• Choose a category
• All
• Classic-Fiction

By Root 1617 0

capitalism is dead something beautiful automatically takes its place. Once capitalism is gone human nature will change, all evil will be wrung out of the world, and a society without problems will bloom. In stressing the communal over the individual, the groups’ power increases to totally submerge individuals. The Greeks who faced down the Oriental tyrants of Persia would not have agreed with the communal standard. They argued, with word and sword, that the individual is superior to the group. Capitalism agrees with the ancient Greeks. So does Ayn Rand and others.

In capitalist societies several theories exist concerning the interface between the economy and government. One is minimal government interference or laissez faire economics—sometimes called classical economics. This was advocated by Adam Smith in The Wealth of Nations, published in 1776, and was the dominate capitalist economic theory until the 1850’s, after which governments took more economic control. Classical economic theory held that an economy would recover from downturns automatically. During the Great Depression the theory came under attack. John Maynard Keynes submitted another theoretical approach to capitalism in 1936. Keynes argued classical laissez faire economics failed in situations like the Great Depression. His theory explained that an economy would not correct itself automatically and could spiral down indefinitely if not stopped. The economy needed a kick, and that kick was to increase aggregate demand by increasing government spending (or by lowering taxes). Keynes felt the potential total economic output could be measured against the actual output, and if there was a significant gap that gap could be bridged by government spending. Thus, like Hoover and Roosevelt, the theory tells the government to spend its way out of economic problems. In 2009 the United States under President Obama spent money in the trillions to escape an economic recession. Obama spent more in 2009 than all the previous administrations combined, building the national debt to 12.4 trillion. In 2010 it is obvious the strategy failed. A society cannot spend its way out of economic trouble.

Capitalism started yet another economic theory that gained popularity in the 1980s under President Ronald Reagan—supply side economics. Under supply side economics, high taxes and government spending are economic negatives because they destroy incentives that encourage work and savings. Supply side economists think governments must scale back significantly, thereby allowing investments, savings, and innovation to pull the economy along or out of a depression. This theory wants the government to encourage high production, savings, and productivity through low taxes, few regulatory restrictions, and an improved infrastructure. It differs from laissez faire economics because it believes government must work toward encouraging high production and productivity with proper taxing and regulatory policies. Laissez faire economics wanted a super small government doing nothing to encourage or discourage economic outcomes. Supply side ideas seem to originate with theories advanced by Ludwig von Mises and Friedrich Hayek in 1974, then termed the business cycle theory. Business cycle theory claims action by a central bank harms the economy, and interest rates are better set by free markets. Only free markets can truly determine the rates of saving and borrowing that can safely take place. Mises and Hayek thought central banks commonly set interests rates improperly, usually causing quick economic upturns (bubbles) that eventually collapse. By allowing the markets to take care of themselves they can better regulate the credit markets and prevent the cycles of boom and bust.[207]

One great difference between classical and Keynesian economics revolves around the theory of wages. Should government allow wages to fall during an economic downturn? Classical economist argue wages must drop to keep people employed; conversely, Keynes argued that if wages drop it decreases incomes followed by in a drop in