Capitalism is an economic and political system in which private ownership controls the trade and industry of the country. In capitalism system the wealth is concentrated in the hands of a few people. The idea of these private owners is capital accumulation; make maximum profit without worrying about social constraints like unemployment, exploitation of labours etc. The private owners will invest a large portion of their accumulated profit resource for replacing labour oriented technologies into technologies that will reduce the cost of production and increase productive capacity thereby increase their profit.
A capitalist system and a free market system are both based on economic settings that are founded on the law supply and demand. Therefore, advantage of capitalist system is that the government will not interfere in the economies of the free market. In the other words, the market determines investments, production, distribution and decisions without the intervention of the government. The Government intervenes only for enforcing rules or policies governing the conduct of business. Further, it rewards the most efficient producers with the highest profit as it encourages innovation to meet customer needs more competitively or efficiently.
The key disadvantage in capitalism is that monopoly of power coexistent with capitalists. The business enterprises with monopoly of power may abuse their position by charging exorbitant price for their products. Another major disadvantage is that all the wealth continues to be passed down to the same groups of people and their future generation, because of which inequality and social division occur in the society.
Related article:
