21 Main Pros and Cons of Capitalist Economy

The kind of economy that we live in affects us a lot. The nature of the economy alters the lives of every citizen of the country for better or for worse. 

Most of the countries in the modern world thrive in capitalist economy. This means that the country and therefore the economy is driven by business and firms that are privately owned. Most of the facilities including the ones that directly affect the citizens’ health and well-being are owned by the people who care little about people’s well-being and focus more on their personal profits. The citizens who are not privileged enough or not doing well in life cannot get the advantages of the best healthcare or other basic necessity.

PROS OF CAPITALIST ECONOMY

  • ECONOMIC FREEDOM

The most advantageous part of thriving in a capitalistic system of economy is that people can spend their earnings as they want to. People can invest in property or business or lifestyle or the upgradation of their lifestyle without being held back by the government. 

  • ECONOMIC EFFICIENCY

As people in capitalistic economy can spend their money on things of their choice, the investors will also invest on goods and services that is demanded by the public. This avoids wastage of products that might not be in demand and helps improve the efficiency of economy by directing the same resource top produce thing that are in demand.

  • ECONOMIC GROWTH

The efficient system of economy helps avoid wastage and thus cuts cost. This contributes to the economic growth and thereby economic expansion of a country and helps improve the living standards of its citizens.

  • EFFICIENT PRODUCTION

In capitalistic system of economy, the business owners have to make sure that their business is propagated both productively and efficiently. They need to keep in mind to cut costs so that they do not lag behind in the competitive market. This ensures efficient production of goods and production.

  • CONSTANT UPGRADATION

Customer demands keep changing with time. This makes it mandatory for the business owners to be updated with the recent trends and demands so that they can produce goods according to that. This is a blessing for the customers as they can easily gat hold of things that are in demand because of the availability of those in the market.

  • PERSONAL FINANCIAL INCENTIVES

Business owners set up new business and take risks of producing better and more varied products with their personal profit in mind. They do not take risks for charity or for the welfare of the mass. If this possibility of personal profit is erased then the entrepreneurs will not take risks to propagate their business. 

  • POLITICAL FREEDOM COMES WITH ECONOMIC FREEDOM

Political freedom of a capitalistic society comes hand in hand with the economic freedom that it gives its citizens. If a state interferes in the citizens’ right to set up business or spend their financial resources, it is bound to interfere in other aspects of their life.

  • HUMAN CONNECTION

Capitalism fosters trade between people from all backgrounds without any discrimination. It breaks down the barriers between countries as they can build their relationship over trade. It connects people from all cultural backgrounds and encourages a cordial relationship between them.

  • INCENTIVES FOR THE EFFICIENTS

Incentives are given to people who are more hardworking, resourceful and efficient. They get reward for their hard work which encourages them to do even better and emboldens their spirit.

  • SCOPE OF NEW INVENTIONS

With the increasing competition in market, business owners are more likely to provide for new inventions that might make their production faster and keep them ahead of others in the business. They will keep in mind to put the new inventions to their profit.

CONS OF CAPITALIST ECONOMY

  • ABUSING POSITION 

When a company is the only producer of a certain commodity in the market, they tend to have a monopoly of power. They can misuse their monopoly in the business by charging the consumers a much higher price than required.

  • UNHEALTHY DISTRIBUTION OF RESOURCES

The aim of a capitalistic society is to hold the wealth and keep it in the family and pass it to future generations. In this way a very small percentage of the population holds the better percentage of a country’s wealth.

  • LABOUR EXPLOITATION

The uneven distribution of resources and power in a capitalistic society pose a lot of problems. One amongst such problems is labour exploitation. Labour do not get paid fairly according to their working hour. Their wages are meagre and are not enough to provide for all the basic necessities of their family.

  • CLASS STRUGGLE

Another social problem posed by the uneven distribution of power and wealth of a capitalistic society is class struggle. A section of people are affluent and have more resources than one might need whereas on the other hand the greater section of the population who are working class are deprived of the basic amenities.

  • ADVERTISEMENTS CONTRIBUTE TO HIGHER PRICE

Capitalistic economy thrives on competition. One needs to suit themselves and their business according to the changing time and also reach more people through advertisements. The cost of advertisements that these companies spend to market their products ultimately needs to a higher pricing of the products.

  • UNBALANCED GROWTH

Entrepreneurs take risks and invest their money and resources only in sectors that are in demand. In this way the sectors that are not so much in demand remain badly neglected and untended. This leads to an unbalanced growth in the economy as one sector rises while the other falls.

  • NO WELFARE ACTIVITIES

The main motive of a capitalistic economy is to gain as much profit as one can. It does not promote compassion for the lesser privileged and hence the people who cannot afford to avail facilities remain neglected. The people who are better off do not contribute for the welfare of the lesser privileged.

Capitalistic economy has both its advantages and down sides to it but all that being said, the relief is that even the most capitalist countries have socialist aspects to them.

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