216
What follows is a political economy analysis of the economic systems of capitalism and socialism in the political regimes of democracy and oligarchy. Political
economy originated in moral philosophy in the eighteenth century and is attributed
to British scholars Adam Smith, Thomas Malthus and David Ricardo. In the late
nineteenth century the term economics gradually replaced political economy and
thereby dropped the moral aspects in sociology and some of the public choice theory of political science (Wikipedia, Political Economy). Thus, I argue that political
economy represents a more robust approach for analyzing political regimes.
3 Economic Systems
Two economic systems of capitalism and socialism are discussed in this chapter. In
reality economic systems in advanced economies like the United States of America
(USA) and Canada are a mix of capitalist and socialist systems. According to historian Niall Ferguson most young Americans do not know what socialism means
(Ferguson 2019) and USA economist Joseph Stiglitz advises Democratic party politicians not to use the word socialist (Stiglitz 2019). The main generic differences
between the economic systems among advanced economies in democratic regimes,
like the USA and Canada, are the degree of the mix between the capitalist and
socialist sectors and the difference between the ownership and regulation of business firms.
3.1 Capitalism
Capitalism is a system for organizing the economic affairs of society that is comprised of four interrelated institutions. Private capitalist firms engaged in the production and distribution of goods and services are the first of these. Markets for
exchange are the second. These include markets for goods and services, markets for
the exchange of labor services, markets for trading in financial instruments that
include securities, bonds, mortgages, derivatives, and markets for the exchange of
assets such as housing, buildings, equipment and consumer durables. The third
institution is a monetary system based on bank credit, the purpose of which is to
preserve the purchasing value of a currency in a nation state over time. The fourth
institution is government coordination of the previous three institutions (Mann
2013, pp. 5,13).
There are many variations of capitalist economic systems depending on the
extent and nature of government regulation of markets, regulation of private firms
as well as taxation policies and expenditure programs and the ownership of the
means of production such as public utilities for transportation and communications.
The ultimate goal of capitalist firms is an ever-increasing accumulation of wealth by
their owners and this translates into the goal of wealth of the nation state.
P. Venton
What follows is a political economy analysis of the economic systems of capitalism and socialism in the political regimes of democracy and oligarchy. Political
economy originated in moral philosophy in the eighteenth century and is attributed
to British scholars Adam Smith, Thomas Malthus and David Ricardo. In the late
nineteenth century the term economics gradually replaced political economy and
thereby dropped the moral aspects in sociology and some of the public choice theory of political science (Wikipedia, Political Economy). Thus, I argue that political
economy represents a more robust approach for analyzing political regimes.
3 Economic Systems
Two economic systems of capitalism and socialism are discussed in this chapter. In
reality economic systems in advanced economies like the United States of America
(USA) and Canada are a mix of capitalist and socialist systems. According to historian Niall Ferguson most young Americans do not know what socialism means
(Ferguson 2019) and USA economist Joseph Stiglitz advises Democratic party politicians not to use the word socialist (Stiglitz 2019). The main generic differences
between the economic systems among advanced economies in democratic regimes,
like the USA and Canada, are the degree of the mix between the capitalist and
socialist sectors and the difference between the ownership and regulation of business firms.
3.1 Capitalism
Capitalism is a system for organizing the economic affairs of society that is comprised of four interrelated institutions. Private capitalist firms engaged in the production and distribution of goods and services are the first of these. Markets for
exchange are the second. These include markets for goods and services, markets for
the exchange of labor services, markets for trading in financial instruments that
include securities, bonds, mortgages, derivatives, and markets for the exchange of
assets such as housing, buildings, equipment and consumer durables. The third
institution is a monetary system based on bank credit, the purpose of which is to
preserve the purchasing value of a currency in a nation state over time. The fourth
institution is government coordination of the previous three institutions (Mann
2013, pp. 5,13).
There are many variations of capitalist economic systems depending on the
extent and nature of government regulation of markets, regulation of private firms
as well as taxation policies and expenditure programs and the ownership of the
means of production such as public utilities for transportation and communications.
The ultimate goal of capitalist firms is an ever-increasing accumulation of wealth by
their owners and this translates into the goal of wealth of the nation state.
P. Venton