Capitalism and bargaining power

Listen to article

Capitalism is a system that fulfils two fundamental desires — freedom and equality — for which people have historically fought for millions of years. Capitalism operates on two levels: political capitalism and economic capitalism. Economic capitalism empowers individuals by granting them ownership of free markets, enterprises, and bargaining power within the economic system.

It is a decisive factor in defining the freedom to do business and mobility in economic class. For example, there was a time when all the powers of economies were concentrated in kings, monarchs, or the feudal. This was the era of empire-building and mercantilism. Common people had no say in economic activity. They were merely passive recipient of official economic policies. With time, economic capitalism developed after the Glorious Revolution in Britain.

The transition from absolute monarchy to constitutional monarchy facilitated reforms that gradually fostered market capitalism. People came to know about their political, economic and social rights. It opened minds and opportunities to do economic reforms.

Bargaining is more than just a term. It refers to people's ability to enhance their economic influence. With the development of capitalism, people's bargaining power increases. Referring to the previous paragraph where we discussed collective empires and concentrated economic capacities, we are moving further to highlight that capitalism introduced decentralised economic bargaining capacities where an ordinary person can decide about their production, outcomes, and inputs. In a capitalist system, from a day-to-day vendor to an industrialist, everyone has the potential to define their products and decide their earning capacity. A vendor in a local market has the freedom to do economic activity, regulate rates, and decide the market value of his product. This marks a pivotal moment in history when an economic model evolves into a decentralised and sustainable system. This is how capitalism empowers individuals, from an ordinary people to the elite, by granting them authority over economic regulation. Overall, it increased the bargaining power of the people in their lives. The transformation of bargaining capacity empowered people about their economic rights.

It is always a historical precedent that improvement in economic conditions improves political space. Economic capitalism increases the likelihood of political progress. Political capitalism is simply defined by the idea that "from an ordinary citizen to the prime minister of any state, all have the power to decide their political representatives." Political capitalism highlights how people are more free, decisive, and autonomous in their rights. It was an idea of economic capitalism which ensured political wisdom in people. As Francis Fukuyama explains in his book The End of History and the Last Man, economic capitalism creates a middle-income class society which eventually demands political space, rights, and authority to decide. Economic capitalism in European and Western societies seeded the idea of political enlightenment. From economic bargaining capacities to political bargaining power, people gained empowerment from the French Revolution to the American Revolution. It is how economic capitalism brought political evolution in society.

Why is capitalism crucial in the 21st century? One key reason is that the rise of authoritarian leadership in this era threatens to centralise economic and political bargaining power. It is the time to uphold those economic and political bargaining rights which we acquired after the struggle of millions of years. There is no doubt that the capitalist system has become a symbol of economic inequality and social polarisation, but there is still a need to rectify the problems for a collective cause. Capitalism has played a crucial role in eliminating absolute poverty, reducing violence, and promoting peace within borders.