Class 3: Canadian Capitalism

Question 1

Key assumptions of capitalism: Private property

Answer 1

The legal right to own and use economic goods (means of production) such as land and buildings.

Question 2

Key assumptions of capitalism: Individualism

Answer 2

The individual, and not society or a collective, is the paramount decision maker in society. The individual is inherently decent and rational.

Question 3

Key assumptions of capitalism: Economic freedom

Answer 3

• Few restrictions on business activity
• Freedom to voluntarily enter business
• Enter contracts
• Locate anywhere

Question 4

How is economic freedom measured?

Answer 4

Property rights, taxation, government intervention, regulation, international exchange, foreign investment, money and inflation, wage and price controls, corruption.

Question 5

Key assumptions of capitalism: Equality of opportunity

Answer 5

Assumption that all individuals or groups have an even chance at responding to some condition in society.

Question 6

Key assumptions of capitalism: Competition

Answer 6

Many rival sellers seek to provide goods and services to many buyers.

Question 7

Key assumptions of capitalism: Profit

Answer 7

• The excess of revenues over expenses.
• The “profit motive”.
• Profit maximization

Question 8

Key assumptions of capitalism: Work ethic

Answer 8

Code of values, or a body of moral principles, claiming that work is desirable, it is natural activity.

Question 9

Key assumptions of capitalism: Consumer sovereignty

Answer 9

The assumption that consumers have and exercise the power over producers through the decisions they make in purchasing the goods and services provided by business.

Question 10

Key assumptions of capitalism: Role of government

Answer 10

In a perfect capitalist market, government intervention would be virtually non-existent (e.g. enforcing contracts).

Question 11

Consumer capitalism

Answer 11

Also called liberal market capitalism; practiced in the U.S., Britain, Canada, and Australia. Government involvement is limited, open borders, profit motive exists. Consumers have considerable influence over the market and producers respond to their wishes. Potential problems are income inequality, low savings rate, and weak central governments.

Question 12

Producer capitalism

Answer 12

Also called social market economy. Emphasizes production, employment, and concentration of economic controls and planning in the hands of a centralized government. Practiced in Germany, and other forms practiced in Japan, France, and Mexico. Regulated capitalist market with generous social welfare. Input is sought from stakeholders. Potential problems are social safety nets fraying, slower innovation, and consumer dissatisfaction.

Question 13

Family capitalism

Answer 13

Also called crony or Confucian capitalism. Practiced in East Asian countries like Taiwan, Malaysia, Thailand, Indonesia. Extended clans dominate business activities and control capital flows. In Japan, the form is based on the implicit belief in social balance and harmony. Emotional attachment formed with groups, family, households, working teams, etc. This differs from the Western beliefs in objectivity, equal treatment, and the “level playing field”. Outsiders are not equal, modern corporate organizations are less likely, and money markets are restricted.