The Power of Economic Ideas

Demystifying Capitalism
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Introduction
Matters of wealth distribution have for many years continued to elicit debate. The manner in which wealth in society ought to be distributed continues to bring about sharp divisions with different people having different arguments. There are two main schools of thoughts to which distribution of wealth is pegged. One is capitalism and the other is socialism. Socialism on one hand emphasizes on equality in which there is fair distribution of resources. This ensures that there is no section of society that is advantaged than others. Capitalism on the other hand is pegged on the principle on ‘every man for himself’. This means that an individual can amass as much as wealth as possible to himself without consideration of giving others a similar opportunity. Thomas Picketty took time to research on this rather controversial subject. After many years of compiling his findings, Picketty came up with Capital in the Twentieth Century a book that would later be ranked as a best-seller. In his book, Picketty has given some very strong sentiments on capitalism backing the same with the facts. It is the arguments by Thomas Picketty that form the basis of this paper.
Thesis Statement
Capitalism is the foundation of economic growth. Despite receiving a backlash, Picketty has given tangible facts as to why capitalism is the way to go for countries looking for economic freedom.
Background Information
The globe is divided into two main spheres which are the peripheral countries and the core countries. The countries are those at the center of resource concentration. They are often well developed and are also known as first world countries. These countries are respected for their economic prowess. On the other hand, there are countries that are at the margins and far placed from where the resources concentrated. They are in the periphery or at the distant edges so that they do not easily access the resources. The economics of these countries are weak and they sometimes have to depend on the core countries for financial aid in order to remain afloat. With this illustration, it becomes apparent that there is inequality in the world. There are some countries that have more resources than others making them richer. What is the cause of this inequality? Does capitalism play a part? If so, does it promote inequality or help bridge the gap that exists?
Statistics indicate that close to the total number of resources that are available the world over are consumed by only a small percentage of the world’s population. To be precise, more than 80 percent of the world’s resources are under the control and strict management of about 20 percent of the entire population of the world. The other 80 percent of the population have to share the 20% and since it is hardly enough, they have to fight for it and it is survival for the fittest. That is without a doubt a great form of inequality. The big question however is, what causes this great discrepancy and discordance? Are the developing countries or the peripheral countries poor because the developed countries are rich? Would that be a valid argument? Does it mean that if the 1st world countries were less rich then the poor countries would be doing better? It is obviously a misconception when we assume that those countries that are rich are the cause of the poverty that the third world countries experience.
Production of Resources
(Picketty, 2014) notes that most of the countries that are strong economically, for example the United States of America, were colonies. They struggled to get on their feet after they gained independence. Surprisingly, some of the countries that are least developed, for instance, Liberia and Afghanistan were not colonized and had control of their resources from the very beginning. The main reason, however, why only about 20 percent of the world’s population has control of close to 80 percent of the world’s resources is because the same countries are in charge of production of these massive resources. What needs to be addressed is the cause of poverty in the world as opposed to why some countries are richer than others.
Picketty (2014) observes that the trend of a hundred millionaires and tens of millions of beggars in society is trend that has been for many years. He notes that some of the phenomena that threatened to disrupt this tend were the world wars and the Great Depression. During these times, the desperation may have led to loosening of the rope thereby bringing order albeit temporal.
Argument against capitalism
Those opposed to capitalism argue that per capita GDP of some of the rich countries and in comparison to the per capita of poor countries, the former is 30 times higher (Picketty, 2014). Critics argue that this disparity is caused by capitalism. While they may be right in making such a conclusion, they are definitely mistaken in regard to the reasons they give. Most of the countries that have prospered economically have taken the path of capitalism while those that have resulted in communism while impeding production, trade and ownership have always experienced economic hardships.
There are natural factors which have also played a role in determining the prosperity of some countries. Factors such as climate, natural calamities among others have undermined the economic development of some countries. Countries that have more than half of the land being a desert or countries that continually experience natural calamities such as earthquakes and floods have been affected economically. This notwithstanding, the kinds of economic strategies that countries have taken are the great determinants of how well their economy has been thriving. The main issue therefore is whether a country is liberal or controlling in terms of management of resources. Liberal countries have managed to gain a stable ground and are now very prosperous while those that are controlling tend to lag behind in terms of development and economic growth. It is this argument that Picketty is advancing in his book. He argues that capitalism does not always result to inequality and should be analyzed in finer details for people to understand the nitty gritties of what it is about. Pickety believes that capitalism and especially in the twentieth century is one of the misunderstood concepts.
Studies conducted have shows that the per capita GDP of countries that are liberal is way higher, close to two times higher, than the per capita GDP of those countries that have remained less liberal and more controlling. Looking at these statistics, it is clear that the discrepancy that exists could be reduced if...