Capitalism vs Democracy

Capitalism and Democracy The political system and the economic system of the United States have been intertwined since the very founding of our country. Although there are many different views on how well the systems work or how they function, this has been a common thought shared by all different sides. Some have an optimistic view of capitalism, while others feel as though capitalism favors too few people. Two major points of view, the conservative and the “reform” liberal, describe how capitalism works, and the role for the government in managing the marketplace, in two similar, yet very different ways. First, we look at the thoughts of Milton Friedman, of the conservative point of view. According to Friedman, capitalism is a free market system that is driven from the bottom up, starting with individuals who make voluntary choices to purchase goods and services and hold jobs. Having a free marketplace gives every individual the power to create their own economic destiny, from what food they eat, to what car they drive, to what career they choose. Friedman also describes capitalism as “self-correcting”, that if left alone, the market place will inevitably fix any problems it creates. According to Friedman, capitalism follows a cycle, consisting of ups and downs in the economy that will eventually work themselves out over time. It begins with a future expectation of profit, and people with money to invest. As more people begin to invest their money, the demand for labor and materials increases, leading to economic expansion and more people spending money. As demand continues to increase, supply begins to decrease, causing inflation and increasing product prices. At this stage, future expectations of profit are bad. As prices rise, people can’t afford to buy things, so they start to pull their money out of the market and investments. With fewer investments comes less demand, causing people to lose their jobs, prices to drop, and consumers to buy fewer goods.