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|← Anglo-Saxon and Rhine Capitalism||Communities in Los Angeles →|
The emergence of the Anglo-Saxon economic model was as a result of cultural backgrounds that were incorporated into the social system. Thus, its development and distinctive features are unique to the cultural practices of the people who created it. According to the literature, this system encompasses two fundamental philosophical theories that make up the backbone of the economic model. For instance, the Scots find it quite easy to embrace and practice this economic model as it borrows a lot from their culture. The first philosophical consideration that perfectly fits into this system is the idea of adversarial principle. This basically implies a conflict between participants of the economic model. It has the same origins as the court system where one party takes the complainant stand while the other party takes the defense stand. The two antagonistic parties then set to argue it out with an aim of reaching an amicable solution or agreement. Although not explicitly so, the model operates in as system whereby an independent third party intervenes to make an objective decision based on the arguments of the two opposite points of view. This is the fundamental idea behind the Anglo-Saxon capitalism. On the other hand, the Rhine capitalism largely borrows from the culture of the people of Western Europe. This term was coined from the works of a French economist and greatly compares with neo-American model that was introduced by President Ronald Reagan’s regime. This model was widely accepted as it was considered to be more efficient, especially in the ever-changing economic environment. In addition, this model is generally less violent and seems to promote social equity as compared to the Anglo-Saxon model of Ireland. Moreover, the fact that the system advocates for more government intervention makes it more lucrative to the American society (Michel 1993).
The Anglo-Saxon economic model is widely associated with the Australian economist, Fredrick Hayek. This economist and philosopher strongly advocated for the free market capitalism that is promoted in the Anglo-Saxon model. He defended the idea that the economic market should be liberalized, and businesses be allowed to exercise their entrepreneurial superiority through competition. According to him, the decision to allocate money to citizens was certainly setting a dangerous precedent and could easily kill the morale of the market players. In addition, the philosopher insisted that persons interested in business should not be handed the power to manipulate the interest rates as they will use it to their advantage. Thus, it only made sense in his opinion that market equilibrium be determined exclusively by the market forces of demand and supply. Furthermore, his postulation that the changing prices can be used to access a lot if information concerning the market has been widely adopted in the market. Ideally, Hayek used his vast experience from the World War II to make significant changes to the development of this economic model of capitalism. In fact, he got a state award from Queen Elizabeth II and the Presidential award in the United States from President George H.W. Bush (Walberg 2001).
The Rhine capitalism model, on the other hand, advocated for interventions that are meant to stimulate activity in the economic system. According to Keynes, the economic stability can only be maintained if the government intervenes to manipulate the interest rates or create an enabling environment through adequate investment in infrastructural development. This idea was widely accepted after the Great Depression when the global economy was literally stagnant and the masses had no money to start if off. This forced governments over the world to inject more money into the economy so that it can trickle down to the citizens. Within a short span, the fruit of this theory were evident as more people attained gainful permanent employments that had become extremely rare. This is in complete contrast to the Anglo-Saxon model that insists on the natural expression of market forces leading to market equilibrium. In fact, Keynesians insist that the private sector, just like the public sector, must take up an active role in deterring the economic success of the society. This they can do by increasing their expenditure or supporting public projects that can inject more money into the market. Over time, the Rhine capitalist model has been associated with Keynesian model of economy (Michel 1993).
The Anglo-Saxon model adopts the social values of equity and the preservation of sanctity of human life. In this respect, countries that practice this model take care of their people’s welfare by providing the basic necessities. In most cases, they give people a certain amount of money in subsidies so that these people can also afford the basics of life. However, this leads to prevalent poverty as it discourages people from working hard to fend for themselves. Although this system is not good for economic growth, it helps to attain sufficient level of social equity and regional development. Conversely, the Rhine capitalism advocates for a social set up that purely conforms to the sociological theory of Darwinism. According to this system, people should be allowed to engage in active competition, as they pursue their economic independence. In addition, the prevailing regimes or governments should focus on creating a level field for competition. This ideally encourages potential investors to invest their funds into the economy as they are sure that the system will secure their investments. Moreover, it promotes the ideals of humanity that emphasize that all humans should be provided with reasonable life conditions. For instance, these states have separate healthcare programs for the rich and the poor as this would technically appreciate the hard work of the rich and encourage the poor to work their way up the social ladder (Scott 2005).
