Thesis statement
Capitalism is a social and economic system that stresses in privately controlled economy in production, pricing and distribution of goods in a market and has many benefits compared to other economic forms. The Oxford Dictionary defines Capitalism as “an economic system based on the private ownership of the means of production, with the goal of making a profit”.
Capitalism produces more wealth and production as they reduce the expenditure in production.
John Maynard Keynes, the British Economist who contributed significantly to the Keynesian economic school of thought, believes that capitalism is essential for freedom to survive and thrive. Wherever Capitalism as a policy has been adopted, the result has invariably been one that of progress and wealth creation to the people of that country. Capitalism which originated in the western European nations in the late part of the sixteenth century, spread to the United States in the dawn of nineteenth century, particularly in regions which had majority of West European settlers. And later it spread to Asia during the middle of the twentieth century. Irrespective of the country and its nature of governance, Capitalism has always offered rich benefits to all the people who embraced this policy.
When there is a free market in a society and people have the free will to do their businesses their own way, the state of trade improves. “Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.” When the individual is granted the free will and individual rights to pursue his trade without interference, he will definitely be motivated and as a result the quality of the trade pursued by him will show a marked improvement.
Governments operating in capitalist society tend to produce more wealth and productions in the market. History shows us that more the Government of a nation is oriented towards capitalism more is the progress of that country. Take the example of all the Western European nations, America and the Asian countries like Japan, who have a capitalistic economic structure and their wealth and production is definitely far above the rest of the pack. To summarize the scenario in a nutshell - “Capitalism is popular in nations that value the freedom of the individual over the stability of the society”.
Capitalism promotes competition between markets and businesses and every company and business people engage on their own individual businesses hence increasing productivity. The famed American economist, Robert Heilbroner defined the “central elements of capitalism to be capital accumulation, competitive markets, and a price system”. From his views, it is evident that the process of mass production to counter competition, is one of the key elements of the capitalist philosophy and thus the market would be flooded with large scale production bringing the price of the commodities down. This would not only help enhancing people’s buying power but also would hugely benefit the economy of the nation
Herbert Walberg, the author of education and capitalism (2003), in his book explains how the activities of millions of people, each seeking his own interest, are coordinated under Capitalism. When indulgence in a particular business is a self motivated act by the person, which is not forced by the Government, but has been undertaken by the individual for his own benefit, then it will certainly amplify the production efficiency many a fold.
Capitalized places respond to the different changes in consumer preferences and different consumer needs are met.
“Each individual is free to produce what he or she wants and to sell it at whatever price the market will support”.
In order to compete in a capitalistic market entrepreneurs cannot afford to be rigid and should be able to adapt to the changing dynamics of the market. Thus in order to surge ahead of competition the producers would always be in the lookout for innovations and ideas to meet the customer’s requirements better than the other players in the market. Thus consumer preference is given importance and almost all his requirements are met in a capitalistic society.
Capitalism also improves the response to new consumer trends. As discussed earlier under capitalism the market responds very sensitively to the needs and preferences of the customer. Thus any change in the customer trend would immediately be addressed by the producers. “Under capitalism, competition is beneficial for consumers because it too drives prices down and improves the quality of the products”.
Capitalism leads to a decentralized system in the economy and is one of the major benefits of capitalism. Under Capitalism the activity of economic planning and organizing, is highly decentralized and decisions are taken in a democratic manner.
“The competition between markets and businesses will create more productivity in the work place, allowing the rate of technological innovation to increase. This will cause the society to advance while the costs of goods and services will decrease.”
In a decentralized economic system, many business people have a variety of options in business.
” People have the right to earn money in whatever job they choose and to spend that money however they want”.
In certain state regulated economies, the job or a profession a person should undertake is regulated by Government rules and norms. Thankfully, under Capitalism no such constraints exist and a person has the liberty to pursue his own choice of business. Also in a decentralized system, business people undergo different challenges in business and each has to find a solution of how to solve the problems. The Nobel laureate Douglass North in his acceptance speech, elucidates that the institutions that define capitalism are private property rights, the rule of law, competitive markets, and entrepreneurial behavior.
So at the end of the day it is up to the individual to tackle the challenges of the business he has chosen using his entrepreneurial traits. Capitalism promotes division of labor as every person has their line of duty and specialization that they get involved in. “Though it might seem at first glance that everyone is selfishly working for their own money, but dig a little deeper and it becomes apparent that every job has a benefit for someone else”.
