Tutorial 5: Do you believe that Capitalism is moral? Justify your answer.

Capitalism can be defined as an economic system in which the major portion of production and
distribution is in private hands, operating under what is termed a profit or market system (Shaw
et al. 2013, p118). There are four features of capitalism which are the used of companies, profit
motive, competition and private ownership of property (Shaw et al. 2013,119-122).

The first argument for capitalism is the justification for owing private property (Shaw et al. 2013,
p122). This is supported by the ideas of John Locke in his Natural Right to Property Theory (Shaw
et al. 2013, p122). He argues that when individuals mix their labour with the natural world, they
are entitled to the results (Shaw et al. 2013, p123). Therefore the results are the entitlement to
property (Shaw et al. 2013, p123). Other than that, The United Nations Universal Declaration of
Human Rights Article 17(1) said that everyone has the right to own property alone as well as in
association with others and it allows everyone to enjoy the right of property and no one should be
prohibited to do so (Universal Declaration of Human Rights 1948). Furthermore, the second
argument for capitalism said that the system is the most efficient, and produces the greatest amount
of benefits due to the utilitarianism reasoning (Shaw et al. 2013, p123). For example, Malaysia
Bank Negaras 2013 annual report on Gross National Income (GNI) per capita and there has been
a rise from US $9,970 in 2012 to US $10,060 in 2013 (Lim 2014). Next, the third argument for is
according to the Adam Smiths concept of the invisible hand theory, it explains human beings
are self-interest and its results in benefit to society (Shaw et al. 2013, p124). When people have
the freedom of pursuing their own interests, they will produce the greatest good for all (Shaw et
al. 2013, p123). For example, when government interference in private enterprise are eliminated,
it will encouraged free competition and this will eventually improve a better economic in their
country (Shaw et al. 2013, p124). Therefore, capitalism encourages us to work hard and compete
with each other when there is competition and eventually the greatest utility will result from pursuit
of self-interest (Shaw et al. 2013, p124).

However, there is some argument against capitalism such as utilitarianism reject the whole idea of
a natural right to property because in their view there is no right to natural property and the moral
system of ownership is that which produces the greatest amount of utility (Shaw et al. 2013, p123).
Even if a person has a natural right to the results of his labour, there are moral limits on how much
wealth a person can amass (Shaw et al. 2013, p123). Lockes theory may not explain some modern
property rights as his premise is the natural world (Shaw et al. 2013, p123). Wealth creates wealth
without the need for labour (Shaw et al. 2013, p123). Besides, the second argument against
capitalism is benefits while greater are not equally distributed to all members of society therefore
inequality also exits in our capitalist society (Shaw et al. 2013, p139). This is because there is only
a tiny minority owns the vast majority of wealth, for example, in 2012, the Department of Statistics
Of Malaysia showed that for the top 20% household monthly income group is RM12,159, and for
the middle 40% of household income group is RM4,573, and for the bottom 40% of household
monthly income group is RM1,847 (Lim 2014). As we can see, the fact that the gap between the
rich and poor is very high (Lim 2014). The rich getting richer and the poor getting poorer (Shah

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2014). In addition, inequality has not only lead to poverty but also with the divisions of social and
economic class come inequality of opportunity (Shaw et al. 2013, p139). For example, a child had
born to a working-class family let alone to a teenage parent, has life prospects and possibilities
that pale beside those of children born to wealthy professional class parents (Shaw et al. 2013,
p139). Furthermore, the third argument against capitalism also includes the invisible hand theory
which assumes that human nature is that of an egoist (Shaw et al. 2013, p125). Self interest and
personal advantage are the things that motivate people all the time (Shaw et al. 2013, p124). They
will also pursue their own best long term interest (Shaw et al. 2013, 63).This is an assumption that
discounts any another motive exists (Shaw et al. 2013, p125).

