Capitalism is known as a system in which private profit production is directed and organized through markets that are free of political interference and influence. However, since its inception, free market has been a fiction. Markets were unable to survive without interference of government in maintaining order, enforcing contracts, printing of money and other public goods.
The relationship between profit-based production and democracy is complicated in all those countries where democracy and capitalism exist altogether. This is due to the fact that in this economic system, the profit is acquired by few, however, the political system favors the rights for many. Hence, the monopolies became as strong as government, capitalism as rigid as absolute monarchy, and independence as a myth. In this essay, I will discuss the pre and post boom economic periods in American society and their severe consequences on society and economic system.
There is intense conflict found in the history of American eco political system on how government should govern the market and private firms. On the other hand, it is also not defined what part of the government bodies should make economic and monetary policies and what standards should they follow. After the great recession, there came a time when business was successful in these struggles, but it is still dependent on the power of larger groups. In the same way, state governments as compared to federal government were actively participating in promotion of capitalistic economic development which forced small firms to give way to larger firms. Consequently, only larger firms were able to dictate prices and wages, and all the profit was divided amongst stakeholders instead of workers. Hence, in late eighteenth century, the larger firms started to dominate in the industry and forced the government to implement some corporate practices in business regulation. Soon, the public lost faith in both; the government and large corporations as they both failed to survive during the Great Depression.
Again, after the World War II, retained Democratic Party started to support the capitalistic style in order to bring harmony in the business cycle developing a welfare state, educating workers, and protecting market. However, it was also critical as the democrats had conservative style as they did not redistribute the gained income among those who deserved. On the other hand, there was another flaw in the system that they did not make any effort to bring change in balancing private and public power through planning or implementing nationalization. In the same way, republicans in later era, lost its credibility by implementing immature extreme capitalistic model, which led to the deepest recession and bank failures.
After all, these drawbacks of capitalism, the new foundation has restored the economic growth in more or less same way. It is investing in banks, auto companies and trying to settle the executive pay; however, critics call it repairing a broken financial system instead of eliminating weak policies and developing productive ones.
It is clear from the above discussion that in the American society, due to the major drift between democratic and capitalistic system, the monopolies became as strong as government, capitalism as rigid as absolute monarchy, and independence as a myth.
The impact of shift from industrial to finance capital has been critical in many ways. The giant financial institutions and industries that control the market are considered so indispensible that the democrats and republicans both were reluctant to change or challenge their one side policy preferences. As a result, the financial sector has been able to put pressure on the government influencing the policies that generate new sources of abnormal profits for banks and, on the other hand, increasing debt, risk ,and instability in market and business.
Each time the so-called new economic model is implemented, it creates new set of losers and winners depending on the political struggle. Although, this time, the paradigm looked changed, however, this epochal shift will be examined after the contemporary government leaves.