Question

Explain the institutionalist argument that capitalism is requires on a legal system?

Answer 1

Introduction

Capitalism is an economic system in which capital goods are owned by private individuals or businesses. The production of goods and services is based on supply and demand in the general market rather than through central planning. The purest form of capitalism is free market, in which private individuals are completely unrestrained in determining where to invest, what to produce or sell and at which prices to exchange goods and services. Most modern countries practice a mixed capitalist system of some sort that includes government regulation of business and industry.

It is true and rightful that Capitalism is required for the legal system. Let’s see how the things work.

Industrial Argument for Capitalism

Industrial capitalism was the first system to benefit all levels of society rather than just the aristocratic class. Wages were increased, it helped greatly by the formation of unions, and the standard of living also increased. This led to the formation of a middle class that began to lift more and more people from the lower classes to swell its ranks.

The economic freedoms of capitalism matured democratic political freedoms also. That all capitalist systems are politically free or encourage individual liberty. Economist Milton Friedman, wrote in "Capitalism and Freedom" (1962) that "capitalism is a necessary condition for political freedom. Clearly it is not a sufficient condition."

Now talking about the argument, when supported by the government, it proved to be more logical. The proper role of government in a capitalist economic system has been debated for centuries. Capitalism operates on two central tenets: private ownership and free trade. Governments are public, not private institutions. They do not engage voluntarily, but rather use taxes, rule and regulations etc to carry objectives that are free of the considerations of capitalism. Strictly speaking, any government intervention in a capitalist economy takes place outside the defined confines of capitalism.

In fact, some argue that a capitalist society needs no government at all. A few describes a market-based society with no government. Politics and taxes would not exist in such a capitalist society, nor would services like public education, police protection and law enforcement that are normally provided by government agencies. Instead, the private sector would provide all necessary services. For example, people would contract with protection agencies, perhaps in a manner similar to how they contract with insurance agencies, to protect their life, liberty and property. Victimless crimes, such as drug use, and crimes against the state, such as treason, would not exist under this capitalism. Assistance to the needy would be provided through voluntary charity instead of compulsory income redistribution. The idea is that an capitalist society would maximize individual freedom and economic prosperity and is required for the legal system.