Zimmerman, J., Brickley, J., & Smith, C. W. (2016). Managerial Economics & Organizational Architecture.
McGraw-Hill Education.
A substantial article or two related smaller articles from publications such as Business Week, Forbes,
Fortune, The Economist, The Wall Street Journal, economic journals, etc. should be read and analyzed.
The economic reports reflect current events (no more than 2 years old) that relate to the course. Some
examples of economic reports that we have seen it the past are: Cash for Clunkers, Southwest Airlines
no fee baggage, Incentive programs at Chesapeake, and reports about Google�s work environment.
ECONOMIC REPORT 2
“How compatible are democracy and capitalism.”
Summary
The economies of the world are gradually growing weaker and weaker. Powerful
countries such as America and Britain are experiencing constitutional turmoil. Many might think
that these constitution struggles are a punishment to unjust systems. However, these troubles
prove that democracy and capitalism are gradually becoming incompatible. Modern economists
argue that the rise of inequality may threaten the foundations of democracy in America. Others
such as the French economist Thomas Piketty claim that this theme is an old perception held by
thinkers such as Freidrich Hayek and Karl max. The article “how compatible is democracy and
capitalism” published in the Economist Journal sheds light on these context of whether
capitalism and democracy may prove incompatible within time (Demeter, 2019). Looking back
to the previous century, democracy and capitalism have worked well together and seem to
reinforce each other. Contrary, to what early economists may have thought. David Soskice of
Hazard University believes that the compatibility is no coincidence since no capitalist democracy
has ever fallen since the beginning of industrialization.
Nevertheless, his view may face a test in the time since different economists have
predicted various ways in which democracies will fail. Some believe that the previous century
had over centralized republics that set the mode for territorialism. They think that democracy
will fail because such a brutal system will expropriate the hard earned cash and wealth of
entrepreneurs. The incompatibility in this sense is that “with no wealth security, there can be no
capitalism” (Demeter, 2019). Others argue that globalization of the economy will require various
governments to drop either democracy or national sovereignty. All these arguments seem in
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place, given that modern governments are shifting their attention from the bourgeois society to
the rich. The rich are slowly welding power as they continue to control funds, the media, and
politics. Though proud democracies might survive their survival is not guaranteed.
Economic significance
The article is very relevant to the study of economics as it applies various ideas and
concepts that form the basis of economics. The notion that democracy and capitalism will collide
in time to come is meticulously crafted and explained with reference to reliable sources and
observable statistics. Capitalism is an essential topic in the study of economics. It expounds on a
system of the economy that is based on trade and growth (Zimmerman, Brickley, & Smith,
2016). However, the changing demographics and the widening gap of inequality is making the
rich to domineer and thus a gradual entry of a territorial government. The current governments
have shifted their focus to protecting the rich and careless about essential factors of our
economy, such as infrastructure, education, and healthy. Thus, quality service in the mentioned
sectors is only accessible to the rich, and hence, they continue to grow stronger and stronger.
Such speculation is essential to economic forecasting since the grip of capitalism has a
significant influence on the economy and democracy (Demeter, 2019). The context of the article
is derived from the current constitutional squabbles in great countries such as America and
Britain. Such information is essential to the economy as brings about an evolution of new
economic concept and ideas that lead to positive economic reforms. A financial analyst can use
the article as reference and evidence of the colliding democracy and capitalism.
A capitalist economy offers the government a certain level of sovereignty, which it uses
to boost the middle class. Promoting the middle class is the equilibrium of any advanced
capitalist economy. Thus, the government leaves much undone in the pursuit of meeting the
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needs of the middle class. Stable governments use their power to restrain large organizations and
labor unions, promoting real competition (Demeter, 2019). Contrary, the weak prefer to support
monopolies, thus hindering competition and growth since only the rich can grow rich. They fail
to concern themselves with the affairs of the working class and public amenities such as
infrastructure, healthcare, and education are left unattended. Such a system undermines the
power of democracy as only the rich have access to quality services and prominent positions.
Such a government discourages the development of many industries that require skilled workers.
To support the middle class, the government needs a substantial amount of tax revenue, which is
raised by wealthy firms (Zimmerman, Brickley, & Smith, 2016). The rich might not like it, but it
preserves democracy as the middle class is less concerned about the needy. Thus the collision of
capitalism and democracy seems to be influential in weak governments than in stable
government. Such information is essential to every bit of economic planning.
Conclusion
Living in a capitalist economy requires one to work hard to keep up with the standards of
the ever-changing economic status. A student in pursuit of an economic career will find the
information in the article very valuable as it relates various economic concepts to their
practicability. Planning the development of an economy requires adequate research of different
political and social factors and how they correlate with each other to influence the economy. A
career as an economist requires ample understanding of these concepts. Personally, the
information is vital as one can define their status quo in the marketplace and thus work had
towards their stability.
ECONOMIC REPORT 5
References
Demeter, O., (2019). How compatible are democracy and capitalism?.
Zimmerman, J., Brickley, J., & Smith, C. W. (2016). Managerial Economics &
Organizational Architecture. McGraw-Hill Education.
