Question

Describe some of the basic components of the evolution of capitalism (pages 73 - 82)

Albert Duncan for their members' protection against unfair treatment because of their race, color, religion, ethnicity, and sex. Consumer protection laws make provisions for people to challenge businesses if they think they were unfairly treated in the marketplace. Such laws and regulations help to prevent deceptive and fraudulent business activities. As Muller (2013) stated, I\"Prior to capitalism, life was governed by traditional institutions that subordinated the choices and destinies of individuals to various communal, political, and religious structures. These institutions kept change to a minimum, blocking people from making much progress" (p. 2). Albert Duncan According to Beaulier (2008), in 1965, Botswana was considered the third-poorest nation in the world, but since its independence in 1966, it has experienced economic growth. In fact, between 1966 and 1996, it was the fastest-growing economy in the world, and its growth was the result of signicant improvement in property rights and limiting the government's role in the economy. The private sector ourished, and profit was the key to its growth. The survival of a market economy depends on the establishment and enforcement of relevant rules and regulations that provide an incentive for citizens to engage in economic enterprise (Cudd 2014). Property rights laws do not only cover tangible assets but intellectual property as well. There are laws involving copyrights, patent rights, and trademarks, and many individuals become billionaires due to their intellectual property. Owners of patents associated with profitable companies, such as Google, Facebook, and Apple, have realized tremendous revenue for these companies. Due to competition, investors are constantly promoting new inventions as a means of increasing productivity. Computer engineers and programmers are constantly developing new software, which promote the enhancement in the way goods and services are produced and distributed. Computer programmers, through patents, are given ownership of their inventions. Duhigg and Lohroct (2012) made the point that large corporations, such as Google and Microsoft, have ownership of tens of thousands of patentspatent applications that are computer- related and otherwise have been increasing exponentially every year. In fact, in 2011, the United States Patent Office received about 540,000 patent applications. In this lucrative sector, many companies and individuals are proting from their inventions and ideas by collecting much revenue from licensing. An example of how the patent and licensing market generates billions of dollars in revenue is through contracts involving Microsoft, Apple, and AOL. In 2012, according to Fuchs (2012), Microsoft sold 650 80 Capitalism and Inequality technology lead to wider customer bases and allow for more efficient production techniques. This new method of wealth creation has resulted in many self-made billionaires around the world. These include company founders and executives who are not inheritors of family wealth. Freund (2016) stated that many billionaires become extraordinarily rich because of innovation, especially in the fast growing markets. Jan Koum and Brian Action (combined net worth of US $10 billion) of WhatsApp, a phone base instant messaging service, first appeared on the list after Facebook bought their app. (23) In some cases, the fortunes of many other self-made individuals' wealth come from their executive positions in particular companies. Facebook's chief operating officer, Sheryl Sandberg, is one such example. Freund (2016), posited, Extreme wealth today is largely self-made, and the self-made share is growing, driven by emerging markets. Among self-made billionaires, in emerging markets, the share of company founders and executives is growing exceptionally quickly, as the share of inherited money declines. (p. 29) Another area in which wealth creation is made possible, which is quite different to the capitalism of long ago, is reflected in the manner of capital acquisition and the role played by investment banks and other financial institutions. Miller (2013) made the point that in many advanced countries, such as the United States, institutions, such as Wall Street investment banks, stock market environments, and the related complex financing system, which facilitate availability of large pools of capital for investment purposes, have made significant contributions to inequality. Pension funds 77\"A rat-f '3' "3. Capitalism and Inequality and enforcing the rules of the game. These laws help to promote competition, regulate monopolies, and protect workers and consumers. Capitalism cannot function without property rights laws. Miller and Kim (2017) linked economic freedom to economic prosperity and made the point that there is a direct relationship between the Index quronomir Freedom and economic prosperity. The Index qucauamie Freedom is a composite measure of how free a country's economy takes into account the different aspects such as property rights laws and market openness. As countries advance their economic freedom, entrepreneurship is encouraged, resulting in economic