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I think that the first way in which the pitfalls of a capitalist set up can be minimized would be to embrace the idea that government can be used as a way to help individuals who are victims to the negative attributes to capitalism. I think that you will find much of the analysis about the downside of capitalism in the writings of Karl Marx. In assessing how capitalism can be a "runaway train" that can truly dehumanize the individual, government and social organizations can be seen as a force to assist individuals who are in trouble. For example, the idea of government relief to individuals who have been adversely impacted by corporate greed and corruption can be a part of this process. Additionally, I think that government can also be part of minimizing the business abuses that help to place individuals in the position of a lack of economic empowerment. The idea of reform has been something that America saw in President Roosevelt's answer to the Great Depression, the New Deal. Part of the New Deal legacy was to provide institutional checks and safeguards that would reform business practices to allow a more healthy demonstration of capitalism and minimize the narratives of people who were economically displaced by it. I think that in these remedies, capitalism is not the static and abusive instrument that Marx saw, but rather an entity where more people have a shot at economic empowerment.
Yes, as #2 points out, there needs to be some form of safety net to catch those who fall between the cracks of a capitalist state system. Capitalism taken to its extreme can be a grimly dehumanising force, as anyone who has seen Arthur Miller's Death of a Salesman can testify. The pursuit of money and growth as the ultimate and most important goal only serves to intensify the way that capitalism can produce so many victims who are left by the wayside. A safety net in terms of benefits and support for those who are unemployed or unable to work for any reason is one way that such negatives can be counteracted.
It is important to have some degree of regulation in addition to the "safety net" that the first two posts discuss. Regulation is important in order to avoid what economists call "negative externalities."
Negative externalities exist when there are bad effects of economic actions that are not paid for by the people involved. An example of this is if a company pollutes the air and my child gets sick because of that pollution. I bear the costs (sick child, medical care) of the company's actions even though I was not part of their economic action. These externalities cannot be cured by the market because the company has no financial incentive to stop polluting. Therefore, the government must step in to prevent the company's desire for profit (a major part of capitalism) from harming me.
The balance between sensible and economically feasible regulation and capitalist incentive is a tricky one that the US has largely experimented with in a trial and error fashion. Since the Gilded Age and the 1920s, we have tried to minimize the natural economic "boom and bust" cycle of capitalism. Besides simple economic controls, there has to be some degree of consumer protection, or else the profit incentive for businesses will lead to abuses of the public trust, the environment and resources.
From the beginning of the Industrial Revolution, especially here in America, the disadvantages of a capitalist society have been readily apparent: workers without safety precautions; working in steel factories in blazing temperatures; restrictions on personal freedoms in order to work; small children being sent to work at dangerous tasks; company settlements that reclaimed all workers' earnings in payment for company-owned housing, company-owned food, and other company-owned goods. These were minimized by government intervention and regulation. Today's disadvantages in business may perhaps also minimized by judicious government intervention and regulation--although in this complex world, that is more difficult to manage.
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