Advantages and Disadvantages of Capitalism

Jose Francisco Lopez , Guillermo Westreicher

The advantages and disadvantages of capitalism constitute the pros and cons of the economic system. Not everything related to capitalism is necessarily good, nor is it bad.

There is no perfect economic system . When we go into the study and analysis of an economic system we see that there are always disagreements. These disagreements, it must be said, are usually based on ideological issues.

For example, the issue of inequality. Those who are in favor of capitalism do not believe that inequality is a problem in itself. On the contrary, they believe that inequality must exist. Therefore, it is something that we must pay attention to when looking at the advantages and disadvantages of capitalism.

The opposite case is the productive capacity. It is usually indicated as an advantage that capitalism is capable of generating a lot of production efficiently. Instead, critics of capitalism see it as a disadvantage since the planet earth has limited resources and this could end up causing a depletion of resources.

Advantages and disadvantages of socialism

Advantages of capitalism

Among the advantages of capitalism are:

  • Free trade , which allows access to a wide variety of goods and services. Likewise, it is sought that supply and demand determine market prices, reaching a point at which the applicants should be able to satisfy their needs.
  • Equal opportunities are promoted. For capitalism, although socioeconomic differences will always exist, a low-income person is not prevented from climbing in society.
  • Capitalism is usually linked, in general, not only to individual freedoms, but also those of a social nature, such as the right to vote and express political ideas.
  • Private property is respected. In other words, individuals should not live in fear that the Government will appropriate their assets without justification. An exceptional case could be that of an expropriation for public interest purposes. But in this scenario the expropriated receives financial compensation.
  • Innovation is encouraged, since people's ability to create business ideas and generate wealth is not limited.

disadvantages of capitalism

However, capitalism also has disadvantages:

  • Individual well-being is privileged, which can sometimes collide with the collective interest.
  • The issue of inequality is often left in the background. This can be dangerous because, if the gap or socioeconomic differences in a country widen, a social conflict could be generated.
  • The issue of the environment is not usually given priority. In other words, more importance is given to productivity than to caring for the ecosystem. This can have consequences in the future. Fortunately, market alternatives can emerge that serve to face the problem of global warming, for example, sustainable businesses that precisely seek to attract customers concerned about reducing pollution.
  • The supply of basic goods and services to the population is not prioritized, being marketed like any other merchandise, which means that a sector of the population still cannot access a higher standard of living.
  • Abuses can occur in the labor market, exploiting workers who do not have the same bargaining power as their employers.