Today in the United States, a free market system or capitalism is the
main economic system. I am interested in this subject because I someday wish to
own my own business. I believe that in the future this topic will be very
useful to me. Among the topics that I will discuss are the greeks and romans
early practices of capitalism, the ideas of Joseph Schumpeter, Rush Limbaugh,
and Karl Marx, corporations, regulation by the government, and Reaganomics. I
will also discuss the relationship between inflation and unemployment. In
addition, I will give my own perspective on the economic theories that I\'m
presenting. These are just a few of the things that I will be discussing in this


Many of the institutions of capitalism can be traced back to Greek and
Roman times. Things such as trade, moneylending, and insurance were well known
practices to them. Unfortunatly, growth of the Roman Empire prevented further
development of a private business class. As power over economic growth came
back to the people or lords during the Middle Ages, modern capitalism started to
evolve. (The Software Toolworks Illistrated Encyclopedia)

In the late Middle Ages, the medieval economy was based on MANORALISM.
This system said that peasants worked on the land that the lord\'s owned, but
everthing that was produced by them was kept in return they had to perform
services or pay dues to there lord. During this time period, there was no
incentive to produce large and productive resources. The end of the midieval
Manoralism was brought about by a larger demand for goods. Kings competed
against lords, and lords competed with peasants for the rights to what was
produced. As a result, there was an emergence of merchants and businessmen who
accumulated large sums of capital. In addition, there was also a large
emergence of banks and the start of corporations. (Galbraith Pg. 58)
The only other economic system that got much attention was a new idea
called Communism. A person named Karl Marx wrote a book called the Communist
Manifesto which thought of the state as being the main controller of economic
growth, unlike capitalism where the people in a free market are the main
controllers of economic growth. In the 19th century when most of the world like
Britan, France, Germany, and the United States were in the age of Laissez-Faire
economic capitalism, other countries like the Soviet Union and China followed
Karl Marx\'s Communism. (Galbraith Pg. 97)

Modern Capitalism

The main thing that drives capitalism today is the large corporations
that are able to finance large operations to promote economic growth. As
corporations got bigger and bigger, many liberals favored breaking up
corporations and putting them under state control. They pressed for antitrust
laws to get a competitive economy. This meant that some corporations that got
too big had to be broken up to make smaller companies in order to create a
competitive economy. The large corporations fought back by saying that they
were no less competitive than smaller businesses. An Austrian-American
economist named Joseph Schumpeter who argued in defense of large corporations
said, "the prime mover in capitalist progress is not the small businessperson
but the entrepreneur who introduces new technologies and develops them." He
also said "Capitalism gives creative people the freedom to make innovations,
unlike state-runned economies which tended to stifle this creative force." He
also predicted that capitalism would eventually be replaced by some form of
socialism in order to protect the people and the global environment. (The
Software Toolworks Illistrated Encyclopedia)

Arguments for and Against

Capitalism today differs from capitalism of the 19th century because
of its dependence on the state. Today government is expected to take measures
in order to stop inflation and unemployment. A British economist named John
Maynard Keynes said, "government should spend more money in times of slump, and
also reduce taxes in order to increase aggregate demand for goods and services,
and in boom times the policies should be reversed to hold down inflation." Most
liberal economists believed that large corporations ought to be broken up and
nationalized so that their manager would be responsible to the public as a whole.
(Lekachman Pg. 51)

Other conservative econimists stated that evan large corporations were
ultimately controlled by the market where they sold their product and the market
is subject to the desires of the public. Conservatives also pointed out that
government spending by federal, state, and local governments amounted to more
than one-fifth of the gross national product. The same thing seemed to be
happening in