Liberalism and Capitalism Today

Introduction ix

Part 1. The Conditions in Which Liberalism and Capitalism Appeared 1

Introduction to Part 1 3

Chapter 1. Political and Legal Conditions 5

1.1. Liberalism and democracy: new eldorados of political thought and political life 5

1.1.1. Liberalism, defender of the superiority of the individual, and its economic application, capitalism 6

1.1.2. The reduced role of the state and different positions in relation to monopolies 9

1.1.3. Democracy as a guarantee of freedom and equality 16

1.1.4. The economic consequences of democracy 21

1.2. The right of ownership as a necessary condition for savings and capital formation 23

1.2.1. Freedom as a condition of private property 24

1.2.2. Land ownership 26

1.2.3. Property rights and savings 27

1.3. The advent of the bourgeoisie 29

1.3.1. The hold of the military and the nobility in Antiquity 29

1.3.2. The emergence of the urban bourgeoisie: a Western phenomenon 30

1.3.3. When economic power… 31

1.3.4. … transforms into political power 32

1.4. The nascent authority of state bureaucracy 34

1.4.1. Legitimate coercion by the state 35

1.4.2. The evolution of the activities of state bureaucracy actors 38

1.4.3. Advantages and disadvantages of state bureaucracy 39

Chapter 2. Economic and Sociological Conditions 41

2.1. Trade and industry: competitors of agriculture and the craft industry 41

2.1.1. The lesser role of agriculture 41

2.1.2. The growing role of trade… 43

2.1.3. … generated by free competition at national levels… 45

2.1.4. … and international levels 46

2.2. The dangers of industrialization 51

2.2.1. Industrialization and the destructiveness of the division of labor for humanity 51

2.2.2. The appearance of an industrial aristocracy 52

2.2.3. Corporate concentration 56

2.2.4. Growing pauperism 58

2.3. The decisive influence of the Protestant religion on economic rationalization 62

2.3.1. The Protestant Ethic and the Spirit of Capitalism 62

2.3.2. The sacredness of work and profit 68

2.3.3. The need for growth 72

2.3.4. Rationalization of the economy 74

2.4. The role of money and financial markets 76

2.4.1. The need for money 76

2.4.2. The first banks 79

2.4.3. The first financial markets 80

Part 2. The Evolution of Liberalism and Capitalism 89

Introduction to Part 2 91

Chapter 3. The Birth of a New Capitalism in a New World: Financial Capitalism 93

3.1. The emergence and development of financial capitalism 93

3.1.1. Globalization 95

3.1.2. The information revolution 98

3.1.3. The financial revolution 100

3.2. Changes in corporate governance 104

3.2.1. Taking sustainable development into account… 107

3.2.2. … and pollution 108

3.3. New economic policies 110

3.3.1. The need to combat rising prices 110

3.3.2. Monetary policy to combat inflation 112

3.3.3. Discretionary versus automatic economic policy 113

3.4. From the perfection of theoretical capitalism to the crises of real capitalism 117

3.4.1. Changes in the assumptions of pure and perfect competition 118

3.4.2. Questioning the uniqueness of prices 119

3.4.3. Expectations which are supposedly too perfect 122

3.5. Recurrent causes of the crises of capitalism 124

3.5.1. The beginnings of any financial crash: an innovation stemming from a need for financing 125

3.5.2. From speculation to collective psychosis 127

3.5.3. A monetary expansion 128

3.5.4. The bursting of the financial bubble 129

3.6. Some examples of crises of capitalism 131

3.6.1. The crises following the discovery of the New World 132

3.6.2. Crises due to the transportation revolution 134

3.6.3. The 1929 crisis 136

3.6.4. The 1987 crash 138

3.6.5. The crisis of the new economy in the year 2000 140

Chapter 4. Towards 21st Century Capitalism 147

4.1. A responsible and proactive economic policy 148

4.1.1. A policy of growth 149

4.1.2. The search for price stability 155

4.1.3. Improving the functioning of markets through positive regulation… 156

4.1.4. … in order to ensure the ethics of capitalism… 158

4.1.5. … and respect for the freedom of the market 160

4.2. Finance that respects the principles of capitalism 161

4.2.1. Banking regulation in the form of minimum prudential ratios 161

4.2.2. Financial regulation 167

4.2.3. The need for transparency on unregulated markets 174

4.2.4. Regulation of the over-the-counter markets 177

4.3. Renewed corporate governance 179

4.3.1. Better controlled accounting standards 179

4.3.2. A different kind of business management 182

4.3.3. The necessity of training employees and citizens in general 184

Conclusion 187

References 195

Index 197

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