Category: Capitalism

Can Capitalism Be Moral after the Financial Crash?

The 2008 financial crash was as much a moral crisis as a financial one. It exposed a major weakness in the capitalist system, and it was not principally financial, but human. Markets have an effect on morality, and this led to the financial crash. In its aftermath, ethics within economics has yet to be resolved. This failure to hold accountability will result in another crisis. There must be a re-evaluation at the heart of what economics stands for.

Markets leave their mark

A common critique of capitalism is that it perpetuates greed, or worse causes greed. This is, at best, a partial diagnosis. Blaming greed debases the problem of markets. Rather, the “logic of [economics] no longer applies to material goods alone, but increasingly governs [morality]” (Sandel, 2012). The character of Gordon Gekko in the film Wall Street is the embodiment of market values replacing human principles. “Greed is good” (Wall Street, 1987) highlights not only a toxic mindset, but also a moral failing at the heart of the financial crash: economic principles replacing ethical standards.

After the Cold War, capitalism was the surviving, and seemingly triumphant, economic system. The triumph of capitalism creates an unrivalled free market economy that has blurred the line between market and social aspect of life. This hazardous faith in the market and deregulation results in the market degrading life into a product. Market values crowd out traditional, social values. This leads to social disintegration, what Émile Durkheim refers to as ‘anomie’ (Durkheim, 1993). Durkheim posits that the effects of capitalism, in the form of 19th-century European industrialisation, lead to a condition in which social moral standards are non-existent. This effect has only continued since, and has been enhanced from the 1980s. Durkheim believes that the labour force will suffer at the hands of the “malady of the infinite” (Durkheim, 1993). What he means by this is that unlimited economic desires will only become more intense and lead to a moral collapse in society. There is an “expansion of… market values into spheres of life where [it does not] belong” (Sandel, 2012).

Market triumphalism promotes individualism. This invokes Adam Smith’s The Theory of Moral Sentiments (1759) that the pursuit of self-interest leads to the common good. Yet, the economic man’s character has fundamentally changed since Smith. Smith places significance on moral character in economics; he sets this out in stating (Smith, 1776): “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”

“Morality stems from our sentiments, not our reason” (Collier, 2018); there is an intimacy within society that creates an altruist perspective, and thus leads to the common good. However, given that society is no longer as integral, the pursuit of self-interests now leads to individual benefit. The consequentialist lens of capitalism is no longer concerned with maximising benefit for others. Instead, the objective of self-interest has become egoist in nature. The market values of profit only relate to private not social welfare. The principles of capitalism now rule culture. “During the era of market triumphalism…, without realising it, without deciding to do so, [society] drifted from having a market economy to being a market society” (Sandel, 2012).

This self-concerned mindset is evident in the build-up to the financial crash. Greed only becomes a problem when it is channelled into individualism. Market values infected morality, and so those in finance only viewed their operations as an instrument of profit. On a basis of a solitary maximising ideology a moral failure began to take place in markets. Bankers lying to sell debt indicates a never-ending downward cycle. “The culture of ‘pass the parcel’” (Costa, 2011) implies a disregard for humanity, because faith in capitalism, promised that the result would always be economic prosperity. Moral hazard no longer regulates financial activity because moral behaviour became over-ruled by economic behaviour. New ethical values arise as a product of capitalism, and thus market ideals replaced morality with a maximising utility. The mindset of ‘the ends justifying the means’ illustrates how markets taint morality. Firms were free to act as selfish as they could within the law, absolved from any moral obligations. The ethical foundation that Smith assumed was lost. “We dehumanised the market and, in turn, it dehumanised us” (Sandel, 2012).

Too big to fail

‘Too big to fail’ was the phrase that came out of the 2008 crisis. Governments were forced to use taxpayer money to rescue banks and other institutions that were so dominant in the financial system that their collapse would threaten the entire economy. This potential for extreme negative externalities can place blame on the banks, yet the “financial crisis discredited governments more than banks” (Anielski, 2007).

Government failed to hold institutions morally accountable, and this still continues. The lack of punishment against banks indicates the futile power that politics has over economics. The era of market triumphalism started with Thatcher and Reagan and continued with Blair and Clinton. Their conviction that markets, not government, were the future of prosperity was an unchallenged assumption, and ever since “market mechanisms are the primary instruments for achieving public good” (Frederick R. and Molly S., 2015). Political faith in market values enabled capitalism’s influence. The faith in market triumphalism forced politics to uphold economic values. The moral vacancy within politics stems from economics’ refusal to offer public discourse on the ‘good life’. This Aristotelian thought posited that government should lead society to an ideal. The aspiration of the ‘good life’ was rooted in fulfilling purpose and creating happiness, but the rise and power of economics changed this goal. The appeal of economics is its non-judgemental stance towards values. The reluctance to engage with ethics is at the heart of market reasoning, and thus has drained moral standard influence over the public.

Deregulation symbolises morality being pushed aside. Valorising irresponsible and unethical behaviour creates a vacuum of morality within capitalism, thus creating the climate for a financial crisis. As Hyman Minsky argued crashes are integral to financial markets. Minsky claimed that economic stability would give rise to a speculative bubble in which more risks will occur. The cause of these risks is the absence of morality within borrowing, which leads to an accumulation of debt and thus instability. Moral vacancy has the intention of avoiding the notion of the ‘good life’, but this reluctance to admit this led to market triumphalism’s crash and the persistent grip of market reasoning. The ‘Ponzi borrowers’ are the embodiment of market values affecting judgement. Borrowing based on the belief that the market leads to the subprime crisis. This has only been worsened by the lack of accountability after the crash, which will only perpetuate such immoral behaviour. “The spectacular failure of financial markets did little to dampen faith in markets” (Sandel, 2012).

Those that took such unethical, reckless decisions received no punishment. Those who suffered were the ones that had to bail out these banks. The inadequacy of the regulation authorities in administering justice illustrates that institutions became too powerful – immune to moral law. Governments and regulation authorities enabled the financial crash. Capitalism disconnects politics from morals; financial confidence overrules moral hazard. Firms that know they are ‘too big to fail’ are less likely to adhere to moral obligations within regulation. The swift removal of such regulation implies that governments are too reliant on banks to stimulate the economy. Yet, these banks do not care about the whole economy. They are run by those who are self-interested, caused by the non-existence of legislative power due to market-driven politics.

“The near collapse of [capitalism]… prompts a reconsideration of markets” (Sandel, 2012). The absence of morality is the appeal of economics, and its danger. The answer is not regulation, but reform.

Capitalism with a conscience

Reform must change the framework of capitalism. There is an ideal infrastructure within capitalism, one that allows people to make their own choices. Yet, there must be an understanding that such choices have consequences. Economics in reality, as Keynes said, is a “method rather than a doctrine, an apparatus of the mind, a technique of thinking”. Therefore, the target must be the mindset behind economic decisions.

In The future of capitalism (2018), Paul Collier posits that “utilitarianism became the intellectual underpinning of [capitalism]” (Collier, 2018). This maximising ideology can be seen in Milton Freidman’s belief that the only responsibility of businesses is to their stockholders, advocating to make as much profit as possible. Capitalism has used utilitarianism to justify actions treating life as a commodity and a means of profit. This has led to a crescendo of immoral behaviour, which has been valorised by the consequentialist lens of utilitarianism governing values. Once realising, the effects of capitalism, there must be a deliberation on what values are controlled by. Such deliberations touch, unavoidably, on competing conceptions of the ‘good life’. Economics operates on moral terrain, so “market reasoning must become moral reasoning (Sandel, 2012)”.

The era of market triumphalism has coincided with a time when there has been a vacuum of moral substance at the heart of decision making. Capitalism does not necessitate perfect equality, but it must now require a shared notion of a common life. To be grounded in reality is not to appreciate nuance through subjectivity, but rather some objectivity. If we begin to live more authentic lives, truth to both an inner and outer nature, then society can function on a foundation of morality. Thus, such thinking must be centered on not a utilitarian compass, but rather one of virtue.

