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Writing Assignment #1
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Read the articles provided
Write at most two pages discussing the differences between a “capitalist” and a
“socialist” economic system
 Your assignment must be typed double spaced. (APA Format)
 Failure to follow APA format will result in a 10% reduction in your score
 One inch margins all around the page.
 Font 12, Times New Roman or Arial ONLY.
 You must have a Cover Page and a References page as requested in APA
 Write it ALL in your OWN words, DO NOT COPY / PASTE anything
 Feel free use other sources to talk about the same topic and analyze using economic
concepts.
 Feel free to write about your experiences in a “capitalist” or “socialist” economic system
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The assignment is due on Monday 2/3/2014 by midnight. For each day your paper
is late there will be a 2.5% reduction in score
Using your text book and the article as your only references is acceptable. Using
additional acceptable recognizable resources in your assignment is encouraged.
The use of Wikipedia, any other internet blog, question-answer websites as a
source is not acceptable
Link to articles
Article one
Article two
Link to APA reference website
http://owl.english.purdue.edu/owl/
Examples of College Level Writing
http://www.mdc.edu/asa/faculty/college_level_writing.asp
Examples of not College Level Writing
http://www.mdc.edu/asa/faculty/not_college_level_writing.asp
Capitalism
Current Issues, 2010
Listen
Capitalism is an economic system in which the means of production and distribution are
owned by private individuals or corporations. Labor, goods, and wealth are traded in
markets, and profits from these exchanges go to owners. Capitalism became the dominant
economic system in Europe after the end of feudalism, and since the Industrial
Revolution has spread throughout much of the world.
How Capitalism Works
Capitalism works through a framework of free markets. People are free to invest their
capital, or money, in businesses for their own profit. Businesses decide what goods to
produce and what price to set for these goods. The desire to reap the highest possible
profit requires businesses to sell as many goods as possible for the lowest possible cost to
themselves. Businesses reinvest some of their profits to improve their goods or to create
new ones. They also compete with similar businesses for consumers. This competition is
a driving force for innovation, encouraging the development of new and improved
products as well as efficiency in production.
To maximize profits, businesses are constantly seeking to lower the costs of production.
These costs include the price of materials and of labor. Seeing labor as a cost, businesses
are motivated to keep wages as low as possible. At the same time, however, workers are
an asset to a company because their skills are necessary to the process that generates the
company's profits. Workers whose skills are in high demand are worth more to employers
and therefore earn higher incomes, while those with fewer or less-needed skills earn less.
In a capitalist economy, individuals are free to use their income as they choose. By
purchasing goods, they create profits for businesses and also influence companies'
production decisions. For example, if large numbers of consumers buy relatively
expensive SUVs rather than smaller and less expensive cars, manufacturing companies
will continue producing greater numbers of SUVs. If consumers refuse to buy SUVs and
purchase hybrid vehicles instead, businesses will lose money by continuing to produce
SUVs and will turn instead to the production of more and better hybrids. Cycles of supply
and demand, according to economic theory, are a normal part of the free market system.
Capitalists argue that such cycles, in which economic recession is followed by recovery
and expansion, are generally predictable and are self-regulating.
Adam Smith
The Scottish philosopher Adam Smith (1723-1790) articulated the classic modern theory
of capitalism in his book An Inquiry into the Nature and Causes of the Wealth of Nations,
commonly referred to as The Wealth of Nations. Smith argued that a free market
economy produces more wealth, and more benefits to society, than other systems. He
explained how the investment of capital into new businesses made possible the huge
expansion of production during the Industrial Revolution. Industrialization brought
specialization of labor, with workers in a factory focusing on only one step in the
manufacturing process rather than each worker making an item from start to finish. This
specialization, said Smith, vastly increases productivity and also increases the value of
labor, which becomes more and more skilled. "Labour," wrote Smith, "is the real measure
of the exchangeable value of all commodities. The real price of every thing, what every
thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring
it."
Smith also wrote that, under capitalism, people's pursuit of their individual interests
creates beneficial market conditions that in turn contribute to the good of society.
