Joined: 23 Sep 2010
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Analysis of an issue! please rate [#permalink]
18 Oct 2010, 08:06
"Individuals living in capitalist economies suffer a higher degree of personal risk than in other types of economies. Creating regulations that protect a society can’t help but interfere with free market forces, a basic tenet of capitalism."
From your perspective, how accurate is the above statement? Support your position with reasons and/or examples from your own experience, observations, or reading.
The writer has put forward a very good point. He claims that a person living in a capitalist economy experiences a personal risk which is greater than that experienced while living in other types of economies. The writer feels that because such an economy has inherent regulations which on the outside are meant to protect the society, but on the inside hampers the flow of free market forces, there aren't many takers for this kind of economy.
Now, a capitalist economy is one where a majority of the factors of production in the economy are owned by private players.Such large scale ownership of essential industries in an economy by private players has the most obvious consequence- price manipulation. These private players have the hunger for profits.They, being the only suppliers of the commodity in the market, control the price of the goods they sell, much to the dissatisfaction of the consumer. Exhorbant prices will be charged for the products and the consumers will have no choice but to buy from these players, as no other source will exist.
For instance, company X operates in a country where there's no liberalisation and globalization of the economy.This is done to protect the domestic industries of the nation.As pointed out by the last line of the statements given, such regulations will disrupt the free market forces of demand and supply.Now, company X has the backing of the government as it is the only player in the industry. Thus, it will charge high prices for its products and since imports will have an abnormally high amount of duty levied on them, hardly any imports will be seen taking place in this economy. The result is an ever growing burden on the personal consumption expenditure of the consumers. Here is where the personal risk lies. Consequently, the standard of living ,of the nation as a whole, suffers.
Take the case of the same person living in a country where there is liberalistion, globalisation and privatisation of industries. There will be more competition among the industry players and thus price will be kept under control. The consumer will be charged a price which is much more fair and justified. This would thus not have a detrimental impact on the personal consumption expenditure of the consumers.Standard of living will not suffer and most importantly, concentration of wealth in few hands will be lesser. The personal risk therefore , in this case, would be much less as compared to the case in the previous paragraph. This is the kind of model every successful country follows. To prevent monopolies , the government of such countries incorporate the Anti-Trust laws , thus being fair to the ordinary consumer, ultimately leading to prosperity of the country.
In conclusion, the writer makes a statement which makes a lot of sense. Where there is control in few hands in an economy, the others will suffer without a shadow of doubt. This is true in the case of a producer-consumer model as well. An economy which prevents the formation of capitalism is bound to prosper in the long run, while a capitalist economy surely has a detrimental effect on the economy, where the consumers are the losers and the producers are the winners!