Thursday, 9 January 2014

Is capitalism-A Self Destructive Weapon.

Wonderful book written by Milton Friedman ''Free to Choose'' in which he advocated complete capitalism without government role ,except in education and infrastructure.
He advocated that success of american economy ''economic miracle'' was based on two sets of ideas,one set of idea was embodied in the ''Wealth of Nations'', it analysed the way in which market system could combine the freedom of individual to peruse their own objective with the extensive cooperation and collaboration needed in the economic field to produce our food,our clothing,our housing,Adam Smith's key insight was that both parties to an exchange can benefit and that,so long as cooperation is strictly voluntary,no exchange can take place unless both parties do benefit,Adam Smith put it ,an individual who intends only his own gain,led by an invisible hand to promote other which was no part of his intention and it benefits whole society.
 The Wealth of Nations''gave an idea to expand business,advocated how individual freedom is important in economic activity,and government intervention only distort economy,price system created by market,based on those ideas,  industrialization began to expand ,world grew rapidly,due to comparative advantage world economy integrated,innovation played major role.and during that time government role was limited to education,roads and defense it is clear that capitalist society played all roles in development process
so with the increase in global warming,various environment distorting threat,this question is obvious,when individual provides incentive to society with no intention to promoting it. then individual can also harm society to promote his self interest?
what are the results of cost benefit analysis when we compare our environment of today with that of  before 1776? we can see tremendous change in environment due to rapid industrialization, .benefits for industrialization is more or cost we have to pay due to environmental damage is more?  public property is being destroyed by individual to promote self interest,which has far more serious consequence then benefits gained from capitalism,capitalist treated public good as free good and utilized it badly,so on one hand we gained from capitalization with the creation of jobs,innovation, on the other hand we are suffering from global warming.deadly diseases,In order to promote self interest. Individual or society undermined the role of nature,disutilised public good,and shortened the life span of earth and probably human existence. Development was indeed essential but not with the cost of environment,exhaustible natural resources utilized compared to their regenerative capacity,how climate change is growing concern.
So, by choosing the capitalist world and by choosing to go against nature we have challenged the nature,free market economy where individuals were given full freedom to peruse his goal indeed benefited the society by developing technologies,made world better place to live,and all glaring achievements.But trade-off between economy and environment is justifiable?
Today the world has became the survival of fittest''if you are good at something you will survive otherwise you will be vanished,luxury,negative externality generated by capitalist is being paid by every individual but benefits are only for few
Now here comes the role of government,economy is better off without government intervention or government intervention is necessary for an economy to grow.
 Now lets take two extreme example one is complete freemarket,second,is centrally planned economy.
As we have seen in case of complete free market economy,individual distorts public goods without caring about future,makes market survival of fittest case,(if you are most productive you will survive otherwise you will thrown out of market),leads to excessive concentration of wealth in upper class and makes lower class worse off.but economy grows rapidly as we have seen in case of  USA,JAPAN and many more developed country.Second one is centrally planned where government controls economy completely,but centrally planned economy totally distorts economic activity because it restricts individuals to innovate,expand grow,In centrally planned economy bureaucrats and politicians decide fate of their citizens.
In case of India from 1st five year plan to 12th five year plan,despite its various efforts economy couldn't grow,Failure in agriculture front,failure to bring India self sufficient in mining, heavy industry,despite its various efforts India is still third world largest poor country with 96% of its population living in less than $5 a day. (according to world bank),this is sufficient to show failure of centrally planned economy.In democratic society if government regulates economic activity ..politics becomes the most profitable business,we can call it Democracy becomes ''FOR THE CAPITALIST,BY THE CAPITALIST,FROM THE CAPITALIST"
  Governments role should be in between capitalist and leftist,should emphasize on environmental loss during growth,Education maintaining roads,canals etc,maintaining  law and order,create equal opportunity for all,creating ground upon which economy grows,taking care of property rights,encourage innovation,taking care of international issues,protecting public rights,rather then entering into business and make politics itself most profitable business.


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