Arguing against external regulations such as tariffs, he believed that markets regulate
themselves and are the most fair and efficient means of distributing resources. In simple
terms this means that consumer demand ensures that businesses produce goods that are
necessary and wanted, at prices that are affordable to buyers but that also generate profits
for the business. Producers who charge too much, or whose goods are of poor quality,
lose business because consumers are free to purchase better and more fairly priced goods
from other companies.
Although not originally his idea, Smith's belief that economies should operate without
any government interference is known as laissez-faire capitalism. In practice, many
countries employ mixed economies, which combine elements of laissez-faire capitalism
and socialism.
Karl Marx
The most influential critic of capitalism was German philosopher Karl Marx (1818–
1883). Marx saw capitalism as a system that exploits labor and creates class conflict. He
argued that because workers are deprived of any control over the production process
under capitalism, the system creates alienation. Workers feel no personal connection to
the process or the product being produced, nor to their fellow workers. Furthermore, said
Marx, capitalism creates unequal distributions of wealth, whereby most of the labor force
is kept poor while a small segment of society owns and controls wealth and power.
Marx believed that this exploitation of labor would impel workers to rebel against the
capitalist system and create a socialist revolution. Under socialism, the means of
production and distribution are owned by workers directly or by the government. Unlike
capitalist economies, socialism regulates production, wages, and prices according to
planned social aims instead of individual profit. The Soviet Union, for example,
established a series of five-year plans establishing specific targets for production of
consumer goods, agricultural goods, and other necessities.
Capitalism in the United States
The capitalist economy in the United States has indubitably generated great wealth,
creating billionaire elites as well as a huge middle class. But the system has also
provoked controversies and violence. Early industrialists in the United States, such as
Andrew Carnegie (1835–1919), reaped extravagant profits from businesses that
suppressed wages and forced workers to endure unfair conditions. Child labor in cotton
mills, coal mines, and other factories was common during this era, and benefits such as
sick time, overtime pay, and paid vacation days were nonexistent. Conditions in many
workplaces exposed the labor force to dirty air, fire hazards, and dangerous machinery
that could mangle limbs or even kill operators, and businesses provided no compensation
for injuries.
The Great Depression, which lasted from 1929 to the beginning of World War II,
profoundly shook the world's confidence in the capitalist system. The crisis began with
the crash of the New York stock market and resulted in widespread economic damage
throughout the world, including bank failures, massive unemployment, and bankruptcies.
Though the causes of the Great Depression were extremely complex, many scholars
believe that a key factor was the increasingly unequal distribution of wealth—a condition
associated with capitalism—in the decade preceding the stock market crash. In addition,
the suffering that resulted from the Great Depression highlighted the vulnerability of the
labor force. In the United States, 25 percent of workers lost their jobs, and bank failures
wiped out many people's life savings.
U.S. President Franklin D. Roosevelt created a range of economic programs to lessen
suffering and stimulate economic recovery. His New Deal, initiated between 1933 and
1936, included major banking reforms, federal budget regulations, agricultural subsidies,
and job creation programs, as well as Social Security. Conservative critics have argued
that these actions undermined the capitalist system by giving the federal government too
large a role in business matters. For some critics, Roosevelt's policies were tantamount to
socialism. Others believe that these programs saved the capitalist system and
strengthened it.
Since the 1800s the labor movement in the United States has pushed for basic workers'
rights such as a minimum wage, an end to child labor, and compensation for workplace
injuries, as well as the right of workers to organize unions. None of these rights was
achieved without intense opposition from businesses, which used their wealth and
influence to exert pressure on the government to squelch strikes and put union activists in
jail.
Globalization
As the world's economy has become increasingly globalized since the last decades of the
twentieth century, capitalism has become more dominant. After the collapse of the Soviet
Union in the 1990s, for example, Russia and former Soviet republics became free market
economies. Similarly, though China has not adopted a democratic political system, it has
embraced capitalism. In 2006 former Labor Secretary Robert B. Reich called China "the
most dynamic capitalist nation in the world." Brazil is another large emerging economy
that has adopted capitalism, though with far more regulation than in the United States.
Yet some see this expansion of capitalism across the globe as a negative development.
