BUSINESS, GOVERNMENT AND INDIAN

SOCIETY ASSIGNMENT

BY:

RAUNAK DOSHI

1021327

1ST

MBA M

The Market Capitalism Model

� Business operates within a market environment

� Primarily responding to economic forces

� Sheltered from direct impact of social and political forces

� Business is substantially sheltered from the direct impact of sociopolitical

forces and focuses on the primary economic forces

� Market environment is shaped by business operations and by social and

political pressures

� The market is a buffer between business units and non-market forces

� “Classic Capitalism”: most economic activity is carried on by private firms

in competitive markets

� Based on the assumption of Laissez-faire (the government should let us

alone)

� Individuals have the freedom to pursue self-interest, and therefore

individuals are motivated by the desire to make money

� Assumes that individuals can own property and are free to risk investments

Model Origins:

� Historically people produced for subsistence

� 1700s people start to produce for trade

� Market Economy reshaped human life

� Emerges when people move beyond subsistence production to

production

for trade

� Adam Smith’s, The Wealth of Nations

� Capitalism and the “invisible hand”

� Market’s pricing mechanism reconciled supply & demand making

commodities cheaper, better, and more available

� Greater good for society when businesses compete freely

� Managerial Capitalism (early 1900s)

� Market economy in which dominant businesses are large firms run by

salaried managers, not smaller firms run by owners

Model Assumptions:

� Government interference is slight or “laissez-faire”

� Government, not business, should correct social problems

� Managers focus on profit and efficiency

� Individuals can own property and freely risk investments

� Markets convert selfish competition into broad social benefits

� Informed consumers making rational decisions

� Moral restraint of business

� Many producers and consumers

Market Capitalism Model Perspective Conclusions:

� Government regulation should be limited

� Markets discipline private economic activity to promote social welfare

� Proper measure of corporate performance is profit

� Ethical duty of management is to promote the interests of shareholders

Model Critics:

� Creates prosperity only at cost of rising inequality

� Markets erode virtue

� Greed

� Ruthlessness

� Profit motive encourages plundering of the earth

The Dominance Model

� Began in 1870s

� Resulted in reform movement of Populism

� President, Union Pacific “could buy Congress”

� Railroad magnate, Vanderbilt “The public be damned!”

� Rise of unionization of railroads and added government regulation