The Role of Capitalism: Business & Marketing Essay

THE ROLE OF CAPITALISM
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The Role of Capitalism
Economic growth and development relies on input from both public and private sector. However, their contribution differs greatly leading to two types of economic systems; capitalism and socialism. Capitalism is an economic system that is privately owned by individuals who control businesses in production and distribution with the main aim of making profit. The United States is considered a capitalist country due to its large national economy with all manufacturing companies being privately owned. There is no central governing body that dictates to private owners what and how much should be produced because they set their own production goals. On the other hand, socialism is an economic system, which entails public ownership of property with centralized planning for allocation and distribution of resources with crucial decisions being made by the government. For example in the Soviet union, top government officials formulated production and cost objectives that had to be followed by individual plant managers (Shaw,2014, pg.116).
Capitalists argue that people have a fundamental natural right to property where they are free to own a variety of things for example houses, stock certificates etc.. Individuals are entitled to the results when they mix their labor with the natural world (Shaw, 2014, pg.122). Second argument for capitalism is that, it is the most efficient and productive economic system because of the free and unrestricted market. According to Adam Smith, when people are allowed to pursue their own interests, they will produce the greatest good for all. Smith invoked the law of supply and demand that keeps the enterprising capitalist from ruthless profits due to competition (Shaw, 2014, pg. 123,124). The Third argument for capitalism is political freedom, whereby firms and individuals receive incentives, thus lea...