DEFINITION OF CAPITALISM

482 WD

From an economic standpoint, capitalism is an economic system whereby all capital (defined in next essay below) employed in commerce is privately owned and the benefits (the return generated on the employed capital) accrues to the owners of the capital. The market (individuals willfully making decisions) determines where to allocate capital (what goods and services to produce and what price to sell them) for and the benefits (profits or return on capital) from this exchange accrue to the individual.

The primary alternative to capitalism is socialism or centrally-planned economic systems whereby all the capital (in the form of ownership interests in companies) is owned by the government, and therefore the benefits accrue to the government, not to individuals. In addition, the government, not the market, determines what goods and services to produce. Some countries may employ a combination of the two systems (companies may be privately owned as well as owned by the government).

Capitalism, however, is more than just an economic system. It is a philosophy that revolves around the individual and combines many of man’s natural instincts and the natural forces of