Fall of Global Capitalism (Frieden)

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Clinton Surratt
ECON 295
Mid-Term Exam
October 15, 2009

I. Introduction
The fall and rise of Capitalism only tells part of the story of Capitalism. If Frieden were to title his book a few years from now, it would probably read “The Fall, Rise, and Fall of Global Capitalism” or “The Cycles of Capitalism” for I feel Capitalism has, in fact, occurred in cycles in we are in one of the final cycles. From the onset of Capitalism until today, Capitalism has produced some vast contrasts between many factors in the economy. Some of these contrasts are the rise of Monopolistic firms and the death of small firms along side and an ever-increasing income inequality between the rich and poor. The effects of Capitalism on today’s modern economy have come to a head. Our approach and attitude in attaining wealth in this Capitalist economy is almost reckless. The magnitude at which we are careless about the effects of Capitalism on our society is alarming and its death will bring about what I would call Efficient Conservationalism. Global Capitalism is more evident now then it has ever been. If you look at the rate at which GDP has increased since the beginning of our country, you will see a sharp acceleration of total output since the inception of Capitalism in the late 1800’s and early 1900’s. With this rapid acceleration, Capitalism is showing signs of overheating and weakness in its practices, especially in America, which is evident by the intensity and frequency of economic recessions and depressions. It is also being blamed as one of the main causes of modern pollution trends. Let us look at the history and evolution of Global Capitalism.

The rise of Global Capitalism was introduced by the beginnings of Mercantilism in which there was a rapid growth in overseas trading with an emphasis on exports. Mercantilism is considered the earliest stage of modern Capitalism for it favored the accumulation of capital. Following Mercantilism, Capitalism changes faces and transforms into Industrialism and furthers its unremitting climb. During the industrial revolution, firms developed the factory system, where they learn to maximize their profits by achieving “economies of scale”. This new found manufacturing system establishes the framework for the Capitalist model to embark on its victorious endeavor of global domination. With the rise of economies of scale and the ability of firms to generate more profits, the rise of Monopolism begins and the horizon of Global Capitalism’s peak emerges. During this time, there was the development of a complicated system of banking and a new model of capital wealth, such as stock ownership, that essentially becomes the initial push for the birth of globalization and was an essential component for realizing the pinnacle of Capitalism. Major characteristics of Capitalism in this era are the establishment of a large number of industry giants. These oligopolistic companies produced massive profits thus exacerbating the competition in the market and the assassination of the smaller firms that could not compete. This may not be such a bad thing for the labor market because now the jobs lost in the small companies are created in these monopolistic firms in which sometimes pay better than the previous jobs lost. Consequently, the negative effect of the creation of these monopolies was their power and complete control over the prices in that market with no reference to supply and demand. The Monopolistic (Capitalist) way of thinking created many reoccurring problems in the economy such as economic depressions and the boom bust business cycles which is evident by the Long Depression of the 1870’s and 1880’s, the Great Depression, and the various recessions of today. How did the Soviet Union avoided suffering the same scale of hurt caused by the global depression? The Soviet Union, at that time, was probably the furthest away from a Capitalist economy in which most of the damage from the...
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