Essay on Capitalism

Pros and Cons of Capitalism

There are different economic systems in the world and capitalism is one of them. People have different views on capitalism. Some refer to it as beneficial for individual business owners as capitalism is an economic system in which there is no government interference. The prices of products, production of products according to demand and supply mechanism are defined by the free market. The demand and supply mechanism of market set prices of products and there is absolutely no government interference making private business owners all free to make decisions for their own benefits.

One of the best ways to evaluate capitalism economic system is to break it down into pros and cons and analyze them closely. This can allow one to conclude and weigh the advantages as well as disadvantages of capitalism.

Pros of Capitalism

Complete Freedom

One of the main pros of capitalism is that it allows complete freedom to private business owners, as they are the sole decision makers. This freedom allows them to operate their business according to their personal gains and benefits. Since there is no government interference in affairs of a private business the owners can set prices of the products at will along with the production which is determined by demand and supply mechanism in the market.

More Efficient

In capitalism, efficiency is rewarded with incentives. Unlike government, owned businesses where employees are in surplus and have no incentives as such for efficiency, businesses in capitalism flourish because they provide incentives in terms of financial rewards and promotions of efficient employees. The incentives further motivate efficient employees and they work harder for more incentives which in turn benefit the private firm in the long run.

Economic Growth and Prosperity

Private firms in capitalism prosper because of incentives they provide to individual employees for their efficiency thus leading to innovations.

Cons of Capitalism

Leads to Monopoly

Since private firms have all the freedom to set prices and determine supply and demand, accordingly a time can come where they can become dominant. When firms become dominant in the market, they can exploit the price, demand and supply mechanism.

Wealth Inequality

In a capitalistic society, there is inequality of wealth. Those who acquire wealth through owning private firms transfer it to their next generations thus creating inequality. Those who acquire wealth keep inheriting it. This leads to inequality which could result in division among the masses of the society due to resentment.

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