The countries of the world choose different political and economic systems to organize power within their borders. Today, the predominant system in the world is capitalism, which essentially forms almost the entire system of world trade. The basis of capitalism is the freedom of economic activity of individuals within the state, which provides protection, justice, and order for the functioning of the system by political power.
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The capitalist system is one of the main in the modern world since most countries use it for their economic activities. The basis of capitalism is the fact that private individuals and companies own the main economic factors and gain profit from them (Milanović, 2019). In other words, in this political and economic system, there is a free market in which private entrepreneurs produce goods and services and conduct trading operations by making a profit from it, and the state does not intervene in these economic relations. Business owners independently determine the products, sizes, and methods of production, as well as sales markets and trading partners.
However, even though the state does not interfere in the political and economic activities of individuals, its goal is to protect the market and ensure justice and order by using power. In this case, the state can apply common forms of coercion to enforce order, precisely through the adoption of laws and taxation. However, in this case, power is not used to control economic activity itself but to protect citizens and the state in general.
For example, taxes levied on private companies are reassigned to the needs of the country, such as defense, infrastructure development, the social and cultural sectors. Laws promote the fair distribution of rights and duties, for instance, labor law that guarantees the protection of employees. These measures also provide a social order in which individuals and companies are subject to universal national laws and institutions by creating a useful functioning system.
Moreover, despite the social inequality that capitalism creates, this system is one of the fairest. Its basic principle is that each person receives that part of the benefits, or money, that he or she can earn (Milanović, 2019). At the same time, people cannot infringe on the earnings of others. This fact can be observed in any capitalist country, where entrepreneurs with original ideas or successful professional athletes and singers earn millions since they offer services or products that are inaccessible to most. Consequently, such political bases as order, justice, and power are essential components of capitalism.
Capitalism also provides many public goods since it essentially forms the entire internal interaction of states. Individuals occupy their niche in satisfying customer demand and create private products, but some complementary components create public goods for all citizens. For example, private power companies offer paid electricity to the population in their homes; however, they also provide for citizens free street lighting.
From a broader perspective, the private business brings revenue to the state by their taxes, which are used to ensure such a public good as the protection of state sovereignty. Thus, capitalism provides the country with the means that it uses to satisfy the needs of its people.
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In conclusion, capitalism is an economic and political system in which individuals own full rights to economic activity and are not ruled or controlled by the government. In this system, objects of economic activity bring public goods to the state, receiving their own profit and benefits at the same time. The state, in turn, guarantees market protection, justice, and order for the stable functioning of the system.
Milanović, B. (2019). Capitalism, alone: the future of the system that rules the world. Cambridge, MA: The Belknap Press of Harvard University Press.