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Capitalist Economy

Scholasticus K Aug 22, 2020
Capitalism or a capitalist economy is not a new concept and dates back to the industrial revolution. It is termed as an economy where the government does not take part in any kind of production process and entrepreneurs are encouraged to do so by the government.
As the winds of industrial revolution started blowing over Europe, entrepreneurs rose to prominence and enslaved the resources from the new colonies and technology that was developing everyday.
These entrepreneurs were often termed as capitalists and their power was further boosted by charters granted to them by their respective crowns and the enactment Joint Stock Companies Act that was passed in Great Britain.
The capitalists thus fulfilled the functions of employing resources and labor for the manufacturing of goods and services that was done with the help of technology and scientific advancements that were developed by scientists.

What is Capitalism

In the pre-world war I era, most of the economies in Europe were capitalist in nature. Even today, many economies have reformed their demerits but have remained capitalist. It must be noted that 100% capitalist countries, where the government plays a laissez-faire role, no longer exist.
In a capitalist nation, the government does the duty of collecting taxes and safeguarding the security of the country. In fact, some essential public functions such as public transport and taking up construction of roads or dams were also handed over to the private sector.

Advantages and Disadvantages

There are some advantages as well as disadvantages of capitalist economies that came to the fore during the industrial revolution. These have been enlisted here.


The first advantage of this form of economy is that rapid economic growth is observed in the nation. The second advantage is that all capitalists make an attempt to dominate the overseas markets. This brings in large amounts of wealth into the nation.
A capitalist market also mobilizes almost all possible resources, monetary and non-monetary, by enslaving it into the production process. The capitalist system has also lead to the development of science and technology which enhances the standard of living of an economy.


The capitalist system introduces a huge gap between the rich and the poor.
Exploitation of labor is often observed in this economy. In addition to that, there are also cases where strikes and intense class violence is observed.
A capitalist market economy often puts a lot of pressure on the natural resources and the environment. Which is why a looming energy crisis is a grave threat to the economy. Fraudulent, unethical, and life-threatening practices by capitalists are observed in the economy as well.
There are many politicians who observed that having a totally capitalistic economy is not very healthy. There are many different mixed capitalist market systems that have evolved as a result. There are many mixed capitalist economies that concentrate on the phenomenon of capitalism but maintain legislation in order to curb all the ill effects of the same.
In addition to that, such governments also undertake all tasks that are considered an absolute necessity. Such tasks include, education, health, defense, and infrastructure. The remaining sectors are kept open for the private sector.
In the modern era, post the cold war, people at large have realized the importance of having elements of both socialism and capitalism blended in their economies. Such ideals have definitely paved a way for better economic, political, and social conditions in any given capitalist market economy in the world.