Capitalism & Managerial Capitalism

Capitalism is a very important economic system, and is practiced in the United States as well as many other countries today. According to Fred Folvary, “Capitalism” means the sector of an economy in which markets determine prices and quantities. In a “capitalist” system, both the market for goods and the market for inputs are based on voluntary action with the exception of goverment interferance such as taxes.  Captialism is based off of private ownership, means of production, and profits. In capitalism, the economy is seperated from the state and is based on a lassiez-fare system, meaning a free market. However, no pure Capitalistic society has ever exisited, for example in America, Capitalism is practiced but is refered to as a “mixed economy” meaning there are some restrictions. In capitalism, all property is privatley owned which creates compeition and winners and losers.

The word Capitalism is derived from the word capitalist, meaning owning capital. Starting in the 12th and 13th centuries, Capitalism was starting to be practiced on a small scale, such as when dealing with livestock and trading goods. Soon it started to become an word associated with money, trade, goods, and assests. The word Capitalism, was first seen in William Thackeray’s 1854 novel, “The Newcomes” and later became frequently used by Max Weber who dissaproved the economic system. He explained his disapporval by stating that capitalism exploited labor. Capitalism can be displayed in this simple example using cows. A farmer has two cows, he sells one and buys a bull. The bull and cows mulitply and he sells them and keeps the profits. Capitalism gives citizens options, and their own free will on what to decide, sell, and trade.

Managerial Capitalism, is the same foundation of Capitalism but with some differences. Managerial Capitalism started to be seen in the 19th and 20th centuries and one of the main differences it has with traditional personal capitalism, is that when it came to decisions dealing with products and services they were made by teams of “salaried managers” who had little or no ownership of the company they were dealing with. Up until the 1840s, managers owned their compaines, and operated and controlled them. In present day, CEO’s of companies can bankrupt a company and not feel any of the downfall because they have either zero or little invested into the company, which is one of the major downfalls of managerial capitalism. Perhaps managerial capitalism started becoming more popular when a company started expanding and could not manage all of them so they hired outside help. However, managerial capitalism is not good for shareholders in a company but it very rewarding to it’s managers.

Capitalism in conclusion is about being able to make your own decisions and to be able to take risks. Without it America would be different then we know it today.

 

 

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