By Dr. Frank Elwell

The way that a society is organized to produce and distribute goods and services is the crucial determinant in the way the other institutions are organized.

Individuals encouraged to own:

Profit has positive consequences for society.

Competition serves to:

Government laissez-faire (leave the economy alone).

If left unhindered by government, the profit motive, private ownership and competition will achieve the greatest good for the greatest number.

While the American economy has always been based on the principles of capitalism, the present economy is far removed from a free enterprise system.

The American economy is now dominated by huge corporations that, contrary to classical economic theory, control demand rather than being responsive to the demands of the market.

Marx hypothesized that competition will result in some firms becoming bigger and bigger as they eliminate their opposition or absorb smaller competing firms.

Under the requirement of laissez faire, the result of the competitive process is the formation of monopolies in each of the various sectors of the economy.

Competition, you will recall is the lynchpin of capitalism. In the absence of government, it keeps individual profit-seeking in check.

When four or fewer firms supply 50 percent or more of a particular market, an oligopoly results, which performs much like a monopoly or cartel.

Since there is no free market, there is no built-in incentive for oligopolies to improve quality or lower costs.

As a result of corporate growth, economic power has become extremely concentrated in America.

There were about 200,000 industrial corporations in the U.S. with total assets in 1980 of about $1.2 trillion.

There are some 67,000 corporations in these fields.

The financial world is equally concentrated.

This trend toward ever-greater concentration among the largest American corporations has accelerated in recent years.

The steel industry provides a good example of how foreign competition has affected the American economy.

Following WWII, the U.S. produced 50% of the world's steel, but in 1982 it produced only 13%, resulting in a 57% decline in steel mill jobs since 1957.

In the decade after World War II, with only 6 percent of the world's population, the US was producing two thirds of the world's manufactured goods.

Because of the lack of competition at home and abroad, American companies didn't bother to modernize plants, didn't anticipate changes in consumer demand, didn't care enough about quality control.

American companies, protected from competition at home and abroad didn't run into serious foreign competition until the late 1960s.

Other nations, especially Japan and Germany, were more competitive in the world market because of government planning, subsidies, stiff competition at home and the building of more efficient plants.

Short-term results of the introduction of foreign competition:

Long-term results:

Now the process of concentration begins on an international scale, but, when sufficient concentration is reached, competition will cease.

The multinational, or corporations located in several countries, change the balance of power between capitalism and the state.

Multinationals have increased leverage to threaten to lay off workers or move jobs abroad if they do not get favorable government treatment such as tax breaks and the relaxation of restrictive regulations.

The public debate over corporate and environmental policy is full of reference to fears that these multinationals will take their business elsewhere if the state becomes too restrictive.

All of these changes in the American economic system will have tremendous impact on the rest of the social system.

These changes cause both economic and social problems.