Aside from the obvious yet vast number of drawbacks regarding morality and fairness, the biggest concerns of instating a capitalist system are limited; the biggest of these concerns is the level of systematic risk that such a market relies on to survive. Whether it is in investing into new businesses or new technologies, the continual need to take risks is the most worrying aspects as it constantly subjects the economy to a state of vulnerability and hence financial crisis. Crises such as that of which occurred in 2008 with the fall of Lehman Brothers is a huge indicator of the vulnerability of capitalism and the extent to which it can fail. What is worse is that, due to the connectedness of the free market capitalist nations, the effects of that crisis caused by excessive, systematic risk-taking drifted over the Atlantic Ocean and exploited the extremely vulnerable banking system in Europe too with even the Euro coming to a near collapse. Not only were people who made the crucial mistakes punished but also business managers and directors showcasing the degree of openness and susceptibility of capitalism to the world outside of economics.
However, should we feel bad about the moral issues imposed by this system? Why feel bad about a system that allowed for such a high quality of life that we enjoy today and has led to countless innovations that have shaped our world? Whilst the economic freedom that capitalism commands is prone to extreme susceptibility to keen risk taking and therefore disaster, it also allows for a playground where the liberality leads to greater economic success. Throughout history economic freedom has been proven to lead to greater economic success as was the case with Singapore or the USA where income tax was first introduced in 1913 and from which point economic growth has slowed. Obviously, income tax is not the sole reason for slowed economic growth but it is these instances of limitation that restrict economic freedom that lead to a decline in economic success whether it be measured in GDP or net wealth. In the UK, the introduction of the minimum wage scheme had similar impacts as every adult had to be paid above £3.60 an hour which inevitably lead to unemployment as the men and women who were only capable of working for £3.50 an hour or less were laid off. These cases of government intervention distort the freedom of the economy and hence limit the capacity of which it is allowed to grow.
The arguments for the merits and drawbacks of capitalism are ongoing as even economic freedom has its issues as seen with China. China, with its rapid economic development, has outpaced the rate at which it has developed socially resulting in healthcare challenges and corruption. In contrast, the UK faces little economic growth when compared and this brings various other issues such as the double recession we faced as well as the social challenges such as cuts to the NHS coming with it. To summarise, the free market is constantly changing and the roles of emerging markets in developing countries are causing problems for itself as well as stagnation in the North American and European economies demonstrating the complexities of a capitalist society. New problems will be encountered as a result of these emerging markets as they shape and transform the idea of capitalism we have today; how the respective nations organize and structure their transformed versions of the system will determine the future of capitalism.
Contributed by Vithujen Mankaleswaran