Venezuelan President Hugo Chavez has called capitalism "the road to hell," saying that it
is responsible for creating poverty, murder, and AIDS. He has urged followers to "fight
against capitalism," which he has described as an "imperial dictatorship" ruling the
planet.
One of the fiercest controversies about globalization is the fact that businesses seeking
cheaper labor have cut their domestic workforces and hired workers overseas. Typically,
workforces in China and other developing countries are poorly paid and may work under
unsafe conditions. Businesses argue that, though they do not wish to exploit labor, they
cannot remain profitable unless they cut production costs. Critics say that this argument
reveals how capitalism, by its nature, is structured to exploit workers.
Among the most vocal recent critics of capitalism is documentary filmmaker Michael
Moore, whose 2009 film Capitalism: A Love Story describes the system as irreparably
broken. In an online discussion with Washington Post readers, Moore said that the only
purpose of capitalism "is to protect the wealth and legalize our greed." Capitalism, he
went on to say, "is a system of exploitation, of using working people, not paying them
properly, not guaranteeing them health benefits, and now it's turned into a system where
it's just about making money off money as opposed to making money by making things."
Consumerism
Critics of capitalism contend that the system encourages rampant consumerism and
greed. Because profits depend on growth, businesses bombard the public with
advertisements and other marketing strategies to make people crave things they do not
need. This encourages people to spend money instead of saving and to incur debt to
finance purchases. For example, U.S. credit card debt in 2008 reached $972.73 billion, an
increase of 1.12 percent from the previous year. Average outstanding credit card debt for
households with a credit card was $10,679.
Consumerism on this scale, say critics, is an environmental threat. It uses up natural
resources and creates waste by encouraging people to regularly buy new things when
they are not needed. In fact, many consumer goods are now manufactured to become
quickly obsolete, requiring them to be replaced at frequent intervals. The manufacture
and trade of such goods also exacerbates global warming. In fact, human-generated
carbon emissions dropped worldwide by a welcome 3 percent in 2009, but only because
the economic recession had significantly slowed the production of goods. A return to
economic growth, say analysts, will once again increase greenhouse gas emissions.
Consumerism also undermines the social fabric, critics say, by fostering greed and other
selfish behaviors. Critics cite the collapse of the real estate market in late 2008, which
precipitated widespread home foreclosures, job losses, and economic stagnation, as an
example of such unchecked greed. In essence, a relaxation of banking regulations over
the previous decades had created conditions in which lenders could profit by extending
mortgages to borrowers without sufficient income to repay them. When these mortgages
came due and could not be paid, major financial systems were threatened with collapse.
Even so, top executives at several banks, who were retained to help solve the crisis,
reaped millions in bonuses. These events have given fuel to the argument that capitalism
fosters greed, recklessness, and a lack of concern for the social good.
Supporters of capitalism, however, argue that it is the economic system that, through its
creation of economic growth, has brought the greatest number of people in history out of
poverty. Supporters cite that between 1990 and 2006, vast improvements have been seen
worldwide in income levels, life expectancy, public health, and literacy rates. The
percentage of people living in extreme poverty dropped from about 52 percent in 1981 to
about 26 percent in 2005. In China alone during this same period, some 600 million
people rose out of poverty. While these global improvements have occurred across a
range of countries with different economic structures, they could not have succeeded on
such a scale without access to markets and, in many cases, major infusions of capital
from government and private donors. The Bill and Melinda Gates Foundation, for
example, had as of 2008 funded $21.08 billion in grants to alleviate poverty and promote
economic development. This capital has played a major role in poverty-reduction
programs worldwide.
Capitalism is also, say some advocates, the foundation of political and personal freedom.
Indeed, writer Ayn Rand, in her novel Atlas Shrugged, argued that capitalism is the only
morally valid system by which to organize social interactions, because it enables
individuals to act freely and rationally to promote their self-interest. Other theorists, such
as economist Milton Friedman, have argued that capitalism is a prerequisite to political
freedom.
Full Text: COPYRIGHT 2014 Gale, Cengage Learning.
Source Citation
"Capitalism." Current Issues: Macmillan Social Science Library. Detroit: Gale, 2010.
