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Regulation of the Capitalist Market

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Regulation of the Capitalist Market

Question 1

Ha-Joon notes that capitalism existed at a high level between 1950-1970s given the presence of overwhelming government intervention through regulations and relatively high tax regimes. He notes that a majority of the largest economies grew exponentially during this period. For instance, Western Europe grew at an estimated 4.1% annually between the years 1950-1973. The United States slowed its growth after the government reduced the taxes levied on the rich and corporate entities as a means of inducing growth. However, this was not the case given that the United States has grown at an estimated 1.8% annually from the 1980s to 2010. Keynes advocated for the government to play an aggressive role in the regulation of the capitalist market economy.

Government regulation is not a form of socialism or communism, but rather a form of government interference to ensure maximized benefits in the capitalist market economy. Government regulation is an important aspect of capitalism given that it provides a market economy with the opportunity of flourishing. Keynes noted that capitalism was “the astounding belief that the most wickedest [sic] of men will do the most wickedest of things for the greatest good of everyone” (Sackrey, Schneider, and Knoedler 124).

His development of various economic theories was informed by the need to provide protection to the public while ensuring that the same public does not engage in excessive savings or investments to ensure adequacy in money supply in the market. Keynes would agree with Ha-Joon in entirety on this statement given that the presence of government intervention is important to ensure constant adequacy in money supply in the market economy. The government is able to induce expenditure and savings by the public, while ensuring that they are protected from various negative economic effects that would arise from capitalism (Chang 169).

Question 2

Keynesian economic theories were developed after insights of the Great Depression illustrated that the lack of government regulation would render a market inefficient and ineffective towards the needs of the capitalist market economy and the public. He noted that a majority of the economies that experienced the Great Depression recovered because of enhanced levels of government intervention. He noted that the “New Deal” in the United States enhanced employment levels with funds borrowed by the government. In addition, economies such as the Dutch one were unable to recover. He attributes the Great Depression and various recessions around the world to the decline in the levels of investor and public confidence and trust in an economy; decline in the levels of consumer expenditures and activity; lower levels of revenues and profits for entities, which results in massive layoffs and loss of employment (Sackrey, Schneider, and Knoedler 120).

He also notes that government intervention is a solution to problems such as low wage rates due the high number of unemployed individuals competing for similar resources and employment opportunities in the market economy. Furthermore, government intervention evens consumption in the market economy attributed to reduced incomes by establishing policies that would enhance minimum wage rates to spur consumer activity. Keynes also argues that governments can enhance the “rough edges” of capitalism through slowing down of an economy that is under a bubble, to establish high interest rates as a means of curbing occurrences such as high inflation rates (Sackrey, Schneider, and Knoedler 119). Furthermore, the role of the government is also evident during recessions whereby it is able to inject capital into the market economy as a means of enhancing the levels of money supply available to firms and the public. Enhanced money supply in the market economy is evident in the form of loans provided to entities and the public resulting in high levels of employment, consumption, and profits for firms (Sackrey, Schneider, and Knoedler 117).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Works Cited

Chang, Ha-Joon. 23 Things They Don’t Tell You About Capitalism. New York: Bloomsbury Press, 2011. Print.

Sackrey, Charles, Geoffrey E. Schneider, and Janet T. Knoedler. Introduction to Political Economy. Cambridge, MA: Dollars and Sense, Economic Affairs Bureau, 2005. Print.

 

 

 

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