What Effect Does Capitalism Have on the Economy?

Capitalism is an economic and political system where private owners (or capitalists) can run the economy for profit, without the government interfering in the production of goods, services, and other products. Additionally, pricing gets set by the free market, Meaning prices are determined by unrestricted competition between privately owned businesses. Capitalism gives people the freedom to gain and develop their wealth and  participate in competitive business markets.  

There is one main incentive to a capitalist society: wage. Capitalists give the most productive workers the largest sums because they want to keep the supply moving to meet the demand.

However, capitalism can encourage monopoly powers to emerge.  Which damages the economy and will drive other capitalists’ businesses bankrupt. Capitalism also increases rent, because in a capitalist society housing is a product to buy and sell for profit and not a right. Capitalism focuses on supply and demand. In a capitalist society, if you can’t supply or cannot contribute to the demand, you’re left behind.

Capitalism also has many benefits. For starters, it can increase a country’s Gross Domestic Product (GDP). Gross Domestic Product is the total market value of the goods and services produced in a country over a year.

It also helps boost the efficiency of markets. Additionally, capitalists’ performance is valued, and they have a lot of economic freedom.

I think that having a capitalist society would be fine as long as it wasn’t purely capitalist. There are many benefits to a capitalist society, but there are also many downsides. If the concept of capitalism and socialism were mixed, that would probably work out better than a purely capitalist society.

Sources

LUKE FANN
Writer at The City Voice

My name is Luke Fann, and I am 12. I love to write fantasy, play Dungeons & Dragons, and play disc golf. I also like to read, bake, and draw!

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