In the documentary, The Peoples Republic of Capitalism, Ted Koppel, the narrator, examines the economic situation in China and reveals how the US and China are inextricably interwoven. The purpose of this essay is to analyze the documentary in the context of business and economics. Major themes of the film will be discussed considering their relation to the focal points of Chinese history. Sources providing a thorough insight into Chinese history and its relationship with Western nations will be explored.
The central themes of The Peoples Republic of Capitalism are the intricacies of the Chinese experiment with capitalism restrained by the authoritarian government and interdependence of American and Chinese economies. Ted Koppel approaches the subject matter by interviewing people that represent various strata of todays Chinese society. Among those people are Chinese bang-bang men, formerly called coolies, scientists, students, new Chinese millionaires, farmers, as well as assembly line workers, and business people both from China and the USA. These interviews provide an in-depth and thorough look into todays situation and demonstrate the entanglements of peoples lives influenced by the complexities of the Chinese American economic relationship.
This is a high-quality documentary that might change ones understanding of the worlds economy. The film consists of parts, or chapters, introduced by cutscenes, which strengthen the feeling of paradox and high contrast of life in modern China. Shooting in urban and rural areas represents a full scale of highly variegated opinions. There are millions of peasants who struggle every day for their meager living, while the rising middle class enjoys the luxuries. It is possible to note that the mass of poor people is called the Chinese paradox in the documentary (The Peoples Republic of Capitalism). All of them are being the countys weakness on the one hand and tending to become its most significant strength through the high ambition and eagerness to change their life.
Furthermore, the documentary under analysis cannot but touch some ethical issues while focusing on the Chinese American economic relationship. What China is offering today is cheap labor that is a foundation of its new economy. Turning big cities, such as Chongqing, into industrial hubs allows providing thousands of people with workplaces. All these processes have an impact on America, where many people find their jobs shipped overseas. The paradox is that Americans, who lost their jobs, have to save money by shopping for the cheap products made in China, but this is how they actually lost their careers in the first place. Another ethical question covered in the documentary considers meager wages in China that are nowhere near as competitive as their counterparts in the USA. What is worse, Chinese managers are pretty aware of the situation and support this system.
Modern Chinese history and economic situation root back to the nineteenth century and the main event of that time, the Opium War (1839-42), that burst between China and the British government. Two Opium Wars resulted in Chinas loss of power and sovereign right to control its economy, as well as the degradation of the population because of the mass use of opium. According to Platt, the Opium War is considered a starting point of modern Chinese history and the beginning of a complicated relationship with Western countries (xviii). Two hundred years ago, China was aggressively pushed into free trade, a landmark of imperialism reality, being deprived of its territorial sovereignty as well as its traditional way of development. In 100 years, China reversed from a prominent civilization to a subjected and torn territory.
Since the times of the Opium War, China endured a turbulent period of political changes and economic deterioration. When the Peoples Republic of China came into being, these privileges were abolished. As it is claimed in the documentary, China failed to create a classless society, and the Socialist dream was lost somewhere between the mansions of the new rich people and tiny farmhouses that hardly provide ones living. At the same time, it is possible to note that China becomes a place where such gaps could be bridged (The Peoples Republic of Capitalism). The narrator also suggests that the experiment with capitalism offers a window of hope (Koppel) for the young Chinese with education. Many of them struggle to learn the English language to fit into the new global economy being encouraged by the Chinese government.
One of the guiding spirits of the documentary is that the USA and China have become trade partners and created a win-win situation, which is profitable for both economies from political, financial, humanitarian standpoints (The Peoples Republic of Capitalism). This might be considered as a rather aggressive endeavor to impose this view on people especially considering the present situation, although historically, the USA-China relationship set a more positive pattern than most of the British (Platt 9). Unfortunately, since the documentary was filmed, the Chinese economy has declined drastically. As for the partnership, China and the USA have been fighting the trade war, which reminds the situation of the Ching, with some products being shifted from China. It turns out that the Chinese experiment with capitalism also failed to feed the millions of Chinese peasants and lead the country to its growth.
All things considered, the documentary manages to demonstrate the vicious circle of the global economic mechanisms that are shaping China in their image and making it impossible to develop in a unique way. Notwithstanding all the difficulties, China is trying to re-establish its leading position in the world today, taking into regard the interdependent character of the relationship with the rest of the world. There are numerous works focusing on the US-China economic relationship, and The Peoples Republic of China is the one that presents an unbiased view on all the perplexities and injustices of the business and financial and the human stories involved.
Works Cited
Platt, Stephen R. Imperial Twilight: The Opium War and the End of Chinas Last Golden Age. Alfred A. Knopf, 2018.
Koppel, Ted, narrator. The Peoples Republic of Capitalism: The Economic Ties That Bind China and the United States Together. The Discovery Channel, 2009.
The central idea in the Evolution of Capitalism is that western society is archetypical of a radical change and gradual development of the capitalist system. This development is espoused by the emergence of a market system developer of industrial technology and asserting political limits on the economic machinery. Capitalism is loosely described as a system that emerges when the state is detached from the economic activity, although it is admitted that there can be no all-inclusive description of the concepts that influence it (Scott 2011).
The book carries out a retrospective examination of the concept to figure out its origin and path of development. It compares modern capitalism to ex post factor systems that could appear to be structurally or functionally similar. The early systems, such as Egyptian and Roman rule, accumulated huge amounts of wealth as capitalists want to do. The early Egyptian and Roman people did it for the sake of glorifying their rulers (Scott 2011). On the other hand, modern capitalists are focused on amassing wealth through the application of many approaches. For example, some capitalists are keen on exploiting the poor in the community in order to achieve significant levels of wealth. Others have been shown to adopt focused investment avenues that enable them to attain wealth.
The revolutionary nature of capitalism is discussed as the writer explains how it was gradually achieved through years of bloody conflict in Europe. At that time, the technology factor contributed to the development of capitalism as pre-capitalist technology was gradually re-awaked, and exponentially developed. As a result, the output capacity of the various industries was improved significantly. Technology was a significant incentive for capitalism during the industrial and agrarian revolutions since people discovered that it could increase productivity a great deal and change their fortunes and economic status significantly.
Thus, people believed that the adoption of technology could help them to become rich. In addition, technology spawned specialisation that brought about the division of labour and this brought about a fragmented and hierarchical nature of work. While this improved the living standards of people, it also posed a serious threat since works stood the risk of having their skills become redundant because of technological inventions (Scott 2011). Thus, there is the political dimension of capitalism that implies that governments allow the economic factors an almost free rein and not intervene. However, the system appears to be getting complicated to handle. The same democratic process that did not require the state to be involved is now agitating for this intervention to keep the system in check.
From this reading, several factors about retrospective and contemporary capitalism were cleared up, especially because of the background information provided. For example, I used to imagine that the ancient Egyptians and Romans were the forerunners of capitalism due to their massive wealth and the seemingly capitalistic oppression of workers. Ultimately, capitalism is revealed as a system that was motivated by a variety of factors, the most instrumental being technology. This is understandable because, even in most societies today, technology appears to have a close relationship with the desire for wealth accumulation and materialism.
In addition, I have realised that capitalism is rapidly growing and evolving. In fact, the government is now being asked to get involved. Thus, this is evidence of the act that in the near future the dynamics of capitalism are likely to evolve considerably.
Reference
Scott, BR, 2011, Capitalism: Its origins and evolution as a system of government, Springer, New York, NY. Web.
The emergence of capitalism has contributed to the development of the community exchange system. Introducing money as a tool for measuring use-value of commodities has provided a revolution into the economic society. Money, therefore, has become a powerful instrument of assessing prices and value of goods and services. They represent both material side and fetishism of goods and services. Therefore, commodity price often equals to material and spiritual needs of consumers.
Apart from the presented network of commodity exchange, the complex capitalist system also introduces significant problems to the recognized system of use-value and its magnitude. Apparently, the problem of shifts and deviations is explained in ability of the capitalism system to estimate the commodity in accordance with labor engaged in creating the value of a product. All these problems are highlighted in studies by Marx about commodities, as well as in the deliberations of Longhofer.
According to Langhofer (2012), &economic lives are comprised of thousands of wages, purchases, gifts, saving, and investment, but they are also social lives comprised of complex human relationships (p. 108). The complex nature of human interaction also leaves imprint on value formation of the products of these relationships.
