Table of Contents
DQ1 Capitalism vs Socialism
Q1: Define capitalism and socialism and provide examples of countries for both structures.
Capitalism is an economic system in which there is private ownership and where there is a drive to provide profit and wealth. Examples include Hong Kong, United Arab Emirates, Singapore, New Zealand, and Australia. Socialism is an economic system in which government owns goods and their production, with a drive to share work and wealth equally among society members (Jahan & Mahmud, 2015). Examples include China, North Korea, Cuba, and Russia.
Q2: Next, discuss why capitalism and socialism are currently being spotlighted in U.S. politics giving the pros and cons to each organizational structure. Be sure to be specific and give supporting facts, not just opinions.
In the U.S., some belief in the continuation of capitalism while others advocate for socialism. For some Americans, socialism evokes weakened work ethic, stifled innovation, and excessive reliance on the government. Others think that it represents a more generous society. The majority of Republicans and Republican-leaning independents have a positive impression of capitalism and a negative view of socialism. Democrats and Democratic leaners view both socialism and capitalism positively. Nearly a quarter of Americans who view capitalism positively say that the system provides an opportunity for individual financial growth (PEW RESEARCH CENTER, 2020).
Pros: Incentive to be rich encourages innovation (Goldstein, 2018), firms have incentives to be efficient and it prevents large bureaucratic government (Klein et al., 2022).
Cons: Firms can use their monopoly power to exploit consumers (Venkatesh, 2021), entities with monopsony power can exploit workers with low wages (Dubb, 2018), and it tends to cause massive inequality.
Pros: It leads to a more equal society, reduces poverty, promotes the common good and social welfare instead of selfish gains, and regulates excesses of the free market (Michaud, 2019).
Cons: Higher taxes reduces incentives to invest and work (Pavel et al., 2021), entrepreneurs may move tax havens to other countries, and can result in less employment due to excess labor regulation.
Q3: Finally, address the question: Does capitalism create wealth inequality, and is this necessarily a bad outcome?
Capitalism creates wealth inequality. Some inequality results from individual differences in talent or skill. Much of the inequality of wealth within capitalist societies results from inequalities of inheritance. The inequalities lead to differences in education, economic power, and further inequalities in income. Capitalists can use their property to obtain money, invest and make even more money but the laborers cannot use their skills as collateral. Wealth inequality is not necessarily an adverse outcome because it is one of the driving forces for innovation that compels economic development. There is healthy competition in the market and there is no barrier for someone to develop themselves and get wealthy. A country can also come up with policies for equitable distribution of income and resources through taxation.
Dubb, A. (2018). The value components of contract farming in contemporary capitalism. Journal of Agrarian Change, 18(4), 722-748.
Goldstein, J. (2018). Planetary Improvement: Cleantech Entrepreneurship and the contradictions of green capitalism. MIT Press.
Jahan, S., & Mahmud, A. S. (2015). What is capitalism? International Monetary Fund, 52(2), 44-45.
Klein, P. G., Holmes Jr, R. M., Foss, N., Terjesen, S., & Pepe, J. (2022). Capitalism, cronyism, and management scholarship: A call for clarity. Academy of Management Perspectives, 36(1), 6-29.
Michaud, T. A. (2019). Blasts from the Preclassical Past: Why Contemporary Economics Education Should Listen to Preclassical Thought. Studia Gilsoniana, 8(4), 839-855.
Pavel, J., Tepperová, J., & Arltová, M. (2021). Tax factors affecting FDI allocation in the EU post-socialist states. Post-Communist Economies, 33(6), 710-725.
PEW RESEARCH CENTER. (2020, August 25). Americans’ views of ‘Socialism’ and ‘Capitalism’ in their own words. Pew Research Center – U.S. Politics & Policy. https://www.pewresearch.org/politics/2019/10/07/in-their-own-words-behind-americans-views-of-socialism-and-capitalism/
Venkatesh, N. (2021). Surveillance Capitalism: a Marx-inspired account. Philosophy, 96(3), 359-385.
DQ2 Minimum Wage
Several states have passed legislation to increase minimum wages to $15/hour, including New York, New Jersey, Massachusetts, California, and Illinois. Various studies have documented the benefits of raising the minimum wage. Increasing the minimum wage would lift some families out of poverty, but it would cause other low-wage workers to become jobless and their families would fall. The low-wage workers who would have lost employment would see their earnings decrease and in some cases, their families would fall below the poverty threshold.
According to the house committee for education and labor, raising the federal minimum wage stimulates consumer spending, help business’ bottom lines and grow the economy (House Committee on Education and Labor, n.d.). A survey conducted by Republican pollster Frank Luntz found that 80 percent of business executives supported increasing the minimum wage (DePillis, 2016). Studies by leading economists found that employee morale and work ethic increase when employees believe they are paid a fair wage. For the economy, there is evidence that it does not kill jobs as some critics argue (Schmitt, 2013). Additionally, raising the minimum wage increases consumer spending and boosts the economy (Hall & Cooper, 2012). I support raising the minimum wage as it has more benefits and would benefit the economy.
DePillis, L. (2016, April 4). Leaked documents show strong business support for raising the minimum wage. The Washington Post. https://www.washingtonpost.com/news/wonk/wp/2016/04/04/leaked-documents-show-strong-business-support-for-raising-the-minimum-wage/
Hall, D., & Cooper, D. (2012). How raising the federal minimum wage would help working families and give the economy a boost. Issue Brief, 341, 1-19.
House Committee on Education and Labor. (n.d.). Raising the Minimum Wage: Good for Workers, Businesses, and the Economy. https://edlabor.house.gov/imo/media/doc/FactSheet-RaisingTheMinimumWageIsGoodForWorkers,Businesses,andTheEconomy-FINAL.pdf
Schmitt, J. (2013). Why does the minimum wage have no discernible effect on employment? (Vol. 4). Washington, DC: Center for Economic and Policy Research.
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