Social vs Liberal Market Economies

Gabriela Lopez

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Section I

Dictators Dilemma:

Dictators can never be sure of how much support they really have because of the repression they practice. As explained in the chapter “repression breeds fear, which in turn breeds misinformation.” Dictators often have to spend more on civilian or military spies to gain knowledge of opposing parties or disloyal civilians. Since dictators can’t be sure of how many supporters they have, they find themselves spending money to buy loyalty. Dictators spend a lot of resources trying to neutralize areas that they believe could be a threat.

Military regimes tend to be more paranoid when it comes to measuring the loyalty of the nation. They are aware that in order to gain power they overthrew the standing government; therefore, they know that someone else can do the same to them. It is important for the dictator to ensure the military’s loyalty but spending luxurious amount of money and resources.

In Africa in authoritarian regimes it was obvious who was ruling because of the difference in infrastructure from one place to the other. Dictators tend to prefer to spend more on their home areas than anywhere else. It is common for authoritarians to be more generous with the people of own ethnic group.

Drogus and Orvis 2012, Chapter 8

Social vs liberal Market Economies:

Market economy is the system in which individuals exchange goods and services in a large manner. It is not limited to finished good, this system also includes labor. Social market economies are designed to benefit a larger amount of people. In a social market economy the government is highly involved in creating social goods for the people. They have highly coordinated business communities. In a social economy the government is heavily involved in protecting the citizen’s welfare and providing employment security. Germany’s highly productive market economy led to be the leading industrial exporter. They have and extensive welfare policies that cover almost every citizen of the nation. Germany has been successful at keeping the productivity levels high, secure wages, and low inequality levels.

In contrast, a liberal economy limits government intervention. The United States is an appropriate example of liberal economy, the states has allowed the economy to take its course with little of no intervention. The market has crashed more than once, taking the nation’s economy down with it. The bargaining levels are not as efficient in a liberal economy that in a social economy because of the lack of government intervention. The bargaining happens between the employer and employee, and unfortunately for the working class we get paid what the employer things the labor is worth. The United States continue to be one of the wealthy countries that don’t provide its citizens with welfare. The United States has been successful in creating good growth, keeping unemployment rates in a moderate state. On the opposite side, the United States has high inequality and poverty levels compared to other wealthy countries.

Drogus and Orvis 2012, Chapter 5

Market Externalities:

Market externalities are one of the three causes of market failure. Market externalities occur when the cost or benefit of the product is not reflected in the market price, this in turn reduces efficiency. The market price should include the price of production and the price of the damage it creates. Environmental damage is often considered an externality because the company that created the pollution did not pay for the damage. When a factory pollutes the air they create a long term health problem for the people that inhale it. Therefore, some people believe that industries should be limited to the amount of pollution that they can release to the environment and or be responsible for the full cost of their production.

Efficiency can also be maximized if both the seller and the buyers know the full cost of the product; this is known as “perfect information”. The 2008-09 recessions were partially caused by investors not knowing the full cost. Home buyers were so desperate to buy homes that they didn’t check the variable interest rates that were in the contracts. The high mortgage payments would be higher than what families could afford after a certain period of time. This happened to my family back in 2009, my parents lost the home that they had invested so on because the mortgage payment double from one month to another. I explain this part of my life to show that I completely understand market externalities.

Drogus and Orvis 2012, Chapter 5

Four Welfare Policy Types:

Social policy can be categorized in four distinct types: universal entitlements, social insurance, mean tested public assistance, and tax expenditures. Universal entitlements are the benefits that the government provides equally to all its citizens, these are funded with taxes. The only example that can relate to the United States is public education, which is a right that every citizen has. Some believe that is an indirect component, the government only offers free education because that will decrease the poverty level in the future. In Europe the universal entitlement is more direct, they provide cash benefits to the families to help pay for the expenses of raising a child. People don’t always agree with universal entitlements because they feel that it’s a waste of money that is going to people that don’t need it.

