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Are Democratic ideals supported by free markets or undermined by them?

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Introduction

Word Count 2745 Are Democratic ideals supported by free markets or undermined by them? In 1991 the world witnessed the collapse of the Soviet Union and an end to nearly 75 years of communism in Russia. In trying to democratize his nation and restructure its economy whilst at the same time attempting to stick to the ideas and principles of socialism, Gorbachev had presented himself with an enormous challenge, one that he had been unable to meet. It was at this time that Francis Fukyama claimed that history had ended. Fukyama believed that history was essentially the struggle between different ideologies, each trying to gain supremacy over the others. She claimed that the fall of the Soviet Union symbolized the end of all ideological alternatives to capitalism; in short the west had won. As the vast majority of capitalist western countries were also democracies, the connection between the free market economy and democracy seems to be a clear one. The western countries, all with stable democratic governments had economies based on the ideas of the free market economy. Those countries that didn't have this system were seen as oppressive dictatorships, such as Russia and Nazi Germany. However, it cannot simply be said that all democracies are built on capitalism and that all state controlled economies belong to oppressive dictatorships. The idea of democracy and capitalism co-existing side by side is a contentious issue and one that has generated countless books and articles. ...read more.

Middle

In the free market system the output of a product is determined by the willingness of the consumer to buy it. The idea of consumer sovereignty is key to the success of a free market economy. Neither the consumer nor the producer is forced to enter into an exchange with anyone else against his or her will. The individual, or household, has a resource that they can trade to their maximum benefit, whether that is an actual product or their labor. By doing this the household can sustain itself by providing services for others rather than being self-sufficient. As the economy advances this method becomes more advantageous for the household and allows specialization in production. Obviously our economy has advanced far beyond simply a collection of households. Industry and private enterprise has provided intermediaries between households as both consumers and producers. Through this system consumer sovereignty is preserved, as all the enterprises are private. Therefore both parties are free to enter into a transaction or not. The consumer does not have to buy something of a producer, as there are other producers available. In the same way the producer does not have to sell to that customer, as there are other consumers available. This market equilibrium between supply and demand allows both household and private enterprises to enter transactions only when it is beneficial to both parties. It is not in the interests of the producer to double their prices as the consumer can go elsewhere. ...read more.

Conclusion

It is the home of big business, private enterprise and multi-national conglomerates. However, there are many cases in recent history where the US has been involved in undermining democratic governments because they were either communist or possessed large quantities of natural resources such as oil. There have also been many cases where the US traded with brutal dictatorships when it was in their interests, turning a blind eye to the atrocities being committed. Therefore although capitalism and democracy can exist in certain places, the freedom and abundance of goods found in one country is often balanced by the suffering and hardships found in another. This is not just found at a government level either; many of the goods imported into rich western nations come from third world countries. Although public awareness has never been higher about the problems these countries are facing and issues such as fair trade are big news, people are still not willing to sacrifice their lifestyles. Fairtrade coffee is one thing, but Fairtrade Nike trainers are along way off yet. Therefore free markets do support democratic ideals, if you happen to live in a thriving western country. In political terms the free market economy is a representative democracy, where each individual can enter into a transaction voluntarily, without coercion. It is hard to see how one could be considered to be politically free without these basic rights. So whereas capitalism supports democracy in those countries with established economies, it can undermine it in those exploited countries that are forced to do the 'dirty work' as it were. ...read more.

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