Post a Comment

Capitalism is an economic system where the means of production and distribution are largely owned by private individuals.

It is essentially an economic system in which most portions of production and distribution are in private hands.

Capitalism is also defined as an economy in which the means of production of goods and services is based on demand and supply rather than central planning, as is the case with centrally planned economies

It is an economic system that believes in the efficacy of the interplay of market forces of demand and supply in the allocation and distribution of limited resources.

As an economic system, capitalism believes in self-centredness, profit motive, free enterprise and competitiveness. It also required a free market to succeed.

Capitalism is one of the oldest forms of the economic system. It's also known as a free market system or free enterprise system.

The United States of America and Germany are two examples of capitalist countries.

Features Of Capitalism

1. Private ownership: The means of production and distribution in a capitalist system is owned by private individuals.

Every private individual can acquire, sell and own property.

There is no restriction on the ownership of land, machinery, tools, etc

2. Freedom of enterprise: In an ideal capitalist society, a Private individual owns the means of production because the government does not coordinate the production decisions.

Hence, there is freedom of enterprise as firms are free to choose and acquire any resources they require for the production of goods and services 

3. Role of government: In capitalism, the economic intervention of the government is not supported.

The government's role is to ensure that the market is free and functioning, which is easily achieved through the provision of the institutional and legal framework to enable the smooth working of the economy

In addition to this, the government can also partake in the provision of public goods and the regulation of monopolies.

4. Profit motive: The pursuit of profit is a notable feature of a capitalist system. 

In capitalism, businesses and firms seek to maximize profit. The profit motive motivates individuals, entrepreneurs, producers, and business enterprises to start a business

5. Price mechanism: The price mechanism is a system in which the market's allocation of resources is determined by the forces of demand and supply.

The price mechanism is linked to capitalism since the dynamics of demand and supply determine the price of all commodities and services, as well as input factors.

6. Existence of competition: In capitalism, there are no restrictions on the maximum amount of production that can be made.

As a result, there is competition because there are numerous producers on the market.

7. Consumer sovereignty: Under capitalism, consumers have the freedom to spend their incomes on goods and services that provide them with the greatest level of satisfaction.

For this reason, production decisions in capitalism are made keeping in mind the needs of the consumers.

Advantages Of Capitalism

1. Increased productivity: Capitalism enables a society to reach a high level of production as production is done with a profit motive in mind.

Moreover, the presence of competition usually results in the full utilization of both human and material resources.

2. Efficient production: Because working on capitalism is guided by profit, producers will likely use minimum resources to produce the maximum amount of resources so that maximum profit can be earned, which can help enhance efficient production.

Moreover, the forces of demand and supply present in capitalism also enhance efficient production.

3. Allow consumers to make choices: Because private individuals control the means of production and distribution, capitalism provides consumers with choices as the consumer gets to choose what they consume due to the availability of various products.

4. Economic development: The effort of many individuals contributing to the means of production and distribution generally results in economic development

Disadvantages Of Capitalism

1. High-income inequality is inevitable: This is one of the most notable defects of most capitalist societies.

When a small number of people controls the majority of the money in a capitalist economy, their wealth is passed down to their children in order to keep the riches within the family.

The implication of this is that the wealthy become wealthier while the poor become poorer.

Therefore, there is a notable difference between the rich and poor in capitalism

2. Poor welfare for the weak and handicapped: The weak and handicapped may not be adequately catered for by the system because profit-seeking individuals may view them as having "nothing to offer."

As a result, their welfare may be neglected.

3. High cost of essential commodities: The costs/price of social goods and services like water, health, education and energy may be very high because they are usually provided by profit-maximizing enterprises.

In fact, it has been observed that public utilities get low priority in capitalist societies.

Related posts

4. Problem of Market failures: Market failure occurs when the price mechanism can not adequately for all the costs and benefits associated with the production and consumption of a particular commodity.

Capitalism is prone to market failure due to the inefficiency of the market to allocate certain goods and services.

Furthermore, the pollution and environmental degradation connected with the exploitative nature of producers in capitalism can also contribute to market failure capitalism.

Help us grow our readership by sharing this post

Related Posts

Post a Comment

Subscribe Our Newsletter