capitalism & management

7/29/2019 Capitalism & Management

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Introduction To Management

Rafiyat Husnain

s3400025

Tutor: Bernadette Hosking


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How has Capitalism affected the growth of management as a profession in the post-industrial societies of Western Europe and the USA? Discuss its relevance andsustainability today.

Management is a theory that can be dated back to various ancient and pre-industrial civilisations in

history when monarchs governed societies. In the nineteenth century, classical economists and

innovators like Adam Smith and Matthew Boulton provided the world with a greater insight into thetechnical and productive aspects of management. As management concepts evolved over the

centuries, capitalism became essential to the success and behaviour of managers in the post-

industrial world, particularly in Western Europe and the United States of America. When

understanding capitalism it is essential to consider its definition, regardless of how widely

interpreted the concept may be. Critics around the world define capitalism differently according to

different theories and historical backgrounds. However, when capitalism is linked to management

theories, it sublimes to an economic and political system whereby trade and markets in a nation are

dominated and controlled by private owners and businesses (Hart, 1999). The corporate mechanism

under which capitalism functions needs to be examined in order to understand the various decisions

managers make to maximize a firm's wellbeing without harming its stakeholders including the

society and the environment in general. As Adam Smith mentions in the Wealth Of Nations,economic individualism is the obvious and simple system of natural liberty (Hessen, 2008). This

is synonymous to the idea of capitalism. However, to what extent this liberty holds valid while

abiding by ethical obligations and sustainability is a question that needs to be discussed. Thus,

considering the post-industrial economies of Western Europe and the USA, the benefits and ills of

capitalism when studying the evolution of management will be critically examined and analysed in

this essay.

The growth of capitalism is closely linked to the growth of management as a profession. While in

certain cases it is emphasized that capitalism has been advantageous for managers, it can also be

argued that it has hindered the success of several managers and firms, especially in rapidly growingeconomies such as in post-industrialised Western Europe. The beginning of capitalism in Western

Europe mainly arised from the opposition and conflict between the proletariat and the bourgeoisie.

In early 19th century England, the typical form of capitalism was the textile factories in which

women and children were hired to work for extraordinarily long hours with mediocre wages. Critics

such as Richard Oastler condemned the managers, who at that period in time were the owners of the

mills, calling them ruthless exploiters and emphasizing on the extreme work conditions although

this was not particularly unheard of before then (Hessen, 2008). From 1963, the revolutionary

expansion of industries and income levels resulted in a massive acceleration of productivity and

growth in the respective economies. Also, several countries in the region became increasingly

attractive to foreign investors and consumers for exporting goods into their own nations from

Western Europe. This worked in favour of the working class as labourers demanded increases inwage rates and strengthened labour unions.

However, the bourgeoisie reacted by implementing collective contracts to prevent the labourers

from taking advantage of economic situations. This clear divide between the two social classes

whereby the ultimate control and power was imposed by the bourgeoise class illustrates the

revolution of the capitalist rule in Western Europe (Gaido, Walters, 2005). As the various economies

continued to prosper under capitalism and major corporations and monopolies dominated the states,

the working class were diverted from their original motives of rebelling against the capitalist forces

as they began to experience the benefits it brought about in addition to a greater standard of living,

thus increasing their own motivation to work harder and strive for success under the supervision of

their managers. According to marxist philosopher Herbert Marcuse, the real evil of capitalism isprosperity, because it seduces workers away from their historic missionthe revolutionary

overthrow of capitalismby supplying them with cars and household appliances, otherwise


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interpreted as tools of enslavement. (Marcuse, 1969). Although this made the work of managers

more convenient for a while as their workers began to cooperate, it was only shortlived as new

problems arose with new changes in the economies which were still continually growing.

