BUS 626 Week 1 Responses
RANBABY
DiscussionResponses.docx4ANSWER ALL RESPONSES.
100 WORDS TO EACH QUESTION. RESPOND TO ALL QUESTIONS.
Question 1(Mandeep)
Socialism is a political and economic system whereby the general public owns the means of production. Hence, the government controls consumer prices and production to meet the people’s needs while limitations exist to regulate private resource control. On the other hand, capitalism refers to an economic system where production is under private ownership, favoring individual initiative over the government. Countries practicing capitalism around the world include Australia, the United Kingdom, and Singapore. Countries practicing socialism in the world include Cuba, Vietnam, and China.
The pros and cons of socialism
The pros of socialism
Socialism diminishes the marginal utility of income within society by redistributing opportunity and income within society. First, redistributing income from the very rich to the very poor adds to the total utility within the community by increasing their ability to afford basic needs. Secondly, socialism supports free health care, thus enhancing the living standards of poor and rich people within a certain community. Moreover, socialism reduces the poverty levels within a community and fosters equality and cohesiveness (Dobb, 2012). Finally, socialism reduces the hidden taxes arising from certain services such as healthcare under the disguise of private health insurance.
The Cons of socialism
Socialism results in higher taxation for entrepreneurs resulting in disincentives for businesses or work. Business owners could feel that the government is stealing from them by taking a large percentage of their profits for resource redistribution hence discouraging investment or movement of business to friendlier countries. Secondly, the regulation of firms, labor markets, and operating public industries could overwhelm the government resulting in government failure in resource allocation. Moreover, high regulation of firms could potentially discourage economic growth by warding off investors. Thirdly, socialism results in healthcare rationing since everybody within the community is reliant on public health care. The financial implications accompanied by the constant demand for healthcare services disadvantages some community members with less urgent needs since practitioners are forced to prioritize more urgent needs. Finally, socialism could result in labor market antagonism under labor unions. Although the concept of socialism is usually geared towards equality and harmony, it creates a wedge between owners and workers, as experienced in the UK in the 1970s.
The pros and cons of capitalism
The Pros of Capitalism
Capitalism rewards and encourages innovation by granting incentives for personal effort. Moreover, by encouraging innovation, consumers within capitalist countries enjoy an array of different products and services, which boosts economic growth. Secondly, capitalism grants economic freedom to individuals, which translates into political freedom. Thirdly, firms within capitalist countries gain incentives that encourage efficiency and produce products on demand. The incentives offered to foster the efficiency of companies as they try to avoid wastage of resources and cut costs. The economic growth stemming from capitalism is also unmatched since individuals and firms work harder to enjoy greater incentives.
The Cons of Capitalism
Capitalism encourages wealth inequality since people can earn more than others across a wide margin, thus widening the disparity between the poor and the rich. Secondly, capitalism brings forth social division and repetitive cycles of wealth or poverty through inheritance. Capitalist societies allow the transfer of wealth down generations, creating systematic inequality while denying people equal opportunities to gain wealth. Thirdly, capitalism enables certain firms to gain monopoly power in labor and product markets, resulting in the exploitation of consumers (Nowak, 2016). Finally, capitalism fosters monopsony powered where firms can pay their workers to lower wages than what owners earn.
Capitalism and wealth inequality
Capitalism results in disparities in wealth since the rich keep getting richer while the poor stagnate or get poorer. Wealth inequality is not necessarily a bad thing since it motivates the poor to work harder to gain wealth. However, this inequality becomes a bad thing when the poor are denied equal opportunity to make wealth while the rich enjoy wealth cycles. Moreover, wealth disparities foster classism, social inequality, and the consequent crime from desperately poor people trying to attain wealth despite the denial of opportunity.
Question 2(Sean)
Capitalism, otherwise known as market organization, involves market prices, voluntary exchanges, and private ownership of assets that are productive (Gwartney et al., 2018, sec. 2-7a). Capitalism describes an economic system that is comprised of productive resources that are privately owned; market prices allocate resources and goods (Gwartney et al., 2018, sec. 2-7a). Socialism (or political organization) involves collective decision-making in which a government will make economical decisions through its political process (Gwartney et al., 2018, sec. 2-7b). Examples of capitalistic countries include Hong Kong, Singapore, New Zealand, and Switzerland (Amadeo, 2020). Examples of socialistic countries include India, Tanzania, Angola, and Guyana (Betts).