There fourth arguments against capitalism is consumer no longer able to make rational choice, this
is because there is no full information and sufficient knowledge (Shaw et al. 2013, p139). Many
of the products and services we pay for require a high level of expertise and specialization that we
are unable to judge appropriately and we are unable to make the optimal choice regarding price
and quality (Shaw et al. 2013, p139). Therefore, consumer are not able to make a rational choice
nowadays is because a high level of consumer literacy required (Shaw et al. 2013, p139). The next
criticism of capitalism is the concept of free market challenged (Shaw et al. 2013, p141). As early
as the middle of the nineteenth century, the German philosopher and political economist Karl Marx
(1818-1883) argued that capitalism leads to a concentration of property and resources, and this
economic power will be in the hands of a few, therefore capitalism breeds oligopolies (Shaw et al.
2013, p141). Small firms suffer owing to high costs, complex and expensive machinery, intense
competition and advantages of large scale production, said Marx (Shaw et al. 2013, p141). Large
firms can conspire to set prices, eliminate competition and monopolise industries (Shaw et al.
2013, p141). Many see proof of Marxs argument in todays economy for example, the food retail
industry with firms such as Woolworths and Coles controlling the vast majority of sales of
supermarket products, similar to Foodstuffs and Progressive Enterprises in New Zealand (Shaw et
al. 2013, p141).

Furthermore, Competition is not necessarily good because they are empirical studies establishing
that in business there is frequently a negative correlation between performance and individual
competitiveness (Shaw et al. 2013, p143). Based on the zero sum game, the outcome must be
someone wins and someone loses and if there is too much competition, people are not able to
collaborate (Knight 2014). The idea of competition does not work all the time, people should have
collaboration by working in team in order to have win-win situation (Knight 2014). When people
work together, coordination of effort and an efficient division of labour are possible (Shaw et al.
2013, p143). Sometimes cooperation is much more productive than competition (Shaw et al. 2013,
p143).

Exploitation and Alienation is one of the criticisms of capitalism (Shaw et al. 2013, p148).
Exploitation is a situation where people are not given rewards (Shaw et al. 2013, p148). Marx
argued that as the means of production becomes concentrated in the hands of the few, the balance
of power between the employers and employees tips further in favour of employers (Shaw et al.

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2013, p144). Because workers have nothing to sell but their labour, employers are able to exploit
workers by paying them less than the true value created by their labour (Shaw et al. 2013, p148).
For example, Nike workers was being abused in a factories (Mail Online 2014). Worker making
Nikes converse shoes at a factory in Indonesia say that they are being physically and mentally
abused. (Mail Online 2014). Besides, they were being paid in a low wages in a way that they are
actually exploiting their workers (Mail online 2014). Legal, political and economic changes have
moderated an employers ability to exploit his workers (Shaw et al. 2013, p144). Critics of the
capitalist model justifiably point to the alienation of workers from their work and its product
through the process of the division of labour and disentitlement to the profit of their labour and the
decisions made about work done (Shaw et al. 2013, p148). Alienation can cause someone to have
low motivation and causes low productivity (Shaw et al. 2013, p148). In Marxs view, when
workers are alienated they cannot be truly free (Shaw et al. 2013, p148). They may have the
political and social freedoms of speech, religion and governance, but even with these right,
individuals still are not fully free (Shaw et al. 2013, p145).

In conclusion, I believe that capitalism is immoral because capitalism will lead to inequality in the
society where a tiny minority owns the vast majority of wealth (Shaw et al. 2013, p139). This is
because as we can see, the gap between rich and poor is very high. Furthermore, I think capitalism
is immoral because it can lead to exploitation (Shaw et al. 2013, p144).
(Word count: 1586 words )

Reference List

Knight, K 2014, COMM101 Principles Of Responsible Commerce, Topic 5 Capitalism and

Business notes, Faculty of Commerce, University of Wollongong.

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Lim, S 2014, Income Rising But Rich-Poor Gap Stays Wide, The Edge Malaysia, 25 August,
p12.

Mail Online, 2014, Nike Workers Being Kicked Slapped and Verbally Abused At Factories
Making Converse, accessed 8/11/2014, < http://www.dailymail.co.uk/news/article-
2014325/Nike-workers-kicked-slapped-verbally-abused-factories-making-Converse-line-
Indonesia.html>

Shah, A 2014, Causes of Poverty, accessed 8/11/2014,

<http://www.globalissues.org/issue/2/causes-of-poverty>

Shaw, WH, Barry, V , Issa T & Catley, B 2013. Moral Issues in Business (2nd Asia-Pacific edn),
Cengage Learning, Melbourne

Universal Declaration Of Human Rights 1948