Capitalism In America Essay

Capitalism according to Baumol et al. is the most open, creative, and dynamic economic system ever devised. The economies of different capitalist countries can be classified in four categories: big firm, entrepreneurial, state-directed and oligarchic. The ideal found in the United States is a combination of big firm and entrepreneurial capitalism. This form of capitalism promotes innovation. While oligarchic and State-directed capitalism are less favorably. Both are dominated by rent seeking rather than productive activity.

Baumol et al. focus on the United States as the standard for successful economic growth was surprising. The growth rate of the United States compared to other nations is unexceptional. Yet for Baumol et al. America, with its productivity miracle in the 1990s, is portrayed as a standard for how to generate economic growth. Even the Gini Coefficient for OCED Countries shows United States has the highest income inequality among OCED countries. Such level inequality is not replicated by most other rich countries. I argue, therefore, the United States is not a standard for economic prosperity, arguably not even in education, health and material wealth.

Much like Bumol et al., I agree that market liberalization and open market access will lead to innovation and growth. Rigidity, limited incentives, and a paucity of

highlights incentives and competition as the core pillars of capitalism. Unfortunately, I believe politics has compromised the core pillars of capitalism in America. Financial institutions in 2008 were bailed out by the government based on the argument that letting them fail is worse. The governments’ incentive was to save jobs, even at the cost of efficiency. American government now engages in creative salvation. I argue modern capitalism is tamed and constrained by politics. Politics has caused the adaptation of twenty-first-century capitalism to the changing times. But it does distort incentives in