According to Marks, other than material side of value is more confined to mysterious processes because the social character of mens labour appears to them as an objective character stamped upon the product of that labour (Marx, 2012, p. 133). Thus, commodity cannot be estimated on the basis of its material values because of the presence of human factor. Moreover, because commodities are result of labor of individuals working independently, the outcome can be regarded as a result of social relations.
The analysis of Marxs theories and assumptions provides a better understanding of how capitalism and commodity system can face financial and economic crisis. Specifically, the theorist attached much importance to the capability of capitalism to adapt to the changes and reinvent the values and principles of commodity exchange and labor distribution.
Specifically, Langhofer (2012) emphasizes, & that the spontaneous collision of social and economic events is actually not spontaneous, but is driven by underlying contradictions in how we create, manufacture, and manipulate the material necessities of life (p. 109). Therefore, the mysterious nature of commodity is explained by changes in material concerns of consumers.
It is important for capitalists to understand how a specific use-value can be obtained, as well as evaluate attitude of consumers towards specific products across time and space. Judging from the historically predetermined trends, future approaches to commodity exchange will rely on the human relations and social aspects of market (Langhofer, 2012).
In addition, financial and economic recessions also depend largely on which value will be introduced to the commodity with regard to the character of social interactions. The concept of exchange, therefore, will adjust to the changes in outlooks on market relations.
In conclusion, it should be stressed that the deliberations on commodities, exchange values, and economic crisis are closely interconnected. In case of financial recessions, the role of capitalist relations is confined to assessing deviations and shifts in exchange value.
Human factor should also be taken into the deepest consideration while assessing the consequences of financial and economic pitfalls for the country because they provide grounds for further analysis of free market opportunities. Approaches to treating the importance of labor and its relation to the exchange value of a single commodity provide better understanding of capitalist system.
References
Longhofer, W. (2012). Networks of Capital: Dimensions of Global Capitalism. In W. Longhofer (Ed.) Social-Theory Re-Wired: New Connections to Classical and Contemporary Perspectives. US: Taylor & Francis. pp. 107-109.
Marx, K. (2012). Capital. In W. Longhofer (Ed.) Social-Theory Re-Wired: New Connections to Classical and Contemporary Perspectives. US: Taylor & Francis. pp. 129-135.
Capitalism refers to an economic system in which production is done by private entities who own the means of production. The central tenet of capitalism is that owning private property and pursuing self-interest is legitimate and morally justifiable (Ikeo and Kurz 46). It advocates for a free market economy in which the state has minimal interference. Capitalists believe that the role of the state should be restricted to protecting the rights of individuals.
Private economic agents should be allowed to make their own decisions concerning investments, production, prices, and profits. Despite its dominance in the contemporary world, several scholars have always criticized capitalism due to its negative effects. This paper focuses on capitalism by presenting a discussion on how it was understood by different scholars. In particular, the paper will focus on the views of Adam Smith, Karl Marx, Andrew Ure, Andrew Carnegie, and Thorstein Veblen.
Smith is considered the founding further of capitalism since his ideas on free trade replaced the concept of mercantilism, which was dominant during his time. He argued that wealth is created through labor. Individuals and the community obtain their necessities and make money by applying their labor in productive activities, thereby improving their standards of living (Medema and Samuels 93). According to Smith, free trade increases wealth since it creates more opportunities for the application of labor.
Smith concurs with Karl Marx by asserting that the society cannot flourish if majority of its members are miserable and living in poverty. He believed that the laborers should enjoy part of their labor in order to improve their standards of living. In this regard, he advocated for the creation of a universal opulence that would benefit all members of the society by enhancing equity in the distribution of wealth (Medema and Samuels 97).
This was to be achieved through a commercial system that would improve the lives of the poor by supplying all the necessities that an individual needed to live a descent life. According to Smith, the socio-economic condition of the masses can be improved by increasing production and the workforce.
Unlike Marx, Smith believed that individuals should specialize in performing specific tasks in the production process in order to increase productivity. Contrary to Marx and Veblens views, Smith advocated for the pursuit of self-interest. He asserts that, the pursuit of self-interest in a free market system not only benefits the individual, but the entire community (Hunt and Lautzenheiser 213).
Thus, he believed that the ideal social and economic order is one in which individuals are allowed to pursue their interests in a free market economy. He defended this position by arguing that a person who purchases a product (self-interest), benefits more people than he would have done by contributing to charity. This is because a purchase leads to increased production and employment.
Ure was also a supporter of capitalism. He focused on defending the factory system of production, which is the cornerstone of manufacturing activities in a capitalist society. He concurs with Smith by asserting that utilizing labor in production benefits the masses through compensations such as wages and acquisition of new skills (Ikeo and Kurz 98).
He further asserts that workers should forego their right of deciding when to stop or start working in order to maintain a stable production process. This contradicts Marxs view that workers will be alienated if they have no control over the production process.
Ure argues that the exploitation associated with capitalism is exaggerated. He asserts that workers in factories have little knowledge of how the economy operates. Thus, they cannot accurately measure the extent to which the value of their labor and the time they spend in production exceeds the wages paid to them. Ure believes that workers should be grateful to the capitalists and be happy with the success achieved through their labor instead of criticizing their employers.
He argues that laborers should focus on being good workers so that they can be promoted to higher positions and to increase the demand for their colleagues labor (Hunt and Lautzenheiser 469). In this regard, Ure believes that the factory system can benefit all stakeholders if the workers abolish violent confrontations, which Marx believed would end exploitation in capitalist societies.
Finally, Ure defends child labor by claiming that children were never exploited in the factories. He argues that working in the factories enabled children to acquire advanced skills. Consequently, they were better than their colleagues who remained at home (Hunt and Lautzenheiser 471). Ure believes that a capitalist system in which the workers cooperate with the employers is the ideal social and economic system since it will benefit the entire community.
Carnegie was a strong supporter of capitalism who believed in Smiths concept of free trade. As a businessperson in the manufacturing sector, he strongly opposed state interference in commerce (Medema and Samuels 172). He also believed that the government should not be involved in charity work. According to Carnegie, private accumulation of capital was essential for the progress of society rather than creating class straggles as Marx claimed.
Unlike Smith who believed that workers deserved a fair share of the product of their labor, Carnegie believed that high wages was not desirable since it would increase the cost of production. Consequently, he focused on reducing wages in his steel mills. He also opposed labor unions by arguing that their quest for high wages led to increased production costs, thereby discouraging industrial production.
According to Carnegie, labor unions should be abolished since they represent the interest of a few workers, whereas capitalists actions benefit the entire community (Medema and Samuels 174). This perspective contradicts Marxs view that labor unions are important since they fight for the rights of the laborers who are the majority. It also contradicts Veblens opinion that capitalists should not reduce wages in order to fulfill their self-interest of earning high profits.
Carnegie believed that the ideal economic system is one in which private entities are allowed to pursue their interests without any state interference. Unlike Smith, he believed that wealthy people should help the poor through charity work. Moreover, rich people should use their wealth to benefit the society rather than leaving it behind as inheritance to their children.
Unlike Smith, Ure, and Carnegie, Marx was an ardent critic of capitalism. He argued that capitalists had to extract as much labor as possible from workers in order to maintain their competitiveness in the market. In this regard, the aim of capitalists is to exploit workers by paying them the lowest wage in order to reduce the cost of production.
Marxs concept of exploitation is illustrated by his labor theory. According to Marx, producing and selling various goods is meant to help individuals to acquire other goods in order to satisfy their needs rather than accumulating money (Hunt and Lautzenheiser 325).
However, capitalists engage in trade in order to accumulate money rather than satisfying their needs for various goods. Thus, capitalists purchase labor at a low price and use it to produce goods, which they sell at a high price in order to make a profit. Marx believed that obtaining surplus value from the workers effort was a form of exploitation that was not acceptable.
Unlike Smith and Ure, Marx believed that industrial production in capitalist societies led to alienation among workers. Marx argued that workers are alienated from the products that they produce because they do not have any say concerning the purpose of production (Hunt and Lautzenheiser 329).
He criticizes Smith by asserting that division of labor alienates workers from the production process rather than increasing productivity. This is because specialization leads to boredom and discourages creativity. Workers are also alienated from themselves and the rest of the capitalist society because they have no control over the production process, as well as, the goods that they produce.
According to Marx, the alienation and exploitation associated with capitalism leads to class struggles between the haves and the have-nots (Hunt and Lautzenheiser 335).
This struggle is expected to cause the defeat of capitalism. Consequently, the proletariats (have-nots) will replace the capitalists. Additionally, the mode of production will shift from capitalism to communism, which Marx considers the ideal socio-economic system.
