Capitalism and Environment Essay ⋆ Environment Essay Examples ⋆ EssayEmpire

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Capitalism i s de scribed in Webster’s College Dictionary as “an economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations.” This is in contrast to the main alternative to capitalism-socialism-that is defined as “a theory or system of social organization in which the means of production and distribution of goods are owned and controlled collectively or by the government.” There are many variations or types of capitalism and socialism both in theory and practice, and most countries in the world have mixed economies that have some elements of both production systems. These systems produce both public and private goods and services.

Capitalism can be described as a system: generally as a private sector, market economy regulated by a public sector government. Capitalism can exist as a global system, where exchange transactions that travel over national boundaries are defined as international trade and international finance. Nations can be classified and rank-ordered according to the types of capitalism practiced. One type of ranking would compare levels of taxation and regulation, while another might look at the most dominant formats of business organization.

Capitalism can also be couched as a philosophy. Major philosophical tenets include: emphasis of individual rights over social rights; the right to purchase, own, and sell private property, including real estate; the use of price as a mechanism that guides the demand and supply of goods and services; the reward to entrepreneurs by the earning of profits derived from business operations; and the retention of capital gains resulting from the selling of privately owned assets.

Capitalism also can be experienced as a lifestyle. A capitalist is a person who practices capitalism in a number of roles. These include the entrepreneur, a person who works alone or in partnership to convert an invented idea, product or process to a marketable good or service. A capitalist can also be an investor who provides monetary resources to entrepreneurs, in exchange for a percentage ownership of their organization. A capitalist might be a manager, who seeks higher income and profit sharing associated with a growing business.

A capitalist is also a significant consumer. Income derived from capital gains, business profits, interest earned from renting capital, and salaries is used to acquire assets such as houses, automobiles, and computers, or more general retail consumption of a myriad of goods and services.

Corporate employees can also play the role of capitalist, to the extent they can save a portion of earned wages and invest them to start small-scale businesses; in many cases, home-based and requiring part-time work. In some societies, the majority of residents might be active in business formation of various sizes and scopes. In other societies, the capitalist might be a rare individual, possibly viewed as an opportunistic nonconformist.

In general, a capitalist economy can be described as having a private sector, with the power to produce and distribute goods and services; and a smaller, public sector, which partially taxes and regulates the private sector. The private sector is made up of a myriad set of activities by individuals, partnerships, and corporations, involving investors, entrepreneurs, employers and employees, vendors, and customers. A large volume of transactions occur in thousands of spatially diverse markets.

Capitalism is correlated with science and technology, and is a process where discoveries lead to innovations in how people organize space. These innovations are then packaged and marketed. If successful, new goods or services will diffuse across space as they are utilized by related producers and end consumers. For example, cellular communications towers allow for the use of small and portable communications devices. The diffusion of this technology has been rapid, and many countries now count more cell phones than fixed-line phones.

Legal Structures and Process

Capitalism will generate a legal structure that constructs a legal process. It is dependent on a public legal system to enforce noncompliance with written contracts, which is a legally binding agreement between two businesses (which themselves are legal entities). Three major legal forms are the sole proprietorship, which is a business is owned by a single individual; the partnership, which is is a contract that defines ownership percentage for two or more individuals; and the corporation, which has a more formal structure, where ownership can be traded between two unaffiliated parties, generally via stock markets. The corporation has the advantage of allowing ownership to shift over time, which means there is no inherent life expectancy or temporal limitation. In addition, corporations tend to have limited liability, related to the potential loss of direct investment, and not personal loss of property or liberty except in cases of gross or criminal negligence. A corporation’s life is limited by the decreasing demand from its consumers. This flexible structure has allowed for corporations to become relatively large, in some cases employing upwards of one million employees, having thousands of owners, and supplying goods and services to millions of customers. Corporations that take full advantage of the span of transportation and communications system networks can operate in many locations and thus become global or multi-national.

A corporation is formed by a multi-step process of idea generation, acquisition of investors and capital, the entrepreneur’s stock ownership of the newly formed corporation, hiring of organizational and technical managers to develop the good or service, identification of vendors, hiring of employees, marketing to identify and secure customers, and securing a customer service and accounting process.

If unsuccessful, the investment is lost, and the entrepreneur’s reputation is damaged. If successful, however, a return on investment is made and a profit is earned, and a business enterprise is able to scale up in size, earning higher revenue and employing more workers. This expansion will be limited by competing firms. Generally, a portion of the profits will be taxed; and to varying extent, government will regulate the firm, especially if there are identified byproducts of the production process, such as air, water and land pollution, and/or safety issues for consumers.

