Nature of Capitalism: Capitalist Economic System Today (Article Sample)

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The Nature of Capitalism
Question 1
One of the strongest moral arguement or consideration in favor of capitalism is Adam Smith’s concept of the invisible hand. Adam Smith who is considered as the father of economics argued that whenever people are left to pursue their interests and targets, they normally exceed it by producing the greatest good for all. He further stated that, each individual and his/her pursuit of wealth is guided by an invisible hand which is beneficial to the organization and the society as a whole due to its distribution of the limited economic resources. However, what Adam Smith did not take into account is the fact that human beings are acquisitive. We tend to have a natural propensity for trading and we are people of self-interest. Therefore, we get what we need from others by offering them something they need. This leads to trade and as a result, division of labor and the production process is created. Since human beings are materialistic and self-serving, engaging in labor and trading is a way that results in the greatest benefit to society. If we try to advance our self-serving economic interests, we also promote the economic well-being of the society.
Critics argue that capitalism has lead to a profound economic inequality system. The difference in personal incomes is enormous and over the past few years, that difference has increased more than ever anticipated. This is further compounded by the fact that a minority of the population owns majority of the country’s wealth; while the society is marred by extreme poverty, and lack or poor housing. Supporters of capitalism claim that, it is a fair economic system but, reality seems to challenge that notion of fairness (William.H.Shaw 123)
Question 2
Capitalism has managed to evolve over the years to what it is today. The mercantile capitalism which advocated for mutual dependence between commercial interests and the state is no longer realistic and viable. However, some of the characteristics such as use of gold as a measure of government’s wealth and financial strenght, and as a safe storage of one’s or state’s wealth is still applicable today. The mercantile capitalism was replaced by industrial capitalism which brought to the fore a sound financial system, introduced use of technology in production, and expanded markets. With the success of the industrial period, many industries set out to strengthen their financing systems which eventually lead to the financial capitalism. It was characterized by the formation of trusts and holding companies, and unprecedented growth of the banking and insurance sectors.
After the Great Depression of the 1930s, a new phase of capitalism emerged. State welfare capitalism lead to the government’s active involvement in the economy and its use of fiscal and monetary policies to influence the economy. Furthermore, the government introduced programs such as social security and insurance for the unemployed, and legitimizing the existence of trade unions. Today, we are in a new phase of capitalism referred to as globalized capitalism. We live in a world where even the traditional socialist nations have capitalist tendencies even though they are reluctant to admit it. This phase of capitalism is characterized by international trade which is made easier by technological advancements. However, we still have doses of the state welfare capitalism with programs such as social security and unemployment insurance still in operational (William.H.Shaw 117-118)
Question 3
Today capitalism is not similar to the laissez-faire model. Huge companies and institutions control markets and are capable of swaying government policies in their favor. This has left small-scale businesses and enterpreneurs at their mercy. In all countries in the world, governments actively participate in the economic realm; through the famous invisible hand. Man...