Veblen was also a critic of capitalism. He concurs with Marx that capitalism leads to antagonistic relationships in the society. In particular, he argues that capitalism creates tensions between individuals who accumulate their wealth through exploitation and those who make it through industry. He refers to those with the ability to exploit as the leisure class (Medema and Samuels 236). This class is associated with conspicuous consumption and little engagement in productive economic activities.
Veblen criticized capitalism by claiming that any economic theory that supports the pursuit of self-interest is unscientific. He also criticized conspicuous consumption because it leads to waste. According Veblen, businesspersons have little creativity, whereas engineers are innovators.
However, businesspersons always benefit through their capitalistic tendencies at the expense of engineers. This leads to waste, predation, as well as, a conflict between the businesspersons and engineers (Medema and Samuels 237). Veblen agrees with Marxs argument that businesspeople exploit laborers by making high profits through selling goods and services, which they did not produce. He believed that socialism was the ideal economic system.
Conclusion
This paper discussed the effects of capitalism as understood by various scholars. Smith, Ure, and Carnegie supported capitalism by arguing that it will help in increasing production and job opportunities. Consequently, it benefits the entire community. On the contrary, Veblen and Marx strongly opposed capitalism by highlighting its weaknesses.
They argue that the pursuit of self-interest is not morally defensible because it leads to exploitation of the masses. Concisely, capitalism benefits the rich at the expense of the poor, thereby worsening inequality in the society. This leads to tensions and class struggles, which can only be avoided by abolishing capitalism and adopting socialism or communism.
References
Hunt, Erick and Mark Lautzenheiser. History of Economic Thought: Critical Perspective. London: Palgrave, 2011. Print.
Ikeo, Aiko and Heinz Kurz. A History of Economic Theory. New York: McGraw-Hill, 2009. Print.
Medema, Steven and Warren Samuels. A History of Economic Thought. London: Sage, 2000. Print.
Capitalist economies have tendency to boom, recession and instability due to a number of peculiarities of the economic order. One of the major goals of these economies is getting profits. Many people try to get their profits at any rate even if they understand that their actions can be harmful for the countrys economy. The USA can be regarded as one of the most conspicuous examples of a capitalistic economy which resulted in boom and then recession.
One of the central concepts used by American business sharks was the famous slogan, That government is best which governs least (MacEwan and Miller 9). American capitalists strived for reduced control and regulation. Eventually, they succeeded and the US government remained quite aside. More so, many analysts claim that politicians do not only close their eyes and fail to see the necessity to bring strict regulations to the fore, but politicians tend to draw peoples attention to some irrelevant issues (Angelides n.p.).
It is important to note that politicians can also be regarded as capitalists as they are being sponsored (as well as bribed) by big businesses. These politicians are also concerned with profits instead of being focused on development of the country. Of course, big businesses interests are being lobbied. This has led to the situation where big businesses pay less and the rest of Americans have to pay more in taxes. Super rich become richer whereas middle class loses its points and many Americans become poorer.
It goes without saying that capitalism cannot be associated with stability and full employment as big businesses are trying to get more profits at the expense of wages and employment rates. Notably, the economy can be booming from time to time which is caused by global economic situation and innovations. During these periods many people become richer or they seem richer as lions share of profits still goes to big businesses. All people try to get more profits and they often do not see the harm they are causing.
Thus, every boom is followed by recession. The more vigorous booms are, the more severe periods of recession are. The housing bulb has shown the way businesses act in times of booms. They only try to get more profits and acting unethically is a norm.
At the same time, the 2008 crisis was also an illustration of the real face of a capitalist economy. Many Americans have acknowledged that banks have violated all possible ethical and even some legal norms. They simply exhausted the economy which is now in ruins. The 2008 crisis has shown that there can be no order when businesses are unregulated.
To sum up, it is necessary to stress that capitalist economies can only be associated with boom and recession. There can be no order or tendency to full employment. Businesses and even lots of ordinary people care about profits and do not think about possible outcomes of their actions.
Capitalist economies are often associated with weak regulation. The lack of control leads to numerous violations. Businesses do not care about the development of the country as they focus on their profits. Of course, it is possible to find the bright side of capitalism. However, it is time to understand that American capitalism should be controlled by the US government. There should be certain regulations to make businesses more responsible.
Works Cited
Angelides, Phil. The Real Causes of the Economic Crisis? Theyre History. Washington Post. Jun. 2011. Web.
MacEwan, Arthur and John A. Miller. Economic Collapse, Economic Change: Getting to the Roots of the Crisis. Armonk, New York: M.E. Sharpe Publishers, 2011. Print.
Capitalism refers to a form of economic system whereby the dynamics of the market are primarily controlled by individuals or privately owned corporations. Capitalist environment provides a free market and there is no government intervention in terms of means of production and distribution, since more power is vested in the economic system rather than the political system. It usually involves a small group of people who control the market trends and make significant economic decisions (Louis, 1985). The capitalist economy of the US between the 1865 and 1930 laid a framework for the present American economic system.
Americas economy was at the peak of capitalism during the late 19th century and early 20th century. During this period, several industries in the US began operating along capitalist lines (Louis 1985). Even the agricultural sector was subjected to the increasing forces of capitalism. Capitalism did not appeal to some Americans during the times and this resulted to the rise of anti-capitalist movements. One of the factors that significantly resulted in capitalism resistance was the rise of socialism in America. One of the organizations that were opposed to capitalism was the American labor movement. The objective of the union was to protect the rights of the workers, who were being oppressed by the capitalists in terms of low wages and poor working conditions and poor living standards. These labor movements were mostly German Americans who used the ideologies of Karl Marx in attempt to fight capitalism and promote socialism in 1873. It is during this period that America experienced economic panic that was known as the Great Depression; since there were no economic activities taking place due to the union strikes organized by the labor movements. This was characterized by severe union strikes organized by Karl Marxists and persistent price deflation. The economic depression experienced in 1873 resulted to a new dawn for the internationalists in the United States. Immediately after the economic depression, the Marxists led by socialist Karl Marx embarked on a series of demonstrations of unemployed workers, requesting for a more organized public works and benefits for every worker. According to the German Marxists, in the absence of a political system that was independent, the workers requirements could never be realized.
Studies of Louis (1985), the anti-capitalist movements were not successful in completely wiping out capitalism in the US. This was due to the fact there was no independent political system that would offer them support and this resulted to the labor unions being dissolved after a very short period of time. The efforts by the socialist movements were suppressed due to the fact that their tactics towards the abolishment of capitalism was not favorable in the US at the time due to lack of a stable political system. The capitalists had control over all things. As time went by, America experienced a socio-economic revolution that resulting to capitalist markets reducing gradually; due to diversification of the American economy ( Soialist Worker, 2008).
Generally, the capitalist system of administration laid a framework for the present American economic structure. Americas socio-economic system can be described as a mixed economy in that it has both capitalist characteristics and socialist characteristics. Most features of capitalism have not changed at all. Elements of capitalism are still present in American society. Means of production and distribution and production of goods in some sectors are still owned and controlled by the private sector.
References
Louis, H. (1985). A History of Industrial Power in the United States 1780-1930, Vol. II (University Press of Virginia), p. 415.Print.
Capitalism is an economic system in which ownership of economic resources is by private individuals. The system entails exchange of goods for making profit. The free hand made up of the unseen forces of demand and supply determines the amounts of goods sold and bought (Slavin 102). The state controls the working of the system by ensuring there is harmony. Capitalism is a common economic system in many countries. However, this study will only examine two states using this system. The two countries using the system are U.S and Canada.
The countries are characterized by private ownership of the basic resources that are used in production such as land, factories and industries. The individuals owning land produce various agricultural products such as corn, wheat, cattle meat and cows milk soybeans among other products. On the contrary, Canada produces grains and oil seed and red meat, dairy products and horticultural products.
The agriculturally produced goods are supplied to other private owners of factories and industries for the manufacture of refined products. The main motive of exchange in the U.S and Canadian economies is profit with the level of demand and supply in the economy determining the levels of goods and services produced and supplied.
Government structure: the structure of the government in the two countries, (U.S and Canada) involves federal governments that are led by the political elites in the countries. The government has the duty of formulating policies that regulate the private production of goods and services in the country. Demographically, the U.S has a population of about of 311,650,000 people. This population is made up of people from different backgrounds including the race, economic, gender and age among other factors. The 2006 census provided the population of Canada as 31,612,895 people (CIA 1).
