Capitalism Advantages And Disadvantages

There has been unresolved conflict among various analysts over the case of capitalism in the country. These groups have failed to reach a common stand on the suitable form of economic system. Capitalism is an economic system where there is a lack of government intervention in the way of doing business. The means of production is owned by the private firms, which drives the economy of the country independently. In capitalism, the goods and services are distributed according to the price mechanisms in the market, meanwhile there is no government intervention in trade; the prices of the commodities are defined by the market forces since the government does not fix prices. According to Adam Smith, a capitalist economy operates with the help of …show more content…
If the government own the means of production and control the prices of the commodity, then this will perpetually turn into a powerful state that comes up with a large bureaucracy, which may extend into other areas of life such as the freedom of the citizens. Capitalism also leads to an efficiency of the involved firms; this is because the capitalist based society incentives to be efficient and more productive with goods, which are in high demand. These incentives will result in designing goods of high quality, less expensive and minimize waste, if a company is not productive and efficient, then it will be forced out of the market by other firms. It has been established that the state-owned firms tend to be more inefficient as compared to private companies. The state-owned companies are also slow to change, as they are not willing to get rid of excess employees and fewer incentives so that they could come up with more innovative working practices. Furthermore, capitalism can influence the owners of the organizations to embrace new technology in designing new products, as this will influence competition. The consumers are the one to benefit from this competition, as the firms will make cheaper and high-quality products (McGlinchey, …show more content…
The few elites who will dominate the economy will lead to recycling of small percentage of wealth; this will lead to monopoly through limited government intervention. This generally happens through setting up of rules that limit the flexibility of money flowing between classes. This will result in exploitation of labor, and thus leading to revolt then strike within the market negatively, which can affect the whole economy by disrupting and halting the production process. Some negative externalities arise because of the market being profit and demand driven, for example, the issue of pollution is overlooked until it becomes a serious within the economy, this will lead to a reduction of money in circulation to resolve this issue. The firms that have established their presence in the market development and gain monopolies will push other small developing firms from entering due to a high level of competition whereas, they may not be able to produce goods and services to consumers. The companies with monopoly power (a person or a certain firm that is tasked with supplying a particular commodity) can abuse the power by overcharging supply