Capitalism Present System 

Subject: Economics
Type: Argumentative Essay
Pages: 5
Word count: 1451
Topics: Capitalism, Government, Poverty


Just like many isms, capitalism is as a social construct is rapidly evolving, with Rull explaining that it has metamorphosed beyond the few fundamentals that facilitated its development in the 18th century by Adam Smith (pg, 104). Over the last century, the global economy has experienced significant changes, even as collapses in industries and markets continue to provide a litmus test on the concepts of economic development. The latest global economic collapse spearheaded experts to question the fundamental soundness of the current economic systems, as it remains unclear whether the limits of economic development have been achieved, or whether significant thinking needs to be considered in order to spur major correctives in the global economy.

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In this discussion, the evolution of capitalism is discussed, with the contention that the evolutionary development of capitalism has been hijacked by the unconstrained free market ideologies that has been imposed on the global economic thinking over the past half century. As such, this paper looks at the current system of capitalism, thus attempting to establish the factors behind the changes in capitalism. Inasmuch as it may seem easy to surmise the evolution of capitalism at the theoretical level, the basic phenomenon of the current system of capitalism is anchored on multi-factorial aspects that are nested in the current environmental identity.


In order to understand the current system of capitalism, it is important to provide a historical overview of what capitalism entailed upon its conception. According to Eatwell, the science of free market was barely understood during the era in which economists conceived sacristy as the greatest economic problem that the world encountered (82). In this respect, the author argues that contemporary economists identified problems such as food shortages, inadequate shelter, limited transportation and scarce education as among the essential world economic problems. This was before Adam Smith championed the concept of capitalism in 1776, in his famous publication titled The Wealth of Nations. In this publication, Smith tabled the fundamental principles of economic competition in what he termed as a free market in order to maximize efficiency.

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Smith hypothesized that the pursuit of self-interest was the primary foundation upon which the economic system works best (Dipietro, 674). From this primary hypothesis, Smith construed that economics is driven by profits, and thus the greatest monetary profit would be the primary basis of making any economic decision. However, such economic decisions could only be made if everything in the market had a price, which means that the metrics for economic value, according to Smith, was money. Smith expressed the supply and demand as the determinants of the decision to produce. This argument led Smith into assuming that the distribution of goods and services in any market is determined by private wealth. Furthermore, Smith defined private wealth as a legally recognized private property that provides an individual with the liberty to do anything.

The birth of capitalism as depicted in the assumptions of Smith represented the frontal attacks of mercantilism, besides being the first systematic economic treatise. Capitalism, therefore, was traditionally a concept that depicted the natural economic order, whose function would effectively be maximized with limited state interference. The belief by traditional capitalists was that the industry was productive beyond the agricultural sector that was required to deliver the subsistence societal needs. These were the foundations upon which capitalism was defined from the aspects of market extensions and division of labor with the prospects of societal wealth expansion through trade and manufacturing.

Traditional capitalism, according to Rull, acknowledged three essential pre-conditions for efficient competition in the markets (pg 106). However, the author observed that the conditions fronted by these capitalists could only be guaranteed by societal laws, thereby revealing the first gap in the assumptions of capitalism, which rooted for limited state interference. The three essential conditions that the author identified include perfect competition, information adequacy and symmetry, and externalities.

The evolution of capitalism was necessitated by the market failures propagated by the preconditions of the efficient market competition that were envisioned as the main building blocks of capacity maximization. The rise of industrialization in the late 18th century was the beginnings of the capitalist evolution (Foster, 41). The main characteristic of the industrialization process was the mechanization of production in order to replace the animal and human power that had earlier been used in goods and services production. The factories became the specialized and concentrated units for production, which led to relegation of the small shops to the periphery among the leading nations such as Germany, US and England.