According to Friedman “the world runs on individuals pursuing their self-interests”, therefore people are always going to push the market to its moral limit. “Capitalism is not an ideology, but an operating system” (Srinivasan, 2016) – only as good as those who practice it; to influence that mindset, there must be a sense of virtue at the heart of economic logic. Such virtue can be seen in the maxim of Immanuel Kant: “Act in such a way that you treat humanity, whether in your own person or in the person of any other, never merely as a means to an end, but always at the same time as an end.” (Kant, 1996)

It is imperative to reconnect markets with the values and morality of the practitioners. To recover a moral spirit can be found in the virtue of a shared humanity, one that precedes and surpasses any regulation. This self-regulation must be internal so that a sustainable and effective compass can be established. “Economic policy does not follow from economic theory” (Craig Freedman and David Colander, 2018), yet what an ethical theory can do is not directly change people, but provide a framework in which they are formed. Capitalism must have the “intention… to offer a measure of useful guidance” (Craig Freedman and David Colander, 2018).

What economics must do is advise, “to influence people’s preferences for the better”. Values of virtue must be elevated to the forefront of economic decision-making enabling individuals to make complex moral judgements. This is what has been called ‘capitalism with a conscience’. This seeks not to change the logic of economics, but re-evaluate it towards a shared moral sense creating an ethical framework that people can adhere to. “Capitalism is not an entity that has a devious underlying purpose” (Goodman, 2013); capitalism is the actions of individuals, therefore economics must become a technique of thinking. Centering on virtue builds a suitable and sustainable foundation, no longer assuming, as economics has done, that there is a sense of morality within decision-making.

Conclusion

In conclusion, the financial crisis was caused by a moral failure. This failure was ignoring the effects of markets on social values, and allowing the logic of economics to treat life as a commodity – a means of profit. This has only continued after the financial crisis in the absence of moral accountability, yet this problem suggests that it is not the fault of the individual, but rather the system of market-driven politics. Thus, the economic system must be re-evaluated to prioritise virtue. No longer treating decisions as a means to end, a utilitarian framework, creates sustainable economic growth. Capitalism can be moral after the financial crash so long as it realises it must become an ethical theory, not an economic one.

Bibliography

1. Anielski, M., 2007. Economics of Happiness: building genuine wealth. 1st ed. s.l.:New Society Publishers.
2. Collier, P., 2018. The Future of Capitalism: Facing the New Anxieties. 1st ed. s.l.:Penguin Books.
3. Costa, K., 2011. Doing good by doing well: Redefining Moral Capitalism, London: Gresham Lectures.
4. Craig Freedman and David Colander, 2018. Where Economics went Wrong: Chicago’s abandonment of classical liberalism. 1st ed. s.l.:Princeton University Press.
5. Durkheim, É., 1993. The Division of Labour in Society. Free Press ed. s.l.:The MacMillian Company.
6. Frederick R. and Molly S., 2015. Kellogg Biennial Lecture on Jurisprudence, s.l.: Library of Congress.
7. Goodman, A., 2013. Conscious Capitalism, s.l.: TedTalks.
8. Kant, I., 1996. Groundwork of the Metaphysics of Morals (Cambridge texts in the history of philosophy). 2nd ed. s.l.:Cambridge University Press.
9. Sandel, M., 2012. What Money Can’t Buy: the moral limits of markets. 1st ed. s.l.:Penguin Books.
10. Smith, A., 1776. The Wealth of Nations. 1st ed. s.l.:Penguin Classics.
11. Srinivasan, B., 2016. Capitalism isn’t an ideology – it’s an operating system, s.l.: TedTalks.
12. Wall Street. 1987. [Film] Directed by Oliver Stone. United States of America: American Entertainment Partners Amercent Films.

The Sociology of Obesity

Obesity as defined by WHO (2018) is having ‘’abnormal or excessive fat accumulation that presents a risk to health ‘’. Most commonly measured using Body Mass Index (BMI) -which is based on height and weight-a score of 30 or more is considered obese. It can lead to several serious and potentially life-threatening conditions such as: type 2 diabetes, heart disease, stroke (due to the large amount of fat build up which can block arteries in the heart and body) and some types of cancer (NHS, 2018). Not only physically but obesity can also increase the risk of developing psychological problems such as depression and self-esteem which can potentially lower your quality of life (Luppino,2010). It was found that approximately 800 000 people die annually from depression so indirectly developing obesity kills thousands of teenagers and adults every year (WHO,2018). In 2016 alone, more than 650 million adults were found to be obese: with obesity rates nearly tripled since 1975 the NHS spends approximately £5.1 billion dealing with the issue in England (P Scarborough, 2011). Therefore, due to the increasing prevalence of obesity and stress placed on the healthcare system, it is globally regarded as one of the most significant Public Health issues (WHO, 2018).

While the basic drivers of obesity are obvious as “excessive sugar intake, increased portion size and decline in physical activity play a role in the rise of obesity” (Davidson K, 2001), there are multiple other complex causes leading into the condition, one of which refers to the ‘obesogenic environment’. Swinburn (1999) defined the term as “an environment that promotes gaining weight and one that is not conductive to weight loss’’. This suggests that obesity is increasingly higher due to the unhealthy and unsupportive surroundings where weight is consequentially being placed on as you are constantly surrounded by fast food and sugary foods. Children and youth ages 5-17 years are recommended at least 60 minutes of physical activity daily however in reality one in three children are now doing less than 30 minutes per day (WHO,2018). This could be a result of new technological innovations in the 21st century as children may exercise less because they may play video games on consoles such as Xbox and PlayStation with an average teenager playing on average for 12-15 hours a week (Statista, 2015)

According to WHO (2003) frequent fast food consumption is harmful to health as most foods are rich in saturated fats, carbohydrates and sodium – all of which are linked with hypertension and cardiovascular disease therefore contributing to the risk of developing obesity and potentially leading to death. Due to the sheer amount and variety of fast food outlets in the UK, they are seen to help create an obesogenic environment as outlets are readily and widely available to anyone and anywhere as approximately 40281 fast food outlets are open in the UK compared to only 14800 supermarkets which sells fresh food (Statista, 2018).

However, the rapid expansion and development of these fast food restaurants can be understood through the sociological perspective of capitalism. Capitalism is an economic system in which the means of production are privately owned and whereby goods are produced for sale in the free market in order to retain a profit (Zimbalist,1988). The free market simply explained refers to the idea that commodities can be bought from and by anyone freely, with most supporters arguing that it provides more opportunities for both consumers and producers as it creates more jobs and allows for competition (Farlex, 2009).

As capitalism resolves around creating a higher value altogether than of smaller parts, capitalist producers need to make goods efficiently and cheaply(braham,2013). Therefore, in this capitalist economy companies are gaining a lot of profit from selling fast food that just so happens to be those high in fat and those that are cheap to produce, easy to brand and market, and easy to stock up. For example, McDonalds (one of the biggest fast food chains) generates approximately £2.6 million in sales annually with its menu consisting highly of processed meat (Peterson,2018).

From a capitalist viewpoint it may seem that the free market allows us the choice to consume and buy goods, but as Wells (2012) sees it, the ‘unifying logic of capitalism’ is exactly the opposite of this cliché about free markets. Food companies maximize their profits by “restricting our choices” through advertising and price manipulation. For example, medium fries only cost £1.09 in McDonalds whereas they cost £1.49 in Burger king, due to this clever marketing and price choice we can see that McDonald is more well-known as it has cheap prices and is more affordable to the consumer. Furthermore, Wells even suggested that it could occur at a psychological level through amplification of substances such as sucrose and caffeine in drinks which are somewhat addictive. These foods high in sugar and caffeine would then psychologically attract and trigger consumers to buy them regularly due to their addictive nature. This is an example of “profit motif” which is a capitalist theory suggesting that the only goal of a business is to turn a profit. This has been heavily criticised by scientists from the Frankfurt School of social science for its” standardised, poor quality goods that are produced disregarding labour conditions and environmental issues” (Braham P, 2013, pp41) and are considered to encourage selfishness and greed. We can directly see this in the form of the high in demand fast food that are created by the producers to appeal to consumers so that they produce profit for the company even if the food may be processed and unhealthy for individuals, rather than improve health levels companies take advantage of the consumers taste to overproduce unhealthy goods.

Marxism however is a critic of capitalism suggesting that it leads to social inequalities and class conflict between the bourgeois (middle class, who own the means of production) and proletariat (working class, workers). The aim of which is to balance the hegemonic powers within the bourgeois -who control society- as suggested by Gramsci (1971) and redistribute wealth into a communist economy rather than capitalist (Chambre H, 2018).

