Disadvantages to Capitalism


Karl Marx illustrated a number of disadvantages to capitalism.

Capitalism that is frequently referred to as free market system is an economic system which most countries of present world are using. The United States is among those countries. There are many advantages of following this system, most significant being high efficiency and resultant increased production. Yet, there are disadvantages to capitalism; the notable ones are lack of equality among masses and welfare of society.

1. Inequality of Income

Since the criteria for rewarding people in a capitalist system is their work output and it doesn’t give the same value to all kinds of work, there is a wide disparity in their income. For example, this system accords more importance and thus better rewards someone with ability to get thousands of cars made as compared to ability of maintaining clean drains. This disparity of income results to disparate distribution of wealth that could cause social unrest. The enormously rich may own many houses and yachts while the poor may find it hard to own a dwelling unit.

2. Lower Employment Rates

Most socialistic systems of economy aim for providing equality among masses. Despite low planned efficiency, its positive feature is that it provides high rate of employment.  In contrast, the capitalist system of economy has unemployment as a built-in feature and no effort is made to ensure that everybody gets a job. In its totality this may help economy but the ones left without any job can result to grave consequences.  That is one of the serious disadvantages to capitalism

3. Overproduction

Free market economies face the risk of overproduction. Two factors can cause it.  One is that such economies are inclined to be very efficient, since compensation is directly related to production. So, overproduction is most likely. The other is because of income disparity, low paid factory workers may produce good in so large a quantity that they may never be able to buy. Moreover, the decision of what needs to be produce is governed by its profitability and not utility. As a result, many items essentially needed may not be produced in sufficient quantities as their manufacturing is not profitable for the manufacturer.

4. No Guarantee of Welfare

Another of the disadvantages to capitalism is that the motive of businesses is to make more profit and hence money. As a result, they pay bare minimum to workers to enhance their profits. This helps business and improves economic performance of the country. However, it overlooks if the low wages of workers will suffice for their food, housing and health care, not to mention entertainment, education or items of luxury!


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