Hello friends! Welcome
to the 2nd episode of the Basic Series. "In the first episode, we talked about
Communism." Today let's talk about
Capitalism. What is capitalism exactly? How
successful was it? Or did it fail? Let's
find out. The word 'Capitalism' comes
from the word Capital which means Money.
Or any type of wealth. "Whether
you have houses, cars on land, they are your capital." "In the last Blog, I gave you the basic definition of
Communism." It is a society where
every person works according to his ability
and receives according to his needs.
"If we have to define Capitalism similarly," "Capitalism is a society where
""from each according to his ability," "To each according to his
capital.""" A society
where every person works according to his ability but they get returns according to their
capital. The person with the most
capital will get the most profit. "After
knowing the definition you'd ask me:
""What kind of a society is this?""" """Where a person who has more
money will get more money."""
"You heard it right, friends."
I'll talk about the exact workings later in the Blog. "Basically,
Capitalism is an ideology that promotes privatisation" "where the means of production like land,
fields, factories, and industries,"
are owned by private individuals.
"In Communism they were owned by the public, everyone owned
these." "Similar to Communism,
Capitalism is a very broad term and ideology."
Where there are many
subsections of ideologies with differences among them. "But if you look at it broadly, there
are a few things that are common in all the types." First is the Privatisation. "Second, minimal interference by the
Government." Most Capitalists
believe that the Government has no
business to be in business. This
dialogue has been used by our Government recently. The third is the Free Market and Competition. "and Fourth is something that is easily
seen in a capitalist society," """Money
Begets Money.""" Money is
earned through Money. I'll explain this
later. "First, let's talk about the
history of Capitalism." The oldest
example of Capitalism is Feudalism. This can be called the primitive form of
capitalism. "This was around the
10th century when landlords occupied land," "and the farmers and labourers who
worked on the land," "worked
tirelessly to grow crops. But all the profits from the land," "was used to be taken by the
landlords," and the farmers hardly
earned enough to get by. You may wonder
how this is an example of capitalism. "The
land was owned by an individual, the landlord." And to whom did most of the profit from the
land go? The Landlord. Capitalism works
similarly today. "Whatever you do
at whichever company," "suppose
you're an employee at Apple," you
work the whole day and get a monthly salary in return. But the company earns profits. Where does the
profit go? It doesn't go to you It goes to the owner of the company. "Obviously, there are differences. Today
you get workers' rights" "and
minimum wages and are not exploited, in most of the cases" Who is the owner of this Apple company? That person who holds the most number of
shares of the company.
Even you can become the owner of the company through the
share market. "If you buy some
shares Apple, any profits earned by it, you will get a part of." Because you are also an owner of a portion. We live in such a capitalist society today. An employee works in a company for a monthly
salary and the profit earned by the
company will be distributed among such people
who don't even know the day to day working of the company. You can earn the profit of the company by
doing nothing if you invest in the company.
And who can invest? Someone who already has the money. "As I said, money makes money." One with the most money in a capitalist world
can make more money easily by investing
in such companies and taking their profits.
Modern Capitalism started Modern Capitalism started in the 16th-17th
century in Britain and Netherlands. "The
first stock exchange of the world was the Amsterdam Stock Exchange," and the first company to be listed was the
Dutch East India Company in 1602. "Like
there's Karl Marx for Communism," similarly
there's Adam Smith for Capitalism. Known
as the Father of Capitalism. In 1776 he
wrote the book The Wealth of Nations.
"In the book, he talked about a policy
Laissez-Faire." It is a French word
that literally means 'leave alone.' That
government should leave the economy alone and should not interfere. From here Free Market Capitalism started. Suppose you want to open a pizzeria and so
does your neighbour. "If a third
person does not interfere between the two," there will be a very interesting and fair
competition between you. About who can
make the better pizza and sell it at a lower rate. Both of you will try to compete with each
other and start experimenting. Trying to
improve the quality of the pizza. "Because
of this competition, both of you will innovate and think of new ways." About how the pizza can be improved and sold
at a lower price. "In the opinion
of Adam Smith," this competition
was the invisible hand of the free market.
