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Will coronavirus herald the end of capitalism? Show more Show less
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The US is already experiencing record unemployment, and stock markets are crashing all over the world. The economic impact of coronavirus is already huge. Does this mean the end of capitalism? Or are we reading too much into this economic shock? Previous economic crashes, such as 2008, made no change at all to the global capitalist economy, so why would coronavirus?

Yes, without spending, capitalism will collapse Show more Show less

Capitalism relies on the exchange of goods. When you can't exchange goods, the system collapses.
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Capitalism is a 'system of competition'

Without vendors or consumer purchasing power, there can be no competition.
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The Argument

As the COVID-19 pandemic evolves, so is the mindset of consumers. Overall, “consumer spending has sharply declined since the onset of the COVID-19 pandemic, with retail sales dropping an unprecedented 8.7% in March. Stay-at-home orders also have caused many people to change the way they shop for the things they do need.” [1]Many people have lost their jobs due to COVID-19, or have had their hours cut by the companies they work for due to the decrease in revenue. There has been “an immediate slump in consumer spending across all major economies which is certain to provoke the deepest recession in living memory: share prices have already collapsed and this, in turn, hurts middle-class families whose pension funds have to invest in shares. Meanwhile, the solvency of airlines, airports and hotel chains is in doubt.” [2]Many people are only purchasing essential products, such as toilet paper, face masks, groceries, and cleaning supplies because that’s all they can afford; and hardly anybody at all is purchasing plane tickets or staying in hotels. The travel industry is being hit hard, but so are small businesses that are being forgotten and overlooked during the era of e-commerce. People are now shopping online for many of their products, including groceries because they can’t go to stores in person. This is beneficial for large companies such as Amazon who own and manage their own warehouses and shipping agencies, but for smaller businesses with fewer resources and less of an online presence, it’s quite the opposite. In addition, consumers are discovering how convenient online shopping is and could potentially continue shopping online once the pandemic ends, meaning that small businesses will be forced to adapt in order to stay afloat. However, the cost of adapting could be high, and the lack of revenue these past several months could result in small businesses being forced to close their doors for good. If we look at other countries that are ahead of the United States, “in terms of progress along the contagion curve, that shopping habits before, during and after the COVID-19 peak indicate that spending in a number of categories remains low for months or possibly even longer. For example, consumption for apparel and in department stores has not yet picked up significantly in China and some other countries that reportedly consider themselves to be 'past peak.' This is in line with consumers' expectations that we may have to wait for several more months, if not longer before routines can go back to normal, and many households expect their income to be negatively impacted for a long time.” [1] This could be because it takes a long time for some consumers to feel comfortable leaving their homes and going out again, even when the stay at home orders have been lifted, or because consumers need time to recover from the financial hit they sustained when they lost their jobs or their hours or their primary or secondary source(s) of income. When businesses close and people begin to shop exclusively for the lowest priced products, rather than for what is more expensive and arguably higher quality, a key element of capitalism slowly erodes and there is no more competition.

Counter arguments

The COVID-19 pandemic has actually encouraged more people to "shop local" and support small businesses than ever before. Even without online ordering and shipping systems similar to that of Amazon, local restaurants and shops are able to survive using curbside pickup, and many consumers are willing to tolerate the inconvenience in order to help their communities and their neighbors. Small businesses are also utilizing various social media platforms to remind consumers that they're still open and advertise their products in a way that large corporations can't. The competition that drives capitalism is still alive and well, and the market might actually become more competitive even as the pandemic comes to an end. The increase in people purchasing products from local businesses or dining in family-owned restaurants may result in consumers realizing that the quality of the items their purchasing or the customer service they're receiving is even better than Amazon, and small businesses could potentially gain the upper hand.

Premises

[P1] People are earning less money during the pandemic so consumer trends have changed. People are now limiting themselves to only purchasing the essentials. [P2] Since stores are temporarily closed, people are turning to online shopping to fulfill their needs. However, this shift is harming small businesses who don't have an online presence and can't afford to begin shipping their products. [P3] Small businesses are going to close as consumers spend less money over an extended period of time. The only businesses that will survive and thrive are large companies such as Amazon, and this will result in far less competition as corporations dominate the market.

Rejecting the premises

References

  1. https://uanews.arizona.edu/story/covid19-has-changed-consumer-behavior-what-does-it-mean-future
  2. https://www.aljazeera.com/indepth/opinion/coronavirus-signal-capitalism-200330092216678.html
This page was last edited on Thursday, 16 Jul 2020 at 12:05 UTC

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