Capitalism and socialism are being spotlighted in U.S. politics largely because of perceptual arguments that may or may not be 100% fact-based; at least that is what I am seeing. In this sense, these debates do not seem to widely differ from other political issues. Political figures such as Bernie Sanders bring socialistic ideas into the political arena, and Americans respond to these ideas in several ways; as long as these debates continue, the issue will continue to persist. It is worth noting, however, that when Sanders ran for president on a democratic socialist platform, it seemed to poison his chances for obtaining the Democratic nomination (Klein, 2019). This could indicate that the U.S. may be a long ways off from making significant structural changes, if such changes are to be made at all.
To give further insight, here are pros and cons of capitalism and socialism:
Capitalism:
Pros:
Product variety, ingenuity, competition, dynamic change (Gwartney et al., 2018, sec. 2-7b). Also, incentives encourage innovation and efficiency (Pettinger, 2019).
Cons:
Potential consumer exploitation, rise of monopolies, greater potential for environmental damage, prone to ‘boom and bust’ economic cycles (Pettinger, 2019).
Socialism:
Pros:
Minimizing the gap between rich and poor, possible improvements in social stability, assurance of supply of daily goods (Environmental Conscience).
Cons:
Welfare state, loss of incentives, too much power for politicians, potential decrease in foreign investment in U.S. firms, higher taxes (Environmental Conscience).
To conclude, few would argue that capitalism does not create wealth inequality. However, as the textbook points out, this is not necessarily a bad outcome; wealth inequality can result in inadvertently helping the masses. For example, those that have had to live with less-than-ideal circumstances have used their dispositions to create wealth that has enriched not only them, but those who have benefitted from their work (Tamny, 2015, p. 42). Many examples are present in that chapter. Corporations also have a long history of creating wealth by making goods more accessible at lower prices and can be genuinely altruistic in the process (Segal, 2017, p. 117).
Question 3 (Talah)
Increasing the minimum wage sounds like an excellent idea. There are clear benefits such as giving individuals more money and thereby bringing them up and above the poverty line. Furthermore, because they will be making more money, this will have an effect of increased morale leading to more employee retention and reduced rehiring costs (Maverick & Boyle, 2021). However, raising the minimum wage is not as simple as give individuals more pay, it comes with many unintended side effects (Gwartney et al., 2018). For instance, raising minimum wage would result in an increase in the cost of living. This is because in order for corporations to adjust for the added expense of labour, they will typically increase their revenue by increasing the price of their product. Now, even though those making minimum wage will be earning more money, they will still struggle because the increased cost of live will continue to be affordable (Kelly, 2020). Another consequence of raising minimum wage if the effect it will have on those making more than minimum wage. There will be added competition for minimum wage jobs because over qualified individuals who were making a bit more than the old minimum wage are now competing for the same jobs as those in the new minimum wage (Maverick & Boyle, 2021). This labour market imbalance could place many minimum wage workers out of a job (Alsalam et al., 2021). As such, with these pros and cons listed, a thorough evaluation must be made before the decision to increase the minimum wage is proceeded with.
Question 4 (Luis)
Minimum wage since the Fair Labor Standards Act, 1938 through 2009 have seen changes from $0.25 to $7.25, and with recent events that have lead to proposals of increasing the wages to help the economy recover from the pandemic (Scott, n.d.), as it has affected everyone in some way. This topic has gotten has so many variables that could be argued in favor and against it, but one of the most aspects that should be reviewed is the effects it has on firms as well as labor costs which leads me to disagree with raising the minimum wage to $15 per hour.
One of the main reasons I can't entirely agree with the raise that it also brings other variables into play that are not mentioned and "may represent a pronounced change to compensation practices which it would be difficult to justify" (Brink et al. l., 2021). The best example for a variable example are contracts as some organizations have bargain agreements due to Unions, which would impact agreement and benefits. It is not without saying that raising the minimum wage won't help, but there is a bigger picture and many variables that need to be reviewed as it will have a greater impact on the system and future generations.
