Modern Approaches to Capitalism - Essay Example

Scott (2011) states that capitalism is more about the interactive system that manages economic relationships based on the principle of individual rights. In the political context, capitalism is the system of freedom, and legally its rules of law are opposed to the rule of man. Economically men’s freedom is applied to the sphere of production. In modern times, economists argue that capitalism works as a system of natural forces with supply and demand that tends toward equilibrium. Governance here serves as the main distortion of capitalism and any opposition to capitalism is equal to the opposition to the markets. While Scott (2006) argues about capitalism is defined as an economic system with private actors owning and managing the use of property, the pricing mechanism coordinates supply and demand in the markets in the best interests of society. Government, in this view, is responsible for tolerable taxes. In simple words, Murray (2012) considers capitalism lifted the world out of poverty since it gave people to be richer as they create value and reap the rewards. Thus, the concept of capitalism is perceived as the indirect governance of an economic, political, and administrative relationship where organized markets exist with a set of institutional foundations with various rights and responsibilities that are created and regulated under the protection of political authority (Rand, Branden, Greenspan, & Hessen, 1986).

While capitalism is taken for granted by many people, Wright (2007) states that certain behaviors of economic policies of the government may receive great criticism where capitalism as such can develop negative consequences. Some bad effect of capitalism involves human misery and thwarted lives (Wright, 2007) and in general, capitalism generates unnecessary human suffering. It raises the question of greed with the exaggerated single-minded pursuit of self-interest which is in the context of capitalism to be the economic system that is driven by profits. Moreover, there is a statement that capitalism hurts poverty in terms of technological change. However, as an economic system, it does not have any triggers for moving people’s skills toward limited job opportunities. In addition, when taken together, exploitation, negative social realities, and technological change, all create the predisposition for capitalism as an engine for economic growth generating poverty and deprivation.

While firms are the central actors in the economy they should be engaged with other actors in different spheres of political economy. Hence, to raise finance and regulate industrial relations as well as to educate and train people and provide access to inputs and technology and enable organizations to compete in product markets, there are many variations of capitalism. Hall and Gingerich (2004) consider that the varieties of capitalist approaches impose the differentiation between two modes of coordination, where organizations coordinate with other actors using competitive markets and through the processes of strategic interaction. In such a perspective, the organization depends on the institutional setting or relies on strategic coordination. The varieties of capitalism are also seen as the effort to go beyond the perspective of modernization approach, social systems of production, and the matrix of sanctions and incentives (Hall & Sockice, 2001).

In the recent literature, the varieties of capitalism were proposed as a monetary and fiscal policy with liberal market economies. Liberal varieties are those of low levels of social protection, while other varieties are based on the well-being state with more protection. It is because of the economic difference that liberal varieties of capitalism are based on, such as non-specific skills from employees. Non-liberal varieties have consensus-based political systems, according to Amable and Azizi (2011) and they provide the foundation for powerful interest groups that participate in policymaking. The varieties of capitalism depend on the way institutions perform their activities, hence there is a need to apply a set of concepts to understand the behavior at the micro levels of the economy. While liberal and coordinated market economies can provide a satisfactory level of long-term economic performance, the different types of economies will have different capacities for displaying capitalistic approaches.