Is Capitalism Sustainable - Essay Example

Is Capitalism Sustainable Introduction: Capitalism refers to the accumulated wealth in the form of investments in financial assets. There are four types of capital in the economy; i.e. human or social capital, financial capital, manufactured capital and natural capital. For the better performance of capitalism, these four factors must remain adequately in the environment. Today the natural capital is in diminishing stage. Insufficiency of the natural resources is affecting the long term sustainability of capitalism. No relevant steps are taken by the capitalism to maintain the natural and social capital. The natural and social capitals are the basis of human capital. Thus reduction in these capitals will lead to destruction of the human capital. Contributions of capitalism to the society depend on their profit and growth. Thus the existence of capitalism also leads to reduction in human and social capital. With the increasing cost of production and diminishing social values the sustainability of capitalism is reduced. (Heslam 2002). Challenges to Capitalism: The growth model used by the capitalism seems to be uncertain due to its dependence on depleting natural resources. Rapid decline in natural capital will be a challenge to the economic capital. Climate crisis, income disparity, and scarcity of financial and social; resources in the global economy are affecting the sustainability of capitalism. Capitalism has helped the development of financial system in countries through increased income from investment and employment opportunity to the society. Thus the existence of capitalism is necessary for improvement in society. Sustainability of any system depends on the energy procured by it. Without energy, sustainability becomes impossible. Capitalism acquires its energy from the environment through extraction. But it does not provide consideration for restoring the energy extracted by it. This makes energy reduction in the environment. It is termed as physical entropy. Capitalism is based on the concept of profit. Without economic benefit, no restoration of energy takes place. Future generations' benefits are not the mission of capitalism. It insists on making profit with the resources in the environment. It undertakes only financially profitable activities. Reduction of wastes and pollution carried out by firms depends on the profitability from that process. Individual's self interest is only considered in capitalism. Energy renewal is carried out to support current consumption and restoring of energy for future generations is not considered. Thus, capitalism inescapably dislocates social energy through weakening the personal relationships in society. In order to ensure maximum economic efficiency, impartial and impersonal relationship between people is necessary. For efficient functioning of market economies, competency instead of cooperation is required. In a more productive business environment social relationship gets less time and energy. In a price based marketing there is no place for trust and personal relationship. It reduces the personal relationship in the society. It is termed as disorganization of social energy through devaluation of personal relationships. In capitalism resources from the society are used for making profit. However, there is no consideration for restoring the social capital which is essential for maintaining effective personal relationships in the society. Investment in the society for the benefit of future generation does not provide any economic incentives for the business capital. Relationship in the capitalistic society depends on its financial benefit for them. Investment in social capital is treated as waste of resources in capitalism In an economy people exchange their resources with other people for mutual benefit. Transformation of physical energy in raw materials with the help of social energy in human resources is carried on in capitalism. It is exchange on the basis of profit. Economic capital takes out energy from natural and social capital. Social and natural capital is used by the economic capital as source of production. By using the social capital for production without restoring it, will lead to social entropy. Thus with the absence of social capital, economy cannot carry on production and this will lead to economic entropy. Thus it can be stated that sustainability of capitalistic economy depends upon the restoring of social capital used by it properly. In a sustainable society, the relationships are mutually beneficial. Thus relationships are selective in nature. Capitalism does not supply economic incentives to the society. A sustainable economy is essential for the political existence of an economy, but because of dispersion of social energy, capitalism is considered as a system of extraction and exploitation which is not sustainable for a long term. (Ikerd 2006). Capitalism is of self destructing in nature. Existing system of capitalism is destructive to the society by expanding the variation in dispersion of income. Thus ecological sustainability of poor people becomes critical in today's economy. Sustainable capitalism is related to the wealth of nations. For increasing the production capacity, exploitation of labour and other resources take place in capitalism. Along with the increase in political power of capital, exploitation also will increase in order to increase the rate of surplus value. A global political system is essential for the sustainability of capitalism on a long term basis. "World capitalism may be much less sustainable than most economist think. First, the systems of national Keynesian regulation have weakened or self-destructed since late l970s. Second, the central role of the United States in the global economy until the post-cold war period-as a kind of world cash register-has ended." (O'Connor 1994, p.7) Sustainable capitalism requires raw material supply, labour and finance in adequate manner. Constraints in supply of labour power, natural resources and lack of adequate infrastructure facilities will badly affect the viability of individual capital units. Thus the sustainability of capitalism is also affected by increasing costs