Conflict theory

Conflict theory

It is a key idea in sociology. Conflict theory looks at society through the prism of power conflicts and social injustices. According to this theory, societal hierarchies and inequities result from competition and resource rivalry. This theory may be used in various contexts, including financial systems, where the allocation of resources and the dynamics of power play a key role in determining how economies develop. The main points of conflict theory as it relates to money will be clarified here, along with its history, tenets, advantages, and practical applications. It will also answer critiques and commonly asked questions regarding this viewpoint. 

What is conflict theory? 

Conflict theory postulates that conflicts and disagreements among different social groups inherently characterise a society. It suggests that these groups, often divided by wealth, class, race, or gender, strive to advance their interests and dominate others. In financial terms, conflict theory examines the distribution of resources, access to opportunities, and the concentration of economic power. 

Understanding conflict theory 

The fundamental tenet of conflict theory is that social structures, including financial systems, are created via ongoing struggles for dominance and control. It argues that purposeful social networks cause economic inequalities, such as wealth concentration, income inequality, and credit availability, rather than just being an accident. The theory also examines how institutions like banks, businesses, and governmental companies contribute to continuing these disparities. 

It is crucial to go further into its key ideas and practical applications to comprehend conflict theory in the context of finance. According to conflict theory, economic institutions are not exempt from larger societal contests for control of resources. Instead, they reflect and strengthen current inequities, favouring certain groups while opposing others. 

One of the key aspects of understanding conflict theory is acknowledging the role of institutions in shaping financial landscapes. Banks, corporations, and governmental bodies play pivotal roles in influencing economic policies and practices. The theory contends that powerful elites often control these institutions, which use their influence to safeguard their interests, perpetuating economic disparities. 

Further, conflict theory offers a lens to analyse wealth inequality, a pressing issue in many societies. The theory questions how some individuals amass enormous fortunes while others struggle to meet their basic needs. Conflict theory highlights vulnerable groups’ potential exploitation and marginalisation by examining the mechanisms facilitating wealth concentration. 

Benefits of conflict theory 

Here are some benefits of applying conflict theory in finance: 

  • Market analysis 

Conflict theory draws attention to the inherent conflicts of interest between market players, traders, investors, and financial institutions. A fuller understanding of market behaviour and price changes may be achieved by understanding these tensions. 

  • Corporate governance 

The power conflicts and conflicting interests between stakeholders in a firm, such as shareholders, executives, and board members, are clarified by conflict theory. This viewpoint may be used to find possible agency difficulties and governance concerns in organisations. 

  • Wealth distribution 

The unequal distribution of income and resources in society can be better understood by looking at financial systems through the conflict theory lens. It could raise awareness of issues like social stratification and wealth inequality. 

  • Financial regulation 

By highlighting the role of strong competitors in determining the regulatory environment and their potential influence on market dynamics, conflict theory may help design and assess financial regulations. 

  • Investor protection 

Developing investor protection instruments and boosting market transparency can benefit from understanding conflicts of interest and power imbalances. 

  • Financial crises 

The views offered by conflict theory may be very helpful in understanding the underlying power conflicts and competing interests that may be a factor in financial crises. 

Working of conflict theory 

In the financial context, conflict theory examines the interactions between different groups and their quest for economic advantages. It highlights how certain monetary policies and practices may favour specific groups while marginalising others. Financial regulations and tax laws might disproportionately benefit the wealthy, leading to the concentration of wealth among a select few. Conflict theorists emphasise the role of societal norms and ideologies in legitimising these disparities and reinforcing the existing power structures. 

Conflict theory, despite its achievements, is not without criticism. Some claim that it oversimplifies complicated social interactions by ignoring examples of collaboration and agreement common in human civilisations. 


  • Wealth Inequality: Conflict theory can be applied to analyse the unequal distribution of wealth in society. It argues that economic elites, such as billionaires and corporate executives, exert influence over financial systems and policies, accumulating vast fortunes at the expense of the less affluent. 
  • Labour Exploitation: In conflict theory, labour relations are viewed as a struggle between employers seeking to maximise profits and workers striving for better wages and working conditions. Exploitative labour practices, such as low wages and long working hours, can be understood through this lens. 
  • Financial Crises: Conflict theory helps understand the root causes of financial crises. Certain financial practices and policies may prioritise short-term gains for a few, leading to systemic risks that ultimately harm the broader society. 

Frequently Asked Questions

Conflict theory traces its roots to the works of Karl Marx and Friedrich Engels in the mid-19th century. They analysed social structures and class struggles, laying the foundation for modern conflict theory. 

The conflict theory of education posits that educational institutions are not neutral entities but are influenced by the interests of dominant groups. It suggests that educational systems can perpetuate social inequalities by providing advantages to certain social classes while being a disadvantage to others. 

The key assumptions of conflict theory include the following: 

  • Inherent conflicts and power struggles mark society. 
  • Social structures and institutions maintain inequalities to benefit the powerful. 
  • Dominant groups control resources and use them to reinforce their positions. 
  • Conflict and competition are essential drivers of social change. 

Conflict theory finds its origins in the works of Karl Marx, who believed that class struggles drove historical progress. Over time, the theory has evolved to encompass various forms of social conflict, including those related to financial systems. 

Conflict theory is criticised for oversimplifying complicated social processes, ignoring the value of agreement and collaboration in society, and failing to consider human agency and free will. Others also charge the theory as too deterministic and pessimistic about the likelihood of societal agreement. 

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