This is a question of political economy

 Adam Smith
Famous book: The Wealth of Nations (1776)
Adam Smith was the father
of economics
 He was also a Scottish moral
philosopher and wrote about questions
of political economy.
Capitalist political economy
 The pursuit of self-interest is good.

 Everyone is trying to make profits for

themselves

[trying to maximize profits]

The is good because…
 If everyone is trying to make a profit, the
whole society benefits…

 …it encourages competition.

 The butcher, the baker, the watch

makers....are all trying to make profits
for themselves.
When everyone is trying to
make money for
themselves, society as a
whole becomes rich.

 Lots of goods and services are

produced.
Karl Marx later challenged
Smith’s political economic
theory.
 1818-1883
Marx believed that
capitalism was better than
feudalism, however….
 He believed that capitalism did two bad
things…

 1) It alienated workers (from what they

produced)

 2) and it was based on exploitation. (収奪)

MOST ECONOMISTS ARE CAPITALISTS

However there are some Marxist

economists, and recently there have
been more criticisms of capitalist
system.
Is there something wrong with
the capitalist system?
 It has produced great wealth for
countries.
 Even China, which has had a communist
political system since 1949 (Mao Tse
Tung), has embraced capitalism
So is capitalism good or evil?
 The answer seem to be that it is an
effective system for producing great
wealth (goods and services and wages for
workers)

 BUT --- there are some deep problems in

the system.
How to overcome the problems
of capitalism ?
 -The unequal distribution of wealth

 The exploitation of workers

 Putting profits over people and society

The Government!
 If the government didn’t regulate the
economy….
• You would have a situation where few people
controlled production and wealth.
• Workers would have few protections.
• Consumers would have few protections.
 When industrial capitalism first
took over the world, there were
few government regulations.
And life was pretty miserable for
many people
 Distribution of wealth
• In the 19th century, the capitalists controlled
most of the economic resources……and even
the political system!
 But how can the government
“redistribute the wealth”

• Through taxation

• Taxation is basically a way for the

government to redistribute the wealth.
So conservative capitalists don’t like it.
 Conservatives believe in the
“invisible hand of capitalism” where
the market place regulates itself.
Liberals: believe in a progressive tax
system to redistribute the wealth.
Corporations
 Corporations since the 19th century have
tried to make monopolies in order to
control particular markets.

 Only the government is able to break up

monopolies (“anti-trust action”)
The end of capitalism
• Some people are saying that we are seeing the
end of capitalism as we know it.

• But what will come next?

• Maybe European (Scandinavian) style

capitalism.
But don’t forget Holland!