Is Capitalism Sustainable?

by Ronak Chadha ‘25

In recent years, the sustainability of free-market capitalism as an economic system in the United States has been brought into question. With the current banking crisis, unsustainable expectations for continuous corporate growth by Wall Street, the impact on the environment of increasing consumption and consumerism, and increasing economic inequality, it is important to analyze whether or not free-market capitalism is a sustainable economic model. 

Capitalism is an economic system that is based on private ownership of the means of production and the creation of goods and services for profit in a market economy. While it has been praised for its ability to create wealth and promote innovation, it has also been criticized for creating economic and social inequality, as well as promoting unsustainable practices that can harm the environment. 

Customers in line outside Silicon Valley Bank headquarters in Santa Clara, California, US, on Monday, March 13, 2023. The collapse of Silicon Valley Bank has prompted a global reckoning at venture capital and private equity firms, which found themselves suddenly exposed all together to the tech industry’s money machine. © David Paul Morris/Bloomberg via Getty Images

One of the fallouts with free-market capitalism as an economic model is that lack of regulation and oversight by the government can lead to weakness and instability in the financial system, such as the financial crisis of 2008 and the more recent banking crisis which led to the failure of Silicon Valley Bank, followed by Signature Bank and First Republic Bank. In 2008, the United States experienced a financial crisis that was caused by years of low interest rates, loose lending standards and excessive risk-taking by banks that fueled a housing bubble. When the housing market collapsed, banks were left holding trillions of dollars of worthless investments in subprime mortgages, resulting in a worldwide recession and a loss of jobs and homes for many people. The banking crisis of 2008 and 2023 highlight the flaws of capitalism, including the lack of regulation and oversight of financial institutions and the excessive risk-taking behavior of banks which can wreak havoc on lives and livelihoods.

The constant pressure for corporations to demonstrate continuous growth and profitability, as demanded by Wall Street, has also been a long-standing issue in a capitalist system that has resulted in unsustainable and harmful practices. This unrelenting pressure has forced companies to prioritize short-term financial gains over long-term sustainability, often leading to poor decision-making, unethical practices, and disregard for social and environmental impact. The excessive focus on meeting the expectations of shareholders has created a culture of greed, where executives prioritize their own financial gain over the well-being of their employees and stakeholders. This is evident in the unethical and unsustainable hiring practices employed in sectors such as the technology industry which overhired during the pandemic when demand for their products and services was high, but are now laying off employees by the thousands to meet Wall Street’s demands for growth and profitability. This unsustainable and harmful cycle needs to be broken, and a more balanced approach that values long-term sustainability and social responsibility must be adopted.

The impact of capitalism on the environment is also a big concern as it encourages consumption and mindless consumerism, which can lead to the depletion of natural resources and the production of waste and pollution. In addition, capitalism often prioritizes profit over environmental protection, leading to unsustainable practices that harm the environment. Consider the fast fashion industry, which is notorious for its detrimental impact on the planet. Fast fashion’s emphasis on producing low-cost clothing quickly and frequently has led to environmental degradation, including water pollution, greenhouse gas emissions, and the overconsumption of natural resources. Additionally, the fast fashion industry relies heavily on exploitative labor practices, including child labor and low wages which are driven by the need to maintain profit margins at all costs.

Finally, capitalism has been criticized for its impact on increasing economic inequality and shrinking the middle class. The pursuit of profit and competition in a capitalist society often results in the concentration of wealth in the hands of a few individuals and corporations. As a result, the income gap between the wealthy and the rest of society has grown significantly, leading to the decline of the middle class. This trend is evident in many developed countries, including the United States, where the top 1% of earners have seen their income grow substantially in recent decades while the income of the middle class has stagnated or declined due to factors such as globalization, automation, and the decline of unions. The impact of capitalism on economic inequality and the shrinking of the middle class has become a significant concern for policymakers and the public, and there is a growing call for reforms to address these issues.

While capitalism has its benefits, it is important to recognize its flaws and work towards creating a more sustainable economic system.  In order to do so it is important to understand the pros and cons of other types of economic systems in prevalence today that include: Socialism, which is based on collective ownership of the means of production and the redistribution of resources according to need and is prevalent in countries such as Cuba and Vietnam, Command or Planned economy, which is a system where the government controls all aspects of the economy, including production and distribution, and is prevalent in countries such as North Korea and Venezuela, and lastly a Mixed economy model, which combines elements of capitalism and socialism, with the government regulating and controlling some industries while allowing others to operate freely in the market and exists in countries such as Sweden, Norway, and Germany. Each economic model has its pros and cons, and different countries and regions may adopt different systems depending on their unique circumstances and priorities. Ultimately though, it is evident that free-market capitalism in its current form in the United States is not sustainable. Some considerations to make the system more equitable and sustainable include  increased regulation and oversight of financial institutions, promoting long-term sustainable growth, and prioritizing environmental protection and social equality. By working towards a more sustainable economic system, we can create a brighter future for both ourselves and future generations.

Ronak Chadha is the ASB Liasion and a staff writer for the Bell Online. Check out his articles on the Bell Online, the Perspectives section, and the Online Podcast.

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