CAPITALISM FOR NEXT GENERATION

Chrissiane XIIA4/ 10

CAPITALISM FOR NEXT GENERATION 

Before I explain my opinion about capitalism on third world, I will explain about what is capitalism and world three.  

Capitalism is an economic system where private entities own the factors of product. The four factors are entrepreneurship, capital goods, natural resources, and labor.  The owners of capital goods, natural resources, and entrepreneurship exercise control through companies. The individual owns his or her labor. 

Third World" is a phrase frequently used to describe a developing nation. Despite its current usage, the phrase "Third World" arose during the Cold War to identify countries whose views did not align with NATO and capitalism or the Soviet Union and communism. The First World described countries whose views aligned with NATO and capitalism, and the Second World referred to countries that supported communism and the Soviet Union.

The capitalism system  certainly not one hundred percent is the best in the field, but in my opinion capitalism is good for the third world which is a poor or undeveloped country. I think residents of a country can feel prosperous, if their country is developed. If a country is developing, all the needs of the country including the country's population can be met. If the community is given the freedom for them to be creative on developing their business, then it will have an impact on that country. The country can advancing the country's economy. There are several benefits from capitalism :

1      Economic freedom helps political freedom. If governments own the means of production and set prices, it invariably leads to a powerful state and creates a large bureaucracy which may extend into other areas of life.

2      Efficiency. Firms in a capitalist based society face incentives to be efficient and produce goods which are in demand. These incentives create the pressures to cut costs and avoid waste. State-owned firms often tend to be more inefficient.

3      Innovation. Capitalism has a dynamic where entrepreneurs and firms are seeking to create and develop profitable products. Therefore, they will not be stagnant but invest in new products which may be popular with consumers. This can lead to product development and more choice of goods.

4     Economic growth. With firms and individuals facing incentives to be innovative and work hard, this creates a climate of innovation and economic expansion. This helps to increase real GDP and lead to improved living standards. This increased wealth enables a higher standard of living; in theory, everyone can benefit from this increased wealth, and there is a trickle down effect from rich to poor.

5     There are no better alternatives. As Winston Churchill, “It has been said that democracy is the worst form of government except all the others that have been tried.” A similar statement could apply to capitalism. 

Of course, in addition to the benefits of the system, there are also negative impacts that exist, such as:

1      Monopoly power. Private ownership of capital enables firms to gain monopoly power in product and labor markets. Firms with monopoly power can exploit their position to charge higher prices.

2      Monopsony power. Firms with monopsony power can pay lower wages to workers. In capitalist societies, there is often great inequality between the owners of capital and those who work for firms. See: Monopsony exploitation

3      Social benefits ignored. A free market will ignore externalities. A profit maximizing capitalist firm is likely to ignore negative externalities, such as pollution from production; this can harm living standards. Similarly, a free market economy will under-provide goods with positive externalities, such as health, public transport and education. This leads to an inefficient allocation of resources. The capital of society is a potential capitalist society.

4     Inherited wealth and wealth inequality. A capitalist society is based on the legal right to private property and the ability to pass on wealth to future generations. Capitalists argue that a capitalist society is fair because you gain the rewards of your hard work. But, often people are rich, simply because they inherit wealth or are born into a privileged class. Therefore, capitalist society not only fails to create equality of outcome but also fails to provide equalityof oppurtunity.

5      Inequality creates social division. Societies which are highly unequal create resentment and social division.

6      A capitalist society argues it is good if people can earn more leading to income and wealth inequality. However, this ignores the diminishing marginal utility of wealth. A millionaire who gets an extra million sees little increase in economic welfare, but that £1 million spent on health care would provide a much bigger increase in social welfare.

7     Boom and bust cycles. Capitalist economies have a tendency to booms and busts with painful recessions and mass unemployment. 

         In my opinion all of the above deficiencies can be overcome with time and with the progress of the country. With the development of the country, that means automatically technology, education from the country will also advance. This is very good for the next generation in the country. Because these countries are developing, of course they can feel life in a developed country. Brands can include development, their knowledge can be broad. They can easily innovate and be creative with their creativity and abilities. So, the conclusion I will join capitalism if I were Third World. Because it is good for the country, the resident and for the next generation.