Analysis of Capitalist Production: A Critical Essay

Desklib provides past papers and solved assignments for students. This essay analyzes capitalist production and global trade.

INTRODUCTION TO BUSINESS,
GOVERNMENT AND SOCIETY
1

INTRODUCTION
The essay discusses the concept of the capitalist production process and the stages of capitalist
production in the global world. The development of export-processing zones which are
detrimental to businesses is discussed in the study. The conditions that support the business
like global trade, production and finance is studied in the essay which are the extended
conditions for capitalist production across countries. The stages of capitalist production state
about the essential three stages covered by the capitalist to convert the raw commodity into a
final saleable product which fetched return to the capitalist (Laclau, 2012).
2

BODY
Capitalist Production Process (Marxist Theory)
According to Karl Marx’s theory of political economy and analysis, the capitalist mode of
production is the organizing, production and distribution within capitalist societies. Activities
like renting, banking, production for profit, merchant trade are all predominant in the
development of the capitalist mode of production. This theory based on wage-labour and
private ownership of business and property began to grow rapidly in Western Europe and later
extended to most of the world (Botwinick, 2017).
The capitalist production is characterized by the complete private ownership of businesses and
also the hold on the means of production. The extraction of surplus value is also owned by the
private ownership for accumulating the capital. The mode of production is simply a distinctive
way of producing and manufacturing goods. It is defined in terms of its social organization and
the technologies, tools and equipment used for the final making of goods (Rojek, 2013).
The following characteristics are played in the capitalist production process-
 The inputs and outputs of the production phase are privately owned, priced by the
business owner and the services purchased in the market are taxed as well.
 The aim of setting up the business is to earn reward and profit from the business
dealings. The production is aimed to carry out an exchange of products and services in
lieu of currency (Ryan, 2010).
 The owners of the production are the dominant ones who make decisions for the
company by the surplus generated by the company after paying the wages and
mandatory expenses.
 The capitalists are mainly characterised by their dependency on wage-labour and the
working class which does not own the capital and to make ends meet, they have to work
and give their services in exchange for wages (Heller, 2018).
3

The capitalist production process exists within societies following different political systems like
liberal democracy, social democracy, Czarism and Communist state. Capitalism has existed in
many forms like merchant activity, renting land and small scale manufacturers.
In his work the Capital (1867), Karl Max defines capital as a mode of production which is
characterized by the direct segregation of producers, working class and the sellers. Since the
capitalist is the owner of production services as well, he controls the industrial labour and
divides the work according to labour. The labourers seek employment according to their
capacity. The labourer enters into the market not under employment retaliation but due to
economic necessity (Rojek, 2013).
The employment relationship between the capitalist and the worker is a contractual relation
who is judicially free and not bound. When the labourers enter into the contract with the
capitalist, they render their services which are used by the capitalist to raise profit. The work by
the labourer is acknowledged with remuneration which is a monetary sum representing
exchange value. The wage of the labourers is calculated depending on the number of working
days and the output produced by the worker according to their ability (Botwinick, 2017).
The seller then sells the goods produced by the workers at a higher price which brings in profit.
From the amount at which the product is sold, the capitalist cuts the cost of manufacture, the
original value at the input and the role of the labourer. The amount that remains is the ‘surplus
value'. The money which comes as surplus value is used by the capitalist to either for self or to
reinvest into the market to generate higher sales (Williams and Chrisman, 2015).
4

Key stages of Capitalist Production
There are majorly three stages of capitalist production. The three stages of the capitalist
production process are as follows-
First Stage: The capitalist who has the money and the capital appears as a buyer on the
commodity. The money that the buyer has is transformed into commodities and goes in the
circulation as M – C. The capitalist then buys and acquires the commodity according to his
likelihood. The commodity could be machinery, raw materials, equipment, textiles or others.
The commodity could also be sourced from other locations apart from the home country where
the trade restrictions are not much.
Second Stage: the purchased commodities are productively consumed by the capitalist. The
capitalist now becomes the capitalist producer of commodities by adding value to them to
make them commercially saleable and profitable to the capitalist. In the production phase, the
product changes into a more valuable product which fetches a higher return. In this stage, the
commodity undergoes a total change where it changes as a raw material to a finished good
which is saleable. The product looks nice, has usability and is durable enough. For example, the
capitalist may acquire raw material like fruits from one country and in the second stage, make
juice out of it and add preservatives so that it lasts longer. Then for selling it, the capitalist will
pack it in attractive packages or bottles which are ready to be sold in the commercial market in
the third stage (Rojek, 2013).
Third Stage: The capitalist now enters the market with the product. He becomes the seller who
approaches the markets where his product can be sold for a higher price. The one paying a
better amount for the product is preferred over the other. The commodity is now liquefied as
money and passes through the circulation as C - M.
Hence the formula for the circuit of money is stated as M – C ... P... C’ – M’. The dots indicate
that the process is interrupted to change the product as a raw material to a finished good of
higher value (Botwinick, 2017).
5

