Capitalism is currently the dominant economic system. It is the direct opposite of a socialist or communist state-run, centralized economy. Finally, a junction of the two is called a mixed economy. Capitalism is also called a free market economy.
Capitalism revolves around private ownership. That means that private actors (people or companies) can determine what they produce and what they do with their capital. Thus, they can buy and sell goods or land based on their interest.
Another major factor is the free market. Rather than the government, the market determines the prices. Where supply meets demand sets the price of a product. In other words, it is an interaction between buyers and sellers. Further, capitalism promotes natural competition between companies or individuals, which forces them to develop, enhance.
Besides, it also compels the companies to focus on the customer’s needs. Lastly, it provides the freedom to choose based on one’s needs and (or) wishes.
History of Capitalism
In general, until the 16th century and beyond, Europe was feudal. Yet, the first signs of a new system based on a free market were slowly emerging. The 18th century brought significant steps.
In the theoretical field, Adam Smith published his famous Wealth of Nations. This work won Smith the title of “the father of capitalism.” Further, American independence and the French Revolution conveyed substantial changes to society. The rights of individuals became more and more critical. In conclusion, the rise of liberalism was crucial.
It was not until the end of World War I. that capitalism truly kicked off. Then, it widely spread around Europe and the whole world. However, in the 1930s, other models, such as that of socialism or that in Nazi Germany, began to arise. During the Cold War, capitalism was the system of the West and socialism of the East.
Today, it is the most dominant system. It creates space for technological advancement and economic growth. Lastly, a capitalist is a person who uses their wealth to produce goods, sell the goods, and hence, make more money. Socialists criticize this system for exploiting the lower classes.