Thesis
Capitalism resulted in major changes in the socio-economic system in the life of the people since its initiation and up-to-date. Capitalism basically refers to a system where the market economy determines the right of individuals to make profits, to invest and to determine pricing of goods and services (Hunt, E.K, 2002, 58). This major problem area that the capitalist system had major impact on includes:- Competition and Free Trade, Social Justice and Political Action and finally Philanthropy and Consumption. This essay will try to highlight the first problem area of Competition and Free Trade, what some of the known authors had to say about the effect of capitalism on it, and finally the overall impacts of the system on competition and protectionism.
Introduction
Capitalism per-ser was normally used to describes a philosophical political sense and narrowly an economic sense. i.e a free market based on the recognition of individual rights, including the right to private ownership of property. The system offered a great political freedom where the state is separated from the economy (production and trade) which offers a preference to put the ownership of property on individuals rather than on the state…but all these processes were protected by a rule of law.
Competition and Free Trade Under Capitalism
George Reisman in (George Reisman, p 1096) gives a comprehensive and intellectually powerful illustration of the values of the nature of laissez-faire capitalism. He concurred with the likes of Adam Smith and David Ricardo in their beliefs on the same school of thought. The scholars had the same idea regarding the subjects touching on wages, capital accumulation, m, monopoly , economic accounting and natural resources among others. His ideas were greatly opposed by critics like Marx and Keynes. In most of his books, Dr. Reisman demolished the following beliefs:- first, that the profit motive is the chief cause of starvation wages, second is that competition is the law of the jungle, third, is that savings a form of hoarding, finally, is that economic inequality is unjust and is also the major cause of unemployment and depression.
Adam Smith in 1776 proposed a kind of reasoning that was referred to as “the system of natural liberty” (Hunt, E.K.,2002, p 92), which led to the formulation of some concepts that have been associated with capitalism to the present day. Smith advocated for free trade, copyrights and patents. he argued that it is the responsibility of the state to provide public goods like roads, canals, bridges and schools., which should in turn be put under the management of the private entities. Karl Marx on his side had it that capitalism was a system that represented the most advanced form of human social organization. He supported the issue of middlemen and wholesalers having to “make-up” the prices stating that the exchange value of a commodity should be higher than its original purchase (Degen, Robert, 2008, p 205).
The concept of free-market led to competition which in turn results in some aspects affecting the economic status of the people…that to the critics of capitalism will be unfair. For instance, wholesalers and other middlemen add “make-ups” to prices of the commodities produced by the farmers and manufacturers; advertisers are frauds who are inherently guilty of try to induce people into buying goods that may not be of great desire to them…the way capitalism showers praises on the goods may eventually make the victims buy the goods that they do not need. Such are the reasons why people turn to the government for direction, and so is how the system of protectionism comes in (Dobb, Maurice, 1947, 56-71).
Protectionism
People always turned to the government for protection, aid and for social justice. “Protectionism” is an economic system that is used by the governments to achieve a political goal of an “independent nation”, while on the other hand “Free Trade” is a means used to create an “interdependent nation”. The trade restrictions imposed on businessmen operating within a nation’s borders as well as across the borders are meant to put the free trade system within control. It was achieved by imposing high tariffs on imported goods, restrictive quotas, establishing anti-dumping laws to protect local/ domestic industries from unfair competition as well as protecting the consumers from using dubious substandard goods. Since free trade has no artificial barriers instituted on it to control the flow ‘of goods and services, protectionism was a major requirement needed to legislate the policies and doctrines which were geared to protect the local businesses from foreign interference. Nations achieved this by the employing following:- Quotas, Tariffs, Tax cuts, Subsidies, Trade Restrictions, and other several state interventions (George Reisman, 57-77).
Work Cited
Burnham, Peter (2003). “Capitalism: The Concise Oxford Dictionary of Politics”. Oxford University Press.
Calhoun, Craig (2002). “Capitalism: Dictionary of the Social Sciences”. Oxford University Press.
Degen, Robert.(2008): ” The Triumph of Capitalism”. 1st ed. New Brunswick, NJ: Transaction Publishers. pp 123-341.
Dobb, Maurice. (1947): “Studies in the Development of Capitalism”. New York: International Publishers Co., Inc. 147-187.
George Reisman. “Capitalism:A Treatise on Economics”. 1096.
Hunt, E.K. (2002). “History of Economic Thought: A Critical Perspective”. M.E. Sharpe. pp. 52-92.
Karl Marx. (Chapter Twenty-Five): “The General Law of Capitalist Accumulation”. Das Kapital.