What are limitations of a free enterprise system?

Answer 1

Although we generally accept the arguments of Adam Smith in "The Wealth of Nations" that the purely self interested actions of independent individuals and businesses in a free market economy will add up to a functional economic system that benefits everybody and is self regulating, much as if it were guided by an invisible hand, in practice, free enterprise run amok can do terrible harm. Catastrophic environmental damage can be, and has been caused by short sighted or misguided businesses in search of a profit for this quarter. Oil spills, soil erosion, global warming, oceans polluted with Mercury, and many other examples could be cited. In addition to the environmental aspect, there is also a serious concern about human rights. We seem to live in a world in which the rich get richer and the poor get poorer all the time, in which some people have bizarre quantities of wealth that they do not even know how to spend, while others die of starvation, lacking even a shred of human dignity. In some countries, children are exploited as a source of cheap labor. Sweat shops squeeze the last drop of profit out of abused workers. These are also the results of the free enterprise system. Employers are free to abuse their employees. So, the free enterprise system has many limitations. Of course, a state run or socialist economy also has limitations. Utopian solutions always run into the problem that human beings are capable of corrupting any economic or political system, however idealistic it may be in its design.