Personal Renaissance Of The Foundations Of Capitalism

2 Personal Renaissance of the Foundations of Capitalism what Is The Foun

What is the foundation of business? Is it about how to manage the funds and stocks? This was my first question when I was adding this class to my schedule. Through a semester of learning, I found this class is touching the core of the business throughout history. And the most surprising is the habit that thinking critically is coming into my mind unconsciously.

It is fun because I always believe I’m a critical thinker since I was born. I can remember I used to rethink every mistake I made, and I have never believed in any social media’s information because the information they gave to me is not enough to represent every side of the truth. Therefore, I couldn’t believe critical thinking is such a hard thing for others, and I didn’t think I have any dark ages. But after thinking for a long time about the topics that we talked during the class, I realized I was wrong, and I still have many “dark ages.” I was too arrogant. The topic that moved me the most was about the foundations of capitalism and how it is related to the division of labor.

As a student comes from a socialist country, I only had a smattering of knowledge about capitalism in the U.S. I thought capitalism was the opposite of communism. In this society, everyone is cold-blooded, and the only purpose for the business is seeking capital. The government only serves the capitalists, and the Acts and policies they made are all benefits for operating more capital. The idea of becoming rich can compel everyone to work hard to run the capitalistic business systems efficiently and successfully.

David M. Potter, an educator and historian, explained American capitalism in his book “The American Economic System” in 1960. He described the capitalism which had exploited proletariats and extremely wealthy capitalists had existed hundreds of years ago in England. The American capitalism is different from the primitive one. Potter also said American capitalism is a mixed economy and explained very clearly that there are two essential goals of American capitalism: one is to maximize opportunities for everyone, and the other is to improve the standard of living for the American people. These two goals have historically guided American economic policy. It was hard for me to believe this because these two fundamental goals are not cold-blooded at all.

I compared the purposes for American capitalism with the purposes for Chinese socialism unintentional, and I felt they are very familiar because both aim to take care of everyone, including the proletariat. After I finished reading “The American Economic System,” I finally understood where this feeling of familiarity comes from. Potter also believes American capitalism is a unique economic system because it combines the free market and government control very well. I think it means that American capitalism has characteristics of a free market that encourages private property, and the government uses tools like taxes and interest rates to get involved in the market at the same time.

As we discussed during class, the purely free market system and the complete government-controlled system are two extreme market systems. So now, I conclude that American capitalism has more free market elements than controlling elements. The most significant difference between Chinese socialism and American capitalism is that Chinese socialism controls the market much more than America. This realization made me feel they are more similar than I initially thought. American capitalism is not purely free market, and it treats every class in society well. In “The American Economic System,” Potter applied concepts from Adam Smith’s "The Wealth of Nations," who is called the “Father of Economics.” Smith explained division of labor, which is a key contributor to increased labor productivity.

The division of labor is a simple idea: breaking down complex work into smaller, specialized tasks. Initially, I considered this idea boring, but upon reflection, I realized it’s everywhere in society. Its origins trace back thousands of years, such as in early agricultural societies where some people farmed and others weaved, depending on specialization and trade. The division of labor helps satisfy self-interest and foster economic prosperity. An illustrative example is Leonard Read’s article “I, Pencil,” which describes how the production of pencils involves countless individual steps, each performed by different firms around the world, with no single person understanding the entire process. This division enhances efficiency and reduces costs.

I had never thought about this before, and realizing I live in a society fundamentally driven by division of labor was astonishing. It is so natural and successful that it often goes unnoticed. Throughout this lesson, I’ve come to believe that the division of labor is at the core of business itself, inseparable from the capitalist system. As Adam Smith discussed, capital investments like machinery and land are costly and inaccessible to ordinary people, which makes the role of capitalists crucial. They invest in capital, and workers benefit through employment, illustrating how capitalism and division of labor complement each other.

My renaissance in this class was about understanding the foundational principles of capitalism in modern society. I had misconceptions about American capitalism, thinking it was purely free market and detached from government intervention. Instead, I now see it as a mixed system where government plays a key role in ensuring market stability and fairness, and the division of labor drives productivity and economic growth. Recognizing the interconnectedness of these elements has deepened my comprehension of how capitalism functions and benefits society at large.