Opposing Viewpoints in Context. Web. 14 Jan. 2014.
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Socialism
Opposing Viewpoints Online Collection, 2010
Listen
Socialism, the economic system in which the ownership and means of production of goods and
necessities are shared by the community, was developed as a formal socioeconomic theory in
the mid-nineteenth century. Socialist governments seek to spread wealth and labor equally
among their people. Critics of socialism contest that the system limits individuals’ freedom to
amass as much money as they can and do with it what they please. They see socialist countries
as being saddled with excessive taxes and oppressive governments. This has long been the
dominant view of socialism in the United States, though there are those who question whether the
economic system is as flawed as its critics contend.
The Development of Socialism
The term “socialism” first came into use in 1830s Europe. The system was originally championed
as a way for individuals to make the most of their talents. Whereas the wealthy tended to have
the most power in capitalist societies, early socialists, such as Count Henri de Saint-Simon
(1760–1825) of France, longed for a system led by the most talented, innovative, and hardestworking members of society. Scientific progress was key to the socialists. They envisioned a
world in which everyone was truly equal, where no one had less material wealth than anyone
else. They criticized capitalism as disorganized, seeing poverty as the natural result of a minor
segment of society possessing the majority of wealth. During the nineteenth century, this wealthy
minority population was generally the land-owning nobility. Throughout most of Europe, a tiny
fraction of the population held most of the wealth, and they passed their wealth down through the
family. The vast majority of the population lived in poverty with no access to means of creating
wealth themselves.
German philosophers Karl Marx and Friedrich Engels were two of the most influential socialist
thinkers of the nineteenth century. Marx and Engels argued that social classes should be
abolished and that the workers themselves should control the means of production and share
equally in the wealth their labor produced.
Socialism arrived on U.S. shores with the coming of German immigrants in the 1850s. Workers
unions in the Marxist tradition soon began sprouting throughout the country. Though the United
States did not have an aristocracy and many poor immigrants had made vast amounts of money
through ingenuity and hard work, there was still an extreme concentration of wealth in the hands
of a small percentage of the U.S. population in the late 1800s. Many workers found this wealth
gap unjust. By the early 1900s, the United States had a growing socialist party led by Eugene V.
Debs with some 125,000 members and widespread backing from farmers and labor unions. Debs
ran for president five times, gaining more than 900,000 votes in 1912 and 1920. After a socialist
revolutionary group known as the Bolsheviks took control of Russia in 1917, the U.S. government
feared a similar revolution. A period of strong anti-socialist and anti-communist sentiment in the
U.S. government, known as the Red Scare, followed. Many radical political figures were
harassed, arrested, and jailed. Debs was arrested for making an anti-government speech in 1918
and sentenced to ten years in prison (though his sentence was later commuted). Though he
made his most successful run for the presidency in 1920 from his prison cell, the American
socialist movement faded in the 1920s.
Throughout the rest of the twentieth century, Americans increasingly came to regard socialism as
out of step with core national values such as personal freedom, personal responsibility,
individualism, hard work, and limited government. The rise of Adolph Hitler’s National Socialist
Party and all the horror it wrought was a major public relations crisis for non-extremist socialist
parties. In his book The Road to Serfdom F.A. Hayek wrote of socialism as a “creeping” menace
that would not result in equality for all but rather economic ruin and the disintegration of personal
ambition. During the 1950s, Senator Joseph McCarthy held his infamous hearings in which he
demonized communism—an economic and political philosophy often and mistakenly used
synonymously with socialism—and sought to root communists out of America. Terrified of
McCarthy’s persecution, communists and socialists alike sincerely and insincerely gave up their
party affiliation in droves. Throughout the Cold War, which pitted the communist Soviet Union and
the United States against each other in a struggle for global influence from the early 1950s to
1991, Americans increasingly came to equate both communism and socialism with their enemies.
