The Theory of Capitalism and Its Current Context

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Table of Contents

Introduction
Adam Smith
Theory Breakdown
Current Research
Theory Selection
Conclusion
Works Cited

Introduction

A variety of academic theories can be implemented when comprehending intercultural communication despite the frameworks being established to highlight a different segment. Thus, the theory of capitalism, while illustrating the economic system in which individuals participate, can be applied in contrasting settings. The model was initially established by the economist Adam Smith and aligned with the idea that a system in which individual needs are pursued, the economy balances itself, and each individual fulfills a financial purpose without major disruptions. The current paper highlights the theory of capitalism in regard to its origins, practical employment, and the current context it correlates with.

Adam Smith

Adam Smith remains one of the most prominent figures in regard to theorizing political economy. One of the main acknowledgments correlating with the Scottish philosopher is the establishment of the notion and foundation of the “free market”, the system in which supply and demand shape prices (Okan 607). There are two main arguments for Adam Smith’s formulation of the theory of capitalism. On the one hand, economics believes that people are inherently prone to working to generate circumstances in which happiness is achieved. Thus, an individual is less likely to work to benefit others but more likely to seek their satisfaction as well as the happiness of their families, communities, and countries. On the other hand, Smith highlighted that a system in which each person is self-serving would, in turn, be sustainable for most members of society. As a result, capitalism would be practically useful for all its followers as long as fair competition exists and self-serving needs are individually fulfilled by each person. This is why the capitalist theory was established in the first place, as it takes into consideration the sociologic and psychological need for self-service actions while highlighting that benefits would be experienced by all actors. Nonetheless, the principle can be employed under the conditions of a free market, a lack of corruption, and a sense of moral sentiments applied by the elements managing the system through their establishments. Smith’s theory is widely applied in multiple countries yet often criticized in modern settings as it is often portrayed as only beneficial for a small percentage of entities.

Theory Breakdown

The theory of capitalism, as mentioned previously, is based on the human nature of advancing in self-serving interests. In this case, the economic system is centered around the idea that a person’s aim for success, under the condition that competition is fair and corruption is minimal, is enough to sustain a society’s financial needs. Thus, one opens a business to improve their income, which leads to the creation of new jobs and opportunities for others. The company grows as the owner considers supply and demand, and the organization progresses based on the establishment of additional positions that need to be fulfilled within the workforce. As a result, the multiple economic actors, while acting independently, are interconnected and generate a stable economy. Moreover, the economics believed that central authorities do not have the necessary tools of insight to intervene successfully in an economic system, which is why actors operating based on liberty would create an interdependency that would regulate business (Matson). In this case, the overall system, while not entirely self-regulating, regulates itself based on the principles of a free market and self-fulfillment needs. The theory of capitalism can be applied in various settings, yet it is mostly present in the illustration of the economic system in which private ownership prevails while state actors have a more regulatory role. Nonetheless, the same framework can be employed in socio-economic settings, such as explaining how self-serving, while beneficial for entities following the goal, does not bring as much success to more vulnerable or otherwise underrepresented communities.

Capitalism theory is based on the explanation of the social reality of fulfilling personal goals while operating within the existing economic barriers. An example provided by research is the notion of a capitalist world economy. Thus, most nations are within the World Trade Organization, yet the prosperity of each actor depends on the resources and capabilities of each country (Block 1173). In this case, the social reality correlating with capitalism is the correlation between a free market and self-serving, or, in a societal rather than economic setting, a free nation and personal interests. Capitalism does not aim for social equality, yet it provides opportunities for prosperity to be obtained through certain means.

Current Research

The theory of capitalism has been widely researched and remains the primary economic system in multiple first-world nations worldwide. Due to the existing experience of countries implementing the framework, it is inevitable that its practical implementation can, indeed, be highly successful in regards to increasing a nation’s GDP and GNP and decreasing unemployment. Nonetheless, the theory has been applied in studies to either determine its implications in a social science setting and determine its derivables or to put the model into a newly established context. In regards to social sciences, researchers highlight that different societies implement slightly different forms of capitalism, which is why the term “variegated capitalism” is to be applied (Block 1166). The research then highlights that the theory in itself cannot be applied in a global context as countries differ based on their socioeconomic, cultural, and economic capabilities and traits. Moreover, newer research highlights differences between various capitalist models, for example, organized versus liberal (Nölke and May 21). On the one hand, capitalism is more restricted and aligns with societal and economic needs, while, on the other hand, based on liberal values and implemented with fewer barriers. Last but not least, capitalism has been examined in regard to its practical employment in newer industries and market segments, such as the technoscientific environment (Birch 3). The theory is being examined further both from the viewpoint of societal benefit as well as its applicability under the circumstances of the current external economic environment.

Theory Selection

The theory was selected due to the interchangeable relationship between its practical appliance in most first-world countries and the criticism it receives in the modern world. Indeed, criticism of capitalism ideas is primarily associated with the Marxist theory that the current system oppresses the working class (Øversveen 440). Nonetheless, it is also often contradicted in modern social sciences based on the notion that it perpetuates inequality and maximizes differences between different demographics. While it is often portrayed as a model that divides people and increases barriers for marginalized and vulnerable communities, it appears to correlate with economic success for countries that have effectively implemented it in their economic environment. This is why the framework was selected for the analysis.

Conclusion

The capitalism theory was established by Adam Smith in relation to an economic system based on a free market, competition, and self-service. Nonetheless, the framework can be applied in multiple different areas of life. It can also be applied to determine the economic reality of inequality both in terms of opportunities and outcomes. In the current research, the framework is studied in terms of its modern applicability, subdivisions, and correlation with social sciences. Despite existing criticism, it is still the central point of national and global economic systems worldwide.

Works Cited

Birch, Kean. “Technoscience Rent: Toward a Theory of Rentiership for Technoscientific Capitalism.” Science, Technology, & Human Values, vol. 45, no. 1, 2019, pp. 3–33.

Matson, Erik W. “Adam Smith on Capitalism and the Common Good.” Econlib, Web.

Nölke, Andreas, and Christian May. “Liberal versus Organised Capitalism: A Historical-Comparative Perspective.” Market Liberalism and Economic Patriotism in the Capitalist World-System, 2019, pp. 21–42.

Okan, Ecem. “Ryan P. Hanley (Ed.), Adam Smith: His Life, Thought and Legacy.” OEconomia, no. 9-3, 2019, pp. 607–612.

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