prosperity. Miller and Kim explained that for the past two decades, the global economy has achieved greater economic freedom, resulting in almost an 80% growth in real GDP. The reasoning is clear. Economic freedom encourages open competition, which in turn causes greater productivitya necessary component for increasing real GDP per capita. That prosperity has caused a significant reduction in the world's poverty, and it has created a greater economic well-being for millions of people. As Webley (1967) mentioned, in countries in the world where freedom of the use of capital is allowed, the standard of living is far greater than those governed by a command economic system. Webley (1967) stated that \"a property-owning society is fundamental to successful capitalism. To deny the rights of individuals and corporations to own and derive wealth from property is to betray the root principle on which western civilization has been built" (p. 36). According to Powell (2008), since 1980, as a result of economic reforms, China's economic freedom index has made a 66% improvement. That created prot opportunities for business entities, which led to the tremendous economic growth achieved by China. 79 Albert Duncan are now invested and managed in a manner to generate additional retirement income for employees. The complexity of this nancial system and their importance in stimulating economic growth require people of high intelligence, insatiable drive, and diligence. As a result, these individuals possessing such skills are highly paid, thus making a significant contribution to the inequality in income. The transformation of investment banks into publiclytraded corporationsin which a highly competitive financial system is created and with a complexincentive structure to reward prot, large amounts of money ow into the financial system that is createdstimulates economic prosperity and inequality. According to Bryan Kantor (1995), Financial markets link borrowers to lenders and so determine the rewards for saving and the minimum returns required for investments. Financial markets not only help raise capital for investment, but also keep the score on the performance of investments made in the past. They inform savers about the value of their accumulated savings. In order words, they help measure wealth and by so doing, influence future consumption, as well as investment decisions. (106) Galbraith (2016), in explaining how the financial sector can influence inequality, demonstrated that facilitating investment growth and increased income to be concentrated in a relatively small environment of economic activity at any one time leads to a herd mentality by financial entities. They all rush in to take advantage of the available opportunity. Many certainly have financially lost, but a few have made lots of money. Another signicant component in the evolution of capitalism is the tremendous involvement of the government in establishing 78 Capitalism and Inequality Albert Duncan people are in constant pursuit of trying to produce better, cheaper, and newer products, as well as more improved distribution methods- Therefore, those innovators and creators in technology can become billionaires. Those with the relevant and needed knowledge and information to sell have the opportunity to become wealthy. This is certainly not the accumulation of wealth by exploitation of others. These people have a service to sella service that can transform society for the betterand as a result, they are highly rewarded for their service. As a result of this, the education system is propelling the income inequality. According to Dadush et al. (2012}, advancement in technology results in replicating the task performed by low-skilled labor but not the tasks performed by high-skilled labor- The interdependency of the different forms of technological research and advancement cause an increase in productivity. This, in turn, creates a tremendous demand for educated workers who are associated with the development and operations of such technologies. As a result, the wages of these workers, such as computer programmers, application developers, software developers, and computer engineers, experience a tremendous increase compared to low-skilled workers. For example, the Bloomberg company receives large sums of money for providing data, news, and other information to companies. As a result, the Bloomberg company is very profitable, and its founder, Michael Bloomberg, is one of the richest individuals in America. According to Edmund Lee (2017), Forbes? estimate of Bloomberg's wealth makes him the eleventh-richest person in the world and the sixth-richest technology execulive behind Bill Gates, Jefi' Bezos, Larry Ellison, Mark Zuckerberg, and Larry Page- According to Caroline Freund (2016), the advancement in communication technology has caused people to communicate more easily, enhancing returns to scale, while globalization provides a nearly unlimited audience. Benefits of communication '26 Capitalism and Inequality 80 Capitalism and Inequality patents to Facebook, which were worth US $550 million, and more astonishing is Microsoft's purchase of AOL's patents for US 51.5 billion. Vaughan-Nicholas (2014) mentioned that in 2013, Microsoft's android