Managerial Economics - Favouring Capitalist economy

Qn. What are the supportive arguments you will raise favouring capitalist economy?

Get all assignments and case study answers of NIBM MBA and EMBA CLICK HERE

The present age of LPG- Liberalization, Privatization and Globalization- the existence of the capitalism is very significant. In my opinion capitalism will accelerate the development of an economy. We, ourselves are the example of enjoying the fruits of privatization of our country via new economic policy-LPG. From 1991-92 after the economic reforms our economy lifted by the merits of capitalization / privatization of public owned or state owned undertaking. The GDP, rage of inflation wholesale and consumer price index, foreign capital investment, foreign trade etc. will shows the effect of capitalism.

Capitalism is the very simple form of economic organization where the Government does not play any significant role. The responsibility of maintaining and running the organization lies mainly with the private entrepreneurs. The basic central economics problems – what, how, and for whom (Prof.Samuel)- are handled by the private entrepreneurs.

The entrepreneurs are guided by their own self interest. The Govt. does not interfere with their activity. The Got can not direct them to produce or not produce anything. They are not required to get any licenses, permits etc. They can produce anything; they can sell this commodity at a time and a place of their own choice etc. As the economy is based on free private enterprise and Govt. does not interfere, this type of system is also known as ‘market economy’ or market system or ‘laissez faire system’.

In short a capitalist economy or free enterprise economy is one which the means of production viz., land, labour and capital are owned and managed privately. In capitalism the above phrase “what, how and for whom ” is lead by the private sector. That is the Govt. has no power to interfere at every stage of the following three questions.

1. What goods and what varieties should be produced, and in what quantities should they be produced.
2. How should they produce?
3. For whom are these goods and services produced or who will consume them?
India is a mixed economy, where consists the features of capitalism and socialism. As a mixed economy, India gives importance to the merits of capitalism.




The following merits of capitalism are very important to the development of a country.
1. Large scale production and newer and finer varieties of goods.
2. Increased productivity.
3. High standard of living
4. Automatic working – without no interference or direction from the top.
5. Maximum satisfaction to consumers.
6. Proper utilization of resources.

7. Protection of fundamental rights like right to property, transaction of property etc.
8. Reward according to the ability of entrepreneurs and workers.
9. Helps to change- flexibility to accept any favorable change in economy.
10. Encourage economic development.

To know deeply about the merits of capital of economy, we should know the characters of it. The following are the main nature of a capitalist economy.

1.The Right to Private Property
It means that the society provided the owner with the right to acquire, to keep, to use exclusively and to dispose valuable things at one likes. In this system one can purchase the asset as his private property. And he can keep it, use it exclusively and dispose it of as and when he likes. Subject to the general restriction and regulation imposed by the state, the owners of the property are free to utilize them in any way they deem fit. Here the private property is a legal right, this is protected by the law of land. The chief merits of private property are the pride and pleasure of ownership and consequently personal interest in the property, initiative to put it to the best use etc. It is correctly said “The magic of property turns even, sand into gold”.........
pls satisfy our t&c to get the full & new version of answer

Posted in: