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Std edition Capitalism and American Economy

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License: Public Domain

Published Time: 2019-10-30 16:53:38
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Capitalism and the American Economy In terms of economics, capitalism is the distribution and production of means in an economic system to private and corporate owners. In the United States, the role of the government in the economy can be traced back up to the era of the establishment of the British colonies. At the time, the government was actively involved in the regulation and overseeing various economic and social activities using different strategies and approaches. In the United States, there was a serious transition in the economy after the War of Independence and the subsequent political and presidential regimes. The economy of the United States in the period after the War of Independence and the beginning of the nineteenth century was only limited to state and local levels. The governments at the state and local levels participated in the economy through the use of regulations and subsidies. It has been postulated that the American economy during this period was laissez-faire as the government did not have much control. Although the government played significant roles in influencing and shaping the economy of the United States, the case was not true during the reign of President Herbert Hoover. He was elected in 1928, and his philosophy and ideologies concerning the management of the American economy took a shift from the previous Presidents. According to Hoover, the government was not supposed to exert more pressure on the economy through control and regulations. He believed and agitated for a limited role of government in the management and regulation of the country’s economy. Instead, he preferred to manage the economy of the nation through associations. Associationism resulted from the partnership of businesses and the federal government. During this period, the federal government exercised little control over the economy of America. The government participated in the management and regulation of the United States economy and that was evident during the reign of President Franklin Delano Roosevelt, who preferred the capitalist system of managing the economy. The increased role and power of the government in the economy of the nation stood out during the presidential reign of Roosevelt. For instance, the emergence of the New Deal that was founded on the basis of the capitalist and democratic system of America clearly shows the extended role of the government in the economy of the United States. Roosevelt took a new approach that was different from his immediate predecessor by strengthening the role and functions of the presidency and the federal government in controlling the economy. The New Deal extended and expanded the mandates, roles, and powers of the federal government, which led to increased control of the government over the economy. Some analytical writing shows that although the government previously had regulatory responsibilities over the economy, the New Deal expanded the responsibilities of the government to include overseeing of the financial systems of the nation. Namely, all banks, utilities, stock markets, farms and the majority of businesses in the nation operated in accordance with regulations set out by the federal government. Through the New Deal, the federal government committed to the enhancement of the life of the jobless and needy people in America through various intervention measures. In fact, it is due to the above interventions and measures that were geared towards increasing the welfare of the jobless and needy that the federal government started the use of deficit spending in order to stimulate the economy of America. This led to the influx of money from the federal government into the economy in order to improve and save the majority of American citizens from hunger and misery. Apart from pumping money into the economy to safeguard the lives of American citizens, the federal government encouraged workers to join unions without the fear of any reprisal from their employers. There was also the enactment of the federal law that required employers to negotiate with their workers’ and thereafter set wages, hours and conditions for working. During the First and Second World Wars, the government took massive economic measures to prepare for the wartime due to the anticipation that the war would cost the country a substantial sum of money and capital. For instance, the formation of the Federal Reserve System that was tasked with the role of regulating money, issuance of national currency and fighting inflation is an example of the role of government in the economy. The massive economic spending during the Second World War contributed immensely to the recovery of the economy after the failure and challenges that prior government involvement in the economy caused or faced. The relative growth and fall of the number of people faced with poverty in the United States of America are because of shaky economic and financial variables. Considering the recession of 2009 -2010, many issues including unstable exchange rates between the dollar and other leading currencies were faced. . Due to globalization, widening, and speeding of the world interconnectedness, the United States has experienced substantial growth in its economy. It is a controversial aspect of world politics and also a powerful catalyst of economic growth. Globalization has brought many positives in various fields like business. Communication has been made easy due to improved technology. Nowadays, individuals have control over business deals in on-line mode regardless of the distances. Online business and advertising have helped improve the welfare of human life not only in the United States but also in other countries. Globalization has had an immense influence on world politics too. It is argued that the concept of infrastructural communications has brought about the demise of the sovereign states as global forces undermine the ability of governments to control their own economies and societies. This is evident in the way the American government has brought down the regimes considered as a threat to economic growth, which had a negative influence on the economy of the United States. The ancient system was based on the idea that nations are sovereign, and no foreign state was to interfere in the affairs of any other country. The eruption of global financial and economic crisis from the United States financial market in 2008 has since spread and developed into the global crisis. The global financial crisis has led to substantial changes within economies of various nations across the world. Slower economic growth has characterized this phase, thus affecting all regions of the world. A study conducted by the United Nations revealed that more than sixty developing countries suffered from the decline in their GDP per capita in 2009. Development aid is the transfer of resources from developed countries to under-developed for development purposes, either through bilateral donors or multilateral donors. Development aid is channeled through Official Development Assistance (ODA) and it was used as a complement or support to other sources of financing for development. Organization for Economic Cooperation and Development (OECD) has defined that ODA has development assistance flows to developing countries, territories and multilateral institutions that are provided by official national agencies for purposes of economic development and welfare. Development aid is dominant in developing countries or those countries that are incapable of attracting foreign private capital flows. A group of scientists found out that development aid is critical in the stimulation of economic growth as it supports and supplements other domestic sources of finance for developing countries thereby increasing the amount of investment and capital stock. Prior research has examined the effect of development or foreign aid on economic growth in developing countries and the impact of the global economic crisis on foreign and trade policies among others. Progression and sustenance of development initiatives across the world are dependent on the prevailing economic environment. For developing countries, the success of development projects depends on the amount of aid delivered from developed countries. For example, the financial crisis and economic slowdown have the potential of influencing the flow of development aid. Since most developing countries depend on development aid and foreign aid investment in the achievement of their development goals, the global financial slowdown might undermine the progress and reduction in per capita growth rates. Although the effects of the financial crisis are currently being faced in low and middle-income countries alike, the impacts are likely to vary across the countries and regions. Bilateral and multilateral organizations have been established by international law to enable national governments to focus on key developments. Their roles involve the provision of development aid, technical expertise and aid instruments that are geared towards the development needs of countries, especially the low and middle-income countries. Prior to the emergence of the global financial crisis, the budget and economy of many developing countries were hard hit by the rise in food and oil prices that affected the flow of development aid. It has been argued that a similar occurrence may emerge in low and middle developed countries as a result of the global financial crisis by impacting negatively on the development aid flow. The potential and immediate consequences of the financial crisis are the reductions in remittance inflows of development aid. The current uncertainty and instability in the global economy is poised to bring risk and detrimental effects to all development sectors in developing countries due to insecurity in funding from developed countries. The countries such as the United Kingdom have increased their development aid to developing nations. These countries together with the United States are committed to increasing funding to multi-lateral organizations amidst the global financial crisis. There is a likelihood of a decline in government tax revenues in developed countries due to a slowdown in economic activities. This affects their capacity to continue channeling development aid to developing countries. The majority of poor countries fear that development aids will be cut due to the ongoing financial crisis since the developed countries are faced with budget constraints.

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