Article I, Section 8, Clause 3 of the U.S. Constitution says "The Congress shall have Power To... regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes."
Democracy
It is now well known that capitalist development leads to the concentration of capital, employment, and power. It is somewhat less known that it leads to the almost complete destruction of economic freedom.
Capitalism leads to a significant loss of political, democratic, and economic power for the vast majority of the global human population, because capitalism creates very large concentrations of money and property at the hands of a relatively small minority of the global human population, leading to very large, and increasing, wealth and income inequalities between the elite and the majority of the population. Corporate capitalism and inverted totalitarianism are characterized by the dominance of hierarchical, bureaucratic, large corporations, which are legally required to pursue profit without concern for social welfare. In corporate capitalism, corporations and large business interest groups have a large amount of power and influence over government policy, including the policies of regulatory agencies and political campaigns. Corporations fail to act in the interests of the people; the existence of large corporations seems to circumvent the principles of democracy, which assumes equal power relations between all individuals in a society. Improved economical equity can only be achieved by decreasing the income gap.
The rise of giant (often multinational) corporations is a topic of concern. Large corporations lead to deep, structural erosion of such basic human rights and civil rights as equitable wealth and income distribution, equitable democratic political and socio-economic power representation, and many other human rights/needs. Large corporations create false needs in consumers and have had a long history of interference in, and distortion of, the policies of sovereign nation states through high-priced legal lobbying, and other almost always legal, powerful forms of influence peddling. Evidence of this includes invasive advertising (such as billboards, television ads, adware, spam, telemarketing, child-targeted advertising, guerrilla marketing), massive open or secret corporate political campaign contributions in so-called "democratic" elections, corporatocracy, the revolving door between government and corporations, regulatory capture, too big to fail, massive taxpayer-provided corporate bailouts, socialism/communism for the very rich and brutal, vicious, capitalism for everyone else, corporate welfare, and seemingly endless global news stories about corporate corruption (Martha Stewart and Enron, among many other examples). Large corporations answer only to large shareholders, giving human rights issues, social justice issues, environmental issues virtually no consideration.
Thomas Jefferson, one of the founders of the United States, said "I hope we shall crush... in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country"
Exploitation
The capitalist system is inherently exploitative. In an economic sense, exploitation is often related to the expropriation of labor for profit and based on Marx's version of the labor theory of value. The labor theory of value was supported by classical economists like David Ricardo and Adam Smith who believed that "the value of a commodity depends on the relative quantity of labor which is necessary for its production."
In Das Kapital, Karl Marx identified the commodity as the basic unit of capitalist organization. Marx described a "common denominator" between commodities, in particular that commodities are the product of labor and are related to each other by an exchange value (i.e., price). By using the labor theory of value, we can see a connection between labor and exchange value, in that commodities are exchanged depending on the socially necessary labor time needed to produce them. However, due to the productive forces of industrial organization, laborers are seen as creating more exchange value during the course of the working day than the cost of their survival (food, shelter, clothing, etc.). Capitalists are thus able to pay for this cost of survival, while expropriating the excess labor (i.e., surplus value).
Due to economic inequality, the purchase of labor cannot occur under "free" conditions. Since capitalists control the means of production (e.g., factories, businesses, machinery) and workers control only their labor, the worker is naturally coerced into allowing their labor to be exploited. Exploitation occurs even if the exploited consents, since the definition of exploitation is independent of consent. In essence, workers must allow their labor to be exploited or face starvation. Since some degree of unemployment is typical in modern economies, wages are naturally driven down in free market systems. Hence, even if a worker contests their wages, capitalists are able to find someone from the reserve army of labor who is more desperate.
Unions are the "traditional method" for workers to have more bargaining power in the marketplace. The act (or threat) of striking has historically been an organized action to withhold labor from capitalists, without fear of individual retaliation. While trade unions are necessary, they simply reform an already exploitative system, leaving the system of exploitation intact. Almost all fortunes are made out of the capital and labor of other men than those who realize them. Indeed, large fortunes could rarely be made at all by one individual, except by his sponging capital and labor from others.
