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Pros & Cons of Capitalism

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Capitalism is a general term for an economic system where the means of the manufacture, sale and distribution of goods and services is privately owned and operates with minimal control and oversight from government agencies.

Pros of capitalism

The basic concept of capitalism is an open system of free competition. It allows multiple suppliers to compete for their share of the market.

Anyone can start a business

Under a capitalistic system, a wider range of the population is able start successful businesses. The entrepreneur flourishes best in this environment.

Market forces shapes products and services

Market forces can, and in many cases do direct the evolution of the markets and the products offered. Companies tend to succeed when they excel at providing what the market or customer wants to buy. This self regulation makes it possible for rapid changes in the goods and services available to consumers.

Decentralized system is more stable and dynamic

A capitalistic economy is less centralized and less subject to the bad decisions of individuals or small, governing groups. If a market strategy doesn’t work, it may mean bad times for the businesses where it was employed, but there are always more companies waiting to pick up the slack. Supply to the consumer is maintained.

Forces innovation to cut cost and improve products

The competitive nature of a capitalist economy in theory produces lower prices, higher quality and encourages rapid innovation.

Cons of capitalism

The lower levels of regulation can allow for many abuses of the system by individual companies or groups of companies. These abuses can include:

Unfair labor practices

One of the big costs of any operation is the money paid to the employees. Companies have used various means to counter workers demands for a living wage, including banning unions.

Unsafe working conditions

Saving money on the plant can boost the bottom line, but can be a danger to the workers and the community.

Poor environmental controls

Few companies have voluntarily improved their impact on the environment, although the recent growth of ecological awareness on the part of the consumer may be changing that.

Monopolistic tactics

Many times through history, companies have worked to exclude the competition crucial to the capitalist model, even to the point of banding together to make price agreements. Past experience includes the railroad monopoly.

A big bully with deep pockets

The rise of the mega corporation is being viewed as a new form of capitalistic excess with the goal of eliminating the competitive factor that helps protect the consumer from price gouging. Rather than banding together, which is illegal in most countries, the new mega company grows by either buying out its’ competitors or driving them out of the market. Once the market is dominated by a single, giant supplier, the consumer is faced with buying only the products offered at the set price.

Top 1% and the bottom 99%

Capitalism is also blamed by many as the source of the great disparity in wealth in many capitalistic countries. The amount of money earned by the top management of major corporations dwarfs the pay of their employees.