Economic Systems

Nineteenth century is characterized both by the economic vs. industrial growth and urbanization in the United States. The strategies that lead to those conditions were Social Darwinism and Monopolies. Those strategies influenced the way businesses worked and performed at that time.

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Mr. Hofstadter, the supporter of Social Darwinism tried to apply the evolutionary theory which Darwin created in his biological concepts to politics and sociology. According to this theory, the natural selection exists in the world and the same free competition can be noticed in the economy which ensures the survival of the fittest. This theory has an assumption that the conflicts between groups only lead to progress. This theory emerged in the United States in the 1870s. Under the influence of works of such writers as Darwin and Spencer, E.Youmans, W.G. Sumner, J.Fiske and J.W.Burgess who developed their theories in the late 19th century. The example of this theory can be compared to the example of Andrew Carnegy, when he took over the steel industry. To achieve this, he bought all mines, railroad lines, ore freighter and even suppliers, as well as competing producers of steel. Finally, his company produced about 80% of the steel in the country. Having bought weaker companies, Carnegy won/survived, as in the nature stronger defeat weaker to survive, and that is the reason why this example refers to the Social Darwinism.

As for the monopoly, it exists when a certain person or enterprise gains complete control over production in the industry; it is when this person or enterprise is the only supplier of a particular product to the market. Such kind of market does not have an economic cooperation and also it does not have viable substitute goods. The company can raise the price of the goods which it produces or it can easily exclude any other competitors which appear and want to take their place in the market. Monopolies can be formed by the government or mergers. Currently, having the policy of monopoly is an illegal act, however, when the company is dominant in the market, it can act in an abusive way. Such kind of actions leads to the use of sanction towards such companies. Nevertheless, the monopoly of government is a legal one.

As the government wanted to create the monopolies in short term, it decided to create companies which main and probably only function would be to buy the stock of other companies. In perspective this would give the opportunity to control each sphere of production in one company.

The raise of monopolies in the United States came with the colonial administration, as there was a need to make a New World, a hospitable one. This administration granted monopoly companies with exclusive contracts for their work. Due to the public outcry and other abuses which monopolies made, the government of the United States adopted the Sherman Act (1890). All combinations which monopolies used to achieve their goals were banned, as they influenced trade badly. After the American Revolution, many of these companies still worked according to those contracts.

The huge problem of both theories was the fact that one party had to be over the other one. In Social Darwinism, people grabbed territories and production, suppressing the indigenous people at the same time. Moreover, when the Darwin’s theory about nature was adapted to society, it was a big confusion that society goes in the same way that nature does; they were wrong. However, some ideas in Social Darwinism were good, especially functioning of the economy without interference of government, charity as a part of society, building the opportunities for the fittest (public institutions, libraries and other sources). The monopolies also gave a lot, not necessarily positive effects on the economy. Some of them are: high prices, destruction of companies, lack of new and fresh ideas (lack of ingenuity), etc. As a result, people did not like such kind of policy and it lead to the Act 1890, which was above mentioned.

Both strategies have advantages and disadvantages. Nevertheless, as time showed, they appeared to be too radical to take its place in the economy of the United States.

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