Capital

The height of capitalism has already been reached. We are now in the days of decline for capitalism as we know it. Adam Smith and Karl Marx both foresaw the inevitable effects of accumulating capital.

“A capitals increase in any country, the profits which can be made by employing them necessarily diminish. It becomes gradually more and more difficult to find within the country a profitable method of employing any new capital.”

Adam Smith: Wealth of Nations, Volume I

A natural law is present, as the corporation accumulates capital, less capital is available to accumulate from the market. Although technically business is not a zero-sum game, and if anything, a two-way exchange, there is a tendency for profits to level off and diminish. Check the stocks of any major corporation and one will see this to effect. In order to increase profits, corporations must find “new spheres of production and channels of trade.” [1] A top electronics company can increase their production through research and development and their sales by broadening their product selections (moving into new fields of innovation such as GPS Units, Digital Photo Frames, Business Cell Phones), but even that in itself runs into natural barriers.

Competition also increases as time passes, given that the company does not have a monopoly over a certain industry. A double-bladed axe is present: If the company stays a monopoly, profits will decrease over time due to decreased effectiveness and competitiveness. If the company experiences competition, then part of the market profits will go to its competitors.

Nature truly takes away from the full and gives it to the empty, saws down the tall and mighty trees and gives chance for new saplings to grow, breaks down the hardest and the most rigid, and spares the soft and flexible, and smooths the sharp edges of massive canyons and mountains, while carving new crevices into the smooth.

The other alternative to capitalism seems to be government control of certain industries. Government control is different from a monopoly because there are subject to social approval. Sometimes government control is more flexible when dealing with consumers rather than a hard-pressed capitalist CEO. Also, the changing demands of the people and legislation subjects government industries to change. Thus it seems at this point, a mixed market is most desirable, compared to the robber-barons of the late 19th century or the large dot-com giants of the early 21st century. Privatized sectors of most industries, and government ownership of certain industries.

[1] Giovanni Arrighi: Adam Smith in Beijing

This entry was posted on 16. May 2008 at 16:57 and is filed under Economics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response or trackback from your own site.