While in major capitalist economies the minimum wage is legislatively imposed by the state, there is no maximum wage limit, which is supposedly determined by the forces of the free market. They further argue that the minimum wage measure does not serve to set a lower limit in a worker's earnings; it actually functions as an upper limit on the earnings of a person that just enters the workforce. The existence of minimum wage, coupled with the absence of maximum, permits rapid wealth accumulation and leads to a phenomenon termed "plutonomy" by Citigroup. In effect, wages are kept low for almost all of the population while the remaining minute percentage is allowed to meet overwhelming profits.
The adoption of upper limits in individual wealth is a solution that would make the world a better place.
Imperialism
The ills caused by capitalism include imperialism and oppression. Systematic violence against political opponents, participation in coups that have placed dictators in power (for example Augusto Pinochet in Chile, Argentina with its Dirty War); and large scale democide (like in the Congo Free State). Although some of these violations occurred during a time period and in states sometimes considered being more capitalist than today since the government share of the economy was much smaller, American and European support of multinational-friendly capitalist dictatorships in Latin America and Africa lasted until the mid-1980s.
Near the start of the 20th century, Vladimir Lenin claimed that state use of military power to defend capitalist interests abroad was an inevitable corollary of monopoly capitalism. The system is responsible for not only economic exploitation, but imperialist, colonialist and counter-revolutionary wars, repressions of workers and trade unionists, genocides and massacres.
Capitalism needs imperialism in order to survive. The unplanned nature of capitalism inevitably overproduces commodities and overuses resources, which leads it to expand its markets into and drain the resources out of other, less developed nations. The wealthy nations must maintain cheap access to Third World natural resources and unfree labor, by force if necessary. Capitalist countries like the United Kingdom initially were helped by the primitive accumulation of capital through the theft of natural resources and exploitation of slave labor from large parts of Asia, Africa and the Americas, which spurred the Industrial Revolution. The constant, capitalist drive to expand markets is the primary cause of globalization.
In his essay, Imperialism, the Highest Stage of Capitalism, Vladimir Lenin advanced the now widespread thesis that the 'New Imperialism' of the late 19th and early 20th centuries was an inevitable corollary of monopoly capitalism. According to Lenin, the export of financial capital superseded the export of commodities; banking and industrial capital merged to form large financial cartels and trusts in which production distribution are highly centralized; and monopoly capitalists influenced state policy to carve up the world into spheres of interest. These trends led states to defend their capitalist interests abroad through military power.
Inefficiency and Waste
There has been a shift from pre-industrial reuse and thriftiness before capitalism to a consumer-based economy that pushes "ready-made" materials. A sanitation industry arose under capitalism that deemed trash valueless; a significant break from the past when much "waste" was used and reused almost indefinitely. In the process capitalism has created a profit driven system based on selling as many products as possible. The "ready-made" trend is related to a growing garbage problem in which the average American throws out 4.5 pounds of trash per day (compared to 2.7 pounds in 1960).
Planned obsolescence is a wasteful practice under capitalism. By designing products to wear out faster than need be, new consumption is generated. This would benefit corporations by increasing sales, while at the same time generating excessive waste. A well-known example is the fact that Apple designed its iPod to fail after 18 months. Planned obsolescence is wasteful and an inefficient use of resources. Brand-based marketing puts more emphasis on the company's name-brand than on manufacturing products.
Inequality
Capitalism is associated with the unfair distribution of wealth and power; a tendency toward market monopoly or oligopoly (and government by oligarchy); imperialism, counter-revolutionary wars and various forms of economic and cultural exploitation; repression of workers and trade unionists, and phenomena such as social alienation, economic inequality, unemployment, and economic instability. There is an inherent tendency toward oligolopolistic structures when laissez-faire is combined with capitalist private property. Capitalism is irrational in that production and the direction of the economy are unplanned, creating many inconsistencies and internal contradictions and thus should be controlled through public policy.
In the early 20th century, Vladimir Lenin argued that state use of military power to defend capitalist interests abroad was an inevitable corollary of monopoly capitalism.
Che Guevara wrote: "The laws of capitalism, which are blind and are invisible to ordinary people, act upon the individual without he or she being aware of it. One sees only the vastness of a seemingly infinite horizon ahead. That is how it is painted by capitalist propagandists who purport to draw a lesson from the example of Rockefeller - whether or not it is true - about the possibilities of individual success. The amount of poverty and suffering required for a Rockefeller to emerge, and the amount of depravity entailed in the accumulation of a fortune of such magnitude, are left out of the picture, and it is not always possible for the popular forces to expose this clearly... It is a contest among wolves. One can win only at the cost of the failure of others."
