Defects of capitalism

Capitalism:

A social system such as capitalism is a system of relationships and cannot be moral or immoral in the sense that a person can be – only individuals can be moral agents. However, a social system can be moral in its effects if it promotes the possibility and likelihood of moral behavior of mindful human beings who act within it. It follows then, that because the formation of a social system is an act of men, there is a moral imperative to create the kind of political and economic system that permits the greatest possibility for self-determination and moral agency.

Defects of capitalism:

The market economy or capitalism has a number of defects.  In analysing these defects it is obvious that some form of government rules and regulations are necessary in order to protect the environment and future generations.

1.  Increasing inequality in wealth: As an economic system characterized by the private ownership of the means of production and distribution, there exists the obvious tendency for the increasing inequality in wealth.  Because the entrepreneur has the advantage to manipulate the factors of production, especially labour and capital, as he considers best in order to achieve the highest measure of profit.  By the end of the day, the capitalist receives a considerable portion of the profits that accrue to the business enterprise, while the labour or working class, gets comparatively less reward for their efforts.  This widens the gulf of economic inequality.  However, with the increased recognition of collectively bargaining, this tendency is gradually being checked.

2.  Goods and services that have high utility to the ordinary citizens are in short supply or non-existent: In a capitalistic economy profit is the motivation behind all productive endeavours.  This way, productive scarce resources could be “wasted” on goods and services that serve no basic purposes, while other goods and services that have high utility to the ordinary citizens are in short supply or non-existent.  For example, basic commodities such as pipe-borne water, regular electricity, effective health care, and others.

3.  Monopoly:  Another defect of capitalism pertains to monopoly, this is a situation whereby there is only one producer of a commodity in a region or locality. For example, an employer may be the only purchaser in a locality, and if this happens, he would be in a strong position when negotiating rates to pay the individual members of the workforce.  Similarly, a seller may be able to exclude competitions, and this further puts consumers in a weaker position.  Because given the prevailing circumstances, the consumers cannot go elsewhere.

4.  Engenders undue concentration of capitalistic wealth: The market economy engenders undue concentration of capitalistic wealth, which attracts with it a concentration of political power.  As a result, greater concern is shown for property rights than for human rights, which touch on the overall welfare of the people.

5.  The possibility of the emergence of imperialism: This is because business people only seek raw materials, markets and places to invest their acquired surplus capital.  With investments abroad, in the light of threats by their host government, they call on their home government to provide necessary protection and this kind of involvement may lead to war.

6. Distortion of consumer sovereignty: Consumer sovereignty may be distorted by large firms that use heavy or extensive advertising simply to convince consumers that the goods and services that the firms have provided are just what the consumers want.  This could lead to purchase dissonance or buyers’ remorse.

7. Possible under-utilization of productive resources: In a capitalistic economy, individuals decide what to produce, consequently, resources may remain unemployed or under-utilized because firms as a whole consider that profit prospects are poor and discouraging in the given situation.

8.  Possible overproduction leading to unnecessary business cycle:  In a market economy, planning by businesses is on an individual basis.  This could lead to over production in certain sectors or industries thereby causing unnecessary business cycles.  The cycles result is frequent depressions which contribute to the waste of productive scarce resources, and feeling of insecurity among the workers in the concern industries.

9.  Discrimination in employment:  Another defect of capitalism pertains to discrimination in employment against women, minorities, and the disabled.  This is because the capitalist will enthusiastically prefer inputs (people) that will most probably generate higher productivity.

10.  Environmental Damage: Capitalism may lead to environmental damage.  Businesses may exploit natural resources, pollute streams and air, among others, without due concern for effective sustainable development.  However, in the light of growing awareness and enlightenment among societal stakeholders, businesses are being encouraged to conduct their operations in more socially responsible manners.

Conclusion:

Capitalism has brought about a society of unfortunate victims of consumerism. Overconsumption stems from individuals’ frustration and is fuelled by organisations’ greed. Encouraging people to behave as individual consumptive units erodes the social fabric, damages relationships and fuelling the worldwide growth of depression.Capitalism has brought about a society of unfortunate victims of consumerism. Overconsumption stems from individuals’ frustration and is fuelled by organisations’ greed. Encouraging people to behave as individual consumptive units erodes the social fabric, damages relationships and fuelling the worldwide growth of depression.