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Unformatted text preview: Capitalism 101 Economic Systems Capitalism, Communism, Feudalism, Slavery, etc. Not religion Not civic republicanism/patriotism Not sacred or moral. Simply a way people earn the means to stay alive and thrive. Economic systems are "Controllable," but they are also very complex. For pure capitalism, this means complete individual freedom of choice For pure socialism, it means choice for society as a whole America today (and most modern societies) fall between these two ideals Economic systems are "Predictable," but only by those who control capital: Credit Ratings determine how much we pay for loans; but credit rating can FALL if we pay off our credit cards; loans more expensive! Companies pay different salaries for the same work (gender, race, age, and now nationality). It is predictable, but based on goals of capital (most productive use of capital) Two Types of Capitalism Merchant/Mercantile Capitalism Adam Smith: Supply and Demand, Hidden Hand of Marketplace, Buy Low Sell High Profit comes from selling something that others want now Basis for American exportimport economy before Civil War Businesses easy to start up; firm usually dies with the owner Post 1865 in U.S. Mass capital to purchase machinery and efficiency (millions of $$) Business so big that no single owner exists; firm is immortal Profit comes from selling for more than it costs to make Stockholders Professional managers (Pres, VPs, etc.) Industrial/Managerial Capitalism Wages (and other benefits) critical to costs Don't want unions to tell capital how much to pay laborers (or working conditions, hours, etc.) Key Facts of Capitalism
1. An extremely radical economic "policy" (one that isn't controlled by any single entity) Individuals radically freed from the bonds of society (aristocracy/birth, kin, church, community) Power generated through the collection of "capital" not through traditional means (aristocracy/birth, kin, church, community) Karl Marx & Frederich Engels, Communist Manifesto (1848): Are you in "control" of your destiny, even if you work for a company "Constant revolutionizing of production, uninterrupted disturbance of all social relations, everlasting uncertainty and agitation, distinguish the bourgeois epoch from all earlier times. All their fastfrozen relationships, with their train of venerable ideas and opinions, are swept away.... All that is solid melts in the air, all that is holy is profaned, and men at last are forced to face with sober sense the real conditions of their lives and relations with their fellow men." Individual freedom is determined by money; most money controlled by certain individuals; extremely hard to earn money in ways not sanctioned by those already with money. those already with money. Key Facts of Capitalism
1. An extremely radical economic "policy" 2. It doesn't "care" about people 1. It does "care" about the productivity of capital ...about God ...about the U.S. of A. Best comparison is to nature, which doesn't "care" about individual lives or human belief systems If you don't use it right, it loses value (less money) If you do use it right, it gains value (more money) A fact: The money in your wallet right now is losing value because it is not in productive use Wall Street (1987) Directed by Oliver Stone Gordon Gecko is not "human", but rather the physical embodiment of capitalism. Evolution, Survival of the Fittest: "You either do it right or you get eliminated" How many have the resources to compete with Gecko? Is America a "malfunctioning corporation" or a democracy with a Constitution? For Capitalism, Choice is Key Merges well with our political heritage and philosophy Democracy based on choice Capitalism emerges historically about the same time as Enlightened politics Adam Smith publishes The Wealth of Nations in 1776 Capitalism becomes "the ways things should be" for most in the West Freedom of action (merges with ideals of social freedom) The best part: the right choices create more capital! We choose how we use our capital (pay $100 to buy into the stock market or $100 for consumer goods?) Advertisers want you choose the latter; they want you to prioritize their goods above the capital you spend to get them. Hard work and innovation critical (Edison: "99% perspiration and 1% inspiration") Selfcontrol as a form of choice Choose not to buy things Choose to work hard, to invest your money Choose to delay gratification (I didn't say they were fun choices) "Controls" over Capitalism
1. Financial Systems 1. The State Banks and credit institutions "control" access to money (profit by this fact alone; great capitalist business!) Financial Systems demand profit from capital will expand or restrict it depending on growth. Ben Bernanke, Chairman of the Federal Reserve Board (New Deal program) 1. Money Supply (M1) Regulation of labor, taxes, minimum wage, trade, etc. State represents society, NOT capital There are eras when state and capital merge (1870s, 1920s, 1980s, today?) "The business of America is business" U.S. President Calvin Coolidge Merger of the two above Varies the value of capital: Increase M1 = Inflation, easy to get money, less valuable, aids those with a lot of credit debt (pay later with weaker dollars) Decrease M1 = "Hard Money" (gold) hard to get, more valuable, aids those who have money to loan/invest (paid back with stronger dollars) Back to Reality (or HIST1302): What does Capitalism Mean for U.S.? Radical Social Change Individualism "Creative Destruction" Speculation vs. Investment Consumerism Foreign Markets (Globalization) Mechanization Radical Political Change Money = Political Power The State either supports or opposes Capital Economic Materialism, not Societal Values, increasingly controls the political agenda Who has capital? Who wants it? How can they get it? "Dehumanizing" Economy favors capital, not people ...
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This note was uploaded on 03/27/2012 for the course HIST 1302 taught by Professor Carter during the Spring '08 term at Texas A&M University, Corpus Christi.
- Spring '08