Every firm has a specific area they specialize on. “Free markets can conduct certain functions that are normally handled by the government. Therefore, capitalist societies tend to be more efficient and free from government control”. So, each firm will see to that they undertake those business activities which they believe they have the know-how to handle it better than others. Thus Capitalism brings in a dimension of specialty and expertise in every specific area of the economy.
Capitalism makes different types of goods accessible and available. As Roger Butters, the President of Nebraska council on Economic Education, specifies in his article, “When natural resources tare exclusively controlled by the government, there is little incentive to consider the needs of the people.” When a person knows he/she is going to benefit out of selling a product, then it is incentive enough to bring it to the market. Thus Capitalism gives common people access to rare products and natural resources.
Capitalism increases employment opportunities for different specialists. Under Capitalism, people with specific skills and professional expertise are much sought after and thus their value in job market increases. This enables even distribution of wealth and erases unemployment.
Capitalism helps in rise of an economy in areas where the consumers are the ones who regulate the market.
Roger Butters opinionates that “the single greatest benefit that capitalism provides is that it enables human choice”. The market forces aim at fulfilling the needs of the customer and thus the customer is the one who controls the market in a Capitalistic economy. In capitalized system, the market’s competitiveness alleviates the manufacturers to manufacture different types of product and even provision of variety of services. “While many perceive increased competition as an inconvenience of the Capitalistic system, it is beneficial since the increased competition results in better quality and lesser prices to the consumer.”
Capitalism boosts the business people to strive towards financial freedom. In Capitalism the more you work hard and channel those hard efforts in the right directions, the more you will succeed. Thus it encourages entrepreneurs to aim at attaining financial independence. Capitalism gives room for every person to make choices of what they want hence empowering choice. The essence of capitalism is freedom of choice. Regulating what a person can produce, buy or what jobs he can perform, is extremely undemocratic and Capitalism is the only tool which grants the customer the liberty to choose what he wants.
As Roger Butters aptly puts it “Capitalism, by guaranteeing an individual’s security in his property, self, thoughts and beliefs creates incentives that make the success of evil people less likely and their actions less damaging while enabling the individual to succeed.”Capitalism also enables every business person to choose and weigh out the risk they may take when offering their goods or services. “Capitalism actively rewards positive traits like hard work and ingenuity. Similarly, it punishes negative traits such as laziness and theft”. When a person embarks on a business venture under capitalism, he has unlimited freedom to assess the risk and rewards of his initiative and he can make the choice that would suit his style of operation.
It allows the poor to have an opportunity to compete by giving them also equal property and entrepreneurial rights because in capitalism both the rich and poor have an equal right and opportunity. According to Michael Porter, “Capitalism aims at creating shared value and society must accept the idea that companies can make money from addressing the needs of the poor.” “One common criticism about capitalism is that it benefits only the mighty and wealthy. This belief cannot be more far from truth. Under Capitalism employment is abundant, price of the goods are lesser and anybody with entrepreneurship capabilities can climb the ladder of success. Thus, capitalism is an equal opportunity for both rich and the poor and it is not about rich exploiting the poor as it is commonly misunderstood.
Capitalism also helps in improving innovations and depends on ideas that are good and also gives good products and services. “Innovators and inventors can take advantage of the free market to make a profit”. This is true because Capitalism is the only system, which encourages a person to use his innovative ideas in a profitable way and make money out of it. Nobody will be motivated to do something in which they have nothing to gain. So unless there is a financial reward, inventors are not going to sweat it out in their laboratory to find something new. Capitalism offers that platform for these people, to make profit out of the concepts they invented.
A capitalist business person critically thinks what his customers want and finds better ways to produce and supply the product. “Producers compete to see who can have the best and cheapest product in order to survive economically. This means the consumer will be given cheaper and better products”. A Capitalist devises his entire business strategy around his prospective customer’s needs. Thus this system meets the demand of the customer better than any other economic concepts.
Capitalism encourages production of goods and services using modern technology and this serves to promote efficacy. Under capitalism an entrepreneur is able to reap the entire benefits of his hard work and in turn he would be encouraged, to invest this profit in technologies that can give him efficient means of production. Thus the production efficiency of any business drastically improves under Capitalism.
Conclusion
Capitalism is a much better economical system and has a wide variety of benefits for the society and economic system at large, hence helps in social interactions, accumulation, and production that give direct reward to every individual for the employment of his or her own capital. In turn this promotes the national economic status and development. In conclusion it would be appropriate to quote Mark Kramer, the co-author of Creating Shared Value, who stated that “Business acting as business, and not as charitable donors, is the most powerful force for addressing the pressing issues we face”.
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