Disadvantages of Capitalist Economy

Disadvantages of Capitalist Economy:

1. Inequalities:

Capitalism creates tremendous inequalities in income and wealth. The landlords, producers, traders reap enormous profits and accumulate wealth. Therefore the rich become richer and the poor poorer. The poor with restricted means are unable to compete with the rich. Therefore capitalism widens the gap among the rich and the poor generating inequality.

2. Leads to Monopoly:

Inequality leads to the monopoly. Mega corporate units substitute smaller units of production. Firms join to form cartels, trusts and in this procedure bring about reduction in number of firms engaged in production. They eventually exhibit as multinational corporations (i.e., MNCs) or transnational corporations (i.e., TNCs). They frequently hike prices against the welfare of consumer.

3. Depression:

There is over production of goods due to the heavy competition. The prosperous exploit the poor. The poor are not capable to take benefit of the production and therefore are exploited. At other level, over production leads to surplus in market and therefore depression. This leads to economic instabilities.

4. Mechanization and Automation:

Capitalism persuades mechanization and automation. This will outcome in unemployment specifically in labor excess economies.

5. Welfare ignored:

Under capitalism, private enterprises generate luxury goods that give higher profits and disregard the fundamental goods required that gives less profit. Therefore the welfare of public is disregarded.

6. Exploitation of Labor:

Stringent labor laws are enacted for the limited profit-motive of capitalists. Fire and hire policy will become the order of the day. These laws also aid to exploit the lab our by keeping their wage rate at its buck minimum.

7. Basic social needs are ignored:

There are many basic social sectors such as public health, literacy, poverty, drinking water, social benefit, & social security. Since the earnings margin in these sectors is low, capitalists will not spend. Hence most of these vital human issues will be ignored in a capitalist system.

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