Free market capitalism: good or bad?

The debate on whether free market capitalism is overall good or bad has been raging for ages. Personally, I think that it would be a good thing, as I feel that prices should solely be determined based on supply and demand, but what I will do in this blog post is evaluate the pros and cons of each. Hopefully using this, some people can make up their own decisions.

A pro of free market capitalism is that companies will be driven to make the best product possible, in order to make their company the best one on the market. As of now, it could easily be argued that some companies such as Tesco are halfheartedly carrying out their daily affairs, because of the monopoly companies like them and Asda have on the market. Free market capitalism would make sure that all companies would be driven to make the best products possible, giving a wider breadth of choice to the consumer and incentivising companies to do the best job they can do.

Moreover, companies will be motivated to innovate more, creating a fast-growing economy and a fast expansive society as well, with new products being created every day, and people racking their brains to innovate. As of now, it’s quite lacklustre as people have no real drive. They need to want to innovate before all else.

Free market capitalism would also be highly beneficial to the ordinary worker. These days, people are more concerned about ethics than ever before and people will not buy a product from a company if it has a reputation of underpaying workers, or putting workers in degrading conditions. This would be better for the worker as they have more power over the companies, as even one worker speaking out could seriously damage a company’s profits.

Also, free market capitalism would incentivise new companies to come to the fore and try and make products which people like. Functioning oligarchies do not make people want t0 create companies, as they simply think that they cannot topple the Apple’s and the Microsoft’s of life. Free market capitalism would change this.

However, if an industry as a whole is not performing well, it could lead to mass unemployment, with lots of people being laid off their jobs due to demand being insufficient. This would create a problem for the government, as they cannot provide benefits for so many people. In this way, the collapse of even one industry could burden governments, which could detract from their ability to provide aid to the social services like healthcare and education. Imagine the UK without the NHS!

Finally, when companies are so driven to succeed, it means 90% of people who may be working equally as hard as the bigger companies will fail. Free market capitalism, then, could be construed as creating even bigger divisions between the rich and the poor, which is hardly what countries like the UK and the US with their levels of inequality bursting at the seams need right now.

Overall, however, in my opinion, free market capitalism is a good thing, simply because it would promote fairness in society.

Thanks for reading! Stay tuned for more!

By Shrey Srivastava

A finance and economics enthusiast, and someone who wants to share his views with the world.


  1. Yes according to the facts you have mentioned above the free market economy is having both pros and cons.. economists argue that there are three main market failures of which the first one being
    Although it is said that free market economy is the mechanism which maximizes economic efficiency it ll fail in following situations
    1 non provision of public goods due to no profit signals are given from them
    2 non provision of quasi public goods
    3availability of common property resources (leading to tragedy of the commons)
    4availability of positive and negative externalities in production and consumption ( when there are positive externalities in production and consumption there ll be a benefit to the external parties in such instances the market mechanism underprovides the product and overvalues the price and in case of a negative externality vice versa)
    5 centralized economic power.. to have the effi ient resource allocation the marginal benefit shluld be equal to the marginal cost. But in certain scenarios the sellers have the market dominance and in case of those scenarios the marginal benefit will not be equal to the price..
    6 availability of merit and demerit goods
    In this scenario merit products are the products which have positive externalities in consumption.. the. Market underutilize the resources and overestimate the price. On the other hand demerit goods are the goods which have negative extdrnalities in consumption. In case of a demerit good the market overprovides the goods and overestimate the price
    7 availability of imperfect/asymmetric information
    When information is biassed tpwards one party effective decisions cannot be made..
    8 missing markets
    These are the goods or services which consumers demand but which the mkt mechanism is not providing ex. Disease eradication programs etc.

    Ths second market failure is
    The income distribution disparities are very high in market economies…
    That is to say fluctuations of actual output is high when compared with the potential output..
    So in order for a mkt economy to be effective a govt. Should involve to.solve the above mentioned problems


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