Demerits of Capitalism

The capitalist form of economic system suffers from the following evils :

• Concentration of Economic Power : Right to private property and the law of inheritance result in the concentration of wealth in a few hands. The concentration of wealth and property in the hands of a few persons lead to extreme inequalities in the incomes or people, On the hand, a few enjoy luxurious living and on the other a large section of society is deprived of even not provide stability necessities of life.

• Economic Instability : Capitalism does not provide stability of the price level Free working of market mechanism results in business cycles where in business booms are followed by business depression. Cyclical fluctuations in the levels of economic activity cause great suffering to the people. During inflation poor people having limited incomes suffer greatly. Depression causes widespread unemployment and investment are not coordinated as these are determined by two different classes of people.

• Lack of Maximum Social Satisfaction at Minimum Social Cost : Maximum social satisfaction can be achieved when goods produced are made available to those consumers who will get the maximum satisfaction from them. But in the capitalist system goods go in the hands of the people who can offer the best prices. In other words, goods are distributed according to the ability to pay rather than according to the needs of people.

• Social Waste : Cut-throat competition among business firms results in unnecessary expenditure on advertising and ruthless exploitation of natural and human resources of the nation. There is mal-allocation of the country’s resources because producers are guided by profit motive. They produce those goods which rich people can afford to buy rather that those which poor people actually need.

• Rise of Monopoly : Big business and giant corporations dominate the country’s economy in a capitalist system. They weaken the forces of competition and reduce consumer sovereignty. They influence public opinion and life styles to suit their business. Free play of market mechanism is distorted.

• Loss of Human values : Capitalism promotes materialistic attitudes in the people. The lust for profits and wealth gives rise to several social evils. It is alleged that “capitalism has no conscience, its God is gold. It contains the seeds of its own distruction.”