Capitalism: Capitalism and East India Company Essay

Submitted By gerluisan
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Gerardo Sanchez
Intro to Global Studies
Prof. Peter Bell
Capitalism
What is Capitalism?

In his book “Capitalism: A Very Short Introduction” its author James Fulcher defines capitalism as the investment of money in the expectation of making a profit. He also argues that this profit is made from the difference between the prices paid for the products and the prices at which they are sold. This gap is made really significant by factors like scarcity and distance. Scarcity is essential in making a good profit. Fulcher refers to scarcity as “Market Conditions”. The market conditions have to be good in order to make a large profit. If there is no scarcity the price of the product decreases significantly. This is how the market functions. An example given by Fulcher backs to the 17th century, when the East India Company started sending ships to buy spices like pepper for very cheap in the East Indies and sell it back in England for a reasonably higher price. The investors would be able to almost double their money by not doing anything, but this was a risky business. Sometimes the ships would get lost at sea and never return and the capital would be lost. What made this so risky was the fact the investments would go to one specific ship, so all the eggs were just in one basket rather that in several, this increased risk, so if that ship did not return all the capital would be lost. Therefore logically to reduce risk to investor’s capital they started spreading this capital on various voyages rather than just one. After some time the company became public and started being exchanged in the London Stock Exchange. Another factor that reduced the risk for the East India Company was monopoly; they were able to achieve this by close connections to the state that granted this company exclusive right to import oriental goods. The state itself gained from tariffs. The East India Company although a monopoly in England had international competitors such as the Dutch. The Dutch merchants created a monopoly in their own country bigger than the one the East India Company created. They were really able to dominate prices by withholding the product in order to create scarcity or to flood the market in order take out competition. Another Example Fulcher uses takes place in the last decade of the 18th century and the beginning of the 19th century. He explains how two men worked in a cotton mill and during the time they worked there they gained money and experience to establish their own mill. They did so in Manchester in 1795 and by 1820 they had 3 mills and were the leading spinner in Manchester which Fulcher says was the global spinning metropolis. But this lead became harder to keep with time, which brought competition to the table. Mills were now bigger and more technological, requiring more capital in order to buy machinery. All this new capital investment, decreased yard price due to high production and competition tied together brought profitability to the floor by the 1830’s. Profitability now depended on the workers who spun the cotton. So they started hiring cheap labor, kids under the age of 16 made up a significant part of the work force in the 1830’s. Kids under the age of 10 worked from 6 am to 7:30 pm. Wages were the main cost of…