Globalisation is the process in which the world is becoming increasingly interconnected. Globalisation is said to have two major driving forces: advancements in transport and technology, which lead to increased trade and communication between nations around the world. Globalisation manifests itself in our social and economic system as capitalism. Capitalism is “an economic and political system in which a country’s trade and industry are controlled by private owners for profit, rather than by the state,” and this inevitably defines the way in which our entire society is structured. Both globalisation and capitalism provide opportunities for, and barriers to, sustainable development.
Some people believe that globalisation is a byproduct of capitalism, while others believe that capitalism is a byproduct of globalisation. However it doesn’t matter how you look at it, because it is clear to see that the two phenomena are interrelated. Understanding globalisation capitalism, and hyper consumer culture is essential for better understanding a range of social issues that I wish to further explore in later posts and videos. For now, let’s begin by better understanding globalisation and capitalism.
While the process of globalisation has occurred for hundreds of years, it has particularly sped up in the past fifty years or so. We can see evidence of globalisation around the world, through increased international trade, the prominence of large multinational corporations, a greater dependency on the global economy, and the freer movement of capital, goods, and services across borders.
Reasons for Globalisation:
There are several driving factors of globalisation, but the most prominent factors are:
Transportation: Improvements in transportation like cargo ships and air travel mean it is cheaper and easier for gods to be transported around the world, and for people to travel more quickly.
Technology: Improvements in technology allow for improvements in the way we communicate between different countries.
Trade: Organisations like the World Trade Organisation promote free trade between countries and allow the elimination of trade barriers.
Labour: Developing countries with lower labour costs and high skill levels (India is an excellent example) provide corporations in developed countries to outsource cheaper labour.
Globalisation has allowed for businesses and corporations to set up, buy operations, or outsource labour in other countries, which is known as an inward investment. Companies that operate in several countries are known as multinational corporations or transnational corporations. There are many factors that might attract a company to a particular country, such as cheap raw materials, cheap labour, easier access to markets, or more accommodating government policies. Some well-known multinational/transnational corporations are the fast food chain McDonalds, the petrol company Shell, the activewear brand Nike, the soft drink company Coca Cola, and the car company Ford.
There are several positive impacts that globalisation has had for people, corporations, governments, and countries around the world. Some of the major benefits include:
- Inward investment from MNC/TNCs provide countries with new jobs for local people
- When countries sell resources, products or services to MNC/TNCs, it brings wealth and foreign currency into their economy
- It promotes the widespread sharing of ideas, lifestyles, and other cultures, allowing people to experience new foods, music, and products that weren’t previously available
- It increases our awareness of what is going on in the world: news events become widespread, and people become more aware of global issues like global warming
Many people are opposed to globalisation and draw people’s attention to the negative effects by demonstrating against the World Trade Organisation. Some of the negative impacts of globalisation:
- It operates in the interests of richer countries, since the role less economically developed countries play is mainly to provide cheap labour and resources to MNC/TNCs
- MNC/TNCs often operate in less economically developed countries because they have less strict laws that allow them to exploit poorer countries for insultingly cheap labour, raw materials, and other services, or to consume natural resources at an unsustainable rate that wouldn’t be allowed in more economically developed countries
- Wealth from inward investments doesn’t always benefit local people: often profits are sent back to the more economically developed countries where the MNC/TNC is based
- MNC/TNCs are a significant threat to local businesses, and may shut down operations in one country if another can provide similar goods/services for cheaper, leaving workers unemployed in already struggling economies
- Globalisation poses a threat to the world’s cultural diversity, with the “Americanisation” of many cultures becoming increasingly evident
Capitalism in the economic, political and social system of many developed countries. In capitalist economies, capital goods (goods that are used in producing other goods, rather than being bought by consumers) are owned by the private sector (the part of the national economy that is not under direct state control, like private individuals or businesses.) Although the government plays a minimal role in economic activity, most contemporary capitalist countries do include government regulation of business and industry. This often results in most of a country’s economic activity being controlled by large MNC/TNCs, which country’s also rely on for economic growth.
There is no significant evidence of any country experiencing compound economic growth prior to the industrial revolution, which is when capitalism really began.
