Capitalism is one of the most followed economic systems ,globally, which is based on the private ownership of the resources required for production and their operations for profit. The vital features of the capitalist system include private property, capital accumulation, wage labour, a price system, and the markets. The four main factors of production, that is, land, capital, natural resources, and entrepreneurship, are owned by private companies. It also implies that the country’s trade, industry, and profits are controlled by private companies instead of by the people whose efforts went into the production of the output and generation of the profits for those companies.
Capitalism can be traced back to Western Europe during the 1600s, through trade and the exchange of products between two or more merchant countries. It is now followed in most countries everywhere, like the United States of America, Canada, the United Kingdom, etc. However, capitalism is not the only economic system available; in the past century, other countries have embraced other systems, such as Communism in Russia, China, and Vietnam, or Socialism as followed in India.
Capitalism has been hailed by many as the greatest turning point in our history for the growth of the economy of various nations that adopted it. The main advantage of capitalism is that consumers get the best products at the best prices due to the high competition between two or more companies. Consumers have been seen to be willing to pay a little extra for quality products, and all businesses obviously wish to maximize their profits. This increases the competition and encourages businesses to be as creative, innovative, and efficient.
The added incentives also play an advantageous role as they cause most companies to reduce cost and avoid waste when it deems necessary while benefiting the society at large by the rollout of an innovative technology or product, for example, electric cars being popularised by Tesla motors (US) reduced the high cost of electric cars while making a greater number of innovative cars available to the public.
A capitalist society promotes and rewards innovative individuals and companies. This is an important factor for the economy's growth as it brings out efficiency and increases competition. Seeing as the government controls all the factors of production and sets the prices of most products in every society that does not practise capitalism, it would create a highly mighty central government that would often be involved in all important aspects of the consumer's life. This assures a lack of political freedom.
In a capitalist society, the citizens of the country are given much more political freedom and stability. Economic freedom causes political freedom in an economy, and having a government-owned means of production can lead to bureaucratic overreach and authoritarianism. Countries that practise the capitalist economic system view it as the only plausible way to have socioeconomic equality, in fact, they consider the other alternatives like socialism, communism, or anarchism are doomed to fail.
Capitalism has some advantages and has certain disadvantages also which are as follows. The most unacceptable impact that occurs due to capitalism is marginalization. In a highly competitive and purely capitalist economy, there will be no place for the children, women, and the senior citizens’ vulnerable sections of the society who would presumably not have any skills or physical capacity. Since such people have less or no paying capacity for various products, services, or facilities, the private sector is rarely incentivized to cater to them. Goods, and essential services like healthcare, public transport, and education, are out of reach of vulnerable sections in countries following capitalist economic systems.
A famous proverb goes like this: “Anyone can be rich if they work hard.” This proverb is prejudiced and may not be true under capitalism, there can never be equality. Relative deprivation exists in society, and the rich are considered rich because there are poor to compare them with. Also, capitalism is undemocratic in nature, where the citizens have very little say in the government's actions. Governments will only listen to corporate houses as they are the ones to fund their election campaigns.
Inclusive growth has been defined differently by different scholars. The dictionary meaning of the term “inclusive” is comprehensive which does not exclude any section of the society”. Basely at al (2007) defined inclusive growth as the “growth that has a high elasticity of poverty reduction”, hence, it should have a higher reduction in poverty per unit of growth. The term refers both to the rate and method of growth, which are often considered to be intertwined and addressed together. It implies a direct link between the macro and micro components of growth.
Inclusive growth means that the fruits of the growth are reaching even the person standing on the last rung of the social hierarchy so that he may lead a life with dignity. It includes food security, employment opportunities, health care, and education infrastructure for all the country's citizens, irrespective of his or her economic status.
The concept of inclusive growth focuses on equitable growth for all sections of society.
This involves ensuring that “fruits of growth and development”, reach the poor and marginalized sections. It promises to reduce disparities in terms of Per Capita Income in agriculture and non-agriculture, rural and urban areas, and different socio-economic groups, particularly between men and women and among different ethnic groups. The result of inclusive growth is a reduction in vertical inequalities/ individual inequalities and horizontal inequalities/ group inequalities.
A rapid and sustained poverty reduction requires inclusive growth that allows people to contribute to and benefit from economic growth. The rapid pace of growth is very crucial for any substantial poverty reduction, but for this growth to be sustainable in the long run, it should be broad-based across sectors and inclusive of the large part of the country’s labour force.
Hence, the term ‘inclusive growth’ is a concept that advances equitable opportunities for economic participants during economic growth with benefits that every section of society can enjoy. This concept talks about traditional economic growth models, and redirects focus on the equity of health, food security, human capital, environmental quality, social protection.
According to Adam Smith, economic growth depends on the amount of capital invested in increasing the productivity of the citizens. Capitalism is vital for India’s economic growth ambition, especially for her inclusive growth ambition.
Despite the flaws of capitalism, if the economy is regulated by a government that functions on a model of social welfare, capitalism can lead to greater efficiency in the enterprise, increase private investments and boost economic production while providing the funds for the government to channelize its social schemes for the betterment of the poor and the marginalized.
Let’s take the example of Scandinavian countries like Norway, Denmark, Sweden that adopted the capitalist economy with a strong regulatory regime and a tendency to promote social welfare scored very well . It remainedin the Top 10 on the Inequality-adjusted Human Development Index. Thus, the model of capitalism can bring inclusive growth if the governments and civil societies throughout the world know to use it for the benefit of the people.