Capitalism

Published Jan 22, 2023

Definition of Capitalism

Capitalism is an economic system based on private ownership of the means of production and the creation of goods and services for profit. That means it is a system in which the production and distribution of goods and services are determined by the free market, with little or no government intervention.

Example

To illustrate this, let’s look at the market for cars. In a capitalist system, the production and distribution of cars are determined by the free market. That means car manufacturers compete with each other to produce the best cars at the lowest prices. As a result, consumers can choose from a variety of cars that meet their needs and budget.

Meanwhile, the government does not intervene in the market. That means it does not set prices, regulate production, or subsidize car manufacturers. Instead, it only provides a legal framework that ensures the free market works properly (i.e., enforcement of private property rights).

Why Capitalism Matters

Capitalism is the most widely used economic system in the world. It is based on the idea that the free market is the most efficient way to allocate resources and create wealth. That means it is a system that encourages competition, innovation, and economic growth.

In addition to that, it also provides individuals with the freedom to pursue their own economic interests. As a result, it has been the driving force behind the economic development of many developed countries.