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Free Enterprise Systems Analytical Essay

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Updated: Dec 7th, 2019

Free Enterprise Systems


Free enterprise systems have been adopted by many countries as the main form of business model. This model allows people to transact businesses without excessive government control and external influences from third parties (Hayek and Hamowy, 2011). The free ownership of property, rule of law, competition and free pricing are encouraged in this system (Bastiat, 2007).

The free enterprise system poses different advantages and disadvantages to the society. One of the influences of this economic model is on the moral and economic development of the society. These aspects of the society are important pillars of human existence. Therefore, it is important to understand how the moral and economic fabric of our society can be affected by the free enterprise system.

More importantly, this analysis would improve the understanding of our social, economic and political environments today (as a product of free enterprise systems). From the above understanding, this paper seeks to investigate the influence of free enterprise systems on the moral and economic development of the society.

Influence of Free Enterprise Systems on Moral development

The most notable characteristic of free enterprise systems in today’s society is the fact that the model gives all people an opportunity to be successful. Unlike other economic and social models, free enterprise systems do not offer limits to success. In fact, if one fails, the system always offers another opportunity to try once again.

Subsequently, if someone fails for a second time, he or she can try a third time (and again). It is very easy for people to succeed in such a system but most importantly, the system does not discriminate who is eligible for success (Bastiat, 2007). From free enterprise system, we have therefore seen many people rise from poverty to become some of the richest people in the world.

Certain socio-economic systems such as the caste system in India offers limits to success and almost entirely, the social class where someone is born dictates the socio-economic destination of the individual. Free enterprise systems are therefore fair to every individual.

The biggest drawback associated with free enterprise systems is the inequality created within such a system. The gap between the rich and the poor can be dramatically wide such that it may be very difficult for poor people to earn a decent living in this system. This situation may be realized through the understanding that free enterprise systems produce gullible individuals who may cannibalize everyone else for their benefit. Rogge (1979) explains that in such a system, there is little concern for the welfare of the majority.

For instance, free enterprise systems have been known to give rise to a wealthy minority who control most of the resources in the society. This inequality puts the poor majority at the mercy of the wealthy minority. Therefore, exploitation, unfair work policies, poor wages and similar practices are likely to be witnessed in such a system.

These are only some of the unfair societal practices we witness today from the establishment of free enterprise systems. Many people would argue that such an unfair and unjust system is immoral in today’s society because it does not uphold good ethical principles. Rogge (1979) observes that the future of free enterprise systems is shaky and there is need to re-evaluate its place in future societies.

Free enterprise systems also erode our moral fabric because it brews corruption and favoritism within the society. For instance, the argument advanced by proponents of free enterprise systems on inequality and injustice is that the poor and the downtrodden are taken care of through charities (Rawls, 1999).

However, the realities of potential success in such a system are extremely low. If charities are set up and donations flow in such systems, people who give such donations receive favor from authorities and all those concerned. Through this understanding, free enterprise systems reward corruption and support peddling. In fact, it is very easy for the wealthy minority to dictate policies in the society by using donations as a tool to wield power over the poor.

From the above dynamics of free enterprise systems, it is important to highlight that the free enterprise systems creates a materialistic society, which is obsessed by the accumulation of wealth (Danner, 1994, p. 63). Through this understanding, free enterprise systems hardly account for everyone’s well being.

Critics of free enterprise systems have cited this drawback as a strong weakness of the socio-economic model. Some have even observed that free enterprise systems will soon collapse because they will lead to the depletion of global resources since people are excessively greedy. This assumption bears a high credibility because the free enterprise system has created the perception that happiness can only be achieved through excessive accumulation of wealth and increased spending (Danner, 1994, p. 48).

Undesirable traits have therefore sprouted in today’s society because of this assumption. It has therefore been very easy for people to be envious of other’s success (and for those who have acquired wealth to be unreasonably selfish).

The increase in materialism has brought forth a generation that is willing to do anything to acquire status, fame and money. For example, many people are now willing to engage in crime to earn easy money. These statistics show how free enterprise systems have created a superficial society (Danner, 1994).

Influence of Free Enterprise Systems on Economic Development

As noted in previous sections of this paper, free enterprise systems support competition. Competition is an important aspect of economic development because it leads to innovation and the production of good quality goods and services. The free enterprise model also ensures that consumers can get the best prices in the market.

The freedom which is evident in free enterprise systems ensure that producers produce the best quality goods and sell them at the lowest prices so that they can be able to stay in business. If businesses do not conform to these requirements, they will be run out of business by others who do so. This business outcome ensures that the economy develops within the principles of quality and fair pricing (Hayek and Hamowy, 2011).

The fact that free enterprise systems do not offer limitations to the number of businesses that can operate within the economy increases the prospects of witnessing rapid economic growth. In addition, free enterprise systems ensure that as a producer, someone can produce whatever type of goods they wish to and sell them at their preferable price.

Similarly, buyers have the privilege of purchasing what they want within the confines of their unique tastes and preferences. The principle of free will is therefore upheld within a free enterprise system. Within such a system, economic growth is likely to be realized (Hayek and Hamowy, 2011).

The influence of free enterprise systems on economic progress is therefore undoubted. Excerpts from economic studies show that over the last few centuries, free enterprise systems have birthed economic growth in most countries. Therefore, some of the world’s super powers we know today became wealthy because of adopting free enterprise systems. For instance, if we use different economic parameters such as gross domestic product (GDP), capacity utilization and the standards of living, we can see that countries, which have adopted free enterprise systems as their main economic model, have the highest GDPs, capacity utilization and standards of living in the world. A few examples are the United States (US), United Kingdom (UK), Canada, Japan and other western powers. Economic theorists attribute the increase in economic development to the ability of free market systems to control price and establish free market systems. Rogge (1979) explains that these elements are the main pillars of economic progress in free enterprise systems.

To affirm the above observation, it is important to highlight that within past two centuries, the global economy has grown substantially. Upon further entrenchment of free enterprise systems, it is reported that further economic progress has been witnessed (Rogge, 1979).

During these times, some of today’s economic giants such as Japan were extremely poor nations but after adopting the free enterprise model, they have become formidable forces it today’s deregulated economy. Consequently, there has been a sharp increase in the standards of living (which has been occasioned by better healthcare services, increased food availability, and increased wages).


This paper shows that free enterprise systems have offered immense opportunities and limitations to our economic and social lives. Economically, the model has contributed to growth and an increase in the standards of living. Apart from the notable divide between the rich and the poor, free enterprise systems seem to work fine (economically).

However, weighing the moral retrogression that free enterprise systems have brought forth; it is difficult to support the economic model. Comprehensively, we can agree that free enterprise systems are economically progressive but morally retrogressive.


Bastiat, F. (2007). The Law. Alabama: Ludwig von Mises Institute.

Danner, P. (1994). Getting and Spending: A Primer in Economic Morality. Kansas: Rowman & Littlefield.

Hayek, F. & Hamowy, R. (2011). The Constitution of Liberty. Chicago: University of Chicago Press.

Rawls, J. (1999). A Theory of Justice. Harvard: Harvard University Press.

Rogge, B. (1979). Can capitalism survive? New York: Liberty Press.

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"Free Enterprise Systems." IvyPanda, 7 Dec. 2019, ivypanda.com/essays/free-enterprise-systems/.

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