Business Ethics: Capitalism

Topics: Business ethics, Capitalism, Corporate social responsibility Pages: 16 (5266 words) Published: June 28, 2011
Part I: Capitalism
1.1 Introduction
According to an online article entitled “ Reflections on capitalism” : The word “capitalism” was popularised by Karl Marx in the middle of the 19th century .It is a social , political as well as an economic system that countries use to guide their development programs and economic policies. Almost all the worlds countries are currently running their economies on capitalist inspired doctrines ,this fact testifies to a great extent of the many advantages and viability of the system of capitalism .

1.2 Advantages of Capitalism
1.2.1 Cheaper and better products
A capitalist economy operates in a “free market”, this is a requirement vital if capitalism is to thrive. A free market is characterized by Businesses which are governed by the laws of supply and demand, not restrained by government interference. As such in a truly free market, naturally Darwin’s theory of survival of the fittest comes into being, that is to say since consumers have access to cheaper and better goods. The wide variety of goods being offered will create a healthy completion among companies which will not only aim to offer quality goods but competitive prices as well. Hence a capitalist economy through competition creates availability of cheaper and better goods. 1.2.2 Economic Growth

Due to the fact that capitalism and the free market promote imports and exports between countries, they create an opportunity for internationally competitive countries to increase their exports relative to their imports thus increasing GDP due to net exports . An example of such a country is CHINA , its economic growth is mainly due to its net exports which are a result of its competitive prices relative to other countries, without a free market system it is not worthy to say that CHINA would not be where it is today. 1.2.3 It promotes Consumer Activism

Capitalism gives rise to an economy where the consumers can have a say in issues and problems through the voice which is their combined buying power . Due to the wide range of alternatives which are made available by the “free market” implied in a capitalist economy this increased variety leaves consumers free to either choose or select a product for whatsoever reason they choose . An early example of successful consumer action was the boycott in England of sugar produced by slaves. In 1791, after Parliament refused to abolish slavery, thousands of pamphlets were printed encouraging the boycott. Sales of sugar dropped by between a third and a half 1.2.4 Promotes the rule of law

For capitalism to thrive it requires existence of long-term “social contracts”. Social contracts are “an agreement among members of an organized society or between the governed and the government defining and limiting the rights and duties of each . Social contracts in turn require the rule of law . This is due to the fact that for capitalism to thrive economic agents and privately owned businesses should be able to make plans that will not be undermined by unpredictable political intervention, state intervention, criminal action or any other destabilising activity. Hence capitalism promotes stability as well the rule of law .

1.3 Disadvantages of Capitalism
1.3.1 Inequality
One of the most common disadvantages of capitalism is inequality this happens when different people have different levels of income .This inequality a arises due to the fact that benefits of capitalism are not equitably distributed. In the USA the wealth of the top 1% is greater than that of the bottom 95%. In Mexico 40 people own 30% of the wealth in that country of 95 million people. 1.3.2 Monopoly Behavior

Another disadvantage of capitalism is monopoly. It is in a situation, which a single company owns all or nearly all of the market for a given type of product or service. This would happen in the case that there is a barrier to entry into the industry that allows the single company to operate without...
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