Breakout room - 9

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Ayush Saini 0332/56
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Tanuj Jain 0396/56

As per Francis Fukuyama, certain aspects of capitalism are indispensable to our civilized
living. However, we also experience the dystopia associated with different forms of
capitalism. How to reconcile the best and the worst and achieve excellence in the socio-
political-economic context.

Indispensable parts of capitalism to our civilization

Capitalism is an economic structure in which private individuals or firms own capital

goods. Here, they are unrestrained private people who are free to decide where to
invest, whether to manufacture or sell, and at what prices to trade products and
services. Capitalism, in the industrial age, is a significant engine of progress, wealth,
and prosperity. It provides an individual the freedom to express an opinion, feel
empowered & in charge of his aspirations. Some significant aspects of capitalism are
private property, private control of the factors of production, accumulation of capital &
competition. One is free to work as per his capabilities to satisfy his need to be equal
& if required superior to others in a capitalist system as quoted by Francis Fukuyama.
A fundamental tenet of capitalism is the right to private property. If they are not
allowed to own anything, citizens can not accumulate capital if they fear that the stuff
they own can easily be stolen or confiscated, or if they can not freely buy or sell the
things they own and transfer that ownership to others.

What happens to the surplus product is a common indicator of whether the

production factors are regulated privately or publicly. The surplus product is
distributed to society as a whole in the Communist system, while in the capitalist
system it is retained by the producer and used to make additional profit.

The accumulation of capital is the central component of a capitalist system. The

driving force behind the economic activity is making a profit in a capitalist system.
Capitalists see profits accumulating as a way to provide a strong incentive to work
harder, innovate more, and produce things more effectively than if the government
had sole control over the net worth of citizens.

Competition is a capitalist system's other vital attribute. Private companies compete

to deliver better, faster, and cheaper goods and services to customers. The
competition principle forces companies to maximize efficiency and offer their
products at the lowest prices the market will bear unless more efficient and better-
priced competitors put them out of business.
Dystopia caused by different forms of capitalism
In all industries that are of prime importance for running the economy, capitalism can
be seen throughout history.

Capitalism in Business
As a result of industrialization, capitalism has grown. Here, higher efficiency and
income were the priority. Among the labour class and the industrialists, there was
rising economic inequality. Eventually, such behaviour sparked elitism in the
population.

Financial Capitalism
Profits have been created here by investing in financial assets/products, real estate,
currency, etc. This has contributed to the creation of massive global financial
institutions.

Agrarian Capitalism
It started with land concentration with a few select individuals who later began to hire
workers/work to work on their land. With government/ruler pressure and an emphasis
on higher efficiency, the interests of workers have been largely overlooked.

Example: The concentration of land among Zamindars that went on to employ labour
for crop cultivation. In addition, labour was required to work in an inhuman climate to
reap further benefits. During British law, this problem was further exacerbated. It
induced a virtuous debt loop with the denial of citizenship to the oppressed.

Capitalism on Data
Data has been the most powerful asset at present. There is an increased interest in
collecting even more data to predict individual human actions with developments in
technology, specifically, Artificial Intelligence and Machine Learning. This has
contributed to the growth of a very diverse and diversified technology. Companies
that make it really hard for potential entrants.

Facebook data capitalization and Cambridge Analytica manipulation in the US

Presidential Elections

Competition and accumulation of capital enable companies to increase production,

enabling investors to profit on this development and allowing customers to benefit
from lower prices on a broader variety of products. However, this doesn't turn out as
expected often. The following negative impacts can be clearly seen through the past
of capitalism:

Power Concentration
By either forming advocacy groups or supporting lobby groups, the rich attempt to
influence government decision-making. To mitigate the risks, they keep in close
contact with various branches of the government. In certain cases, there are
problems with the financing of the quid pro quo election campaign.
When a foreign corporation attempts to set up business in underdeveloped countries
by persuading the government in their favour, the problem is major. Companies often
 also try to force the government to establish policies that benefit them by growing
market entry barriers, as seen in the telecommunications industry.

Inequality of Wealth
Company owners depend on higher efficiency and cost control in the desire to
produce higher profits. Staff only earn compensation as the owners are split into
whole profits. This may not be completely wrong, because the responsibility and
liability rests with the owners, but this should not come at the detriment of workers'
rights.
The effect of this is that the owner increases business and increases income and
inequality increases.