Development of export-processing zones helps Capitalists to Organize Production
Export Free Zones or (EPZ) is a type of free trade zones which are allowed certain privileges
which can be in the form of complete exemption from paying duties while travelling the goods
and services from one geographic area to another. The EPZ also enjoy fewer barriers and
restrictions, more incentives for investment and many other forms of relaxations. The countries
in Asia, Africa and Latin America are engaging in creating export development programs. They
encourage investments from multinational companies (Foster, 2014).
EPZ’s are created in those countries where the following factors exist-
Attracts foreign Investment to Create Jobs- The countries wish to attract foreign
investment to create jobs and reduce unemployment in their region. This happens when
the country does not have local businesses and employment avenues so the
dependency on foreign companies and ventures increases. The foreign companies bring
in revenue when they establish themselves in the host country which is either a
developing or an underdeveloped country. The workers of these regions agree to work
at minimalistic wages as they do not have any alternate source of earning money
(Bottomore, 2010).
Expand the Industrial base- The EPZ are found in those regions where the countries
want to expand their industrial base and develop more industries which can bring in
revenue to the region. The countries that have a lower industrial base and thrive on
other forms of employment like agriculture, textiles industry or other petty businesses
want industries to set up in their region which gives a more commercial edge to the
country. The setting up and expansion of the industrial base also calls for technical and
industrial development in terms of education as more people would want the training
and skill set to work in the industrial sector in future. The government also encourages
people to work for industries where better employment options exist (Rojek, 2013).
Introduce Technology- The countries who are lagging behind n technology also open
EPZ to attract ventures and companies to bring in more technological advancements to
the region. When technology enters the country then the many tasks of production,
6

assembly and distribution of products become easy, benefitting the capitalist.
Technology helps in the adding of value to the original product or service with the
capitalist to shape it into a more valuable asset that can fetch greater returns. Countries
and regions that allow Export Processing Zones bring in more technology and
advancements which help the region to become technologically sound and educated
(Botwinick, 2017).
Availability of Resources- The regions which facilitate EPZ have some resources that
attract investment from other global countries and companies like natural resources,
cheap labour which is also skilled or easily learns, and logistical advantages. The regions
which facilitate Export Processing zones give these facilities to companies so that they
have to spend less on logistics or procurement of products or getting the product made
or assembled through cheap labour. The companies make use of these ease facilities
provided by the region to improve the business structure and generate sales (Larrain,
2013).
7

Advantages of the Export Processing Zones to Capitalists
Over the world, there are 130 nations that provide Export Processing Zones at their borders.
Obviously, there are a number of benefits of EPZ to the capitalists which is why they prefer
these export zones over others. The benefits of EPZ to the capitalists are explained as follows-
Increase in foreign exchange thereby costing less to the capitalist
Creation of job hence the availability of skilled and abundant labour to the capitalist
Creation of Foreign Direct Investment (FDI) in the host country thereby bringing the
asset to the host country of the capitalist. This will also result in cutting down costs and
taxes from the home country
Introduction of new technology into the country which is bringing of new knowledge
and expertise
Along with the benefits, there are some challenges which are the initial development
costs of creating infrastructure for the EPZ and also the tax incentives given for foreign
incentives (Murray, 2018).
The countries that have benefited greatly from EPZ are China, South Korea and Indonesia. In
the Philippines, the high cost of infrastructure outweighs the benefits of EPZ in that country.
Role of Global supply chain Management in benefitting Capitalists
Global Supply chain management is the distribution of goods and services throughout a trans-
national global network to maximize profit and minimize waste. The global supply chain
management is similar to logistics supply and supply chain management but it considers
transactions on an international basis. The rise of global supply chain management has
benefitted capitalist as they can sell their goods on an international level. They can also procure
their goods from various places and create a unique product. The salient advantages of global
supply chain management for the capitalists are as follows-
1. Higher Efficiency Rate- The capitalists can get a higher efficiency rate when it incorporates
product innovation strategies, logistics and reliable use of supply chain management to create
an efficient network of business dealings. This makes the system more efficient as it networks
8