The capitalist system has inherent biases favoring those who already possess greater resources. The inequality may be propagated through inheritance and economic policy. Rich people are in a position to give their children a better education and inherited wealth, and that this can create or increase large differences in wealth between people who do not differ in ability or effort. In the United States, 43.35% of the people in the Forbes magazine "400 Richest Americans" list were already rich enough at birth to qualify. In the United States, wealth, race, and schooling are important to the inheritance of economic status, but that IQ is not a major contributor, and the genetic transmission of IQ is even less important. The tax and benefit legislation in the United States since the presidency of Ronald Reagan has contributed greatly to the inequalities and economic problems and should be repealed.
Market Failure
Market failure is the condition where the allocation of goods and services by a market is not efficient. This scenario in which individuals' pursuit of self-interest leads to bad results for society as a whole. From this, the best solution is economic intervention by government into free markets. The lack of perfect information and perfect competition in a free market is grounds for government intervention. There are many unique problems with a free market including: monopolies, monopsonies, insider trading, and price gouging.
Legislation has been introduced to deal with these concerns (e.g., antitrust laws or financial regulation). Also, governments overseeing capitalist economies have been known to set mandatory price floors or price ceilings at times, thereby interfering with the free market mechanism. This usually occurs in times of crisis, or relating to goods and services viewed as strategically important. Electricity, for example, is a good that has typically been subject to price ceilings in many countries.
Wages determined by a free market mechanism are a problem and are unjustifiably low or unjustifiably high. Free markets usually fail to deal with the problem of externalities, where an action by an outside agent positively or negatively affects another agent without any compensation. An example of an externality is pollution. More generally, free market allocation of resources in areas such as health care, unemployment, wealth inequality, and education are considered market failures by some.
Poor distribution of goods has also been identified as a market failure. 200 million Indians went hungry in 1995, while the Indian economy was exporting $625 million worth of wheat and $1.3 billion worth of rice that same year.
Market Instability
Market instability is a permanent feature of a capitalist economy. Marx believed that the unplanned and explosive growth of capitalism does not occur in a smooth manner, but is interrupted by periods of overproduction in which stagnation or decline occur (i.e., recessions). Several contradictions in the capitalist mode of production are present, particularly the internal contradiction between anarchy in the sphere of capital (i.e., free market) and socialised production in the sphere of labor (i.e., industrialism). Due to the unplanned nature of the system, capitalists produce without knowing in advance what they can sell, while at the same time unleashing huge productive capabilities through industrial organization. The result is that crises are not caused by shortages, like a crop failure, but rather from a production of too many goods. Marx and Engels, in the Communist Manifesto, highlighted what they saw as a uniquely capitalist juxtaposition of overabundance and poverty: "Society suddenly finds itself put back into a state of momentary barbarism. And why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce."
Property
In discussions of the sensitive issue of property, it is critical to make a clear distinction between private property and public property: private property needs to be abolished and transformed into the commons or public property, respect will be retained for personal property rights.
Friedrich Engels argued that the free market is not necessarily free, but weighted towards those who already own private property. He viewed capitalist regulations, including the enforcement of private property on land and exclusive rights to natural resources, as unjustly enclosing upon what should be owned by all, forcing those without private property to sell their labor to capitalists and landlords in a market favorable to the latter, thus forcing workers to accept low wages in order to survive.
In recent times, most economies have extended private property rights to include such things as patents and copyrights. This as coercive against those with few prior resources. Such regulations discourage the sharing of ideas, and encourage nonproductive rent seeking behavior, both of which enact a deadweight loss on the economy, erecting a prohibitive barrier to entry into the market.
Sustainability
An economic system that produces strong economic growth and requires essentially free trade may have a large effect on the environment.
