The basic assumptions of laissez-faire capitalism the existence of perfect competition and of free trade has not proved to be realistic and hence the benefits to the consumer accruing from the capitalistic system has not been realised.
The actual world is a world of imperfect competition where the actual output has been less than the optimum and the price charged has been higher than the minimum cost of production.
Capitalism has failed to ensure that the consumer will get what he wants at the minimum unit cost. The consumer’s sovereignty exists only in the imagination of the advocates of capitalism. It is not a fact, but a fiction.
Image Source: i.ytimg.com
ADVERTISEMENTS:
Further in view of wide disparities of income, the freedom to consume, even if it is assumed to exist, is meaningless for the vast majority of the people who lack the purchasing power to buy goods of their choice. It is only a handful of rich people who might enjoy the so-called freedom of consumption under capitalism.
Capitalism has an ugly face it divides society into two warring camps the haves and the have-nots. If capitalism has brought about economic progress it has done so at the expense of the worker whose labour made such progress possible.
The outstanding faults of the capitalistic system are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.
ADVERTISEMENTS:
Keynes conceives that a somewhat comprehensive socialisation of investment will prove the only means of securing an approximation to full employment.
The central controls, necessary to ensure full employment, will involve a large extension of the traditional functions of government.
In every capitalistic society we find concentration of too much wealth and income in the hands of too small a number of people. If economic inequality was solely due to differences in ability, we have nothing to say.
But economic inequality is mostly due to economic system. A man is often rich not because he is particularly gifted but because he was wise in the choice of his parents. The law of inheritance which is an integral part of capitalism has contributed to economic inequality. It makes the rich richer and the poor poorer.
ADVERTISEMENTS:
Social costs which capitalism imposes on the society are in the form of inflation, unemployment and cyclical fluctuations. Laissez-faire capitalism has given way to mixed economy in course of time.