Thursday, May 11, 2017

What is ‘democratic capitalism’ anyway ?

"The first thing to understand is that “democracy’ is a system of governance, and “capitalism” is an economic system. The genius of America has been to unite these two elements into a synergistic whole with the goal of providing every American “the right to life, liberty, and the pursuit of happiness.”
The foundation of capitalism is “profits.” A profit occurs when you sell something for more than you paid for it. All taxes depend on profits — no profits, no taxes; no taxes, no government. So, if governments (combining local, state and national) take too much of the profits generated by businesses, there will not be any profits, and the economy will fail — and people will go hungry. Thus, there will always be a tension between government and business over the amount of profits government takes and the amount kept by businesses. Since there is no accepted “balance,” there is always a tug of war between advocates of “big government” and “limited government,” generally represented these days by the Democrats and the Republicans.
There are some basic issues at stake. First of all, governments generally have the guns, meaning the resources to enforce whatever they want to enforce, whether through confiscation (taxes), incarceration (prison), or militarization (martial law). The basis of democracy is to limit the powers of government so that it treats its citizens according to rules set by the representatives of those citizens. It is the responsibility of these representatives to in fact control the police, the military, and all law enforcement resources in such a way as to nurture the life, liberty and pursuit of happiness of all its citizens. These “rules” are what we call the “law of the land.”
Obviously, it takes money to maintain a government capable of providing all these critically important services. Thus, the need for taxes. But there are no taxes without profits. People have to be motivated to work hard and to take chances with their money. So, what motivations are there which are powerful enough to get people to work hard?
Four crises of democratic capitalism in the U.S., 1970-2014, How will capitalism end? ( Streeck, 87)
How you guys think the responsibility of the U.S. government in terms of the consecutive economic crises? Is government interference into the financial market a big cause of these crises?


  1. Not quite completely sure which questions I should be answering.

    In regard to what motivates people to work hard... I think firstly it needs to be in their character to do so. In today's times, I see quite a bit of apathy. Kids our age (mostly American students and young adults, most internationals I know are much more driven) are often overly entitled. The 'American Dream' culture seems to be slowly dying, whether it's because people are content, or because people don't believe it's possible to make it big anymore I'm not sure.

    The other factor is how badly people want to consume goods and services, which is something that capitalism thrives on. The more exciting or attractive these goods/services are, the higher disposable income people will want, and the harder they will work.

    I think shorter work weeks could also be beneficial. Most European nations have adopted six hour work days. I believe 8-10 hour work days simply burns employees out, especially if they don't feel like they are being compensated enough (that is my last key factor: wages).

    The minimum wage needs to be raised. It is impossible to support yourself, let alone a family, in most places on minimum wage alone. This makes it an extremely unattractive option for people to take jobs that offer this pay, especially when the government offers fail-safes like unemployment benefits that compensate just as well.

  2. From how I am interpreting this piece, it seems that the writer is making an argument for capitalism. They are saying that the only way government would have money to run is if people continued making money to pay for taxes. Ideally, this is a great system. The problem is that we are humans, and we're full of mistakes. The problem isn't capitalism itself, it is human behaviour. We are not rational. Democratic capitalism might work in a utopian society in which humans are not discriminating or being discriminated against. This way everyone would have the same access to the kinds of opportunities capitalism brings, and government services funded through capitalism would be provided in a equitable manner. Clearly, this is not how our real world is so using the simple notion of democratic capitalism means denying the many complexities of our society and history.

  3. I especially agree with Nick's point about minimum-wage. Workers are more productive when they feel that the company they work for has their best interests at heart. It has been shown that the better the work benefits, the more productive workers are. Raising the incentive to work should lead to more productivity.

  4. I am not sure if improving the minimum wage is necessarily increasing productivity, I feel like it is simply giving people the option to work more hours. I feel like added benefits definitely do like health insurance, dental insurance etc. I think I wrote in my summary a week ago that it helps their quality of life but not how hard they work and thats why Warren Buffets wants to improve how much money they get back in their tax credit.

  5. I agree with Kriti. I don't think that capitalism itself is the problem. I think that working to earn a profit is one of the biggest reasons that people are driven to innovate and create products and services which people appreciate enough to buy. The problem comes when people become so greedy that profit itself becomes more important than the people helping you to make a profit.

  6. Shanice makes a great point about how money and greed seem to be corrupting many avenues of possible life changing innovations. Cant help thinking where we would be on things like alternative energy sources if we really dedicated all we had to the project.