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Critically examine the issues and problems arising from capitalist development in contemporary times.

 Advocates and critics of capitalism agree that its distinctive contribution to history has been the encourage ment of economic growth. Capitalist growth is not, however, regarded as an unalloyed benefit by its critics. Its negative side derives from three dysfunctions that reflect its market origins. 
Many critics have alleged that the capitalist system suffers from inherent instability that has characterized and plagued the system since the advent of industrialization. Because capitalist growth is driven by profit expectations, it fluctuates with the changes in technological or social opportunities for capital accumulation. As opportunities appear, capital rushes in to take advantage of them, bringing as a consequence the familiar attributes of a boom. Sooner or later, however, the rush subsides as the demand for the new products or services becomes saturated, bringing a halt to investment, a shakeout in the main industries caught up in the previous boom, and the advent of recession. Hence, economic growth comes at the price of a succession of market gluts as booms meet their inevitable end.

Moving from specific examples of distribution to a more general-level, the criticism may be broadened to an indictment of the market principle itself as the regulator of incomes. An advocate of market-determined distribution will declare that in a market-based society, with certain exceptions, people tend to be paid what they are worth-that is, their incomes will reflect the value of their contribution to production. Thus, market-based rewards lead to the efficiency of the productive system and thereby maximize the total income available for distribution. This argument is countered at two levels. Marxist critics contend that labourers in a capitalist economy are systematically paid less than the value of their work by virtue of the superior bargaining power of employers, so that the claim of efficiency masks an underlying condition of exploitation.

A second criticism with respect to market-driven growth focuses on the adverse side effects generated by a system of production that is held accountable only to the test of profitability. It is in the nature of a complex industrial society that the production processes of many commodities generate “bads” as well as “goods”-e.g., toxic wastes or unhealthy working conditions as well as useful products.

The catalog of such market-generated ills is very long. Smith himself warned that the division of labour, by routinizing work, would render workers “as stupid and ignorant as it is possible for a human creature to become," and Marx raised the spectre of alienation as the social price paid for subordinating production to the imperatives of profit making. Other economists warned that the introduction of technology designed to cut labour costs would create permanent unemployment. In modern times much attention has focused on the power of physical and chemical processes to surpass the carrying capacity of the environment-a concern made cogent by various types of environ mental damage arising from excessive discharges of industrial effluents and pollutants. Because these social and ecological challenges spring from the extraordinary powers of technology, they can be viewed as side effects of socialist as well as capitalist growth. But the argument can be made that market growth, by virtue of its overriding obedience to profit, is congenitally blind to such externalities. 

A third criticism of capitalist growth concerns the fairness with which capitalism distributes its expanding wealth or with which it shares its recurrent hardships. This criticism assumes both specific and general forms. 

The specific form focuses on disparities in income among layers of the population. In the early 21st century in the United States, for example, the lowest fifth of all households received only 3.1 per cent of total income, whereas the topmost fifth received 51.9 per cent. Significantly, this disparity results from the concentration of assets in the upper brackets. Also, the disparity is the consequence of highly skewed patterns of corporate rewards that typically give, say, chief executive officers of large companies an average of 265 times more income than those of ordinary office or factory employees. Income disparities, however, should be understood in perspective, as they stem from a number of causes.


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