Significant human costs emerged from the development of industrial capitalism, as poor working conditions were evidenced in many countries that competed to maximize on the advantages presented by industrialization. The fundamental capitalist principle of private wealth ownership enabled the owners of wealth to distribute it based on their needs and wills. In addition, industrial capitalism propagated the cycles of economic booms and busts. According to Dipietro, capitalism enabled nations to realize unprecedented economic expansion and prosperity, which would then be followed by waves of unemployment and economy collapses (pg 676). The author observes that no ready explanations were provided by classical economists who attempted to refine the capitalist ideas of Smith through introducing the concept of industrial capitalism, as the fluctuations of economic life were complemented by substitution of the quality of life with the material progression as established under the social construct of capitalism.

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As evidenced, capitalism has not only evolved in theory but also in practice, as the rules of capitalism have shifted constantly (Eatwell, 83). For the most part of the last century, capitalism has introduced a new aspect that manifests through the constant struggle for economic value, which is the basis upon which the wealthy determine their production and purchase decisions.

Rull explained that in the 20th century, depression, revolutions and wars depicted the influence of capitalism, even as economic ideologies were restrained though conflicts that were violent in nature (pg 105). With the Great Depression bringing onto the discussion table the impacts of capitalism on market failures, governments began to structure interventions that would correct the inherent abuses of capitalism. One such example is the financial system restructure by US President Franklin Roosevelt with the aim of preventing the recurrent of the excessive speculations that were largely blamed for the 1929 financial collapse.

Capitalism present system has been attributed to market failures, which to a large extent are inflicted by individual interference on the market. In the conception of capitalism, Smith assumed that the interference by the state was the main reason behind the failures by markets to realize their capacity’s potential, though as is presently evidenced, the freedom provided to the producers and consumers in these markets are the greatest undoing of the market inefficiencies. For instance, the lack of government regulations on the housing industry led to the real estate bubble in 2006, which induced more investors to seek financial loans to purchase houses. Later, in 2007, the global economic crisis would manifest from the over-investment in the real estate industry relative to the scarcity of financial services among consumers to purchase these houses. Therefore, capitalism in its current state has propagated the problem of scarcity, as it has given absolute authority to people with wealth to capitalize on the market, hence overtaking the theories that have positioned equitable distribution of resources as a determinant of market efficiency.

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The present system of capitalism is moving towards regulation by relevant authorities, which aim not only at preventing market failures presented by unregulated capitalism, but also eradicating the inevitable extremes of poverty and wealth that have been linked with the traditional capitalism. Over the last century of the development of capitalism, the wealthy in the society have been seen to develop inordinate power though capitalism, hence making them the controllers of politics, economies and social discussions (Foster, 46). Today, the foundations of democracy have been reduced by capitalism, as it continues to deliver more wealth at the hands of the wealthier, while subjecting the poor to conditions that expose them to higher poverty.


The underlying theatrical structure of capitalism has spearheaded the intensity of resource scarcity, with the gap between the rich and the poor being manifestations emerging from the traditional capitalism. This discussion identifies modern capitalism with increased government regulations of the free markets, even as the topics of poverty eradication are being considered more than the need to realize material benefits that accrue from capitalism. In conclusion, it may seem easy to surmise the evolution of capitalism at the theoretical level, but the basic phenomenon of the current system of capitalism is anchored on multi-factorial aspects that are nested in the current environmental identity.

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Did you like this sample?
  1. Dipietro, William. “Potential Sources Of Modern Day Slavery.” Advances in Social Sciences Research Journal 3.1 (2016): 674-701. Web.
  2. Eatwell, John. “Is Capitalism In Crisis?.” Public Policy Research 15.2 (2008): 80-83. Web.
  3. Foster, John. “Class Struggle And The Industrial Revolution: Early Industrial Capitalism In Three English Towns.” Technology and Culture 67.24 (2015): 37-46. Web.
  4. Rull, Valentí. “Sustainability, Capitalism And Evolution.” EMBO reports 12.2 (2011): 103-106. Web.
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