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The idea of this paper is that capitalism is the most viable economic system available in the world. People can live far better under a thriving capitalistic system than under any possible scheme of state socialism. All leading countries succeed under capitalism. Challenge that is imposed by free market economy makes capitalism the most practical economic system. Outline Introduction Discussion Principles of capitalism Cons of capitalism Capitalism vs. socialism Pros of capitalism Conclusion Is Capitalism the Most Viable Economic System Available in the World?
Capitalism, unlike communism or socialism, depends for its driving force on the initiative of individuals. Hence, its prospects for survival depend directly on the incentives it gives people to commit their labor and their property to carrying out its work. These incentives have been of two general types. One is that provided by necessity. It presents a case of working to be sure of eating and being clothed and sheltered.
The other general type is provided by the opportunity to improve ones position, both in material terms and in terms of power and prestige. This second type offers a reward for doing something rather than a penalty for not doing it. Capitalism runs on the principle that people should maximize their assets, whatever those were -- land, money, machinery, labor (and also of course, any available brute force or political influence). Governments have long intervened to restrain some kinds of maximizing, especially to protect some weak bargainers and to restrain some unproductive types of strong bargaining by brute force or by monopolists. Most of those interventions adjusted the conditions of competition but encouraged competition to continue.
Because it did -- because lowering costs and maximizing profits still paid -- capitalism still had animating motives. The profit motive has become less directly important in a good deal of big business, where the operative motives have become more like those which motivate managers and bureaucrats in any big organization. By its very nature, socialism tends to slow down industrial progress. Its emphasis is on security and equality in the distribution of income rather than on a drive to create income.
Capitalism, if allowed to operate smoothly, calls forth a maximum degree of industrial initiative, thus promoting a rapid advance of living standards. By producing more products and getting them distributed more broadly and more steadily, private enterprise under capitalism can contribute a greater measure of welfare than any other system yet devised. Democracies might run economy more liberally and efficiently than dictatorships do, they would still bring needless problems of national planning, many bureaucratic rigidities and inefficiencies, and dangerous opportunities for the entrenchment of bureaucratic inequalities. The central contradiction of capitalism from the beginning of the 20 th century to the present day has been its inability to resolve the conflicting needs of profit-driven production and the continuing existence of nation states. (Socialism Today) Inequality, alienation and greed are the chief offences of capitalism.
None of them is necessarily cured by bureaucratic monopoly of ownership and control. It would be better - more productive and more popular - to combine as much as possible of the freedom, diversity and market-responsiveness of the present system with measures which enforce effective equalities, while allowing a pluralist economic system to make full use of traditional motivation. The mere fact that capitalism has many negative issues is not enough to ensure the triumph of socialism. History is full of examples which show that the dissolution of a society can lead to chaos and retrogression as well as to a new and more progressive system. Hence it is of greatest importance that capitalism by its very nature creates and trains the force which at a certain stage of development must overthrow it and replace it by socialism. So it is very desirable that people should relax about socialism and public ownership, as well as diversifying its forms.
They should use it instrumentally as often as it is expedient, which it often is. But they should not identify socialism or equality, in a doctrinaire way, with exclusive public ownership. Even under democratic government monolithic state capitalism is likely to encourage less freedom, less efficiency and more bureaucratic inequality than will a pluralist system. Not the least notable contribution of capitalism to human freedom is that it disperses the power to take freedom away. When both government and capitalism are in the field giving direction to human activity, the freedom of the individual can be taken away only in two steps. Both the government and the capitalistic enterprise must act.
When government alone dominates the field, as is the case of socialism and communism, only one step is required to take away the individuals freedom. Some people, of course, argue that capitalistic enterprise is the embodiment of freedom. The moral genius of capitalism, then, lies in its institutional support for the inalienable capacity of human beings to use their own wits creatively. (Novak) They say that the idea that capitalism might destroy freedom is fanciful. The record, however, does not run that way. The history of modern industrialism presents many cases where business enterprises have sharply curtailed the freedom of their workers, not only on the job but in their community life.
The fact that government on occasion has enlarged the scope of individual freedom in the United States has prompted a good many people to regard government, rather than capitalistic enterprise, as the friend of freedom. However, even a glimpse at the historical record discloses that this attitude is not well founded. Frequently it has been the emergence of capitalistic enterprise which loosened the restraint of government on freedom. Indeed, as we know from the history, capitalism came onto the scene as a liberating movement. One may argue that the capitalist system is also inherently exploitative, in the sense that some people still live by the labor of others, and that those who produce end up at the bottom of the socioeconomic structure. However, the exploitation under capitalism is more subtle than it is under slavery and feudalism.
