Can the capitalist way create a better free market economy? try the Scandinavian model for a start. Image Credit: Shutterstock

Capitalism, which has been existent in some form or other for 250 years, is facing challenges that calls for an immediate renewal of its model. These challenges stem from economic, cultural and technological changes that have affected society as a whole. Research is thus needed to understand how these changes have impacted on the capitalist way of doing things.

We will focus only on the economic aspect of such challenges, often leading to discrepancies within individual capitalist states. Many contradictions have arisen as a result of rapid advances in science, technology, and communications, and exacerbated by the information revolution.

One of the most significant contradictions is obviously the capitalist system’s inability to adapt to economic developments at the required pace. Despite attempts to manage using traditional methods, the scale of the changes prevent the transition from being effective, leading to the system colliding with an insurmountable barrier. This has resulted in the adoption of methods that have long been criticized by theorists.

Capitalism does not free up trade

For example, the principle of free trade and the movement of goods within open markets in traditional capitalism is in open conflict with the ambition of financial capital seeking to control the global economy. This has resulted in the undermining the principles that have underpinned markets for two centuries. It also imposed restrictions on prices of goods and services in the global markets.

It's important to note that there are attempts being made to control the price of certain goods. In the past, prices were determined by supply and demand laws or through monopolies. Such monopolies led to laws being created in capitalist countries to prohibit and penalize them.

The latest trends contradict the fundamentals of capitalism and reveal deep-seated issues within, which will likely have significant consequences on its current state.

In principle, this price-setting mechanism will not work out. Adam Smith, the founder of the capitalist economic system, said in the second chapter of his book ‘The Wealth of Nations’ that trade exchanges would not take place if either party believed they were going to lose because of the other. This is true in the sense that both parties need to believe that they will benefit from the trade for it to occur.

In practice, this mechanism has been known to lead to higher prices, which impact the living standards of many individuals and communities. Additionally, the price-setting mechanism, as implemented, has been shown to be ineffective, leading to monopolies, black marketeering, and skyrocketing prices.

Building a Scandinavian economic model?

The contradiction we are discussing in the capitalist system is completely different from the controlling of prices leading to monopolies or the exploitation of certain events that must be monitored by concerned agencies within the so-called consumer protection system. This is an important issue that is of interest to society and its protection within the scope of a state’s rights.

In fact, this contradiction highlights a crisis within the capitalist system. Its continuation has outlived itself thanks to the scientific progress that paved the way for the emergence of economically and technologically advanced countries outside of the Western system. And which means the complete exhaustion of traditional capitalism's capabilities.

However, this does not signify the end of capitalism, but rather the need for renewal in light of the tools for progress that are available, and changes in social and cultural structures in global power dynamics. This requires changes in economic structures to be reflected in other aspects of the system, whereby the current version of Scandinavian capitalism is considered the most appropriate for the present.