influence on patterns of culture, inequality, and societal change. The introduction or desire to lead due to capitalism has been one of the strongest forces behind the transformation of many developed economies and increasingly, the developing and third world economies. Most people in such economies as the United States believe in firm lifestyles, and the Puritan way of life is the best example of this. A review of American history shows that Americans were reserved in nature and never practiced capitalism because they were satisfied with what they had. In this case, many people were able to meet their needs and wants without necessarily having to manipulate the market. However, the culture of capitalism and promotion became evident in the 20th century with the emergence of the broadcasting media. It is clear that the need for a particular product has been reinforced by the broadcasting industry This notwithstanding, the culture of consumption had a bigger influence on capitalism (Meltzer, 2012). All the social and media undertakings that improvise desire had copied the capitalist culture owing to the need for promotion.
Capitalism tends to promote a working culture. This is because it encourages people to engage in things that are important in their lives. This is what is viewed by many people as a benefit of capitalism and has therefore been instrumental in the success of capitalism (Meltzer, 2012). At a certain level, the motive to gain and compete in a given field encourages the capitalist system. In addition, the capitalist market promotes the thinking that the winner in business competition takes it all. These motives suggest that the reward does not directly link to a person’s contribution and the individual who has the highest rank has to get a share of what everybody else is working for. Using this perspective, no one is hindered from aspiring to be a winner. In fact, the person with the most wins eventually benefits from the biggest share.
One negative aspect of capitalist markets is that it ignores the social advantages. A firm or individual that focuses on maximizing profit will tend to ignore externalities. Incidences like pollution are likely to harm living things hence affecting the ecological balance. On this, a free capitalist market will provide goods that have fewer benefits such as health or education to external users. This facilitates the widening of the inequality gap because resources are not distributed equally (Santos, Costa and Teles, 2014). A society built on capitalism acknowledges the law of wealth inheritance. This contradicts their policy which states that a person gains the reward of his or her success. Some people become rich after having acquired family wealth, and not because they worked hard. Thus, capitalism fails to advocate income inequality and also fails to offer equal opportunity. In this way, a lack of equality leads to social division.
The capitalist trend is growing at an overwhelming rate with important values for nature and greatness in the class struggle. Three conditions are affecting capitalism. These conditions include a state with high growth, stagnation, and profound crisis (Bratton and Denham, 2014). The countries with the fast-growing economy are torn between exporters of agro-mineral goods and manufacturing exporters. Crisis economies are divided into fast recovery, slow, and prolonged recovery.
Capitalist has only one motive, producing goods and services and supplying them at a profit and not fulfilling peoples' needs (Bowles, 2014). The capitalist produces products and services with the hope of finding a buyer with the only aim of making a profit and acquiring more monetary gains. This is something practical and can be confirmed daily in advertising media. The production process is based on what forecast of the investor and the potential gains to be realized and not what consumers are ready to pay to satisfy their needs. The goods will automatically meet the only consumer who has purchasing power. The capitalist, in some cases, does not make money out of greed. The fact is they do not have an alternative because they need to make a profit for them not to lose their investments and their social status as capitalists (Røyrvik, 2013). The level of competition in their industry compels them to make more investments to raise their profit high for them to stay relevant in the market. As a result of this argument of making a profit, the capitalist has the root of most of the world's problems in the modern world, from hunger and starvation to crime-related activities. In a capitalist society, needs will always be met at the expense of realizing a profit.
Most people assume that capitalism only operates on a free market. The fact remains that it is also possible to have capitalism without a free market. The systems that are put in countries like China and Cuba can explain this. The people wealthy people are divided into classes framed as socialists. Looking at the bigger picture, these countries are capitalists. In a country like Russia, just to mention, there still exists wage slavery, and exchange of goods for money, and just like other countries, Russia is always ready to go to war to defend its economy. The aspect of having the Soviet became a way of exploiting people through wage labor.
The countries experiencing high economic growth and their economy is laid on agro-mineral exports are having an offensive struggle over having a greater share of the economy. Some countries are experiencing an income disparity of more than 10%, and in some areas, the rate is high. In some cases, there is inflation which affects the cost of living. Inflation tends to affect consumers negatively by increasing the prices of goods and favoring capitalists by realizing more profit from sales, according to Sottile (2015). Inflation leads to increased prices of foodstuff, logistics activities, and power. In stagnant developed countries like the United States, the governments use the approach of putting all the recovery costs on workers, cutting employment opportunities, and reducing social services. The struggle for labor is intensive in these countries with influential wealthy politicians trying to play the class of politics by manipulating the law to cut taxes for capitalist people and widening the gap of inequality.