well with the other countries and their logistic systems to import raw materials and export the
finished goods which bring in more value (Botwinick, 2017).
2. Optimal Shipping Options- The benefit of global supply chain management to the capitalist
can also be felt when the company has multiple options to ship its products and inventory. The
countries where the product is unique will facilitate the shipping options as well and will
increase the possibility of shipping options for the company. The global supply chain network
can also help the capitalists to find the ideal shipping route for the procurement of the products
and to sell them to the destinations as well (Rojek, 2013).
3. Cater to Global Demands- The capitalists can address the global demand for its products by
effectively networking with the global supply chain management process which has greatly
helped the capitalists to establish their hold on the regions where their product is in demand.
The capitalist also gets to know the various markets from where they can fetch inventory. The
assembly and packaging can be done where labour is cheap and the tag of the company can
take the product to sell at multiple locations across the world.
These are some of the benefits of global supply change management to the capitalist. The
capitalists have been able to organize production and sell their finished goods to many places
where the products have been in high demand (Larrain, 2013).
9

Globalization Project of McMichael
The globalization project by Phillip McMichael has many social and political consequences
which have a direct implication for the future of the world. The phenomena discussed by
McMichael in his study were outsourcing, displacement, informalization and recolonization.
McMichael states in his summary of Globalization Report that none of these is unique to the
global project and these have been in practice from a long time in the global history of trade
and capitalism but are not found at the scale persisted in today's times. They are the four
dimensions of a single process of global restructuring which affects the countries engaged in
trade. The substitution of wage labour against technological substitutes is causing a huge
change in the global markets of the world. Also, the employment contracting for employees is
also affected and is leaning towards a casualizing trend where jobs are becoming increasingly
part-time and home-based. The strategy of flexibility embraced by companies and firms has led
to the surplus of production and employee engagements (Laclau, 2012).
Some observers in the study see informalization as a counter-attack to the official economy of
the region and to state regulations. In Africa, practices like informalization of both stripes,
withdrawal from, corrupt practices, marginalization by selective corporates and predatory
states, cherry picking of local resources is still in practice. This illustrates that colonization is an
endemic feature of world system premised on accumulation (McMichael, 2007).
In the Global South, the conditions for capitalist production have been unfairly distributed.
Since the global south comprises of the countries like Africa, Latin America and the developing
countries, less developed countries and less developed regions. They have different economic
and social change mechanisms which make them very difficult for capitalists to draw business
of any kind. These regions are not well connected with the global north where the trade has
been well established in the past due to Silk Routes and so on. The southern globe includes
countries like Australia, Japan, Israel, Hong Kong, Singapore and other affluent countries which
have their own pre-established trade routes within each other. The global south is well
connected with each other and the capitalists of the global south can get the services from
[peer countries (Larrain, 2013).
10

CONCLUSION
It can be concluded from the study that capitalism has been very helpful in managing trade and
business across borders. The stages of capitalism show how the capitalist makes use of a non-
worthy item acquires it and changes it completely in the production stage to make the capital
more worthy and saleable which makes the product more profitable. The concept of EPZ was
discussed and its benefits to the capitalists were also covered in the essay. The rise of global
supply chain management has also benefitted the capitalists who are venturing to trade on an
international basis. International trade within the global south is discussed at the end of the
essay. Finally, the essay concludes with the globalization report by McMichael about the
conditions of capitalist production for the Third World or the Global South.
11

REFERENCES
Bottomore, T., 2010. Theories of Modern Capitalism (Routledge Revivals). Routledge.
Botwinick, H., 2017. Persistent inequalities: wage disparity under capitalist competition. Brill.
Foster, J.B., 2014. The theory of monopoly capitalism. NYU Press.
Heller, A., 2018. The theory of need in Marx. Verso Books.
Laclau, E., 2012. Politics and ideology in Marxist theory: Capitalism, fascism, populism. Verso
Trade.
Larrain, J., 2013. Theories of development: Capitalism, colonialism and dependency. John Wiley
& Sons.
McMichael, P., 2007. Globalization and the Agrarian World. (Online) Available at
https://devsoc.cals.cornell.edu/sites/devsoc.cals.cornell.edu/files/shared/documents/G-and-
the-agarian-world-final-pdf.pdf (Accessed on 17th March 2019)
Murray, M., 2018. Export Processing Zones (EPZ). (Online) Available at
https://www.thebalancesmb.com/export-processing-zones-epz-2221273 (Accessed on 17th
March 2019)
Rojek, C., 2013. Capitalism and Leisure Theory (Routledge Revivals). Routledge.
Ryan, B., 2010. Making capital from culture: The corporate form of capitalist cultural production
(Vol. 35). Walter de Gruyter.
Williams, P. and Chrisman, L., 2015. Colonial discourse and post-colonial theory: A reader.
Routledge.
12