Which is better?
The Presidential election is coming up so a lot of important subjects are being discussed. One popular topic is over the type of economic system that is best for the United States. The two most talked about are on the opposite ends of the political spectrum: the Capitalist Self-Sufficiency model and the Social Welfare Net model. Both models seem to have valuable characteristics.
For example a social welfare safety net maintains that to help people who have fallen on hard times is a good idea for the economy. When people are given some support during hard times it is easier for them to get back on their feet. Once they are back to work they can start buying the consumer goods they need. That buying power helps the economy.
On the other hand the capitalist self-sufficiency model encourages people to start-up new companies. Entrepreneurs can try out new ideas and offer new innovations like Steve Jobs and Bill Gates have done. When people work hard to be successful it is possible for them to make a big profit. This can also help strengthen the economy.
The purpose of this essay is to determine the economic model that is better. Since the US is a democracy I think the better model will be the one that is best for the most people.
Adam Smith is the economist who had a big impact on how capitalism evolved in the United States. He was born in 1723 in Scotland and lived until 1790. He wrote The Wealth of Nations which made him famous for his economic theory. He explained “how rational self-interest in a free-market economy leads to economic well being” (Adam Smith 2008 para. 4)
Today Adam Smith is often thought to have been the ‘inventor’ of the Capitalist Self-Sufficiency model, but that isn’t accurate. The capitalist mode of individual rights and ‘looking out for number one’ is more selfish than Smith’s theories advocate. (Adam Smith 2008 para. 5& 6). He also included in his theory how to be kind to others and to use charity. Smith said producing something that had value to other people (like bread) is good for the baker and for the society, that is, in a competitive market a business person works for his own gain but is helping others with “an invisible hand.” (Adam Smith 2008 para. 5-9)
I think the ‘invisible hand’ means keeping the business cycle moving by producing, for example, bread to supply people with something that meets their demand for affordable bread.
The economist Milton Freidman was a strong advocate for neo-liberalism. He wrote that government is the enemy of freedom. He also wrote that a free market can give a group of people what they want more efficiently than a government regulated market. Mr. Friedman has written that the “role of competitive capitalism – the organization of the bulk of economic activity through private enterprise operating in a free market — as a system of economic freedom and a necessary condition for political freedom” Friedman 1982, 4). About the individual he wrote that a person who does not use only those tools that produce efficiency in his/her business will not do as well (Friedman 1982 109). In other words business people who do not focus only on making profit for their business will not survive in a free market.
Neo-liberalists are the group who support the capitalist self-sufficiency model more than any other political group in the USA. The basic belief is that markets should rule the way money flows in the market with no interference from the government. They want privatization of all public services from interstate highways to Social Security. The neo-liberal philosophy is that private business can run services more efficiently than government can. In order to have as little government intervention as possible they want private companies to run government social programs. The self-sufficiency part of the theory is that each individual is responsible for their own success or failure.
Social Welfare Net
Different types of social and governmental organizations in daily life are available to fill people’s social needs. For example religious institutions like churches, mosques and temples are places that fill a person’s need for growing spiritually as well as offering services such as family counseling. The national government’s role in providing a social welfare net for citizens became essential during the depression of the 1930s. Local and state governments are involved in offering a social welfare net when they offer school breakfasts for children who don’t have enough to eat. Another way government is involved is by offering websites about jobs and training sessions that are available. Unemployment insurance is part of the social welfare net that gives a person without a job, money to use while looking for another job.
Social security is an important safety net for people who are unable to work because of physical problems and for elderly people who are retired. The organization Social Security Works (SSW) (2012) reported that “for the last two years 47% of women and 35% of men reported reduced confidence in having enough financial resources to last through retirement” (para. 1). SSW (2012) continued by noting that “Social Security is still paying full benefits and keeping millions of people out of poverty in retirement” (para. 2). This indicates that social security is successfully working as a safety net by keeping older people out of poverty. The more people who are in poverty the more the economy slows down.
Before changes to Social Security in the 1980s young people who needed support could have money to attend college (ssworks 2012 para. 4 no. 4). This benefit was available to young people if the income making parent died or when both parents were on social security.
Medicare is another government program which offers health insurance to people aged 65 years and older. Medicare also offers help to young people in certain cases when they have disabilities and when they have “permanent kidney failure.” (US Govt. 2012 para. 3)
USA versus Venezuela
President Obama has relied on advisors who have had a lot of experience on Wall Street. Prof. Petras wrote that Obama expected corporations and businesses to create jobs while Chavez nationalized “private sector mines, banks and energy enterprises and decreased military tensions” (2011 para. 1& 13). In other words President Chavez relied on the public sector while President Obama has relied on the private sector. In the USA many teachers and other workers involved in education have been fired while in Venezuela has seen a creation in this job sector. Venezuela has had success from using the “bottom up” approach to building the economy while the USA has more people living in poverty each year (Petras, 2011, para. 17 & 18).
Mr. Freidman’s book didn’t seem to be logically argued. A lot of words in the text were in quotations. It seemed they had another meaning but he never carefully explained what he was trying to imply. It seemed like he thought people who did not agree with capitalist self-sufficiency were “dumb.”
I felt more comfortable reading information at websites like Social Security Works. On the SSW website facts were given, references were available and you could email the site with questions. I felt that the people working there were being as honest as they could be; giving historical and contemporary facts and numbers.
After studying both types of theories I would say I think the social welfare net is the most attractive to me. That could be because it is the only type of economy I’ve known so far growing up. But I think it makes more sense for a government to use the money people pay for taxes to build a safety net so they don’t have to worry about having to be sick and living on the street. It is important for people to be able to cooperate together to reach goals like a strong economy.
I’m comfortable with the Social Welfare Net model more than with the Capitalist Self-Sufficiency model. From what I understand and observe the social welfare net helps more people.
“Adam Smith.” The Concise Encyclopedia of Economics. 2008. Web. 29 Feb. 2012.
Social Security Works. “Social Security keeps millions of seniors – especially women – out of poverty.” http://washingtonpolicywatch.org/, 27 Jan 2012. Web. 28 Feb 2012.
Ssworkswashington. “Scrap the cap to improve Social Security.” http://ssworkswa.org/, 23 Feb 2012. Web. 29 Feb 2012.
USA Government. Social Security. The official website of the U. S. Social Security Administration. http://www.ssa.gov/24 Feb. 2012. Web. 29 Feb. 2012.
Friedman, M. and Friedman D. R. (1982) Capitalism and Freedom. Chicago, IL: University of Chicago Press. http://www.questia.com/ n.d. Web. 29 Feb. 2012.
Petras, J. ‘Chavez versus Obama: “Capitalist stimulus” versus “Socialist economic recovery.”’ The Global Realm. http://theglobalrealm.com, 23 Sept. 2011 Web. 29 Feb. 2012.