Date: Jun 12, 2019
Category: Economics Essay
Schools of Economic Thought

It is quite a common phenomenon when a certain concept within a particular discipline becomes a subject of considerable debate. Though, such sort of debates can last for decades in case this controversy is not of primary importance to human activity. Taking this point into account, it is to be said that such discipline of economics is not capable of prolonged debates because it is a dynamically developing field of human activity. As a consequence, a strong controversy over this science can lead to negative outcomes. Therefore, the majority of economics’ concepts are compared among each other in order to reveal the aptest one for the implementation in a particular environment. In such a way, it is necessary to provide a comparison and contrast between two economic thoughts, namely the German and the American and outline numerous perspectives.

First of all, the impact of both economic thoughts on the macroeconomic environment has to be described. Moreover, these impacts should be assessed in order to estimate their actual contribution to world economics. In addition, this estimation is expected to be exemplified in order to provide empirical evidence of these economic thoughts. In the same way, an equal assessment has to be conducted in terms of the United States economy. In this case, a vivid rationale is required. As a consequence, it is important to linger on the primary manners, which will enable policymakers to implement these economic concepts with regard to the following issues. Thus, these concepts are supposed to address economic growth, business cycle fluctuations, tax reform, and growing income inequality.

Get a price quote

Type of paper
Academic level
Spacing
Urgency
Number of pages
Currency
Order total:

 

Schools of Economic Thought Description

Initially, the schools of economic thought have to be presented. Therefore, the first school of economic thought is German, which has emerged after devastating periods of the World Wars. With reference to this point, it should be admitted that it is the basis for the entire thought. In fact, the economy of Germany started growing after World War II. As a consequence, the abilities, which were gained during this period, have become the central points of economic thought. To be more exact, the tempos of the economy’s development have not changed after the German society was restored. Furthermore, as Keynes claimed, the German economy was developing with the primary focus on the production rather than trade. In fact, Keynes as one of the prominent economists emphasized the fact that the German economy should progress naturally so that it cannot remain in the same state as it was in the post-war period because it can influence entire Europe.

By way of contrast, it is important to note that the United States actually utilized the idea of focusing on production. As a result, capitalism has emerged. Nowadays there is a wide range of representatives who claim capitalism to be a perfect economic concept. For instance, Bill Gates has supported this concept in his numerous public speeches. In general, the main idea of this concept is the focus on production so that organizations will create a competitive environment within markets. In other words, the company which suggests a wide choice of products will obtain more market shares. In spite of the fact that recent discussions have a little agreement on the credibility of capitalism, it is to be noted that this economic thought origin from the American school, and nowadays it is the most widespread concept, which makes a considerable impact on the macroeconomics.

The Level of Impact Assessment

With regard to the German school of economic thought, it is important to admit that its main impact should be referred to its original concept. As it has been described in the previous section, post-war Germany was particularly focused on the production rather than on trade. In such a way, this approach has become the fundamental basis for the modern American and Japanese schools of economic thought. Therefore, the German school is comparable in its basic idea to American capitalism. However, significant differences between German and American school still can be found. In fact, it can be demonstrated by the way of the following example. Needless to say that Volkswagen is one of the leading companies in the car industry. Though, a significant expansion on the other markets was launched only in the middle of 1960s. Before that time, Volkswagen automobiles were hard to access for foreign customers. Hence, Germany was oriented on the production of goods for national use in order to restore its economy after the war.

As for the American school of economic thought, the impact on the world economy is quite evident. Capitalism to the broadest extent has been boosted by the terms of liberal tendencies in the world economy. Even though the controversy about the credibility of capitalism has raged unabated for recent years, it is increasingly difficult to ignore the fact that this concept makes a significant impact on the current macroeconomics. In such a way, by contrast to the German school of economic thought, the American concept claims the competitiveness to be the key factor in modern tendencies of the economy. In other words, production should be oriented on the competition but not on the customer segments. For instance, a German tissue brand Kleenex has entered the U.S. market. For the first time, it failed to obtain a significant market share because it suggested only one kind of tissues. As the entire product line had been designed, the brand started being more competitive because customers could choose the preferable product instead of purchasing the products of the other brands.