Social insurance is a form of insurance that you only get if you have contributed to the funds. For instance, in the United States we have social security, the pension system created by the government to help you when you need it. The money is taken out directly from the paychecks and it’s put into the general fund. Young people pay for the elder’s social security and in turn we rely on the future generations to do the same. People are more supportive of social insurance because they don’t have to question the reasons why people get money.

Means-tested public assistance are the programs that only people that fall under low income levels get. SNAP, CHIP, WIC, TANF are programs offered in the United States to families that need financial assistance. The tax payers don’t always agree with means-tested public assistance because they are funded with their tax money. The working citizens that contribute the nations general tax fund don’t feel that the people receiving welfare benefits are worthy of the assistance because they are getting money that they did not work for.

Tax expenditures are tax breaks that only specific people get. This social policy is different from the rest because the government is not spending money on providing you with assistance; instead they allow you to keep this money. This is sometimes helps families to keep money that they can use to purchase a home, which would stimulate the economy in a different way. Tax breaks can be limited to certain groups of people and they are meant to help lower poverty and inequality.

Drogus and Orvis 2012, pages 564–596

Cap and Trade:

Cap and trade is and incentive given to companies by the government that is intended to reduce the pollutant that a company releases into the environment. The government gives vouchers to the companies that allow them certain units of pollution, the companies are then free to trade or exchange with other industries that have a higher cost of pollution. The companies that cannot afford to but cleaner technology to create less pollution can buy more rights from the companies that can easily upgrade to more ecofriendly technology. The downside to the cap and trade system is that any company with enough resources can buy all the rights it needs, creating some trouble areas where they will suffer from severe pollution. The government still has to limit the amount of right a company can buy to be able to successfully make the cap and trade system work. Some suggest that a simpler solution will be to directly tax pollutants.

Drogus and Orvis 2012, pages 564–596

Part II

Is political science actually science?

Political science as Aristotle described it is the study of the state. Political scientists preoccupy themselves with studying nations, states, and government policies among other things. As defined by science is the study of a subject that deals with facts systematically arranged to show the operational of general laws. Based on that definition I will say that political science is definitely a science. The study and comparison of the state policies and nations is no easy task, it requires hard work and years of study to find out what works for society and what doesn’t. Comparative politics is possible because even when nations are not exactly the same they do have similar variables that can help weight the differences.

Thanks to comparative politics we are free to “exchange ideas” with other nations. Throughout the course we have compared many nations and their rules and we have being able to make our mind on what we find correct and the things we wish to stay away from. For instance most of us already had an idea of what democracies are, but little did we know that there are different types of democracies. The type of democracy that we find politically correct is the one in the United States, the nation that allows a liberal market economy, and holds free and fair elections regularly. Other nations that are not democratic have adopted the term to make them sound democratic like the Democratic People’s Republic of North Korea and the People Republic of China. Communist countries have gone as far as to adopt elections and have democratic institutions. Then there are nations that are recognize as democracies but don’t measure up to the definition of the word. Comparative politics has allowed us to measure how democratic a nation is based on contestation and inclusion.

Political scientists are constantly focusing their studies on topics such as health care and the different types of health coverage offered across the world. Most of the world has adopted the idea that health care is a social right. Everyone is regardless of social status has the right to get the appropriate health coverage they need. Most wealthy countries have been able to intervene in the market to be able to create universal coverage to the citizens. Even though the United States has not taken it into its own hands to recognize health care as a social right it, it does claim the provision of the best health care possible to the largest number of people. Comparative politics has put the health care systems into perspective to be able to adequately identify which one serves the largest amount of people. In Germany the national health insurance system has been a success, the government has mandated that every must have health insurance. Since the government regulates insurance company’s there’s absolute control on how much those companies can charge for premiums and health procedures.

National health insurance only works for wealthy countries; most citizens in poor countries cannot afford insurance. Some countries implement a modified version of the national health insurance that adapts to the peoples budget, or that only benefits the higher classes. The national health system is also more common in wealthy countries. This system is government financed and managed. Doctors that work in a national health system get their income directly from the government. Therefore the government can regulate the cost of procedures and drugs. Poor countries attempt to enforce the national health system by offering services through public clinics and hospitals.