Natural resources: economic resources are scarce yet the needs they are required to fulfill are many. Countries are endowed with different natural resources that form the base of their comparative advantage. Therefore, the U.S is endowed with large pieces of land used for farming practices, forestry, and oil among other resources. Similarly, Canada is endowed with land, forestry, minerals and metals. The differences in the endowments of natural resources enable the countries to engage in international trade. The good produced by the countries are sold both domestically and internationally in various markets.
For both Canada and the U.s, the destinations of the goods are mainly in EU, Asian countries and developing countries throughout the world. The trade deficit for Canada for the financial year that ended in April 2011 was CAD 924 Million. The U.S too experienced a trade deficit that amounted to USD 43.7 billion in the financial period ended in April 2011. This means that the imports of the two countries were more than the exports.
Communism
According to Slavin, communism as an economic system is characterized by the ability of the state to promote equality among the members in the communist state (105). Communist states are not many in the world. Communism is characterized by public ownership of resources of production and in individuals do not posses anything. Although people exert many efforts top national building, their wages are low. Two examples of communist states are China and Cuba.
China: the country has an estimated population of about 1.3 billion people comprised of different age structures. The population is made up of different ethnic group. However, the dominant ethnic group in China is the Han Chinese that forms about 91.5% of the population. The religions in the country are Daoism, Buddhist, Christianity and Islam. The Chinese economy is strongly supported by various sectors with the major sectors being service and industry sectors.
The Chinese market is supported by a market system with main agricultural products such as rice, wheat, potatoes, barley and cotton among other agricultural products. Being sold both domestically and internationally. The main trading partners of China are the U.S, EU, Asian countries and other developing countries in Africa. Some of the natural resources found in China include natural gas and minerals such as antimony, Zinc and Tungsten (CIA 1).
The government structure in China is that of a central government that controls all resources of the state. A president (Hu Jintao) who is assisted by the premier, WEN Jibao and the vice president rules the country. The people of the republic of China elect these officials for a period of five years. Given the countrys economic and governance system, the economy has been performing well because economic indicators point to a positive economic growth. For the first time in many years, Chinas economy registered a deficit of $1.02 during the first quarter of 2011. The deficit is termed as temporary and can be changed to a surplus especially due to the appreciating Yuan.
Cuba: is a communist state located in the Caribbean islands. The country has a population of about 11,087,330 million people made up of American-Indian. The population is composed of different races including Indians, Africans and whites. The religious affiliation of the citizens in the country is Christians with Catholics being the majority. Official language spoken is Spanish. The Cuban government is led by the president (Raul Castro) assisted by two vice presidents. The electorate elects the political leaders of the country, the president and vice presidents among other leaders for a period of five years. Being a communist state, resources of production are controlled by the state with the citizens working had for the development of the economy. However, the hardworking people are poorly compensated for their efforts (CIA 1).
Owning about 7.4 million acres of land, the state controls agricultural production. Sugarcane, tobacco, and coffee beans are the major agricultural products of Cuba among others. Major natural resources of Cuba are land and forestry. The economy of Cuba has realized deficits for a long period with a deficit of $1.7 million being realized in the 2010-2011 financial period. However, recent years have seen the deficit improve as the exports began growing at an increasing rate compared to imports since 2007. This follows a growth in the level of export that the country exports. The country has suffered for many years from sanctions from the UN and U.S. however; major trading partners of Cuba include Canada, Netherland, China and Spain.
Fascism
Slavin defines fascism as an economic system in which the leader of the government is a dictator who imposes his/her power on the opponents leading to their suppression (106). War-like ultranationalists are the modern day fascists since most of fascism was experienced many years ago. Fascist states are limited and cannot be directly pointed at because they have branded themselves in different names that sound democratic and patriotic.
However, their actions reveal something different. Examples of fascist states could be drawn from Africa and other parts of the world with countries such as Sudan and Cambodia being examples. Fascism is characterized by dictatorships and individual drives of political leaders. In spite of the resources being owned by either the state or the public, political leaders loot from the people using force and their power.
Sudan: is an African country whose leadership has been dominated by Islam religion. The country suffered from long-term war for the last part of the 20 century. The conflicts in the country were fueled by domination of the Southern no Muslim and non-Arabic speaking by the Northern Arab and Islam. Having a population of 45,047,502 people, the country is a major exporter of coffee, tea and tobacco among other crops. The population of the country is made up of Christians (Southerners) and Muslims (northerners). The Muslims are of Arab origin while Christians are Africans by decent (CIA 1).
A government of national unity whose leader is Omar El Bashir leads the government of Sudan. In spite of the brand name of the Government of national Unity, the country does not depict any national unity since the North neglects the South. The President abuses his power to suppress the development and progress of the South. The country is endowed with natural resources such as oil and vast arable land owned partly by the state and by private investors. The resources drive the economy of the country. In spite of the minerals, the country has constantly realized a deficit due to other reasons such as civil war.
Socialism
Socialism means common ownership of resources used in production. In economies that are purely socialists, every member of the society owns a section of the resources. In such states, every person has the right to the decision making process hence democracy is an important factor. The electorates participate in the election process to help select representatives that would present their contribution to leadership regarding resource governance.
Resources are produced specifically for consumption rather for sale and profit motive as indicate din capitalism. Moreover, members have free access to the produced goods and services. There are not socialist countries today although previously, there were as indicated below (CIA 1).
Venezuela: military strong men who promoted social reforms and socialism governed the country for a long time. Every citizen of the country owns the resources. The country is endowed with land and forestry that is accompanied by production of sugarcane, rice, corn and sorghum. A central government that owns some resources while other are owned by the private owners leads the government. The produced goods and services are shared among the citizens.
The democratically elected government monitors and manages resources while sharing produced output among its 27,635,743 population. In spite of the sharing, the country has not realized smooth economic growth since it has continuously realized a deficit (CIA 1).
Libya: is an African country situated in the Northern part of the continent. It is endowed with oil that has helped it serve its citizens well, led by a central government, the country has tried its best to ensure that every citizen benefits from the resources. The leaders are elected democratically after five years. The main agricultural productions are wheat and barley that are produced mainly for consumption and not for sale. The economy of Libya has been resilient for many years depicting surpluses. However, the violence being experienced in the country led the country to realize a deficit of about USD 2.1 billion (CIA 1).
Works Cited
CIA. The World Factbook. Central Intelligence Agency. 2011. Web.
Slavin, Stephen. Economics. 9 Edn. New York: McGraw-Hill Irwin. 2009.
Capitalism is an economic system that enables individuals to own resources of production privately. The system values private ownership with the price system as the system of determining the rate of exchange of goods and services. Te individual owners of the resources pursue their own selfish personal interests rather the mutual interest of everybody in an economy. The free hand of the economy determines the prices of commodities. Consumers determine the demand of the products to be supplied hence fuelling the competition between firms. Economic progress is important is every economy in the world. The progress of an economy depend so various factors that include free trade, high competition, low taxes and limitations to business. The characteristics that favor economic progress are similar to the characteristics of progress. Capitalism favors economic progress. This paper compares and contrasts capitalism and economic progress.
Capitalism
Capitalism is a form of industrial organization where the production means are mainly machines and are owned by individuals privately. Capitalism is characterized by pursuing material self-interest due to the freedom of the system. The reasoning of culture usually influences this. Savings and accumulation of capital by individuals, exchange of goods and services using money self interest of people financially and the motive of profit further characterize capitalism. Moreover, under capitalism, there is freedom of economic competition and equality. Capitalism operates under the price system, economic progress and harmony of the material self-interest of the participants in the system. There is the division of labor in almost every section of capitalism. Therefore, Capitalism is a social system that is based on the explicit recognition of private property and of nonaggressive, contractual exchanges between private property owners (Irwin, 2008, p. 8).
Economic progress
Economic progress is the ability of an economy to grow. The growth of an economy depends upon several factors. According to Boehn (2002, p. 138), economic growth is determined by the effective application of capital in the economy. The use of capital by individuals privately should be promoted by the state. The foundations of economic growth are five. First, there should be private property rights. Private property rights grant the owner of property the right to buy, sell, or derive income from their land, natural resources, capital and entrepreneurial talent. Even-handed enforcement protects these rights to exclusive use, protection against abuse, and transfer rights, thus allowing property owners to focus on resource allocation, efficient production, investment, and technological advancement. Property rights should encourage private owners of capital should be encouraged to use their capital productively. This should also involve promotion of stewardship, encouraging people to develop their property in ways beneficial to others for possible exchange, transfer or sale and promoting wise development and conservation of resources for the future (Dickens, 1996, p. 91).
