Question

“Capitalism is a system of winners and losers both within nations and across the globe, and this, along with creative destruction, contributes to inequality. Today there are various forms of capitalism co-existing – some dynamic and some not, some alongside democratic governments others not”

a) Give an example of a capitalist system with a non-democratic form of government that exists today. Does capitalism when combined with democracy lead to higher GDP growth over time? Why/Why not? Does capitalism when combined with Democracy lead to less inequality? Why/Why not?

Answer 1

One of the best examples of a capitalist system with a non democratic form of government that exists today is China since China is a state capitalist nation with an authoritarian government hence resulting in extremely limited democracy in a pro capitalist system.

Capitalism when combined with democracy does lead to a higher GDP growth rate over time since capitalism requires democracy in order to function effectively since the free market requires a free flow of ideas and information with as few barriers as possible.A higher GDP growth rate is usually a sign of increased total wealth without representing the distribution of it which means that capitalism and democracy together is the perfect ecosystem for higher GDP growth rate over time.

Capitalism when combined with democracy does not lead to less inequality since capitalism within a democratic framework works best for those with entrenched capital thus widening inequality since it claims to provide equality of opportunity but the access to these opportunities is dependant on capital accumulated already which means capitalism makes the rich richer and the poor poorer from a relative standpoint in a relative framework.