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38 Pros and Cons of Capitalism

Capitalism is an economic system based on free and open competition whereby you keep the profits that you are able to generate with your initiative. This typically requires regulation to prevent anti-competitive practices that would destroy open competition. The following are the basic pros and cons of a capitalist system.


Capitalism is the defacto global economic system that sustains the livelihoods of most people on the planet. As it provides the things that we all need to survive it is difficult to overstate its overall benefits. The following are positive attributes of capitalism that have allowed it to become such a dominant and productive system.
A free labor market where you can choose your own profession and compete for jobs.
A labor market based on meritocracy produces talented employees who have worked to earn their positions.
All developed nations with a high standard of living are based on capitalist systems.
Capitalist firms are able to solve global problems such as inventing a vaccine to address a disease.
Compatible with the human need for freedom and growth.
Competition increases quality.
Competition orients firms to customer satisfaction such that they are responsive to customers.
Efficiently allocates capital to produce goods that are in demand.
Employees are often given strong incentives to perform such as profit sharing and bonuses.
Has greatly increased life expectancy on a global basis since the beginning of the industrial revolution
High productivity driven by the profit motive.
High efficiency whereby resources are efficiently used to create goods.
Market competition drives down prices.
Produces a great variety of niche goods.
Produces creativity and innovation based on competition.
Produces goods at great scale to reduce costs and increase efficiency.
Produces significant wealth and income.
Provides economic freedoms such as the ability to start a business and retain your profits.
Taxation of a capitalist economy can be used to provide public services and benefits that provide a minimum standard of living.
Those allocating capital are often risking their own money such that they have strong incentives to put capital to productive use.


The negative aspects of capitalism are arguably addressable by the capitalist system itself. For example, cronyism is a major problem whereby international organizations, nations and corporations cooperate in ways that supersede democratic processes. However, this isn't an inherent feature of capitalism and could be corrected by societies. Likewise, capitalist firms are paid for the goods they create but often do not pay for the cost of economic bads they create. This destroys much value by creating things like pollution but could be addressed within a capitalist system with regulations or prices for economic bads set by a cap and trade market. The following are negative aspects of the defacto capitalist system as it exists today.
Rent seeking behaviors such as government corruption and market speculation.
Capitalist realism whereby the capitalist elite act with impunity because they feel capitalism can never be overthrown due to its overwhelming success as a system.
Corporate influence over democratic societies.
Corporate influence over international organizations and agreements.
Corruption such as a revolving door between industry and government positions.
Cycles of boom and bust whereby speculators drive up the price of assets only to see prices eventually collapse.
Economic exclusion and low participation such as youth unemployment or poor access to credit for small business.
Environmental injustice.
Firms and societies that claim to be meritocracies are actually dominated by an upper class that preserve their status over many generations often using high status institutions such as universities.
Firms and societies that claim to be meritocracies are actually driven by biases that create systematic oppression.
Labor injustice.
Monopolies that are inefficient.
Monopolies that are unresponsive to customers / customer needs.
Monopolies that destroy competition by purchasing and ending the products of promising new firms.
Production of economic bads.
Tax avoidance by corporations and wealthy individuals.


Economic bads are also known as externalities.


This is the complete list of articles we have written about capitalism.
Capitalist Realism
Crony Capitalism
Economic Bad
Economic Freedoms
Economic Rights
Political Economy
Pros and Cons
Quality Of Life
Rent Seeking
Social Ideology
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