History of Capitalism
Understanding the history of capitalism will help better understand how capitalism developed into our current economic, political, and social system. This video by PBS Crash Course does an excellent job of explaining the history of capitalism:
Role of government
Governments are public institutions, but capitalism operates on private ownership and voluntary trade, which goes against the nature of government. Governments use taxes, regulations, police and military for issues that exist outside the realm of capitalism.
Capitalist societies have two major classes (although many societies will subdivide these categories further based on socioeconomic disparities that may exist within these two groups:) the capitalist class, and the working class. The capitalist class are the small minority who own the means to produce and distribute goods: land, factories, technology, transport systems, etc. The majority of people are the working class, those who sell their ability to work to the capitalists for a wage or salary. The working class get paid to produce goods or services that are sold for profit, which is gained by the capitalist class.
Private property rights are important in capitalist societies. If you’re familiar with John Locke’s theory of homesteading, then you probably have an understanding of most modern concepts of private property: basically, property can be claimed by human’s who mix their labour with unclaimed resources, and once they own property, the only way of transferring it between others is through trade, gifts, or inheritance. Capitalist societies rely very strongly on contracts to facilitate and enforce private property rights, so individuals and businesses alike can easily deploy their capital goods and protect their legal rights to own and transfer property. In capitalist systems, the owner of property is entitled to any of the value that is associated with such property, which is why maximising the value of property is very important to owners.
Profit & loss
In capitalist systems, profits are closely associated with the concept of private property. Individuals only enter into the voluntary exchange of private property if their is evidence that the exchange will benefit them in some way. Voluntary trade is what drives capitalist activities. The capitalist class compete with one another over consumers, who compete with other consumers over goods and services. This activity is built into the price system, which balances supply and demand to coordinate with the distribution of goods and services.
In capitalist societies, the motive for producing goods and services is to sell them for a profit, not to satisfy people’s needs. This isn’t just the result of greed, the capitalist class have to compete with other capitalists to make profit so that they don’t lose their investments and position in the capitalist class.
According to the World Socialist Movement, “the class division and profit motive of capitalism that is at the root of most of the world’s problems today, from starvation to war, to alienation and crime. Every aspect of our lives is subordinated to the worst excesses of the drive to make profit. In capitalist society, our real needs will only ever come a poor second to the requirements of profit.”
Hyper-consumerism is the social result of capitalism. Simply put, our economy relies on the continued production of goods and services in order to generate profit and economic growth. In order for economic growth to continue, we need to produce more and more goods and services, and the demand for these goods and services needs to continually increase. This results in a hyper-consumer culture.
Consumerism is not only our economic system; it is the way our society functions, to the point where consumption is intimately tied to the creation and production of our sense of self. To find out more about this, check out this article You Are What You Buy: Postmodern Consumerism and the Construction of Self
Is it sustainable?
This brings us to the all important question, is capitalism and hyper-consumerism sustainable in our globalised world? As you can probably already guess from the above video about consumerism, capitalism, and the environment, it isn’t. In fact, capitalism by its very definition is unsustainable: you can’t have perpetual growth on a planet with finite resources. If capitalism relies on production and consumption by humans, with the need for continual production and consumption, this will require continual use of resources like fossil fuels, uranium, corn, water, that are in limited supply on our planet. There is no way that capitalism, in its current manifestation is sustainable. To learn more about the sustainability of capitalism, check out this article: Is Capitalism Sustainable.
References & Sources
BBC Bitesize, 2014. What is Globalisation. http://www.bbc.co.uk/schools/gcsebitesize/geography/globalisation/globalisation_rev1.shtml
Ikerd, J. Is Capitalism Sustainable. University of Missouri Online: http://web.missouri.edu/ikerdj/papers/SFT-Sustainable%20Captialism.htm
Investopedia, 2017. Capitalism. http://www.investopedia.com/terms/c/capitalism.asp
Sheth, J & Maholtra, N. Global Consumer Culture. Encyclopedia of International Marketing: http://www.uwyo.edu/sustainable/recent-research/docs/global%20consumer%20culture%20arnould.pdf
Todd, D. You Are What You Buy: Postmodern Consumerism and the Construction of Self http://www.hilo.hawaii.edu/academics/hohonu/documents/vol10x12youarewhatyoubuy-postmodernconsumerismandtheconstructionofself.pdf
World Socialist Movement, 2017. What is capitalism? http://www.worldsocialism.org/english/what-capitalism