Brett Jackson Mrs. B. Ishmael Honors English IV 5 February 2012 Why Do Capitalist Societies Succeed?

Capitalism creates gross inequality, inflicts environmental destruction, and undermines democracy nothing could be further from the truth (Wolf). In the United States, a mixed market economy has primarily dominated the business climate for the last 100 years. The economic policies of the Federal government have primarily ensured growth, innovation, and prosperity. The U.S. government adopted a free market economic policy. This policy is generally justified by the beliefs that many Americans believe is fair. Many Americans feel that the fruits of their labor belong to them, and this is the belief to which all capitalist societies model their economic systems.

Historical Context
Our nations founding fathers recognized the importance of this system. Great thinkers such as Thomas Jefferson and Benjamin Franklin had experienced the colonies tyrannical rule under the King of England. This system was not one of prosperity, nor was it a system that gave liberties to the people.

Consumerism
A core aspect that drives capitalist societies is consumerism. Consumerism is the idea that people are driven to enhance their lives by buying goods (Woolf 10). Individuals will consume goods and services which they find the to be the best, which forces businesses

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to compete to sell their own products to consumers. Businesses must innovate and become more efficient to sell to more customers than their competitors. This results in more choices, better products, and better prices for consumers. In a consumerist society, such as in the United States, individuals may place sentimental or intrinsic value on items that normally would not have those values. A person may feel an attachment to a gift that someone bought for them. The most common example of this is the purchase of engagement rings. Engagement rings generally have a very high emotional, and monetary, value attached to it. Engagement rings have pressured many people to spend a large amount of money, generally two months salary, on an engagement ring. This is an example of consumer spending becoming a core component in our society. The focus point on whether a potential suitor values his fianc is the amount for which he pays for an engagement ring.

Leisure
Capitalist societies are heavily influenced by leisure time activities. The first department store opened in Paris in the 1830s. These types of stores brought a wide range of products to the marketplace. Consumers had many choices. These choices were nearly enumerable. Many people would visit department stores purely for leisure. The act of visiting stores to browse products would become a major leisure activity in the modern world (Woolf 14). One could argue that leisure time, resulting from a decreased workday, is a direct result of the competitive nature of capitalism. Contrary to popular belief, capitalist societies do not put more pressure on workers. Businesses, in order to compete, developed new

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technologies that lessened the burdens of workers. These lessened burdens resulted in decreased work hours, and so leisure time was common among American workers.

Environmental Regulation
Environmental concerns are often at the forefront of concerns about free market policies. Yet these concerns do have solutions. In fact, these solutions would arise naturally from property rights. Polluting anothers property violates the property rights of someone else. This would be strictly not allowed in a capitalist society and government regulations would be made to enforce it.

Property Rights
Stanford professors Ilya Segal and Michael D. Winston in the following quote best define property rights:
Thus, property rights over an asset can be dened as a bundle of decision rights involving the asset (also called entitlements in the legal literature), which provide rights to take certain actions (rights of access) and to prevent others from taking certain actions (rights of exclusion), including the right to take the prot generated by use of the asset and to prevent others from doing so, often called prot rights or cash ow rights in the literature.

This essentially gives the right to the owner of an object to do anything with it that he pleases so long as it does not violate the property rights of another. This is essentially the basis for all neoclassical economic theory. It provides for liberty and an efficient, fair system for the distribution of resources. Resources are allocated with respect to how well an individual can compete in the marketplace.

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Many systems of law are based off of property rights, and there are many theories on how property rights are gained. Many economists subscribe to the theory of first possession; this rule grants an ownership claim to the party that gains control before other potential claimants (Lueck). Many political theorists believe this to be the natural order as throughout history, many people have recognized an individuals right of ownership to a specific piece of property based on who acquired the property first. This theory allows a person, John, who finds a tree in a newly discovered land to claim ownership of the tree. John has discovered it first, and as it has no owner, by this system of property allocation, John is allowed to claim ownership of the tree. Perhaps he may claim the acre surrounding the tree as well. As no one has claimed this land before him, it would appear that this is his land. John may wish to develop a farm on this property, or he may simply allow it to remain untouched. Yet another system of property rights allocation is also championed. This system goes by several names and often emphasizes natural rights. John Locke defined the labor theory of property in his Second Treatise on Government. This develops the homestead principle. This theory argues that God gave the world to all of humanity, and questions the right of an individual to claim lands to which he has no connection. Locke argued that a person owns the fruit of his or her own labor. When a person works a property, he or she is entitled to the property rights of such property. By this definition, John would not simply be able to claim the tree and the acre surrounding it. John would have to first work the land, cultivate it, build a home or business upon it, or otherwise exercise his labor over the property before he would have the right to claim it as his own. One can argue that first ownership is a more definitive theory than the theory of labor appropriation. The theory of first ownership would perhaps be best applied on objects that

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have less potential to be developed, while the theory of labor appropriation would apply to land and larger, more developable objects. It can be argued that the labor theory of appropriation results in more development and innovation when applied to U.S. history. In the United States during the first half of the nineteenth century, the population expanded westward. The Federalist Party, who favored selling land to the wealthy, set up systems of dividing land. This system allowed wealthy investors to buy large quantities of land and speculate on the price of the land. The Homestead Act of 1862 allowed anyone, not just wealthy landowners to attain land in undeveloped Federal lands in the West. Applicants would apply for a homestead with the Federal government. The applicant would improve the land, and if improved sufficiently, would attain a deed to that land, typically 160 acres. This act allowed common people to own their own land, and encouraged growth and development in the United States. Previously, the theory of first appropriation of property rights had been applied to determining land ownership in the West. This had proved to be a corrupt, State-supporting system that favored the wealthy and powerful. This system also did not encourage growth and development, as land was being bought was not used. Under the Homestead Act, individuals were given free land, developed that land, given a livelihood, and traded and furthered commerce in the West. These systems are not mutually exclusive of each other and both have their place in defining property rights in differing circumstances.

