Question

A. Contrast the Anglo Saxon (or US) model of capitalism with the European(or German) model of capitalism. Include the specific differences between the two models of capitalism.

B. Under what set of assumptions would the Anglo Saxon model be expected to be more productive? Include a brief example to demonstrate the outcome, as well.

C. Under what set of assumptions would the European model be expected to be more productive? Include a brief example to demonstrate the outcome, as well.

Answer 1

A) Anglo Saxon model is based on theory of free market which is the purest form of capitalism that states the system is run by the needs of good and services facilitated by the low transaction cost to achieve optimal benefits. The model doesn’t believe in any interventions and welfare just the invisible hand of market forces guiding the economy and serving the best to the most capable. In case of European or German model the system is based on harmonizing the relationship between financial and industrial sector with welfare of the industrial employees via vocational training. The core of the model is the parity of industrial relations with financial sector along with empowerment of industrial workers and workers union will lead to economic prosperity.

B) In case of a country where the most of the sectors are privatized and Government only overseas the norms will be the ideal grounds for Anglo Saxon model. UK is one of the example where the model works the most as the government has least function in running day to day activities of the economy and the private sector like finance generate the revenue by the market forces of demand and supply. Even Singapore is a example of the stated model.

C) Conutry like Bangladesh which is mostly manufacturing oriented and still has long road ahead of itself to develop a self sustainable economic system can use German model by harmonizing the relationship between the financial and industrial pace. The welfare of the workers by providing union benefits will be a giant leap in the economic progress.