The assignment was:
Think about the four different economics systems: Traditional, Command, Market, and Mixed. Write an essay in which you compare and contrast these four systems to our own system of “American Capitalism.” Be sure to use specific evidence from the thinglinks (posters created by classmates with information about various other contries) you observed to help support your similarities and differences.
Please note that I only had around one hour to complete this, and did not have time to proofread.
ESSAY BEGINS BELOW:
There are four different types of economic systems. These systems are Traditional, Market, Command, and Mixed Economies. In America, there is a concept of “American Capitalism.” American capitalism is not a major economic type like the four above, and could be considered a subset of mixed economies. American capitalism promotes freedom of choice and enterprise, private property, competition and a system of incentives based around profit to ensure that businesses follow the wishes of the people. However, in the last century, America has started to veer away from this system. America has begun implementing more and more ideas from command and traditional economies, with some politicians suggesting that we abandon capitalism altogether and switch to a socialism based system.
America shares many similarities with a pure market system. American capitalism is, at its root, based on a system which uses profits to incentivise producers to produce goods and services that consumers want, with the consumers almost casting a vote with their dollars. However, there are many differences between American capitalism and market systems. First, the bailouts. Legislation gave a small consortium of companies and banks near complete control over the american economy, especially banking and lending services. When these companies and banks began to fail, the government intervened. When the banks should have been forced to reevaluate their business model as a result of their failure, they were instead bailed out by the government. But how did this consortium become so powerful? This isnt just a problem with banking. As a result of legislation that promotes regional monopolies and duopolies, many industries such as insurance, internet service providers, and silicon semiconductor chip manufacturers have been able to act against the wishes of consumers by taking advantages of regional, or in some cases national, monopolies and duopolies. This can be compared to countries like Switzerland, whose governments take a much more hands off approach to regulation and controlling their economy. In Switzerland, most companies are small to medium sized enterprises, comprising of less than 250 employees. This shows that Switzerland’s government promotes competition and prevents monopolies.
These systems of monopolies and duopolies are introducing more and more elements of traditional systems into the American economy. However, unlike in a traditional system, consumers do not choose the same services year after year because of tradition, but rather because they have no other options. One good example of this is internet service providers. Because there are only a handful of internet service providers, they can easily conspire together to unbalance the incentives of capitalism. These companies have tried several times over the last five years to remove net neutrality. Net neutrality, among other things, ensures that internet service providers cannot adjust your connection speed to a server based on the content on that server. If net neutrality is removed, it could allow an ISP, say Comcast, to slow users connection to services like Gmail, and increase connection speeds to their own services. This is clearly against the wishes of consumers, however protections against net neutrality are dangerously close to being removed altogether. These monopolies and duopolies work in a simelar way to tradition. In traditional systems, consumers have less choice because societal norms force people to consume specific products. In the US, regulations and legislation limit the number of products available for consumption. This is similar to a situation in Uganda. Uganda is a farming based economy, but their tradition and underinvesting causes them to not pursue more modern farming equipment. In the United States, these pseudo-traditions stagnate competition and produce the same result: less innovation.
The American economy is also implementing elements of a command system. Many of the American government's policies are designed to redistribute wealth from savers to debtors. And, in any county, the biggest debtor is the government itself. Systems such as social welfare, and systems being planned such as free college and free healthcare transfer money from savers to debtors. Even America’s 2% annual inflation, designed to “stimulate economic growth” promotes this transfer from savers to debtors. If I hold 100,000 dollars, in thirty years it would be worth around half of that, due to inflation. This is similar to countries such as Iran, where the government is able to promote legislation that benefits only the government itself.
The United States, because of it’s adoption of these systems, is becoming more and more of a mixed system. The capitalist and free market principles that America was built on are slowly being replaced by more and more elements of command and traditional economies. Mixed systems, while allowing for a large amount of flexibility, also softens the purpose of the systems that have been mixed. Market systems lose their consumer control, traditional systems lose some of their rich culture and community, and command systems lose some of their efficiency.