FREE ESSAY ON CAPITALISM

CAPITALISM

CAPITALISM 
Today in the United States, a free market system or capitalism is the main economic
system. I am interested in this subject because I someday wish to own my own business. I
believe that in the future this topic will be very useful to me. Among the topics that I
will discuss are the Greeks and Romans early practices of capitalism, the ideas of Joseph
Schumpeter, Rush Limbaugh, and Karl Marx, corporations, regulation by the government, and
Reaganomics. I will also discuss the relationship between inflation and unemployment. In
addition, I will give my own perspective on the economic theories that I'm presenting.
These are just a few of the things that I will be discussing in this paper. 
HISTORY OF CAPITALISM 
Many of the institutions of capitalism can be traced back to Greek and Roman times.
Things such as trade, money lending, and insurance were well known practices to them.
Unfortunately, growth of the Roman Empire prevented further development of a private 
business class. As power over economic growth came back to the people or lords during the
Middle Ages, modern capitalism started to evolve. (The Software Tool works Illustrated
Encyclopedia) 
In the late Middle Ages, the medieval economy was based on MANORALISM. This system said
that peasants worked on the land that the lord's owned, but everything that was produced
by them was kept in return they had to perform services or pay dues to there lord. During
this time period, there was no incentive to produce large and productive resources. The
end of the medieval Manoralism was brought about by a larger demand for goods. Kings
competed against lords, and lords competed with peasants for the rights to what was
produced. As a result, there was an emergence of merchants and businessmen who
accumulated large sums of capital. In addition, there was also a large emergence of banks
and the start of corporations. (Galbraith Pg. 58) 
The only other economic system that got much attention was a new idea called Communism. A
person named Karl Marx wrote a book called the Communist Manifesto, which thought of the
state as being the main controller of economic growth, unlike capitalism where the people
in a free market are the main controllers of economic growth. In the 19th century when
most of the world like Britain, France, Germany, and the United States were in the age of
Laissez-Faire economic capitalism, other countries like the Soviet Union and China
followed Karl Marx's Communism. (Galbraith Pg. 97) 
Modern Capitalism 
The main thing that drives capitalism today is the large corporation that is able to
finance large operations to promote economic growth. As corporations got bigger and
bigger, many liberals favored breaking up corporations and putting them under state
control. They pressed for antitrust laws to get a competitive economy. This meant that
some corporations that got too big had to be broken up to make smaller companies in order
to create a competitive economy. The large corporations fought back by saying that they
were no less competitive than smaller businesses. An Austrian-American economist named
Joseph Schumpeter who argued in defense of large corporations said, the prime mover in
capitalist progress is not the small businessperson but the entrepreneur who introduces
new technologies and develops them. He also said Capitalism gives creative people the
freedom to make innovations, unlike state-runned economies which tended to stifle this
creative force. He also predicted that some form of socialism would eventually replace
capitalism in order to protect the people and the global environment. (The Software Tool
works Illustrated Encyclopedia) 
Arguments for and Against 
Capitalism today differs from capitalism of the 19th century because of its dependence on
the state. Today government is expected to take measures in order to stop inflation and
unemployment. A British economist named John Maynard Keynes said, government should spend
more money in times of slump, and also reduce taxes in order to increase aggregate demand
for goods and services, and in boom times the policies should be reversed to hold down
inflation. Most liberal economists believed that large corporations ought to be broken up
and nationalized so that their manager would be responsible to the public as a whole. 
(Lekachman Pg. 51) 
Other conservative economists stated that even large corporations were ultimately
controlled by the market where they sold their product and the market is subject to the
desires of the public. Conservatives also pointed out that government spending by
federal, state, and local governments amounted to more than one-fifth of the gross
national product. The same thing seemed to be happening in other European countries like
Sweeden, and Britain. 
(Lekachman Pg. 62) 
During the 1980's when Ronald Reagan was elected president it signaled the return of
capitalism as the dominant economic idea in the United States. Reagan's two main policies
or objectives were to reduce the size of government and deregulate the economy. The main
benefit of Reagan's new policies of lower taxes and tax reform was the virtual
elimination of inflation. As a result, the U.S. economy expanded and new records were set
on Wall Street. Critics of Reagan favored tax and spend policies that would inflate the
economy into what we are now seeing in Russia. As our National Debt got larger, they
blamed it on Reagan, but as I see things it was caused by the Democrats in Congress
during the 70's who authorized many new spending programs that could not be paid for.
This is why there was such a problem with inflation during the 70's. I believe it to be
unfair to blame him when we saw some of the biggest economic growth in the history of the
U.S. during the 1980's. Reagan, as well as many other conservatives, believed that if you
cut taxes, it would give incentive to businesses to invest there marginal tax dollars,
causing them to earn more money and pay more taxes on their earnings. As a result you get
rid of inflation and unemployment at the same time. Critics still protest, saying that
these policies are unfair to poor people and minorities. This statement has some truth to
it, but in the words of Rush Limbaugh, Capitalism, though not promising prosperity to
all, greatly improves the lot of most and offers opportunity to all. (Limbaugh Pg.
273-274) 
The concept that I talked about in the last page is called supply-side economics.
Liberals think that if you cut taxes, you get less revenue. Right? Wrong! Actual revenues
nearly doubled during the 80's from 550 billion to 991 billion. To go even further I
would like to see a flat tax implemented. A 15-18 percent flat tax rate would stimulate
the American economy greatly. This would happen by giving huge incentive to everybody to
make more money. Of course, some liberal might confuse you by saying that making money is
greedy. Sure the rich will get richer, but their businesses will grow due to the fact
that they will have more money to employ more people creating less unemployment. Also
people currently avoiding taxes either legally or illegally will be brought into an even
system where they will not need to avoid taxes through current legal loop holes. The
reason why people like Bill Clinton get elected to be president is because he plays the
game of class warfare. Clinton did a good job of convincing the poor and the middle class
that Reagan did them wrong. Clinton believes that the rich should be punished by higher
taxes. I ask you, why should you punish prosperity? The main goal of the liberals and
Bill Clinton is the redistribution of wealth. The key question to ponder is,  when do
profits become unfair and excessive? (Limbaugh Pg. 118-119) 
In conclusion, capitalism is the best thing to help the United States economy grow. The
entrepreneur is the person who makes this economy rum smoothly and profitably. A creative
person at the head of a company can do a lot more than a person who is at the head of a
state-runned bureaucracy. This is true because the entrepreneur has incentive to do the
job correctly, but the bureaucrat has none because he knows that his job will still be
there tomorrow no matter how he performs. I will agree that pure capitalism won't work
because you still need environmental laws and other laws to protect the consumer.
However, problems begin when extreme socialistic views like Bill Clinton's are imposed.