Commodity chains or production/consumption chains are networks of transfers of materials and commodities that is currently part of the functioning of the global capitalist system. Examples include high tech commodities produced in countries with low average wages by multinational firms, and then being sold in distant high income countries; materials and resources being extracted in some countries, turned into finished products in some others and sold as commodities in further ones; countries exchanging with each other the same kind of commodities for the sake of consumer's choice (e.g., Europe both exporting and importing cars to and from the U.S.). Such processes, all of which produce pollution and waste of resources, are an integral part of the functioning of capitalism (i.e., its metabolism).
Some leading conservation organizations such as the World Wide Fund for Nature and the United Nations Environment Programme argue that the impact of humanity on Earth is continually increasing. In 2004 they jointly reported that "humanity's ecological footprint grew by 150% between 1961 and 2000" and that most of this growth occurred in the 27 wealthiest countries of the world, in other words, the leading capitalist countries.
The real dangers are due to the world's current social institutions that promote environmentally irresponsible consumption and production. Under the "grow or die" imperative of capitalism, there is little reason to expect hazardous consumption and production practices to change in a timely manner. Markets and states invariably drag their feet on substantive environmental reform, and are notoriously slow to adopt viable sustainable technologies. The externalization of costs is the "dirty secret" of capitalism. There are built-in limits to ecological reform and the costs of doing business in the world capitalist economy are ratcheting upward because of deruralization and democratization.
Beyond environmental sustainability, there is the question of labor market and consumer market sustainability. In a constant-growth model, new individuals have to be constantly added to the free market economy (as laborers and/or consumers). Capitalism encourages overpopulation.
Unemployment
If a higher minimum wage increases the wage rates of unskilled workers above the level that would be established by market forces, the quantity of unskilled workers employed will fall. The minimum wage will price the services of the least productive (and therefore lowest-wage) workers out of the market. The direct results of minimum wage legislation are clearly mixed. Some workers, most likely those whose previous wages were closest to the minimum, will enjoy higher wages. Others, particularly those with the lowest prelegislation wage rates, will be unable to find work. They will be pushed into the ranks of the unemployed or out of the labor force.
It is assumed that workers are willing to labor for more hours if paid a higher wage. Economists graph this relationship with the wage on the vertical axis and the quantity (hours) of labor supplied on the horizontal axis. Since higher wages increase the quantity supplied, the supply of labor curve is upward sloping, and is shown as a line moving up and to the right.
Democracy
It is now well known that capitalist development leads to the concentration of capital, employment, and power. It is somewhat less known that it leads to the almost complete destruction of economic freedom.
Capitalism leads to a significant loss of political, democratic, and economic power for the vast majority of the global human population, because capitalism creates very large concentrations of money and property at the hands of a relatively small minority of the global human population, leading to very large, and increasing, wealth and income inequalities between the elite and the majority of the population. Corporate capitalism and inverted totalitarianism are characterized by the dominance of hierarchical, bureaucratic, large corporations, which are legally required to pursue profit without concern for social welfare. In corporate capitalism, corporations and large business interest groups have a large amount of power and influence over government policy, including the policies of regulatory agencies and political campaigns. Corporations fail to act in the interests of the people; the existence of large corporations seems to circumvent the principles of democracy, which assumes equal power relations between all individuals in a society. Improved economical equity can only be achieved by decreasing the income gap.
The rise of giant (often multinational) corporations is a topic of concern. Large corporations lead to deep, structural erosion of such basic human rights and civil rights as equitable wealth and income distribution, equitable democratic political and socio-economic power representation, and many other human rights/needs. Large corporations create false needs in consumers and have had a long history of interference in, and distortion of, the policies of sovereign nation states through high-priced legal lobbying, and other almost always legal, powerful forms of influence peddling. Evidence of this includes invasive advertising (such as billboards, television ads, adware, spam, telemarketing, child-targeted advertising, guerrilla marketing), massive open or secret corporate political campaign contributions in so-called "democratic" elections, corporatocracy, the revolving door between government and corporations, regulatory capture, too big to fail, massive taxpayer-provided corporate bailouts, socialism/communism for the very rich and brutal, vicious, capitalism for everyone else, corporate welfare, and seemingly endless global news stories about corporate corruption (Martha Stewart and Enron, among many other examples). Large corporations answer only to large shareholders, giving human rights issues, social justice issues, environmental issues virtually no consideration.
