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What is capitalism?
Well, there are a lot of definitions that can be derived from so many resources about capitalism. But according to one of the sources, "Capitalism is a social system based on the principle of individual rights. Politically, it is the system of laissez-faire (freedom). Legally it is a system of objective laws (rule of law as opposed to rule of man). Economically, when such freedom is applied to the sphere of production its result is the free-market".
While in this case, we are going to focused more on the economic side. From the definition mentioned before, the capitalism is really connected with the concept of free market. Free market itself means that almost all of the economic activities are controlled by the private owners, rather than by government. The concept of free market encourage people to be more innovative and efficient because the level of competitiveness is increasing. Most of the businesses are aimed to generates profit. With this kind of system, all the businesses have to be more innovative and efficient for the sake of profit-making, as a result, the goods and services produced will be more varied and people will have more choices.
How it affects The World Economy?
This kind of situation seems good for the world economy because there is also an increase in the free trade activities including foreign investments which lead to an increase in the total Gross Domestic Product (GDP) and the economic growth rate. However, it may not be as good as it seems, because capitalism is also bring some negative effects to the world economy. Take an example from capitalist system in America, which most of the rich people getting richer, while the poor people getting poorer. The exploitation of labour and the unequal distribution of income has becoming a major problem within this period. Additionally, the lower class people are encouraged to loan money from the bank, and it makes their household debts are rising and because most of them are unable to pay the loan, their houses are evicted and they end up being unemployed. As a result the world economy are also getting worse due to these devastating conditions.
So, the conclusion is, the capitalism affects the world economy in great extent. It may brings good or bad influences, but it all depends on how the people manage the capitalist system itself and how they are able to maintain fairness in applying the principle of "freedom".
Dania Siti Hardiani Hamdan
1701359884
Binus University
Sources :
http://capitalism.org/
http://en.wikipedia.org/wiki/Capitalism
http://www.s-cool.co.uk/a-level/economics/free-market-v-command-economies/revise-it/which-system-is-best
Well, there are a lot of definitions that can be derived from so many resources about capitalism. But according to one of the sources, "Capitalism is a social system based on the principle of individual rights. Politically, it is the system of laissez-faire (freedom). Legally it is a system of objective laws (rule of law as opposed to rule of man). Economically, when such freedom is applied to the sphere of production its result is the free-market".
While in this case, we are going to focused more on the economic side. From the definition mentioned before, the capitalism is really connected with the concept of free market. Free market itself means that almost all of the economic activities are controlled by the private owners, rather than by government. The concept of free market encourage people to be more innovative and efficient because the level of competitiveness is increasing. Most of the businesses are aimed to generates profit. With this kind of system, all the businesses have to be more innovative and efficient for the sake of profit-making, as a result, the goods and services produced will be more varied and people will have more choices.
How it affects The World Economy?
This kind of situation seems good for the world economy because there is also an increase in the free trade activities including foreign investments which lead to an increase in the total Gross Domestic Product (GDP) and the economic growth rate. However, it may not be as good as it seems, because capitalism is also bring some negative effects to the world economy. Take an example from capitalist system in America, which most of the rich people getting richer, while the poor people getting poorer. The exploitation of labour and the unequal distribution of income has becoming a major problem within this period. Additionally, the lower class people are encouraged to loan money from the bank, and it makes their household debts are rising and because most of them are unable to pay the loan, their houses are evicted and they end up being unemployed. As a result the world economy are also getting worse due to these devastating conditions.
So, the conclusion is, the capitalism affects the world economy in great extent. It may brings good or bad influences, but it all depends on how the people manage the capitalist system itself and how they are able to maintain fairness in applying the principle of "freedom".
Dania Siti Hardiani Hamdan
1701359884
Binus University
Sources :
http://capitalism.org/
http://en.wikipedia.org/wiki/Capitalism
http://www.s-cool.co.uk/a-level/economics/free-market-v-command-economies/revise-it/which-system-is-best
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