With millions of corporations and thousands of governments in existence, there are numerous interactions between the two entities. Many of these interactions are complementary, and assist in relatively efficient economic activity that has resulted in economic growth. Some of the interactions are contentious, resulting from a disagreement about the level of taxation or the volume of regulations. This can result in firms relocating their business activities to places with lower taxes and regulations.

There are many environmental impacts resulting from capitalist economic activity. First, there are the land use and land cover changes associated with the raw materials needed for the production, such as the water supply, food, fiber, metals, construction and building materials, and energy. This can involve large areas of land used for cropland, pastureland, plantation timber or selective forest harvesting, and energy and mineral extraction.

Second, there are pollution byproducts, which can take gaseous, liquid or solid forms. Pollution impact can be on-site and affect production workers, or migrate across space and affect larger areas. Third, goods and services are consumed in buildings and houses, which in turn are the result of extensive construction. Over time, the area used in clusters of housing and buildings form a set of urban places that convert land from natural or primary production into urban related development.

The mitigation of negative environmental changes takes a number of forms. In many cases, new technologies and markets evolve, including pollution control devices and more efficient production methods. In other cases, the public sector regulates or taxes the private sector to reduce the volume of pollution. An incentive is created to minimize pollution outputs, and thus the burden of pollution-related tax and regulation. Technological changes take place over time, resulting in reduced pollution levels, which may be offset with increased pollution associated with greater economic activity. Spatial changes may occur where pollution is avoided by moving from degraded landscapes to healthier landscapes.

From 2001-2006, the global economy has expanded at an average rate of about four percent per year. Most of this economic expansion has been the result of successful investment in capitalistic activities. In contrast to the period 1800-2000-where some places became economically successful relative to their neighbors, resulting in divergence in per capita incomes-the 21st century begins with strong evidence of convergence, with a set of emerging economies growing at twice the economic growth rates as developed economies. These emerging economies include China and India, and as a group of about 30 nations, contain the majority of the world’s population.

The future implication of continued economic growth at these rates is a mid-century global economy growing from $60 trillion to about $300 trillion. Combined with a demographic transition, which may result in a stabilized global population of about 8 billion persons, there is a potential for the global economy to have a per capita income of about $40,000 per person. This is a level currently enjoyed by countries including the United States, United Arab Emirates, and Norway. Capitalism is characterized by competition and varied outcomes, so there is a range of observed incomes. The potential exists, however, for the large reduction in poverty and even elimination of extreme poverty, and a human condition that, overall, is better than in prior history.

The environmental challenges are how an economic system of this size will obtain sufficient energy that is efficient and sustainable in the long-term, with less environmental problems than the current energy mix that is dominated by oil, coal, and natural gas. Also, there is the future relationship of primary production of food, in an efficient process that provides bountiful per capita caloric needs, while also expanding and maintaining a global network of wild lands, wild vegetation, and animal life.

A capitalist might view the environmentalist as faced with two important challenges. First, to use comprehensive scientific monitoring of the earth to identify new problems to which a wider audience will need to be alerted, and refine the relative relationships of the current set of problems, whose parameters may be shifting. Second, to play a complementary role-as both outside observers and participants of both the public and private sectors of the global capitalist economy-so that the trillions of economic transactions occurring in a global trading system incorporate environmental attributes.

Bibliography:

Peter Berger, The Capitalist Revolution, Fifty Propositions about Prosperity, Equality, and Liberty (Basic Books, 1986);
“Surprise! The Power of the Emerging World,” Economist (September 16-22, 2006);
Milton Friedman, Capitalism and Freedom (University of Chicago Press, 2002);
Jane Jacobs, The Economy of Cities (Random House, 1969);
Charles Jones, Introduction to Economic Growth (W. W. Norton & Company, 2002);
John Maynard Keynes, The General Theory of Employment, Interest, and Money (Harcourt Brace & Company, 1964);
Mankiw, Principles of Microeconomics (South-Western College Pub, 2003);
Random House Webster’s College Dictionary;
Jeffrey Sachs, The End of Poverty: Economic Possibilities For Our Time (Penguin Press, 2005);
Xavier Sala-i-Martin, “The World Distribution of Income: Falling Poverty and … Convergence, Period,” The Quarterly Journal of Economics (v.121/2, 2006);
Martin Wolf, Why Globalization Works, (Yale University Press, 2005).