Capitalism,Socialism,andDemocracy

1、Capitalism, Socialism, and DemocracyCoherencies and Contradictions1Capitalism & DemocracyInherently linked?No!Capitalism also linked to non-democratic regimes (e.g. China).2Socialism & DemocracyMutually exclusive?No!Most European Countries are “social” democracies not to mention that the United Stat

2、es has many elements of social democracy.31) Democratic CapitalismCapitalism= Economic system based on private property and free markets.4Traditional CapitalismAlso known as: “Free Market” or “l(fā)aissez-faire” Capitalism and has five components:Private ownership of propertyNo legal limit on accumulati

3、on of property.Free Market-no government intervention in the economyProfit motive as driving force.Profit as measure of efficiency5Adam Smith (1723-1790)Intellectual Father of Capitalism who said:Humans motivated by self interest.Should be free to pursue profits.Result: “The Invisible Hand.”Efficien

4、t economic system; all will benefit because goods will be produced and sold cheaply.6Capitalism Vs. FeudalismCapitalist entrepreneurs had to organize to fight against the system of their time, Feudalism.Feudalism was the economic system derived from Monarchical and Aristocratic society.Serfs or Peas

5、ants were allowed to work the land but a percentage of their labor went to the king, noble, or lord who owned the land.7Capitalists as RadicalsFeudalism was inefficient, did not promote economic growth because there was no private property.Capitalists organized, started social movements based upon t

6、he ideas of Adam Smith: Private property, government non-intervention.8Late 19th and Early 20th CenturyChanges to capitalism as a result of criticism.Some regulation of the economy9Mixed Economy: Rise of the Welfare StateMain Catalyst: The Great Depression (1929-1941)Key Presidents: FDR, LBJ, and Ni

7、xon.Specific areas: retirement, health, unemployment, education.10Arguments for Mixed EconomyJohn Maynard Keynes (1883-1946): argued that depressions can be avoided if government pumps money into the economy to eliminate unemployment. Also argued for government role in building a social security sys

8、tem and regulate business.11Who Else uses Mixed Economy?Japan, most European countries built welfare states.Why?Eliminate antagonistic relationship between business and labor through government mediation = corporatism.12Welfare SystemTwo types of assistance:Need-based: Food stamps, aid to families w

9、ith dependent children, unemployment.Non-need based: pensions, social security.13Response to criticism:Welfare system does give away money.But, they are supposed to ease tension and inequality.14Perpetuates DependenceMay be true to some extent, but what is the alternative?Minimum wage jobs?Supposed

10、to help people subsist at a minimum level.151980s & 1990sReturn to free market principles (Reagan).Dismantling of Welfare state.Cut taxes.Massive Government Debt.16Capitalists & DemocracyCapitalists argue that democracy requires capitalism because of freedom to accumulate.Private property is highest

11、 value (economic freedom).Economic freedom exists when government and monopolies are checked.17MonopoliesGive too much power to business (J.P. Morgan).Reduce competition (Bill Gates).Eisenhowers warning: Military Industrial Complex; creation of a power elite (military, corporate, government).Result:

12、 Collusion of Interest18Economic FreedomProblem for small businesses?Many hurdles.Working hard often not enough.Problem of equality of opportunity (race and gender barriers).19Critics of Democratic CapitalismFocus on extremes of poverty and wealthAnd, Influence of wealth on political processAnd, Pow

13、er differentials between employers and employees.They say: capitalism produces inequality of wealth and power.20The answer:Private property must be checked.What are the effects on the community if not?Outsourcing, factory closuresMust be accountability of economic power to the people (political powe

14、r)21Too much CapitalismResults: Profit motive strengthens selfishnessLoss of community values of cooperationFree Market allows rich to accumulate without responsibility to community (Multinational Corporations).22Democratic Socialism(Social Democracy)Characterized as follows:much property held by th

15、e public through democratically elected government, including major industries, utilities, and transportation systems; a limit on the accumulation of private property;government regulation of the economy; extensive publicly financed assistance and pension programs; social costs added to financial co

16、nsiderations as measure of efficiency.23History of SocialismResponse to the Industrial RevolutionWorking conditions, living conditions, pay.Christianity: sharing, community, cooperation.24Revolution or Evolution?Marx argued for revolutionary transition to socialism (communism) through workers revolu

17、tion.Later, others argued for reform through elections.25AssumptionsCitizens ought to control political and economic life.Should be democratic accountability.If people control economic system then more equality and less poverty will follow.Limited Private Property. Socialists are not against private

18、 property, but are in favor of government regulation. 26Government and EconomyMonarchy (one) DictatorshipAristocracy (few) OligarchyDemocracy (many) TyrannyFree Market (Pure form: Market rules)Democratic Capitalism (hybrid)Democratic Socialism (hybrid)Command Economy (pure form: State rules)27Social

19、ism and DemocracyPolitics and economics are connected.People should decide the direction of the economy.Community should benefit, not just a few individuals.28ContinuedProfit motive (self-interest) goes against the interests of the community.Liberty requires economic security (remember “positive lib

20、erty”).29ContinuedWelfare/Social Security (high taxes on rich): Typical democratic socialist welfare system (Sweden) includes extensive medical care system (free or minimal costs), prenatal care for expectant mothers, sabbatical leave for mothers (full pay); unemployment benefits and retraining prog

21、rams, free public education; workers representation on boards of corporations; rent subsidies.30CriticismsProblem of bureaucracy, accountability.High costCorruption31ResponseOmbudsman: hears complaints about bureaucracy tries to correct inefficiencies, corruption etc (like an “independent commission

22、”).32More CriticismsFree market of competitive capitalism is essential for efficient production and distribution of goods.Interference with free market through government ownership and control puts too much power in the hands of government destruction of freedom and democracy but the electoral process is still there.Human Nature acts against socialist idealism.33Current TrendsSupply-side economics argues that government should only control the supply of money in the economy to keep inflation low government borrowing