Capitalism

What is Capitalism?

Capitalism is an economic system where private businesses and trade are encouraged. It is also known as the Market system which encourages competitive markets and Capital markets that are freely operating, ownership rights and low corruption.

The market is not under the rule of the government. This means that production in the market is not owned or directed by the government. Whereas, communism, which is the opposite of capitalism, is owned and directed by the government.

Drivers of Capitalism

There are three major drivers of capitalism, i.e. private ownership, free markets and market-driven by profit. The production in the market system is privately owned by companies. The market is driven by profit along with supply and demand. They have a good and reliable legal system and governing laws in place. However, inequality levels are high in capitalism.

Benefits of Capitalism

One of the major benefits of capitalism is that it drives people to innovate and improve products and services. In capitalism, businesses can be superior and therefore, provide better services. Consumers are always ready to cash out more for quality products. It is a win-win situation for both parties.

Under capitalism, the market allows us to decide how businesses need to allocate resources. This basically means that the working capital, labour and other necessary resources are distributed in a way that will lead to high profits. It is a self-organising market.

Four Economic Systems

Capitalism is one of the four economic systems that operate in the world today. They are mentioned below:

a. Capitalism b. Socialism c. Communism d. Fascism