The second factors are competitive markets. Efficient and effective use of economic resources is influenced by competition while providing a continuous innovation stimulus. Producers are forced to operate efficiently by the pressure from competition. Competition forces businesses to cater to the preferences of their customers and provide goods and services for which they are willing to pay prices sufficient to cover their costs. Consumers ensure that sole proprietors, partnerships and large corporations charge low prices, produce quality products and provide services of value relative to costs (Dickens, 1996, p. 92).
The third factor that promotes economic progress is the limits placed on the regulations of the government. Economic progress is usually retarded by policies that regulate trade. Such limits of the state include Limits of entry into some businesses and occupations, substituting political authority for rule of law and freedom of contract and imposing price controls. Another factor for economic growth and progress is an efficient market. It is important for an economy to have the means to distribute the capital that is used to create projects that generate wealth in order to realize its potential. This includes things that re able to produce goods and services such as machines, buildings and computers. Investment in capital tools requires consumption sacrifices today (savings). The payoff is increased production and consumption in the future. A mechanism is needed to channel savings into productive investments. Capital markets perform this function. The next factor for economic progress is the stability of the monetary system. Monetary policies that are inflationary alter price signals while undermining the free economy. The functions of money in an economy such as store of value, unit of account and as a medium of exchange makes it an important factor in an economy. Monetary stability there is usually less uncertainty in an economy leading to more capital investment (Boehn, 2002, p. 236).
Taxation also affects economic progress. More output is produced by people when they are allowed to keep more of what they earn. Thus, low taxation increases savings while increasing capital investment. Marginal taxes that are High deject the efforts of employees at work and decrease the efficiency of employees. The outcome is less and low capital formation efficiency. The low degrees of capital efficiency support the consumption of products that are tax-deductible by individuals even when the nondeductible products may be more desirable. Free trade is vital for economic progress this factor is closely linked to taxes. It is possible for a country to progress by selling products that it produces at a cost that is lower while purchasing products that would be costly to produce. Such form of trade leads to comparative advantage that in turn reduces costs further.
Comparison of capitalism and economic progress
Capitalism is the economic system where there is private ownership of the production factors. The factors of production include land, manufacturing plants, machinery and other production tools. The system values the price system in establishing wealth and economic growth. Trade is vital for effective growth to be achieved. The price for the exchange of the produced goods and services is determined by the free hand in the economy. Similarly, progress values the use price to exchange goods and services. The economic progress of a country also depends on the level of free trade within the country. Just like capitalism, progress will only be realized if individuals are left to purchase and sell products free (Wolf, 1982, p. 203).
The purchase and sale of products free leads to increased competition. Therefore, the two systems, capitalism and progress are characterized by intense competition. The competitiveness of the economy is healthy for economic progress. Competitiveness can be reduced with increase in taxation by the state. Taxation will slow down the levels of savings, reducing the available funds for private investments hence slowed economic activities. The low pace of economic activities can lead to less competition and slowed progress. Similarly, taxation restricts trade with an economy hence slowing the economic progress (Irwin, 2008, p. 12).
The system of capitalism is superior with respect to the production of wealth and the average standard of living. Capitalism can rationally allocate means of production and it can ensure that with the quality of the people and the allocation of resources being given, the quality of the output produced reaches its optimal level as judged again in terms of consumer evaluations. Assuming a given allocation of production factors and quality of output, and judged again in terms of consumer evaluations, only a market system can guarantee that the value of production factors is efficiently conserved over time (Irwin, 2008, p. 14).
Despite its benefits, capitalism differs from progress in the sense that it has been viewed as a wasteful system that is characterized by duplication of efforts, bad competition that ruins businesses and the absence of concerted and coordinated action. As socialists call it, it is anarchy of production. The systems doe not favor progress. It is only when the system is substituted by collective ownership of the resources of production that it is possible to eliminate the waste in the produced goods through the implementation of a single, comprehensive, coordinated production plan.
Capitalism is about private ownership of production resources. Therefore, there must be individuals who control resources while the rest do not control anything. Since the resources are limited, the individuals controlling resources are few while the majority does not have anything. Therefore, the system encourages proletarianization of the economy, something that is not good for progress and should not be encouraged. In accordance with common socialist beliefs, this tendency would in turn produce an increasingly uniform proletarian class-consciousness, which then would lead to a swelling voter turnout for the socialist party.
Conclusion
Capitalism is an economic system that enables private individuals to own resources of production privately. The system was established long time ago and is usually seen by many as a means of ensuring fairness in an economy since it gives each person an opportunity to own resources. The system utilizes the price system where the free hand determines the prices at which resource are exchange din the economy. The system is characterized by free trade, high competition, private ownership and price as a means of exchange. When the system is not interferes with, it leads to economic progress. Economic progress on the other hand involves the realization of the growth of and economy coming from various economic activities. The economic activities are realized when economic resources such as land and labor are well utilized. Progress can be slowed down by limited competition and taxation that affects the free movement of goods and services in an economy. Despite the two factors being different, they are similar. Moreover, capitalism promotes progress.
References
Irwin, S 2008, The New Capitalism. Web.
Dickens, C 1996, Graham Law, Hard Times: For these times, Broadview Press, pp. 60-65, 90-111, 169-182
Wolf, E 1982, Europe and the People without History, University of California State. pp. 195-231
Boehn, S 2002, is there Progress in Economics? knowledge, truth and the history of economic thought, Edward Elgar Publishing.
Arguably, one of the most outstanding features in human beings is their ability to design systems that help them develop various aspects of their civilizations. Over the last century, nations all over the world have implemented various systems that help them allocate, distribute and govern the available resources accordingly.
Despite the effectiveness exhibited by these systems, various scholars and system analysts have come up with evidence that either support or disapprove such systems in relation to how they help the citizenry achieve their needs, and how the governments allocate various resources. Among the most common systems adopted by most nations are the capitalistic and the socialistic economic systems.
Through their use, these systems have in the recent past proven to be effective to some and detrimental to others. This research paper shall set out to explore the differences and similarities between these two systems. A detailed analysis of how each of these systems affects the distribution of wealth and resources within different nations shall also be provided.
This shall aim at elaborating the extent to which each of these systems has proven to be effective in maintaining certain socioeconomic aspects such as human right, health care, social economy, model of development and social wellness among others in specific nations.
Capitalism: A brief overview
According to Hooker, Capitalism traces its roots back to the early middle ages where individuals participated in a form of trade known as mercantilism (1). In this trade practice, individuals would distribute goods and services with the main aim of getting profits (Hooker 1).
One of the recurrent characteristic in this form of trade was that merchants would buy goods from one region and redistribute the same to other regions at a higher price. As time went by, this system of trade was introduced and adopted by other nations across Europe. It is from here that the word capitalism was used to define this evolved economic practice.
Capitalism: A current perspective
Considering these undertones, Capitalism can be defined as an economic system in which individuals exercise a high level of freedom in matters regarding to acquisition of property, price determination and private ownership of resources. Members of a capitalistic economic system have the freedom to make their own decisions as relating to how best they can utilize the scarce resources in their possession as well as the freedom to own and operate a business of ones choice (Blumenthal 8).
This indicates that in such economies there is little to no government interference on how businesses, income and profits are earned or regulated. In economic terms, Petras asserts that capitalistic economies are run by the forces of demand and supply (1).
In light of this definition and description, one would argue that this is the most convenient system of economic governance because individuals have the freedom to conduct business in a manner that best meets their business goals (making profits and market expansion), all the while appealing to their creativity in running business endeavors (survival for the fittest). However, documented and practical (real life situations) evidence has in the recent past proved that this assumption is far from the truth.
Socialism: A brief overview
In the world we live in today, historical as well as present economic situations have proven that granting individuals the freedom to determine market trends (prices, supply, resource allocation and distribution among others) is not only detrimental to ethical business practices, but also prevents the less fortunate from having access to some much needed social amenities such as roads, hospitals, schools and in some instances land.
The socialistic economic system is based on the principles of equality, freedom of expression and individuals ability to exercise democracy. As such, is an economic system through which government and other significant regulatory bodies determine how, scarce resources should be allocated and distributed equally to all sectors of their economy.
Socialism: A current perspective
In regard to the above description, socialism can be described as a political and economic theory which advocates for the equal distribution of a nations scarce resources and wealth through the government (Pierce 16). Arguably, this is a convenient economic system in todays world which is characterized by greed, injustices and high inequalities in both the social and economic/income perspectives.