and weakening flexibility of capital. It limits the growth of capitalism. Shortages in labour supply and resources will result in increasing the cost of production and thus the profitability will be badly reduced. In order to ensure profitability in such a crucial situation, capital markets would adopt rationalism in labour markets. In the present stage of capitalism, profits and surplus are more valued than social relations but at the same time the real value of circulating capital is reduced. Due to the increased financial interests in the capitalistic economy, environmental interests are ignored. In the beginning stage of capitalism, the resources are in plenty. But in the current economic conditions all the resources are diminishing and the cost of it is increasing and the resources causes to increase the cost of capital. Along with this the flexibility is reduced. Nowadays individual capitals do not have the capacity to use the productive resources in sustainable ways. Due to the insufficiency of political system to prevent the demolition of social resources with accurate planning, the sustainability of capitalism is affected badly. A self expanding capital is treated as antisocial in nature. Thus a better political system should be developed to set off the uncertainty problems in the economy. International macro economic regulation insists on sustainable capitalism on a global basis. Depletion in capital values will cause inflation in the global economy and it will affect the normal life in the economy. Overproduction of capital forces individual capitals to set off the cost of one capital with the cost of another capital. This cost shifting will increase cost for other capitals also. Capitalism involves factors such as investment, consumption and open and fair competition. According to Max Weber, capitalism wants to sustain through an independently created value system. (Sustainability of capitalism and the rise of Asian values. 2007) Socialism and capitalism are unsustainable system. Capitalism depends upon economic institutions and free market system. In this system corporations are created with the aim of creating and maximizing profit. For maximizing the profit, cost of production has to be reduced. In order to ensure long term existence of capitalism, efforts are made to produce more with reduced resource through advanced technology and improved production system. Recycling of products also takes place for reducing the usage of new resources. There is a close link between sustainability and long-term value creation. The existence of capitalism largely depends upon the existence of society and environment. An isolated operation from society is not possible for the business firms. Thus business firms have corporate responsibility towards society and environment. A long-term and responsible form of capitalism is built on the concept of corporate responsibility towards society and environment. (Gore and Blood 2008). The attempt of individual capital to produce more profits with least resources will lead to exploitation of human capital. In order to reduce the cost of production, labour exploitation will be adopted by firms through overtime work and reducing wages. This will affect the quality life of labourers and thus the final demand for commodities will be reduced. The result is that with the increased profits, the actual gain from the business is limited. A sustainable economic system necessitates a sustainable global political economic system which has the capacity to overcome the contradiction feature of capitalism in the economy. (O'Connor 1994, p.8). Conclusion: Sustainable economic development is the factor behind the improvement in social life. Capitalism is facing challenges with regard to the environmental impacts and limited natural capital. For getting long term entity, capitalism must take into account creation and strengthening of social relationships effectively. For restoring the sustainable capacity of capitalism, it has to adopt accurate and purposeful steps for renewal of the energy extracted from the society. The benefit of future generations also has to be considered while using resources. For restoring the depleted social capital mutual co-operation between people is necessary. Continuous renewal of social capital is necessary for the existence of economic capital. (Ikerd 2006). For developing a sustainable capitalism, future prosperity of social and human capital must be ensured. For this the exploitation of natural resources must be limited to productive purpose only. Due to the complexity of contemporary capitalism, the social values are affected with widening income disparity in the society. Capitalism must perform its social responsibility. By ensuring quality life with least resource consumption, a sustainable capitalism is possible for a long term. Bibliography GORE, Al., and BLOOD, David. (2008). We need Sustainable Capitalism. [online].The Wall Street Journal. Last accessed 09 December 2008 at: http://www.planet2025news.net/ntext.rxmlid=30096 HESLAM, Peter S. (2002). Sustainable Capitalism: is it Possible. [online]. JRI. Last accessed 09 December 2008 at: http://www.jri.org.uk/news/sustainable_capitalism.htm IKERD, John. (2006). Is Capitalism Sustainable. [online]. Last accessed 09 December 2008 at: http://web.missouri.edu/ikerdj/papers/SFT-Sustainable%20Captialism.htm IKERD, John. (2006). Is Capitalism Sustainable. [online]. Last accessed 09 December 2008 at: http://web.missouri.edu/ikerdj/papers/SFT-Sustainable%20Captialism.htm O'CONNOR, James., and O'Conner, Martin(ed). (1994). Is Capitalism Sustainable: Demand crisis: Expansion and Consumption. [online]. 7. Last accessed 09 December 2008 at: http://www.boell- latinoamerica.org/download_es/SUS_connor_capitalism.pdf O'CONNOR, James. and O'Conner, Martin(ed). (1994). Is Capitalism Sustainable: Cost Crisis: Conditions of Production. [online]. 8. Last accessed 09 December 2008 at: http://www.boell-latinoamerica.org/download_es/SUS_connor_capitalism.pdf Sustainability of capitalism and the rise of 'Asian values'. (2007). [online]. The Nation. Last accessed 09 December 2008 at: http://www.nationmultimedia.com/2007/06/08/opinion/opinion_30036308.php Read More