In an answer of at least two well-developed paragraphs, explain the advantages a

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In an answer of at least two well-developed paragraphs, explain the advantages and disadvantages of free market economies.

May 26th, 2015

  1. Competition between different firms leads to increased efficiency, as firms do whatever is necessary—including laying off workers—to lower their costs;
  2. Most people work harder (the threat of losing one's job is a great motivator);
  3. There is more innovation as firms look for new products to sell and cheaper ways to do their work;
  4. Foreign investment is attracted as word gets out about the new opportunities for earning profit;
  5. The size, power, and cost of the state bureaucracy is correspondingly reduced as various activities that are usually associated with the public sector are taken over by private enterprises;
  6. The forces of production, or at least those involved in making those things people with money at home or abroad want to buy, undergo rapid development;
  7. Many people quickly acquire the technical and social skills and knowledge needed to function in this new economy;
  8. A great variety of consumer goods become available for those who have the money to buy them; and
  9. Large parts of the society take on a bright, merry and colorful air as everyone busies himself trying to sell something to someone else.
These are the main advantages of the market economy, and in his article Professor Kang gives a good account of them. But, as I said, there are also major disadvantages, and these Kang neglects. Among the disadvantages, we find the following:

  1. Distorted investment priorities, as wealth gets directed into what will earn the largest profit and not into what most people really need (so public health, public education, and even dikes for periodically swollen rivers receive little attention);
  2. Worsening exploitation of workers, since the harder, faster, and longer people work—just as the less they get paid—the more profit is earned by their employer (with this incentive and driven by the competition, employers are forever finding new ways to intensify exploitation);
  3. Overproduction of goods, since workers as a class are never paid enough to buy back, in their role as consumers, the ever growing amount of goods that they produce (in the era of automation, computerization and robotization, the gap between what workers produce—and can produce—and what their low wage allows them to consume has increased enormously);
  4. Unused industrial capacity (the mountain of unsold goods has resulted in a large percentage of machinery of all kinds lying idle, while many pressing needs—but needs that the people who have them can't pay for—go unmet);
  5. Growing unemployment (machines and raw materials are available, but using them to satisfy the needs of the people who don't have the money to pay for what could be made would not make profits for those who own the machines and raw materials—and in a market economy profits are what matters);
  6. Growing social and economic inequality (the rich get richer and everyone else gets poorer, many absolutely and the rest in relation to the rapidly growing wealth of the rich);
  7. With such a gap between the rich and the poor, egalitarian social relations become impossible (people with a lot of money begin to think of themselves as a better kind of human being and to view the poor with contempt, while the poor feel a mixture of hatred, envy and queasy respect for the rich);
  8. Those with the most money also begin to exercise a disproportional political influence, which they use to help themselves make still more money;
  9. Increase in corruption in all sectors of society, which further increases the power of those with a lot of money and puts those without the money to bribe officials at a severe disadvantage;
  10. Increase in all kinds of economic crimes, with people trying to acquire money illegally when legal means are not available (and sometimes even when they are);
  11. Reduced social benefits and welfare (since such benefits are financed at least in part by taxes, extended benefits generally means reduced profits for the rich; furthermore, any social safety net makes workers less fearful of losing their jobs and consequently less willing to do anything to keep them);
  12. Worsening ecological degradation (since any effort to improve the quality of the air and of the water costs the owners of industry money and reduces profits, our natural home becomes increasingly unlivable);

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