"Capitalism in Europe"- Part 3: The Consquence

 

Consequences of development of capitalism in Europe

The end of the prolonged transformation from feudalism to capitalism was defined by the Industrial Revolution. Finance integrated the production process and changed the way things were done. For the first time in human history, its advent gave rise to the possibility of eradicating natural scarcity. It also resulted in the West's worldwide power being greatly expanded. The West's dominion over the rest of the globe instilled in Europeans a sense of superiority over non-Europeans.

The industrial revolution, free trade, and globalization have exceedingly expanded the world. Undoubtedly, these are not the only factors influencing the capitalistic economy. But also the consequences of capitalism. After several decades as command economies and seven grueling years of 'transition' to capitalism, their average GDP per capita in 1996 was just over a third of that in the European periphery and a quarter of that in the European core, according to the study. This is a strong indication that their performance is below potential. However, the situation is far worse in Eastern Europe, with a per capita output that was a fifth below 1985 levels in 1996.

Over this past half-century, European capitalism has made significant strides forward in terms of development. As of 1950, the average production level has risen from 40% to over 80%. The procedure was exceedingly convergent and equilibrative. After several decades as command economies and seven grueling years of 'transition' to capitalism, their average GDP per capita in 1996 was just over a third of that in the periphery and a quarter of that in the core amongst the six European countries. According to the World Bank, the quickest growth happened among the poorest countries in 1950. These countries' performance is clearly below potential, but the situation is even direr in Eastern Europe, where the per capita output in 1996 was one-fifth below 1985.  A quarter-century after the interwar conflict, progress was especially fast because European countries were recouping chances squandered in two world wars and two decades of interwar animosity. These countries were able to close the productivity gap quickly because they possessed well-trained and educated workers and high-tech manufacturing facilities.

According to historians, Western Europe is the foundation of modern capitalism, with centuries of economic growth to its glory. During the pro-capitalist period before 1820, the 12 core countries saw nearly 400 years of sluggish (an average of roughly 0.2 percent per year) income per capita growth. This momentum escalated after 1820.GDP per capita continued to rise by around 0.9 percent annually from 1820 to 1870 and twice as quickly from 1870 to 1996 shown in table 1. Since 1820, their pay scale has increased around 15-fold. As Europe approaches its productivity frontier, the pace of progress will inevitably slow. To be fair, though, the 1973-96 rate of growth was better than the 1870-1913 rate shown in Table 2, which is the strongest comparative yardstick we have for measuring capitalism normality today.

Because of the slowing in technological progress that is evident in the United States, West European productivity growth will likely continue to decline during the next quarter-century. The most troubling aspect of European performance has been the steady increase in unemployment. The average unemployment rate in our 16 nations was 8.7% during the 12 years between 1984 and 1995. The situation is worse than it was in the 1930s, and it is about three times worse than it was in the 1920s as well. This isn't capitalism's paradigm. Because of inaccurate European policy, there is no equivalent in the United States to this phenomenon. This is not due to demographic variations, as the American age structure is identical to that of Europe. The American policy is one of producing jobs. Policy in Europe is a hindrance to job growth. 

The welfare state in Europe is substantially larger than in the United States. In the 16 countries, social transfers account for an average of 22 percent of GDP, compared to 13 percent in the United States. Therefore, Europeans are more economically secure, and poverty and inequality are minimized. At the current unemployment rate, Europe would be in a catastrophic depression without the welfare state.  East Germans are substantially better affluent than before the Cold War, but their average per capita GDP is lower than that of the Czech Republic in absolute terms (Table 1). As with other East European countries, the EU's common agricultural policy and other restrictions on sensitive industrial items impede their access to Western markets.

Currently, capitalism is globalized around the world. Previously many experiments and formats of capitalism failed, but the concept was never minimized but rather ingrained more in a systematic process and has expanded since then. From the origination of the capitalistic structure, the successful capitalistic economic models have been globalized worldwide. Third-world countries follow the capitalistic model of successful countries. Different components of capitalism have been globalized to varying degrees, affecting diverse civilizations and areas in various ways.  If the world has not yet become fully and fairly connected, it is mostly due to capitalism's desire to monopolize globalization of trade and production. Capitalism has always tended to expand globally, but this has always been coupled with maximizing profit through unequal trade relations.

-Sadia Ahmmed