I’m going to address the benefits of capitalism and then refute some of the arguments against capitalism.
Technological Advancements and Cheaper and Better Products:
The free market is the market of competition, and with that competition comes many benefits, including technological advancements, cheaper products, and better products, but for now, I’m going to focus on one benefit, in particular, technological advancements. Technology makes the world go round, and it’s very profitable to have the best technology as you can use it to be the most efficient, so, therefore,
companies will want the best technology to make the best profit, and this creates somewhat of a race to advance the fastest and if one company slows down, they lose the race and also lose income or get forced out of the market entirely. This is how the market sheds off weaker companies and only leaves the strongest companies standing. By shedding off the weaker companies the market gives consumers the best products, which is good for the consumers and due to the fact that the company is selling good products they make more money, so it’s also very good for the company. An amazing example of this competition occurring is the Industrial Revolution. Technology advanced by leaps and bounds during the Industrial Revolution, and this was about the same time as the idea of a free market system became more prominent and started taking shape in the governments across the world. Another great example and a much more recent one is all the private companies that are trying to do more in space, some of these companies include SpaceX, Blue Origin, Boeing and a few more. All of these companies are competing but the two that are competing for the most similar goals, and thus are the best examples, are SpaceX and Orbital Sciences Corporation, and because they have such an intense competition going on they are both making major leaps technologically, but SpaceX is a little ahead as their capsule is designed to return back to earth while Orbital Sciences Corporation’s capsule isn’t, but they are going to continue to try and advance to outdo their counterpart and attempt to end up finishing their main goal of space tourism before their competitor and thus make more profit. There are plenty of other examples that prove that the free market increases technology faster than any other economic system, but these are the two that I thought best represented what I’m saying. Technological advancements are huge in this day and age because so many people rely on technology for so many things and we want our technology to be more efficient, and the free market is the system we need if we want to have rapid advancements in our technology. The competition also causes prices to drop and quality to raise. I already explained how competition increases quality, but I will give another example of how it increases quality and I will explain how it drops prices. Due to the constant competition that I mentioned above companies are forced to lower prices, and they do so in order to gain more customers, and by gaining more customers they also increase their income. This means that both parties, the consumer and the company, benefit, due to the consumer not spending as much money and due to the company making more money. It works the same way with quality, whichever company has the best quality tends to gain the most consumers, as long as they keep relatively low prices, and so they gain more money. This shows that capitalism creates competition in the market and competition rapidly advances technology, lowers prices, and increases quality, and by doing all these things capitalism helps both the company and the consumer.
Negative effects of regulations:
A majority of people today think that without government regulations there would be monopolies. Which is true, in a free market society there would be monopolies but they wouldn’t last long, or if they did they would keep their prices very low and they would have great quality products, so it would help the consumers. However people will argue against this point by saying that the monopoly will have enough income to lower prices enough to drive out all competition, and this majorly decreases the incentive to enter the market as a small business. This is true only if you believe that only small businesses run by men who depend upon their business to survive will attempt to compete with the monopoly, but that’s not how it happens. Businesses can very easily come into the market with previous funds, due to inheritance or due to a company entering a different sector of the market, and with these previous funds they can compete with the monopoly, and whenever these two very rich companies are competing they open up space for smaller companies to enter the market and build themselves since both of the rich companies are forced to lower prices to compete with the other. This means that by the time one of the richer companies runs off the other rich company there will be multiple other companies with a large foothold in that sector of the market and this will stop the victor rich company from becoming a monopoly. Even John Maynard Keynes, the creator of Keynesian economics, agrees that the free market is much more efficient in the long run, but as he said: “in the long run we’re all dead”. So in the short run, regulations benefit the economy, a great example of this is the New Deal implemented during the Great Depression which did actually help many people survive the depression, but in the long run it hurts the economy, if we had allowed the Great Depression to run its course it would have allowed for a sort of purge in the market and only the stronger companies would have come out of the depression, thus benefitting the economy in the long run. However this does not mean that all regulations are bad, but the only ones that I support are environmental regulations. Not due to the fact that market can’t regulate itself and reduce pollution, it’s because I believe that regulations will act as obstacle that businesses will be forced to get over to make more income, and in order to get over these obstacles they must advance and so I believe that environmental regulations if used correctly can help the world advance into non-renewable resources much quicker.
