A Broad Analysis of Economic Principles

The economy serves as a central structural base for how we conduct our lives. Americans are, and always have been, flushed with an enthusiasm for capitalism, a system that encourages competition within a market that is generally free from governmental intervention. Our capitalist fervor has shaped our cultural norms and values by glorifying competition and placing the victors on a pedestal. We celebrate the “rags-to-riches” mentality and idolize those who embody it. This is probably why celebrities often appear as icons, rather than human beings, in American culture. The opposite end of the spectrum favors principles that essentially contradict those mentioned above. Socialism advocates for an equality of living that downplays competition in favor of ensuring that each individual is living by the same standards, regardless of the significance of one’s occupation. That being said, history has exhibited the successes and shortcomings of both sides of the argument, and today, we still struggle to decipher what, exactly, represents the best economic system for society.

Both the pros and cons of a socialist/communist system are somewhat obvious and have been explored in great depth. It appears as though a harmonious community that strays from competition in favor of individual equality would be an ideal society to strive for. In theory, all forms of government would eventually be phased out as the people learned to stabilize the society on their own. A modern socialist system would include a government that serves as the full-time regulator of all business transactions, ensuring that no one manipulates anyone else, and as the distributor of wealth, ensuring that people with low-income jobs are compensated for by the people with high-income jobs through taxes. This also appears ideal at first glance, as the struggle of the impoverished would theoretically be eliminated and everyone would live comfortably; no one has too much and no one has too little.

The cons, however, seem to overshadow these utopian-like ideas, especially in an American culture that prides itself on the qualities of motivation and self-reliance. In a society in which everyone is rewarded equally for unequal services, motivation almost certainly declines. Reliance upon our fellow persons is a nice idea, but it eliminates one’s sense of responsibility to the whole. Consequently, overall production declines and the standard of living, though equal, becomes worse, on behalf of the fact that the incentive for improvement is absent.

On the contrast, a capitalist society, in which people compete for wealth and quality of living conditions, may appear ruthless and manipulatory. However, when people are encouraged to compete, they are pushed to achieve products of higher quality that in turn lift society to greater and greater heights, while fostering constant growth and improvement. If one is compelled to create a better product than someone else, the end result, regardless of which product is better, will probably be of greater quality than if the fuel of competition was not present. In this way, growth is incessant. Furthermore, the inclination for betterment seems to generate an ever-increasing level of creativity in this human mind. When we are forced to improve our work beyond that of our opponents in order to survive, we must develop creative ways in which to produce innovative results that outshine the competition. In this way, our culture is constantly expanding and growing, as people extend themselves and their work to the finest limits.

Pure competition, however, is damaging for obvious reasons. When coerced into a dog-eat-dog mentality with no restrictions to the level of ruthlessness one is permitted to use, people are bound to be solely concerned with their personal self-interests, disregarding the well-being of others and therefore contributing to destructiveness. To remedy this issue, the government oversees competition, establishing regulations and ensuring justice and order by implementing rules. I liken the system to a standard game of basketball, in which two opposing sides release their competitive tendencies through a productive outlet, while the referees manage the game and enforce the rules, ensuring that fairness is maintained. In this setting of controlled competition, both sides are able respect the efforts of one another and pursue self-improvement within a setting where reckless and destructive behavior are unacceptable. Using this example, it is clear that competition can be a productive force, so long as it is maintained in a controlled environment.

Given this general framework, it is difficult to interpret the rights and wrongs within the current discussion of President Obama’s proposal to avoid the “fiscal cliff” and how much government intervention is needed for a competitive society to flourish. The intricate details of the issues are challenging to evaluate without the first-hand knowledge and experience of what works and what doesn’t. During the election, it seemed to me that Mitt Romney had a firmer control over the economic issues than did Barack Obama, but the extent to which his policies would benefit our economy is impossible to predict. Furthermore, I don’t think that President Obama is leading America down the path to socialism by redistributing the wealth to a certain degree. Socialism entails a nearly absolute redistribution, in which the janitor is living to the same degree of luxury as the doctor. With that being said, it appears obvious that those who work to achieve material prosperity deserve to reap the benefits of such; if taxes and further government intervention impede upon that principle, it seems that the central American “rags-to-riches” ideal fades into obscurity.

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