"Where no one is forcing you to make a better pizza,"
but the market situation is forcing you to innovate to make
a better pizza. You are working only for
your self-interest. You want your
restaurant to grow and earn more profit and
to perform better than your neighbour. But
your working in your self-interest is also benefiting others. It is also in the interest of society that
you work for your self-interest. This
is the philosophy of Adam Smith. To
increase the efficiency of your pizzeria you'd eventually realise that doing everything yourself was not smart. "If you start taking orders yourself and
making the pizza, it'll take a lot of time." It would be better to hire a few people. One to take the orders at the front desk. One who'll make the pizza and buy ingredients
for it. One who will put the toppings on
the pizza and put it in the oven. And
one whose work would be to deliver the pizza.
This is the Division of Labour. "Every
person is specialising in his work and because of the specialisation," productivity and efficiency increase rapidly. Adam Smith talked about this as well. This is one of the major reasons for the
success of Capitalism across the world. "Everyone
realised that if they want to work in a better manner at a better speed," division of labour and specialization is
necessary. "Take Apple company, if
a person wants to build an iPhone, it will take him years." "but if there is an assembly line of
workers to manufacture these iPhones,"
"where the first person would fit the screen the second will fit
the screws," then the assembly line
will be able to manufacture numerous iPhones in a day. By implementing these ideas Industrial
Revolution began. Where large factories
were established; but what happened
then?
I talked but that in the Communism Blog. The
workers were forced to work for hours in terrible conditions. They were getting exploited and eventually communist
ideologies started. After hearing this
you'd think that Karl Marx and Adam Smith would be sworn Enemies. "But this wasn't so, in reality, Karl
Marx has written a book Das Kapital,"
where he agreed on many viewpoints of Adam Smith. There were definite disagreements between
them but it can be said that they were
looking at the same situation from different perspectives. "On one hand, Adam Smith focuses on
productivity and efficiency," "On
the other hand, Karl Marx agrees that productivity and efficiency would
indeed" increase but his focus is
on an individual. He says that a worker
would start feeling alienated if he works on repetitive tasks. To do the same for hours and years on end. The worker would not be proud of his work. He
would question the purpose of his life. Seeing
himself as only a small gear in a piece of large machinery. "Karl Marx believed that specialisation
would make workers more easily replaceable," and the capitalist would get more power to
exploit the workers. The ideas of Karl
Marx and Adam Smith are two perspectives of the same situation. Remember that both of them were born in
different eras. Adam Smith died in 1790
and Karl Marx was born in 1818. 1790 was
a time when the Industrial Revolution had just begun. And Karl Marx grew up seeing the workers
being exploited in the factories. "Maybe
if they lived in the same era, their opinions would have agreed." "Moving ahead in history," we know that Communism was first implemented
in the Soviet Union. "When it comes
to the implementation of capitalism,"
in 1902 a significant incident happened.
"Three large steel companies in the USA," "Carnegie Steel, Federal Steel and National Steel," merged together to become The US Steel. This was the first billion-dollar corporation
in the world.
Elbert H Gary was the chairperson of the company. "And in the first year, it manufactured
2/3rd of the total steel manufactured in the US." But there remained some competition in the
steel industry. So Garry invited all his
competitors for a dinner and asked them
why they were fighting amongst themselves
while someone else was benefitting from their competition. He suggested that they work together and stop
competitive pricing. This was how the
first billion-dollar company in the world became a monopoly. "According to the theory of Adam
Smith," the Invisible hand of the
free market was supposed to work and set things right. "but in reality, this did not
happen." "Whenever there's a
monopoly for anything or a company,"
it is terrible for the consumers.
