Site icon Eminence Papers

The Influence of Capitalism on the Economy

Martin

The Influence of Capitalism on the Economy

Capitalism greatly influences economic processes. One of the pillars of capitalism is the unequal distribution of property rights based on free markets. The primary principle here is that people’s property ownership should depend on free market forces, and everyone has the liberty to own as much as they can accumulate legally. Another distinct characteristic associated with capitalism is the profit motive. To that end, property owners are free to allocate and utilize resources to maximize their profit earnings. Also, competition emerges as a key underlying motivation for capitalists. Individuals and businesses are expected to compete fairly, and those who innovate and develop better products will have a competitive edge over others. Based upon these underpinnings of the capitalist process philosophy, it is viable to conclude that the system leads to self-interests and social welfare.

Political capitalism is evident in the regulatory framework in the US, especially in states controlled by the democratic party. The political elite creates policies that favor the economic elite, and in exchange, the latter supports the political elite. The process is known as the regulatory capture theory, where state agencies act in the interest of the firms they regulate, while the firms reciprocate by acting in the interest of those who create these regulations (Saltelli et al., 2022). A perfect example to explain this phenomenon is the taxicab medallions required for one to be allowed to drive a taxicab in New York state (Cooper et al., 2023). The number of medallions in the market is limited, creating a barrier to entry and super-normal profits. However, the medallions can be sold to anyone who wants to enter the market, and this cements the principle of free markets under capitalism.

Also, the nature of the subsidy programs in the US shows regulatory capture at play. For instance, when issuing farm subsidies, the US government transfers money from taxpayers to farmers. Beneficiaries of farm subsidies must own a significant portion of land whose produce can benefit the national basket. By offering these subsidies, the government capitalizes on such farmland (Cooper et al., 2023). On the other hand, if the government was to do away with the subsidies, the farms would lose their value, representing a transitional loss. Since the government is obligated to provide these subsidies to maintain their value, it emerges that the regulatory capture is central to the capitalist system.

Moreover, capitalism greatly influences competition in the US. Proponents of the capitalist system believe that competition is healthy for the US economy. When firms compete for customers, they have greater motivation to innovate, produce quality products, and offer diverse products (Rolf & Schindler, 2023). Besides, when firms compete to get employees, they are likely to offer better compensation packages than when there are a few favorable firms. One of the outstanding government policies supported by competition in the US is the protection of labor rights. Due to the increased competition for workers, the US government passed the minimum wage policy, which is $15 per hour in most states. Such a policy would not have been possible if there were few firms. Such firms would blackmail the government in the absence of competition, but now they have to comply since competition for employees is high. Competition created by the capitalist system reinforces the free markets principle.

Despite the economic benefits created by the United State’s capitalist system, there are also detrimental effects. One of the profound negative impacts of the system is wealth inequality. The competitive markets and corporations create a winner-take-it-all paradigm whereby the most competitive firm takes all the benefits while the rest lose everything (Iversen & Soskice, 2020). For instance, if one company manufactures furniture cheaply, the laggard ones will lose the market and be forced out of the market. A more practical example in the US is in the airline industry. Southwest Airlines has leveraged the cost leadership structure to stay ahead of its competitors by offering lower fares-the company offers up to 30% less fares than competitors (Chen et al., 2021). Subsequently, other airlines have been making losses consistently and have had to lay off workers since they cannot compete. This disadvantage also extends to individuals who cannot acquire better-paying jobs. Such people individuals cannot afford to live in dignified houses, and some end up homeless since they cannot afford the high rent.

In summary, the US economy is significantly shaped by the capitalist process psychology. Capitalism creates a few elite corporations and individuals who capture the state and make it work for them as the benefits trickle down to the masses. Other benefits associated with a capitalist market include free markets and free entry mechanisms. Also, competition encourages firms to produce quality products and innovate. On the flipside, a capitalist economy creates a winner-take-it-all, eliminating corporations and individuals who cannot catch up with the rest. Capitalist societies like the US should invent ways of cautioning individuals who cannot compete through welfare policies such as government housing and subsidies. These interventions are necessary to create a common good, although they do not align with the principles of a capitalist system.

References

Chen, R., Xie, Y., & Liu, Y. (2021). Defining, conceptualizing, and measuring organizational resilience: A multiple case study. Sustainability, 13(5), 2517.

Cooper, J. M., Aarhaug, J., & Scott, J. (2023). Taxi, Limousine, and Transport Network Company Regulation: Recurring Challenges. Taylor & Francis.

Iversen, T., & Soskice, D. (2020). Democracy and prosperity: Reinventing capitalism through a turbulent century. Princeton University Press.

Rolf, S., & Schindler, S. (2023). The US–China rivalry and the emergence of state platform capitalism. Environment and Planning A: Economy and Space, 0308518X221146545.

Saltelli, A., Dankel, D. J., Di Fiore, M., Holland, N., & Pigeon, M. (2022). Science, the endless frontier of regulatory capture. Futures, 135, 102860.

ORDER A PLAGIARISM-FREE PAPER HERE

We’ll write everything from scratch

Question 

For this assignment, you will write an essay providing examples of how some facet of “process philosophy” has impacted American government and/or society. You may focus on just 1 example, or you may discuss 2–3 examples.

The Influence of Capitalism on the Economy

The Influence of Capitalism on the Economy

Options include the following topics:

In discussing one of these topics, the goal is to relate how a particular political perspective derives from process philosophy (such as socialism). In making the connection, incorporate clear references from the required reading. Include at least 2 references which may include the textbook, scholarly resources, and provided readings. Be sure to adhere to the format specified in Read: Course Style Guidelines, located in Module 1: Week 1.

Instructions 

Follow the below instructions to compose your assignment:

Exit mobile version