Democratic capitalism is the economic and political system that is based on individual’s potentials in an environment of cooperation and trust. In democratic capitalism the leadership is only charged to harmonize the cooperative nature of the individuals. America, which in all sense is seen as the world symbol of capitalism, its democratic system of government that fosters individuals’ liberty is demonstrated as the engine to its economic prosperity.
In his quest to find out why despite their prosperity, Americans are so anxious, Tocqueville (1835), illustrates on the freedom of individuals to make decisions on the type of investment to make, location of investment, change from one investment to another, choice of career etc. He showed that, all this freedom is accompanied by a constant desire to accumulate more wealth and capital within the shortest time possible to ensure self satisfaction and happiness. According to Buffett (n.d), human energy works well to supply human needs and ensure their satisfaction when they are assured of individual liberty. This affirms the fact that Americans economic prosperity has been anchored on democratic capitalism and individuals’ liberty where people are free to make choices depending on their abilities which according to Buffett, forms a basis for innovations and development. Lead (1992) shows how integration of freedom and cooperation gangs up people to achieve even the difficult goals.
In relation to the rule of law, democratic capitalism includes economic justice and social cooperation, among other things. Also, the authorities are simply charged with provision of incentives to foster independency and free will. Thus, individuals are free to make and exercise their thoughts while observing the rule of law. According to Ebeling, (n.d), he indicates that the distinctive nature of the rule of law is to strive to eliminate or reduce the arbitrary powers in the leaders. Thus the role of the rule of law in democratic capitalism is to promote equality to all while nurturing independence. Since in a capitalistic society every individual strives to achieve the most and the best, it is only the government that can engage the society to ensure fair distribution of wealth to induce equality (Kristol, 1978).
Democratic capitalistic states have in many aspects been referred to as welfare states. Myrdal (1960), demonstrates democratic governments as those where welfare aspects of individuals have been a subject of concern. Such welfare aspects include employment conditions, social security, and higher standards in housing, nutrition, health and education. This has been agitated by market forces in free societies as well as due to necessity.
Milton and Fredman (1979) say “government measures that promote personal equality or equity of opportunities enhance liberty”. In democratic capitalism, government intervention is applied to control its citizens’ investments, spending, and saving for the exchange of capital security. Such interventions include direct injection of capital to rescue nation’s financial sector. This is further supported by Smith (1776) where he shows that, capital is only best invested at home where the investors can directly monitor those investments. In addition, Smith indicates that, capital invested at home puts into motion domestic industries and gives revenue and employment to inhabitants of that country than equal capital invested in foreign countries.
Democratic capitalism and individual liberty works well to foster people’s cooperation in trying to achieve the human needs. When each member of a society is free to make choices of investments and other economic decisions, the individuals take up the responsibility of perfecting in production or service delivery to the community. Williams (n.d) shows that in a free society, revenue is earned through serving and pleasing other human beings. Further he suggests that the difference in the revenue earned and thus the accumulated capital between individuals depends on the effectiveness with which he serves fellow men. Thus inequality between individuals is as a result of the rewards gotten after serving and being served by fellow human beings by providing what they don’t have and acquiring what one can not produce.
However, the existence of individual liberty to private property and its role in fostering economic development in democratic capitalism does not go unchallenged. Marx and Angles (1848) shows that capital is collective and that it is by engaging the society that capital can be set into motion. It is further indicated that the capitalistic society forms classes of people where there are bourgeoisie become the rulers of the proletarians. This aspect denounces the existence of individual liberty in democratic capitalism.
Recently, the U.S Congress approved $ 700 billion as direct capital injection to its economy to rescue the nation’s financial sector. The phenomenon in the whole world is a situation of economic downturns therefore the governments are charged with making economic decisions that will stabilize their financial sectors. When the U.S government makes the decision to use its capital at home many, US nationals will be involved directly thus providing revenue and employment opportunities to the citizens as well as boosting local industries. According to Smith (1776) investments at home yield the best economic gains for individuals, organizations or states.
References
Buffet, H. (N.d). The Economic Foundation of Freedom. Kirkpatrick Signature Series Reader.
Ebeling, R. M. (N.d). Free Markets, The Rule of Law, & Classical Liberatism. Kirkpatrick Signature Series Reader.
Kristol, I. (1978). A Capitalist Conception of Justice. Kirkpatrick Signature Series Reader.
Marx, K. and Engels, F. (1848). From the Communist ManifestoProletarians & Communists. Kirkpatrick Signature Series Reader.
Milton and Friedman, R. (1979). Equity of Opportunity: From Free to Choose: A personal Statement. Kirkpatrick Signature Series Reader.
Myrdal, G. (1960). Planning in the Welfare State: From Beyond the Welfare State. Kirkpatrick Signature Series Reader.
Reas, L. E. (1992). I, Pencil. Kirkpatrick Signature Series Reader.
Smith, A. (1776). From an Inquiry into the Nature & Causes of the Wealth of Nations. Kirkpatrick Signature Series Reader.
Tocqueville, A. (1835). Democratic Capitalism & Individual Liberty: From Democracy in America. Kirkpatrick Signature Series Reader.
Williams, W. E. (2005). The Entrepreneur as American Hero. Kirkpatrick Signature Series Reader.