Capitalism:
a) a system of economic organization in which individual persons, singly or in groups, privately own the factors of production and possesses the right to use and dispose those economic resources generally in whatever matter they choose
b) economic activities will be conducted by managers of firms instead of entrepreneurs (Joseph Schumpeter) - freedom of enterprise
c) Requirements
i) Competition - all factors of production be privately owned and controlled instead of just capital - Canada, where the government owns the land, is not capitalist - self reliant individuals must compete for economic rewards - benefits are (1) allow prices to reflect supply and demand, (2) will show prices and costs to be efficient, (3) encourages innovation, invention, flexibility, and decrease in the long run cost, (4) encourages equitable distribution of income, (5) provides a variety of goods and services
ii) Unlimited use of Wants - right of individuals to employ his or her talents and energies in the matter he deems best to promote personal interest - slavery is not capitalistic - Calvin and Luther: accumulation of capital is not evil - rewards are for those who are economically competent and punishes for incompetence
iii) non-economic institutions have significant bearing in capitalism in its development
iv) there should be some economic institutions in capitalism - private property - freedom of enterprise and choice - competitive markets - limited government - competition - individualism - Protestant work ethic
v) Private Property - right of individual to control property and the right to enjoy the economic rewards that result - government protects owners claims - functions: (1) does not refer to only tangible things (intellectual rights), (2) encourage accumulation of private property - encourages the private savings of private and corporate income (3) inheritance - generational transfer of wealth - separate from but attached to private property - not based on merit
d) Economic Institutions
i) private property
ii) Freedom of enterprise - gives individual owners the right to select economic activity in which your economic resources will be employed - in Capitalism, it is entrepreneurship, owning capital, and generally, exercising self interest (maximization of self-interest and satisfaction - producing where MR=MC)
iii) competitive markets - circular flow (factor market (supply) and product market(demand)) - owners of FOP and demanders of FOP and how they interact - to be competitive, nobody is coerced - free interaction -
a) price serves two functions - plus a less important third
(1) rationing - allocate goods and services to those willing to pay prevailing price - willingness depends of purchasing power - rationing also among producers who are able to make more efficient use of resources
(2) motivating - both in factor and product market, price increases are created by increase in Demand and price decreases are created by decrease in Demand - these shifts in supply and demand result in equilibrium
(3) price may affect consumer choices - price will tell us way in which resources will be employed - (non-price determinants of demand)
iv) government with regulatory matters
a) should have checks and balances - liberal?
b) must preserve social values and use regulatory measures
c) government must exist to stop existing institutions from destroying themselves
d) Milton Friedman - wrote Capitalism and Freedom - government exists to preserve law and order - government exists to promote competition - he was a monetarist - government should intervene in all monetary policies - government should never be neutral - for instance, government should guarantee property rights - when government intervenes, negative externalities are created
e) Conditions of Capitalism (perfect competition)
i) Product Market
a) self-interest allows consumers to determine which products they want - Supply and Demand and all that affects price mechanism
b) Consumers maximization of utility - must be without cost
c) sufficient number of firms in each market - many buyers and sellers
d) individuals are price takers - one person cannot affect market
e) consumers experience decreasing marginal utility - as consumers consume more, smaller satisfaction is received for each additional item consumed
ii) Factor Market
a) response of the prices to demand and supply conditions
b) firms maximization of profit
c) resource (factor) owners maximization income
d) firms can enter or exit without cost or penalty
e) no barriers to impede operation of perfectly competitive market
f) political power parallels concentration of economic power
g) competitive system achieves equilibrium prices and quantities in every market by Pareto?
iii) Distribution of Income
a) the more you own, the more income you have
China, the world's most populous country, is touted by bourgeois propagandists as the second largest and fastest growing economy -- proof of the benefits of privatization and a source of enormous potential profits. Alternatively, some on the left uphold China as a bastion of socialism, or at least a socially progressive workers' state, in the wake of the fall of "communism" in the USSR and East Europe.
But China is neither of these things. It is a crisis-ridden society plagued by both the particular contradictions of Stalinist statified capitalism and its rulers' foredoomed effort to win a place in world imperialism by selling superexploited labor power on the domestic and international markets.
The rapidly expanding and increasingly class-conscious Chinese proletariat has other ideas. Workers drew the rulers' particular wrath during the Tienanmen movement of 1989, and labor struggles have accompanied the enormous infusion of foreign capital in recent years. China exemplifies Marx's axiom that capitalism creates its own gravedigger. It is critical for the Chinese working class to adopt a revolutionary strategy and construct an internationalist proletarian vanguard -- in time for the inevitable showdown with imperialism and indigenous capitalism. Given China's size and importance, the fate of the world proletarian struggle could lie with its working class.
The Chinese class struggle can only be understood by examining China's relationship to world capitalism. The post-World War II prosperity bubble that offered partial camouflage to the reality of capitalist decay ended a quarter of a century ago. Capitalism has been fighting off a debilitating worldwide crisis since; its need to deepen its exploitation of the working class has grown accordingly. To this end it increasingly cast an eye towards productive investments in imperialized regions of the world.
This is nothing new, but it is a shift in emphasis from the previous period. Then, imperialism's "third-world" exploitation stressed plundering raw materials and marketing finished goods, an arrangement that perpetuated desperate conditions. Capital now is compelled to tap that backwardness as a source of super-cheap exploitable labor, using the threat of capital flight ("globalization") as a hammer against the better paid workers in the metropolitan nations. And it is more able to: with technical innovations (in particular, computerization and telecommunications) controlled by imperialism, capital movement is easier. The result has been a massive shift of industrialization and trade towards selected portions of the "third world."
The focus of this activity has been East Asia, largely because of relatively stable but highly repressive regimes capable of policing the grinding exploitation. While large portions of the enormous surplus value pumped out of the workers landed in the hands of imperialist powers, several nations in the region emerged as models of capitalist success. Known as the "four tigers," Taiwan, South Korea, Hong Kong and Singapore graduated from backward, domestic-based economies into export-minded, labor-intensive ones, and even to a significant degree into more sophisticated niches of world capital (e.g. high technology industry and banking). In the process they have obtained some of the privileges previously reserved for charter members of the imperialist club -- major league conglomerates, higher income levels, technical sophistication.
At the same time, these countries (particularly South Korea) have seen the growth of concentrated, militant working classes whose rising wage demands cut into profits and whose strength implicitly threatens capitalist rule. So increasingly other countries in the area have become sites for capital infusion -- not only from imperialist powers like Japan and the U.S., but from the "tigers" themselves. These include Thailand and Indonesia -- and most prominently, China. Reforms initiated in the past two decades by Chinese leader Deng Xiaoping opened up the country to imperialist investment and exploitation.
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