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What Is Capitalism?

  • Capitalism ignores external costs, such as pollution and climate change. This makes goods cheaper in the short run. But over time, it depletes natural resources and lowers the quality of life in the affected areas.
  • Capitalism is an economic system where private entities own the factors of production, i.e. entrepreneurship, capital goods, natural resources, and labor.
  • The owners of capital goods, natural resources, and entrepreneurship exercise control through companies.
  • The individual owns his or her labor.
  • The motto for capitalism is 'Greed is good'. Innovation and competitiveness is often rewarded under this system.
  • Capitalism requires a free market economy to succeed. It distributes goods and services according to the laws of supply and demand, meaning higher the demand, more costlier the supply.
  • Competition is encouraged under capitalism as it is believed that it increases efficiency. Moreover, the government is expected to intervene only to maintain a level-playing field. Otherwise, it has limited control.
  • Capitalism results in the best products for the best prices. Competition is rampant, innovation is rewarded and hence efficiency is increased.
  • However, capitalism doesn't provide for those who lack competitive skills and it does not provide for equality of opportunity, as the system fundamentally relies on the motto of 'survival of the fittest'.

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