Government and economy are closely related and constitute the basis for any state; however, they have different functions. Economics is a social institution that provides all the processes for the production, consumption, and distribution of goods and services in society (“Economic Systems”). The government provides the legal basis for the functioning of all processes in society, the distribution of resources and power, including the work of the economic system.
Capitalism is a socio-economic system in which all resources, products, and services belong to private owners.
Socialism is the opposite of the capitalistic system, which is based on the fact that all resources belong to society and are managed by the government.
Communism is the “highest point” of socialism, in which social and economic equality reaches the level at which society does not need the government (“Economic Systems”).
The primary role of the government in the economy is to establish legal measures for the stable and predictable functioning of the system. These measures may include government acts and laws restricting monopolies or fraudulent actions and transactions, or taxes and national standards that guarantee product quality.
Although, in theory, economic systems are divided into socialism and capitalism, in practice, the state can combine the features of both of them. An example of such an economy is democratic socialism, in which the government controls the economy and society, but in a democratic way and by measures (Bump).
Most often, the US economy is defined as capitalistic because of Cold War stereotypes. However, in fact, the US economy also has the features of a socialistic economy, since the government regulates a significant part of business activity.
The modern world and its economy are built on a system of capitalism, which varies from country to country, depending on its policy. However, the basic principle remains the ownership of resources by individuals and companies, and the obtainment of profit from them. The United States also has a capitalist economic system, which, although regulated by the state, is not concentrated in the hands of the government. This system is beneficial for business owners and the country as a whole; however, it brings as much benefit as harm to society. Consequently, the United States and the world need to revise its goals of the capitalist economy and direct efforts not only to make a profit but also to solve global problems.
Capitalism is a system that works efficiently and supports the economy for many years. People invest in a business, build corporations, earn money, and create new corporations. This approach has helped reduce global poverty by about 80% in 200 years (“Everybody talks”). However, millions of people still live in the world who are forced to starve and live on the street because they do not have the opportunity to be producers but not consumers. The US has the same economic system, and although the government regulates business, and also tries to provide citizens with everything social help, the problem of inequality continues to exist.
Adam Smith noted that capitalism would make the life of the majority of the population so miserable that government intervention will be necessary to reduce the worst effects, ideally characterizes this system (Bump). In addition to social inequality, capitalism harms the environment as in the race for profit, corporations have polluted the planet and caused an environmental crisis.
However, one cannot blame capitalism for the problems of the present, or abruptly exchange it for another system, since from an economic point of view, this option is effective and pushes the world to develop. The world needs to change goals and take advantage of capitalism. The purpose of modern business people is to create a product for making more and more money that accumulates in the same hands (“Everybody talks”). However, if each company is called to social responsibility, for example, by government measures, then these billions of dollars can go to the benefit of humanity.
At the same time, the government should not force corporations to give money exclusively as a charity, but it is better to show them investment opportunities. For example, to help pay for education for children to appoint qualified personnel for future work. Or finance the construction of solar power plants that will help reduce environmental pollution. There are many examples of companies and rich people that assist other people in developing; however, so far, not enough to fix all the flaws (“Is Capitalism Saving”). In addition, each corporation will only get the advantage of investing in the development of human capital and the protection of the planet, since a higher standard of living means higher consumption. Thus, the economic system that creates inequality will be able to overcome it.
In conclusion, capitalism, with a different number of socialistic features, is the dominant system of the economy in the modern world. In the United States and other countries, it creates the conditions for the development of inequality, since it encourages the earning money only for the sake of their accumulation. However, if governments and corporations redefine their goals and become a little less selfish, then the world could be a better place to live for everyone.
Works Cited
Bump, Philip. “A High School Teacher Helps Clarify ‘Socialism’ for Donald Trump (And You!).” The Washington Post. 2015. Web.
“Economic Systems & the Labor Market: Crash Course Sociology #29.” YouTube, uploaded by CrashCourse. 2017.
“Everybody talks about capitalism — but what is it? | Kajsa Ekis Ekman | TEDxAthens.“ YouTube, uploaded by TEDx TalksBBC Earth, 2015. Web.
“Is Capitalism Saving or Destroying Us? | Davis Smith | TEDxSaltLakeCity.” YouTube, uploaded by TEDx TalksBBC Earth. 2016. Web.