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Historical Development of Theory

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Historical Development of Theory

Introduction

Economic systems have for centuries guided the social way of life. Understanding the

history of the development of such systems is crucial in informing this research. The primary aim

of the history is to help the audience understand the foundations that inform the study. The

chapter aims at helping the audience understand the history and evolution of the various

economic systems. The changes are highly influenced by times and the social factors observed

due to the adoption of the different economic systems. The historical perspective provided in this

case will expand on research horizons for the audience as it will depend on the understanding of

economists on the causes of inequality in modern economies. 

Historical Development of Theory

The demise of capitalism is traceable from the changes in its formation as the economic

system moved from one form of capitalism to another. The capitalist economic system is

traceable from the 16th century and relates to the rise in the clothing industry in England.

Mercantile capitalism was adopted as a process of capital accumulation in the 17th century, thus

leading to the rise in monopolies (Reinert & Fredonia. 2017). It involved the movement of goods

from cheap markets to expensive markets. The process did not recognize the movement of the

cheap production processes but instead opted for capital accumulation in the cheap markets. 

Later was replaced by industrial capitalism, which took center stage in the last third of the 18th

century. The rise of industrial capitalism had significant consequences and played a significant

role in changing the way of life for communities, especially in America. Industrial capitalism

brought about a complex division of labor, thus leading to the immediate classification of the

workforce. The empowerment of the workforce led to the development of unions which would
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later advocate for improvement in economic and political systems. However, most of the capital

resources ended up in the hands of private investors who would later also influence the

development of policies to suit their business needs. Thus, as much as the workforce may have

the power of changing the economic and political system, it is thought that most of the policies

are highly influenced by capital-intensive companies.

Some of the nations did not consider the adoption of capitalism and therefore adopted

communism. Karl Max is believed to be the father of the theory of communism. It is vital to note

that China lost its ties with the USA due to its adoption of communism. Although the system

allows the government to control economic and social activities, it does not entirely solve the

issue attached to greed, materialism, and social-economic inequality (Ten Brink, 2019). The

system has remained influential in increasing the country’s wealth generation ability but

ineffective in solving inequality (Ten Brink, 2019). Communism is also blamed for more

significant effects, such as interference with human rights. Most of the national economic

reforms are made without the consent of the local people, as voting is primarily done by

congress. 

The beginning of socialism can be traced to the 16th century from the French revolution.

The social theory is collectively referred to as Marxism. According to Karl Max, human societies

are bound to progress through a distinct struggle among the existing and distinct social workers.

Karl Max developed the theory while he sought to explain the existing relationship between the

capitalists and the workers. According to him, the social class carries out all the tasks involved in

generating revenue while the capitalists emerge as the greatest beneficiaries from the generated

resources (Astarita, 2018). The Australian labor partly was the first group of social workers that

formed a government in the colony of Queensland back in 1899 (Murphy, 1971). The Soviet
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model of economic development was also a perfect illustration of the model proposed through

socialism. In this economic model, states owned the production systems. According to Marx,

social class influenced by modern developments play a crucial role in influencing the need for

justice and equality in the distribution of resources. 

Optimum government participation in economic developments is proposed to be the

solution that will bring justice to the distribution of resources. The argument on the effectiveness

of socialism as a solution to help mitigate the inequality aspect promoted by capitalism is

borrowed from a comparison of the state of life for countries that have adopted socialism. Nordic

countries such as Sweden, Norway, and Denmark are examples of democracies that retained

social corporatism even with the existence and fame of industrial capitalism (Refsgaard et al.,

2021). The quality of life and inequality in these nations is comparatively lower, with the

government distributing resources through progressive tax regimes and a high level of influence

on the labor laws. However, the argument is that a collaborative economy maybe efficient than

any other system in helping mitigate the inequality effect attached to capitalism. 

The rise in labor unions promoted the debate on human rights and equality. Although

labor unions influenced policy development for some time, there was a decline in their power.

Changes in workforce demography, a high level of global completion, deregulation of unionized

industries, and a decline in the rate of union registration influenced the fall in the unions’

economic and social powers. According to Ross (2019), industrial capitalism marked the end of

capitalism in itself. The vast ability for industries to merge natural resources through the use of

machinery and the available workforce enhanced the level of economic inequalities and high

levels of unsustainability Blühdorn, 2017). Similarly, the clear division of labor also played a

significant role in influencing the levels of economic inequalities. The high level of inequality
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influenced scholars to believe that the demise of capitalism is now close more than ever. The

western world concept allows private traders to influence trade, thus leading to a high level of

greed. However, it is prudent to state that the vast economic developments are all credited to the

adoption of capitalism in the western countries, thus creating room for the development of free

trade, which creates ground for healthy competition.

