GMAT Essays (AWA)

ESSAY QUESTION:
"Individuals living in capitalist economies suffer a higher degree of personal risk than in other types of economies. Creating regulations that protect a society can’t help but interfere with free market forces, a basic tenet of capitalism."

From your perspective, how accurate is the above statement? Support your position with reasons and/or examples from your own experience, observations, or reading.

YOUR RESPONSE:
Some may think that individuals living in capitalist economies suffer a higher degree of personal risk than other type of economies and that creating regulations to protect a society will not help but interfere with free market forces. Other may claim that individuals will not necesarily suffer by capitalism. The debate is controversial but based on certain observations and facts, I would support te fact that individuals will not necessarily a higher degree of personal risk due to regulations set by a capitalist economy but the opposite is possible.

Firstly, in economies other than a capitalist, say democratic where the market is driven by free market forces, there is a higher chance of extreme movements which could benefit an business and hence an individual but in times of distress, an individual will suffer a higher degree of personal loss of property and wealth. For example, US economy is a democratic economy and has few regulations on the operation of the company but in times of financial crises, businesses suffer a greater degree of loss. To illustrate this scenario, we can take examples of businesses such as General Motors and AIG. Due to lack of regulation, the business was good till the overall economy was good but the lack of regulation in proper areas have led these businesses to an extent where not only the nation has suffered economically, but the individuals have suffered a greater loss. The individuals as investors and as employees have suffered a greater loss in terms of loss of wealth, employment and property.

Secondly, if we take a capitalist economy such as China, the economy has suffered due to overall world financial crises, yet the loss is less than that suffered by its counterparts in US. Further, a capitalist economy as China also creates business barriers by way of regulation to other nations. This results in protection of not only the nation's wealth but also helps keep the loss of an individual in check. China operates within the free market dynamics but with an intervention which keeps its economy and hence its individuals safe from huge negative financial losses.

Further, capitalist economy will ensure that its nations' interests are protected by proper timely intervention to avoid massive blows as in case of certain democratic economies where there is no control over the market forces. Moreiver, it is not necessarily true that an intervention will limit a country's progress which can be seen by China's overall economic progress.

In summary, while there are arguments possible on both sides of the issue, there are greater advantages for capitalist economies in times like these in order to protect an individual and hence limit the financial loss vis-a-vis the massive loss that an individual faces in a democratic nation. Further, it is not necessarily true that creation of regulation will result in increase in an individual's personal risk. Thus, as can be seen from above examples, individuals living in capitalist economies do not necessarily suffer a higher degree of personal risk than in other types of economies.