The Disadvantages of Capitalism in the Economic System

  Reviewed by: Michelle Seidel, B.Sc., LL.B., MBA
  Written by: Liz Gold      Updated October 20, 2018
COINS AND SAVINGS WALLET

The United States participates in an economic system called capitalism. It's marked by a more hands-off government with private industry controlling much of the country's products, goods and services. And while there are incentives to accumulate wealth, companies can easily monopolize market share and exploit consumers. While we may live in the "land of the free," there are many disadvantages to capitalism.

Wealth Inequality

A capitalist society is based on the legal right to private property and the ability to pass on wealth to future generations. Proponents of capitalism believe that a capitalist economic system is fair because you can gain the rewards of your hard work. While this may be true, often people are wealthy because they inherit money and resources from their family or are born into privilege. This is systemized inequality since opportunities are not equal, leading to social division and resentment between classes.

Consumerism

Capitalism has been described as "the engine of productivity and growth," but while that has pushed our society into the future, it also has caused environmental disasters and raised questions about sustainability. Capitalism requires endless growth of production to remain stable. Production is contingent on consumption. Or in other words, the more a society consumes, the higher the productivity rates. Higher productivity rates equal higher sales, which ultimately leads to higher profits. And often, high production comes with an environmental or social impact.

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Environmental Costs

One of the goals of capitalism is to make goods cheaper and accessible in the short run, often leading to a detrimental, long-term impact on the environment. Pollution and climate change are often ignored in the process of production. While in the short-term it allows for lower prices and more availability, capitalism depletes natural resources and lowers a society's overall quality of life.

Profit is Everything

Many capitalists say "greed is good." In a capitalist society, profit comes first. Those companies who own production and supply companies will compete with each other for the highest profit. Their goods are sold at the highest possible price while keeping their costs down. Competition drives cost and how much a company can get for a particular product. Capitalism also doesn't provide for those who lack competitive skills, therefore it is not equal opportunity. Those without the proper nutrition, support and education may never make it to the playing field, as well as others who are in a lower social class or who hold less privilege.

About the Author

Liz Gold has been published in a variety of capacities writing about everything from Kennebunkport and southern Maine municipal government, art and cultural events, to cloud technology and business transformation. Her experience extends to both corporate and freelance; she's a former Senior Editor at the B2B publication Accounting Today, writing about public accounting firms with a specialization in diversity, technology, best practices, and business development. During her tenure, she was also co-founder and editor of AccountingTomorrow, a blog focused on intergenerational workplace issues that is still thriving today. Most recently, Liz has been writing about accountants working in the cannabis industry on CPA Trendlines and reporting on cannabis trends for Southern Oregon Good Herb magazine in Oregon.

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