How capitalism has majorly reduced poverty:
“Capitalism only helps the rich” is a common argument against capitalism, but that’s plain not true. As recently as 1980, the World Bank estimated that around half of the world’s population was in extreme poverty and it has now dropped to only 700 million people being in extreme poverty. In 1820 the percent of people that were in poverty (or living with under 2 dollars a day wages) was 94 percent, and the extreme poverty rate (less than 1 dollar a day) was 84 percent. And since then only 10 percent of people make less than 1.90 dollars a day (source- https://ourworldindata.org/extreme-poverty/ ). In the richer countries poverty has also decreased in major amounts. These countries include
the United States, Japan, Canada, Australia, New Zealand, and Italy. All of these countries except Japan and Italy are in the top 20 most free countries economically,
Japan being 40th, and Italy being 79th out of 196. This goes to show that capitalism isn’t the system that is purely based off of helping the rich, and it has made much more dramatic cuts in the amount of poverty in the world than any other economic system. The only other system that you could say has helped the impoverished to nearly the same extent would be Keynesianism which hasn’t really helped the impoverished as much, it just helps the impoverished get through times of depression better. Other systems such as communism have actually added into the poverty rate, for example, look at the Soviet Union, which is the prime example of communism, where there was widespread poverty due to communism.
In conclusion, capitalism leads to major technological advancements, lower prices, and better quality of products. By doing this is helps the consumer and the producer. Capitalism has also majorly reduced the poverty rate worldwide over the years which shows that capitalism is, in fact, good for every class rather than just the upper class. Below is a different essay about taxes that I decided to add because low taxes would come with capitalism.
Progressive Income Tax:
Many countries have implemented a progressive income tax in the last few decades, or basically, a tax where you pay a larger percent of your income whenever you make more than a certain amount of money. A progressive income tax is one of the most efficient ways for them to collect money, but it comes with major side effects. A progressive income tax stifles the incentive to advance by creating a fear to gain more income. This fear is based on the idea of “why should I advance because if I do advance all the extra money I’m money is just being taken away from me due to higher taxes”. This fear majorly reduces the incentive to advance, and whenever the taxes are higher it may totally get rid of the incentive to advance. For example, say a company is booming and has the resources to hire more and advance, but they don’t advance because if they hire more people and make more income then the owner will be in a new tax bracket and he doesn’t want that. And whenever taxes are high and the rich are taxed 50% it causes them to either illegally pays fewer taxes or it causes them to move elsewhere so they can avoid those taxes. This causes many of the major companies that benefit our economy so much to leave, and this hurts our economy and increases unemployment by a dramatic amount. But for those companies that do stay and they tolerate those high taxes they can’t invest into their company as much because of the enormous amounts of money they have to pay for taxes. A flat tax is much more desirable and retains the incentive to advance much more effectively.
Another tax that majorly hurts the incentive to advance is the inheritance tax. A major incentive to advance is the thought that if you work hard, your kids may not have to, and an inheritance tax kills that incentive if it is a very high tax rate, but even at a lower rate, it hurts the incentive. A great example is my father’s girlfriend, her grandfather recently died and in his will, he gave her and her brother ownership of his small ranch. Well the government decided that they would tax her and her brother on the ranch, so they made them pay about half of what the government decided the ranch is worth, and the government is awful at appraising land, and so they are paying a sum of I believe around 80 thousand dollars, which is way more than they could ever afford to pay. This happens a lot and it causes people to sell their parents land to pay off the debt or it causes the parents to sell their land so their children can avoid that debt. It works in a similar way if the parent is passing on money, they will either make major purchases so they’re children can use the things they bought without the debt, or their children are forced to pay a good chunk of the money their parents made. This makes people not work as hard to achieve because they lost the incentive of making a better life for their children.
These taxes majorly decrease the incentive to advance and so we need to majorly reform our tax system. Preferably I would reform our progressive income tax into a national sales tax of around 20%. I would also abolish both the capital gains tax and inheritance tax, but in order to do this we must also majorly reduce spending, which I also advocate for but that’s a whole nother essay. Thanks for reading!