National Capitalism, Essay Example
Please explain how in the readings Paul Bowles talks about National Capitalism. List and explain the ways in which National Capitalism differ, and the three major models that Bowles describes explaining what led to the rise and fall of the “Golden Age” of Capitalism
According to Bowels characteristics of capitalism are private ownership, profit motive and the market. In his definition capitalism is an economic organization that is based on private ownership of society’s productive assets and firms. In this system sales and purchase of factors of production like labor, land and capital as well as that of goods and services are voluntary. Driving force in this system is profit motive.
Bowels state that National capitalism of Europe and US during the period of colonialism from 1870 – 1945 was rooted in states and they are supported by such state. These countries search the world for economies and markets and larger geographical areas are incorporated for supporting their insatiable profit pursuit. He also states that during this period national capitalism emerged in countries that were colonized due to increasing of production that was centered on those who were surrounding international firms and international firms itself. This was based on private property, wage labor employment and profit pursuit.
After 1945 several mechanisms and a coherent set of institutions were set up for regulation of capitalism in global arena. This resulted in formation of various varieties of capitalism. One of the reasons behind this was Bretton Woods initial design system that restricted the flow on international capital allowing considerable scope for autonomy of economic policy at national level. Another factor that caused variation in national capitalism is due to path dependent character of economies. That is operation of markets depends on evolution and forging of national capitalist economies. Further associations, government and firms of capitalist economy are not relying on market. Coordination in this method is relying on hierarchy, cooperation and trust. In this system profit making is in the social, organizational and political structure that are wider than market structure.
After 1945 national capitalism was different due to various specific challenges faced by nations. Those who won the war faced different challenges than those who won. Third world also had a different situation resulting in the formation of a different capitalist system there. Legacy of devastation of last fifty years before 1945 created a feeling among nations that they need to have a capitalist system that is more humanitarian in nature. This resulted in the formation of various kinds of capitalist system for each country addressed legacies and challenges of post war in different manner.
National capitalism is differentiated on the basis of labor, capital and state. It is on the basis of relation between these three agents of economies that Bowels differentiate capitalism. He provides three models of capitalism based on these three agents of economies. First model is the one that emerge from state capital relation. In the first model state has no guiding or direct role in decisions of firms though it is responsible for macro economy. In another model that arise from state capital relation it is the government who decides the level of private investment in key industrial sectors.
In second model capital labor relations forms the core. In this relation state can provide legal framework for the operation of trade unions and firms. But they are having some role in wage bargaining and other labor related activities. Wage bargaining in this method is in decentralized method where it is the relative strength of unions and firms that determine the outcome. In another method there is a legal frame work to determine wage levels and along with that state also has a role to play in this. In this method negotiations takes place at national levels and it is the employers, government and employers that make negotiations. This can be considered as a consensual form of capitalism and is called as corporatism. Decisions are made on state provisions of welfare called social wage, what can be afforded by economy and what amount is to be distributed as profits and wages. In this system national capitalism can be distinguished on the basis of welfare state types and extent. In the final model it is the state that imposes labor organization, trade unions role and control organized labor’s powers.
This method has another issue and it is about the organization of training and the responsibility of the same. If there is mobility of labor between firms, no firm will have to incur training cost of workers. If a firm wishes to train its labor they can do so at their own cost but at last worker might join another firm who offer higher wages. In such a situation only minimal amount is invested on workers of such economy. State is free to provide training to workers as required by firms.
Next factor is the method in which industries are financed. Distinction is normally based on financing from stock market and banks. In stock market financing system external fund is raised by industries through issue of equity. In bank financing system banks lends capital to firms.
Bowels proposes three models of capitalism and they are
Anglo American model- this model is base on capitalist institutional frame work in UK and US. Here state has no direct intervention in wage bargaining and this is a decentralized system. Relation between capital and labor is considered as adversary. Legal frame work in which bargaining takes place is provided by state and they change this frame work too. Labor markets are thick in this system and workers move from one firm to another. Financial intermediaries and stock market has great role in financing. In this model markets have coordinating role that is large and state has a small role.
Corporatist model – In this system wage bargaining takes place between representatives of labor, capital and state at national level. This also covers objectives of income distribution and welfare state services. Policy frame work is highly influenced by tripartite committees between labor, capital and state. Employer employee relation is more stable with long term contracts. The model is characterized by patient labor and capital.
Japanese model- In this system it is the bank based finance that dominates. There is long term relationship between firms and employees. There is less labor mobility in this system. Welfare provisions are organized at company level. Developmental strategy of business is state controlled and it is the state that controls finance, trade and technology. But in this system role of state is very limited when it comes to welfare of employees and there is very less women participation in industries.
