Smaller firms can struggle to enter the market due to the high level of competition they face from firms able to gain monopolies early on within market development meaning they are less likely to be able to produce effectively as economies of scale will act as an issue, putting prices of production up per unit for smaller firms. Keynes wanted capitalism without its contradictions, the problem didnt lie with capitalism, but the laissez-faire approach capitalism took. Meaning that investors were then left and enable to pursue their own individual profit at the expense of the rest of society, without a care (Booth, 2012).
Keynes solution to this was to encourage investment and consumption through the State intervening.
If the state increased their spending this would mean investment would be increased, if the incomes of the rich were taxed this would allow for consumption to be raised by giving some to the poor as it is based around the theory that as a consumer, the poor as a collective will spend more than a few rich people (The Socialist Party,1979).
Capitalism is a system that is based on production powers and ownership inequality but may lead to innovation in the market. An economic structure such as capitalism is known for wealth inequality and distribution being unequal of resources (Clarke, 2012) but in order for the proper functioning of capitalism, within the working class there must be those willing to sell their labour-power to capitalists for money, a wage and in return the capitalist class recieve a commodity.
Being an economy that is focused on profit, it is ultimately keen to increase production meaning increased wage labour. This generally conflicts the interests of employees who work for a wage and those that they are hired by. It allows for companies to experiment with new products and technologies, allowing innovation to occur which keeps markets competitive which forces capitalist firms to plough as much of their profits as they can afford, allowing them to keep their methods of production up to date. An important role within capitalism is markets as they initiate some form of competition (Stanford,2008). Competition between firms mean they are always trying to lower costs through cutting wages or increasing productivity, leading to negative social implications, namely physiological needs of workers. This may be an issue causing unethical practice. As capitalism is profit driven it has been blamed for many negative implications on humanity, namely resource overexploitation, pollution as well as inequality in terms of financially and non-financially (Novkovic and Webb 2014).
It was thought by Smith that an individual has the power to determine their own success. Whereas Marx would expostulate that to beginning with wealth is advantageous within a capitalist economy as