In the United States of America, on the other hand, capitalism has been a mixed element of political

power and market competition. From 1865 to 1920, the American economy developed vigorously,

transitioning from agriculture as its main productive industry to manufacturing (Weinberg, 2003).Upon the turn of the 19th century, as businesses and industries expanded unequivocally throughout

the nation, the USA altered into the world's most efficient economic system as the industrial

revolution driven by technology, immigration and fierce competition brought about the rise of

capitalism in ways previously imagined by classical economists like Adam Smith. According to

Smith, People of the same trade seldom meet together, even for merriment and diversion, but the

conversation ends in a conspiracy against the public, or in some contrivance to raise prices.. This

appropriately summed up the level of competition in markets as firms continually fought to

dominate the industries. Also, as consumption hit high levels, the immediate reaction of firms was

to increase prices. Unfortunately, this led to an unprecedented income gap in the nation, the spread

between the rich and the poor becoming so great that protecting individual capital was the

government's main function (Weinberg, 2003).

Unfortunately, instituting the government interfered with the pure capitalist rule of the markets and

managers were directly affected as the economic decisions they made for their individual

companies were crucial to driving market forces while having to conform to public policies laid out

by the authorities. However, this interference was inevitable as letting the nation be driven solely by

the free market, or as Adam Smith stated, the invisible hand, would bring about chaos in

management decisions due to conflict with employees and the potential to affect the society's

wellbeing. Lawrence Friedman wrote, "A plan of government is a plan for distribution of the power

and wealth of a society.". Moreover, the mixed economy in the USA was largely dependent and

driven by corporations and monopolistic competition, without which the post-industrialised era

would hinder the ultimate growth and development of the nation. As Meyer Weinberg mentions in

his book, A Short History of American Capitalism, Both American industrialization and

capitalism were crucially dependent upon the corporate form of organization. (Weinberg, 2003),

and this corporate form of organization was dependent on the efficiency and capability of its

management.

Therefore, in the post-industrial economies of Western Europe and the USA, firms functioned more

effectively to maximize profits and dominate industries which made management more essential to

the success of these businesses than ever before. In making decisions to lead and guide their

companies, managers have continuously been required to utilize their expertise to their utmost

potential, considering all the different factors that affected their firm's productivity, and thus stay onpar with the furiously revolving economies. As capitalism brought about large corporations and

hundreds of investors who invested their funds into a single corporation by trusting the competency

of the management to ensure the corporation's success, the role of managers became systematic and

solely concerned with the internal operations of the business. This stood in line with Fedrerick

Winslow Taylor's notion of scientific management. According to Taylor, In the past the man has

been first; in the future the system must be first., and thus organizations divided work segments

according to what would achieve the maximum efficiency in assigned tasks. However, this was not

the end of changes in management styles across the nations. The evolution of management has

undergone several stages in history, transforming the role of managers rapidly over the years from

enterepreneurs managing their own businesses and controlling their own funds and production to

bureaucrats who depended upon hierarchy in the organization to fulfill responsibilities and controltheir employees, the approach taken by the German sociologist, Max Weber (Bosman, 2009).

Nevertheless, capitalism has remained the main driving force affecting the strategies and direction


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of management in organizations. At the same time, it has greatly contributed to the enrichment and

innovation of industries as it encouraged creativity and competition which in turn raised the

standards of management efficiency requirements and qualifications.

Management as a profession has been largely questioned over the past several decades, and

unfortunately, the questions are still ongoing today. Abiding by ethical principles when making

decisions and leading a corporation has always been a challenge for managers because of thevarious trade-offs they incur from doing so. However, it is a serious requirement from the society's

perspective and their expectations in managers. Capitalism has brought about great advances in the

post-industrial world, expanding and transforming societies and industries rapidly. Max Weber

believed that the rise of capitalism is interlinked to the process of rationalization, explaining that

people do things just to attain the most efficient way of achieving their goals and their actions are

based upon calculations and rational principles instead of emotions and selflessness. According to

him, bureaucracy gave rise to managerial control in the workplace as established rules and

hierarchy prevented informality and chaos among employees. This form of management was less

concerned with ethics and morals and more inclined towards technicality and authoritative power.

According to economist Karl Marx, as the capitalist rule extends throughout modern societies and

industrialization triumphs, nations move closer to social conflict, fragmentation and destruction.Marx believed that capitalists, with their inherent obsession for surplus and accumulating profits,

allocate tasks to workers to the extent that it becomes serious exploitation of their potential. He

stated, Modern industry has converted the little workshop of the patriarchal master into the great

factory of the industrial capitalist. Masses of labourers, crowded into the factory, are organized like

soldiers. As privates of the industrial army they are placed under the command of a perfect

hierarchy of officers [managers] and sergeants [supervisors]. (Marx, K. and Engels, F.,

1848/1967).

