Manager and Market Capitalism

By: Shubhaishi Chandak

"Capitalism knows only one colour: that colour is green; all else is necessarily subservient to it, hence, race, gender, and ethnicity cannot be considered within it." - Thomas Sowell

A system where private individuals and businesses own the means of production, where private investments drive the economy, and where competitive markets connect employers and employees, is known as market capitalism. Private ownership, a profit-driven mindset, the capacity of businesses to compete on a free market, and minimum government intervention are the key characteristics that constitute market capitalism. Presently, emerging markets produce more than half of the world's output. This is causing living standards to converge globally and altering how business is conducted. Meaning that there are unquestionably many economic chances for multinational firms and start-ups as a result of the global expansion of market capitalism.

While the world is moving toward an increase in the volume and value of cp capital market operations, where we see retail investors, angel investors, and multiple funds enter and operate in markets that are free, the morality and ethicality in these markets is frequently questioned due to the information available in the market regarding competitors and companies.

Currently, private and public corporations are held to different reporting standards, with public companies being required to meet significantly greater criteria simply because a larger public interest is involved. Modern market capitalism is based on accounting principles, which shape incentives, performance evaluations, and decisions on how to allocate resources.

The accounting requirements for private companies should only become more stringent and closer to those of public companies in an economy where a large amount of money is now being invested in and generated through startups and private companies. Matching the same standards as a public company will be costly for a private firm due to the high cost of accounting and reporting at the moment. However, moving toward these standards gradually will help and ensure the managers' moral responsibility, bringing it in line with their primary duty of generating profitable returns within the law.

Markets have not always been used to organize economic activities. The general acceptance of market capitalism as a highly effective and firmly grounded system of economic structure, however, has only occurred in the last four decades.

Is Market capitalism both an ethical and pragmatic necessity?

Many have argued that accepting market capitalism is both an ethical and pragmatic necessity and a significant portion of the public discussion that the 2008 financial crisis has highlighted the ways in which the legitimacy of capitalism as a means of resource allocation in a complex society rests on the shared conviction that capitalism is fundamentally an ethical system. The normative justifications for capitalism have a long history and varied degrees, the idea that free markets are linked to normative goods is ingrained in popular culture.

They can be roughly divided into three streams: one that holds that free markets maximize libertarian freedom, or lead people toward financial freedom; another that holds that capitalism is Pareto efficient; and a third that holds that free markets are just because they are based on the broadest possible participation of people in a society.

The first stream is predicated on the idea that these free markets function to achieve a single, overarching objective: financial independence. The average man's goals are fundamentally based on financial freedom and independence, and the functioning of free markets facilitates the achievement of this objective. Using instruments and products like fixed deposits, bonds, Systematic Investment Plans, the fundamental principles of demand and supply along with competition, etc., institutions like banks, mutual funds, and for-profit businesses enable people to achieve their dreams of financial independence and capital growth by delivering value-based growth in the capital markets.

The utilitarian claim that capitalism is Pareto efficient holds true in markets with lax regulation, according to the second stream of the argument. After the repercussions of the 2008 crash, the SEBI and RBI stepped in to assure more efficient and moral operations of these markets and control of the management of these markets. As a result, the laws surrounding these markets have increased and continue to increase. Even in markets that are heavily regulated, this stream of thought still remains true, and these systems can only become Pareto inefficient by using more moral means of accomplishing the same end.

The third argument for the fairness of free markets is that they depend on as many people as possible participating in society. The equity markets and stock exchanges, which permit participation in a wide range and facilitate the accumulation of wealth for a wide range of members of society, serves as the lone and best illustration of this.

These markets are extensively controlled by SEBI and require clean corporate accounting from the listed businesses in order to reduce fraud and ensure the development of these markets' values in an ethical manner, even if they operate freely according to the laws of demand and supply.

It is proposed that managers operate in this manner for both selfish and moral reasons, but that in the end, their choices in this area are likely to influence the moral and political validity of market capitalism. Participating in these capital markets allows one to accumulate wealth, which, on the whole, facilitates the development of the community in which these markets exist. A steady, controlled expansion that accumulates over years can be made possible by the combined work and effort of the managers, layers, and customers in these markets.