Advantages and Disadvantages of Capitalism

Capitalism is the most common form of system which is followed by majority of the countries in the world, it refers to that economic system where the factors of production are not owned by government but individuals and prices of goods and services are decided by market. Given below are some of the advantages and disadvantages of capitalism –

Advantages of Capitalism

  1. It leads to better use of resources because in this form of economic system a greater efficiency implies that much more profits and hence there is no question of under-utilization of resources.
  2. It encourages entrepreneurship because people can set up easily their own business under this as compared to other economic system.
  3. Under capitalism people have to work hard if they want to survive which is not possible in case of socialist economy where government provides amenities to people.

Disadvantages of Capitalism

  1. Biggest drawback of this system is that private companies become so big that they become almost monopoly in their field which leads to exploitation by them in terms of charging the price for product or service which they produce.
  2. In this system poor people are hit the hardest because the gap between the rich and poor keep rising under this system as there is limited government control.

It is due to the above disadvantages that many countries follow a mix of capitalist and socialist economic system where the important resources are controlled by government and rest are left to the market.

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