patent licensing contract with Samsung yielded US $1 billion for Microsoft. For that year, Microsoft made about US $3.4 billion from its android patent licensing. The patent market is, indeed, a lucrative way of generating income. To protect ownership of patent licenses, expensive lawsuits are filed, resulting in hefty judgments. Duhigg and Lohroct (2012) reminded that in 2012, Apple won a US $1 billion patent infringement judgment against Samsung. According to Louis M. Hacker (2012), property rights laws are a necessary pillar of capitalism, and for capitalism to function, it is necessary to have private property and the resulting unequal wealth and income should be protected by law. Accumulation of wealth must be linked with both profits from enterprises and savings as a surplus over personal expenditures. The market system is dynamic and involves a process in which goods and services are voluntarily exchanged, and the value of the goods and services exchanged is mainly determined by how highly they are demanded. Given that human capital, services, and the goods we sell are different, we are rewarded differently, and thus, all have different incomes. There are numerous federal and state agencies enforcing hundreds of ederal laws and regulations that aim at protecting workers and consumers. There are laws dealing with workplace security, minimum wage, health care and other employments benefits, and job-related harassment and discrimination. In addition, there are federal laws that protect the formation of labor unions. This association of workers represents union members in negotiating labor contracts; dealing with wages, complaints, hiring, and firing; and handling promotions and demotions. Unions work 81 01F CAPHTALHSM According to lnvestopedia (2017), capitalism grew from European feudalism in which workers were controlled by feudal lords. The system was mainly agricultural in nature, and as economies became more urbanized, child labor and long working hours were common. Mercantilism and colonialism expanded trade among countries, with periods characterized by wars, nationalism, exploration, and exploitation. Henri See (1928) also believed that capitalism was part of an economic revolution in Europe, which first appeared in the form of commercial and financial capitalism. The capitalistic businesses, which manifested themselves in the nineteenth century, went through some transformation with labor businesses and relations between employer and employee. Historically, capitalism was seen as an exploitation of labor in the wealth-creation process and in the reproduction of social relations. According to Shaikh (1990), the manner in which society was structured enabled some people to live off the labor of others. The subordinate classes supported the ruling class, and the existence of a ruling class was the result of the exploitation of labor, as well as the perpetual reproduction of the social and material conditions of that exploitation. Such conditions gave rise to social 73 Albert Dunc an and political unrest. Shaikh further explained that capitalism is a class society in which the upper class's existence is the result of the ownership and control of a large portion of society's means of production. In commenting on Marx's ideas, Shaikh (1990) demonstrated that it is the surplus of the working class's labor that provided the capitalist profit. Today, one thing is certainover many decades, capitalism has gone through a dynamic evolution. The capitalism of today is vastly different from the one that existed centuries ago. Therefore, some of the justiable rationale used to condemn this economic system manyyears ago is not applicable today. Capitalism has evolved into an engine of economic prosperity and poverty reduction. 92 0f123 THE NEW CAPIITALIISM In describing the evolution of capitalism, it is clear that wealth creation was accomplished mainly from the acquisition of land with added labor. Agricultural and forced labor were common. As capitalism progressed with manufacturing and industrial activities, capitalists were seen as extractors rather than contributors. Wars, revolution, and slavery were all associated with capitalism. It was about being selfish, not about self-interest. The world economy was seen as a fixed pie; someone's gain was at the expense of others' loss. Today, the wealthy are more of contributors and should not be seen as extractors. Their wealth is not created by exploiting others. Due to the advancement in technologies associated with transportation and communication and the interconnectedness and interdependence of economies, capitalism should not be equated with the European economic systems of centuries ago. Computers and the Internet have significantly transformed the manner of wealth creation. It demonstrates the importance of human capital in economic prosperity, and easy access to the Internet for business transactions is conducive to economic growth. According to Li (2011), there is a 2.5 96 increase to GDP growth for every 10% increase in broadband implementation. Modern capitalism is propelled by the acquisition and enhancement of human capital. Human capital plays a significant role in wealth creation. Competition leads to innovation because ?5