Economic systems: what is capitalism

General definition

What is capitalism? It is a system of economy that is based on private ownership of means of production and the creation of goods or services for profit. Characteristic traits include competitive markets, wage labor and accumulation of capital. Capitalism can come in different forms, like laissez-faire, welfare capitalism and state capitalism. It is believed by many theorists to promote economic growth and to allow for more opportunities for individuals to have more income. However, some critics of capitalism also attribute such aspects as social inequality and unfair distribution of wealth and power.

Types of capitalism

Depending on country and region capitalism can appear in many different variants. Below are the major ones.

  • Mercantilism

This is an early form of capitalism that is associated with intertwining of national business interests to state-interest and imperialism. Example: early colonists living inAmerica.

  • Free-market capitalism

What is capitalism with a free-market model? It is a system where prices for goods and services are set freely by the forces of supply and demand with no intervention by government policy.

  • Social-market economy

What is capitalism with social-market economy? It is a system where prices form with minimal intervention by the government. Example: Western and Northern European countries.

  • State capitalism

What is capitalism with a state system? It suggests state ownership of the means of production within a state. The government influences the economy on a wider scale.

  • Corporate capitalism

Corporate capitalism is associated with the dominance of hierarchical, bureaucratic corporations

  • Mixed economy

What is capitalism with mixed economy? This kind of system consists of both private and public ownership of the means of production. Macroeconomic policies are intended to correct market failures.