Capitalism: Its Two Variants


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There exist 2 variants of capitalism: Individual Capitalism and Communitarian Capitalism.

Individual Capitalism is epitomized by the United States. Japan , at the other extreme, exhibits a form of communitarian capitalism.

The 2 tables below outline the differences between the 2 systems.

MAJOR CONCEPTS & ASSUMPTIONS
UNDERLYING THE ECONOMIC SYSTEM

CONCEPTS & ASSUMPTIONS

PURE COMMUNITARIAN CAPITALISM*

PURE INDIVIDUALISTIC CAPITALISM

How to optimize the performance of a system:

Cooperation at all levels will optimize the system.

Competition at all levels will optimize the system.

The key driving force in the economy:

The desire to build for the future.

The desire for current consumption and leisure.

Motivation for work:

Work provides utility. Individuals live to work.

Work provides disutility. Individuals work to live.

Responsibility for skills and training prior to employment:

Responsibility of society. Strong high schools and apprenticeship programs.

Responsibility of the individual beyond relatively weak high schools. Few apprenticeship programs.

Relationship between government and business:

Government supports and cooperates with business to optimize the system.

Government regulates business to promote competition. Click for Summary of the 2001 and 2005 ASCE Report cards on U.S. Infrastructure.

Government policy:

Promote growth in supply.

Promote growth in demand.

 

MAJOR BUSINESS CONCEPTS ATTITUDES AND PRACTICES

CONCEPTS ATTITUDES & PRACTICES

PURE COMMUNITARIAN CAPITALISM

PURE INDIVIDUALISTIC CAPITALISM

Dominant objective and focus:

Building for the future with long term focus.

Profit maximization with short term focus.

Organizational Structure:

Horizontal, flat or lean with relatively few layers of management. Bottom up consensus decisions.

Vertical with many layers of management. Top down autocratic decisions.

How profits are used:

As fuel to keep investing and building.

To increase consumption and leisure for stockholders.

Hierarchy of organization’s constituencies:

1. Employees
2. Customers
3. Stockholders
4. Suppliers

1. Stockholders
2. Customers
3. Employees

Employment and job security:

Lifetime employment promotes bonding.

Uncertain employment discourages bonding.

Responsibility for training after employment:

Companies provide cross training and job rotation.

Individuals are mainly responsible for their own skills.

Route to management:

Long multi-function internship.

From college, to single function specialization, to management.

Management attitude toward teamwork:

Teamwork and cooperation are essential for optimizing the system.

Teamwork is risky. Individual performance will optimize the system.

Management behavior in economic recession:

Cut:
1. dividends
2. management compensation.
3. workers pay and jobs as last resort.

Cut:
1. workers pay and jobs
2. management compensation.
3. dividends.

View of leadership:

A leader manages processes or work.

A leader manages results.

Management attitude toward problems:

Understands the variability within the system and tends to blame the system first.

Specialist has less understanding of the system and tends to blame employees.

Tools of management:

Employee empowerment, group praise and profit sharing. Statistical control. Managers facilitate, counsel, teach and provide resources.

Management by objectives, merit ratings, incentive pay, quotas, standard rates and quantities, piecework and annual ranking of employees. Count results.

So where do you think BRIC/BASIC countries place themselves?

Source: http://maaw.info/Chapter1.htm#FRAMEWORK:%20TWO%20GLOBAL%20VARIANTS%20OF%20CAPITALISM

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