One of the biggest critiques of Capitalism was based on the exploitation of workers; In traditional systems workers would rely solely on what they produced themselves but due to capitalism their only way to survive was to sell their labour to an employer who would pay them minimum amount for their maximum effort. Due to this Marx disliked capitalism as although workers were working hard, their labour was used to make profits for bourgeois- those who owned the means of production. Additionally, as workers entirely depended on their wages, they were made to increase productivity through longer, harder hours in order to extract “surplus value”. Coined by Marx, surplus value is the difference between the value of what the labourer produced and the cost of their hire which were all carefully planned in order to maximise profit for the employer (Braham P, 2013, pp17). Eventually as capitalism has grown globally in the last century, this form of exploitation can still be seen both subtly and extremely in cases such as clothing where high street clothes are being made by children in smaller countries such as Myanmar for only 10-13p an hour (Guardian).Companies such as clothing brands and other commodities such as cars prefer to use this system of cheap labour often as the surplus value is maximised which is advantageous to the company. This is as the company will pay very little wages to the employees, but the goods produced by the worker will be sold in larger countries for thousands of pounds. In Marx’s terms this profit is a direct reflection of the degree to which workers’ labour has been exploited. More subtly people all over the world are being paid less than the price of their labour with the constantly widening inequality gap as ‘’ 42 people hold the same wealth as 3.7bn poorest ‘’(Elliot L, 2018).In south Korea for example the minimum wage is 7000 Korean won yet stores such as 7-Eleven pay minimum of 5000 Korean won per hour. Although the inequality is obvious, students and other citizens opt to accept these job roles in order to survive as they need money in this economy in order to survive. Due to the low income and poverty in the UK specifically, people cannot afford home cooked meals and full healthy lunches. Instead as Marx pointed out, those from the working-class background-who are constantly pushed to work harder for their employer to gain profit – opt to eat out at fast food restaurants as they are cheap, quick and convenient, with a meal costing £5 or less (Rayner, 2013).Therefore due to the direct impact of capitalism, obesity has significantly risen as individuals are- as Marx suggested- alienated from the product. This means that the product they produce is too expensive for them to use so they are in turn separated from the product of their labour. For example, some people working in high end restaurant may not themselves be able to afford to buy the food they themselves make regularly. As more and more people become alienated from the products, they’d opt out to consume more affordable goods for themselves to also obtain money. Therefore, more and more people are becoming a target as the capitalist economy which is constantly evolving and with increasingly small jobs available to individuals. This then would result in more individuals affected by social inequalities as Marx suggested leading to mass consumption of commodities such as fast food resulting in the high risk of developing obesity.

Although the free market involves a laissez -faire form with little to no government intervention, Public Health professionals and the government have implemented several initiatives and plans to help reduce obesity through looking from a sociological perspective(Braham P, 2013, pp 15).For example, a recent sugar tax has been implemented on British drinks companies in the attempts to decrease rising levels of obesity and tooth decay. The idea is that the higher content of sugar found in the drink the higher tax it will have. As a result, for a regular coke can, the price has increase by around 8p with brands such as Irn Bru deciding to release new sweetener-laced fizzy drinks with a decreased 54% on sugar content (Birchall G et al ,2018). The Theory behind this kind of new implementation is the idea that prices for drinks have risen therefore the consumer will not buy them as much which will directly impact the sales and profit of the company. Furthermore, it will cost the companies more to produce such sugary drinks due to the sugar tax. As a result, companies will produce drinks which are less sugary, and people will decrease the amount they consume which would overall benefit their help and influence rate of obesity and tooth decay. This type of sugar tax on sugary drinks was introduced in Mexico in 2014 and the results showed a 12% reduction in tooth decay and obesity in the first year suggesting that the intervention taken by the government is very useful and has a strong chance at controlling obesity.

To conclude this approach of capitalism is very useful to both explain obesity and to suggest how to respond to the issue as this approach is very holistic. Although capitalism enables us to think deeper regarding the economic state and free market it also acknowledges other biological and social factors which contribute to obesity and are amplified by inequalities directly created by capitalism. Through this, many successful research and interventions have been made such as the sugar tax and Change4life campaign which successfully help control and prevent the rise of obesity. Change4life aims at specifically children, enabling them to make healthy life choices especially as approximately 1/3rd of children leaving primary school are obese (GOV,2017).

What Is Capitalism and What Are Its Main Features? Essay

Capitalism quickly became the adopted ideology of many societies as this idea enabled free trade and exchange commodity between nations. There are many features of the capitalist ideology which drives the economy and has given opportunity of equality in rights (to those with all class backgrounds not just the bourgeoisie) to obtain success from capitalizing off of a product or service. Some of which are: co-ordination, motivation and property rights.

Firstly, co-ordination under capitalist economies has a market mechanism which determine prices in accordance to supply and demand. The forces of supply and demand increase or decrease prices in response to the decisions of individual buyers and sellers. This mechanism is commonly referred to as Adam Smith’s ‘Invisible Hand’. Within this capitalist system there is no state intervention to ensure that economic activities are carried out properly. Today, the state does not interfere with an individual or a business trading but must abide to tariffs and laws input by the government. Free trading still exists but with a saturated market these laws enable movement between legitimate traders and any fraudsters can be caught. The idea zero government intervention would not work due to criminal offenders levitating in the market system therefore the government work with larger private businesses to ensure people are exchanging commodities fairly. For example, banks will observe individual’s bank accounts and if they suspect money laundering fraud from visible multiple accounts and invoices then the situation would be handed over to the government to be dealt with. Integrating some laws allows safer trading within the capitalist economy.

Secondly, capitalism is a motivational structure. This is because as a result of the self-interest of many economic agents, within this system, the market is pushed by material motivations. Suppliers have an incentive to offer only those goods on which they expect to make a profit, on their own terms. For example, given the recent phenomena of social media surfacing and new jobs never thought of before, many working-class people are able to build up wealth and status more easily, because it is accessible to many which come from lower class backgrounds. For example, youtubers, Michelle Phan and Jeffree Star have become multi-millionaires through providing service on a media platform then invest money into a business where products are sold.

Finally, capitalism is portrayed by private responsibility for non-work variables of creation. The proprietors of these private properties have the ability to control these components of creation just as the merchandise and enterprises delivered from such information sources. The proprietors have the opportunity to choose what to create, how to deliver and for whom to create. The advantages proprietors are compensated with from responsibility for assets are lease from the utilization of their territory, compensation for the utilization of their work, enthusiasm as an arrival on their capital and benefits from their innovative aptitudes. Real estate allows any man to have assets or liability on their own accord and further experience wealth growth from such. Mobility in class structure was taking place in postmodern capitalism, never seen before, this is deemed functional for the society because it creates an equal opportunity for people to attain wealth. Though, the gap between the upper class and working class may not close, the living standard of the working class could potentially improve and this achievable realistic goal drives the labor and in return performance of the economy.

As indicated by Adam Smith, a capitalist economy works by methods for the ‘Invisible Hand’. The hypothesis of the ‘Invisible Hand’ expresses that inside a free market, items are traded at a cost exclusively controlled by the shared assent of buyers and sellers. demand by consumers for items direct the distribution of assets to accomplish customers’ utility amplification. Benefit is money related (material) motivating force to create merchandise. This monetary framework guarantees that deficiencies and surpluses do not keep going for long. When there is an abundance request (lack) costs in the market are probably going to ascend, as every buyer would now outbid the other for the scarce good demanded by many. At higher costs, suppliers are likely to increase their offer, and thus market harmony will be achieved. Circumstances may exist in the market where there is overabundance of supply (overflow). The inclination here is as costs begin to fall, every provider will attempt to attract and takeaway customers from their competing firms. At these lower costs, buyers are probably going to demand more. In this way, harmony in the market is reestablished.

Why Capitalism Is Bad? Essay

Capitalism is an economic system that rose to popularity in the middle 19th century and competed with two other prime economic systems: socialism and communism. However, capitalism came into full power post-Cold War victory and America succumbed to the system. Capitalism is characterized by lack of government intervention, free markets, and goods and services distributed without government price controls. This system is known to provide political liberty however, it leads to inequalities of wealth and income (capitalist economic system). Under this capitalistic economy, the wealthy become richer and richer, while middle class and the working poor endure the most taxes. The rich have successfully harnessed and protected their wealth, whereas middle class is burdened by taxation. Middle class must abide and pay for public goods, even when they don’t have the wherewithal to fund it; unlike the rich, who are in charge of capital and receive larger profit over time. Capitalism is an evil system because it promotes wealth inequality, puts the health of our earth at risk, primary concepts of capitalism are not congruous with moral and non-secular codes.

