Personal Renaissance of the Foundations of Capitalism
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What is the foundation of business? Is it about how to manage the funds and stocks? This was my first question when I was adding this class to my schedule. Through a semester of learning, I found this class is touching the core of the business throughout the history. And the most surprising is the habit that thinking critically is coming into my mind unconsciously. It is fun because I always believe I’m a critical thinker since I was born. I can remember I used to rethink every mistake I made, and I have never believed in any social media’s information because the information they gave to me is not enough to represent every side of the truth. Therefore, I couldn’t believe critical thinking is such a hard thing for others, and I didn’t think I have any dark ages. But after thinking for a long time about the topics that we talked during the class, I realized I was wrong, and I still have many “dark ages.” I was too arrogant.
The topic that moved me the most was about the foundations of capitalism and how it is related to the division of labor. As a student comes from a socialist country, I only had a smattering of knowledge about the capitalism in the U.S. I thought the capitalism was the opposite of the communism. In this society, everyone is cold blooded, and the only purpose for the business is seeking for the capitals. The government only serves the capitalists, the Acts and policies they made are all benefits for operating more capitals. The idea of becoming rich can compel everyone to work hard to run the capitalistic business systems efficiently and successfully.
David M. Potter, an educator and historian explained American capitalism in his book “The American Economic System” in 1960, and he described the capitalism which had the exploited proletariats and extremely wealthy capitalists had existed hundreds of years ago in England. The American capitalism is different from the primitive one. Potter also said American capitalism is a mixed economy, and he explained very clearly that there are two essential goals of American capitalism, one is to maximize the opportunity for everyone, another is to improve the standard of living for the American people, and these two goals control American economic policy throughout the history. It was hard for me to believe this because these two fundamental goals are not cold blood at all. I compared the purposes for American capitalism with the purposes for Chinese socialism unintentional, and I felt they are very familiar because both of them are aiming to take care of everyone including the proletariats.
After I finished this reading “The American Economic System”, I finally understood where’s this feeling of familiar comes from. Potter also believes American capitalism is a unique economic system because it combines the free market and government control very well. I think it means that American capitalism has the free market characteristics which encourage people to have the private propriety, and the government uses many tools like taxes and interest rates to get involved in the market at the same time. As we discussed during class, the purely free market system and the completed government control system are two extremely market systems. So now, I come out with the idea that the American capitalism has free market elements more than controlling elements, and the most significant difference between Chinese socialism and American capitalism is that the Chinese socialism controls the market much more than America. And this is why I felt they are familiar. The American capitalism is not as same as what I thought before, it is not the purely free market, and it treats every class in the society very well.
In “The American Economic System,” Potter applied some concepts which came from “The Wealth of Nations” that written by Adam Smith, who is a Scottish moral philosopher who lived from 1723-1790, and he is named by “Father of Economics.” In the reading “The Wealth of Nations,” Smith explained the idea of division of labor, and he said the division of labor is the most excellent improvement to increase the efficiency of labor productivity in the history. Basically, the division of labor is an elementary idea, which is separate a complicated working process into several simple steps for different people to specialize the simple work. I didn’t think a lot about this reading because I believe it is meaningless and boring, but after I reviewed this module, I realized the idea of division of labor is still exist, and it is everywhere in our society. The concept of division of labor can be traced back to thousands of years ago, as old as the business. People can’t satisfy their self-interest by themselves in our society nowadays, let alone at the agricultural age. For example, as we discussed in the class, people at that time can’t give consideration to both weaving and farming, so some of them only farming and others only weaving. Afterward, they can trade with each other to satisfy both weaving and farming requirements. This is the start of the division of labor. Therefore, the relationship between the division of labor and business is as same as the chickens and eggs, and they are inseparable.
Leonard Read detailed the division of labor in his article “I, Pencil.” He mentioned when they are producing pencils, every step gets divided and put into different firms around the world, and none of the workers know how to make a pencil because of the division of labor. This skill can reduce the cost and increase the efficiency a lot. I had never thought about this before, so when I realized I’m living in a community that is full of the idea of division of labor, I was incredibly surprised. It happens and runs so nature and successful. Throughout this lesson, I started to believe the division of labor is the origin of business, and it is the most fundamental core of the business. Almost everything about business is based on the division of labor, and I ignored it because it is too usual.
In my opinion, the relationship between the capitalism and the division of labor is inseparable as well. As Smith talked in “The Wealth of Nations,” the fixed capitals like machines and lands are usually very expensive, and the normal people can’t afford the cost of them. Therefore, the capitalists can invest the machines and let the workers get jobs. This is the best example that capitalists and the division of labor can benefit with each other, and the capitalism is the best result come from them.
My renaissance for this class was about finding and understanding the foundations of capitalism in our society nowadays. I had lots of ignorance for it, and now I understand I misunderstood American capitalism, it is a mixed market system, the government will intervene in the market and make sure it works well and benefit everyone in the society. At the same time, the division of labor works very well under this market system, and it promotes the American capitalism a lot as well, people shouldn’t ignore the power of it.
Potter, David M. The American Economic System. 1960.
Reed, Lawrence W., and Milton Friedman. I, Pencil: My Family Tree as Told to Leonard E. Read. Foundation for Economic Education, 2008.
Smith, Adam, and D. D. Raphael. The Wealth of Nations. Knopf, 1991.