What's Your Take on These Important Pros and Cons of Capitalism?

Pros and Cons of Capitalism
What is capitalism? How does it affect an economy? What are the pros and cons of capitalism? Find your answers here.
OpinionFront Staff
Last Updated: Apr 22, 2018
Karl Marx believed capitalists to be the most revolutionary and praised capitalism for providing the means for technological advancement and economic growth. But he had also predicted that problems with capitalism would lead to instability and socialism would eventually replace it.
Capitalism is defined as an economic system that is based on private ownership of capital. In a capitalist economy, the means of production are owned by individuals and the market functioning determines the production and pricing of goods and services. People are divided into two classes, those who own businesses and those who work for them. People who have or can supply a larger capital, own business ventures and earn profits from the factors of production that are employed. The working class earns a salary or wages in return of their labor or skill used in producing goods and services. In this OpinionFront article, we will look at the pros and cons of capitalism and take a quick look at socialist views.
Pros
▸ Capitalism promotes economic growth by providing an open competition in the market.

▸ It provides people with very good opportunities of raising their income to achieve economic growth.

▸ Private firms own the means of production and there is no government intervention in the production or pricing of goods.

▸ Prices are set by the demand and supply.

▸ Capitalism results in a decentralized economic system. This is considered as one of the greatest advantages of capitalism. In a decentralized economy, individuals are open to more options in business. They are exposed to competition and have to overcome challenges to stay in the market.
▸ It is in a capitalist economy that hard work is rewarded. Entrepreneurs who pitch well and are able to better their business are the undoubted winners. To stay ahead, businesses work towards the consumers' benefit and with greater efficiency.

▸ Capitalism gives rise to an economy where consumers regulate the market. Many consider this as one of the greatest strengths of a capitalist economy.

▸ A competitive market provided by capitalism leads to wider variety in products and services offered to consumers. Due to the free market conditions, consumers are happier.

▸ A capitalist economy encourages people to work towards achieving financial freedom.
▸ People have the right to own private property.

▸ Everyone has the right to work in the field of his/her choice, which is to say that people are free to choose their occupation and way of living.

▸ There is freedom of choice right from selecting products to selecting one's education and profession, and the religious or political influences on the economy are none.

▸ Due to constant competition and because the economy is regulated by the demand and supply, economic conditions are subject to frequent changes. The economy has to adapt to them. A capitalist economy exhibits greater flexibility and adaptability to change.
Cons
▸Some consider the fierce competition that is characteristic to capitalism as its major drawback. They believe that a capitalist economy can give rise to unfair competition.

▸ Capitalism makes an economy money-oriented. Business corporations function with a materialistic point of view. Profitability remains their primary business goal. Goods and services are available for people if they can pay for them.

▸ Business giants take over smaller companies, which may lead them to monopolize the market.

▸ The class division in a capitalist economy (business owners and workers) is considered as its weakness by many.

▸ There is a right to own property and also pass the ownership to future generations. Due to this, some are rich only because they are children of property owners. This defeats the concept of equal opportunity.

▸ Since wealth generation for oneself is the sole motive of people and businesses, social welfare needs may not be taken care of.
▸ Employment rights are compensated with the aim of higher productivity. For example, with the purpose of profit-making, businesses may reduce wages, reduce labor, and ignore employee safety.

▸ For businesses to function well and work for the consumers, there is a need of skill, labor, capital, and other resources. Moreover, for the consumers to dictate the market conditions, the competition has to be tough. Else, it's the sellers, and not the buyers who influence pricing.

▸ Increasing competition increases the need for rapid development, leading to automation. It may result in a reduced need for man power. Excess use of technology may prove to be harmful for the environment.

▸ Lacking external regulation, a capitalist economy is not stable. It experiences intermittent periods of growth and decline.

▸ Some economists believe that capitalism may lead to depletion of natural resources, as there is a continuous economic growth.
Capitalism Vs. Socialism
Capitalism is often compared with socialism. In the words of Winston Churchill, the inherent vice of capitalism is the unequal sharing of blessings and the inherent virtue of socialism is the equal sharing of miseries. While the means of production in a capitalist economy are privately owned, in socialism, they are owned collectively. The class discrimination that is characteristic to capitalism is absent in socialism. While capitalism focuses on individual profit-making, socialism believes in fair distribution of wealth across all sections of society. The state employs people. So the risk of job cuts or unemployment is minimal. In a capitalist economy, an economic decline leads to unemployment. Proponents of socialism believe that government intervention is necessary to achieve social equality, and that services like public health and food should be managed by the government so that they reach everyone irrespective of their economic status. In capitalism, there is competition, and virtue and hard work are rewarded. In socialism, the focus is on equality rather than competition.
There are different views about capitalism. Some believe in its strengths, while others criticize the unfair distribution of wealth that it leads to. A mixed economy can perhaps serve as the golden mean.