Question

Is capitalism the best economic system for the economic well-being of a country? In an essay no less than 600 words, explain your answer. Citation is required.

Answer 1

Capitalism generally increases the overall wealth of a country. Because it makes use of the profit motive, it gives people a strong incentive to work hard, to innovate, and to do other things that increase the economic health of a country. Capitalism also helps the consumers. In a capitalist system, companies try hard to give consumers the best possible products (and the widest variety of products) at the lowest possible price. The firms know that they cannot make money unless they do this, so they try very hard to please the consumers. Thus, we can see that capitalism ends up making the country as a whole richer and that it gives consumers the best possible deals.

However capitalism does have its faults. The major fault is that it contributes to economic inequality. In a capitalist system, some people can become poor while others become rich. There are times when this is bad for the economy because too few of the people have too much of the wealth. At its worst, inequality can cause conflict between rich and poor and can even destabilize an economy. In order to write your essay, you will need to expand on these ideas.

Capitalism is an economic system where private entities own the factors of production. The four factors involved in capitalism are entrepreneurship, capital goods, natural resources, and labor. The owners of capital goods, natural resources, and entrepreneurship exercise control through the companies they form. The individual owns his or her labor. The only exception is slavery, where someone else owns a person's labor.

Capitalism results in the best products for the best prices. That's because consumers will pay more for what they want the most. Businesses provide what customers want at the highest prices they’ll pay.

Prices are kept low by competition among businesses. They make their products as efficient as possible to maximize profit.

By creating incentives for entrepreneurs to reallocate away resources from unprofitable channels and into areas where consumers value them more highly, capitalism has proven a highly effective vehicle for economic growth.

Prior to the rise of capitalism in the 18th and 19th centuries, rapid economic growth occurred primarily through conquest and extraction of resources from conquered peoples. In general this was a localized, zero-sum process. Research suggests average global per-capita income was unchanged between the rise of agricultural societies through approximately 1750, when the roots of the first Industrial Revolution took hold.

In subsequent centuries, capitalist production processes have greatly enhanced productive capacity. More and better goods became cheaply accessible to wide populations, raising standards of living in previously unthinkable ways. As a result, most political theorists and nearly all economists argue that capitalism is the most efficient and productive system of exchange

Capitalistic ownership means two things. First, the owners control the factors of production. Second, they derive their income from their ownership. That gives them the ability to operate their companies efficiently. It also provides them with the incentive to maximize profit. This incentive is why many capitalists say "Greed is good."

In corporations, the shareholders are the owners. Their level of control depends on how many shares they own. The shareholders elect a board of directors. They hire chief executives to manage the company.

Capitalism requires a free market economy to succeed. It distributes goods and services according to the laws of supply and demand. The law of demand says that when demand increases for a particular product, price rises. When competitors realize they can make a higher profit, they increase production.

The greater supply reduces prices to a level where only the best competitors remain.

The owners of supply compete against each other for the highest profit. They sell their goods at the highest possible price while keeping their costs as low as possible. Competition keeps prices moderate and production efficient.

Another component of capitalism is the free operation of the capital markets. That means the laws of supply and demand set fair prices for stocks, bonds, derivatives, currency, and commodities. Capital markets allow companies to raise funds to expand. Companies distribute profits among the owners. They include investors, stockholders, and private owners.

Laissez-faire economic theory says the government should take a "hands-off" approach to capitalism. It should intervene only to maintain a level playing field. The government role is to protect the free market. It should prevent the unfair advantages obtained by monopolies or oligarchies. It ought to prevent manipulation of information, making sure it is distributed equitably.

Part of protecting the market is keeping order with national defense. The government should also maintain infrastructure. It taxes capital gains and income to pay for these goals. Global governmental bodies adjudicate international trade.