Speculative investment within the capitalist system may enrich the investors and the financial community, but in so doing it creates economic and political instability with negative repercussions on the welfare of the majority. The evolution of capitalism, in first creating an artificial and non-productive elite class with regard to the ownership of the means of production, tends towards an even greater abstraction of this class from the production process. Speculation may involve overseas and colonial holdings. The double role of commodities and money as exchange value as well as real value reaches its peak in speculation which may alter the exchange value drastically, according to artificially-created supply and demand. A direct result of speculation may be inflation.
Capital that is not dissipated in conspicuous consumption or used for financing land transactions may not be available for industrial uses in developing countries because it is invested instead in speculative commercial undertakings.
In a world characterized by uncertainty, speculation is essential to the allocation of economic resources over time. There is no question of whether or not speculation should be permitted; the only economic issue is who will perform the service most effectively. The charge of 'over-speculation' is incorrectly framed. The issue is not one of amount but rather whether it is done well or poorly.
The quick turnover usually involved in such activities affords opportunities for speedy liquidation which are greatly valued under conditions of uncertainty. In comparison with industrial activities, moreover, they are simpler both to start and to operate. And, in some countries, they are in a better position to escape taxation and various government controls.