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An economic ideology differentiates itself from economic theory in
being normative rather than just explanatory in its approach. Economic
ideologies express perspectives on the way an economy should run and to what
end, whereas the aim of economic theories is to create accurate explanatory
models to describe how an economy currently functions. However, the two are
closely interrelated, as underlying economic ideology influences the
methodology and theory employed in analysis. The diverse ideology and
methodology of the 74 Nobel laureates in economics speaks to such
interrelation.[1] A good way of discerning whether an ideology can be
classified an economic ideology is to ask if it inherently takes a specific and
detailed economic standpoint. Furthermore, economic ideology is distinct from
an economic system that it supports, such as capitalism, to the extent that
explaining an economic system (positive economics) is distinct from advocating
it (normative economics).[2] The theory of economic ideology explains its
occurrence, evolution, and relation to an economy.[3]
Capitalism Capitalism is a broad economic system where the means of production
are largely or entirely privately owned and operated for profit, where the
allocation of capital goods is determined by capital markets and financial
markets.[4] There are several implementations of capitalism that are loosely
based around how much government involvement or public enterprise exists. The
main ones that exist today are mixed economies, where the state intervenes in
market activity and provides some services;[5] laissez faire, where the state
only supplies a court, a military, and police; and state capitalism, where the
state engages in commercial business activity itself. Laissez-faire
Laissez-faire, or free market capitalism, is an ideology that prescribes
minimal public enterprise and government regulation in a capitalist economy.[6]
This ideology advocates for a type of capitalism based on open competition to
determine the price, production and consumption of goods through the invisible
hand of supply and demand reaching efficient market equilibrium. In such a
system, capital, property and enterprise are entirely privately owned and new
enterprises may freely gain market entry without restriction. Employment and
wages are determined by a labour market that will result in some unemployment.
Government and judicial intervention are employed at times to change the
economic incentives for people for various reasons. The capitalist economy will
likely follow economic growth along with a steady business cycle. Social market
The social market economy (also known as Rhine capitalism) is advocated by the
ideology of ordoliberalism and social liberalism. This ideology supports a
free-market economy where supply and demand determine the price of goods and
services, and where markets are free from regulation. However, this economic
calls for state action in the form of social policy favoring social insurance,
unemployment benefits and recognition of labor rights. Social democracy Social
Democracy is an ideology that prescribes high public enterprise and government
regulation in a capitalist economy. It espouses state regulation (rather than
state ownership of the means of production) and extensive social welfare
programs.[7] Social democracy became associated with Keynesianism, the Nordic
model, the social liberal paradigm and welfare states within political circles
in the late 20th century.[8] Casino capitalism Casino capitalism is the high
risk-taking and financial instability associated with financial institutions
becoming very large and mostly self-regulated, while also taking on high-risk
financial investment dealings.[9] This has been a driving motive by investors
in the quest for profits without production; it provides a speculation aspect
that offers prospects for a quicker and more speculator returns for people,
wealth, and inside assumptions of the factors likely to affect asset price
movements.[10] Typically, this does not add to the collective wealth of an
economy, as it can instead create economic instability.[10] Casino capitalism
falls alongside the idea of a speculation-based economy where entrepreneurial
activities turn to more paper games of speculative trading than actually
producing economic goods and services. It is believed by people such as
economists Frank Stilwell that casino capitalism was one of the leading causes
of the global financial crisis in 2008. Investors sought out a get-rich-quick
motive they found through speculative activities that offered a particular
individual gain or loss depending on the assets’ future movements.[11]
Other economists like Hans-Werner Sinn, have written books on casino capitalism
with commentary outside the Anglo-Saxon bubble.[12] Neo-capitalism
Neo-capitalism is an economic ideology that blends elements of capitalism with
other systems and emphasizes government intervention in the economy to save and
reconstruct companies that are deemed a risk to the nation. The ideology's
prime years are considered by some economists to be the 10 years leading up to
1964 after the Great Depression and World War II. After World War II, countries
were destroyed and needed to rebuild and since capitalism thrives in
industrializing countries. These countries most affected by the war saw a
growth in capitalism. Neo-capitalism differs from regular capitalism in that
while capitalism highlights private owners, Neo-capitalism emphasizes the role
of the state in sustaining the country as a provider and a producer and
condemns private companies for lacking in their role as a provider and producer
for their country.[13] Critics of neo-capitalism claim that it tends to
suppress the reserve army of labor which may lead to full employment, as this
can undermine one of the main basics that make capitalism work. Other critics
state that if neo-capitalism was put into place, it would become immediately
corrupt.[13] Fascism Fascism as an economic system takes the middle ground
between capitalism and socialism.[citation needed] It promotes the pursuit of
individual profit while promoting corporations through government subsidies as
the primary tool of economic progress as long as their activities are in line
with the goals of the state.[14] In fascist economies, profits or gains are
individualized while losses are socialized; these economies are often compared
to the third way due to being heavily corporatized. Fascist economies of the
mid 20th century such as Italy and Germany often used bilateral trade
agreements, with heavy tariffs on imports and government subsidized exports to
developing nations around the world.[15] While economically fascism is oriented
towards self-sufficiency, politically fascist countries of the mid-20th century
were oriented to war and expansion; two seemingly contradictory motives. The
goals of fascist nations was to create a closed economic system which is
self-reliant, but is also ready and prepared to engage in war and territorial
expansion. Fascist economies can then be seen as state capitalist. Socialism
Socialism is any of the various ideologies of economic organization based on
some form of social ownership of the means of production and cooperative
management of the allocation of resources.[16] Socialist systems can be
distinguished by the dominant coordination mechanism employed (economic
planning or markets) and by the type of ownership employed (Public ownership or
cooperatives). In some models of socialism (often called market socialism), the
state approves of the prices and products produced in the economy, subjecting
the market system to direct external regulations. Alternatively, the state may
produce the goods but then sell them in competitive markets.[17] Democratic
socialism Democratic socialism (sometimes referred to as economic democracy) is
an economic ideology that calls for democratic institutions in the economy.
