State capitalism Essay Example | Topics and Well Written Essays - 3250 words

State capitalism - Essay Example Thus the government itself is acting as a capitalist in such state capitalist systems. Communist countries like China and Russia are examples of countries in which state capitalism prevails. State capitalism is a controversial subject in the world. The declared aim of an elected government is to implement socialism in a society. Both democratic and communist administrations have no second opinion about the necessities of socialism for reducing the gap between the rich and the poor. Income should be distributed equally in a society in order to achieve the objectives of socialism. Communism tries to achieve the socialism objectives by giving more benefits to the working class. They are trying to achieve a wealth balance by taking more wealth from the wealthiest areas and distributing it in the poorest areas. This is logical and easy to understand. However, the governments in capitalist countries are active capitalists and it is difficult to believe that these governments will distribut e their profits to the poor people in order to raise their standards. â€Å"State-capitalism is in itself the total contradiction, absolute antagonism. In it are concentrated all the contradictions of revolution and counter-revolution† (James and Dunayevskaya). This paper analyses how state capitalism is a contradiction. ... He argued that the competitive processes of a capitalist market society will lead towards the accumulation of wealth towards one particular segment. In other words, the global wealth would come in the hands of few people in a capitalist economy. Marx explained capital as money and the services of the workers as a commodity. He argued that a person achieves capital or money at the expense of another person. In other words, he argued that the gain of one person would be the loss of another person. In order to avoid such gains and losses, Marx proposed the intervention of states in capital systems. According to Marx capitalism is the number one enemy of socialism. He argued that the intervention of states is necessary in preventing capitalism. For him the entire resources of a nation belong to the state and it is the duty of the state to distribute this wealth evenly among people. In other words, Marx dreamed about a society in which all the people enjoy equal power, wealth and rights. However, Marx’s beliefs are against the developments of current realities. Marx defined state capitalism as a social system just like other social systems in our community. He argued that in state capitalist countries, the government controls the economy and acts just like a single giant corporation. He also pointed out that capitalism would result in over production ultimately since there is no control over the production activities of capitalists. In European countries capitalism is currently working in three different forms; Market, Managed and State. In these countries, state capitalism means a system in which the state, large firms and labor unions work together to ensure the economic growth of the countries. France and Italy are examples for this modern model of

Economics of Organisations Essay Example | Topics and Well Written Essays - 750 words

Economics of Organisations - Essay Example Victor P. Goldberg (2008, pp. 1071-1084) states that the contract which was entered into between General Motors-Fisher Body (GM/FB) in the year 1919 was lawfully not enforceable. This realistic proof warranted the chronological significance of the institutional understanding of the economics of the firm founded on the minimization of transaction costs (Tirole,1988; Carlton and Perloff, 1994; Williamson, 1985; Ricketts, 1994). In a current publication of the Journal of Law and Economics (2000), law of economics of firm has received new explanations. Profounders like (Klein, 2000; Coase, 2000; Freeland, 2000; Casadesus-Masanell and Spulber, 2000;) have proposed that the leading clarification established on issues of sorting of information and transaction costs is an incorrect one. The explanation with regard to taking into account transaction costs, has failed or even neglected many other important causal factors of vertical integration. But according to Kelin (2000), the foremost hypothesis H0 is "holdup is the main rationale for vertical integration". Klein ( 2000, p 106) states that "the evidence unambiguously demonstrates that while the contract initially worked well, this contract broke down in 1925 when GM's demand for Fisher bodies increased dramatically. Fisher then refused to make the necessary capital investments required to produce bodies efficiently for GM, in particular refusing to build an important body plant close to GM production facility in Flint, Michigan. These contractual difficulties were the primary reason GM decide in 1926 to vertically integrate with Fisher Body" Whereas Coase (2000, p 15) states that Coase, alternatively, supports the idea that H0 is rejected by historical facts. To him, asset specificity is only a possible foundation for vertical integration which is not sufficiently adequate to validate vertical integration. According to him there are three reasons which stimulate arguments. They are: a. GM had only acquired 40% of the shares of FB which it had already owned. b. FB did not locate its plants far away from GM. c. Fisher Brothers did not use any incompetent methods of production. Thus it can be said that there was no holdup and thus the H0 was rejected by Coase and he suggested an alternative H1 which is: ""Asset specificity (with or without hold up) is normally handled satisfactorily with long term contracts without requiring vertical integration". According to Freeland (2000, p 35) vertical integration was "caused primarily by the desire to acquire and retain the specialized knowledge and services of the Fisher brothers". Thus Freeland also declines H0 and places more emphasis on human assets. He states that "Access to specialized human capabilities favours vertical integration which may, in turn, produce holdup situations". The H0 was also rejected by Casadesus-Masanell and Spulber (2000, 68). Conclusion: Alternatively, in more current combinings between economics of the firm and business history as in the case General Motor/Fisher Body, the previous difference still applies. Reference: 1. Crocker and Masten, 1996, "Regulation and administered contracts revisited: lessons from transaction-costs economics for public utility regulation", Journal of Regulatory Economics, 9, 5-36. 2. Carlton and Perloff, 1994, Modern