The Drawbacks of Socialism
Although the Cold War is over, many Americans continue to view socialism as threatening or
even evil. Critics of socialism have many examples of failed, struggling, or troubled states to
choose from in making the argument that socialism produces negative economic and social
consequences. The collapse of the oppressive Soviet regime in 1991 is a case in point. Decades
of complete state control of all means of production simply concentrated power in the hands of a
new group of elites: government officials. A revolution meant to elevate workers instead resulted
in the replacement of an aristocratic totalitarian regime with a communist totalitarian regime. The
Soviet Union failed not only philosophically but economically. The state-controlled Soviet
economy was not competitive globally with capitalistic countries.
Critics of socialism also point to the financial struggles of Western European countries in the
wake of the 2008 global economic crisis as evidence that socialism is a deeply flawed economic
system. When governments in Europe faced serious budget shortfalls in 2009, many leaders saw
no other option but cutting generous, state-supported social welfare programs and pensions. But
attempts to make such cuts met with massive anti-government protests. People were unwilling to
accept cuts to their government benefits despite the fact that the government could not afford the
status quo. These protests in Europe led many Americans to conclude that socialism was
unsustainable. Multiple economists have agreed that the comfortable, state-supplemented
lifestyle enjoyed in Western Europe cannot be maintained, mainly due to demography. Plunging
birth rates mean that there are increasingly fewer workers to support an increasingly aged
population.
In the United States, critics of President Barack Obama regularly describe him as a socialist
intent on “redistributing wealth.” Conservatives argue that the wealth-based, capitalist hierarchy
actually benefits the economy. When the government does not interfere with capitalist pursuits or
disable the wealthiest members of society with heavy taxes, opponents of socialism argue, their
wealth naturally trickles down to those lower down the economic pyramid in the form of jobs.
Wealthy business owners are able to hire more workers and pay them greater wages. The dream
of scaling the economic pyramid and amassing wealth breeds ambition, creativity, and efficiency
and spurs the creation of new businesses which, in turn, provide jobs. According to critics,
socialism destroys the human drive for achievement by removing a major motivator: wealth.
The Socialist Point of View
Contemporary socialists argue that unrestricted capitalism leads to social, economic, and
environmental disasters. While the United States is one of the wealthiest nations in the world and
home to more billionaires than any other country, 2010 U.S. Census figures show that one in
seven Americans lives below the poverty line. The richest 20 percent of Americans own 84
percent of the wealth and the richest 1 percent own 38 percent of the wealth. Socialists argue that
this wealth divide is immoral and harmful to society as a whole.
Leading socialists also argue that the global economic crisis that began in 2008 can be blamed
on unrestrained American capitalism. Ordinary workers suffered the most from plunging home
prices and loss of jobs caused by the greed and recklessness of ultrawealthy bankers, who
showed little regard for the wellbeing of society as a whole when they made risky investments in
pursuit of huge profits. Economists have also called into question the popular conservative,
capitalist concept that wealth flows from the wealthy to the poor. This “trickle down” theory of
economics assumes wealthy people invest their wealth in economically productive activities.
However, the extremely wealthy bankers and fund managers at the heart of the 2008 global
economic crisis made their fortunes through investments and financial manipulations that were
not productive for the economy in general. In fact, Lord Adair Turner, the chairman of the United
Kingdom’s Financial Services Authority, the body that regulates the financial industry in the UK,
has labeled much of the work that the financial industry performs as “socially useless.”
Rising concern over the environment has produce a new strain of socialism in recent decades—
so-called “ecosocialism” Ecosocialists argue that the pursuit of profit central to the capitalist
economic system has led to widespread environmental degradation—from the collapse of onceabundant fisheries due to rampant overfishing to environmental devastation caused by the mining
operations of Western companies in developing nations. They advocate state ownership and
regulation of industries as a means to insure responsible stewardship of the environment.
Socialists, in general, value social justice above profit. Capitalists counter that the goal of social
justice is laudable, but socialist economic policies do not produce the desired results.
Full Text: COPYRIGHT 2014 Gale, Cengage Learning.
Source Citation
"Socialism." Opposing Viewpoints Online Collection. Detroit: Gale, 2010. Opposing Viewpoints in
Context. Web. 14 Jan. 2014.
Document URL
http://ic.galegroup.com.db16.linccweb.org/ic/ovic/ReferenceDetailsPage/ReferenceDetailsWindo
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