Academic Master

Business and Finance

How can the capitalist approach benefit economies?

The term capitalism is termed as an economic and political system where the businesses and industries of a country are being commanded by private vendors for profit rather than by the state itself. There are four factors of capitalism: entrepreneurship, labor, natural resources, and capital goods.

Capitalistic ownership means two things. Firstly, the owner controls the production factor. Secondly, they get their income from the profit from ownership. This is what gives them the ability to operate efficiently their companies. Capitalists declare that “greed is good”. They get incentives to get their maximum profit.

In corporate organizations, stakeholders are the owners of the organization. Their level of control is dependent upon the number of shares they have. The stakeholders are responsible for electing the board of directors; they hire Chief Executives to operate the company.

Capitalism needs a free market economy to be successful. It is responsible for distributing the services and goods, allowing for the law of demand and supply. The law of Demand states that if the demand for a product is increased, then the price of that product will also increase. When competitors are sure that they can make more profit from their products, they increase their production. The greater supply results in a decrease in the cost of the product because the product is easily available in the market.

Capitalism is a powerful approach that has made remarkable progress in economies all across the world. It is the central institution of private property and voluntary social arrangements. It is undeniably true that the capitalistic approach has shown positive results in the path of market systems. If we talk about history, traditional models other than capitalism have shown reduced opportunities and fewer profits compared to capitalism.

In a market system in which only mutual benefit exchange is allowed, freedom of choice is consistent, and therefore, it offers a great opportunity for a moral order in which the honesty of individuals is appreciated (Ikerd, John, 2008).

Works Cited

Ikerd, John. “Sustainable capitalism: a matter of ethics and morality.” (2008).

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