Socialism and Capitalism: causes for debate
Ask yourself this question: what would happen to the world if people were allowed to only produce goods and services that earned them high profits? Would you afford to buy a car, use the roads, hospitals or even have access to a descent education? The answer that pops up in my head is; NO. This is mainly attributed to the fact that such amenities have proven to be of great use to us as human beings. In other words, they are highly demanded by people.
It therefore goes without saying that if they were individually owned with no government interference or regulations, the prices charged on such amenities would be insanely high such that only the rich in the society would benefit. So what happens to the poor members of the populace? This scenario highlights the differences between these two economic systems.
According to Blumenthal, capitalists believe in the notion that survival is indeed for the fittest (274). As such, the author suggests that capitalists are firm believers of the fact that everyone has a right to own as much land, property, resources as he/she is able to acquire.
Pierce further reiterates that capitalistic economies are defined by the notion that people who do not work as hard as those with property and other resources should not eat or be given special considerations because wealth is a reward for a persons determination, creativity and aggressiveness in similar business situations (387).
These are logical arguments considering the fact that if people were spoon-fed without any ambitions or efforts, the world would have been a sad place characterized with low productivity, poor growth and development and poverty. As such, the capitalistic economic system would be most desirable if a nation wishes to promote determination, wealth creation and hard work among its citizenry.
However, Ross asserts that this economic system and its proponents fail to acknowledge the fact that there is no country within which people enjoy equitable distribution of natural resources (85). This is mainly due to geographical and climatically factors which in most cases affect the level of resources that can be found in a specific region within a country. In addition, people do not have equal mental skills.
This means that while an individual in Afghanistan can comfortably do some productive farming in the desert, another individual in the Sahara desert may not necessarily posses the same intellect or skills to do the same. In addition, the capitalistic economic system undermines the fact that no government can guarantee employment to all its citizens.
On the other hand, socialists believe in the notion that the government should be responsible for the allocation and distribution of resources within their countries.
This sentiment is further accentuated by the fact that government-regulated resource allocation is the most viable means of promoting equal growth and development within the country as well as an effective tool for combating inequalities and poverty within a nation. With these undertones, this report shall use various parameters to indicate the differences and similarities between these systems.
Differences between Socialism and Capitalism
Arguably, people go to work or spend most of their time working so that they can accumulate their wealth base and get financial rewards which in turn enable them to achieve set goals and objectives. According to Ross, capitalistic economies are governed by very strict policies regarding the ownership of private property (128).
As such, it would be safe to suggest that economic beliefs held by capitalists are most often influenced by private investment and innovation. This means that capitalistic economies are designed in such a manner that citizens can freely buy and sell their own property/possessions. This is not the case in socialistic economies in which private ownership of property is to a large extent discouraged or lack property rights (Kronenwetter 67).
In regard to investments, Pierce alludes that socialism discourages its proponents from investing (214). Personal investment means that some people will have more resources or wealth than others and this would go against the principles that govern this economic system.
In addition, people probably shy away from investing because at the end of the day, their effort will not matter as much as the notion that they should share their wealth and resources with those who do not have regardless of their effort or contribution in the investment (Pierce 229). Blumenthal therefore asserts that in a socialist setting, the probability of lazy people exploiting their hardworking counterparts is significantly high (114).
On the other hand, Blumenthal argues that unlike socialism, capitalism is a source of encouragement in regard to creativity and innovation (267).
The author suggests that due to the unequal distribution of resources that is normally backed by the capitalists desire to succeed; people are often under pressure to exhibit high levels of innovativeness and creativity as they struggle to remain relevant in an economy characterized by high levels of competition related to resource and market share acquisition.
This assertion is further reinforced by the fact that in most cases, people who have limited resources tend to work harder than their counterparts with more resources.
Similarly, Blumenthal sheds some light on the fact that capitalists have a right to patent their property as long as they do not infringe the rights of other people (28). As such, monopoly is a common and acceptable practice in capitalistic economies. However, this is not the case with socialism where every piece of property is government owned and monopolistic business entities are not allowed (Pierce 38).
A great example to expound this fact is the American health care system which is documented as being the most expensive in the world. This is mainly due to the fact that most insurance companies as well as health care facilities are owned by private parties who normally prioritize profits before safeguarding the wellbeing of their clients.
However, this is not the case with Australian health systems where the universal health care system which allows all citizens equal treatment is adopted. The American health care system is an example of a capitalistic business practice while the Australian system represents the socialistic approach in healthcare delivery.
Similarly, a look at the capitalistic Russia indicates that capitalism is detrimental to the growth of any economy. For example, since Poland shifted turned into a capitalistic nation, more than 20% of its labor force were considered unemployed by the year 2004.
In addition, 30% of the employed citizens get low paying jobs. Additionally, the real per capita growth of Poland has decreased significantly in comparison to the preceding 15 years that the country was socialistic in nature (Petras 1). The economic situation being experienced by the people of Poland are similarly being experienced by people in Bulgaria, Romania and most parts of East Germany which is filled with capitalists.
In addition, Russia which is a capitalistic economy has in the past two decades experiences political and economic unrests and declined progress due to the fact that most of the resources therein are owned by a numbered few who use illegal means such as murder, corruption, intimidation and violence to cut-off competition.
In addition, the nation is run by criminals who pillage resources for personal gains. As a result, the provision of social amenities such as hospitals and schools has declined significantly since such issues are not given adequate budgetary allocations in the national budget.
Similarly, the prevalence of sexually transmitted diseases and HIV/AIDS has increased even among young children who are subjected to child labor or forced labor as prostitutes and drug peddlers. In regards to mortality and life expectancy rates, the number of premature deaths increased above 15 million deaths after Russia transitioned to capitalism.
Petras suggest that these numbers would have been significantly lower if Russia stayed as a socialist nation (1). In addition, the life expectancy rate of Russian men decreased from 64 years to 58 years as a result of the increased rates of suicide, drug abuse, alcoholism and prostitution which came about after the transition into capitalism.
On the same not, a country like Armenia which was recognized as a technological hub has been reduced to a sad state of affairs where the number of scientists and researchers reduced from 20, 000 in 1990 to a shocking low of 5,000 professionals in 1995 (Petras 1).
Currently, the country is run by criminals and most of the population therein do not have access to power and heat facilities. These are the side effects that capitalism has on an economy.
The fact that people in capitalistic economies have unrestricted rights to do as they please means that the rich will get richer while the poor becomes poorer. The level of lawlessness exhibited in the above mentioned capitalistic nations is proof enough that without regulatory systems, most of the core values that hold a nation together are most likely bound to be neglected as people try to fight for survival and accumulation of personal wealth.
In contrast, Cuba and Bangladesh have recorded significant progresses since they adopted the socialistic system of economic governance. For example, by the year 2003, Cubas infant mortality had improved significantly (6 deaths per 1000 live births) as compared to statistics presented in 1989 (11 deaths per 1000 live births).
In addition, Russia only spent an average of 5% of its GNP on public and private health care while Cuba spent a little over 16.7% to support the same. In addition, the male life expectancy rates increased to 74 years in 2003 while it reduced to 54 in Russia (Petras 1).
During the same year, unemployment reduced by 3% in Cuba. This was as a result of the government initiative which enabled the youth to access training and educational programs that facilitated their efforts of acquiring employment. In contrast, capitalistic Poland had a 21% increase in unemployment during that period (Petras 1). Poverty has also reduced significantly in Bangladesh and Cuba.
This is mainly due to the fact that socialistic economies have regulated minimum wages which are increased in accordance to the type of job being done. In addition, the fact that resources are government owned means that they are distributed equally thereby promoting balanced progress in all sectors all the while ensuring that citizens have access to the basic social amenities. These are the characteristics of socialism that have aided such countries progress to such unimaginable statuses.
Similarities between socialism and capitalism
Ross states that the distribution of resources is the key concern in both the Socialism and Capitalism systems. In capitalistic settings, resources are distributed by those who have the ability to acquire them while in socialistic economies; resources and wealth are distributed by the governments. Similarly, both systems have proven to be unfair to various members of the economies. In both cases, wealth and resources are not distributed fairly.
For example, since the government allocated and distributes wealth and resources in a socialistic economy, people who work hard are at a loss since their efforts and rewards will be shared amongst those who do not have regardless of the reasons behind their lack of performance. The same case applies in capitalistic economies where those who are able acquire more resources than those who cannot access them regardless of the reasons behind their inabilities.