Under capitalism, according to liberals and conservatives, laborers and capitalists are free to bargain for wages. Either one can look elsewhere if they are not satisfied. Radicals regard this freedom as illusory on the part of laborers. They argue that, unless a laborer can invest his own capital, the only freedom she or he has is to work for the capitalist or starve. The distribution of property under capitalism that follows constitutes the social injustice that is reflected in the distribution of opportunity and, hence, the distribution of income. From their point of view, free market capitalism is the best-known vehicle for the allocation of resources, in that it provides the best incentives for individuals to be as productive as they can.
Free competition makes the fullest possible use of the gifts of nature and human ingenuity. (Davies) However, it is neutral with respect to the distribution of income, and as such it is incapable of redressing the wrongs of the unjust distribution of property. Further, free market capitalism came after the expropriation of property and therefore can be blamed for perpetuating but not for causing inequality. Free market capitalism, if unchecked, not only perpetuates but also augments inequality. For example, in this type of economic system, access to credit is crucial for further accumulation of wealth.
Unfortunately, money lenders, if allowed to freely pursue their own self-interest, are more likely to accommodate the already wealthy than propertyless workers or poor peasants. This happens simply because the wealthy have collateral, hence are less risky borrowers. Consequently, the poor are likely to remain poor as the wealthy get wealthier. Moreover, unequal distribution of property is also responsible for the unequal distribution of opportunity. For example, a person born in a wealthy family has more doors open for advancement in this economic system than a person with exactly the same innate talents, but born in the ghetto. It may be argued that socialism is better economic system.
Under socialism, in contrast to capitalism, individual initiative is paralyzed by the fear of punishment. Prison replaces profit for the man who would seek to implement an idea on his own initiative, for it is against the law under socialism to act outside the governments plan. If an individual does manage to think of some improvement under socialism, he must submit it to the government. If he does so, he will at most have only a handful of chances for approval of his idea.
In addition, whatever officials he turns to in the government will have no economic incentives to adopt his idea, whatever its possible merit. They will be inclined to reject it, in order to spare themselves the difficulties and uncertainties that are always entailed in implementing an innovation-such as the need to find new suppliers of raw materials, obtain new workers, or discharge or relocate present workers. The officials will not want to run the risk of the innovation being judged a failure and thus arousing the displeasure of those in a position to do them harm. At the same time, if the innovation were somehow to succeed, by whatever arbitrary standard success is judged under socialism, the effect on the officials would likely be merely the difficulties of establishing the new arrangements and then having their assigned production quotas increased -- these conditions prevailed in the former Soviet Union. Under such circumstances, very few new ideas are thought of, fewer still are implemented, and virtually none at all are of benefit to the plain citizen. The complete and utter powerlessness of the plain citizen under socialism can hardly be exaggerated.
Under socialism, the plain citizen is no longer the customer, who is always right, but the serf, who must take his rations and like it. For no official of a socialist government stands to make a profit by supplying him better or suffer a loss by supplying him worse. These officials both lack the incentive of profit and loss and need not fear any competition from the initiative of outsiders. Thus, the plain citizen is economically powerless against them. Capitalism remains the most fundamental institution organizing modern human life. (Thompson) To understand why capitalism is the best economic system, let us compare the conditions of socialism with those of capitalism. Under capitalism, whoever sees a profitable opportunity for action is free to act on his own initiative.
He is powerfully motivated to do so by the prospect of the profit he can make. At the same time, he is restrained from rash action by the risk of losing his own money. In addition, his action constitutes a challenge to the established ways of doing things. For if what he is doing is in fact an improvement over present products or methods of production, and then those producing the present products or practicing the present methods must copy his or be driven out of business.
And, as we have seen, competition is powerfully promoted by the fact that if an innovator lacks capital of his own, he can turn to any one of hundreds or even thousands of independent sources of financing by offering to share his profits with potential backers. The rise of capitalism would break the habit of servile dependency, and awaken the longing for personal independence and freedom. (Novak) Thus, under capitalism, every new idea has an enormous number of possible chances for being implemented and this constant development improves lives of people. Because of its freedom of initiative, its incentives to use that initiative, and its freedom of competition, the products and methods of production of capitalism tend to be literally the very best that anyone in the entire society can think of, and to improve further as soon as anyone can think of any still better idea. Capitalism triumphed because it is a system that is robust to cynicism that assumes that each man is out for himself. (Capitalism's Mysterious Triumph) Capitalism may be temporarily rescued from the contradiction by new industries; it may seek, with more or less success, an escape through imperialism and militarism; it may even undertake, again with more or less success and certainly against the growing resistance of the capitalists themselves, to modify the functioning of the system through taxation and government spending. But one thing is certain: as long as it remains capitalism, it can never abolish the contradiction, which makes capitalism the most practical economic system available. Bibliography: Michael J.
Thompson. Capitalism Resurgent, web Michael Novak, Wealth & Virtue. web Lindy Davies, Socialism, Capitalism, and Geoism, web Socialism Today, Socialist Party Magazine, web Capitalism's Mysterious Triumph, web
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Research essay sample on Distribution Of Income Unequal Distribution
