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< Back to question What are the pros and cons of capitalism? Show more Show less

Capitalism is an economic system in which the four factors of production (entrepreneurship, capital goods, natural resources, and labor) are owned by private entities with the aim of generating a profit. Capitalism requires a free market economy driven by supply and demand. There is a lack of government intervention. Competition helps keep prices moderate and production efficient. This stands in opposition to socialism, a system in which the means of production are owned by the state.

Capitalism is bad Show more Show less

Capitalism ignores peoples' needs, results in wealth inequality, and does not promote equal opportunity. Capitalism also encourages mass consumption, is unsustainable, and provides an incentive for business owners to harm the environment for monetary gain. Capitalism is also ineffective and unstable.
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Capitalism is ineffective and unstable

Capitalism is ineffective because the formation of monopolies eliminates competition which is essential for capitalism to function properly. Also, corporations being "too big to fail" and economic cycles of booms and busts make capitalism unstable.
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Proponents


The Argument

A core tenant of the theory of capitalism and a free market is competition. However, in reality, capitalism eliminates competition by allowing monopolies. Monopolies form by crushing small companies or through mergers and acquisitions. This decreases competition and harms consumers' rights by letting those few corporations set price and quality standards.[1] They also have excessive political influence through campaign donations, lobbying, and the propaganda they can create. Capitalism is also unstable. Monopolies create instability. There are now corporations that are “too big to fail”. This means they are so big that their failure would be a disaster for the entire economy. This is an unstable system. During the global recession from 2007-2009, banks had to be bailed out because they were too big to fail.[1] This results in a system where corporations receive socialist assistance with government regulations, subsidies, and bailouts. As Martin Luther King Jr. said about America, “we all too often have socialism for the rich and rugged free enterprise capitalism for the poor.” [2]This is the reality of capitalism. Another reason that capitalism is unstable is because of its economic cycles. Capitalism creates periods of great growth (booms) and busts. Unfortunately, most people can't save enough during the booms to adequately save for the busts. For example, in the U.S. 78% of people are living paycheck to paycheck, this means they aren't saving [3]These busts lead to recessions or depressions and massive unemployment. They are incredibly harmful to people.

Counter arguments

Capitalism is effective. It has led to incredible advancements, vast wealth creation, and a higher standard of living for everyone.[4] Additionally, capitalism is still based on competition because large conglomerates still have to compete against each other. The system is self-regulatory. Capitalism is also stable because cycles of growth and decline are to be expected. Other economic systems would still have cycles, but their booms would not produce the same growth as capitalism.

Premises

[P1] Capitalism is ineffective because the formation of monopolies eliminates competition which is essential for capitalism to function properly. [P2] There are corporations that are "too big to fail". [P3] There are economic cycles of booms and busts. [P4] Capitalism is unstable.

Rejecting the premises

[Rejecting P1] Capitalism is not ineffective. Large conglomerates still have to compete against each other. The system is self-regulatory. [Rejecting P3] Other economic systems would still have cycles, but their booms would not produce the same growth as capitalism.

References

  1. https://connectusfund.org/21-capitalism-pros-and-cons
  2. http://cityobservatory.org/dr-king-socialism-for-the-rich-and-rugged-free-enterprise-capitalism-for-the-poor/
  3. https://www.forbes.com/sites/zackfriedman/2019/01/11/live-paycheck-to-paycheck-government-shutdown/#6eab769b4f10
  4. https://www.economicshelp.org/blog/5002/economics/pros-and-cons-of-capitalism/

This page was last edited on Friday, 17 Jul 2020 at 23:12 UTC

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