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Download the original attachment Capitalism typically refers to an economic and social system in which trade, industry and the means of production (also known as capital) are privately controlled (either singly or jointly) and operated for a profit This fits in with the most commonly held notions about capitalism as the free-market economy. However, it interprets capitalism so narrowly as to make it almost non-existent.  Capitalism is often defined as an economic system where private actors are allowed to own and control the use of property in accord with their own interests, and where the invisible hand of the pricing mechanism coordinates supply and demand in markets in a way that is automatically in the best interests of society. Capitalist economy is an economy system in which the production and distribution of goods depends upon invested private capital and profit making. It is the dominance of private owners of capital and production for profit. CHARACTERISTICS OF CAPITALISM 1. Private property-the right to own resources and bequeath property 2. Freedom of enterprise-own a business 3. Freedom of economic choice-work/not work, spend/not spend 4. Role of self-interest a. People are by nature economic creatures b. Self-interest is a fundamental characteristic of people 5. Competitive market system a. Many buyers and sellers b. Market participants, buyers and sellers, have little control over price c. Competition performs the organizing and controlling functions for a market economy 6. Limited government ("laissez-faire") refers to the idea that government should let markets be with a hands-off philosophy) OR THESE CHARACTERISTICS OF CAPITALISM Capitalism - Private ownership of the means of production An essential characteristic of capitalism is the institution of rule of law in establishing and protecting private property, including, most notably, private ownership of the means of production. Capitalism - Free market The notion of a "free market" where all economic decisions regarding transfers of money, goods, and services take place on a voluntary basis, free of coercive influence, is commonly considered to be an essential characteristic of capitalism. Capitalism - Profit The pursuit and realization of profit is an essential characteristic of capitalism. Profit is derived by selling a product for more than the cost required to produce or acquire it. Some consider the pursuit of profit to be the essence of capitalism. Capitalism - Self interest The pursuit of self-interest is commonly regarded as playing an essential role in capitalism. Many writers, such as Adam Smith and Ayn Rand, point to what they believe to be the benefit of individuals trading for their self-interest rather than altruistically attempting to serve the "common good." Smith, widely considered to be the intellectual father of capitalism
Capitalism - Private enterprise In capitalist economies, a predominant proportion of productive capacity has belonged to companies, in the sense of for-profit organizations. This include many forms of organisations that existed in earlier economic systems, such as sole proprietorships and partnerships. Nonprofit organizations existing in capitalism include cooperatives, credit unions and communes. Capitalism - Economic growth One of the primary objectives in a social system in which commerce and property have a central role is to promote the growth of capital. The standard measures of growth are Gross Domestic Product or GDP, capacity utilization, and 'standard of living'. Capitalism - Economic mobility One of the key markers of entrepreneurial economies and 'growth' in a society is its economic mobility, defined as the existence of large changes in the make-up of its socio-economic strata. This is manifested as the occurrence of large fluctuations in the various deciles or quintiles of income and wealth among the population, and the existence of large changes over a person's lifetime in relation to their real earning power.
EXAMPLE OF A CAPITALIST ECONOMY In every economic system, entrepreneurs and managers bring together natural resources, labor, and technology to produce and distribute goods and services. But the way these different elements are organized and used also reflects a nation's political ideals and its culture. The United States is often described as a "capitalist" economy, a term coined by 19th-century German economist and social theorist Karl Marx to describe a system in which a small group of people who control large amounts of money, or capital, make the most important economic decisions. Marx contrasted capitalist economies to "socialist" ones, which vest more power in the political system. Marx and his followers believed that capitalist economies concentrate power in the hands of wealthy business people, who aim mainly to maximize profits; socialist economies, on the other hand, would be more likely to feature greater control by government,
which tends to put political aims -- a more equal distribution of society's resources, for instance -- ahead of profits. While those categories, though oversimplified, have elements of truth to them, they are far less relevant today. If the pure capitalism described by Marx ever existed, it has long since disappeared, as governments in the United States and many other countries have intervened in their economies to limit concentrations of power and address many of the social problems associated with unchecked private commercial interests. As a result, the American economy is perhaps better described as a "mixed" economy, with government playing an important role along with private enterprise. Although Americans often disagree about exactly where to draw the line between their beliefs in both free enterprise and government management, the mixed economy they have developed has been remarkably successful.