Capitalism Will Always Create Poverty and Inequality - Research Paper Example

Published: 2021-08-11
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George Washington University
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Research paper
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Capitalism is an economic system where private individuals are allowed to take full ownership and control over property, in this economy the invisible hand of pricing mechanism coordinates supply and demand in markets in a way that is automatically in the best interests of society. In this case, the Government is responsible for peace, justice, and tolerable taxes or in providing services that private individuals can not avail (Piketty, 2014).The essential features of a capitalist economy are to own private property, accumulate capital, exchange wage for labor, do a voluntary exchange through a price system in a competitive market. This paper illustrates how capitalist economies bring poverty and inequality through informed arguments obtained from research findings.

The world today remains a competitive place with every adult, rich or poor granted freedom to do business freely, with every individual subjected to similar laws, these create a perfect mix for a capitalist economy. It is unfortunate that the same individuals have inequality in power, wealth and all have different starting points. As a result, the glorified capitalist economy has created a significant difference among individuals hence bringing an unhealthy existence.

In a capitalist economy, income distribution occur to those working and those who are wealthy, many people in society neither work nor own a lot of wealth, and those people very often end up in poverty as a result. In a capitalist economy, capital assets such as plants, mines, and transportation can be privately owned and controlled, labor in exchange for money wages, capital gains accrue to private owners in the form of profits from them doing business, and prices allocate capital and labor between competing uses (Piketty, 2014). Capitalism is blamed for many shortcomings, as Pope Francis said in Bolivia "capitalist system is by now intolerable farm workers find it intolerable, laborers find it intolerable, communities find it intolerable and mother earth find it intolerable" (Reuters, 2015).

Capitalism has led to the emergence of two groups "haves" and "have not" group. Those that "have" represented economically endowed minority while they" have not" represents an economically disadvantaged majority. They "have" group has grown into monopolies, and they are much hated by "they have not" group. With capitalism policies taking effect the government avails an environment for capitalism to take charge, it provides unattainable resources and maintains its work to protect the right of all with an argument that the same freedom has been to every individual (Piketty, 2014).

Capitalist economies have contributed to societal problems, for example, the great depression of 1933 led to mass unemployment (Crafts & Fearon, 2013). This economic recession resulted from prevailing capitalist economies mainly in the United States. Economic downfalls have presently continued on a different perspective, capitalism effects attributed to recent economic shortfall such as the Brexit among other worldwide economic recessions. The recent Brexit was a tug of war Between David Cameron his Chancellor George Osborne and many other senior figures who opposed for Britain exit from the European Union, British citizens majorly voted on the Britain exit. Brexit has seen positivity as economic trends have improved a clear indication of masses voicing their interest as a society and not one controlled by the rich few. Remembering that one's gain is a loss to another, the European Union will adversely lose all privileges that were solely brought by Britain as a member state these could be possible loss of skilled labor as a majority will feel proud working and living in Britain.

More questions than answers remain in consumers mind as to why should a capitalist economy prevail even after early signals to fail. John Maynard Keynes argued that capitalism takes time to revamp after the economic recession since a capitalist economy can work indefinitely in equilibrium with high unemployment and no growth (Keynes, 2011).

Capitalism steers Inequality of Distribution of Wealth and Income. The capitalist system of privately owned property acts as a means of increasing inequalities of income among different classes. Today, in the USA, the wealthiest one percent own thirty-four percent of the wealth and the richest ten percent own seventy-four percent of the wealth. In the UK, the wealthiest one percent own twelve percent of the wealth and the richest ten percent own forty-four percent of the wealth. In France, the figures are twenty-four percent and sixty-two percent respectively. The wealthiest one percent own thirty-five percent of the wealth in Switzerland, twenty-four percent in Sweden and fifteen percent in Canada, (Geoffrey, 2016).

It is evident that this increases the gap between the rich and the poor. Money begets money. Those who have wealth can obtain resources such as big affordable loans and start big enterprises. Those without substantial wealth exchange their labor for wages to the capitalists. Wages are much lower. Thus, the property holders obtain a significant share of national income. The common masses have their salaries to depend on, although their number is overwhelming their share of income is relatively much lower.

Class struggle is evident and well portrayed as inevitable in a capitalist economy. Marxists point out that there are two main classes in a capitalist society. The "haves" who are the rich propertied class own the means of production. The "have not's" who constitute the wage-earning people have no property. The haves' are few. The have not's are in the majority. There is a tendency on the part of the capitalist class to exploit the wage-earners. As a result, there is a conflict between the employers and the employees, which leads to labor unrest, Strikes, lockouts and other points of tension (Malott, Cole, & Elmore, 2013). All this have an evil effect on production and employment.

