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Becoming Rich in a Free Market Economy
From a macroeconomic perspective, Ricardo’s comparative advantage theory sought to morally justify colonialism. This theory basically serves to give economic reasons as to why some countries are extremely wealthy while other have a majority of citizens languishing in abject poverty. Ricardo proposes that those countries which enjoy a healthy financial status do so as a result in specializing in innovation and value addition. Poor countries on the other hand tend to specialize in ensuring that manufacturing countries have a constant flow of raw materials. The rich countries thus take advantage of the poor countries in a relationship which is heavily skewed in the favor of industrialized economies. This paper seeks to discuss how individuals become rich in a free economy.
In a free market economy, the government has no authority to regulate or state economic intervention strategies. In free market economies, governments only play the direct role of ensuring private contracts are enforced in accordance with law as well as overseeing property ownership. This implies that all means of production in free market are in the hands of private entities as opposed to the government.
The fact that the free market is in the hands of private entities and that the demand supply mechanisms control pricing means that the market is heavily dependent on mutual consent. To become rich in a free market economy is therefore rather easy in the contemporary world economy. This statement is however subjective as it common to find that the moral and ethical considerations towards getting rich are not adhered too.
For instance, a free market economy is driven by the profit factor which essentially tends to ignore the need. Profit oriented market economies are motivated by the need to accumulate more capital. People therefore have the freedom to invest in any free market enterprise that attracts the highest possible profits so as to accumulate more capital which is then reinvested into other profitable enterprises. As this form of capital accumulation ignores the need factor, investors tend to ensure costs are kept at a minimum at the expense of workers, the environment is characterized with poor income distribution channels. This leads to income inequalities which further lead to social and political challenges.
In the book titled, The Frackers: The Outrageous inside Story of the New Billionaire Wildcatters by Gregory Zuckerman, the free market economy is exposed as a means through which people accumulate wealth by ignoring the needs of the environment (Zuckerman). The free market economy is essentially to uplift the standards of living of the human race and more so appraise liberty. However, this is not the case in most quotas as these values are relegated at the expense of human development and liberty.
The oil industry is one of the most lucrative free market enterprises in the world. This is because it is the primary source of energy used in transportation, industry and power generation. In the US, shale oil has been turned into a commercially viable free market enterprise as a result of a poor supply of oil in the global markets resulting in a rise in the price of crude oil (Zuckerman). In the book, the author describes the lives of eleven individuals who have reached the higher echelons of the wealthiest individuals by exploiting this natural resource at the expense of the environment.
Extracting oil and gas in shale is a complicated and technology intensive enterprise. It involves shooting pressurized chemical liquids into shale so as to precipitate the release the release of oil and gas deposits (Zuckerman). These liquids have resulted in major ecological crisis causing groundwater pollution, death of animals and are a viewed as a threat to human life.
The individuals mentioned in this book who became rich in the US economy’s energy production industry include George Mitchel, Harold Hamm, Abbey McClendon, Mark Pap and Aubrey McClendon (Zuckerman). This people lived the American dream and became extremely wealthy. Through employing the ideals of capitalism, the strong profit motivation, robust private property rights, contract law, capital access, great expertise, as well as quick decision making processes as well as resilience in face of failure.
As much as this individual made significant personal sacrifices, once the window of opportunity presented itself, they reaped massive rewards translating to a near exponential increase in capital accumulation. The graph bellow shows the massive earning the US petroleum industry benefited from the Shale revolution.
In the book titled, THE BIG SHORT: Inside the Doomsday Machine by Michael Lewis relates to a story many Americans would rather not want to hear about. Prior to the 2007-2008 housing bubble burst, there are some players in the financial sector who foresaw that complexities in the mortgage market (Lewis). They took advantage of flaws in the financial market to make billions of dollars in profits. These flaws opened up a window of opportunity for individuals with great knowledge of the developments in the American financial system which had progressively made the system too complex.
Characters in this book include James Mai, Charles Ladlie, Michael Burry, Ben Hockett, and Steve Eisman (Lewis). As much as these individuals made billions of dollars in the turmoil of the American financial system, millions of American lives were severely affected. This trend later led to a global financial crisis. This is one of the negative aspects of the free market economy where capital accumulation relegates the needs of the greater society. This defeats the real ideals of capitalism which are aimed towards achieving human development goals and liberty.
For a free footed American aged 20 years, the best means with which to reach millionaire status is through the American music industry. Music is a great source of entertainment and as such, the whole listens to American music. Rap music is a relatively new form of music which rose to prominence during the early nineties. The rappers were basically individuals raised in different American ghettos living slightly above the poverty line.
However, these individuals chose to indulge in this new cultural dispensation towards earning a decent living. Through making use of the appropriate marketing and distribution channels, these artists slowly but surely rose to prominence. By exposing the culture in American ghettos, these musicians appealed to the masses and quickly rose to prominence.
In the contemporary American music industry, there exists a diverse array of music genres which one can employ to realize quick reaches. By singing rock and roll, country, blues, jazz, rap, or gospel music, it is easy for an individual to make it big is they invest capital in the most appropriate manner.
In the book titled, The Party: The Secret World of China’s Communist Rulers by Richard McGregor, the communist perception the world has of China is far from the truth. This book provides that after the death of the founder of the Communist Party of China, Mao Zedong, the Communist Party sought to re-invent itself (McGregor). As such, the party sought to employ novel economic strategies towards wealth accumulation. For instance, this book provides that the Chinese Communist Party whose closed membership involves millions of multimillionaires took advantage of the global financial crisis of 2008. Suring this time, presidents of a number of Chinese banks were allowed and encouraged to offer loans towards investing accumulated capital towards reaping supernormal interests.
This implies that as much as the Chinese economy is fully regulated by the government, there are some in high places which take advantage of dynamics prevalent in the economic environment to realize maximized capital accumulation (McGregor). In communist China, the economical ideals are pegged towards collectivism as opposed to individualism in the US. This however happens under the limitations of class. The wealthy always get richer as they have the capital to invest in profit making enterprises at the expense of common citizen.
For a 20 year old in China, if he or she is from a lower caste background, the challenges of making it to the millionaire status would take a rather long time if it ever even sets off in the first place. However, if the parents of such a youth are members of the communist Party, the road to success, riches and fame is bright from the onset. The main difference between the Chinese and the US economies is that in China, the wealthy get wealthier. In the US, it is possible for the an individual from a poor background to make to the millionaire status through conforming to the capitalist way of wealth accumulation.
Lewis, Michael. The big short: Inside the doomsday machine. New York, NY : WW Norton & Company, 2011. Print.
McGregor, Richard. The Party: the secret world of China’s communist rulers. London, UK: Penguin UK, 2010. Print.
Zuckerman, Gregory. The Frackers: The Outrageous Inside Story of the New Billionaire Wildcatters. Penguin, 2013. Print.