Thomas Jefferson, one of the founders of the United States, said "I hope we shall crush... in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and bid defiance to the laws of our country"
Exploitation
The capitalist system is inherently exploitative. In an economic sense, exploitation is often related to the expropriation of labor for profit and based on Marx's version of the labor theory of value. The labor theory of value was supported by classical economists like David Ricardo and Adam Smith who believed that "the value of a commodity depends on the relative quantity of labor which is necessary for its production."
In Das Kapital, Karl Marx identified the commodity as the basic unit of capitalist organization. Marx described a "common denominator" between commodities, in particular that commodities are the product of labor and are related to each other by an exchange value (i.e., price). By using the labor theory of value, we can see a connection between labor and exchange value, in that commodities are exchanged depending on the socially necessary labor time needed to produce them. However, due to the productive forces of industrial organization, laborers are seen as creating more exchange value during the course of the working day than the cost of their survival (food, shelter, clothing, etc.). Capitalists are thus able to pay for this cost of survival, while expropriating the excess labor (i.e., surplus value).
Due to economic inequality, the purchase of labor cannot occur under "free" conditions. Since capitalists control the means of production (e.g., factories, businesses, machinery) and workers control only their labor, the worker is naturally coerced into allowing their labor to be exploited. Exploitation occurs even if the exploited consents, since the definition of exploitation is independent of consent. In essence, workers must allow their labor to be exploited or face starvation. Since some degree of unemployment is typical in modern economies, wages are naturally driven down in free market systems. Hence, even if a worker contests their wages, capitalists are able to find someone from the reserve army of labor who is more desperate.
Unions are the "traditional method" for workers to have more bargaining power in the marketplace. The act (or threat) of striking has historically been an organized action to withhold labor from capitalists, without fear of individual retaliation. While trade unions are necessary, they simply reform an already exploitative system, leaving the system of exploitation intact. Almost all fortunes are made out of the capital and labor of other men than those who realize them. Indeed, large fortunes could rarely be made at all by one individual, except by his sponging capital and labor from others.
While in major capitalist economies the minimum wage is legislatively imposed by the state, there is no maximum wage limit, which is supposedly determined by the forces of the free market. They further argue that the minimum wage measure does not serve to set a lower limit in a worker's earnings; it actually functions as an upper limit on the earnings of a person that just enters the workforce. The existence of minimum wage, coupled with the absence of maximum, permits rapid wealth accumulation and leads to a phenomenon termed "plutonomy" by Citigroup. In effect, wages are kept low for almost all of the population while the remaining minute percentage is allowed to meet overwhelming profits.
The adoption of upper limits in individual wealth is a solution that would make the world a better place.
Imperialism
The ills caused by capitalism include imperialism and oppression. Systematic violence against political opponents, participation in coups that have placed dictators in power (for example Augusto Pinochet in Chile, Argentina with its Dirty War); and large scale democide (like in the Congo Free State). Although some of these violations occurred during a time period and in states sometimes considered being more capitalist than today since the government share of the economy was much smaller, American and European support of multinational-friendly capitalist dictatorships in Latin America and Africa lasted until the mid-1980s.
Near the start of the 20th century, Vladimir Lenin claimed that state use of military power to defend capitalist interests abroad was an inevitable corollary of monopoly capitalism. The system is responsible for not only economic exploitation, but imperialist, colonialist and counter-revolutionary wars, repressions of workers and trade unionists, genocides and massacres.
Capitalism needs imperialism in order to survive. The unplanned nature of capitalism inevitably overproduces commodities and overuses resources, which leads it to expand its markets into and drain the resources out of other, less developed nations. The wealthy nations must maintain cheap access to Third World natural resources and unfree labor, by force if necessary. Capitalist countries like the United Kingdom initially were helped by the primitive accumulation of capital through the theft of natural resources and exploitation of slave labor from large parts of Asia, Africa and the Americas, which spurred the Industrial Revolution. The constant, capitalist drive to expand markets is the primary cause of globalization.
In his essay, Imperialism, the Highest Stage of Capitalism, Vladimir Lenin advanced the now widespread thesis that the 'New Imperialism' of the late 19th and early 20th centuries was an inevitable corollary of monopoly capitalism. According to Lenin, the export of financial capital superseded the export of commodities; banking and industrial capital merged to form large financial cartels and trusts in which production distribution are highly centralized; and monopoly capitalists influenced state policy to carve up the world into spheres of interest. These trends led states to defend their capitalist interests abroad through military power.