A capitalist economy has very high social costs. This economy industrializes and develops, but the social costs of the same are hefty. Factory owners running after private profit do not care for the people affected by their production. The environment becomes polluted because factory wastes are not correctly disposed, and diseases and illnesses become a social norm for immediate dwellers. Housing for factory labor rarely provided results to slums growth around big cities and the standards of living to deteriorate.

Equally important, unnecessary multiplicity and too much of competition is a major characteristic of a capitalist economy. Consumers pay a high price for their product of choice and variety. There is sometimes too much competition causing unnecessarily high costs of production. As a result, competitors bid the prices of resources too high at the expense of the consumer who ideally is the final user of producers' products.

A capitalist economy is inherently unstable with time. There is a notable business cycle. Sometimes there is a slump in economic activity, especially on every electioneering period. Prices fall, factories close down, workers are rendered unemployed. At other times business is brisk, prices rise, fast, there is a good deal of speculative activity. These alternating periods of recession and boom lead to uncertainty and lead to wastage of resources. Besides, employment virtue is mostly at risk because the market mechanism is slow to adjust to the changing conditions leading to unemployment and underemployment. Business fluctuations also result in large part of the labor force going unemployed during depressions. Not only this, workers are not able to get full-time employment except under boom conditions.

In a capitalist economy, the lucky working class does not have adequate social security, if such a social system is present, it is mostly bureaucratic and dishonest to beneficially. Capitalists do not provide for any pension, accident benefits or relief to the families of those who die in employment. As a result, widows, widowers, and children have to undergo a good deal of suffering. Governments are not in a position to provide for adequate social security in overpopulated less developed countries, and if it does, it is a long-term affair.

A capitalist economy may work automatically, but the rate of growth is rather slow. Moreover, as the economy progresses (Hawken, Lovins, & Lovins, 2013), there is no all-round development. Some areas develop much faster while others remain stagnant, for example, we may have a scenario where capitalist industries may grow and expand much quickly while there may be poverty or decline growth in agriculture, this brings about slow and unbalanced growth. Additionally, workers are often paid a wage rate much lower compared to their productivity. Exploitation takes effect because people do not have the bargaining power to get their due from the wealthy capitalists. Women are also often exploited and paid a meager wage rate.

A capitalist economy is competitive only in theory. In reality prominent capitalist beat their competitors by acquiring large market shares through all means, in the long run, they get to control the industry as price setters. The scenario in a capitalistic economy is that few competitors often arrive at an understanding and exploit the consumer through monopolistic powers (Turner, 2015). A good example is Monsanto, an agricultural company. Monsanto has specialized in the seeds production in the USA. Most farmers buy seeds from Monsanto every planting season as they are bound to contracts in an out-grower program with Monsanto Company. Occasionally, it is evident that the more prominent firms eliminate the smaller businesses to establish their supremacy in particular lines of market or production. They charge high prices and do not improve on product quality.

In summary, it falls that there are vast problems in a capitalist economy. The Government must be bold and stand out to regulate the economic system so that it does not occasionally dwindle, as it has been the norm. The government has a major and a crucial role to play in curbing unemployment, price instability, and disorderly growth. The difference of opinion now is not on whether the government should regulate or not but is preferably on how power should be instilled to the Government and its organs to control the overall economy and still not interfere with the normal play of economic laws, - such as demand and supply. It should therefore, foster effort in bringing healthy and sustainable business economy. This way there shall be controlled and robust growth distributed equally among citizens. As a result, economies will strengthen, and there will be more entrepreneurial opportunities, expanded markets, live international economy, and resources that are more productive. The citizens will also be at level with each other with equal access to sustainable livelihood, essential social services, social protection, and in general have a healthy growing nation.


Crafts, N., & Fearon, P. (2013). The Great Depression of the 1930s: Lessons for today. Oxford, OX: Oxford University Press.

Geoffrey M. H. (2016, August 11). How Capitalism Generates More Inequality: Why extending markets or increasing competition won't reduce inequality. Retrieved from

Hawken, P., Lovins, A, B., & Lovins, H. (2013). Natural Capitalism: The Next Industrial Revolution. Oxon, OX: Earthscan.

Keynes, J. M. (2011). The general theory of employment, interest, and money. Mansfield Centre, Conn: Martino.

Malot, C. Cole, M., & Elmore, J.M. (2013). Teaching Marx: The socialist chal...

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