In at least one hundred and fifty words, evaluate the pros and cons of government involvement in the free-enterprise system of economics.
Answers
Unlimited Profit Margins
PRO
An economy based on the relationship between supply and demand promotes healthy competition. Companies strive to offer better goods or services than other, similar companies. If one company offers more extensive goods and its profit margins increase, then that inspires its competitors to get innovative so that they can retain or gain some of that market. This lively symbiosis is the backbone of free enterprise, and is a huge positive. Consumers gain when companies compete to offer more products or services in varied, often more efficient ways. Consider how the shopping industry drastically changed during the last 10 years with Amazon able to ship products directly to consumers, saving them money and time spent driving to a “big box” store.
CON
That potential for profit is as alluring as it is dangerous. In order to maximize the highest profit margin, potential companies often resort to unethical or even illegal behavior. The 2010 Deepwater Horizon oil spill is arguably a symptom of such a mindset, because of rushing, that oil company caused a horrific natural disaster. Such behavior is detrimental to its employees, because a company is not paying attention to, safety protocols, for example. Rushing or not paying attention to safety protocols, can cause lives lost or at least caused sickness and injury. Free enterprise suffers when companies go completely unchecked and foster corrupt competition.
Efficiency at a Cost
PRO
The competitive backbone of free enterprise nurtures efficiency. Knowing your company is up against another company just like yours means resources at your company’s disposal must be used to maximize all benefits, while also reducing the cost of any risks, financial or otherwise. Consumers dictate the demand, so businesses must regulate the supply, both output, and containment, in order to not flood the market.
CON
Ideally, a free market economy is self-regulating. Self-regulating means that the market is considered responsible enough to go about its business with minimal government oversight. This can backfire, especially where efficiency is concerned. Let’s say a company produces a product that's in high demand right now, as consumers are willing to pay above the standard market value for it. This means that a company may be tempted to cut corners to efficiently maximize its profit margins. If that business feels free to conduct business however they please -- even if that means paying workers an unfair wage or bypassing government regulations -- all to be more efficient economically than their competitors, then the entire system suffers.
Economic Growth Rates
PRO
Countries operating a free enterprise market traditionally have a higher economic growth rate. Generally speaking, this leads to a country’s citizens to be wealthier overall. A larger market fosters more competition, which means that more companies open up, which means a greater number of jobs, and the healthy cycle continues to prosper. More jobs mean more money, and more money is poured back into the system by consumers.
CON
In one word -- inflation. This is the biggest danger of economic growth. When the demand outgrows supply, it sets the scene for companies raising prices. This sort of disparity can have a very bad chain reaction. For instance, in the last 30 or so years almost every December there has been one toy more popular than another, and the sparse supply meant that the demand increased, and with that, prices inflated. This means that consumers have less money to spend on other things -- even on necessities. This same negative comes into effect after natural disasters such as hurricanes, when gas stations price gouge the gasoline, knowing that people will pay whatever they ask because supplies are limited.
The self-made billionaire Warren Buffett told Barack Obama in his book, "The Audacity of Hope" that, “The free market’s the best mechanism ever devised to put resources to their most efficient and productive use. . . .The government isn’t particularly good at that. But the market isn’t so good at making sure that the wealth that’s produced is being distributed fairly or wisely.” Of all the pros and cons of free enterprise, the most consistent thing is that it is perhaps the one economic system that gives everyone a shot.