Capitalism has led to a social struggle in the countries with the most stable economies like Spain and France. The ruling class in these states has changed their old system of social and wage gain to meet the standards of Western bankers and the IMF. This aspect has led to many strikes and protests which bore no fruits, according to (Pettinger, 2013). To implement the standards, the countries had to slash millions of workers, and the unemployment rate was high. The ruling class has then channeled a lot of money into debt payments. The opportunities are utilized by ruling capitalists to reduce labor costs, transferring part of the economy to 5% top rulers and increasing productivity with no intention of reviving the whole economy.
Impact of indebtedness on Contemporary Society and Culture
Consumption according to Saiag (2012) has been the subject in the social sciences, of its importance in contemporary society. This rise in consumption has overlapped with the rise in consumer behaviours. Households on the other hand have been an issue of concern, triggered by the financial crisis between 2007 and 2008. The indebtedness regime is laid upon the reversal of roles where the production sectors must be answerable to the financial sectors. In this production system, the wage-labor relationship must be evidenced, which allows mass production and consumption of goods by reorganizing the distribution channels (Saiag, 2012). When the monetary regime is used, the reverse holds. The relationship between the institution's finances and the wage must be profitable to the financial sector. This trend implies that the stock rates are in a position to determine investment decisions, household debt and consumption rates, and fiscal policies.
Too much finance in circulation may affect the economic development of the country and deteriorate the inequality gap. According to a report released by the Organization for Economic Cooperation, the level of household and business has risen; with the same rate of economic growth. It is sad to note that the ratio of all world debts is estimated to equal the world's total GDP, according to Santos et al. (2014). This led to the conclusion that the world's debt is triple the world's input. According to research, the more credit, the lower the rate of growth.
The aspect of inequality has affected wealth creation because the household’s marginal urge to consume is reducing the decreasing level of income. To sum it up, an increased demand for locally produced goods has hit the commercial pressure from the private sector negatively. The customs duties have decreased because there is less import. Since the tax has been reduced, the government will cover its expenses either by increasing taxes on wages and salaries without touching luxury goods, assets, or real estate (Santos et al., 2014). These heavy taxes imposed on people lead to income reduction. The same income is expected to cater for the health, transport costs, and other budgets, creating pressure to cut down other expenses.
The recent crisis on the pension issue has had a direct impact on the mode of production, trade, and finances as a result of the rising household debt. The investment market cannot feed itself by observing the current trends. This means that the capitalists cannot maintain themselves because the over-indebted people are unable to pay their debts (Santos et al., 2014). The effect of reducing peoples' income results in increased debt because people want to meet their needs and that can be done through borrowing. In the short and medium, this trend will lead to health in the financial organization but result in a high level of unemployment in the future. The strong demand for debt has to an unsustainable disequilibrium with a direct impact on the degree of reproduction and production process, trade, and financing models.
Conclusion
Shareholder value has been quite instrumental in enabling an increasingly larger number of firms to replace equity with debt and in the process, cut down employment. Reducing the workforce is seen by many firms in the capitalist economy as the most logical step towards maximising shareholders’ value and a valid sign for the active management of an enterprise. A capitalist culture generates an obstinate set of motivations designed to reduce total production and in the long run, realize a high profit margin. The ensuing implications include among others, rising levels of employment, reduced income, and income inequality.
References
Bratton, J and Denham, D., 2014. Capitalism and Classical Social Theory: Second Edition, Toronto: University of Toronto Press.
Bowles, P., 2014. Capitalism. New York: Routledge.
Davis, G.F., and Kim, S., 2015. Financialization of the economy. [Online].
Meltzer, A.H., 2012. Why capitalism?, New York: Oxford University Press.
Pettinger, T., 2013. Pros, and cons of capitalism. Economics Help. [Online].
Røyrvik, E.A., 2013. The Allure Of Capitalism: An Ethnography of Management and the Global Economy in Crisis. New York: Berghahn Books.
Saiag, H., 2012 Household over-indebtedness in contemporary societies : a macro-perspective. Academia.edu. [Online].
Santos, A.C., Costa, V. & Teles, N., 2014. The Political Economy of Consumption and Household Debt: An Interdisciplinary Contribution. RCCS Annual Review. [Online].
Sottile, J.P., 2015. Our United States of Indebtedness. Truthout. [Online].