Wealth inequality is dangerously increasing. Capitalists like to argue that capitalism is fair because you achieve income for your labor, yet inheritance contradicts this. People inherit extreme wealth or are born into a rich class, diminishing the fair and just, hard work. The rich have no real merit, contrarily to the working class. Therefore, capitalism fails to erect equality, and fails to produce equality of opportunity. Capitalism promotes disparity, resulting in an evil and immoral economic system. Further, capitalist societies empower firms to obtain monopoly ability in labor markets. A monopolist makes an unnatural surplus profit which leads to unequal income distribution in society. Firms with monopoly power take advantage of their position and charge inflated prices, similarly to monopsony, firms exploit their position and pay workers extremely low wages. This is another example where the rich get richer at the expense of everyone else. Capitalism generates monopoly power for firms, and creates great inequality between owners of firms and workers. There must be a call for decreasing the wealth imbalance between the rich and poor.

Not only is capitalism is leading to increasing inequality, but also threatening the health of our planet, and resulting in social tensions that rapidly rise. Capitalists will ignore externalities; this type of economy will disregard harmful consequences for greed. Capitalism feeds our growing environmental issues, and is one of the main leading causes of depletion of good living standards. Firms will ignore pollution from production because their desire for wealth and power is potent. This greed-driven system is bound to be our own self-destruction. The former Deutsche Bank managing director and founding director of Corporation 2020, stated “negative externalities are basically the public costs that come from the pursuit of private profit”. The planet can no longer sustain the power-machine that capitalism is; the commanders of finance, economics, and huge industries have fabricated and assembled a suicide machine.

In conclusion, capitalism is a bad system because it locates the desires of business above the wellbeing of an individual. He creates a polarized civilization in which the inclinations of the few are more significant than the needs of the many, and self-interest goes to the extreme and transcends moral boundaries.

Comparative Analysis of Capitalism and Socialism

Both the political and economic worlds have always been dependent on each other, neither can survive without the other and the modern world is incapable of functioning without them both. Countries have been competing in finding the best economic and political combination that brings their countries into the power they need to lead the world for a prolonged period of time. Initially, Europe had always conquered the world utilizing the power of the church to limit freedoms for the people, and to bring cause to their strong militant forces. As the two world wars ended, however, the political landscape began to rapidly change. Europe lost its place as the number one world power, and new ideologies started to show. The United States of America began its own path into becoming a world power, and Russia adopted the communist approach of the world, and began collecting countries under their union. Capitalism evolved and quickly became adopted by the United States.

During their Cold War and the fight to show which political economic theory is better, capitalism won the first round, and the USSR was utterly destroyed. Capitalism had taken the world by storm for nearly 20 years, and after believing for so long that the world had finally discovered the perfect political economy theory, Capitalism collapsed in 2008. This showed the world how vulnerable the theory of capitalism truly was, while simultaneously promoting the theories of economists who had always predicted the collapse of the financial system and the world economy. This catalyzed the collapse of the political economic theories, and thus reopened the debate of where to go both politically, and economically in order to maintain the spot of leading nation.

Bruce R. Scott defines capitalism in two ways. The first as “a system of indirect governance for economic relationships, where all markets exist within institutional frameworks that are provided by political authorities”. While the second perspective is described a “three level system much like any organized sports. Markets occupy the first level, where the competition takes place; the institutional foundations that underpin those markets are the second; and the political authority that administers the system is the third. While markets do indeed coordinate supply and demand with the help of the invisible hand in a short term, quasi-static perspective, government coordinates the modernization of market frameworks in accord with changing circumstances, including changing perceptions of societal costs and benefits”.

In this broader line of vision, the government’s job is then to meant mobilize political power to bring about modernizations in the given infrastructure, and fit them as societal priorities change in order to enforce the existing institutional. Since the Great Recession of 2008, however, it can be argued that capitalism has consisted of a free market system with small government intervention in the market, laborers are fit to work as much as possible to come up with the optimum production, wages are distributed in accordance to the demand and supply of the labor itself, and capital is accumulated and saved.

Socialism, however is a planned market economy, where the means of production lays in the hands of the government. Workers are suppressed, and therefore need to retaliate on the means of production owners through revolutions that would demolish the capitalist system and replace it with an inherently communist system. Technology itself, in a general, socialist perspective, is a crucial source of economic development, as it works to facilitate the production process on labor and is more productive and efficient. It is also argued that technology is the reason for the economic development in the capitalist systems.

In theory, the socialist approach is meant to annihilate capitalism. From a market standpoint, however, the strongest case for socialism is from the desire to cripple modern monopolies by turning them undoubtably bureaucratic. If the businesses are run by the state, then there will be a surplus of innovation and a newfound restoration in the business cycle itself (Shliefer and Vishny). However, with the power of the market entirely trusted into an increasingly centralized power’s hands, there’s little if no room for anything ‘personal’, as everything goes back to the state.

Led by such considerations, the discussion again returns to the (little left behind notion) of economic importance. In order for a world to morally and economically make the drastic switch into a socialist nation, they must be devoted to an analysis of how a social system based on a private property ethics would come to grips with the problem of monopoly and the production of so-called ‘public goods’. Contrary to the frequent and persistent writings in the economics literature on monopoly and public goods, the issues simply are nonexistent, and if they did exist, they would continue to be insufficient of any notable sense to prove any economic deficiency in a pure market system. A capitalist order always, essentially without exception and necessarily so, provides in the most efficient way for the most urgent wants of voluntary consumers. This includes the areas of police and the courts. With this constructive task completed, the argument will have been brought full circle, and the demolition of the intellectual credibility of socialism, morally and economically, should be complete.

The important issue of whether effectiveness should only be understood in terms of maximizing production of material consumption goods is also pertinent. If certain things are taken into account capitalism can also be criticized as inefficient on account of its tendency to negate the availability of free time in trade for their free market. This carries limitation of people’s access to the various goods that leisure provides, including political participation (as seen in the frequently when assessing the issues regarding voter turnout.)

Nevertheless, a large motivating force in the capitalist society is of course, undoubtedly, the profit margin. Capitalism thereby narrows the realistic options of its constituent economic agents—both firms and individuals. Firms would lose their competitive edge and risk bankruptcy if they did not pursue profits ahead of the broader interests of their workers (as their products would likely be more expensive). And it is typically hard for workers to find jobs that pay reasonable salaries for fewer hours of work. People who remain concerned with expanding free time—and also with environmental risks continue to because persuaded into a socialist agenda under concerning circumstances.

With socialism, there is no free-market approach and while capitalism creates a world in which one can do what is possible for themselves, a socialist world is reliant on what one can to best for their nation. Again, in spite of its bad public reputation, it is capitalism, a social system based solely on the recognition of private property and of contractual relations between owners of private property, that continues to appear the most logical. Whoever argues in favor of anything, and in particular in favor of certain normality’s as being fair, must, implicitly at least, assume the value of the normality’s that remain inherent in capitalism. To deny their truth as norms of universal acceptability and argue in favor of socialism is therefore self-contradictory.

To keep it brief, capitalism is centered around a free market. The process involves little government intervention in the economic processes, and workers must depend on only themselves and their actions in order to get hired and maintain a stable income to cycle back into the economy. Workers are free to do any business, and buy and sell in the market. The free business system catalyzes an extremely competitive market which enhances price inclination, leaving the society overall in a much better position. More importantly, private ownership and private property is a societal norm for all the people. They capable of owning anything they pay for. Moreover, business is dealt with according to supply and demand, which pushes the prices to increase or decrease, and the highly competitive market works to keep prices relatively honest.

From a dissimilar perspective, the socialist system is based on government owning all factors of production. The government sets a standard price for goods and services, distributing wealth and wages to all employees, and is responsible for finding employment for everyone in the society, focusing more on how blatantly and irrevocably equal citizens should be. Instead of instigating competition and rivalry, all property is owned by the nation, and business is based on the state’s wellbeing. This poses the more important questions of whether anyone or any nation that considers socialism is thinking more so for the benefit of the government than the people themselves.

