What is Neo-Capitalism?

Financial District in New York.
Financial District in New York.

Neo-capitalism is a blend of various elements of capitalism with other economic systems. It is a new type of capitalism which emphasizes on the government intervention in the country’s economy to restructure and rescue various big companies which are considered to be too big to fail. The failure of these companies poses a huge risk to the economy. Neo-capitalism is a new type of capitalism as compared to capitalism before the Second World War.

Neo-capitalism is an economic ideology which corrects its excesses by applying various measures which help protect the country’s social well-being. The ideology supports a balance between good public governance, social assistance, good working conditions, low unemployment levels, lower inflation, and economic growth across the nation. It was introduced by the technology firms which were reconstructed during the postwar era.

Origin of the Term Neo-Capitalism

The phrase neo-capitalism was first used during the late 1950s by Belgium and French left-wing writers like Leo Michielsen and Andre Gorz. Marxist Mandel helped popularize the term in English in some of his works including the introduction to the theory of Marxist economy. Michael Miller used the term neo-capitalism during the 1970s to refer to the European blend of extensive social-welfare programs, selective government intervention, and expansive private enterprise. Miller focused on how organized labor worked with private and government industries in negotiating and implementing wage levels and government expenditure to avoid strikes.

Characteristics of Neo-Capitalism

Neo-capitalism is a new method of capitalism whose features are derived from the need for capital and its attempt to answer the challenge of the colonial revolution and Soviet bloc. Some of the characteristics of neo-capitalism include:

1) Accelerated Rate of Technology Innovation

Historians consider the heydays of Neo-Capitalism to have lasted from 1954 to 1964. During this time various developed nations experienced an exceptionally high growth rate. The rapid growth after the Second World War can be attributed to the successions of technology innovations developed during this time. Before neo-capitalism was adopted, technological changes were introduced in bunches, and they were allowed to lie dormant until the current process was exploited fully.

2) Shortening of the Lifespan of a Fixed Capital

Previously the lifespan of fixed capital was between eight to ten years. Therefore a new technological innovation had to wait until the lifespan ended before being adopted by the economy. Later after the Second World War, the lifespan of fixed capital was reduced to about five years, and this imposed accurate calculations of obsolesce and depreciation plus proper long-term planning.

3) Increased Volumes of Production

The third industrial revolution saw the introduction of a new contradiction between limits of effective market demands and limitless productive capacities. Difficulty in realizing the surplus value resulted in a constant increase in selling price. Neo-capitalism saw the introduction of marketing techniques, calculation of demand elasticity, publicity, and market research. All of these features resulted in the gradual introduction of various planning techniques into the economy. These were integrated demand and output forecasts by all the employers’ associations based on the projections of the future trends. Neo-capitalism helped rationalize capital investment.


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