Types of Capitalism | Examples of a Capitalist Economy

Types of Capitalism

Definition of Capitalism

Capitalism is an economic system that defends the freedom of the market and that the means of production are privately owned.

In this way, it uses the market as a mechanism to efficiently use resources and have capital that generates more income.

As a result, it is possible to affirm that capitalism is the opposite of socialism, since it is based on the fact that productive resources and industries belong to individuals and not to government organizations.

Features of Capitalism

The main characteristics of capitalism are the following:

• It is governed by the freedom of the market, that is, it uses free trade to manufacture, buy and sell any type of goods and services, especially those most demanded by society.
• It has minimal government intervention and supervision, since government entities manage national defense, so that private property is respected and all contracts are fulfilled, but they only intervene as regulatory bodies.
• As mostly private property is developed, capitalism earns the respect of industry.
• It has free stipulation of prices so that resources and their distribution among individuals are freely assigned.
• It presents complete freedom in terms of contracting, legality and the financial resources that can be obtained.
• Promote the entrepreneurial spirit.
• Pursue economic growth.

Types of Capitalism

It is possible to classify capitalism as follows:

• Mercantilism

Mercantilism is a doctrine that was born in Europe between the 16th and 18th centuries, and which holds that countries will be more prosperous and successful the more wealth they accumulate. In this way, they must maintain a positive trade balance, where exports exceed imports.

• Free Market Economy

This system of capitalism, also called a market economy, is characterized by setting the prices of goods and services through supply and demand. In this way, it avoids the intervention of the State or any third party.

• Social Market Economy

The social market economy supports minimal government intervention in the economy, but ensures that basic and important services, such as social security, labor rights or education, are under the command of the State or under agreements where it intervenes.

In the social market economy, the vast majority of companies are privately owned and owned. This is often the most widely used form of capitalism today.

• Corporate Capitalism

This type of bureaucratic and hierarchical capitalism maintains that the public sector (State) only intervenes in the market to benefit and promote the interests of corporations.

Thus, in corporate capitalism, the State is in charge of eliminating competitive barriers and providing subsidies to companies to promote the country’s economy.

• Mixed Economy

The mixed economy combines public sector intervention with the supply and demand market.

This type of capitalism has a greater intervention of the State, since it ensures that the population has the necessary supply of resources. The mixed economy is also a widely used system today.

• Origin of Capitalism

Capitalism “free conomy” has existed since the earliest civilizations. However, it appeared in Europe in the 13th century, when the social-economic system of the Middle Ages was introduced as a substitute for feudalism.

Before capitalism existed as an economic system, work was practically compulsory and was required as slavery, servitude and a socio-moral obligation. In this way, capitalism proposed that they work for wages and that workers be considered as employees, not as slaves.

Difference Between Capitalism and Socialism

Capitalism and Socialism are completely different economic systems.

• Capitalism develops production with private and non-governmental entities , while socialism defends economic equality and contributes to the government eliminating inequality in society, implementing programs that protect those who have less in an economic sense.
• Ultimately, capitalism is sustained through the freedom of the market while, in contrast, socialism supports a greater and rigorous state intervention in the market.
• On the other hand, capitalism is governed by working independently to obtain income, therefore, as the main ideal, the one who works less will have less, and the one who works more will have more.

Examples of Capitalist Countries

Some countries that use the capitalist system today are the following: