Defining capitalism and the capitalist system is not as cut-and-dry as it may seem. There are many different forms of capitalism and many opposing ideas of how a capitalist society should be structured. Some definitions portray a highly negative view about capitalism and mostly consider capitalists to be selfish and greedy. Others view capitalism as the only economic system that coincides with freedom, individualism, and choice.


 

Definition

Capitalism is an economic system involving the private ownership over the means of production, distribution of goods, and the overall structure of businesses. Profit motive, via success, is a key driver in a capitalist society where millions of businesses must compete against one another to survive. As a result, capitalist societies are usually among the most innovative and successful at societal advancement and technological creation. A reward-for-success model drives people to innovate, create, and produce goods or services that others want to buy.

Businesses in a capitalist society can include both a single person providing a specific service or a large multinational corporation operating thousands of stores throughout several countries. All  companies, both large and small, must compete against one another for consumers and dollars. Consumers are usually big beneficiaries of a capitalist system. Competition among businesses makes products more affordable and buyer-responsive than they would be if a single entity - such as a government - was the only supplier of a good or service.

Individuals typically have more options, too. A robust capitalist system often leads to the creation of small businesses with unique and consumer-driven products that may cater to a smaller segment of the population otherwise ignored in other systems where only one or two options are available.

Unlike socialism, fascism, and communism, a free-market economy emphasizes a structure that is free of burdensome government controls. The purest form of capitalism is known as laissez-faire capitalism. Here, the government acts only to protect businesses and only intervenes to prevent criminal activity. While the United States is considered a capitalist country, it is only partially so. Depending on the industry, socialist elements often creep in as the government exerts heavy control over production and even ownership of business. Economic capitalism is supported aggressively by conservative Republicans and libertarians.

Capitalists support a system that is entirely free-will based and participation is not forced. Consumers can choose to purchase a product, or to not buy a product and to create or not to create. Individualism and freedom are stressed. Capitalists, specifically laissez-faire purists, reject the infusion of government influence to force a product on people. Governments often subsidizes expensive products that citizens otherwise would not buy in order to push the product over other products. In it's worst form, purely political quid-pro-quo actions or special favors between government and business, often referred to as crony capitalism, is especially opposed.

 

Pronunciation: kap-eh-tal-iz-um

Also Known As: laissez-faire capitalism, market economy, free market, free enterprise, private enterprise

Alternate Spellings: None

Common Misspellings: capitalizm; capitolism

Leading Advocates for Capitalism: Conservatives, Libertarians, and Conservatarians in the United States; Philosopher Ayn Rand; Economists Thomas Sowell, Larry Kudlow; Talk Radio Host and Financial Guru Dave Ramsey; President Ronald Reagan

Examples: "In a capitalist society, all human relationships are voluntary. Men are free to cooperate or not, to deal with one another or not, as their own individual judgments, convictions, and interests dictate. They can deal with one another only in terms of and by means of reason, i.e., by means of discussion, persuasion, and contractual agreement, by voluntary choice to mutual benefit." - Ayn Rand