As regarding to company policies and management, both economic systems share the concept that markets can be monopolized. For example, the government in socialistic economies controls the market since it has all the resources. The same is true in capitalistic economies where the person/organization with the most resources controls the market (Blumenthal 231).
Regardless of the characteristics, the government has the power to decide and intervene in both systems. By using various economic policies, the government can influence capitalistic markets just as much as it does on socialistic markets. On the same note both systems make provisions for their citizens upon retirement.
For example, in capitalistic economies, private organizations as well as those owned by the government offers their retired employees pensions which help them cope and survive after their contracts have expired. Similarly, governments in socialistic economies have programs that cater for the needs of retired employees when the time comes. These are some of the similarities that are evident in socialistic and capitalistic economic systems.
Recommendation and Conclusion
This report has effectively illustrated that there are differences as well as similarities between socialism and communism. While each has various strengths and weaknesses, the discussion herein has shown that capitalism is not the best economic system to adopt in this day and age.
The risks associated with capitalism far outweigh the benefits as has been proven by the examples illustrated in this paper. Considering the fact that both systems have loyal followers, it would be best if they set aside their differences and learn from the weaknesses inherent in their preferred systems.
For example, while socialism advocates for the spirit of brotherhood (sharing and equality) among its followers, it has been noted that lazy socialists may take advantage of their hardworking counterparts and conveniently survive on their effort and sweat. On the other hand, capitalism is based on the Darwinian concept that survival is of the fittest. However, there are capitalists who may suffer due to inadequate access to resources despite the fact that they may want to succeed.
As such it stands to reason that socialists should adopt the Darwinian concept in a bid to promote hard work among fellow socialists and at the same time, the capitalists can utilize the brotherhood concept and share with those who are less fortunate in their economies.
Implementing such a strategy would not only guarantee economical success in terms of growth and development, but it would also ensure that followers in these systems enjoy some peace, equality and fairness as they go about their day-to-day activities. By accepting these changes, the world can finally look forward to a future characterized by practices that work for the common good of all.
Works Cited
Blumenthal, Max. Republican Gomorrah: Inside the Movement that Shattered the Party. Minnesota: Minneapolis, 2009. Print.
Hooker, Richards. Capitalism. Web.
Kronenwetter, Michael. Capitalism versus Socialism: Economic Policies of the US and the USSR. California: San Francisco, 1986. Print.
Adam smith is one of the famous economists whose contribution in the field of economy has shaped various aspects of both the ancient and modern world economy. Most of his economic theories are currently given more consideration to assist in explaining subtle economic conditions. Different economies exhibit different conditions because of different economic theories upon which their policies are based. Unfortunately, his theory sparked great controversy among people with divergent opinions.
It must be asserted that there is no general agreement among economic historians as to what the meaning and essential features of capitalism are. On that note, this essay seeks to discuss Adam Smiths understanding of Capitalism, how he perceived modern Capitalist economies. In addition, to be discussed is the difference between Adams theory and those of Keynes and Marx.
Adam Smith and Capitalism
The first attempts to understand capitalism began with Adam Smith. Capitalism is viewed as a prevailing political, social and economic system that originated in the Western Europe and later spread out to various parts of the world. The concept emerged drastically over centuries. However, most economies have had convergent views on capitalism, as a system that functions differently from preceding economic systems and that it is different from non-capitalist systems (Heilbroner, 1987).
Therefore, according to Adam Smiths understanding, capitalism is a system that encompasses the following sets of behavior: market which is characterized by commodity production ; private possession of factors of production ; large section of population that cannot exist independently unless it sells its skills in the labor market ; and idiosyncratic, materialistic and maximization behavior of most of the individuals in the economy (Heilbroner, 1987).
According to Adam Smiths theory of moral sentiments, despite the desire to accumulate wealth, the capitalists are forced to share with the poor their resources. The invisible hands would guide the owners of factors of production to redistribute life necessities back to the workers and thereby, without any intention, improving the well-being of the working class (Meeropol, 2004).
Adam Smiths perception of modern capitalistic economy
According to Adam Smith, products of human labor, in a modern capitalistic economy, are valued because they have specific physical characteristics by virtue of their usability and ability to satisfy human needs. Adam Smith asserts that products are also valued because they can be sold in the market in exchange for money.
In modern capitalist economies, the product value is desired because it can be exchanged for money; on the other hand, money is also desired because it can be exchanged for products that have a desired use value. Modern capitalist economies therefore have a well-developed market in which products can freely be bought or sold for money in order to facilitate the existence of commodity production (Heilbroner, 1987).
Adam Smith asserts that in commodity production process, producers have no personal concern for a products use value of but instead are but are concerned only in the price worth of the goods. Thus, in modern capitalist economies, commodity production is not a direct means of satisfying needs. Instead, it is a way of obtaining money through selling the products.
Under these conditions, products of human labor are commodities and the economy in which production activity is taking place is described as a commodity producing economy. Adam Smith says that productive activity of an individual has no direct connection with his or her consumption pattern; rather, its exchange and the market that mediate the two (Heilbroner, 1999).
Commodity production implies a high level of specialization in production in which each producer is expected to create only a few commodities and must therefore depend on other producers for the commodities he or she does not have. Once a person has exchanged the commodities for money, s/he must again depend on people with whom he has no direct personal relationship to supply the commodities in the market, in order to satisfy personal needs.
According to Adam Smith, modern capitalistic economy is characterized with complex inter-relationships and dependencies that do not involve direct personal interaction or association. What happens is that individuals interact only with the impersonal social institutions of the market, in which the individuals exchange commodities for money (Heilbroner, 1999).
The second approach for Adam Smith to understanding modern capitalist economy is that it is characterized by private possession of means of production. This could also mean that the economies empower private owners with authority and right to oversee how the raw materials, tools, machinery and buildings necessary for production are used.
Such authority implies that other individuals with no ownership to factors of productions have no say about how these means of production are to be used. Thus, ownership of the factors of production is a capitalism trait, which is a source of capitalists influence on the working class; making them the prevailing class. Consequently, the commodities they produce do not belong to them but to the owners of factors of production.
The workers own and control only one thing, the capacity to work. That is, labor power. For the workers to engage in productive activities, they must sell their labor power to capitalists who in turn, reward the labor supplier by payment of an agreeable amount of wage.
This system converts human productive power into a commodity and generates some sets of conditions in which the majority of people cannot sustain the cost of living unless they are able to sell their commodity (labor power) to a capitalist for a wage.
Smith states that most people in the modern capitalist economy are motivated by individualistic, acquisitive and maximization behavior. In order to assure an adequate supply of labor and to facilitate the strict control of workers, capitalists produce commodities whose values are in excess of the value of commodities that workers consume (Heilbroner, 1999).
Keynes economic theory
John Maynard Keynes work The General Theory of Employment, Interest, and money constituted a huge attack on the classical economics. World War 1 destroyed the period that gave rise to classical economics, and for Keynes, serious system inadequacies were revealed. Keynes, therefore, created a new synthesis. In his theory, Keynes concluded that classical economies were constructed on an original error.
He assumed that forces of demand and supply would guarantee total employment. He asserted that forces of supply and demand could stabilize at an equilibrium point without creating full employment opportunities. According to Keynes, the solution to the problems lies in introduction of public investment sector that would be financed through debt finance (Keynes, 1936). This strategy would force the government to borrow money expenditures such as public works.
The borrowing of funds to invest would then, create job opportunities and increase purchasing power. In an attempt to drive home his point, Keynes used standardized national income accounting system that created the concept of gross national product. He stated that the concept of aggregate demand and multiplier (people receiving government money for public jobs will spend money), which will create jobs. Keynes intention was for the government to play a much bigger role in the economy.
He envisioned a reformed capitalism or a managed capitalism, free of both socialism and pure capitalism (Wolff, 2012). He talks about a rather inclusive investment activities and active involvement in organization of investments by the state. He states that fiscal policies would enable wise managers to stabilize the economy without resorting to actual controls. The decision-making responsibility would be decentralized (Keynes, 1936).
Marxism economic theory
The motivating factor of the economic theory by Karl Marx is the labor theory of value and its extension into the theory of surplus value. Through the labor theory of value, Marx intended to prove that workers alone produce value and through the theory of surplus value, Marx wanted to show that capitalism requires exploitation. Marxists consider the economic theories expressed in Das Kapital to be merely an objective enquiry into the functioning of a free market economy, but they are not.