Also, Marx raised the concern of the alienation of workers which stultifies the uniqueness and

creativity of individuals, all because of capitalism. He emphasized, Owing to the extensive use of

machinery and to division of labour, the work of proletarians has lost all individual character, and

consequently, all charm for the workman. He becomes an appendage of the machine, and it is only

the most simple, most monotonous, and most easily acquired knack, that is required of him.(Marx,

K. and Engels, F., 1848/1967). These concerns raised by Marx were not redundant as managers

have constantly led their corporations in an attempt to succeed in the greatest way possible,

accomplish the highest profits in the industry and gain the largest market power. However, in doing

so, while these capitalist economies have grown over the years, they have neglected the extent to

which their workers have been utilized, and in many cases, were only concerned about their own

personal benefits (Bonner, 2012). This neglect has not only been internal, as firms have utilized

consumers as well by hiking up prices to unjustified levels to maximize their profits. An example of

this is mentioned by the Washington Post blogger Ezra Klein, Unlike other countries, sellers ofhealthcare services in America have considerable power to set prices, and so they set them quite

high. Two of the five most profitable industries in the United States - the pharmaceuticals industry

and the medical device industry - sell health care. With margins of almost 20 percent, they beat out

even the financial sector for sheer profitability. (Buell, 2013). Although managers today are

constantly in search of new strategies to overcome challenges and take advantage of opportunities

in the industry by directing their employees on a regular basis, there are still several ethical issues in

workplaces that remain unsettled. A few of these issues were brought up by Adam Smith early in

history, including exhausting the energy and souls of workers, unjustified price adjustment

processes in markets, exacerbating the gap between the rich and the poor by prioritizing the rich and

distinguishing between ownership and control of corporations as the scale and capital requirements

of these businesses expanded (Wilson, 1989).

In a world where capitalism has constantly grown, developed and evolved over the several decades


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and centuries of history, managers, regardless of the industry in which they operate, have had to

deal with numerous changes and concerns which have obligated them to readjust their decision

making processes. In today's modern economic period, corporations in Western Europe and the

USA are expanding their operations and shifting their manufacturing bases to other countries simply

because they are able to minimize production costs greatly in other nations and the level of

pollution they are allowed to emit through production is much greater in these other nations, letting

them operate without being as concerned about compliance and corporate environmentalism as theywould have been in Western Europe or the USA (Wolff, 2013). As businesses have expanded and

the production of goods and services have been prioritized according to the growth in profitability

and corporate reputation, the one thing that has been increasingly neglected is the impact their

activities have had upon the environment and the unprecedented challenges that have surfaced upon

the planet because of the lack of responsibility enacted towards it by all these capitalist

corporations. Disastrous consequences such as climate change, scarcity of water and poverty are all

matters of major concern in today's world.

Although corporate environmentalism requires a more committed approach to business that many

corporations are not willing to undergo, it does attain a lot of long-term benefits for the company.

By integrating environmental concerns into business decisions, companies are able to gain thesupport of the society and consumers in general which in turn gives them the competitive advantage

in the industry. According to a report by Generation Investment Management LLP, As companies

undergo the transformation to becoming more sustainable through these stages, it usually becomes

evident within the company that sustainability does not involve a trade-off between profitability and

improving the environment and society. Rather, it can in fact improve operations and inspire

innovation. (GIM, 2012). While governments and environmental activists can help to reduce all

the problems to a certain extent, the actual sustainability of capitalism and the most practical

measures needed to control these issues permanently must ultimately be incorporated by managers

in businesses in the various industries that build up an economy. After all, managers are leaders of

corporations, which are, in large, leaders of capitalist nations and post-industrial economies.

According to former British politician Christopher Huhne, It is business that can exercise the

fastest degree of change by seeing the opportunity rather than the threat. (Huhne, 2008). Thus,

even though it may be a huge challenge for managers in firms to include socially and

environmentally responsible measures in their decision making processes, doing so entitles their

companies to massive profits in the long run, both economic and environmental, which is

advantageous for the growth of these companies in a capitalist economy.


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