Capitalism and Globalization
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Capitalism
Capitalism,
also known as the free-enterprise or free-market system, is the
economic structure that permits people to use their private property
however they see fit, with minimal interference from the government.
Under capitalism, people are free to work at jobs of their own
choosing, to try to sell their products or services at whatever
prices they wish, and to select from among various product- and
service-providers for the best value.
It should be noted that
"pure" capitalism, unencumbered in any way by government,
exists neither in the United States nor anywhere else in the world.
Moreover, the capitalist system of present-day America differs in
significant ways from other capitalist systems around the globe, just
as it differs from the capitalism that existed in the U.S. at the
turn of the 20th century. While private-property rights and certain
amounts of economic freedom have always been part of American life
since that time, those rights and freedoms have become increasingly
weighted down by heavy governmental regulation.
Critics of
capitalism believe it is imprudent to allow an unregulated market to
run its course, and to permit private citizens to make their own
economic decisions based on self-interest. Asserting that such
systems are inherently chaotic and inefficient, these critics propose
that government regulators and bureaucrats -- "experts"
presumably unencumbered by the greed or the impulse for self-interest
that motivates private citizens -- should be empowered to "manage"
economies authoritatively. In response to these positions, the Ludwig
von Mises Institute scholar Robert P. Murphy writes:
"This view is flawed in two major respects. First it
is impossible for a central authority to plan an economy. New
technologies (if entrepreneurs have freedom to create new
technologies), changes in consumer taste (if consumers have freedom
to pursue their tastes), and innumerable variables that can affect
production, distribution, and consumption of everything from
newspapers to lawnmowers on national or international scale are
simply not 'manageable' in the way socialist planners like to think
they are. Second, the planning bias completely misunderstands the
role of profit and loss in a market economy. Far from being
arbitrary, a company's 'bottom line' indicates whether an
entrepreneur is doing what makes sense: if his product is one that
people want and if he is using his resources in the best possible
way."
Perhaps the most common objection to capitalism is the Marxist
claim that it exploits the poor in order to serve the interests of
the rich. History shows, however, that this is precisely the
antithesis of the truth. In pre-capitalist, medieval Europe, for
example, most people either toiled in the fields to which they were
bound or they worked at crafts that were heavily regulated by various
guilds. The aristocracy, meanwhile, acquired a virtual monopoly on
luxury goods.
The rise of modern capitalism changed all this.
The fortunes of the big businessmen who emerged under capitalism no
longer depended upon the patronage of a few wealthy clients. Rather,
these entrepreneurs began catering to the needs and desires of a
newly empowered working class consisting of millions of people. By
meeting those needs and desires, businessmen greatly increased their
own wealth and influence. In the first days of the Industrial
Revolution, workers were abused. Yet they organized into unions that
protected their interests and changed capitalism itself, pressuring
it to evolve from its early exploitative model to a more humane one.
As a result, capitalism helped improve the lives of people in every
social stratum. For example, the transition into the capitalist era
brought a dramatic decrease in infant-mortality rates and a
significant rise in life expectancy. Moreover, the average
blue-collar worker under capitalism was far wealthier than the
“bosses” of socialist economies.
After the Bolshevik
revolution of 1917, communist true-believers expected that their
system would offer the average person a better standard of living
than capitalism ever could. But the working classes in the United
States lived far better under capitalism than their counterparts in
the Soviet Union under communism, most of whom were subjected to
impotence and immiseration. Wherever communism was tried, it resulted
not only in economic deprivation but also in political tyranny and
oppression. Moreover, it brought about an immense wealth disparity
between the common people on the one hand, and government authorities
and their bureaucratic operatives (the nomenklatura) on the
other.
Notwithstanding this historical track record,
modern-day Western intellectual elites continue to despise
capitalism, blaming it for virtually every social ill that can be
identified. Indeed, feminists blame capitalism for the inequitable
treatment to which women were historically subjected. Civil rights
leaders blame capitalism for having created the psychological
conditions and the economic incentives that made the slave trade and
racial discrimination possible. Environmentalists blame free-market
industrial pursuits for poisoning the air and water, and for
triggering the "climate change" that allegedly threatens
the well-being of every form of life on earth. Peace activists blame
war on greedy capitalists and their insatiable thirst for wealth and
empire. Consumer-advocacy groups allege that capitalism encourages
business to put "profits over people," and thus to be
inattentive to the needs and the safety of consumers. And moralists decry
the commercialization associated with capitalism.
Globalization
Globalization refers to the
worldwide phenomenon of increased technological, economic, and
cultural interconnectedness between nations. It is essentially
capitalism on a global, rather than a national, scale. In a
globalized economy, economic activity is unrestricted by time zones
or national boundaries. There is an international exchange of labor
forces, ideas, knowledge, products, and services. This trend has
accelerated dramatically since the 1980s, as technological advances
(most notably the rise of the Internet and advances in
telecommunications infrastructure) have made it easier for people to
travel, communicate, and do business internationally.
The
expansion of international trade and foreign investment was sparked
not only by technological progress, but also by two major
sociopolitical developments of the 1980s. One of these was the
collapse of global communism. The fall of the Berlin Wall and the
subsequent dissolution of the Soviet empire freed some 400 million
people from the shackles of closed, centrally commanded economic
systems. The second development was the demise of the Third World’s
reliance upon import substitution -- a trade and economic policy
founded on the idea that a developing country can increase its wealth
by importing as few goods as possible and relying instead on locally
produced substitutes. When import substitution proved to be a
colossal failure, struggling countries all over the world -- starting
with Chile in the mid-1970s and China later that decade -- began
opening their markets and welcoming foreign investment.
Opponents
of globalization characterize the phenomenon as a form of Western
expansionism and cultural imperialism, claiming that it will merely
increase the opportunities for wealthier nations (and their
multinational corporations) to take advantage of poorer ones. This
happens, the critics say, because multinational corporations can
exploit the cheap labor and lax regulations typical of developing
countries where there are no labor unions. Believing, despite
overwhelming evidence to the contrary, that a planned economy ensures
the greatest economic benefit to the poor, the anti-globalization
movement tends to favor socialism over capitalism. It also warns that
globalization could eradicate regional diversity and lead to a
homogenized world culture where “native” cultures are swallowed
up by Western traditions.
Supporters of globalization respond
by pointing out that since the 1980s, every nation that has
experienced an increase in its manufacturing output has also seen its
per capita income rise; that nations open to trade tend to be much
more prosperous than nations with closed economies; and that the
increased wages spawned by globalization correlate with reduced
poverty and improved living conditions for all. The most impressive
gains in this regard have been realized in East Asia.
The two
most prominent pro-globalization entities today are the World Trade
Organization and the World Economic Forum. The former, consisting of
144 members, was created to establish a set of rules to govern global
trade through the process of member consensus. The latter is a
private foundation that does not possess decision-making power but is
a powerful networking forum for many of the world’s business,
government, and not-profit leaders.
Source for the Capitalism section: The Politically Incorrect Guide to Capitalism, by Robert P. Murphy (Washington, DC: 2007).
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