What Does it Mean to be a Capitalist Economy – Political Science Essay
Capitalism is defined as an economic system in which the means of production are mostly privately owned, and capital is invested in the production, distribution, and other trade of goods and services, for profit in a competitive free market. The concept of “classical”
capitalism is said to have emerged in the late 18th century.
“The classical, political economists: Adam Smith, Jean-Baptiste Say, John Stuart Mill, and David Ricardo published analyses of the production, distribution, and exchange of goods in a capitalist economy that have since formed the basis of study for most contemporary economists.”
–from J. K. Galbraith’s
American Capitalism
In a capitalist economy, privately owned corporations and businesses control the entire economy. This is probably this most popular economic view, a small farmer can buy his neighbor’s small farm for a set amount of money, and buy his neighbor’s neighbor’s small farm, and so on. Eventually the farmer can buy out all of his surrounding farms and create a monopoly. A monopoly is defined as a persistent market situation where there is only one provider of a product or service. Monopolies are normally characterized by a lack of economic competition for the good or service that they provide and a lack of viable substitutable goods. There are laws in the United States regulating the creation of monopolies in an attempt to keep the free market fair. The barriers for business or organizations to become a monopoly are great. There are two acts in the United States that have attempted to “prevent,” or slow down potential monopolies: The Sherman Anti-Trust Act and the Clayton Act. The Sherman Anti-Trust Act was the first U.S. federal government action to limit monopolies. It was enacted on July 2, 1890. The Clayton Anti-Trust Act was enacted in 1914 to remedy deficiencies in antitrust law created under the Sherman Anti-Trust Act that allowed corporations to dissolve labor unions. The Clayton Act filled in the gaps of the Sherman Anti-Trust Act by preventing price discriminations, and from people being involved in two competing organizations. With these laws in place in the American law system it is unlawful for any one company to gain control of all its competitors and become one corporate “giant”.
The non-government regulation in capitalism creates the ability for a company to charge whatever they can. Examples of this would be cable television, phone, and electricity. These examples are sometimes able to charge higher fees because they are the only company in that field available to you, but because they are considered a utility, they are not a monopoly. The price of gas is another example. When there is a “situation” in the Middle East, the price of gas seems to go up. The reason we are given is, because it is costing us more to get the product out of the Middle East. The problem with that explanation is that only about 15% of the nation’s gas consumption is from foreign sources, majority of our resource is domestic. The reason gas prices go up is because we no longer have the option of the getting the “cheaper” Middle Eastern gas, and can now be gorged by our domestic companies.
Capitalism, inevitably, results in unequal wealth distribution. In actual practice it appears that as the ranks of the wealthy grow the ranks of the poor also increase. At least that seems to be what is happening in the United States. It also appears that wherever there are great disparities of wealth in an area crime increases dramatically. Another negative result of unrestrained capitalism is that the wealthy have little need to spend all of their wealth, so that they keep a great deal of the total wealth of the country invested and growing more family fortunes. As a result they can send their children to better schools getting better educations, and creating an ever-increasing gap between classes. The poor have more need to spend all of their income on the necessities, therefore can save little and accumulate little or no capital growth. In a capitalist society the wealthy have disproportionate power to influence legislation which inevitably favors themselves, often at the expense of the less affluent. This also, all too often, results in the corruption of government officials, and increase of white-collar crime. Although the wealthy provide the means of developing the natural resources of a nation, they often contribute mightily to its pollution and degradation. I think it could be argued that the streams and forests and minerals of the country ought to belong to all of its citizens, not the wealthy who gain access to strip mine and deforest or drill at the expense of an environment that we all share.
Even though we may concede that capitalism is the most successful among the economic systems, we must recognize that it is not without negative aspects or that there is no room for improvements. The smug American attitude which assumes that we excel at everything overlooks areas in which we might benefit by studying how someone else does things. The complexity and chaos of a health care system which leaves 45 million citizens to the mercy of emergency room treatment for minor ailments, which costs the taxpayers a higher percentage of gross national income than any other nation, might well benefit by adapting some of the methods of those countries which cover all of their citizens with lower costs and better results. Socialist and communist countries have often outstripped us in such areas as education and health care, and it makes sense that we ought to imitate whatever aspect of their successes would prove advantageous to ourselves. We first need to acknowledge that there is room for improvement in our still imperfect society.
The non-government regulation in capitalism creates the ability for a company to charge whatever they can. Examples of this would be cable television, phone, and electricity. These examples are sometimes able to charge higher fees because they are the only company in that field available to you, but because they are considered a utility, they are not a monopoly. The price of gas is another example. When there is a “situation” in the Middle East, the price of gas seems to go up. The reason we are given is because it is costing us more to get the product out of the Middle East. The problem I have with that explanation is that only about 15% of the nation’s gas consumption is from foreign sources, majority of our resource is domestic. The reason gas prices go up is because we no longer have the option of the getting the “cheaper” Middle East gas, and can now be gorged by our domestic companies.
Capitalism inevitably results in unequal wealth distribution. In actual practice it appears that as the ranks of the wealthy grow the ranks of the poor also increase. At least that seems to be what is happening in the United States. It also appears that wherever there are great disparities of wealth in an area crime increases dramatically. Another negative result of unrestrained capitalism is that the wealthy have little need to spend all of their wealth, so that they keep a great deal of the total wealth of the country invested and growing more family fortunes. As a result they can send their children to better schools getting better educations, and creating an ever-increasing gap between classes. The poor have more need to spend all of their income on the necessities, therefore can save little and accumulate little or no capital growth. In a capitalist society the wealthy have disproportionate power to influence legislation which inevitably favors themselves, often at the expense of the less affluent. This also, all too often, results in the corruption of government officials, and increase of white-collar crime. Although the wealthy provide the means of developing the natural resources of a nation, they often contribute mightily to its pollution and degradation. I think it could be argued that the streams and forests and minerals of the country ought to belong to all of its citizens, not the wealthy who gain access to strip mine and deforest or drill at the expense of an environment that we all share.
Even though we may concede that capitalism is the most successful among the economic systems, we must recognize that it is not without negative aspects or that there is no room for improvements. The smug American attitude which assumes that we excel at everything overlooks areas in which we might benefit by studying how someone else does things. The complexity and chaos of a health care system which leaves 45 million citizens to the mercy of emergency room treatment for minor ailments, which costs the taxpayers a higher percentage of gross national income than any other nation, might well benefit by adapting some of the methods of those countries which cover all of their citizens with lower costs and better results. Socialist and communist countries have often outstripped us in such areas as education and health care, and it makes sense that we ought to imitate whatever aspect of their successes would prove advantageous to ourselves. We first need to acknowledge that there is room for improvement in our still imperfect society.
My final view on capitalism is that in a country, the United States, which promotes all types of equality, uses an economic system that promotes economic inequality. I say that because within modern market economies is because wages are determined by a market, and are hence influenced by supply and demand. In this view, inequality is caused by the differences in the supply and demand for different types of work. Also capitalism can lead to a type of government known as Imperialism.
“Imperialism is a policy of extending control or authority over foreign entities as a means of acquisition and/or maintenance of empires. This is either through direct territorial conquest or settlement, or through indirect methods of exerting control on the politics and/or economy of these other entities. The term is often used to describe the policy of a nation’s dominance over distant lands, regardless of whether the nation considers itself part of the empire.”
–Wikipedia’s definition of Imperialism.
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