Bibliography

1. Gilabert, Pablo, and Martin O’Neill. “Socialism.” Stanford Encyclopedia of Philosophy, Stanford University, 15 July 2019, plato.stanford.edu/entries/socialism/#LibeEgalIneqCapi.
2. Scott, Bruce R. “The Political Economy of Capitalism”. 2006.
3. Shleifer, Andrei, and Robert W. Vishny. “The Politics of Market Socialism.” 1994.
4. Zygmont, Zenon X. “Debating the Socialist Calculation Debate: A Classroom Exercise.” The Journal of Economic Education, vol. 37, no. 2, 2006, pp. 229–235., doi:10.3200/jece.37.2.229-235.

Capitalism Vs Democracy: An Essay on Whether Capitalism Poses a Threat to Democratic Governance

The assertion here is that capitalism poses a threat to democratic governance, however, not only do I disagree with this statement, but I feel that democracy and capitalism go hand in hand. We just have to look to history to find the compatibility between the two, where we can see that democracies thrive with a capitalist economy, taking the example of contemporary Switzerland among others. Throughout the essay I will explain my view that capitalism leads not only to stability, but also to a higher level of political freedom, as outlined by Friedman. Also, I will look at why a centrally planned economy is inferior to a free market decentralized economy, as outlined by Hayek. Furthermore, I will talk about how capitalism recognizes the paradoxical effect of state intervention in citizens lives and finally I will talk about the view on how a viable economy depends not on altruism, but on self-interest.

Before critiquing this assertion, it’s important to define what I mean, when I talk about the concepts at hand here. Capitalism, in its purest form, is the private ownership of the factors of production. The four factors of production (Amadeo, 2019) are entrepreneurship, capital goods, natural resources, and labor. However, throughout history many different forms of capitalism have been used, the one I refer to is responsible capitalism. This is where there is a free market economy, but the difference here is that responsible capitalism requires a degree of government intervention to avoid the excesses and inequalities of capitalism. This type of capitalism is similar to Britain’s as it protects those who are unable to work through an ‘extensive welfare state’ (Pettinger, 2017). Responsible capitalism also contains a progressive tax system with higher earners paying higher taxes and also although most industries would be in the private sector, social benefits would be government run. This type of capitalism is hugely different to extreme capitalist theories such as anarcho-capitalism we see from economists such as David D. Friedman, as it allows for state intervention when it is needed while still disagreeing with the need for a centralized economy in the hands of the government.

Next, we can define !!!! threat as ‘a person or thing likely to cause damage or danger’. From this we can see the title states that capitalism is likely to danger democratic governance. In my critique I will show why this is in fact not the case.

Furthermore, to define democracy I will use the Greek translation for the word, where it originated from. ‘Demos’ can be translated to people, and ‘kratos’ is translated to power. So, democracy in its rawest form is power of the people, or as Abraham Lincoln said “Power of the people, by the people, for the people”. However, in this instance I will be referring both to direct democracies, such as we can see in Switzerland, where any changes to the constitution have to be done through a referendum, and liberal democracies, otherwise known as indirect or representative democracies such as the UK and the United States. These states can also be seen as examples supporting the theory of democratic capitalism, which combines liberal democracy and capitalism in support of individual freedom and pluralism. This is a theory of people such as Michael Novak (1993) and Robert Benne (1981).

Capitalism in a Democracy Leads to Stability of the State

Many economists such as Marshall (1950) argued that capitalism led to instability due to wealth disparity caused by capitalism, however when we look to real world examples, we can see this is not the case. In fact, I argue that capitalism in a democratic society of most types leads to stability of the state. Firstly, take the example of Switzerland, whose society is a direct democracy, one of the only direct democracies in the world. Using the Fragile States Index we can see that Switzerland are the 3rd most stable state in the world, as well as having the 2nd highest GDP per capita in the world according to both the IMF and World Bank rankings. On top of all this, they have been ranked as the 4th freest economy in the world according to ‘CEOWORLD Magazine’. This shows us that capitalist economies can thrive even in direct democracies, therefore disproving Marshall’s beliefs.

Secondly, I argue that capitalism can thrive in liberal democracies and representative democracies, taking the example of New Zealand. According to ‘The Economist’ and the 2018 Democracy Index we can see that New Zealand ranked as the 4th most democratic country in the world, as well as being the 7th most stable state in the world, also coming from the Fragile States Index. ‘CEOWORLD Magazine’ also rank New Zealand as the 3rd most free economy in the world.

These two countries are examples of how not only capitalism doesn’t threaten democracy, but in actual fact they thrive side by side. This supports my stance that capitalism leads to stability, and this is because free economies and economic freedom in turn lead to political freedom.

Economic Freedom Leads to Political Freedom

Another reason capitalism is not a threat to democracy is because of the economic freedom it creates. As Friedman said, a decentralized economy and a free market allows economic power to be widely dispersed and takes away the economic coercion of the government within non capitalist states. Therefore, if political freedom is absence of coercion from fellow men, then the capitalist system is one that contributes to democratic freedom.

This can also be backed up by one of the most important philosophers for capitalism, Ayn Rand, who in her book ‘Capitalism: The Unknown Ideal’ states, “the first question to answer… Is man free? In mankind’s history, capitalism is the only system that answers: yes”. She also states “without property rights, no other rights can be practiced”, which shows us that without the economic freedom that capitalism brings, political freedom ceases to exist. This is because the inability to thrive and support your own life through the “effort and guidance of his own mind” (Rand, 1967), makes you a slave to the state, who can control your effort and your produce.

We can see from these two philosophers, that without economic autonomy and freedom, your political freedom is reduced to nothing. As Friedman said, “history suggests that capitalism is a necessary condition for political freedom”.

Inferiority of Centralized Planned Economy

Philosophers and political theorists over time have argued that centralized planned economies such as Stalin’s 5 years plans are superior to capitalist systems, which, as argued by Lenin (Lenin, 1917), are “Democracy for an insignificant minority, democracy for the rich”. However, as Rand (1967) says in reply, Lenin argued that industrialization would bring them abundance and help them surpass the Capitalistic West, yet at that point, Soviet Russia was unable to feed their own people. This shows that even one of the fathers of industrialization was unable to succeed with a centralized economy. This is because centralized economy as inherently inferior.

Whereas a free market allows people to succeed based on their own merits, a meritocracy to some extent. Also, free markets provide for protection unlike centralized economies which is argued further by Friedman. Friedman’s argument can be summed up by stating that a free market protects consumers, sellers, employers and employees from coercion as there is always another option for them as Capitalism is fundamentally a voluntary freedom of exchange. This freedom of exchange takes away centralized power from the state, and leaves the fluctuation of power to change because as Friedman states, “there is no law of conservation which forces the growth of economic street to be at the expense of existing centres”. This states that economic growth, contrary to what Lenin says, does not have to be at the expense of other people. Therefore, supporting the view that a free market allows people of any background to succeed, unlike a centralized economy, where no one succeeds.

Furthermore, Hayek states in his book, ‘The Errors of Socialism’, that centralized economies (socialism) seem sensible at first glance however when it has been tried in history, it has never been as efficient or effective in democracies as capitalism. This is because, as Hayek says, “the whole idea of ‘central control’ is confused”. Centralized economies create a monopolization from the state and reduce the choice for consumers therefore reducing the efficiency of the system.

Capitalism Recognizes the Paradoxical Effect of State Intervention in Citizens Lives

Penultimately, we can look to the father of capitalism, Adam Smith to show the dangers of state intervention. In his most well-known book, ‘The Wealth of Nations’, Smith argued that state intervention lead shortages and surpluses, as can be seen in Soviet Russia under Lenin. This view is widely accepted by capitalists.

However, I do not believe there should an elimination of the government. Friedman also had the view that the government was essential for regulating and interpreting the ‘rules of the game’, as well as being responsible for peace and justice. The free market however takes away the power of the state in certain issues.

Furthermore, although responsible capitalism involves an extensive welfare system, this is purely for people who are unable to work. Systems such as communism and socialism allow take away the drive of people to work. This is because state intervention allows for people to ‘sponge’ off the government. Whereas a capitalist system incites people to work. Rand (1967) argues that in a capitalist state, “those who are unwilling to work remain unrewarded”. She then goes on to argue that if you work hard, you are rewarded. This supports the claim of a meritocracy that democracies hold and shows how capitalism supports democracy.