They were developed mainly to destroy the capitalist system. According to Marx, efforts of reforms without the destruction of private ownership of the means of production and the forcible convulsion of political power by the working class would never free the workers from capitalist wage-slavery . Marxist theory is developed based on the condemnation of the capitalism (Harvey, 2010). Marx was of the opinion that it is socially undesirable to for some individuals in a community to earn income merely from the ownership of properties.
For the theory to be successful however, an economic system must function in harmony with the human being nature. It is for this very reason that the economic theory developed by Marx was a total failure. With the full implementation of Marxists principles, individual enterprises, profit production and the free exchange of goods would be considered criminal activities (Wolff, 2012).
As stated earlier, Marxist economic theories refer to the labor theory of value developed by classical economists and adopted by Marx, it applies to theory of surplus value. These two theories were developed in Marxs Das Kapital, subtitled, Critique of political economy . Political economy refers to the activities of classical economists such as Adam Smith or David Ricardo, who agreed that the concept of free market system is natural.
On the contrary, Marx believed that the free market system was an abnormality and had to be destroyed. Capitalism according to Marx is quite different from what it is today. For Marx, capitalism was a single stage in the progression of the history of struggles between classes.
The two major classes that were struggling against each other were the workers and the capitalists. Workers were considered those who contributed their labor skills toward production, yet had no personal property, that is, they had no ownership of the means of production. The capitalists on the other hand are those who owned all the properties in production process (factors of production) but contributed no labor toward production (Mandel & Pearce, 1970).
The labor provider would then contribute his labor while the capitalist contributes his capital. According to Marx, the capital contributed by the capitalists, contributes nothing to the value of the products. The value is added exclusively by the skills from laborers. The workers therefore, are the sole contributor to commodity value, yet they are not well remunerated, while the capitalist take home more than enough in form of profits.
Commodity value
According to Marx, the commodity is the fundamental unit of the capitalist economic structure. The main purpose for production of the commodity is exchange rather than consumption. That means, the capitalist is interested in selling the produced commodities rather than use them. According to Marx, a commodity has two types of values, that is, the use value and exchange value. Use value is generated by useful labor .
The other type is exchange value which is the value or the price of the commodity. In Marxists economy, commodity value is its exchange value. Use value is of no interest because it does not represent a social relation. That is, since the commodity is mainly produced for change, in capitalism, the important aspect of commodity value is its exchange value. According to Marx, commodity value refers to exchange value, which is equivalent to the price.
This is in turn equal to the number of hours of labor required to produce the commodity. The number of hours refers to the average time necessary for a worker to produce the particular commodity. The main intention of Marxs labor theory is to convert the workers to communism by showing them that all value comes from labor that they provide (Mandel & Pearce, 1970).
Theory of surplus value
According to analysis done by Marx, three components enter into the manufacturing process to yield a product. These are raw materials, the machinery, and labor power or laborers. For example, in a shirt making process, the raw materials would be the cloth, the machinery would be the sewing machine and the labor power would be the sewing. The role of the Marxist economist is to sum up the values contributed by each of these elements.
Let us say the manufacturer pays $1 for the cloth needed for each shirt. He also sets aside $1 in a depreciation account for every shirt that is made. He also uses this money to buy a new sewing machine when the present one is worn out. He also pays the workers $2 for every shirt made. Finally, he charges $7 per shirt in the market at the time of the sale. The $7represents the real value of the shirt as determined by the labor theory of value. The sum of the values expected by the capitalist is $4, and yet the revenue is $7.
There is difference of $3 that the capitalist calls profit. According to Marx, the capital spent on raw materials is not variable. The value of the raw materials does not undergo any change during the production process. Marx also determines that the capital spent on machinery is constant; he claims that the machine contributes his own exchange value into the product it makes.
To find out how much exchange value went into each product, take the price of the machine and divide by the number of products manufactured before it wears out. Marx found out that the capital used to purchase labor power is a variable capital. Therefore, this capital gives rise to the profit. The profit as a result comes exclusively from the labor power of the laborer.
The conclusion of this analysis is that profit belongs to the laborer, but the capitalist unfairly seizes it. The laborer is locked into the position of continually being exploited and the capitalist himself is driven to exploit. Marx states that the only way out of the dilemma is revolution. When capitalism is destroyed, exploitation will end (Mandel & Pearce, 1970).
Contrasting Marxs theory and Adam Smiths Capitalism
Capitalism, according to Adam Smith, is an economic condition characterized by private possession of means of productions. The capitalist economies with this kind of system grants power and authority to private owners of factors of production to control how the raw materials, tools, machinery and buildings necessary for production can be used.
Such authority implies that other individuals with no ownership to factors of productions have no say about how these means of production are to be used. Thus, ownership of the factors of production is a capitalism trait that empowers the capitalist class to take control over the social aspects of the economy and thereby establishes itself as the prevailing social class (Heilbroner, 1999).
Employment is considered as a commodity and is expected to be provided in exchange of wages. Capitalists therefore, do not view labor as an important factor contributing to the products value (Heilbroner, 1999). Contrary to that, Marxs theory of value of labor argues that the capital contributed by the capitalists contributes nothing to the value of the products.
The value is exclusively added by the skills from laborers. Therefore, laborers are more important in a production process than capitalists are (Mandel & Pearce, 1970). In capitalism, the laborers have no say about the implementation process of the manufacturing activities, yet they are the same people whose skills are used to convert raw materials into finished products, which are exchanged for money (Heilbroner, 1999).
Marx, on the other hand, argues that laborer should embrace communism and seek for ownership of the factors of production since they are the reason profits are being accrued by capitalists (Mandel & Pearce, 1970). According to Adam Smiths understanding of capitalism, the ownership of the factors of production is entirely with the capitalists. Therefore, workers only own skills and can only control their labor power (Heilbroner, 1999).
On the contrary, Marx argues that laborers effort is exclusively the reason for profitability in a manufacturing process. Therefore, laborers have power to, not only control their labor power but also the levels of profitability accrued by the capitalists. This is true because if the laborers decide to employ less skill into their work, the levels of productivity and product quality will be low. As a result, the low quality products will fetch low revenues in the market, which will reduce the profitability levels.
Contrasting Keynes economic theory and Adam Smiths Capitalism
Keynes main vision in his economic theory was for an active government with a huge controlling muscle in an economy. He envisioned a reformed capitalism or a managed capitalism, free of both socialism and pure capitalism. He talks about a rather inclusive investments activities and active involvement in the organization of investment activities by the state. He states that fiscal policies would enable wise managers to stabilize the economy without resorting to actual controls.
The decision-making responsibility would remain in a decentralized market. Keynes theory would deliver decentralization of power to the state by confiscating authority from private owners of factors of production. Government participation in ownership of factors of productions has the effect of reducing the excess control possessed by private owners of factors of production (Keynes, 1936).
As indicated in Smiths Creation of Wealth of a Nation, the wealth of a nation would increase rapidly if individuals were allowed the free will of investing (Kleerr, n.d). The step would increase the level of competition for laborers and thus, increase the labor prices (Keynes, 1936). On the contrary, capitalism is characterized by private possession of means of productions.
Therefore, concentrates decision-making power to private individuals who own the factors of production. This system drives away competition and increases market monopoly. Monopoly creates an imperfect market in which producers or owners of the factors of production solely control market prices because market forces of demand and supply have no influence in such a market (Heilbroner, 1987).
Conclusion
In conclusion, capitalism is an economic system that facilitates formation of two different classes. That is the owners of factors of production and the workers. The owners of factors of production (capitalists) utilize their wealth status to develop a sense of control over the working class.
The resultant is a massive exploitation of the workers. Marxs theory seeks for destruction of capitalism and contends that workers are the driving force of an economy. Keynes suggests a reformed capitalism that involves both government and private sector. He asserts that decision-making power should be with the public instead of a group of private investors.
References
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Heilbroner, L. R. (1999).The Worldly Philosophers: The Lives, Times and ideas of the great economic thinkers (7th Edition). New York: Touchstone Pub.
Keynes, J. M. (1936). The General Theory Of Employment Interest And Money. N.Y: Createspace Pub.
Kleerr, R. A. (n.d). The role of teleology in Adam Smiths Wealth of Nations. Retreived from web.
Mandel, E., & Pearce, B. (1970). Marxist economic theory. New York: Monthly Review Press.
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Wolff, R. D. (2012). Contending Economic Theories: neoclassical, Keynesian, and Marxian. New York: Mc Grawhill.