Asymmetry of Information
In general, details on adjustments and organization processes flows from top to
bottom. Therefore, the leaders of the organization strive to retain employee records.
In particular, the negative consequences of this are exacerbated during periods of
financial difficulties.

The Best and Worst of Capitalism

Capitalism has a lot of pros but can also lead to an experience of dystopia.
Best and Worst of Capitalism are:

PROS
● Economic freedom helps political freedom. If governments own the means of
production and set prices, it invariably leads to a powerful state and creates a large
bureaucracy which may extend into other areas of life.
● Efficiency. Firms in a capitalist based society face incentives to be efficient and
produce goods which are in demand. These incentives create the pressures to cut
costs and avoid waste. State-owned firms often tend to be more inefficient (e.g. less
willing to get rid of surplus workers and fewer incentives to try new innovative working
practices.)
● Innovation. Capitalism has a dynamic where entrepreneurs and firms are seeking to
create and develop profitable products. Therefore, they will not be stagnant but invest
in new products which may be popular with consumers. This can lead to product
development and more choice of goods.
● Economic growth. With firms and individuals facing incentives to be innovative and
work hard, this creates a climate of innovation and economic expansion. This helps
to increase real GDP and lead to improved living standards. This increased wealth
enables a higher standard of living; in theory, everyone can benefit from this
increased wealth, and there is a ‘trickle-down effect‘ from rich to poor.
 CONS
● Monopoly power. Private ownership of capital enables firms to gain monopoly
power in product and labour markets. Firms with monopoly power can exploit their
position to charge higher prices.
● Monopsony power. Firms with monopsony power can pay lower wages to workers.
In capitalist societies, there is often great inequality between the owners of capital
and those who work for firms.
● Social benefit ignored. A free market will ignore externalities. A profit maximising
capitalist firm is likely to ignore negative externalities, such as pollution from
production; this can harm living standards. Similarly, a free-market economy will
under-provide goods with positive externalities, such as health, public transport and
education. This leads to an inefficient allocation of resources. Even supporters of
capitalism will admit that government provision of certain public goods and public
services are essential to maximise the potential of a capitalist society.
● Inherited wealth and wealth inequality. A capitalist society is based on the legal
right to private property and the ability to pass on wealth to future generations.
Capitalists argue that a capitalist society is fair because you gain the rewards of your
hard work. But, often people are rich, simply because they inherit wealth or are born
into a privileged class. Therefore, capitalist society not only fails to create equality of
outcome but also fails to provide equality of opportunity.
● Inequality creates social division. Societies which are highly unequal create
resentment and social division.
● Diminishing marginal utility of wealth. A capitalist society argues it is good if
people can earn more leading to income and wealth inequality. However, this ignores
the diminishing marginal utility of wealth. A millionaire who gets an extra million sees
little increase in economic welfare, but that £1 million spent on health care would
provide a much bigger increase in social welfare.
● Boom and bust cycles. Capitalist economies have a tendency to booms and busts
with painful recessions and mass unemployment.

How to achieve excellence by strengthening the best to make

it a just sustainable system in a socio-political-economic
context

Some of the ways through which we can improve capitalism to achieve excellence in
a socio-political-economic context are as follows-

Need to stop obsessing over quick growth- Over the last decade, human beings
have improved by almost one-third in the sectors of calorie intake, expected life span,
earnings due to the development of Their right to creativity and freedom to perform
any type of business should be protected for this purpose.
Accepting the fact that rising inequality is not inevitable- It is clearly visible over
the decades that a greater share of the economic growth goes to the most affluent
people in the world. We need to stop believing that these trends are natural
outcomes of a modern capitalist economy so that we can work on reversing these
trends boosting inequality through deliberate policy choices.
Promoting financial literacy- Citizens of an economy need to be educated about
how the financial markets and products work so that they do not make any mistakes
that can hurt the overall economy and system of capitalism. Therefore, financial
literacy needs to be improved among the masses.
To keep this growth going, some capitalist economies like East Asian Nations have
crippled themselves into huge debts. This form of borrowing needs to be limited for
the overall well-being of the economy.
The promotion of freedom of enterprises- In a capitalist economy, the freedom
given to enterprises can increase the growth of the economy at an exponential rate.