The emergence of global climate change issues has raised questions on the possibility for

sustainability development through continued dependence on capitalism. An increase in the rate

of anthropogenic factors contributing to global warming has escalated through the times of

industrial capitalism (Blühdorn, 2017). The impact of such factors on global warming is now

irreversible, but the continued contribution to environmental degradation is now considered more

dangerous. According to research, the addiction of industrial capitalism to the exploitation of

fossil fuels and other natural resources makes it impossible to restore planet earth. Therefore,

global companies have been blamed for the high level of climate change, with companies such as

Murphy Oil, the people’s republic of china, Saudi Aramco, and ConocoPhillips being blamed for

a high level of contribution towards atmospheric carbon dioxide. Other companies such as Coca-

cola, are also blamed for their high levels of contribution towards pollution. 

However, considering the top five most polluting countries, it is prudent that scholars

agree that the level of pollution is not to blame on the capitalist-based economy since a country

such as China which is known to be communists, is leading in the list. According to Acciona's

report, China contributes to about 30% of the global pollution, the second country in the United

States contributing about 15% of the global pollution ("Top 5 most polluting countries", 2021).

Acciona also provides that the third country leading in global pollution is India, followed by

Russia and Japan shipping as the fifth leading ("Top 5 most polluting countries", 2021). The
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findings of the report by Acciona may therefore support the argument that although industrial

capitalism is blamed for pollution and the increased levels of atmospheric carbon dioxide, all

other forms of economic systems have equally contributed to the destruction of planet earth. 

Directions for Future Research

Since it is clear that capitalism may not be wholly responsible for the challenges attached

to communism and capitalism are equally to blame for the high levels of inequality and

environmental degradation. The public ownership of production systems may help solve

inequality but will not solve the issues attached to environmental degradation. Therefore, future

research must focus on solving the issue of inequality while addressing sustainable development.

Therefore, the researchers must lay their efforts and resources in studying the changes that can

help improve the current economic systems so that the most feasible system is adopted. 

The researchers’ effort must focus on the understanding that although equality is crucial,

sustainable development is equally sensitive. Future research must also focus on developing

solutions for the possible challenges attached to adopting socialism over capitalism. The

developing countries have a variety of challenges attached to corruption. Considering the nature

of man as naturally greedy and egocentric, researchers need to focus on studying the forms of

leadership required to adopt socialism as an economic system that solves the inequality aspect

attached to capitalism. 

Summary of the Chapter

The literature in this chapter has discussed the historical development of capitalism,

communism, and socialism in general. The evolution in capitalism has been considered as the

primary factor influencing the increasing disadvantage attached to capitalism. In addition, a high

level of inequality is considered the primary factor influencing the increased resistance to
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capitalism. The inequality is considered to be there in resource distribution as well as the use of

natural resources. Industrial capitalism is primarily blamed for the vast increase in unequal

distribution of natural resources and a high rate of environmental degradation. Nordic countries

are examples of perfect economies using a hybrid economic system (Refsgaard et al., 2021). The

historical perspective concludes by proving a platform in which it proposed that future research

developments need to focus on studying the effectiveness of the proposed new system that

should focus on equality. Throughout history, it is easy to understand the challenge attached to

the modern economic system, which does not encourage collaboration in sharing resources. A

modern economic system such as capitalism has also been seen to promote individualism which

leads to greed and thus the lack of consent for sustainable development. Therefore, it is clear

from history that there is a need to adopt a collaborative economic system. 

References

Astarita, C. (2018). Karl Marx and the transition from feudalism to capitalism. International

Critical Thought, 8(2), 249-

263.https://www.tandfonline.com/doi/abs/10.1080/21598282.2018.1478248

Blühdorn, I. (2017). Post-capitalism, post-growth, post-consumerism? Eco-political hopes

beyond sustainability. Global Discourse, 7(1), 42-

61.https://doi.org/10.1080/23269995.2017.1300415

Murphy, D. J. (1971). The Dawson government in Queensland, the first Labour government in

the world. Labour History, (20), 1-

8.https://search.informit.org/doi/abs/10.3316/informit.231309723825747

Refsgaard, K., Kull, M., Slätmo, E., & Meijer, M. W. (2021). Bioeconomy–A driver for regional

development in the Nordic countries. New Biotechnology, 60, 130-

137.https://doi.org/10.1016/j.nbt.2020.10.001

Reinert, S., & Fredona, R. (2017). Merchants and the Origins of Capitalism. Harvard Business

School BGIE Unit Working Paper, (18-021).https://papers.ssrn.com/sol3/papers.cfm?

abstract_id=3037173

Roos, J. (2019). From the Demise of Social Democracy to the ‘End of Capitalism’: The

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