Analyzing Capitalism's Shortcomings: A Political Science Essay

This essay provides an overview of capitalism, defining it as an economic system characterized by private ownership of the means of production, where decision-making power rests with capital owners. It contrasts capitalism with socialism, which critiques capitalism for creating waste, developing ...Read More

Running head: POLITICAL SCIENCE
POLITICAL SCIENCE
Name of the Student
Name of the University
Author Note

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Introduction
Capitalism can be illustrated as such kind of economic system where the means of
production is under private ownership. In a typical capitalistic economy, all the decision
making power including important decisions relating to investments, lies in the hands of the
owners of capital or wealth. In other words, the employers who has wealth, property and
financial capability has all the decision making power including fixation of the wage
structure of the workers and other laborers1. However, level of competition in the market
fixed the prices of the goods and services as well as regulate its distribution.
Description
Socialists are of the view that accumulation of capital or simply capitalism creates
waste which is generated as a result of certain externalities and such a situation requires
corrective measures. The socialists also state that this particular capitalistic economy
develops wasteful industries only, that is, it develops such practices that creates demand for
the goods they make to generate more and more profit only ignoring the economic demand
satisfaction. According to the socialists, the main motive of these industries was to generate
extra profit only. For example, they tried to enhance the demand for their goods through
attractive advertisements, ignoring economic demand concept and the effects on society as a
whole.
Apart from the above stated negative impacts of capitalism, the socialists argued on
the fact that capitalistic economy generated some irrational activities as well2. Socialists
identified that capitalism indulged in some irrational activities like speculation where they
1 Awan, Abdul Ghafoor. "Wave of Anti-Globalization and Capitalism and its impact on
World Economy." Global Journal of Management and Social Sciences 2.4 (2016): 1-21.

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bought the goods to be sold at a later time when the prices of such goods will appreciate,
completely ignoring the fact of economic welfare of the people and increasing the inequality
of the distribution of wealth in the society.
Other than the ones discussed above, there are other inherent negative impacts of
capitalism or capitalistic economy identified by the socialists, which are as follows:
Monopoly power: Private ownership can be considered as the main characteristic of
capitalism. Monopoly power in the labor and product market results out of this private
ownership3. This private ownership induced monopoly power exploits the society as a whole
by charging higher prices for the products.
Exploitation of workers: Exploitation of workers or labor can be illustrated as taking undue
advantage of the workers by their employers on account of inferior position. In capitalism,
the firms are privately owned and the owners of capital exploits the laborers by paying less
wages to them. The capitalism induces monopsony power, that is, a group of buyers of labor
fixes the wage structure for the laborers4. Hence the group of buyers of labor pays low wages
to the laborers. This monopsony power thus results in the exploitation of workers and also
2 Moreno, Louis. "The urban process under financialised capitalism." City 18.3 (2014): 244-
268.
3 Foster, John Bellamy. The theory of monopoly capitalism. NYU Press, 2014.
4 Jaeggi, Rahel. "What (if anything) is wrong with capitalism? Dysfunctionality, exploitation
and alienation: three approaches to the critique of capitalism." The Southern Journal of
Philosophy 54 (2016): 44-65.

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results in increasing the inequality between owners of wealth and capital and persons
working for the creation of such wealth.
Conclusion
In capitalism, the main motive of a firm is to increase its profit irrespective of the
negative externalities which would be inexistent if the market was set free. Here, negative
externalities mainly includes the pollution that the production process creates in the normal
operation of the production process and many more that causes harm to the normal standards
of living. Hence it can be concluded that, capitalism as a whole results in the decline of social
benefit.

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References
Awan, Abdul Ghafoor. "Wave of Anti-Globalization and Capitalism and its impact on World
Economy." Global Journal of Management and Social Sciences 2.4 (2016): 1-21.
Foster, John Bellamy. The theory of monopoly capitalism. NYU Press, 2014.
Jaeggi, Rahel. "What (if anything) is wrong with capitalism? Dysfunctionality, exploitation
and alienation: three approaches to the critique of capitalism." The Southern Journal of
Philosophy 54 (2016): 44-65.
Moreno, Louis. "The urban process under financialised capitalism." City 18.3 (2014): 244-
268.