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The Advantages and Disadvantages of Capitalism / Globalization

Both globalization and capitalism have and will increasingly become integral elements of the world‟s economy. This is an undeniable fact. Whether or not this transformation will be beneficial to humanity, however, still remains a point of heated contention, and although some overzealous politicians or social leaders may insist that one or both of these concepts are completely without merit, the rest of us level-headed thinkers must recognize that there are in fact advantages and disadvantages to be weighed for both positions. This paper will serve to elucidate the disagreements between their supporters and opponents. Capitalism is an economic system whereby the means of production and employment are wholly controlled by private individuals or organizations. The free market, unrestricted by any government regulations, controls all economic decisions: income, tax (if any), wealth distribution, and pricing to name a few. Whether or not these economic decisions are wise is of no concern to the committed capitalist. Those who make profitable investments will benefit while those who do otherwise will suffer the consequences. This idea lends itself to the concept of a boom and bust cycle; whenever a large society fails to choose the correct economic path, the economy will temporarily weaken. After the initial shock of this economic decline, however, the capitalist posits that the free market will inevitably rebound and learn from this mistaken decision. The investors will recognize their error and accommodate their investments in such a way as to avoid that error in the future. After World War I, the world‟s general populace supported capitalism immensely. They saw great hope and future prosperity in applying this seemingly sound economic theory. The

consumer believed that in light of the absence of much government regulation, companies would exhibit unprecedented competition. This competition would first give the consumer a choice as to where they could invest (which would empower them in the sense that they could “vote with their money”), second improve the quality and variety of products and services in which they could invest, and third drive down the price of the products and services in which they would invest. (Hinshaw) This kind of competitive improvement seemed unattainable if the government were to support one company over another. The capitalist would also say that capitalism is also beneficial to the average employees of the world. In poor countries for instance, large corporations would employ destitute individuals as a labor force to lower the prices of their products while also raising the standard of living for those individuals as a kind of symbiotic relationship. Furthermore, in any nation affluent or poverty stricken, if a worker were to exhibit substantial profit/advantage to a company, in theory, the worker could be promoted and dramatically improve their standard of living. Andrew Carnegie for example was a poor Scottish immigrant of America who grew to become one of the richest men in history. In this way, capitalism promotes and inspires social mobility and productivity more than any other kind of economic theory. The benefits of capitalism for a large company are almost too obvious to call attention to. Under a capitalistic system of economy, companies would be free to gain as much profit as they wished in whatever manner they could possibly imagine. There would be no regulation to limit the maximum number hours a company could employ a worker per week. There would be no regulation to stop the formation of a monopoly. In short, there would be no laws to inhibit the growth of a company that would otherwise be present in a state oriented economy. Furthermore, there would be significantly less bureaucracy in a capitalist system. A particular example of this

theory in action is when “India‟s „Permit Raj‟ ended. State control was reduced, government subsidies were cut, tariffs and trade barriers reduced, and regulatory licenses eliminated.”(Commanding Heights) As a result of adapting a more capitalistic system, India‟s economy boomed. As much as Friedrich von Hayek or any other capitalist would like for this essay to stop now, there are some potentially undesirable aspects of capitalism. For instance, the Great Depression terribly crippled the American economy for roughly a decade. Millions lost all of their savings, and millions were left unemployed. Keynes argues that government intervention could have lowered the impact of the depression or completely avoided the crisis by increasing spending. Under Keynes‟s theory, those millions of people would not have had to suffer, whereas in Hayek‟s theory, the suffering is a necessary precondition of capitalism if people are to learn from their mistakes. (Commanding Heights) Another point of contention concerning capitalism is the tendency of wealth to stay with wealth and poverty to beget poverty thus leading to an ever increasing gap in wealth and division in class between the rich and poor. While the rich often spend a small percentage of their money on necessities and luxuries, the poor must often spend all of their money solely on simple necessities and can therefore not accumulate wealth to later invest. Does capitalism then really allow for the increase in social mobility of the lower rank and file? Quality education for instance remains almost exclusively reserved for the wealthy. (Waiting for Superman) In a capitalist society, wealth would be distributed heavily in favor of the top one percent of companies and to the obvious detriment of the general public. Furthermore, a company can grow so large that it becomes a monopoly and stifles any kind of competition, and because