After 1945 state gained a more prominent role in economy and was responsible for social equity and full employment and the period is known as golden age of capitalism. But after 1980 role of state was reduced and they became less responsible for economic outcomes. Power of trade unions reduced and labor became weak. Regulatory constraints on capital became less and market fundamentalism came to existence. Privatization and free trade became common and this led to the end of golden age of capitalism.
Despite the weakness of Capitalism during the Golden Age, Capitalism did not disappear but in fact “came back” in the so–‐called the Second Great Age of Capitalism. What/how/which policies and/or countries helped the new rise of Capitalism making sure you mention no only the political and economic debate but also the role of the “impossible tirade,” Gold Standard, BW, and MNC among others to make sure you briefly describe how these helped shape “capitalism 4.0” from a political and economic point of view.
According to Gilpin after the end of cold war in 1989, world economy changed to a great extent. This was the result of Soviet Union’s collapse, upcoming of Japan as a rich economy, Germany’s reunification and consequent return as Western Europe’s dominant power, and rise of Pacific Asia and China began to influence all international affairs. Technological and other changes that began to develop in earlier decades also began to become dominant during this period. Further economic power also began to redistribute among Asia Pacific countries that were industrializing rapidly and where economic crisis has riven. World began to rely more on market for managing economic affairs and national economies began to integrate in to a global economy and this resulted in expansion of financial flows and trade. Demographic evolution also played a major role as the population of industrialized countries reduced to a great extent while population growth was high in India, China and other Asian countries and developing world. This had an effect on distribution of global economy and military power.
After the fall of Soviet Union, United States was considered as the only super power and people began to believe that the liberal values of America with regard to individualism, free markets and democracy had triumphed. Commentators also believed the world is now going to prosper, and an era of freedom peace and democracy is being established. During latter half of twentieth century it was with in the frame work provided by alliance structures of cold war and cold war itself that economy of whole world developed. Even United States emphasized allied corporation and security interests than its economic interest.
After cold war interest of America changed and their emphasis was on economic security than military security and political interest. This led to the growth of economic unilateralism and resulted in ratification of North American Free Trade Agreement. An aggressive result oriented trade policy was also recreated as a result of this and this policy was aimed towards Japan. Japan and Western Europe were also less willing to follow the leadership of America during 1990’s. They were also not ready to tolerate the disregard of America towards their political and economic interest and they began to give more emphasize to their national priorities. Germany on reunification provided more emphasis to issues of European region and began to create a politically and economically united Europe. Japan tried to develop an integrated Pacific Asian regional economy under its leadership. Thus during 1990 Trans-Atlantic, North American and trans-Pacific issues were over ridden by regional concerns. It was with an intention to assume the leadership of whole world that America put forward trade liberalization and free market concept. Though Western Europe and Japan followed the authority at first during 1990 they began to realize this and began to think and work more on their own interests. Alliance with America that was continuing for decades became weak and this was likely to cause serious consequence on prosperity and world peace. Economic turmoil that took place during the final years of century warns about the threat faced by global economy towards its stability and health.
Rise of computer and information technology revolutionized the world by transforming political, social and economic aspects. Gilpin states that “Newer technologies, especially in computing and electronics, are relevant to a broad array of economic processes and other activities in many sectors of the economy”. Further economy also shifted from manufacturing to service sector which was a great threat to American industry. World economy also shifted during this period from America, Western Europe and Japan to Latin America, Pacific Asia and other economies that are industrializing. These economies have sound economic fundamentals with large labor force, investment and saving rates which is capable enough to recover.
Another aspect according to Gilpin is the economic regionalism. Developing countries gained greater efficiency through liberalization and with this they abandoned the strategy of substitution. Regional integration was promoted in this structure in both manufacturing and service sector. Regional arrangements were made by countries to promote collective and national objectives both political and economical. Management of global economy has become tough through globalization and countries and alignments between countries are not ready to accept the leadership of America.
Factors necessary for long term success of globalization and capitalism
For the long term success of globalization it is necessary to have an economic integration between states. It is not necessary to have an authority but a consensus must be arrived on by the parties who participate in globalization regarding economic, social and political matters. An authority is also needed to sort out issues that are likely to arise or that is in existence. For that it is better to accept some authorities like United Nations of Court of Justice and countries who are becoming parties to globalization must act in a way that it is beneficial for global economy and not regional economy. Regional interests will not be of good to globalization though trade is conducted for the regional economy. Better being of global economy must be the aim and regional interests are to be given second priority only.
Second factor that is to be given more consideration is the use of information technology in a globalised economy. Information technology is to be highly made use of for the growth of economy in global scenario. Capitalism will prosper well in globalization for companies will get more opportunity to grow. They can perform in various economies and function better under political sectors that are more supportive to them. If capitalism has to remain successful it is necessary that political and social circumstances help the companies to perform in an economy that is supportive. With globalization companies can perform in a wider economy with out political restrictions and constraints. With the growing market economy too will grow irrespective of political interests.
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