Inefficiency and Waste
There has been a shift from pre-industrial reuse and thriftiness before capitalism to a consumer-based economy that pushes "ready-made" materials. A sanitation industry arose under capitalism that deemed trash valueless; a significant break from the past when much "waste" was used and reused almost indefinitely. In the process capitalism has created a profit driven system based on selling as many products as possible. The "ready-made" trend is related to a growing garbage problem in which the average American throws out 4.5 pounds of trash per day (compared to 2.7 pounds in 1960).
Planned obsolescence is a wasteful practice under capitalism. By designing products to wear out faster than need be, new consumption is generated. This would benefit corporations by increasing sales, while at the same time generating excessive waste. A well-known example is the fact that Apple designed its iPod to fail after 18 months. Planned obsolescence is wasteful and an inefficient use of resources. Brand-based marketing puts more emphasis on the company's name-brand than on manufacturing products.
Inequality
Capitalism is associated with the unfair distribution of wealth and power; a tendency toward market monopoly or oligopoly (and government by oligarchy); imperialism, counter-revolutionary wars and various forms of economic and cultural exploitation; repression of workers and trade unionists, and phenomena such as social alienation, economic inequality, unemployment, and economic instability. There is an inherent tendency toward oligolopolistic structures when laissez-faire is combined with capitalist private property. Capitalism is irrational in that production and the direction of the economy are unplanned, creating many inconsistencies and internal contradictions and thus should be controlled through public policy.
In the early 20th century, Vladimir Lenin argued that state use of military power to defend capitalist interests abroad was an inevitable corollary of monopoly capitalism.
Che Guevara wrote: "The laws of capitalism, which are blind and are invisible to ordinary people, act upon the individual without he or she being aware of it. One sees only the vastness of a seemingly infinite horizon ahead. That is how it is painted by capitalist propagandists who purport to draw a lesson from the example of Rockefeller - whether or not it is true - about the possibilities of individual success. The amount of poverty and suffering required for a Rockefeller to emerge, and the amount of depravity entailed in the accumulation of a fortune of such magnitude, are left out of the picture, and it is not always possible for the popular forces to expose this clearly... It is a contest among wolves. One can win only at the cost of the failure of others."
The capitalist system has inherent biases favoring those who already possess greater resources. The inequality may be propagated through inheritance and economic policy. Rich people are in a position to give their children a better education and inherited wealth, and that this can create or increase large differences in wealth between people who do not differ in ability or effort. In the United States, 43.35% of the people in the Forbes magazine "400 Richest Americans" list were already rich enough at birth to qualify. In the United States, wealth, race, and schooling are important to the inheritance of economic status, but that IQ is not a major contributor, and the genetic transmission of IQ is even less important. The tax and benefit legislation in the United States since the presidency of Ronald Reagan has contributed greatly to the inequalities and economic problems and should be repealed.
Market Failure
Market failure is the condition where the allocation of goods and services by a market is not efficient. This scenario in which individuals' pursuit of self-interest leads to bad results for society as a whole. From this, the best solution is economic intervention by government into free markets. The lack of perfect information and perfect competition in a free market is grounds for government intervention. There are many unique problems with a free market including: monopolies, monopsonies, insider trading, and price gouging.
Legislation has been introduced to deal with these concerns (e.g., antitrust laws or financial regulation). Also, governments overseeing capitalist economies have been known to set mandatory price floors or price ceilings at times, thereby interfering with the free market mechanism. This usually occurs in times of crisis, or relating to goods and services viewed as strategically important. Electricity, for example, is a good that has typically been subject to price ceilings in many countries.
Wages determined by a free market mechanism are a problem and are unjustifiably low or unjustifiably high. Free markets usually fail to deal with the problem of externalities, where an action by an outside agent positively or negatively affects another agent without any compensation. An example of an externality is pollution. More generally, free market allocation of resources in areas such as health care, unemployment, wealth inequality, and education are considered market failures by some.
Poor distribution of goods has also been identified as a market failure. 200 million Indians went hungry in 1995, while the Indian economy was exporting $625 million worth of wheat and $1.3 billion worth of rice that same year.
