Question

1. What factors caused American business to develop into a mixed economic system rather than some other type of economic system?
2. Discuss this statement: “Business competition encourages improved product quality and increased customer satisfaction.”

Answer 1

Mainly due to the Great Depression, monopolies, strikes, socialism. The notion of communisn was despised by Americans and still hated, but state-sponsored capitalism was out of the question. During the golden age, when customers needed them most, most extremely large corporations aggressively increased their prices. This was most pronounced as farmers in the Midwest had to transport their crops using railroads. As a result, some midwestern states have tried to enact laws that could control fares on railroads. It failed because it was a violation of the Commerce Clause of the Constitution.

Because Congress noted the increasing nationalist feeling in the Midwest, in 1887 they passed the Interstate Commerce Act. Before Theodore Roosevelt became president, however, the national government was not interested in enforcing existing laws on monopolies or in passing new laws controlling corporations, and laissez-faire capitalism and monopolies were still rife during both the golden age and the 1920s. The magnitude of the Great Depression in the United States leads to a more mixed economy.

Most people realized that at that time government services were needed, so liberal ideals of this kind died out at that point. Even with the second red scare, the Cold War and McCarthyism, there was a strong interest in keeping social welfare programs running and starting new ones, even as socialist ideals were branded. The rise of unions throughout the late 1800s to the mid 1900s also greatly influenced the growth of business regulations, most notably with safety regulations and the rights of workers. A synthesis of all these activities brings us to the model of mixed economy that we now have.

Market competition encourages quality production of the service and also improves the satisfaction of the consumer. Competition offers all manufacturers great scope to provide minimal cost to the customer.