The Rhine capitalism holds that financial corporations and social institutions, like associations should work together with a view to building a stronger society with better economic institutions. According to the literature available, this can be achieved through vocational trainings and credit systems established by corporate institutions that basically target the general market. However, the system emphasizes that the relevant state organs must play their roles by ensuring that agreements between associations or contracts between institutions remain valid and legally bound. This will not only earn the public confidence in the system, but also encourage people to invest more funds into the economic system. Essentially, this system seeks to promote social democracy as it emphasizes the need to put constrains on employee dismissals by corporate institutions and encourage democracy at all levels of the society, including the workplace. However, Anglo-Saxon retains the need for market competitiveness and creation of temporary jobs as it is the best way to make institutions more prepared to respond to technological changes in the market. However, this also has the disadvantage discouraging investments due to the fact of financial insecurity that employees have constantly (Michel 1993).
The corporate governance in the Rhine model is emphatic about constant consultations with the governments. For instance, the American government usually steps in to avert looming economic crises as a way of protecting the citizens from the effects of such economic disasters. Thus, while the world talks about the market liberalization, these economies give handouts to struggling institutions with a view to stimulating their rapid growth. Basically, this means that the system gives the governments responsibility to ensure that the economic market is an active and properly working structure. Although this does not perfectly conform to the idea of natural selection, it still fits into the definition of capitalism, albeit one with a human face. This is quite different from the Anglo-Saxon model that advocates for no interventions and no austerity measures. According to the proponents of the Anglo-Saxon model, economic growth should be left for natural forces of market equilibrium, and the government should restrain itself from making interventions that may favor certain players in the market. However, this proves quite unrealistic considering that interventions are sometimes necessary. For instance, the economy of the United States would have collapsed if not for the timely intervention by the government through economic stimulus packages. Essentially, the Rhine capitalism seems to fit into the prevailing global economic order that the Anglo-Saxon model (Walberg 2001).
The nature of relations between firms in the Anglo-Saxon capitalism is purely based on competition. For instance, they should ideally look at one another as an enemy that they should not hesitate to eliminate from the market. Thus, it is common to find one company hacking intones another’s information system to obtain information that will put them ahead in the competitive market. Although competition is good for rapid economic growth in the long time, it has several disadvantages to the owners of the companies, especially if they end up losing their investments in the cutthroat competition. That certainly restrains the superiority of the Rhine model of capitalism because it advocates for responsible interventions. Although these interventions may be abused by people in power who want to enrich themselves at the expense of the larger community, the fundamental intentions are good for equitable social development. In fact, many developing countries are currently contemplating fully adapting this model of capitalism as it looks more responsive to the realities of the economic world (Michel 1993).
The economic performance indicators are generally good for the Rhine model of capitalism. For instance, the fact that the system protects companies from collapsing implies that they retain a large base of companies, from which it can collect its revenue, thereby leading to large improvements in the gross domestic products over the years. In addition, it causes a tremendous increase in the per capita income due to the fact that most people are in gainful employment. Moreover, the presence of government intervention implies that the rates of inflation will be appropriately checked so that life does not become unbearable for the people. This is a complete contrast to the Anglo-Saxon model where interventions are limited. Thus, there arise several cases of collapsing companies and the resulting job losses that technically cause negative balance of payments. In terms of economic freedom, the Anglo-Saxon model gives the best form of economic freedom. However, this freedom can easily be abused by companies that have enough resources to exclude small companies out of the market. Thus, it indirectly stifles the very economic growth that it is suppose to promote (Walberg 2001).
Generally, the Rhine model assures a better quality of life to its people. This is due to the fact that governments have a sole duty to intervene in providing certain basics of life to its people. Thus, they have to increase their spending occasionally in order to ensure that people are not economically strained. For instance, the countries that practice this form of the economic model provide basic healthcare to its people regardless of their social or economic status. In addition, they provide basic education to all children in their countries due to the fact that this moral obligation squarely falls on their laps. However, the Anglo-Saxon model is quite different in that it discourages government spending and emphasizes natural competition. Basically, the Anglo-Saxon capitalism promotes social inequality and poor quality of life, because most services are preserves for those, who can afford them. In fact, this results in situations where people get to adulthood without basic education because their parents could not afford or they had no parents to take care of them. Thus, the Anglo-Saxon model is prone to market failure because it has no sources of control. Besides, this model does not take into consideration the fact that a country is only rich if its citizens are rich. Basically, it leaves a chance for a situation where the country is generally receded as rich, while its citizens live in extreme poverty (Michel 1993).
In conclusion, the Rhine capitalism is superior in the light of the current economic performances. Accordingly, Rhine capitalism in the contemporary economic order will remain quite popular in the western parts of Europe and the entire world as it seems to consider the demands of social democracy. On the other hand, the Anglo-Saxon model is good for national economic development. However, it can cause unimaginable social inequalities due to the fact that it restricts government intervention or other types of external controls.