Application Impacts of Capitalism Essay

Application Impacts of Capitalism

Capitalism is one of the major economic problems in the United States. Income inequality in the United States has intensified since the 1970s, while a huge number of employees and their families are anguishing for long unemployment term or for unstable or insecure work. The America economy is characterized by big corporations that are always fighting to minimize the cost of production while maximizing profit. These corporations and their owners are the major possessors of the American wealth (George, 2014). To reduce their costs, the corporations tend to reduce the wages or increase the workload without any salary increment. Workers on the other hand, tend to work hard to maximize their wages, while the consumers tend to obtain quality goods and services at reduced cost. This demonstrates that everyone is trying to minimize on the cost while maximizing on the profit. However, capitalism key drivers are market exchange and private property. Land, money, space, things, ideas, and all other kinds of objects can be owned by corporations and individuals who establish how they will be utilized and obtain profits or returns on their enterprises, as guided by self-interest pursuit (Atkins & Parker, 2012). The US has for a long time been employing free-market capitalism model. This model is used to sets agenda for economic development and governance.

Although this model is similar to what was advocated for by Adam Smith, the current economic form of capitalization does not employ the ethical values advocated by Adam Smith. Adam Smith considered a free market capitalization where the market regulate itself, where there is the labor division and specialization, limited government role in the economy, and free market advantage. Smith thought of a self-regulating market which is different from what is being experienced today in America. The American market is being regulated by big corporations and strong individuals who own almost all vital resources in the market. This eliminates the aspect of self-regulating market addressed by Smith. According to smith, the market efficiency working was the key to contented living standard. He demonstrated that the system of price was a self-adjusting technique that resulted to utilization of used resources in a manner which maximized their production contribution value (Gopnik, 2010). In this regard, competition would yield to the provision of the products needed by the society in quantities desired by the society, at prices which the society would be agreeable to pay. These demand laws are still viable even today in the market.

The US market is still along the line with Smith’s definition of capitalism; however, the aspect of reducing cost to maximize profit has highly influenced the market today as compared to labor division and other market forces. The current market creates in balance, such that workers are poorly compensated and thus, they have low purchasing power. Their poor wages do not give equal share for their contribution in production and the company’s profitability and thus, as companies continue to grow rich for their contribution, they continue getting poor and thus widening the gap between rich and poor. In addition, the workers state of job insecurity is increasing. Corporations are easily eliminating highly qualified positions that require high wages to semi-skilled individuals who can be paid less for the same job. Thus, most workers are not sure about their future economic states. Layoff is being used as a way of enhancing short-term profitability of firms by cutting on wages. This is turning to be very beneficial to the corporations while very destructive to the corporations (Desai et al., 2010).

Possible Changes in the US Capitalization Model

Free-market capitalism has been the dominant form of capitalism in the United States and in the world where it sets the global economic development and governance. According to this model, markets should take the responsibility of allocation of finance, goods, labor and services, with stage assuming highly restricted role in the governance of economic. This model is what has aspired to the current capitalization situation in the market where the corporation profitability is not proportion to the number of employees working in these organizations or their wages. Profitable Corporation are lying off workers to ensure short-term profits. The level of workers payment is much less as compared to the company’s annual profitability. In this regard, I would consider the involvement of the government in the regulation of the number of employees that should be employed in each organization and the salary they should receive as a form of regulating capitalization. The number of employees should be defined based on the company’s size and profitability where companies that are highly profitable should be required to employ a certain minimum number of employees despite being of similar size with other companies but with less profitability. This will reduce the exploitation employed by different corporation on employee to maximize profit. It will also give employee a chance to grow and enjoy good life. This will ensure that the natural balance which Smith aspired by creating free-market capitalism and labor division based on specialization has benefited the laborers as required. The oppression brought about by increase in corporation power to control various aspects of the market will be balanced by the government and ensure balance.

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