These may take the form of cooperatives, workplace democracy or ad hoc approach
to the management and ownership of the means of production. Democratic
Socialism is a blending of socialistic and democratic ideas to create a
political and economic Structure.[18] Marxism–Leninism
Marxism–Leninism is a political ideology that calls for centralized
planning of the economy. This ideology formed the economic basis of all
existing Communist states. A socialist state will primarily concern itself with
the welfare of its citizens. Socialist doctrines essentially promote the
collectivist idea that an economy's resources should be used in the interest of
all participants, and not simply for private gain. This ideology historically
opposed the market economy, and tended to favor central planning.[19] Communism
As Friedrich Engels described it (in Anti-Dühring), communism is the
evolved result of socialism so that the central role of the state has 'withered
away' and is no longer necessary for the functioning of a planned economy. All
property and capital are collectively owned and managed in a communal,
classless and egalitarian society. Currency is no longer needed, and all
economic activity, enterprise, labour, production and consumption is freely
exchanged "from each according to his ability, to each according to his
needs". Communism is also a political system as much an economic
one—with various models in how it is implemented—the well known being
the Marxist Leninist model, which argues for the use of a vanguard party to
bring about a workers state to be used as a transitional tool to bring about
stateless communism, the economic arrangement described above. Other models to
bring about communism include anarcho-communism, which argues similarly to
Marxist schools for a revolutionary transformation to the above economic
arrangement, but does not use a transitional period or vanguard party.
Anarcho-primitivism Anarcho-primitivism strives to return humans to a
pre-industrialized and pre-civilization state. From an economic standpoint,
advocates of this model argue the non-necessity of economic systems for human
existence. Proponents of this ideology believe that the entire history of human
civilization took a wrong turn from hunter-gatherer systems into an
agricultural system and has led to human dependence on technology to support
increasing populations, government control, and culture. Population growth and
the institutions created to support and control it are exploitative of not only
humans but also the environment. They argue that the more people live in a
society, the more resources they will need. These resources must be taken from
the Earth and therefore lead to environmental exploitation. However, they claim
that materialist exploitation can be seen throughout almost every society in
the world today. This materialism creates inequalities and exploitation such as
class structure, the exploitation of humans in the name of labor and profit,
and most importantly environmental destruction and deterioration. This
exploitation has led to the increase in human population growth, activity, and
development which they argue is destroying the Earth's ecosystems. They
emphasize coexisting with the natural world instead of destroying it, "a
world order on our planet where human civilization is brought into harmony with
nature".[20] They differ from other anarchist and green ideologies by
opposing technological and industrial advancement as it further propagates the
exploitation of humans.[21] "Technology is not a simple tool which can be
used in any way we like. It is a form of social organization, a set of social
relations. It has its own laws. If we are to engage in its use, we must accept
its authority. The enormous size, complex interconnections and stratification
of tasks which make up modern technological systems make authoritarian command
necessary and independent, individual decision-making impossible."[22]
Anarcho-primitivists seek to revert the economic and government institutions of
civilization which they argue are authoritarian, exploitative, and abstract and
return humanity to a way of living which is harmonious with the natural world
in which technology used mostly individually to create tools for survival much
like in primitive cultures and tribes where they argue there is little need for
abstract things such as an economy or government.
See also:
Constitutional economics Economic system Development economics Ecological
economics Political economy Schools of economic thought Social model Political
ideology
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