Research Assignment Topic 3: The Two Realms of Capitalism

The Two Realms of Capitalism
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The Two Realms of Capitalism
Capitalism is essentially a political and economic system wherein the trade and industry of a country are controlled not by the state, but instead by private owners for profits. In this system, factors of production are owned by individuals, enterprises and other private entities (Scott, 2009). Robert Heilbroner is one of the most well-known economists who extensively discussed the system of capitalism in his paperback titled Twenty-First Century Capitalism. In this book, Heilbroner (1992) identified two realms of capitalism. He pointed out that these two are both dysfunctional and beneficial for the society. This paper provides a discussion of what he meant by this and how it is truly possible. In addition, the paper discusses how capitalism’s contribution to the society has been more negative or positive.
Heilbroner’s Two Realms of Capitalism
The two realms of capitalism that Heilbroner (1992) identified are the government or state on one hand, and the business or economy on the other hand. The relationship between the government/state realm and the business/economy realm is interesting given that one aspect of this relationship makes them dysfunctional for the society, whereas another aspect of the relationship actually serves to make them beneficial for the society. According Heilbroner (1992), the realms of the economy/business and the government/state are of benefit to the society only when these two realms are dependent upon each other. This is because when they are reliant on one another, they are able to support each other. This in turn leads to a peaceful state and economy of a society. Conversely, the realms of the economy/business and the government/state are able to proceed separately without having to rely on one another. When they split, however, Heilbroner (1992) pointed out that they would become dysfunctional for the society given that the government may block the path of the economy/business to grow in a free manner, and the economy would not survive separately by itself without the state’s support leading to a weak economy.
Under the system of capitalism, the private sector controls the economy of the nation or state. Capital and land are owned privately by individuals or by private companies. The government’s involvement in the economy is limited (Sternberg, 2015). In essence, the state may only be involved when it is required to protect the rights of properties and contracts of people. In this economic and politic system, workers and employers have the freedom of seeking their own self-interests. A notable characteristic of capitalism pertains to its goal. Heilbroner (1992) pointed out that the elusive goal of any capitalist country in the world is to simultaneously secure stable prices for goods/services and high rate of employment amongst its citizens. With such an idea, an ideal capitalist society is able to effectively provide job opportunities to the people and simultaneously allow individuals to seek profits all whilst sustaining stable prices. The prices of goods are kept steady by means of mass production of products which is only possible through significant investments made by private entities (Baumol, Litan & Schramm, 2012).
Even so, it is important to point out that capitalism cannot survive only on the basis of investments made by private enterprises. Support from the state is also crucial. For this reason, the 2 realms of capitalism, namely the economy/business and the government/state, should work with each other in order to attain the greatest profit or benefit (Heilbroner, 1992). Independently or when they are separate, the economy/business and the government/state realms lack an adequate amount of power needed for keeping a nation’s economy floating. In this way, the economy/business realm and the government/state realm are, in fact, dysfunctional for the society. When they work together nonetheless, the two realms are able to create an alliance that would keep the country’s economy, not just floating, but also thriving and growing (Baumol, Litan & Schramm, 2012). In other words, when they work together interdependently, they possess sufficient power to move the country and make it prosper. In this way, the economy/business realm and the government/state realm are beneficial to the society. If either the economy/business realm or the government/state realm fails to play its role as it should, Heilbroner (1992) mentioned that it is actually the society that would pay for their shortcomings. As such, the economy/business realm and the government/state realm can be both dysfunctional and beneficial for the society.
While the role of the government in a capitalist society is very limited, it has a few functions that it has to perform. These include regulating the supply of money, strengthening the country’s national defense, and maintaining law and order nationwide. In addition, the government has to develop and sustain the free market mechanism system, increase the efficacy of the free competitive market system using a variety of measures, get rid of any sort of restrictions on the working of free competitive market, support private ventures in an economy, and regulate and control different economic situations like deflation and inflation (Sternberg, 2015). The state is also expected to possess the ownership of public utilities like electricity, water, medical care, education, railways, and roads that are needed by an economy in general; control the power of large and monopolistic conglomerates in order to avoid a number of economic problems like inequitable distribution of resources and joblessness; limit restrictive trade practice; and create a central planning body whose purpose is to help in the economic development on a bigger scale. All in all, the state’s main role in a capitalist society is to encourage and control the free market mechanism. The state also has to encourage private ventures to safeguard the economy’s future (Scott, 2009).
On the other hand, private entities in a capitalist economy are involved in wealth accumulation to be utilized for exchange and not for consumption; own means of production, private properties and commodities; and decide their own allocation of resources. The economy/business and the government/state realms have to play their respective roles accordingly to bring benefits to the society. When the government plays its role well, for example by ensuring there i...