"Imagine you are stranded in a village late at night, waiting for a taxi." And the nearest city is 100-200 km away. But there is only one taxi. "You ask the taxi driver to take you to
the city," "While he charges
₹500 for the distance normally," "but
he tells you that he would charge you ₹50,000 for taking you." You will not have any option. The taxi driver will have a monopoly here. "You are stuck in a situation where the
only way out is to," either give in
or remain stuck there. You are forced to
pay that sum.
This extra amount is known as profit in Capitalism. "In Das Kapital, Karl Marx talks about
this theory, the Theory of Surplus Value."
"If I run a company that manufactures a product," "and you are an employee working in the
company that actually makes the product,"
"Suppose I earn a profit of ₹80,000 by selling that product," "but I pay ₹8,000 to you as
salary." "The ₹72,000 that we
put call profit, Karl Marx called Surplus Value." All the surplus value and profits are taken
away by me and you get only a salary. This
is often seen in Capitalism. There can
be many examples for this. A trader that
buys products very cheap from the farmer and sells it at a much higher price The profit or surplus value is taken by the
trader. "A scientist discovers the
formula for a vaccine, but in reality,"
the pharma companies selling that vaccine get the most profits. "A singer that actually sings the
song," but it is the music label
that takes most of the profit. "According
to Karl Marx," "this is a
system where everyone is trying to climb a ladder to stop being
exploited," but as soon as they
reach the top they would start exploiting others. A system where work is not rewarded but money
is. "If you have the money to
establish a company and employ people,"
you can take away the maximum profits.
"But obviously, not every company is like this, not every company
owner is like this" that'd keep on
exploiting the employees. In contrast to
the companies owned by private individuals
are Joint Cooperative Companies such as Amul. More than 36 lakh of farmers are joint owners
of Amul Co-operative. This is not a
company listed on the stock market.
You and I cannot invest our capital in Amul company. The profit earned by Amul and its benefits is
distributed among these farmers that
have created this company together. "But
obviously, to make such cooperative, one person has to take the lead." "In the case of Amul, it was
Tribhuvandas Patel who set up the Cooperative in 1946." Under the guidance of Sardar Vallabhbhai
Patel. Regarding this there was a film
as well called Manthan. It was the first
crowd-funded film in India. More than 5
lakh farmers working in Amul contributed ₹2 each to make this film. "Anyways, I got too diverted in the
story." "Coming back to the
history of Capitalism," "in
1929, capitalism received a huge shock when the stock market crashed
terribly" and a Great Depression
started. The recession has been a very
regular feature in Capitalism. There
were large scale unemployment and poverty in the USA because of this. "At this point entered the revolutionary
economist Keynes," who altered the
history of Capitalism. He believed that
the Invisible Hand of the free market does not actually exist. "In reality, if the free market is left
free, it will lead to depression, recession, monopolies." The theory of Keynes was that governments
should interfere and regulate the companies.
"Small companies should be subsidized," "and big companies should be prevented
from getting monopolies,"
there should be strict rules and regulations in place. "In the decades that followed
Keynes," countries all over the
world took inspiration from him and
implemented a model of Capitalism where rules and regulations existed. The next big shock to Capitalism was in the
1980s when Ronald Reagan in the USA and
Margaret Thatcher in the UK reintroduced
the free market of Adam Smith to the world.
The capitalism implemented in these two countries is known as
Neoliberalism. The basic foundational
idea is of Adam Smith "that
government should not interfere in the market and market share run
itself," "and there exists an
invisible free hand of the market,"
"The current status is that in the last 40 years," "in many countries of the world,
especially the USA," we have seen
Neoliberalism being implemented. Because
of this inequalities have been rising significantly in the US. The rich are getting richer and the poor are
not able to improve their situation. The
big companies are starting to become monopolies. The impact of Neoliberalism has been felt in
India as well. What were the successful
ideas of capitalism? What are the
dangerous failures of Capitalism that we see today? We will talk about it in detail in the next
blog. "I hope you found this blog
informative, please share it." "so
that I can keep making such high-quality, extremely detailed blogs for you." Let's meet in the next blog. Thank you very much.