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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

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