Disadvantages of Capitalist Economy

Inequalities: Capitalism creates extreme inequalities in income and wealth. The producers,
landlords, traders reap huge profits and accumulate wealth. Thus the rich become richer and the
poor poorer. The poor with limited means are unable to compete with the rich. Thus capitalism
widens the gap between the rich and the poor creating inequality.

Leads to Monopoly: Inequality leads to monopoly. Mega corporate units replace smaller
units of production. Firms combine to form cartels, trusts and in this process bring about
reduction in number of firms engaged in production. They ultimately emerge as multinational
corporations (MNCs) or transnational corporations (TNCs). They often hike prices against the
welfare of consumer.

Depression: There is over-production of goods due to heavy competition. The rich exploit
the poor. The poor are not able to take advantage of the production and hence are exploited. At
another level, over-production leads to glut in the market and hence depression. This leads to
economic instabilities.

Mechanisation and Automation: Capitalism encourages mechanization and automation.

This will result in unemployment particularly in labour surplus economies.

Welfare ignored: Under capitalism, private enterprises produce luxury goods which give
higher profits and ignore the basic goods required which give less profit. Thus the welfare of
public is ignored.

Exploitation of Labour: Stringent labour laws are enacted for the exclusive profit-motive of
capitalists. Fire and hire policy will become the order of the day. Such laws also help to exploit
the labour by keeping their wage rate at its lowest minimum.

Basic social needs are ignored:There are many basic social sectors like literacy, public
health, poverty, drinking water, social welfare, and social security. As the profit margin in these
sectors is low, capitalists will not invest. Hence most of these vital human issues will be ignored
in a capitalist system.

The Advantages of Socialism

Best utilization of resources
Better solution of central problems
Smooth working of the economy

1. Eliminates Greed
The biggest advantage that comes from socialism is that there is no more greed. No
individual person can have much more than the other, and businesses are all owned by
the government. Money isnt the driving force in a socialistic society.
2. The Needs Are Met
Another great thing about socialism is that everyones needs are completely met. This
means that health care is universal, education is free, food is supplied, as well as
clothing and other necessary items to live. This is great for the entire society because it
helps to reduce poverty.
3. Mobilization of Goods
Disasters of all kinds can occur at any time, and when they do, an immense of amount
of services and goods are needed in order to ensure that everyone is safe and taken
care of. In other types of economies individual people own all of the rights to these
goods, and have the right to refuse them for assistance. With socialism, the government
has full control of all of these things and can easily mobilize them to the areas that need
them the most.
4. Everyone Does ItKind Of
The idea of socialism is used in just about every single country on the planet in some
way shape or form. It is the only way to ensure that some of the most basic and needed
things are given and provided to all people. Some examples of this is the public
education system in the United States and Universal Health Care in Canada.