Review of the Main Aspects of American Capitalism in a Comparative Analysis with Germany, Great Britain and Japan

Capitalism, the foundation of many countries, is today the most widely spread economic system in the world. It goes without mentioning that capitalism was and still is most concentrated in one country in the world, and that is the United States of America (USA). But how did this happen? How come the USA developed into such a big capitalist superpower? It maybe has a little bit to do with luck, but it has a lot to do with the decisions made throughout the history of the country. A lot of important decisions were made, that have shifted the country in the right direction and have shaped it to the country that we know and live in today. As much as the USA is so closely associated with capitalism, it is not the only country in the world where certain aspects of capitalism have emerged. Each capitalist country in the world has gone through a similar process of growth. Countries such as Great Britain, Germany and Japan, have all gone through their version of capitalist growth. This process of development is not only complicated, but it is dependent on a lot of variables. Therefore, today we see many differences in capitalism around the world. In this essay, I will look at two important aspects of American capitalism that are closely related, labor structure and management system, and explain how they have evolved into the system we know today. Furthermore, I will compare these aspects of American capitalism to the same aspects in Germany, Great Britain and Japan.

During the early years of the United States, there were a lot of immigrants coming to the country creating a very large labor force. These immigrants came from all over the world in the hope to find a better life on the new continent. Most of the people that came were young and hard-working adults, the prefect labor force for America. Furthermore, these immigrants were not the only labor force available at the time. During the early years in America, there were a lot of slaves brought to the country, and they were the cheapest labor force available. As America made the progression from the agricultural industry to the manufacturing industry, workers moved from plantations into the factories. This created a demand for certain types of workers, the ones that could run the factories and motivate the workers, or also knowns as managers.

During the 20th century in the United States, the demand for managers in companies across the country was growing at a fast rate, much faster than for any other kind of workers. Managers were of high importance to the company, and they were one of the key factors that could make it or break it. The demand for managers in the USA was born with the construction of railroads, it was not until a couple of years later, that they have made their way into the big corporations and factories. One of the key factors that added to the importance of managers in big business in America was that the management was separated from the owners or stockholders. So, in reality, the managers were in control of the company, and they had the power to make a lot of important business decisions. This new power given to the managers proved to be a beneficial thing for the company, and for many reasons. One of the reasons is that the managers could make important company decisions without having to consult the owner of the company. Which allows managers to make quick decisions on urgent matters. Furthermore, this separation allowed the managers to decide how much money they would like to pay out to the shareholders, and how much they would keep in the company for reinvestment. The role of managers at this point was major. Controlling the assets of the company meant that the managers could keep the company’s best interests in mind, instead of worrying about the stockholders. Moreover, this way the managers were keeping the workers best interests in mind as well. Since the ownership and management were separated, if there was ever a change of ownership in the company, the managers could make sure that the company still exists and that all workers keep their positions. Giving managers such important roles has led to a hierarchy in the companies. The workers knew exactly who their superior was, who they report to and what is expected of them. This meant that the workers were more organized and more efficient, and therefore the whole company was more productive. The majority of American companies still follow this model today. When it comes to unionized labor in America it wasn’t until the 1930s that the structure was starting to form. That change started with the National Labor Relations Act of 1935. More and more Americans started to join unions, but even at its peak, the number of workers in unions was still lower than in European countries. Unions were not as popular in America, and after the 1940s the number of workers in unions started to decline.

As much as separation of ownership and management sound good in theory, sometimes in practice, some managers did not make good decisions for their companies. Like any other human being, the managers got greedy and would pay themselves big salaries even if the company was not earning any profits. Furthermore, the money that they decided to reinvest would not always yield a profit and therefore the owners or stockholder would be paid lower dividences. The role of managers continued evolving, as the country was developing. New technologies were invented and managers job in American companies was expanding. With the introduction of economics, the managers had to be educated, and they were more and more separated from regular workers. American managers had a difficult job, to convincing the workers to come together and be productive, so therefore we can say with ease that if it was not for them, the economy of the United States today would be much different than it is.

While in America the management and ownership were separated from each other, in Britain for example that was rarely the case. British managers were mostly family that owned the company or someone that they have a lot of trust in. British managers could not make decisions as freely as Americans and would have to consult the owners first. Furthermore, British managers usually paid higher dividends to the stockholders or owners, therefore leaving less money in the company for future investments and development. Since there was less money left in the company for reinvestment the majority of the companies did not grow as rapidly as companies in America. This is a good example of what could happen when managers have no freedom to implement their plans for further improvement of the company. In my opinion, their way of management was not benefiting the company as much as the American system did. Moreover, unlike America, Britain did not have nearly as big labor force. One other problem Britain had was that during the first industrial revolution their workers were exploited and were unhappy with the conditions in the factories. This started to change with the unionization, and as soon as the British Labor Party was created the conditions started to get better. America also had their problems with unionization, but the unions were never as popular there, as they were in the European countries.

On the other hand, in Germany the managerial position was a little bit different. Germany’s approach to labor was to have the government regulate the labor laws. When the process of unionization started in Germany the goal was to have a unified labor force, and they did a much better job than Americans. After the implementation of the unions, there were fewer strikes in the factories, and the working conditions were better. During the time of unionization in Germany the managers had an important role of negotiating the amount of wages the workers will receive, the number of hours they will work, and much more, something that American managers did not have to worry about. Through unions, the workers could affect the decisions made by the company’s management. This made the job of managers harder. This was not the problem for American managers since the rate of unionization in America was much smaller compared to Germany. Furthermore, since the unionization, the managerial board had a labor representative on their board, that in case of a split tie between the board member could decide which way the vote would go, this was also one of the characteristics that the American managers did not have at the time.

At the same time, in Japan, the managerial system was much different than the one in America. Unlike the American system, the Japanese management system devotes more time and resources to their human resources department. The majority of decisions regarding the workers are left to the local management, and they could even hire new workers. Like I mentioned before the American system has a hierarchy in place, and the managers make decisions according to the information they get through the hierarchy, on the other hand, the Japanese let their lower-level managers take care of the easier decisions, leaving room for the managers on top to make only very important business decisions. These more important decisions fall into the category of long-term plans. Somewhat like German and American managers, the Japanese were more focused on long term plans rather than just paying high dividends to their stockholders like the British. Furthermore, unlike the Americans, the Japanese focused more on manufacturing products rather than investing in new development. This is one of the main differences between American and Japanese investment and labor focuses.

In conclusion, all of these three countries have their labor and management structures set up in a much different way than the United States. Some aspects of it are for better, but in the end most of the American implementations of the labor force yielded much higher results than any of the countries. It is interesting to see how certain managerial decisions can influence the course of economic progress in the country. The two aspects of capitalism that I have compared in this essay, are just a little part of what made American capitalism so successful. Multiple political decisions have influenced the capitalist growth greatly. If we look at the economies of these countries today, we can still see that there are certain differences in their economies. America is still the world’s leading capitalist country in many ways, but it seems like in the last few years there have been many countries that have been experiencing high economic growth, but it is still much lower than the Americas during the mid-1900s. As for Germany, Great Britain, and Japan, today their economies are even more different than Americans, and in some cases for better and in some for worse. Nevertheless, all of these four countries are today the leading capitalistic superpowers, and none of this would be possible if there was not a well-implemented and organized managerial and labor system throughout their biggest economic growth times.

Capitalism Vs Socialism: An Essay

Capitalism and socialism are the two most important systems that along modern history have had an effect on the social structures, economic methods and political position of many nations. Through period of the 18th 19th centuries that two systems of political economy occurred as the primary competitor to each other. Capitalism is in countenance private goods and decentralized economic judgement while socialism is in countenance public or commonly owned goods and centralized economic judgement. Capitalism permits free market interchange without the huge third-party surveillance while socialism organize and controls the economic action throughout the central discipline. Capitalism forbids material equality in the service of augmenting material welfare totally, while socialism immolate a size of material welfare in the service of unlimited equality.

The reason that some nations choose capitalism and some nations choose socialism, their needs. These nations should make an election between the prosperity and equality. The primary mission is choosing different systems is to settle on which is more significant prosperity or equality? Alternative method of asking the same question is: ‘If there were two social disorders, which one should be solved by poverty or inequality?’. The response of this question clarifies which system of political economy would be approved. Likewise, capitalism creates welfare while refuse to equality a person who needs welfare would choose capitalism on the other hand a person who needs equality would choose socialism.