monopolies would be able to force the consumer into buying exclusively from them, the economic gap would widen. When previously addressing the benefits of capitalism, I mentioned how the employment of underprivileged individuals as a cheap labor force would raise the individuals‟ standard of living. This does not however address the basic human rights violations an ambitious company may seek to forgo in its greedy quest for profits. These violations could lead to among other things: employee mistreatment, risk to health, and exploitation. A company could not only harm its employees but also harm the entire society as is the case with large factory pollution and food contamination. (Hinshaw) Without government regulation, the free market may not be able to react quickly enough to avert catastrophic disasters like global warming or unconstrained diseases. In contrast to capitalism, one exemplar for the success of applied socialism is the American airline industry. New companies were continuously being established and then soon filing for bankruptcy. With the help of government regulations, the airline industry was finally able to take off and become profitable. As Keynes said, “Government should spend money to restore and maintain employment” in times of hardship. (Commanding Heights) This stabilizing action benefited America by securing safe and dependable transportation for citizens all over the country and would not have otherwise come into fruition had capitalism continued its course. Globalization “is the newfound power for individuals to collaborate and compete globally.” (The World is Flat) With the emergence of web browsers, work flow software, outsourcing, and other of Friedman‟s ten world flatteners, globalization has become capable of spreading to an unprecedented level. (The World is Flat) Although the common person may

object to the presence of true globalization since people in Africa or North Korea lack access to such “world flatteners,” the fact of the matter remains that if they were to hypothetically have a computer, they would be able to connect to the rest of the world, whereas this technology was not even existent a hundred years ago. To discuss all the benefits and drawbacks of globalization I have learned in the past month would be tedious and boring, so for the sake of brevity (a quality this essay has perhaps already lost), I will only name a few. Globalization has undoubtedly created thousands if not millions of new jobs. As corporations seek to increase profits and compete with each other, they more often than not seek to outsource jobs to places that don‟t have minimum wage and don‟t have strict labor laws. Although this exploitation has dire humanitarian results, the tendency of corporations to outsource has in part drastically raised standards of living in such a way that would not have happened had globalization not occurred. Moreover, by utilizing this new pool of cheap laborers, multinational corporations have been able to lower prices for consumers. Another boon of globalization is the increase in workers‟ productivity because of the surge in the number of competitive companies and employees. This new larger working class encourages the rest of the previously unmotivated group of laborers to work harder and be more disciplined in order to keep their jobs. This not only applies to laborers but also to the realm of science and technology. With more and more degrees handed out each year, a scientist must increasingly be more productive and innovative if they are to maintain their standing in the world. Thus the world profits from the rush of innovation caused by globalization. Finally, globalization lowers trade barriers for underdeveloped countries, which opens huge markets of untapped demand and presents huge opportunity for economic growth. For

instance, when India, as previously mentioned, lowered its tariffs and opened its markets, its economy flourished into an economic superpower with an incredible economic growth rate. India was able to improve its economy thanks to its collaboration and cooperation with other economic superpowers like the United States. This lowering of barriers allowed India to export its surplus goods and insource the jobs foreign countries supplied that had not previously been available to India because of their isolation. It‟s easy to get swept up in the hoopla around globalism, but it remains necessary to understand that, like most things, globalization has some negative features. One such feature is directly related with one of its previously mentioned positive features, job loss. As a necessary byproduct of outsourcing, corporations must cut local jobs. This issue raises concern for the future of currently affluent nations. Will these countries continue to be affluent if fewer and fewer jobs are available to their general public? On a related note, the jobs that do stay in America will also be less valuable because they could very well be replaceable by foreign employees. What becomes of local jobs, then, is left more unstable and less secure for this and future generations. Another disadvantage of globalism is the likelihood that a recession in one country could easily infect the economy of other countries. This is most poignantly exhibited in the Asian disaster known as “contagion.” What started as a crisis in Thailand soon spread to five other countries in no way related to Thailand‟s economic crisis. This appalling debacle demonstrated the fallibility of global market. These five other countries could have potentially been saved or not affected at all had globalization not become a domineering force in the economic world.

Finally, the last allegation to the imperfection of globalization is the pollution that it would produce. As more and more people improve their standard of living, it becomes reasonable to assume that these people would want luxuries such as cars or electricity. This additional consumption of energy and resources would undoubtedly create a higher demand for coal to be burned and oil to be pumped. This environmental destruction could potentially lead to global catastrophes such as hurricanes, typhoons, and mass aquatic extinctions. Ultimately, capitalism and globalism should be looked upon as inevitable zeitgeists that will undoubtedly produce social and economic change. As outlined above, these changes are not necessarily evil nor are they necessarily beneficial. As most ideas do, capitalism and globalism both have pros and cons, and it is an honest person‟s duty to research and investigate these positions before espousing a preference for or against capitalism or globalization. With this in mind, the purpose of this essay was to briefly educate and inform the reader of some of the different perspectives surrounding these two ideas.