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Shaw Chap 4 Capitalism.docx

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MGMT 1040
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Ethics Notes- Chapter 4 The Nature of Capitalism and Corporations Capitalism- an economic system in which the major portion of production and distribution is in private hands (eg manufacturing firms, banks), operating under with is termed a profit or market system.  Using money to make money  Owned by individuals (capitalists) who determine what and how much to produce, production goals, etc  Eg US Socialism-an economic system characterized by public ownership of property and a planned economy.  Owned by public bodies- decisions made by government  Eg China Mixed Economy- adopted by contemporary countries- and economic system that combines features of both capitalism and socialism  Eg Canada Historical Background th th  Formed during the 15 and 16 century in the Renaissance in Europe  Before than businesses were organized through guilds (associations of individuals of the same trade)  Hans Fugger-weaver, family business, it grew and expanded and turned into a great German dynasty. It was termed mercantile capitalism because it was based on mutual dependence between state and commercial interests  Industrial capitalism-associated with the development of the large-scale industry  Financial capitalism-characterized by pools, trusts, holding companies, and interpenetration of banking, insurance, and industrial interests  State-welfare capitalism- government plays an active role in regulating economic activities in an effort to smooth out the boom-and-bust pattern of the business cycle  Globalized capitalism- operating on a world-wide scale Key Features of Capitalism 1. Companies- The existence of companies or business firms separate from the human beings who work for and within them. “Its not in the company’s interests” “From the company’s viewpoint” 2. Profit Motive- companies and capitalists are motivated by a hunger for profit 3. Competition- keeps prices for desired goods from escalating 4. Private Property- 1) one can have property rights over things that are not physical objects (Eg stocks) 2) property ownership involves rules and regulations governing to the thing in possession  Capital: money that is invested for the purpose of making more money Moral Justifications of Capitalism  The natural right to property: people have a fundamental moral right to property and that our capitalist system is the outcome of this natural right  The invisible hand: capitalism is more efficient and productive than any other system and brings about many benefits. Each individual and pursuit of wealth results in the most beneficial overall organization and distribution of economic resources (as if an invisible hand were at work) Criticism of Capitalism Theoretical criticisms challenge capitalisms’ fundamental values, basic assumptions, or inherent economic tendencies. Operational criticisms focus more on capitalism’s alleged deficit/shortages/lacks in actual practice as opposed to theory (eg on its failure to live up to its own economic ideals)  Inequality: the disparity in personal incomes is enormous. A tiny minority of the population owns the vast majority of the country’s productive assets. Defenders of capitalism have 3 responses to this point: 1) they deny that capitalism is responsible for poverty and inequality- they believe it’s the governments fault of interfering with the market, 2) In its basic form, capitalism does nothing to prevent and may foster inequality and poverty. Critics deny this. 3) Benefits of the system outweigh the weak points(eg living standards are rising- even for the poor)  Human Nature and Capitalism: 1)the theory of capitalism views human beings as rational economic creatures who recognize and are motivated by their own economic self interest 2) Capitalism presents no higher sen
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