Today in the United States, a free market system or capitalism is the main economic system. I am interested in this subject because I someday wish to own my own business. I believe that in the future this topic will be very useful to me. Among the topics that I will discuss are the greeks and romans early practices of capitalism, the ideas of Joseph Schumpeter, Rush Limbaugh, and Karl Marx, corporations, regulation by the government, and Reaganomics. I will also discuss the relationship between inflation and unemployment. In addition, I will give my own perspective on the economic theories that I\'m presenting. These are just a few of the things that I will be discussing in this paper.


Many of the institutions of capitalism can be traced back to Greek and Roman times. Things such as trade, moneylending, and insurance were well known practices to them. Unfortunatly, growth of the Roman Empire prevented further development of a private
business class. As power over economic growth came back to the people or lords during the Middle Ages, modern capitalism started to evolve. (The Software Toolworks Illistrated Encyclopedia)

In the late Middle Ages, the medieval economy was based on MANORALISM. This system said that peasants worked on the land that the lord\'s owned, but everthing that was produced by them was kept in return they had to perform services or pay dues to there lord. During this time period, there was no incentive to produce large and productive resources. The end of the midieval Manoralism was brought about by a larger demand for goods. Kings competed against lords, and lords competed with peasants for the rights to what was produced. As a result, there was an emergence of merchants and businessmen who accumulated large sums of capital. In addition, there was also a large emergence of banks and the start of corporations. (Galbraith Pg. 58)
The only other economic system that got much attention was a new idea called Communism. A person named Karl Marx wrote a book called the Communist Manifesto which thought of the state as being the main controller of economic growth, unlike capitalism where the people in a free market are the main controllers of economic growth. In the 19th century when most of the world like Britan, France, Germany, and the United States were in the age of
Laissez-Faire economic capitalism, other countries like the Soviet Union and China followed Karl Marx\'s Communism. (Galbraith Pg. 97)

Modern Capitalism

The main thing that drives capitalism today is the large corporations that are able to finance large operations to promote economic growth. As corporations got bigger and bigger, many liberals favored breaking up corporations and putting them under state control. They pressed for antitrust laws to get a competitive economy. This meant that some corporations that got too big had to be broken up to make smaller companies in order to create a competitive economy. The large corporations fought back by saying that they were no less competitive than smaller businesses. An Austrian-American economist named Joseph Schumpeter who argued in defense of large corporations said, "the prime mover in capitalist progress is not the small businessperson but the entrepreneur who introduces new technologies and develops them." He also said "Capitalism gives creative people the freedom to make innovations, unlike state-runned economies which tended to stifle this creative force." He also predicted that capitalism would eventually be replaced by some form of socialism in order to protect the people and the global environment. (The Software Toolworks Illistrated Encyclopedia)

Arguments for and Against

Capitalism today differs from capitalism of the 19th century because of its dependence on the state. Today government is expected to take measures in order to stop inflation and unemployment. A British economist named John Maynard Keynes said, "government should spend more money in times of slump, and also reduce taxes in order to increase aggregate demand for goods and services, and in boom times the policies should be reversed to hold down inflation." Most liberal economists believed that large corporations ought to be broken up and nationalized so that their manager would be responsible to the public as a whole.
(Lekachman Pg. 51)

Other conservative econimists stated that evan large