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Overview
Technology has made it easier for businesses to grow rapidly. The cost of production and distribution is decreasing, which changes the way companies make money. This new technology also threatens capitalism because it allows people from all over the world to compete with each other in a global market.
In this essay, you will learn that production methods don’t have a large impact on the world economy; that capitalism is its own worst enemy; and how the internet can change energy markets.
Big Idea #1: As new technologies replace human labor, companies may find themselves in trouble.
People have always wondered if machines will take over all the work. It’s an appealing thought, since it means we can relax and not have to worry about working anymore. However, companies are embracing technological innovations for cost-cutting purposes and productivity reasons.
A trend is occurring where people are being replaced by machines. We have to ask ourselves, “How will this affect our society?” There’s a fine line between automating jobs and over-automating them.
The current situation has the potential to get pretty bad. As technology replaces human workers, unemployment rises and this affects the rest of the economy. For example, in 2011 alone, sales of robots increased by 43 percent in both America and Europe. Walmart is already using self-checkout terminals, which they installed 10,000 more last year alone.
By 2050, there will be hundreds of millions of unemployed people around the world. This is because machines are taking over jobs that used to belong to humans. Robots and software have already started replacing workers in manufacturing companies across the globe.
The same is true for highly skilled workers. Even though they have a lot of knowledge, computers will eventually be able to replace them as well.
Because automation will make it easier to produce goods, companies won’t need as many workers. As a result, unemployment will rise and the economy will suffer because unemployed people have less money to spend on goods.
In other words, these companies may end up hurting themselves!
Big Idea #2: Capitalism sows the seeds of its own obliteration.
There’s an old joke about doctors. They’re more successful when they aren’t needed, or something like that. The same can be said about the economy. If it does too well, then people don’t have to rely on it as much and so its success could threaten itself with collapse.
In a free market, supply and demand will balance each other out. If the demand for something goes down, then suppliers will lower their prices to keep people buying it.
The second assumption of capitalism is that competition leads to increased productivity. To compete, businesses must use technologies which allow for increased production at decreased costs. Eventually the cost to produce one additional unit approaches zero. For example, if you run a printing press, then each book you print incurs certain costs – materials, utilities, labor and so on – which are added to the cost of any other books you print.
You are a smart businessperson, so you decide to switch from book distribution to e-book distribution. Now that the marginal cost of books is very low, your production costs have also declined. The capitalist system will collapse if it continues on this path because demand for products will drop and prices will plummet as productivity increases.
Prices fall as time goes on. Eventually, prices will be so low that businesses won’t make enough money to stay in business. In fact, some companies have already been forced out of the market because they relied too much on print books and not enough on e-books.