Market based insurance is the least common; the insurance game is ran by markets. This allows limited government regulation which in turn creates high prices for the citizens to pay. Even though, the market based economy is usually pricier due to the lack of government regulation, the size of the population that doesn’t have health insurance is relatively small. Comparative politics sets the examples of what country we want to be like. Do we want to continue to have a market based insurance system or do we want to be like Germany where health care is a social right?

Political science has helped us gain knowledge of things that have failed in the past to keep us from making the same mistakes in the future. Everything in this world can be measured and compared; some things are more obvious to the eye than others. Comparative politics is certainly possible. If it wasn’t for the patience and dedication of political scientist that live to reject their theories there might not have been such great advancement in the world.


Clark et al. 2009, Chapter 5

Drogus and Orvis 2012, pages 564–596

Essay 2

Advanced Democracies

Advance democracies are countries that have institutionalized democracies and have high levels of economic development and prosperity. Originally, advanced democracies were considered “first world” countries, they were ahead of all others because they were growing economically and they had declared themselves democracies. Referring to countries as first, second and third world had to be redefined because countries with oil-based economies began to become wealthier but weren’t exactly heading toward democracies. The biggest challenge that advance democracies face is staying ahead in the economy game.

Advanced democracies can be identified as such by looking at the degree of institutionalization of participation, competition, and liberal. Advanced democracies have open market policies and high levels of private property ownership. A small portion of the economy is based on agricultural. Advanced democracies initially replaced agriculture with industrialization, which is now being replaced by education, real estate and other parts of the service sector. Liberal democracies all share common characteristics of high economic development based on industry and services. However some differences stand out. Advance democracies take different approaches to measure freedom and inequality. Liberal democracies limit the freedom that the citizens have. For instance, some countries like the United States allow abortion as long as they are done before the first trimester. In other countries the government can go as far as to ban abortions all together. Every country can takes different approaches to protecting certain liberties.

Todays advanced democracies are rational, materialistic, and bureaucratic. They give greater importance to individualistic freedom than collective equality. Advance democracies are undergoing social, political and economic changes. These changes have shifted from having an economy that was based on industrial and agricultural goods to service sector economies. Most of the people in the nation are employed in the service sector, instead of producing something that can be sold or traded people are working in finance, retail, and health care. According to the reading three quarters of the population are employed by the public sector, the “made in China” stickers are to blame.

Globalization has made it easier for companies to move to foreign countries to pay for cheap labor. Industries have migrated to China and India among other countries where labor is so cheap it outweighs the cost of transporting the goods. Advanced democracies are faced with the daily challenge of keeping unemployment levels down by creating different jobs. Globalization has made it easier for communist countries to draw economic growth their way. Being a manufacturing company in the United States comes with more costs than what companies can afford. In the United States environmental awareness is rapidly gaining attention, companies find themselves either having to buy newer ecofriendly machinery or buying pollution rights from other companies. Environmental issues might not be that big of a concern in developing countries, they are yet to see the long term cost of the rapid economic development they’ve been enjoying.

In consequence advanced democracies no longer have the advantage of selling “home-made” products. Companies in advance democracies have taken the rational approach to increase their individual gain while ignoring the nation’s economic needs. Globalization has made the challenge of even greater, economic growth more difficult. Fortunately, the market has been creative enough to come up with jobs that might not have existed years ago. The main concern is to come up with leverage to somehow be able to compete with growing economies that are benefiting from the companies that have found better business opportunities elsewhere.

As a supporter of advance democracies, I believe in the strength and the efficiency of the countries to successfully compete in foreign markets. The United States must be able to produce something that other nations want to invest on, in order to have even trade with other countries. I also admire globalization and how easy it is to be united with other parts of the world. I believe that globalization is a threat when countries are competing for economic growth. The United Stated and other advance democracies should not ignore the importance of trading manufacture goods, there should be some incentive plans to keep American companies in American soil.

Citations: O’Neil 2010, Chapter 7