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Effects of Capitalism

Capitalism came into play in the late 15th century and it was fueled by the start of the industrial revolution. During this time, colonialism was also taking root. These two factors accelerated capitalism throughout Europe and the world. Amadeo (2021), defined capitalism as an economic system where all the factors of production which include, capital goods, entrepreneurship, labor, and natural resources, are controlled by a single entity. This is done through companies and factories. Its opposite is said to be socialism (“Definition of capitalism,” n.d.). In the recent past, different economists have tried to argue the advantages and disadvantages of a capitalist society. However, the disadvantages of capitalism outweigh the advantages. In a capitalist society where government involvement is limited, we have serious cases of inequality, monopoly by specific companies, environmental distraction, and an uncertain economy.

One of the main effects of a capitalist society is that it fuels social inequality. This is made possible by the fact that capitalist society is run and mostly governed by powerful individuals and companies and the long-term effect of this is that it does not favor those who are less competitive or less privileged in the society. Therefore, in a capitalist society, the most disadvantaged people are kids, the elderly, and those who are disabled (Amadeo, 2021). Even though some economists prefer a capitalist to socialist society by insisting that capitalism promotes a free market where everyone has a chance to participate, in most cases it does not create balance in opportunities available (Amadeo, 2021). To my opinion, social inequality is the main effect of capitalist society and this can be solved by government regulations and involvement.

The second effect of a capitalist society is the monopolization of certain services and product by specific companies. A report by Pettinger (2019), stated that the ownership of capital by individuals and companies may lead to market exploitation. It stated that these companies may exploit the market by hiking the prices of their commodities as they are the only ones who offer certain services in society. According to the same report, another way in which monopoly companies may exploit their workers is by offering low wages which widens social inequality. Therefore, despite being a free market, socialism is much better compared to capitalism as in socialism, the government is involved and regulates the wages and services.

The third effect of a capitalist society is the fact that it leads to environmental distractions. A firm that controls the majority of the capital in society may tend to ignore the negative effects that are caused as a result of the production process. This may include pollution from production. This kind of pollution may be extreme when harmful fumes are emitted near areas of residence or in other incidents, oil spills in water bodies. This will directly harm the environment and the living standards of the people in that society (Pettinger, 2021). In conclusion, the long-term effect of capitalism may lead to the effect of global warming and if it persists, may be devastating to the world.

The fourth effect of a capitalist society is the fact that it is characterized by massive unemployment and economic uncertainty (Pettinger, 2021). The direct cause of this is the fact that the major part of the economy is controlled by the private sector (“Definition of capitalism,” n.d.). According to Pettinger, the economy of a capitalist society goes up and down due to minimal regulation by the government. Despite rewarding hard work, a capitalist society may cause much damage to society if recessions persist and may need the aid of the government.

In conclusion, a free society may be great because it rewards hard work, however, the fact that it is characterized by massive inequality, monopoly, environmental distraction and uncertain economy, makes it a less preferred society compared to socialism. According to Pettinger (2021), capitalism is about passing wealth to the future generation. He went on to argue that despite being rewarded for your hard work, more than often, individuals inherit wealth. This makes it unfair and it is by this that it creates wide societal inequality.


Amadeo, K. (2021, October 21). How capitalism works compared to socialism and communism. The Balance.

Definition of capitalism. (n.d.). Dictionary by Merriam-Webster: America’s most-trusted online dictionary.

Pettinger, T. (2021, June 3). Pros and cons of capitalism. Economics Help.


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