What Are The Main Advantages Of Capitalism?

Capitalism is based on having free markets, with firms and resources being privately owned. As we look at practice, this practically means that the state intervenes in order to regulate economy aspects and private property. The US and the UK are widely regarded as being capitalist countries, even if the governments spend up to 40 percent of the GDP.

Many organizations now support capitalism, like Turning Point USA. Why is that? Some of the advantages that can be mentioned are:

Lack Of Government Involvement

One of the advantages associated with capitalism is that governments cannot control economy. Whenever governments get involved too much, various problems appear, like a lack of incentives, corruption and providing poor information to people.

Efficient Resource Allocation

At a theoretical level, capitalism makes sure that resources are going to be distributed based on consumer preference. Companies are basically not going to be rewarded for offering goods that people just do not want.

Production Efficiency

When the market system is in place, companies have specific incentives to become efficient in productivity. Cost cutting improves both productivity and competitiveness. When companies do not stay efficient and productive, they simply run out of business.

Efficiency Becomes Dynamic

This practically means that efficiency grows as time passes. Companies living in capitalist systems have to respond to all the changes that happen in the preferences of the consumers. As new consumer trends appear, companies have to quickly respond.

Higher Financial Incentives

There is a lot of evidence proving that people work much harder when there is the presence of personal financial incentives. As an example, the entrepreneurs are going to take risks as they set up businesses because there is a potential to get a larger financial reward in the future. When this private profit scope is not there, brand new firms are not going to be opened.

Political Freedom Helped By Economic Freedom

Capitalism is often associated with having political freedom. States that are limiting the individual’s rights to open their business or to choose where working will surely be faced with high political interference. However, economic freedom is not enough to guarantee the freedom of politics. It is just a really good starting point for that.

Overcoming Discrimination And Increasing Networking

Capitalism, at its core, encourages the trade between different people. We are faced with an economic incentive to break down the barriers of the past while looking for increased profits. The free market system does not really care about the personal belief of people or the color of their skin. It is only interested in finding a way to make more profits. When the system is really effective, people end up working with each other even if they hate each other. Racial discrimination is automatically reduced because companies and people that practice it will be penalized.

Final Thoughts

Given the advantages mentioned above, it is quite obvious why capitalism is praised at the moment. We are looking at a system that could do wonders, although it also has some problems. This is why it also has its criticism, of course.

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