Paper For Above instruction

Throughout history, the foundations of capitalism have been shaped by complex interactions between market forces, government policies, and social structures. My understanding of these foundations has evolved significantly over the course of this semester, leading to a deeper appreciation of how capitalism operates in modern society. Initially, my perception of capitalism was simplistic and somewhat negative, rooted in the belief that it solely served the interests of the wealthy and operated without regard for social equity. However, critical engagement with economic theories and historical contexts revealed that capitalism, particularly in the American context, is a nuanced system balancing free-market principles with government intervention.

One of the key concepts I explored was the division of labor, originally introduced by Adam Smith in his seminal work, “The Wealth of Nations.” Smith argued that dividing complex tasks into simple, specialized steps enhances productivity and efficiency—a principle that underpins modern industrial and service economies. In class discussions, I realized that division of labor is not merely an economic theory but a fundamental driver of business operations. For example, when observing how pencils are produced globally through segmented tasks performed by various firms, the efficiency gains from division of labor become evident. This idea underscores how interconnected and complex modern production systems are, and it emphasizes that the core of business success often lies in optimizing specialization and coordination among different actors.

Furthermore, my perspective on American capitalism has shifted from seeing it as a cold, purely profit-driven system to understanding it as a mixed economy. Cultural and historical analyses, such as those by David M. Potter, demonstrate that American capitalism aims to balance two vital goals: expanding opportunities for all and improving living standards. Unlike the image of relentless greed, the system incorporates social welfare motives and regulatory measures to ensure a fair distribution of benefits. This understanding challenged my previous stereotypes, especially as I drew parallels with Chinese socialism, which also seeks to promote social welfare but through different mechanisms. Both systems reflect an underlying goal of shared prosperity, though their methods differ significantly.

Additionally, I gained insight into the symbiotic relationship between capitalism, division of labor, and capital investment. Capitalists invest in expensive machinery and land, which enables workers to perform specialized tasks efficiently. This relationship creates a cycle where the accumulation of capital fuels productivity, and increased efficiency generates wealth. The government’s role in regulating markets through fiscal tools like taxes and interest rates ensures stability and equitable growth, further strengthening the system’s resilience and fairness.

Reflecting on this course, I recognize that critical thinking is an essential skill for understanding complex economic systems. It allows individuals to question stereotypes, analyze historical and theoretical frameworks, and appreciate the multifaceted nature of capitalism. By examining the interplay between market forces, government interventions, and social goals, I now see capitalism as an evolving system that seeks to serve broader societal interests rather than merely enriching a few. This nuanced understanding enhances my appreciation for the importance of balanced economic policies and the ongoing role of innovation and specialization, as epitomized by division of labor, in fostering sustainable development.

In conclusion, the foundations of capitalism—particularly the division of labor and the balanced integration of market and government influences—are vital to understanding both historical and contemporary economic systems. As I continue my studies, I am eager to explore further how these principles are applied across different cultural and political contexts, shaping the prosperity and stability of modern nations.

References

• Potter, David M. (1960). The American Economic System. New York: Harper & Brothers.
• Read, Lawrence W., & Friedman, Milton. (2008). I, Pencil: My Family Tree as Told to Leonard E. Read. Foundation for Economic Education.
• Smith, Adam, & Raphael, D. D. (1991). The Wealth of Nations. Knopf.
• Blaug, M. (2002). The Economics of Adam Smith. Routledge.
• Friedman, M., & Friedman, R. (2002). Capitalism and Freedom. University of Chicago Press.
• Smith, Adam. (1776). An Inquiry into the Nature and Causes of the Wealth of Nations. Oxford University Press.
• Marx, K. (1867). Capital: Critique of Political Economy. Penguin Classics.
• Stiglitz, J. (2002). The Roaring Nineties: A New History of the World's Most Prosperous Decade. W.W. Norton & Company.
• Becker, G. (1976). The Economic Approach to Human Behavior. University of Chicago Press.
• Ostrom, E. (1990). Governing the Commons: The Evolution of Institutions for Collective Action. Cambridge University Press.