Chapter 1 - The Crisis of Capitalism
Introduction
Capital is nothing but consumable commodities in their potentiality. Intelligent people collect more capital than others in the form of consumable goods, but since this capital cannot be stored for long, people began to keep it in the form of money. This is how capitalism originated. In a free-market enterprise system, wages of the masses catch up with their productivity. This is how free markets ensure that economic demand catches up with the supply of goods in an economy ensuring a balanced economy. Capitalism encourages acquisition of material wealth, be it land, money, metal, or other property. This acquisition, when left unchecked, leads to huge economic disparity, which transforms free-market capitalism into monopoly capitalism; the accumulation of more and more wealth by any inappropriate means reaches a point of depriving other human beings of their basic requirements, which diminishes their consumer purchasing power. This chapter explains the difference between free-market capitalism and monopoly capitalism. It also introduces the reader to mass capitalism and provides an explanation about how mass capitalism would establish a free-market economic system with minimal government intervention and lead to a sustainable progress of Moore’s law in the US semiconductor industry.
Free-market Capitalism in the United States Post–World War II
World War II led to a total destruction of economies in Europe and Asia, and afterwards, the United States became the nexus of global capitalism, as war was not directly fought on US soil, thereby protecting its manufacturing sector. In fact, World War II played a big role in the revival of the US economy from the 1930s economic depression. The war helped Americans find employment in industries that catered to the building of armaments for US allies in Europe. As a result of World War II, only physical gold was used as a medium of exchange for international transactions, and the United States accumulated huge reserves of physical gold, selling munitions to its allies for fighting the war. This shows the importance of possessing physical gold reserves for any country in times of a global economic chaos from war or other disasters.
After World War II, when Dwight D. Eisenhower took over the presidency, he continued the tax structure put in place by his predecessor, Franklin Delano Roosevelt, following the Great Depression of 1930. The important fact to remember is that, as a result of the progressive tax structure during the presidency of a Republican president, where the highest income earners paid a maximum tax rate of 92 percent, there was less hoarding of wealth and more investments in the economy. These investments led to a creation of more jobs and better macroeconomic growth. In addition, the Federal Reserve followed a monetary policy such that wages kept track with productivity. This led to a balanced economy where the supply of goods into the economy was able to catch up with economic demand for these goods. These economic policies led to a 4 percent year-over-year growth in the US gross domestic product (GDP) during the 1950s, called the golden era of free-market capitalism.
A free market is a market economy in which the forces of supply and demand are free of intervention by a government, price-setting monopolies, or other authority. A free market contrasts with a controlled market or regulated market, in wh
