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While Adam Smith in his ‘Wealth of Nations’ promised prosperity for all, the present capitalism has brought prosperity for a few. On June 5, 2021, the President of El Salvador, Nayib Bukele announced that the Caribbean country would soon adopt Bitcoin, the world’s most famous cryptocurrency as a legal tender. This is one of the many avenues which capitalism has been able to achieve in the last three centuries- avenues which have the potential to change the world.

A historical perspective The present day capitalism has emerged from the remnants of mercantilism when its fundamentals got challenged by various economists including Adam Smith. Mercantilism is primarily an economic thought which intends to maximise the exports and minimise the imports of a country, though it has its own political ramifications like colonialism and imperialism. The Scottish philosopher argued that the world’s wealth remains constant and one nation can grow only at the expense of others. This challenge to the foundations of mercantilism paved the way for the next phase of capitalism i.e. industrial capitalism.

The vast amount of capital accumulated during the merchant phase of capitalism and the availability of large consumer markets stimulated the growth of industries in the late 1700s and early 1800s. It was also a time characterised by division of labour and increased conflicts of interest between the capitalists and the working class, thereby strengthening the socialist wind in Europe, wherein Karl Marx later made important contributions. This growth in industries led to a concomitant growth in finance and credit. Capitalism continued to make successes until it was close to its demise during the Great Economic Depression of 1929. However, when JM Keynes argued about the role which fiscal the deficit could play in an economy, capitalism again assumed importance. The unprecedented growth after the world wars till the 1970s, witnessed by the capitalist bloc on the basis of Keynesian model not only ruled out capitalism’s existential crisis, but also established the dominance of free trade and liberalisation all over the world. The decade of the 1970s marked the emergence of neoliberalism when the Keynesian model failed to answer the problem of stagflation. Consequently, economies started drifting away from the Keynesian model. This continued till 2008 when the US Housing crisis again diverted the economies towards the Keynesian Model. Added to this was the phenomenal growth in technologies, which opened a number of avenues for the capitalists.

New Grounds For Capitalists This revolutionary growth in technology changed the way monopolies are created in different sectors. For instance, certain B2B companies which are involved in selling goods to retailers, after purchasing them from the wholesalers, now use the shield of technology to protect their policy of ‘Predatory Pricing’. This involves selling the goods directly to the retailers without involving distributors, at a price even lower than at which they purchase it from the manufacturers, thereby leading to the elimination of lakhs of distributors all over the country. This attempt to create monopolies, however, does not come under the purview of competition laws, primarily because of the defence of technology applied. Another field open for Capitalists is the ‘Space Sector’. While this sector has been open for private players for years, a couple of recent events have drawn the attention of the general public towards it. Jeff Bezos’ Blue Origin made headlines last year when the company made a trip to space. This has been designed to take people on short suborbital trips providing them about four minutes of weightlessness. India too is not lagging behind. The IN-SPACe interface would act as a link between the private and the government sector. This program would act as a single point interface between ISRO and anyone who wants to participate in space related activities. However, this too explains a dichotomy- while the rich would spend millions to go to Space, millions would struggle on Earth to even feed themselves. As mentioned by various sources, one significant event in the growth trajectory of capitalism is the ‘US Housing Crisis of 2008’. Fuelled by neoliberal economic thoughts, the crisis led to governments returning to the Keynesian model, with the sovereigns relying on fiscal deficits to pull their economy out. This increased reliance on fiscal deficits, induced governments to print more and more currency, thereby lowering the faith of the investors on the sovereign’s power of currency printing. This ultimately led to the growing popularity of Cryptocurrency- a challenger to this power of the sovereign. Coming to more recent times, during the pandemic, an increased interaction of technology with education was observed, which ultimately led to the emergence of a number of Edtech start-ups. Though the contribution of these companies during the pandemic has been phenomenal, they lack essential principles and morals. For example, many programs are named in a way that attracts more customers but turn out to be false and misleading. This partially explains why the Government is thinking about introducing regulations to curb the monopoly of this sector. It would prevent the exploitation of students by these Edtech platforms through lofty promises or unfair practices.

Reactions The opportunities have come with a number of concerns. They have led to four main reactions – one, increased importance of the capitalist class in an economy; two, increased prevalence of crony capitalism; three, more acceptance of concepts like Universal Basic Income amongst governments all over the world and four, the emergence of the dominance of China. As mentioned before, this capitalist class is responsible for the breakthrough achievements which mankind has made in ventures of nanotechnology, biotechnology, Artificial Intelligence, etc. To some extent, one may give credit to the capitalists for the significant developments mankind has made in increasing life expectancy. The recent transplantation of a pig heart in the body of a homo sapien bears evidence to it. David Benett, a 57 year old American has now become the first person to receive the heart of a genetically modified pig. Further, these capitalists are responsible for increasing the economic pie of any country, which is later used by the sovereigns for running their welfare programmes. Hence, the role of capitalists is undoubtedly of paramount importance. Unfortunately, the thriving successes made by the capitalists is also because of the increased interaction between the capitalist class and the political class, popularly called crony capitalism. India, China, the United States and Germany ranked 9th, 11th, 16th and 22nd respectively on the Crony Capitalism Index-2016. These allegations particularly get stronger when the incumbent government of India supports the policy of electoral bonds. The corporate donations to a political party does not fall within the ‘citizen’s right to know.’ under electoral bonds. As a result, the policies are framed giving primacy to the interests of the corporations, which also leads to a skewed distribution of wealth. The concept of Universal Basic Income (UBI) has also gained popularity to deal with the problem of economic inequality, poverty and unemployment, especially after the pandemic. It involves the periodic transfer of cash to individuals without any precondition to the beneficiary. This concept has garnered support from not only entrepreneurs like Elon Musk and Mark Zuckerburg, but also from academicians like Peter Diamond and Christopher Pissarides. Still, one important concern cannot be left out- the concern of an increase in inflation. Under the banner of free trade and expectations of tapping a large market, the United States got China into the World Trade Organisation in 2001. However, China has successfully used this mistake of the superpower for increasing its economic pie and establishing its dominance in the Asian world. The present personality cult of the dragon can be estimated from the fact that it is challenging the dominance of the US in almost all spheres, from chip-making industry to its influence in the Indo-Pacific. This economic strength is also used by the dragon for funding its Belt and Road Initiative. It is also used for extending predatory debts to the developing nations. Re – Examining the fundamental tenets Coming to a conclusion, capitalism has undoubtedly brought benefits for mankind. However, the present capitalism is very different from the very foundation of it- while Adam Smith in his “Wealth of Nations” promised prosperity for all, the present capitalism has brought prosperity to a few. Both the US Housing crisis of 2008 and the pandemic induced economic crises (2020-22) have led to K-shaped recoveries, with the rich becoming richer and the poor even poorer. As per a study by the Federal Reserve, the top 1 percent of people hold more than 38 percent of the total global wealth. Thus the entire contention of liberal economies “producing wealth for all” sounds more like a cliché than a pragmatic idea. It’s the right time for the world to come together and re-examine what the fundamental tenets of capitalism are.

By Anshh Gupta


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