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. 

Examples 

  • 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. 

Related Terms

    Read the Latest Market Journal

    Weekly Updates 19/2/24 – 23/2/24

    Published on Feb 19, 2024 40 

    This weekly update is designed to help you stay informed and relate economic and company...

    Unlock Prosperity with 5 Sure-Fire Financial Instruments!

    Published on Feb 14, 2024 173 

    In Singapore, the concept of guaranteed returns may evoke the spirit of prosperity, reminiscent perhaps...

    Weekly Updates 12/2/24 –16/2/24

    Published on Feb 13, 2024 69 

    This weekly update is designed to help you stay informed and relate economic and company...

    Decoding FX CFD

    Published on Feb 7, 2024 95 

    The foreign exchange market commonly known as the forex or FX market, is a cornerstone...

    Chinese New Year: Three Cases For CFD Trading

    Published on Feb 6, 2024 134 

    The Chinese New Year is a festive season may be celebrated by some parts of...

    Weekly Updates 5/2/24 –9/2/24

    Published on Feb 5, 2024 62 

    This weekly update is designed to help you stay informed and relate economic and company...

    The Intricate Dance of Forex Trading: Unveiling the Psychological Game

    Published on Feb 2, 2024 55 

    Understanding the forex market The foreign exchange market, also known as the forex market, is...

    8 HUAT Secrets to Financial Triumph in 2024!

    Published on Feb 2, 2024 164 

    As we embark on a new year with hopes of new possibilities, many individuals set...

    Contact us to Open an Account

    Need Assistance? Share your Details and we’ll get back to you

    IMPORTANT INFORMATION

    This material is provided by Phillip Capital Management (S) Ltd (“PCM”) for general information only and does not constitute a recommendation, an offer to sell, or a solicitation of any offer to invest in any of the exchange-traded fund (“ETF”) or the unit trust (“Products”) mentioned herein. It does not have any regard to your specific investment objectives, financial situation and any of your particular needs. You should read the Prospectus and the accompanying Product Highlights Sheet (“PHS”) for key features, key risks and other important information of the Products and obtain advice from a financial adviser (“FA“) pursuant to a separate engagement before making a commitment to invest in the Products. In the event that you choose not to obtain advice from a FA, you should assess whether the Products are suitable for you before proceeding to invest. A copy of the Prospectus and PHS are available from PCM, any of its Participating Dealers (“PDs“) for the ETF, or any of its authorised distributors for the unit trust managed by PCM.  

    An ETF is not like a typical unit trust as the units of the ETF (the “Units“) are to be listed and traded like any share on the Singapore Exchange Securities Trading Limited (“SGX-ST”). Listing on the SGX-ST does not guarantee a liquid market for the Units which may be traded at prices above or below its NAV or may be suspended or delisted. Investors may buy or sell the Units on SGX-ST when it is listed. Investors cannot create or redeem Units directly with PCM and have no rights to request PCM to redeem or purchase their Units. Creation and redemption of Units are through PDs if investors are clients of the PDs, who have no obligation to agree to create or redeem Units on behalf of any investor and may impose terms and conditions in connection with such creation or redemption orders. Please refer to the Prospectus of the ETF for more details.  

    Investments are subject to investment risks including the possible loss of the principal amount invested. The purchase of a unit in a fund is not the same as placing your money on deposit with a bank or deposit-taking company. There is no guarantee as to the amount of capital invested or return received. The value of the units and the income accruing to the units may fall or rise. Past performance is not necessarily indicative of the future or likely performance of the Products. There can be no assurance that investment objectives will be achieved.  

    Where applicable, fund(s) may invest in financial derivatives and/or participate in securities lending and repurchase transactions for the purpose of hedging and/or efficient portfolio management, subject to the relevant regulatory requirements. PCM reserves the discretion to determine if currency exposure should be hedged actively, passively or not at all, in the best interest of the Products.  

    The regular dividend distributions, out of either income and/or capital, are not guaranteed and subject to PCM’s discretion. Past payout yields and payments do not represent future payout yields and payments. Such dividend distributions will reduce the available capital for reinvestment and may result in an immediate decrease in the net asset value (“NAV”) of the Products. Please refer to <www.phillipfunds.com> for more information in relation to the dividend distributions.  

    The information provided herein may be obtained or compiled from public and/or third party sources that PCM has no reason to believe are unreliable. Any opinion or view herein is an expression of belief of the individual author or the indicated source (as applicable) only. PCM makes no representation or warranty that such information is accurate, complete, verified or should be relied upon as such. The information does not constitute, and should not be used as a substitute for tax, legal or investment advice.  

    The information herein are not for any person in any jurisdiction or country where such distribution or availability for use would contravene any applicable law or regulation or would subject PCM to any registration or licensing requirement in such jurisdiction or country. The Products is not offered to U.S. Persons. PhillipCapital Group of Companies, including PCM, their affiliates and/or their officers, directors and/or employees may own or have positions in the Products. Any member of the PhillipCapital Group of Companies may have acted upon or used the information, analyses and opinions herein before they have been published. 

    This advertisement has not been reviewed by the Monetary Authority of Singapore.  

     

    Phillip Capital Management (S) Ltd (Co. Reg. No. 199905233W)  
    250 North Bridge Road #06-00, Raffles City Tower ,Singapore 179101 
    Tel: (65) 6230 8133 Fax: (65) 65383066 www.phillipfunds.com