Capitalist System and Its Flaws Analysis

It is important to note that capitalism is a political and economic system that enables private ownership and profit-seeking. Although the system brought a wide range of innovations and quality of life improvement, it is far from perfect in terms of justice, equality, fairness, and long-term viability. As with any political and economic system, human nature found a way to abuse and twist capitalism to bring more inequality and exploitation. Therefore, the fundamental flaws of capitalism are worker exploitation, capitalistic governments, and consolidation of power.

Firstly, the oldest and most apparent critique of capitalism offered by Karl Marx was centered around worker exploitation. Capitalism operates on the basis of the formation of two distinct classes of society, which are comprised of the working class and owners. Ownership of capital enables the utilization of the workforce in order to achieve profits. This very incentive to seek profit with a goal of its maximization makes owners constantly aware of possibilities to increase profitability. However, profits are equal to what the customer pays minus what the cost of making a product or service is. The working class provides its labor in exchange for payment, such as wages, and this accounts for the cost of making a product and service. Considering the economic forces limiting the changeability of market price, there is a strong incentive to exploit workers to increase profits.

The sole purpose of any endeavor in a capitalistic system is to seek and maximize profits. Therefore, paying the working class as little as possible is a prime incentive towards the core goal. This tendency exposes a major problem with capitalism, which is the lack of focus on human wellbeing and prosperity. Karl Marx considered capitalism immoral due to worker exploitation because the working class will always be under pressure to deprive them of their earned payment. In a sense, all workers are paid less than what they deserve because there is no opposing incentive or force, except competition, which is difficult to preserve for it to be significant due to consolidation and inequality among businesses as well.

Secondly, More’s vision about the economic and societal system was distinct, where independence and labor played a central role. The most interesting element of the scholar’s utopian vision is the government. It is stated that governments are mere conspiracies for the wealthy elites, which only pursue their private interests pretending to manage the public (Aditya Shukla, 2020). The given remark is not only spot-on but also holds relevance even today. It is evident and well-known that the wealthiest individuals, families, and enterprises lobbied and influenced the decision-making processes in the government. The documentary ‘Inside Job’ revealed how the prime speculators, who caused the financial crisis of 2008, were able to get away with their wealth untouched, whereas millions of American investors and homeowners suffered (More, 1551).

It also showed how key government figures did not act in the interests of the public but rather helped top executives and large corporations to keep their wealth and organizations through bailouts and legal assistance (More, 1551). In other words, government, even today, functions as conspiracies for the most powerful and richest groups.

Thirdly, on paper, many issues of capitalistic incentives are supposed to be balanced by competition, but, in practice, the force of competitive struggle can be undermined through consolidation. Any free market begins with many small businesses competing with each other, and after some time, few emerge as the largest market leaders. The longer the market exists, the more likely it is to have fewer market leaders. The end result is that these few players can consolidate their efforts to prevent smaller businesses from flourishing, agree on pricing, determine the common business practices, and influence the government to make legislation beneficial to them.

Consolidation is impossible if there are many competitors with a similar level of influence, however, large corporations can easily suppress smaller businesses by buying them out or using their economies of scale to make their business invalid.

Lastly, when it comes to solutions, there is a wide range of propositions. It is well-known that Karl Marx advocated for socialism in the form of communism, where all types of private property are abolished. The system he proposed was realized and implemented in many nations, some of which became one of the largest superpowers, such as the USSR. However, it proved to result in authoritarian dictatorships, where economic prosperity was far inferior to the capitalistic systems. More’s vision is more outdated but still relevant in its conceptuality of self-reliance and true independence. He wanted families to grow their own foods, make their own clothes, tools, etc. Government and consumerism are almost non-existent in his utopian vision.

In conclusion, the major flaws of capitalism include consolidation of power, the vulnerability of governments to capitalistic influence, and worker exploitation. Although the scholars and thinkers who were first at addressing these problems might have offered the best solutions, recognizing the core issues of capitalism remains critically important. By being aware of the stated flaws, it is possible to address them in an effective manner to ensure prosperity, well-being, and justice.


Aditya Shukla. (2020). Inside job (2010 full documentary movie) [Video]. YouTube. Web.

More, T. (1551). Utopia.

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