Assignment 1 Essay Example | Topics and Well Written Essays - 1250 words - 1

Assignment 1 - Essay Example One of the key individual who has highlighted the importance of capitalism in his research is Adam Smith who proposed the theory of the invisible hand (Wilber 1998, 7). According to his theory there is a hand that cannot be seen but is guiding a particular economy to achieve the purpose of common good. According to his concept, the government does not have to intervene in the market and the market is regulated itself and this concept is similar to the concept of laissez faire. Strengths Those economists who are considered as liberalist and capitalist in nature are of the idea that the economy under liberalism is ruled by eight basic tenants (Davis 2008, 5). The initial tenant of liberalism and capitalism is that people operate to safeguard their own interest and to achieve their own aims and objectives before considering the interest of others. The second element of liberalism is that market is place where buyers and sellers meet each other in order to exchange goods and services. Th e third element of liberalism is that everyone has a free will to own property and assets should be privatized and not controlled by the government. The fifth element of this kind of economy is that market is governed and guided by the forces of competition. In order to achieve this element of liberalism, the sellers in the market have to operate in such a way that they compete with each other to attract more and more consumers and in order to attract more consumers they compete through the tools of pricing and they try to utilize their resources in the most efficient manner. The sixth basic element of liberalism is that all individuals are free to choose for whom they are going to work and they can even choose the markets they are willing to serve. The seventh element of liberalism is that consumers are the most important part of the market. This principle is in line with Adam Smith’s idea of consumer sovereignty and the consumer is the decider of the number and kind of reso urces that will be used to produce a product and when this production will occur and for whom the production will be conducted. The last element of this form of economy is that government should not intervene in market operations and let the forces of demand and supply dictates the operations of the market. Another major figure who promoted the idea of liberalism and who himself was a believer of liberalism was John Maynard Keynes of the 20th century (Heinberg 2011, 38). According to his believes, the government should not intervene in a particular economy and they have minimum amount of role to play in the market that are created in foreign and local regions. This concept can clearly be witnessed in the BWS (Bretton Woods System) that was witnessed after the era of WWII. A major part of the BWS was the Keynesian Compromise according to which involvement of the state is limited to the operations of their local markets and their involvement is unnecessary in international market oper ations (Bordo 1993, 158). Those economists who are considered as liberals even support the hegemonic stability theory and they assert that market operations that are international in nature are more stabilized if there is presence of hegemon. Hegemon is a term used to refer to the elite or the dominant one who has the power to make