Applied Anthropology

What are some of the issues that arise with a free-enterprise system?
Answered by Jacob Silverman and Discovery Channel
  • Jacob Silverman

    Jacob Silverman

  • Discovery Channel

    Discovery Channel

  1. Also known as a free market or laissez faire capitalism, a free-enterprise system is, in theory, an economic system in which government plays no role, except perhaps to guarantee property and ownership laws. Consumers, merchants, businesspeople and everyone else involved are allowed to conduct their economic affairs as they see fit. Proponents of such a system often claim that it increases competition and allows for business to proceed without obstruction.

    But there are consequences to such an unfettered style of capitalism. A big one is that it offers no protection to workers. Businesses would be under no legal obligation to treat their employees well, to limit their hours or provide breaks, to offer vacation time or healthcare or to pay them a fair wage. And if employees got hurt on the job, they'd have little or no recourse.

    A free-enterprise system also has no government oversight or involvement, meaning that even roads and police forces would be privately run. It is a system wholly designed to promote competition and profit, which can come at the expense of consumers and even citizens who have no interest in engaging with the system. For example, under a truly free-enterprise system, an aluminum plant would be free to dump waste wherever it pleases. People living nearby wouldn't be able to do much about it. They could move, but for many people that would be impossible, too expensive or simply something they wouldn't want to do.

    In the fall of 2008, as the U.S. and global economies began to experience severe turmoil, some commentators argued for a free-market-oriented approach, meaning to withhold any government intervention and ride out any turbulence. But since the economic downturn was in part caused by fraud, speculation and dangerous accumulations of debt, many governments chose to act, injecting money into the economy or propping up financially unsound firms so as to contain the damage.

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  2. The basic problem with free enterprise is that most people like making money, and the more the better. So if no one tells an entrepreneur that he needs to pay his workers a certain minimum wage so they can afford basic necessities, he may not. Ideally, the entrepreneur will take good care of his workers because he knows a happy and motivated employee can make a better product. But other entrepreneurs will pay workers next to nothing, understanding that he can sell his products for much cheaper and at a much higher volume. Same thing with safe working conditions and pollution-spewing factories -- it's all about the bottom line in a truly free-enterprise system.

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