Characteristics of Capitalism
I. Basic Characteristics of Capitalism
A. Economic systems determine what to produce, how to produce, and
who will receive production.
B. An economic system must also have the ability to adapt to changing
economic environments. For example, How will America's economic
system adapt to changes caused by September 11?
C. Adam Smith described the beginning of market based capitalism.
1. His 1776 book The Wealth of Nations first described of capitalism.
2. It described capitalism as it was practiced in 18th century England.
3. For more visit econlib.org/library/Enc/bios/Smith.html
D. Basic characteristics described by Adam Smith
1. Private property-the right to own resources and bequeath property
2. Freedom of enterprise-own a business
3. Freedom of economic choice-work/not work, spend/not spend
4. Role of self-interest
a. People are by nature economic creatures
b. Self-interest is a fundamental characteristic of people
5. Competitive market system
a. Many buyers and sellers
b. Market participants, buyers and sellers, have little control over price
c. Competition performs the organizing and controlling functions for a
6. Limited government ("Laissez-faire ")
a. Government should let markets be with a hands-off philosophy)
b. Acceptable government involvement has become an important
political question in the United States during the last few decades.
c. Francois Quesnay popularized the term laissez faire.
7. Characteristics of capitalism lead to Creative Destruction
a. First described by 20th century sociologist and economist
Joseph Schumpeter, it was an important new idea for
b. Change involves the creation of technolodgy improved economic
structures and the destruction of inefficient economic structures.
c. Capitalism allows this destruction to take place.
d. The fight between labor and management has also brought much
e. Let Us Now Praise Private Equity explores the application of
creative destruction to the poor job creation during the great
recession. National Review. 2/6/12
f. Carnival of Creative Destruction: a futurist predicts change
g. Rust Belt Almanac rMid-West decline and Creative Destruction
In the News
The Capitalist's Dilemma Harvard Business Review
How Capitalism Has Gone Off the Rails Der Spiegel
Capitalism and Inequality CFR
Two Sources of
Sites of Interest
II. Modern Capitalism has many
A. Complex Market System Setting Prices
B. Importance of Capital Goods and Technology
1) Complexity requires company produce limit their product lines.
2) Division of Labor allows specialization by ability ad training.
D. Unique Descriptions of Modern Capitalism
1. Corporate Capitalism: a capitalist marketplace characterized by the
dominance of hierarchical, bureaucratic corporations.
2. Crony Capitalism has been around from the beginning.
a. New name is Corporate Welfare
b. How crony capitalism corrupts the free market 30 minute vide 12/22/13
c. Hunter Lewis on crony-capitalism 30 minute vide 1/25/14
d. Geithner and Summers accused of being Crony Capitalist 2/16/15
3. Money Manager Capitalism: money managers dominate savings/investing and
markets impacting economy's performance
4. State Capitalism: economy driven by state, less reliance on markets, practiced in China
5. Democratic Capitalism vs. Capitalistic Democracy is about cost effectiveness.
6. Patrimonial Capitalism is gentry living off of inherited wealth.
7. Capital in the Twenty-First Century is very popular by Thomas Pikett, book review
a. Capitalism vs. Democracy editorial 1/28/14
b. Capitalism in the Twenty-First Century editorial 3/25/14
c. Taking on Adam Smith and Karl Marx NYT 4/19/14
d. Capitalism is Not to Blame for Middle-Class Plight
8. Capitalism is a concise overview from reference.com
Sources of Economic
"rent-seeking is expending resources on political activity to increase one's share of existing wealth without creating wealth"
III. Criticism of Modern
A. Crises Capitalism is a concise video contains ideas about capitalism resulting from
The Great Recession of 2008-2009.
B. Why is Chinese Capitalism Better than American Capitalism? 1/2/11
C. Why Intellectuals Hate Capitalism by Robert Nozick
D. American Politics Are we a Democracy? A Republic? A Polyarchy?
Noam Chomsky breaks down American Politics today and American
Politics that our founders envisioned.
E. Is Capitalism Moral? A Commonwealth Club Podcast Debate – 10/ 22, 12
F. Hoodwinked An Economic Hit Man Reveals Why the
World Financial Markets Imploded--and What We
Need to Do to Remake Them, by John Perkins
G. Coercive power of capitalism
H. Capitalism and Inequality (Jerry Z. Miller, Foreign Affairs) Without social safety
nets capitalism is doomed through social disorder. Editor's Note: I've seen a lot of
verbiage blaming Capitalism for the inequality in the U.S. Inequality is a political
question. It is the responsibility of voters through politicians to fairly distribute
production without substantially limiting the productive capabilities of capitalism which
has coped with the Balance Sheet Recession known as with The Great Recession 3/12/13
See People Not Voting Their Pocketbook is Literally Killing the Poor
I. How Will Capitalism End 6/14
J. Has Capitalism Reached a Turning Point discussions on needed reforms Forbes, 9/26/14
Capitalism Readings and Videos
Some Criticize Dramatically
Some Question his motives.
Sam Walton went from doing
farm choirs to remaking U.S.
How Markets Work: The Circular Flow
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Conclusion Four Horsemen video is a collection of today's greatest sociological, political and economic voices that analyze and put into historical perspective the decisions and results of our economic and political systems.
Discussion Questions updated 2/14/15
Editor's Note: To solve the problem of not enough income for the middle classes in the 1980's, capitalism changed the name of Home Improvement Loans to Home Equity Loans and people were allowed to what had been a retirement nest egg before they retired. There is nothing wrong with this as long as people realize that they are delaying retirement.
Please Blog Friends About This Free Library Using
Is This Divergence an Economic or Political Issue?
More Project Data
Editor's Note: The recent large decrease in the Household debt resulted because people defaulted on mortgage debt and the Federal Reserve picked up the tap by printing money.
Educating the Class of 2030 An Economic
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Calvin and Hobbes Explain Modern Capitalism from The Daily Beast
US Produces Most Per Capita
We Borrow on Home Equity for Current Consumption.
Yet Many Seem Dissatisfied?