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Socialism
Socialism is an economic system that redistributes wealth from each according to his ability to each according to his need. This system has shown through various examples to stifle innovation, competition, and liberty and to breed corruption. It brings some economic fairness, but it also brings a lack of choice to consumers, and a slow-growing market. Some allege that free markets distribute the hardships and profits of economic activity and interpersonal interaction unfairly, promote egocentric behavior and attitudes, and fail to provide economic democracy, and fail to fairly and efficiently distribute scarce resources. Adherents to socialistic economic distribution policies hold that when workers are hired to do work, they are not paid for wages that are equal to the value of the products and services they produce (Hahnel). Socialism also breeds corruption:
The connection between political and economic freedom is more controversial. Some observers, such as Milton Friedman in CAPITALISM ANDFREEDOM, argue that the two freedoms are mutually reinforcing. In this view, an expansion of political rights-- "more democracy"--fosters economic rights and tends thereby to stimulate growth. But the growth-retarding features of democracy have also been stressed. These features involve the tendency to enact rich-to-poor redistributions of income (including land reform) in systems of majority voting, and the enhanced role of interest groups in systems with representative legislatures (Barro).

Essentially, socialism, in an effort to seek fairness in economic redistribution, instead turns into a system that parasitizes the rich and gives its earnings to the poor. With systems

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of majority voting, interest groups can unfairly influence legislatures to do their bidding without the consent of the governed. Also, Barro makes another discovery that serves to show quantitative evidence why socialist societies cannot succeed:
For given values of the variables already mentioned, the growth rate tends to be higher if a country starts with a lower level of real per-capita GDP. That is, if a poor country can maintain good government policies and accumulate a reasonable level of human capital, then it tends to converge toward the richer places. However, one reason that most poor countries remain poor is that their governments distort markets and fail to maintain property rights (Barro).

Yet are not these issues able to be fixed in a capitalist economy? In advanced market economies, individuals tend to place great value in eliminating injustice and pain and promoting the general welfare of other individuals and animals. This is due in part to the fact that a market economy encourages valuable moral qualities. It primarily fosters trustworthiness, reliability, individual initiative, civility, self-reliance, and self-restraint (Wolf). Nor can one deny the tens of millions that died as a result of the political systems that concentrated power in the state by Mao and Stalin. These lives would not have been lost and famines would not have been created had the market controlled agricultural production. Also if one were to look at the gross domestic product (GDP) per capita, a relatively accurate scale for gauging the economic output of a country, one would see that capitalist economies rank highly. The GDP per capita in the United States in 2010 was $47,814, for the United Kingdom it was $35,860, and in Japan it was $33,994. Compare this to the GDP

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per capita in socialist, communist, and former communist countries. In the Peoples Republic of China in 2010 the GDP per capita was $7,536, in Russia it was $19,840, and $1,800.1

State Capitalism
State capitalism is a system in which the government acts as the dominant economic player and uses markets primarily for political gain, and the motive is not maximizing growth, but political growth (maximizing the states power and the leaderships chances of survival (Ma). States in this type of system are corrupted and generally are used by private individuals to leverage the states resources to benefit the individuals with much influence in the state. These states may stop trade with another state for political reasons. These states also may have unfair advantages when competing in the global marketplace; they may also have a significant advantage when competing against other domestic businesses, if those businesses are even allowed to operate. This results in a lack of competition, which results in lack of choice, innovation, and growth.

Conclusion
The main factor that influences the success of the United States and other capitalist societies is competition. Competition creates growth and innovation and brings choices to consumers. The capitalist system also brings about a great number of personal

Source: World Development Indicators database, World Bank. Accessed on 25 January 2012.

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freedoms as well. This economic distribution system is also a core component in the lives of many Americans and has been ingrained in our culture. Its success is something that anyone can recognize and enjoy. Capitalism will leave a lasting legacy in the United States, and increasingly, around the world for years to come. The hope for continued and increasing freedom, liberty, and happiness lies in a capitalist system.

Jackson 10 Works Cited Barro, Robert J. "Economic Freedom and Political Democracy." Swiss Review of World Affairs (1995): 20-22. Hahnel, Robin. "Against the Market Economy: Advice to Venezuelan Friends." Monthly Review 59.8 (2008): 11. Lueck, Dean. The New Palgrave Dictionary of Economics and the Law. 1998. Ma, Ying. "Market Capitalism, State Style." Policy Review 165 (2011): 102. Segal, Ilya and Michael D. Winston. Property Rights. Palo Alto, 7 August 2010. Wolf, Martin. "The morality of the market." Foreign Policy (2003): 46. Woolf, Alex. Consumerism. Ed. Claire Lewis. North Mankato: Smart Apple Media, 2004.