Capitalism - Pros and Cons
Pros of Capitalism Market gives incentives to produce Incentivizes acquisition of useful skills Variety of goods available Incentive to use resources efficiently Competition leads to better quality of goods Productivity is rewarded by large profit Self-Reliance American Dream (Anybody can become rich)
Examples of Pros Industrial Revolution Nouveau Riche Rapid Innovation Roaring 20 s Americans getting rich by getting involved with stocks 1980 s - Commercialism/Globalization Lack of regulations increase marketing pool for companies Countries start liberalizing their markets to have greater access to investments and markets
Drawbacks of Capitalism
Cons of Capitalism Manipulation by advertising Prices and Income might not be best for society Not consistent - Prone to ups and downs Monopolies and oligopolies can emerge Inequality exists Environmental issues can arise Insecurity Impoverished don t get equal opportunity Trapped in poverty
Examples of Cons Industrial Revolution Working class is exploited in terms of wages, safety and work hours 1929 Stock Market Crash & Great Depression Millions lost their saving Millions out of jobs 2008 - Subprime mortgage crisis Banks lost large amounts of money High unemployment Gov t bailouts - Companies too big to fail
Keynes & Welfare Capitalism
Historical Context 1929 - Stock Market Crash Millions bought on stock on margin creating a huge issues The Great Depression 1929-1939 Many unemployed in Canada and US Created a bad economic cycle No one buying -> No one producing ->No jobs -> No job/no money to buy President Hoover did nothing The weak companies should fail Little to no government intervention Economy will naturally come back
The End of Laissez Faire Capitalism 1932 - Americans elected a new president, Franklin Delano Roosevelt (FDR) Elected on the premise he would revive the economy by intervention Promised the New Deal Government will spend more and tax less Social Security Government will provide a social security net - unemployment insurance, minimum wage, welfare Largely based off of John Maynard Keynes - Demand-side economics
Keynes Demand-Side Economics Keynes was an interventionist Believed gov t should be involved in order to control the times of boom and bust to create more stability Encouraged deficit spending Boom Times Gov t should tax heavily and spend less This controls inflation Bust Times Gov t should cut tax and interest rates Spend more Spending on items like infrastructure Stimulate more job creation and increase The General Theory of Employment, Interest and Money (1935)
The New Deal (1933-40) President FDR s economic policy It created programs and policies to help lessen the impact of the depression Created public work programs Giving jobs building highways, schools, hospitals, etc Social security Pensions for the old Gov t sanctioned workers rights/wages He transformed the USA into a Laissez Faire capitalist state into a welfare capitalist state Often looked at as the end of Laissez faire capitalism as a whole Did not end depression, but helped improve the conditions of those impacted by the downfalls of capitalism
Impacts of Keynes Today Trudeau s Economic Stimulus Plan Deficit spending in order to create growth 125 Billion invested into infrastructure over 10 years Invest in public transit Social Infrastructure Affordable housing Childcare Recreation Books to be balanced in 10 years Bank of Canada plans on monetary stimulus to create growth
Economic Policy Fiscal Policy Taxation Government spending Use taxation to regulate business cycle Set by current government Monetary Policy Interest rates Money Supply Set by the Bank of Canada