What are the drawbacks of unregulated capitalism.

Assignment

Business Environment And Indian Economy

Submitted To,                                                                                                              Pro. Gurdeepak Singh

Submitted By,                                                                                                               Deepak Singh                                                    

Introduction   

Capitalism is an economic system dominated by free markets and private ownership of wealth, assets and business. This refers to an unregulated form of capitalism with financial deregulation, privatisation and lower tax on high earners. There are different forms – from unregulated ‘Turbo-capitalism’ to ‘social welfare capitalism.’ In practice, all ‘capitalist economies have a degree of government intervention. There are different types of unregulated capitalism: Turbo Capitalism, Responsible Capitalism, Crony Capitalism, Advanced Capitalism, State Capitalism and Popular Capitalism.

Discussion

“Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”

– John Maynard Keynes

Drawbacks of unregulated capitalism

Monopoly power: Private ownership of capital enables firms to gain monopoly power in product and labour markets. Firms with monopoly power can exploit their position to charge higher prices.              Monopsony power: Firms with monopsony power can pay lower wages to workers. In capitalist societies, there is often great inequality between the owners of capital and those who work for firms.                                    Social benefit ignored: A free market will ignore externalities. A profit maximising capitalist firm is likely to ignore negative externalities, such as pollution from production; this can harm living standards.                 Inequality creates social division: Societies which are highly unequal create resentment and social division.                                                     Boom and bust cycles: Capitalist economies have a tendency to booms and busts with painful recessions and mass unemployment.  

 

Conclusion

Capitalism is the lifeblood on which most of the world’s economies and societies are run. We all have varying degrees of knowledge about what capitalism. Capitalism’s most characteristic feature is the investment of money to make more money. This sort of invested money is known as capital. Those who use money in this way are capitalist, and the excess money made out of this process is profits. Critics of capitalism argue that it establishes power in the hands of a minority capitalist class that exists through the exploitation of the majority working class and their labor, prioritizes profit over social good, natural resources and the environment; and is an engine of inequality, corruption and economic instabilities. Supporters argue that it provides better products and innovation through competition, disperses wealth to all productive people, promotes pluralism and decentralization of power, creates strong economic growth and yields productivity and prosperity that greatly benefit society.