Market Instability
Market instability is a permanent feature of a capitalist economy. Marx believed that the unplanned and explosive growth of capitalism does not occur in a smooth manner, but is interrupted by periods of overproduction in which stagnation or decline occur (i.e., recessions). Several contradictions in the capitalist mode of production are present, particularly the internal contradiction between anarchy in the sphere of capital (i.e., free market) and socialised production in the sphere of labor (i.e., industrialism). Due to the unplanned nature of the system, capitalists produce without knowing in advance what they can sell, while at the same time unleashing huge productive capabilities through industrial organization. The result is that crises are not caused by shortages, like a crop failure, but rather from a production of too many goods. Marx and Engels, in the Communist Manifesto, highlighted what they saw as a uniquely capitalist juxtaposition of overabundance and poverty: "Society suddenly finds itself put back into a state of momentary barbarism. And why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce."
Property
In discussions of the sensitive issue of property, it is critical to make a clear distinction between private property and public property: private property needs to be abolished and transformed into the commons or public property, respect will be retained for personal property rights.
Friedrich Engels argued that the free market is not necessarily free, but weighted towards those who already own private property. He viewed capitalist regulations, including the enforcement of private property on land and exclusive rights to natural resources, as unjustly enclosing upon what should be owned by all, forcing those without private property to sell their labor to capitalists and landlords in a market favorable to the latter, thus forcing workers to accept low wages in order to survive.
In recent times, most economies have extended private property rights to include such things as patents and copyrights. This as coercive against those with few prior resources. Such regulations discourage the sharing of ideas, and encourage nonproductive rent seeking behavior, both of which enact a deadweight loss on the economy, erecting a prohibitive barrier to entry into the market.
Sustainability
An economic system that produces strong economic growth and requires essentially free trade may have a large effect on the environment.
Commodity chains or production/consumption chains are networks of transfers of materials and commodities that is currently part of the functioning of the global capitalist system. Examples include high tech commodities produced in countries with low average wages by multinational firms, and then being sold in distant high income countries; materials and resources being extracted in some countries, turned into finished products in some others and sold as commodities in further ones; countries exchanging with each other the same kind of commodities for the sake of consumer's choice (e.g., Europe both exporting and importing cars to and from the U.S.). Such processes, all of which produce pollution and waste of resources, are an integral part of the functioning of capitalism (i.e., its metabolism).
Some leading conservation organizations such as the World Wide Fund for Nature and the United Nations Environment Programme argue that the impact of humanity on Earth is continually increasing. In 2004 they jointly reported that "humanity's ecological footprint grew by 150% between 1961 and 2000" and that most of this growth occurred in the 27 wealthiest countries of the world, in other words, the leading capitalist countries.
The real dangers are due to the world's current social institutions that promote environmentally irresponsible consumption and production. Under the "grow or die" imperative of capitalism, there is little reason to expect hazardous consumption and production practices to change in a timely manner. Markets and states invariably drag their feet on substantive environmental reform, and are notoriously slow to adopt viable sustainable technologies. The externalization of costs is the "dirty secret" of capitalism. There are built-in limits to ecological reform and the costs of doing business in the world capitalist economy are ratcheting upward because of deruralization and democratization.
Beyond environmental sustainability, there is the question of labor market and consumer market sustainability. In a constant-growth model, new individuals have to be constantly added to the free market economy (as laborers and/or consumers). Capitalism encourages overpopulation.
Unemployment
If a higher minimum wage increases the wage rates of unskilled workers above the level that would be established by market forces, the quantity of unskilled workers employed will fall. The minimum wage will price the services of the least productive (and therefore lowest-wage) workers out of the market. The direct results of minimum wage legislation are clearly mixed. Some workers, most likely those whose previous wages were closest to the minimum, will enjoy higher wages. Others, particularly those with the lowest prelegislation wage rates, will be unable to find work. They will be pushed into the ranks of the unemployed or out of the labor force.
It is assumed that workers are willing to labor for more hours if paid a higher wage. Economists graph this relationship with the wage on the vertical axis and the quantity (hours) of labor supplied on the horizontal axis. Since higher wages increase the quantity supplied, the supply of labor curve is upward sloping, and is shown as a line moving up and to the right.
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