How can be explained the rapid well-being between the 18th 19th centuries? It seems like can be clarified with the term of ‘capitalism’ because the essential event that changed around two hundred years ago was the beginning of the capitalist institutions: private property, markets and political and economic decentralization in specific. Furthermore, there is a huge proof indicates that the more one’s country who tend to capitalism wealthier, than the one’s who tend to socialism. If the main promissory of capitalism is development of the welfare it is possible to say that capitalism is officiate its mission.

Capitalism is not just capitalism. There are several factors which affects the capitalism and affected by the capitalism. First one is trade. In between the 18th and 19th centuries there was different trade routes for instance the routes which are takes place in the Atlantic Ocean between Africa, American and Europe. That trade route activities directly affected the occurrence of the capitalism. The discovery of the America provided a new land for the developing bourgeoisie. The colonization of America, the developments in the subjects of exchange and commerce with the colonies, goods generally, gave to trade, to industrialization, pushing strength which begin to be known after and the rapid improvements of the feudal population and lead up to domination of the capitalism.

Capitalism in the perception of manufacture for interest for the market, is a predecessor phenomenon. The consideration of the capitalism in early modern Western Europe through the total feudal socio-economic structure has been deeply evaluated. Although big percentage of the world such as Europe and North America involve capitalism in a large scale. These included urban trading centers and specialist production for both local and out way markets. Through the millennia there has been a huge trade routes in different parts of the world.

According to the bourgeois, free trade is another expression of the freedom, free selling and free buying. However, if selling and buying vanishes, and all the other expressions of the bourgeois about freedom there would be communistic abolition for buying and selling and that ideology destroys the trade and production so the economic welfare.

The second element which affected the domination of the capitalism is competitive market and desire of consumption. Capitalism based on the free market system. Competition of the businesses established a tremendous amount of qualification way to create commodities and services. Socialism generally does not indicate competition of the enterprises due the property of capital and means of production are private in huge percent, but it depends on the country. Behalf of the having all generative goods, the state taxes both labor and capital revenues. The wealth of state takes advantage of private capital without having the capital or operate the goods. Majority of the developed countries, the property state uses its tax income to finance a reapportionment of revenue and assets. The effectiveness of this reapportionment has too many reasons to vote for more of the same, hereby preserving and usually becoming wide the social wealth state. Therewithal, nevertheless, the superior tax proportions applied to fund this reapportionment caused decreasing acceleration of growth. These dynamics give chance to pivotal political issue of current politics: voters should make a choice if they ask more consumption now or not, subsidized by redistributive policies, or small tax ratios to big amount of economic development and create bigger future revenue and permit more aftertime consumption. Voter has that right to make a choice one or the other when they select the state officials.

Socialism is a market economy, which is created by the strategists. It is easy realize that socialism follows the idea which oppose the steady capitalist power and individual human selfishness. Government should take care those problems. However, it is not the cause of denigrate the ideology. Denigrating the ideology due to it faces, that problems cause disorder and disorder creates confused practice: there are cases where the ideology can be strong, nevertheless is forced smaller doubtless than it might be, since of lack of openness about the definition of the ideology. The aim of the socialist ideology is making the community and justice wider for the entire of the financial life. That aim is approved by the society, society know they approved it however they do not know how to do that, most of the crow indicates that there is no way to imply that ideology hold on specific knowledge for instance health care and education, continuous valid shapes of production and distribution in old times and it is necessary, protect the community because it is exposed to the offensive hazard from the market principle. The indigenous trend of the market tends to be higher in the point of view which consist of the social relations that it includes, since promoters can intuit the chances at the center to what is not just a good into one. Capitalist features can sustain itself and socialism ideology should have the strength of organized politics to be against it: capitalism competitors, who run with the grain of the circle, desire that strength little.

Capitalism and socialism are both follow strengthen ideologies. One emphasizes the competition between the dynamics of the economics to let the laborer to provide for himself and access any level of achievement. The other indicates the voluntariness to give up richness and prestige, for the benefit of the crowd, will result in a wealthy economics and people. Despite the competition between these two economic theories which sustain for as long as history capitalism demonstrate a victory and stability to leading that competition. Due to developing trade activities, competitive market, desire of owning a commodity and wealth capitalism defeated the socialism which is an economic theory based on equality and control of the government but not the private economy.

Capitalism as a Good or Bad System in the Context of Milton Friedman’s Ideology

The question of whether or not capitalism is a good or bad system requires that we first define our terms. We will use Milton Friedman’s basic definition of capitalism as an economic system, where private citizens engage in voluntary exchange and cooperation without compulsion from the state, and where the means of production are primarily owned and operated privately for a profit. Friedman attaches a condition to the nature of the exchange, “the essential notion is that both parties to the exchange must benefit, that each individual by separately pursuing their own self-interest, can promote the social interest” (Friedman, 2012). This is a reiteration of Smith’s ‘invisible hand’. We must also take care to be clear about what we mean by a ‘good’ or ‘bad’ system, in making this judgement are we comparing our modern capitalist system to an ideal capitalist system (practice to theory), or to alternative economic systems (ex. feudalism or communism)? It seems we must do both, contrast our current capitalist system to alternative economic systems (past and present), and simultaneously hold the market in practice to the standard promised by Friedman, as an organic corrective to social ills (ex. discrimination). Two of Friedman’s main arguments from capitalism and freedom will be examined: 1) the necessary relationship between capitalism and democracy, and 2) the corrective effect that capitalism has on discrimination. These will be analyzed in context with two important criticisms of (or caveats to) the capitalist ideal: externalities and the concept of public good. Both of which appear absent from Friedman’s ideology. In this context, ‘good’ will be measured by the degree to which our capitalist system outperforms alternative economic systems insofar as providing a standard of living for a broad cross-section of society, including its most marginalized members. Second, whether capitalism actually delivers on Friedman’s utopian ideals.

The first of Friedman’s arguments to be examined here is that capitalism (economic freedom) is a necessary means of achieving democracy (political freedom) (Friedman, 2012). Essentially, he argues that when the means of production are entirely under the control of the state, there is no space available for dissent to arise or organize. It’s difficult to argue that nations in history and today with centrally controlled economies have as much political freedom as those with market economies. For instance, in China or North Korea where state industries comprise a substantial part, or the entirety of the economy, political freedom is severely limited, and progress on this front is painstakingly slow in the case of China, or non-existent in North Korea. It’s difficult to find an example of a state anytime in history without a sizable free-market component to the economy whose citizens enjoyed any amount of political freedom. From a comparative perspective then, capitalism appears a favorable system.

However, Friedman’s view of ‘freedom’ is narrowly defined, his conception focuses only on ‘negative freedom’ (ie. the freedom from state coercion) and ignores what Locke termed ‘positive freedom’, such as access to opportunity (Baran, 593). Friedman considers only the freedom from something (state coercion) and ignores the dimension of freedom to something. Additionally, he is unconcerned with regulating discrimination by private citizens or enterprises, as he believes market mechanism will eradicate private discrimination.

Friedman sees only the differential intentions, ambitions, choices and industriousness between individuals, and pays no attention to the differential circumstances of birth, ie. privilege, that individuals inherit. His emphasis on individual freedom forces a sacrifice of other values, such as harm or fairness. He ignores the reality that unregulated markets inevitably lead to the concentration of wealth, monopolies and oligopolies. This concentrated economic power allows businesses to “massively affect the lives of people and communities” (Wright, 2010, 54). This concentration of economic power leads inevitably to a concentration of political power, which ultimately services to undermine democratic principles.

However, Friedman is correct in that, in order to be free to criticize the state, citizenry must have some degree of autonomy from the state. While this clearly means that individuals must be free to cooperate voluntarily (as in a market system), it also means that they must be free from structural and institutional barriers to opportunity and success, and it is not at all clear that market mechanisms can correct for prejudice and discrimination in the way Friedman claims.

The United States has been built on capitalist foundations since independence in 1776, and yet institutional racism and other forms of prejudice flourish to this day. While Friedman is correct that an enterprise ‘pays a price’ for discrimination (Baran, 592) he is incorrect in assuming that this cost alone is sufficient to disincentivize or reduce discrimination. A prejudiced private enterprise can serve a loyal and equally prejudiced customer base. If free markets really eliminated discrimination, then why does it persist so brazenly despite centuries of free market dominance?

