GMAT Essays (AWA)

"Individuals living in a capitalist economy 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"

A capitalist economy is a type of economy where means of productions such as capital , land etc. are privately owned . According to the above statement , the individuals living in a capitalist society suffer a higher degree of personal risk than do people living in other type of economy such as a socialist economy. This statement is contoversial , as proponents of capitalism may say that regulating financial markets goes against capitalism . At first instance i partially agree with the statement but when the statement is taken as a whole i do not agree.

On one hand , citizens of a capitalist country may be at higher risk of loss of personal property and wealth if the economy is not doing so great but on the other hand these citizens will reap bigger benefits if the economy is prospering. A good ex is America where people were prospering before the real estate bubble burst , businesses were booming , real estate prices were increasing etc. After this real estate crisis many people lost their jobs , their life's savings , their houses etc. But when a country like India is concerned were there is more strict regulation on the financial market , the personal risk that Indians have suffered is lesser inspite of the effect that the ongoing recession in america has on the rest of the economies of the world. So it is true to say that personal risk in a capitalist economy is far bigger than in any other economy.

But when the statement states about breaking the main tenet of capitalism that is unregulated market and the policy of laissez faire and that this won't be of any help to the society i disagree. Even capitalism requires government . Even in capitalist countries there are certain level of government regulations that are there to support the market and follow the politics and the policies of the country. For ex: banks in America are vulnerable to run i.e. worried depositors are scared and they all try to withdraw their money at the same time. But the banks can't give their money back as that money has been invested somewhere else. Government regulation or interference helps here by guaranteeing the money of depositors and thus the bank survive.

Thus to sum up , in my opinion a capitalist economy does expose its citizens to a greater risk of personal loss but the chances of gain are higher as well in such an economy. Moreover , government and regulations are good if they are done thoughtfully to make the system better and thus to help the citizens secure , the country prosper and the market to run smoothly.