Fundamentals of Capitalism
Capitalism is characterized by its focus, on investing profits into the economy to promote growth prioritizing expansion over stability. This approach motivates businesses to pursue advancements to improve efficiency and living standards. However rapid innovation can disrupt markets leading to job displacement as observed during the Internet revolution's impact on industries. Economic progress often involves utilizing resources that present challenges like deforestation for agricultural purposes and contribute to issues such as climate change. Additionally, wealth accumulation naturally occurs, concentrating resources among a few individuals or entities thereby exacerbating economic inequality while also fostering innovation.
Having faith in growth proves challenging within capitalism as it influences investment decisions, economic cycles, and term planning strategies. Optimism about opportunities encourages investments in ventures and technologies but can also result in speculative bubbles and economic uncertainty as seen in instances like the dot com bubble and the 2008 financial crisis. The cyclical nature of expansions and contractions is inherent due to fluctuations in confidence regarding growth. These variations impact business approaches and government policies designed to achieve stability and predict growth.
Credit
The credit system plays a role in capitalist economies by facilitating economic activities beyond current financial capabilities but also introduces systemic risks.
Financial tools, like mortgages, support investments in areas such as infrastructure. However, the 2008 financial crisis exposed the dangers of debt and risky lending practices in credit-based models. Central banks use policies like adjusting interest rates and implementing easing to control inflation and keep the economy stable, which affects borrowing costs and economic activity.
Money acts as a symbol in societies relying on trust in banks for its value and stability. This trust is essential for transactions, savings, and investments that help maintain balance. Economic uncertainties caused by fluctuations and external shocks can impact currency values and asset prices influencing investor confidence and financial stability. Modern monetary systems based on fiat currency rely on government credibility and effective policies to regulate cycles through measures.
Globalization
Globalization boosts productivity and specialization. Also raises risks, as seen in rapid crises like the 2008 financial collapse. Consumerism, an aspect of ideals, fuels economic growth through demand for products including sustainable options but raises concerns about resource depletion and environmental harm. Sustainable development efforts push for consumption practices to align with ecological preservation goals while seeking a balance, between long-term economic growth and environmental well-being.
Scientific Revolution
The Scientific Revolution played a role in advancing technology, which has fueled growth and influenced the development of capitalism. Discoveries in technology have led to changes in industries opening new prospects in digital and renewable energy fields. Yet the emphasis on consumerism and constant growth in capitalism poses obstacles to sustainability and societal welfare calling for approaches to balance advancement with environmental sustainability.