Friedman claims that a free market prevents the concentration of power (Friedman, 2012). But as pointed out by Monbiot (2016), this neo-liberal vision of capitalism results in a ‘shareholder democracy’ whereby not all ‘votes’ are equal. Some citizens have the power to spend much more than others and dominate as oligarchs or monopolists. These new oligarchs dominate news media, so-called ‘think tanks’, in fact most industries today are dominated by oligopolies. The financial meltdown of 2008 puts the lie to any claim that the market prevents concentration of power, as a small handful of de-regulated investment banks essentially torpedoed the global economy. Their losses were socialized through bailout packages, because as Monbiot notes, these corporations were “too big to fail” (Monbiot, 2016). Private enterprises can become so large (in Friedman’s logic so ‘successful’) that they effectively become essential public services, and cannot be permitted to collapse, and the logic of the market no longer applies. Friedman overextends himself in his criticisms of state intervention and in his rejection of regulation. Our current neo-liberal free-market economic structure is beset with market failures of all sorts (Baran, 592). One of the most obvious shortcomings of an unregulated free-market are negative externalities. Arguably the most pressing problem of our generation, global climate change, is a product of negative externalities, namely carbon pollution.

Wright and Rogers (2010) point out that negative externalities socialize costs not accounted for by private enterprise. This is an example of a kind of freedom, the freedom from violations by private enterprise rather than by the state, that Friedman does not account for. One cannot simply avoid purchasing products that contribute to the problem of climate change (electricity or gasoline) as these are compulsory if one is to engage with the economy. Nor can one simply choose to purchase exclusively from ecologically or socially responsible corporations. Consumers often have little or no access to the information needed to make such decisions. Also, where industries are dominated by oligopolies there is frequently little difference between competitors on which to base a decision.

Finally, the way in which Friedman and the neo-liberal school of economics puts individual freedom from state coercion on a pedestal, ignores the value of public goods and the tendency of the market to underproduce in these areas (Wright, 2010, 59). This ideological stance on the part of the neo-liberal school seems once again rooted in their ignorance of the realities of privilege. If and where education is a private good, those born into marginalized communities will lack access to adequate education. One of the results of this will be the dramatic underutilization of talented individuals from these communities, as they will lack the opportunity to contribute to the economy to their full potential. Far from creating efficiency, a free market for education will result in the inefficient use of human capital.

Klein’s conclusion that Friedman’s form of capitalism has been “midwifed by the most brutal forms of coercion” (Klein, 2007, 22) has merit up to a point. Considered in isolation it is true that the unfettered, neo-liberal brand of capitalism endorsed by Friedman tramples on many rights and ignores crucial positive freedoms. However, we must also acknowledge that the amount of political freedom enjoyed by citizens of capitalist countries far exceeds that in states with centrally planned (communist) economies, or those of the previous feudal era. The ability to cooperate voluntarily and engage in private economic transactions is clearly an essential aspect of freedom, just not the only aspect.

The question therefore is not whether voluntary cooperation is a condition of a ‘good’ economic system, but rather is this an ideal that all other rights and values must be sacrificed to. The answer is equally clearly no. Market mechanisms have no ability to curtail discrimination, unregulated capitalism leads inevitably to the concentration of economic power, which leads to the concentration of political power. Too big to fail corporation privatize profit while socializing risk and loss. Market failures and externalities give rise to calamitous problems such as global climate change, and to-date at least, market mechanisms are unable to solve it.

Friedman’s ideal brand of neo-liberal, unregulated capitalism, where individual freedom is prized above all values is clearly not a ‘good’ system. However, our capitalist system in practice, when compared to alternatives (Soviet Communism, for instance) does not appear to be uniquely ‘bad’ either. While any ‘good’ economic system must clearly include the rights of individuals to voluntarily cooperate, in order to secure a minimum form of individual autonomy, we must also accept the many limitations and failures of the free-market, and the need to build into our economic system concepts of social responsibility and public good.

Why Is Capitalism Good? Essay

Capitalism is a form of economy driven by economic freedom. In this system, private individuals and corporations own capital and independently decide how to use their capital to make profit. They determine which goods to produce, the quantity to produce and try to sell their goods at a profit based on consumer demands. Producers, motivated by making profit, produce new and more desirable goods that address human needs at lower costs. People benefit from capitalism because they have access to those goods, which provide a higher quality of life for the individual. Capitalism is good because it has driven the most significant technological progress of all time, it has vastly increased the quality of life and standard of living, and reduced poverty on a global scale.

Capitalism has been the catalyst for over 200 years of technological growth that has led to the invention of all goods we use every day; such as cars, computers, Internet and smart phones. Companies exist in a capitalist society to make profits and acquire a dominant market share within their industry. To achieve this goal, they need to offer superior products or services compared to those of their competitors. They need to be able to cut costs to produce and sell their products at lower prices and speed up production times in order to provide these products in a timely fashion to their consumers. Market competition induces capitalists to reinvest their profits in order to come up with better technologies that can deliver more profitable products to the consumers. This leads to the creation and development of better technological advancements that increase the quality of products produced, which are then more desirable to the consumers. Better technology has lowered the cost of essential goods, created more jobs that also provide better pay, and gave to the masses access to goods that were not readily available to most consumers.

In addition, capitalism has also increased the quality of life and the standard of living within countries where capitalism exists. This can be demonstrated by comparing the change in the per capita GDP (Gross Domestic Product) of a capitalistic country and what medical advancements have been made to help individuals live longer, healthier lives. From 1960 to 2017, the average per capita GDP (total GDP/population) of the United States went from $3,007 to $59,530. This demonstrates that a capitalist economic system leads to more income being earned by an individual. More income earned leads to a better quality of life. Moreover, not only has capitalism led to a higher per capita GDP for a better quality of life, it also provides investment in medical research to help increase quality of life, too. This investment in medical research has led to the discovery of treatments for many diseases, has made medicine more accessible to the masses, lowered child mortality rates and increased our life expectancy. In the last 30 years, the life expectancy raised from 47 to 79 in the US thanks to the advancements in medicine. Capitalists are now investing in treatments to underserved regions in order to eradicate diseases that have already disappeared in developed countries. Novartis is an example of a corporation that is committed to expand access to healthcare in rural and underserved areas where millions of people are still affected with malaria and leprosy. This company has the mission to supply affordable medicines, create awareness and create new treatments to improve health in developing countries, such as India, Kenya and Vietnam. To summarize, capitalism has led to an increase in per capita GDP which helps drive a better quality of life by allowing individuals to afford more goods, and has increased medical advancements to help extend the life of an individual.

Finally, anti-capitalists sustain that the capitalistic greed for profit makes the rich richer and the poor poorest. However, there is data to show us a different story. In 1820, more than 90% of world population lived in extreme poverty. The percentage of the world population living in poverty decreased to 60% in 1970, 36% in 1990 and 10% in 2015. From 1990 to 2015 there was a decrease of 1.1 billion people living in extreme poverty. Capitalism helped lift the world out of poverty, thanks in part to the expansion of free market and economic development, which are two driving factors in a capitalistic system. No other economic system than capitalism has done a better job in fighting poverty. China is an example of how capitalism decreased poverty rates. In 1981 almost 90% of the population, 878 million of people, lived in extreme poverty. After the enactment of economic reforms and the adoption of capitalistic methods in the late 1970s, this number drastically decreased to 1.85% of the population living in poverty in 2013. Capitalistic reforms, which included the recognition of private rights to businesses, were a boost for private businesses that led to more profits. These profits allowed incomes to increase, which brought a vast reduction to the number of people living poverty. Today, China has become one of the most innovative countries in the world and a major consumption hub.

Conclusion

In conclusion, capitalism has brought to life new and innovative technologies that would not be possible without the freedom capitalism provides individuals and companies to operate under. Capitalism also helped eradicate some deadly diseases, which has helped increase the life expectancy of an individual, and has reduced the amount of people living in extreme poverty.

Lastly, capitalism has led to a better quality of life by providing a way for individuals to earn more money, buy cheaper goods, and expand their income’s purchase power. Overall, capitalism is good because it has improved life for a majority of individuals in this world.