Alternative To Capitalism example essay topic

"Capitalism is doomed to fail" Comment on the above statement, stating if you agree or disagree and your reasons for doing so. The famous socialist, Karl Marx believed that capitalism was not to succeed, which he stated, "capitalism is doomed to fail". Marx believed that capitalism would fail because capitalists exploited workers by not paying them their full value of their labour. In Marx's time new machinery was being introduced, which replaced many jobs leaving thousands of people unemployed.

He also predicted that the system would turn out into one big monopoly and all the small firms would be wiped out. Therefore, the groups outside the monopoly would get poorer and poorer and form an enormous group and rise against the capitalists. However, Marx's theory did not exactly turn out the way he thought it would. Capitalism still exists in today's modern world and has not failed.

It will be argued that many of the problems Marx saw in capitalism have been solved, and that in areas of innovation, wealth creation and efficiency, capitalism came out ahead of socialism. Often government intervention in the market is wasteful and inefficient, which was the socialist alternative to capitalism. This can be seen when capitalist countries, such as Britain tried to nationalize their industries after World War II. Yergin describes these industries, "Whatever the vision, state companies had often proved in practice to be highly inefficient, inflexible, poorly performing employment agencies, politically pressured to maintain and expand employment far beyond what was needed". (Yergin, 2000, p 97). The government nationalized industries that have turned out to be a failure and has not lived up to the expectations to the public.

An example was the British telecom system, which Yergin states, "It took months to get a new telephone. There were only two choices-the design or nothing. The only way to get a phone fixed in any reasonable time was to pay a repairman, who freelanced after hours, under the table. The red box were relatively rare, sometimes malodorous, and often out of order". (Yergin, 2000, p 101). This shows that government intervention is inflexible and inefficient, the alternative to capitalism, did not focus on the sovereignty of the consumer and was better off in the hands of individuals.

Capitalism works because the market allocates resources efficiently and to the right places without government intervention. Adam Smith described this as the 'invisible hand'. It is the ability of the free market to allocate factors of production, goods and services to their most valuable use. If everybody acts from self-interest, spurred on by the profit motive then the economy will work more efficiently, and more productively, than it would do if economic activity directed by a central planner.

An example on how capitalism increases wealth of society is in the national income per capita figures for capitalism vs. communism countries. The capitalist country America has the largest and most technologically powerful economy in the world, with a per capita GDP of $36,300. However the communist country China with its 1.28 billion people, has a GDP of just $4,600 per capita. Karl Marx believed that capitalism was a failure because capitalists exploited workers and treated them unjustly. However, capitalism overcame this major problem of the unfair treatment towards workers.

During the 19th century workers formed unions for wage negotiations. This was known as collective wage bargaining, and was able to equalize the imbalance of market power that Marx saw in the factories of Europe. Obviously it would not be effective if one employee goes on strike and asks for a pay rise. It would have a much bigger impact if all workers all unite together and threaten to go on strike. The employer would be pressured because he cannot afford to lose so many of his workers so he is forced to give his employees a pay rise they want. Another reason why capitalism has not failed is because of 'diminishing returns to capital.

' This is where each additional unit of capital adds less to production than the previous unit where other factors, such as labour on land are fixed. For example if more fertilizer and better machinery are used on an acre of farmland, the yield will increase for a while but then begin to slow and become flat. A farmer can only get so much out of the land, and the more the farmer works, the harder it gets. The economic reason for diminishing returns of capital is as follows: When the capital stock is low, there are many workers for each machine, and the benefits of increasing capital further are great; but when the capital stock is high, workers already have plenty of capital to work with, and little benefit is to be gained from expanding capital further. During the 19th century new machinery was introduced (such as sewing or weaving machines) which replaced thousands of jobs. It was very productive in the start, but as new machinery was invented they were less effective or productive than the previous machine, so fewer jobs were being replaced.

The unemployment rate stopped rising because capitalists purchased more machinery, which required workers to run and help maintain them. Capitalism is a success because it gives people freedom. As a result people are inspired to invent and create new products that will satisfy consumer demand, they do this as they will earn a large amount of profit, known as profit motive. Capitalist countries are innovative and modernized unlike communist countries where the government takes control of everything in the market.

For instance, in the book 'Commanding Heights' it states, "Already by the early 1970's, a fatal weakness was becoming clear in the system: It could not, for the most part, innovate. There was no reward, no reason to do anything new."The only exception was in parts of military sector". (Yergin, 2000, p 281). This indicates in communist countries the only government innovation is on military, which does not benefit or increase the quality of people's life.

In conclusion, it is evident that the statement made by Karl Marx, "capitalism is doomed to fail" is false. Capitalism still exist today and powerful and economically wealthy countries such as America and Britain are capitalist countries., which economically dominate over communist countries such as China. There are many areas in capitalism that have solved the problems that Marx saw in his days such as innovation, unions, and education. Overall capitalism is better than communism. This is because government intervention was wasteful and inefficient, which individuals are better in using scarce resources in serving the public interest than the government.

Finally, capitalism is the best economic system out there, countries such as Britain have attempted to alternate to communism by nationalizing industries and factories but have failed. Capitalism prospers and economically benefits society and increases their quality of life.