Capitalism was born in the late 18th century in Europe. The effect of this form of the economic system on society has been an issue ever since. It has also led to some great discussions on the pros and cons of capitalism. There’s no denying that it has been beneficial to humans and the economies in some way or the other. It has promoted a culture of work, encouraging people to participate in activities beneficial for them.
However, this economic system is fed by the motive of profit and encourages competition. As a result, only certain sections of people get a fair share. There are many other negative impacts of capitalism on society,: which we’ve tried to explain here:
The benefits arising out of capitalism are rarely distributed equally. Wealth rests in the hands of a very small percentage of the entire population. The demand for luxury goods is limited to a few among the total workforce. Inequality, therefore, keeps increasing. One of the reasons for the inequality is inherited wealth.
In a capitalist economy, the children of wealthy individuals inherit their assets. Those born with certain privileges, therefore, are more likely to do well. They end up getting a better upbringing, education, and wealth.
Companies or firms that are successful in a free market can gain the power of monopoly. This gives them the ability to inflate the prices of their goods and services. The freedom of monopoly is thus abused and this causes a certain amount of loss to the consumers.
Let us take the companies that supply tap water or electricity as an example here. They have a natural monopoly. If they inflate the prices, consumers would be left with no other alternative. They’ll have to pay the prices that they’re charged by these companies.
3. Unemployment of some individuals
The factors of production should be able to move from an unprofitable sector to a profitable industry. Although this is seen as something that’s quite empowering in a capitalist society, there are certain faults. Let’s take an example of a farmer who is unemployed due to some unforeseen events.
He can’t just move to a big city and get a job immediately. As he has spent most of his life on the farm, he can’t let go of the geographical ties. He may not have the right skills for a new job as well. So, you’ll get to see many such people unemployed in capitalist societies.
Capitalism is based on the desire to earn profits. The system creates incentives for choosing profit over matters of social welfare. This might lead to a lot of greed in such societies. The theories of price discrimination might be employed by some firms to charge the consumers higher prices. This might lead to the creation of a society, where the rich can pay to jump a queue.
This profit motive has been an encouragement for many firms. Some of the law firms pursue claims of litigation quite aggressively. In a way, this implies that a certain amount of resources are being given away just to protect themselves.