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.

RESPONSE:
Some believe capitalist economy is essential but risky to individuals because of the free market principals. While others contend that free market forces need to be controlled to reduce the risk to individuals. I believe the free market system can be maintained even with some regulations. These regulations would ensure that businesses are held accountable and do not deceive individuals putting them at risk.

The free market system of capitalist economy, such as that of United States of America, is based on the fact that the system allows businesses to compete and grow without much outside interference. However, the great American economic meltdown of 2008-2009 is a perfect example of why free market economies should be regulated. The economic impact created by the technique of credit swaps was based on bogus and false ratings, furthermore many American banks were giving out credit to ineligible individuals just to meet their goals. This is the primary reason why regulations should be imposed on some aspects of free market system. Although, i do contend that the economic forces should be kept separate from government control, regulations are important to make sure big corporations do not walk the wrong path to reach their goals. In the example provided earlier, the banks and credit agencies were giving out credits to individuals who could not pay back the loans. For example, one bank agreed to loan more than half a million dollars to a person working in McDonalds making minimum wage. I believe such actions warrant regulations.

As state earlier, i am not in favor of government controlling every aspect of the economy. Although these socialist economies have their advantages. The fact that American enjoy the best living conditions in the world is due to the profits tricking down to individuals on the other hand socialist economies, such as China and Columbia, have high percentage of people living in poverty.

In conclusion, i think regulations should be levied but only to an extent to avoid deceptive practices in business. I also agree that there is a very fine line to define this extent, but it is important to set the rules of the trade for the greater good.