Capitalism: the double-edged sword
Published Date: 05 March 2025
Published in: Business Recorder
Capitalism, as an economic system, has been both celebrated for its unparalleled ability to drive innovation and criticized for its role in perpetuating inequality and exploitation.
Its emergence alongside the Industrial Revolution marked a transformative period in human history, reshaping economies, societies, and technological landscapes.
While capitalism created powerful incentives for increased productivity, investment in research and development (R&D), and global interconnectedness, it also entrenched systemic disparities that have hindered the equitable distribution of its benefits.
Yet, there is a need to critically examine capitalism from an objective perspective, exploring how its dual nature—simultaneously fostering progress and perpetuating inequities—has shaped human civilization.
The rise of capitalism: catalyst for innovation and economic growth
The rise of capitalism is deeply intertwined with the Industrial Revolution, which began in late 18th-century Britain. At its core, capitalism operates on principles of private ownership, profit maximization, and “market competition”.
These principles created powerful incentives for innovation, efficiency, and economic growth. Entrepreneurs and industrialists invested heavily in new technologies, such as steam power and mechanized production, to increase output and gain “competitive advantages”.
For example, the textile industry saw dramatic transformations with inventions like the spinning jenny and the power loom, laying the foundation for modern manufacturing processes. Similarly, advancements in transportation, such as railways and steamships, revolutionized trade and connected distant markets, fostering globalization.
The profit-driven nature of capitalism also spurred significant investment in R&D. Corporations and individuals sought to outpace competitors by developing groundbreaking technologies and improving existing ones.
This dynamic contributed to the rapid advancements of the Second Industrial Revolution, characterized by electricity, internal combustion engine, mass production, and the rise of chemical and steel industries.
By the early 20th century, capitalism had become the dominant global economic system, driving unprecedented technological progress and economic growth in industrialized nations.
However, this progress was not without cost. While capitalism incentivized innovation, it also entrenched inequalities and exploited vulnerable populations, both within industrialized nations and across colonized regions. The same mechanisms that fueled economic growth often exacerbated social and economic disparities, leaving marginalized groups disproportionately affected.
The dark side of capitalism: inequality, exploitation, and poverty
Despite its contributions to technological advancement, capitalism has historically deepened social and economic inequalities. Within industrialized nations, the transition from agrarian economies to industrialized ones disrupted traditional livelihoods, displacing skilled artisans and labourers who found themselves competing with machines.
Historical records reveal that child labour accounted for nearly half the workforce in some textile mills during the 1830s, reflecting the economic desperation of families unable to sustain themselves amidst rapid industrialization.
Although real wages in Britain increased by approximately 200% between 1800 and 1900, this progress was uneven and slow, with decades of poor working conditions, low pay, and urban overcrowding persisting before reforms addressed these issues.
Capitalism’s exploitative tendencies extended far beyond industrialized nations, profoundly impacting colonized regions through the extraction of raw materials, exploitation of cheap labor, and creation of captive markets. European colonial powers systematically exploited their colonies to fuel industrial growth, often at the expense of local populations.
For instance, British colonial rule in India facilitated technological transfers such as railways but simultaneously disrupted indigenous industries and knowledge systems.
Historian Prasannan Parthasarathi argues that the extraction of resources and wealth from India arguably slowed its own technological development while accelerating Britain’s industrial ascent.
Similarly, the transatlantic slave trade and plantation economies of the Americas generated immense wealth for European powers, which partially funded the Industrial Revolution.
However, this came at the cost of immense human suffering and the suppression of African and Indigenous knowledge systems. Colonizers also restricted education in their territories, viewing it as a potential threat to their authority.
In British India, higher education was initially limited to a small elite, intended to create intermediaries rather than empower the broader population. These exploitative practices entrenched global inequality and stifled opportunities for scientific and technological collaboration, perpetuating disparities that persist to this day.
There can be no debate about the exploitative nature of capitalism, which has historically led to the emergence of a select group of nations as dominant global powers, while the rest of the world either remained colonized or became economically dependent.
This fundamental structure of inequality has continued to persist through time for around 200 years, with capitalist systems reinforcing disparities in wealth, resources, and power. Even as the world evolved, the exploitation was not confined to the colonial era; it transformed into new forms of dependency and economic domination.
Barriers to knowledge and technological access
Capitalism has created significant barriers to knowledge and technological access, with scientific and technological advancements often confined to wealthy nations or corporations.
Despite claims of free markets and globalization, barriers, including transfer of technology, restrict the global flow of knowledge and hinder progress. Instead of promoting equitable access, capitalism fosters a distorted “trickle-down” effect that benefits only a small portion of society, leaving the marginalized without the tools necessary for development. As a result, capitalism not only reinforces existing inequalities but also obstructs the potential for widespread social and economic progress.
Colonial powers further exacerbated these barriers by controlling education and technological resources in their colonies. Indigenous knowledge systems were often dismissed or appropriated, depriving colonized regions of their scientific and technological traditions.
The monopolization of knowledge and technology by industrialized nations created a global divide that persists to this day. While the West advanced rapidly, colonized and developing nations were left behind, struggling to access the tools and resources needed for progress. This disparity highlights how capitalism, while driving innovation in some regions, perpetuated inequality and exploitation on a global scale.
A world of inclusiveness and shared prosperity
Imagine a world where capitalism had been tempered by principles of inclusiveness, shared prosperity, and open access to knowledge. In such a scenario, the benefits of scientific and technological advancements could have been distributed more equitably, accelerating global progress. Universal education and equitable access to resources would have broadened participation in innovation, leading to breakthroughs in fields like medicine, agriculture, and energy.
For example, if the Industrial Revolution had been accompanied by universal education and equitable access to resources, the pool of innovators and problem-solvers would have been significantly larger.
The inclusion of marginalized groups, such as women and colonized populations, could have brought diverse perspectives and ideas to the forefront, leading to novel solutions to humanity’s greatest challenges.
Moreover, the elimination of exploitative practices could have redirected resources from wealth accumulation to investment in education, healthcare, and infrastructure. Collaborative progress, driven by the free exchange of knowledge and technology, might have enabled earlier advancements in areas such as renewable energy, public health, and communication.
Not a hypothetical analysis
This is not a hypothetical analysis, but rather an exploration of the real-world developments post-Internet, particularly after the year 2000, in an era characterized by the rise of generative technologies such as artificial intelligence (AI).
In this context, the most compelling arguments in favour of a more inclusive system—one that promotes shared prosperity, equal opportunities, and justice—have gained traction. This stands in stark contrast to systems rooted in inequality and exploitation, where barriers to equitable globalization persist.
The continuous advancement of previously underdeveloped countries, along with the slow growth or crises in developed capitalist nations, strongly supports this analysis.
The rapid rise of China, which transformed from a very backward status to its current position in a relatively short period, contrasts sharply with the more than 150 years it took countries like European states, the USA, and Japan to reach their current levels of development. This serves as compelling evidence for the validity of this argument.
The stagnation of Japan, for example, is closely linked to China’s rise and its ability to capture markets in the USA and other countries, despite the challenges posed by the so-called free market, fuelled by increasing consumer demand.
