Professional Documents
Culture Documents
1) Democratic Capitalism
Traditional Capitalism
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Also known as: Free Market or laissez-faire Capitalism and has five components: Private ownership of property No legal limit on accumulation of property. Free Market-no government intervention in the economy Profit motive as driving force. Profit as measure of efficiency
Intellectual Father of Capitalism who said: Humans motivated by self interest. Should be free to pursue profits. Result: The Invisible Hand. Efficient economic system; all will benefit because goods will be produced and sold cheaply.
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Capitalists as Radicals
Feudalism was inefficient, did not promote economic growth because there was no private property. Capitalists organized, started social movements based upon the ideas of Adam Smith: Private property, government nonintervention.
Late
th 19
and Early
th 20
Century
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John Maynard Keynes (1883-1946): argued that depressions can be avoided if government pumps money into the economy to eliminate unemployment. Also argued for government role in building a social security system and regulate business.
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Welfare System
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Two types of assistance: Need-based: Food stamps, aid to families with dependent children, unemployment. Non-need based: pensions, social security.
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Response to criticism:
Welfare system does give away money. But, they are supposed to ease tension and inequality.
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Perpetuates Dependence
May be true to some extent, but what is the alternative? Minimum wage jobs? Supposed to help people subsist at a minimum level.
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Monopolies
Give too much power to business (J.P. Morgan). Reduce competition (Bill Gates). Eisenhowers warning: Military Industrial Complex; creation of a power elite (military, corporate, government). Result: Collusion of Interest
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Economic Freedom
Problem for small businesses? Many hurdles. Working hard often not enough. Problem of equality of opportunity (race and gender barriers).
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The answer:
Private property must be checked. What are the effects on the community if not? Outsourcing, factory closures Must be accountability of economic power to the people (political power)
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History of Socialism
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Response to the Industrial Revolution Working conditions, living conditions, pay. Christianity: sharing, community, cooperation.
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Revolution or Evolution?
Marx argued for revolutionary transition to socialism (communism) through workers revolution. Later, others argued for reform through elections.
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Assumptions
Citizens ought to control political and economic life. Should be democratic accountability. If people control economic system then more equality and less poverty will follow. Limited Private Property. Socialists are not against private property, but are in favor of government regulation.
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Free Market (Pure form: Market rules) Democratic Capitalism (hybrid) Democratic Socialism (hybrid) Command Economy (pure form: State rules)
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Continued
Profit motive (self-interest) goes against the interests of the community. Liberty requires economic security (remember positive liberty).
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Continued
Welfare/Social Security (high taxes on rich): Typical democratic socialist welfare system (Sweden) includes extensive medical care system (free or minimal costs), prenatal care for expectant mothers, sabbatical leave for mothers (full pay); unemployment benefits and retraining programs, free public education; workers representation on boards of corporations; rent subsidies.
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Criticisms
Problem of bureaucracy, accountability. High cost Corruption
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Response
Ombudsman: hears complaints about bureaucracy tries to correct inefficiencies, corruption etc (like an independent commission).
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More Criticisms
Free market of competitive capitalism is essential for efficient production and distribution of goods. Interference with free market through government ownership and control puts too much power in the hands of government destruction of freedom and democracy but the electoral process is still there. Human Nature acts against socialist idealism.
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Current Trends
Supply-side economics argues that government should only control the supply of money in the economy to keep inflation low government borrowing main source of inflation (monetarism).
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More Trends
Welfare policies drain money from private investments (taxes) that would otherwise create more jobs reduction of government spending. Problem: unemployment, social inequality. Socialists argue that social costs must be included in cost of doing business. Problem: profits.
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Market Socialism or Third Way Developmental Socialism Economic Democracy Communal Living Cooperatives
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Deregulation: Enron, Anderson Relinquishing government oversight of the economy. Core idea: over regulation has forced inefficiencies on the economy correction is needed. Problems: 1) lowering of health and safety standards for workers; 2) Savings and Loan disaster; 3) product quality
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