The prices are the drivers of the capitalist economy. Prices coordinate the millions of activities and ensure that everyone interest is served and leaves all parties better off. The price system has three major functions. It conveys information, provides an incentive to the production process and helps utilize available resources to the maximum. A free market is one of the benefits of capitalism. It is through the market that resources are equitably distributed to various sectors of the economy. The market forces of supply and demand enable people to get the best products in the market and at the appropriate price that relates to her or his disposable income.
Capitalism has grown from the exchanges of goods in ancient time to the gold and silver and to the money economy. The money economy has enabled people from distance shore to trade and thus international trade had dominated the world since its inception in the 15th century. However, international trade has benefited some countries over others and has led to the establishment of tariff to control exploitations and protect infant industries. The American industries have a competitive advantage over countries in Latin America, Europe, Africa and Asia.
The big company takes advantage of a huge financial base to edge out small businesses (Friedman, 1990). Capitalism helps in shaping political freedom in society. American society is known to have a vibrant political system in the world; this is because the country enjoys the highest level of economic freedom. The ownership of enterprises by private businessmen enables the government to avoid large bureaucracies that would hinder the dispensation of services to the people. Moreover, if the government was involved in economic operations, it world extended to control people life on what and when to consume (Friedman, 1990).
Capitalism has been the engine of industrialization and promotes economic growth of America’ s economy. The free market economy offers the best incentive for firms and individuals to innovate.
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