Assessment of the Current Economic Situation of the United States

Speaking about the perspective of the German school of economic thought, first of all, it is important to admit that this concept would assess the economic situation of the U.S. as a drastic deviation from the natural approach of development. In other words, the German school would claim that the competitive markets are created artificially. In the same way, this concept would argue that contemporary U.S. markets provide their customers with what they produce but not with what customers really need. In the majority of cases, it is certainly true that the German school of economic thought would suggest the increase of competition by focusing on the production aimed for the satisfaction of the national interests. However, compared with the American school of economic thought, the German concept would agree on the need to improve the scientific background of the production. As a result, it would widen product lines and satisfy customers’ needs.

Undoubtedly, the American concept would demonstrate a notable difference with the German assessment. To be more precise, the American school of economic thought would include a meaningful portion of democratic tendencies. In fact, both schools of economic thought claim that the business is supposed to be publically-driven. However, the American concept emphasizes the freedom of choice, while the German school prefers the customers’ behavior to be authoritatively regulated. Taking these points into account, it should be admitted that the American school of economic thought would assess the U.S. economy as the dynamically developing environment. Furthermore, recent predictions have stated that the business will be serving society, and the public will formulate their preferences.

Utilizing of Approaches

To begin with, it is important to note that this section provides potential practical evidence of both schools of economic thought. In other words, this section analyzes the discussion of primary manners, which can address such economic issues as economic growth and business cycle fluctuations. Taking this point into account, it is necessary to discuss the approach of the German school of economic thought. Hereby, it should be admitted that policymakers can refer to the approach in order to focus the business on the production. In such a way, economic growth is potential because national products will both increase in quality and quantity. As a result, a national business can compete at the international level. Moreover, business cycle fluctuations can be regulated. In fact, policymakers have to implement a standard which outlines certain minimums and maximums for production. One may say that it can be regarded as an attempt to nationalize business, but it is worth mentioning that this policy would stabilize the business cycle.

By way of contrast, it is possible to claim that it would violate liberal principles of running a business. What is more, it is worth emphasizing that regulation to a reasonable extent would normalize such issues as income inequality. To be more specific, the implementation of such pro-German regulations as standards, license requirements, policies, and guidelines would create a more competitive environment. It can be explained by the fact that companies will need to make more efforts to meet all requirements. As a consequence, companies which produce goods of high quality but are incapable of wide distribution will receive the opportunity to demonstrate their competitiveness at the market. Undoubtedly, the national economy would benefit from highly competitive rates.

Conversely, with regard to the American school of economic thought, it is worth saying that it is currently addressing the outlined problems. However, the situation can be improved by numerous changes in the related approaches. Thus, policymakers have to implement a meaningful policymaking campaign which will be oriented on the creation of the framework for the public demands. To put it simply, the real needs of customers have to be taken into consideration. As a result, it will lead to economic growth because products will serve the interests of the society so that it will be provided with sufficient goods. It can be explained by the fact that income is not an indicator for the assessment of economic growth. What is more, money is not the final outcome of the economic process but its means of exchange. Therefore, economic growth should be estimated by the actual consumer capacities of society. Likewise, business cycle fluctuations can be eliminated with a more publically-driven business. In addition, it is necessary to mention that it would reduce taxes because society and government will benefit from the production nearly in equal terms. In general, the solutions to the outlined issues can be achieved through the utilization of the American approach of the publically-driven business.

 

To conclude, it is necessary to admit that this paper has compared and contrasted two schools of economic thought, namely German and American. To be more specific, the paper has lingered on some aspects regarding the comparison and contrast of these concepts. First of all, two schools of economic thought have been introduced with reference to their overall impact on macroeconomics. Afterward, the assessment of the impacts which both of the schools of economic thought had produced has been given. Moreover, these contributions have been supported by exemplified evidence of real-life cases. What is more, the paper has assessed the economic situation within the United States from the perspective of both concepts of economic thought. Furthermore, the primary manners of utilizing the concepts of both economic thoughts have been described. In fact, this section has demonstrated how both schools of economic thought can address such economic issues as economic growth and business cycle fluctuations.

All in all, it should be admitted that the main difference between these schools of economic thought is based on the fact that the German concept tends to be more conservative and authoritative, while the American one is primarily focused on the idea of freedom of choice. In fact, this difference can be explained by historic backgrounds of both concepts. On the contrary, it is to be said that the main similarity is based on the following fact. In fact, the American concept of capitalism dates back to the post-war Germany which was particularly focused on the production rather than on trading. Hence, the American concept regards the production as a way of creating competitive markets. In other words, the capacity to produce considerable amounts and various products is the key to the acquisition of sufficient market shares.