Capitalism boasts that it allocates scarce resources to where they are most economically productive. Consumer demand drives the allocation of resources to the manufacture of products or the provision of services, while competition provides the incentive to supply products and services as cheaply as possible. Therefore, the use of resources is as efficient as possible.

However, there are problems: the distribution of wealth is one, externalities (costs, such as environmental damage, that are not taken into account) are another. Despite this, no other system that has been tried has managed the same sheer efficiency in creating wealth and the United States is reaping the rewards.

America's model seems to work and capitalism seems to be the reason, but America's capitalism isn't beyond improvement. Proof of this are the financial scandals we have had on both sides of the Atlantic Ocean - Enron and Parmalat. In the US, the outrage caused has made Sarbanes-Oxley, the stock market's governing body, take drastic action and has placed daunting requirements on managers. This, together with the threat of severe criminal penalties, have soared the cost both directly and indirectly. Ironically, one of those fingered as the main culprits - the book-keepers - have seen their incomes boosted by these measures.

One way of improving the model would be even less government intervention; reduce subsidies, grants and tax rebates to stimulate specific actions and use the extra income generated by these measures to directly reduce corporate tax. Let's be frank, the business world seems to know what's good for itself - or who seems to be doing better the US or the more interventionist France. This is obviously an oversimplification, but whether we like it or not, the US model has proven to be much better at generating wealth. Maybe, government intervention should be left for areas that seem to be less able to look after itself, such as the National Health Service, the environment, human rights, etc.

But is this modern capitalism really capitalism? One of the premises of capitalism is that free market mechanisms and perfect competition are the decision-makers, and however, many large corporations that rule the world are protected by patent and trademark laws that hinder competition and provide these corporations with competitive advantages that supply them almost unlimited profits. This is specially true in sectors like the software or pharmaceutical industries where their investment in R&D si rewarded with strong protection.

But, would R&D really suffer in a totally free market?

In whose hands should we leave R&D?

Article vocabulary

Para poder sacar el máximo provecho de este curso y aprender inglés de negocios siguiendo los 10 pasos de la Guía, aquí puedes comprar por tan solo 17€, a través de la seguridad de la plataforma PayPal, 30 audios que acompañan los artículos:

Una vez realizada la compra, haz clic en el link "Volver al vendedor" y podrás descargar los audios en inglés de todos los artículos. Tienes 1 mes para probar los audios. Si no quedas plenamente satisfecho te devolvemos el dinero sin realizar preguntas. Para cualquier consulta, puedes contactar a través del email: ivangarth@gmail.com

¡Tiene un Audio Gratuito en el artículo Email Writing!

• www.economist.com
• www.ptz.com