THE SPREAD OF CAPITALISM

The history of capitalism has diverse and much debated roots, but fully-fledged capitalism is generally thought
to have emerged in north-west Europe, especially in the Low Countries (mainly present-
day Flanders and Netherlands) and Britain, in the sixteenth to seventeenth centuries. Over the following
centuries, capital has accumulated by a variety of different methods, in a variety of scales, and associated with
a great deal of variation in the concentration of economic power and wealth, and capitalism has gradually
become the dominant economic system throughout the world. Much of the history of the past five hundred years
is, therefore, concerned with the development of capitalism in its various forms.

HISTORIOGRAPHY

The processes by which capitalism came about, evolved, and spread, are the subject of extensive research and
debate among historians. Debates sometimes circle around how capitalism is defined, but a significant body of
work has been able to bring substantive historical data to bear on key questions. Key parameters of debate
include: how far capitalism is a natural human behaviour and how far it arises from specific historical
circumstances; whether its origins lie in towns and trade or in rural property relations; the role of class conflict; the
role of the state; how far it is a distinctively European innovation; its relationship with European imperialism;
whether technological change is a driver or merely an epiphenomenon of capitalism; and whether or not it is
the most beneficial way to organise human societies.

The historiography of capitalism can be divided into two broad schools. One is associated with economic
liberalism, with the eighteenth-century economist Adam Smith as a foundational figure, and one with Marxism,
drawing particular inspiration from the nineteenth-century economist Karl Marx. Liberals tend to view capitalism
as an expression of natural human behaviours which have been in evidence for millennia, and the most
beneficial way of promoting human wellbeing. They tend to see capitalism as originating in trade and
commerce, and freeing people to exercise their entrepreneurial natures. Marxists tend to view capitalism as a
historically unusual system of relationships between classes, which could be replaced by other economic systems
which would serve human wellbeing better. They tend to see capitalism as originating in more powerful people
taking control of the means of production, and compelling others to sell their labour as a commodity.For these
reasons, much of the work on the history of capitalism has been broadly Marxist.

ORIGINS OF CAPITALISM

The origins of capitalism have been much debated (and depend partly on how the defining features of
capitalism are defined). The traditional account, originating in classical eighteenth-century liberal economic
thought and still often articulated, is the 'commercialization model'. This sees capitalism originating in trade. Since
evidence for trade is found even in palaeolithic culture, it can be seen as natural to human societies. In this
reading, capitalism emerged from earlier trade once merchants had acquired sufficient wealth (referred to as
'primitive capital') to begin investing in increasingly productive technology. This account tends to see capitalism
as a natural continuation of trade, arising when people's natural entrepreneurialism was freed from the
constraints of feudalism, partly by urbanization. Thus it traces capitalism to early forms of merchant
capitalism practiced in Western Europe during the Middle Ages.

TWENTY-FIRST-CENTURY DEVELOPMENTS

The twenty-first century has seen renewed interest in the history of capitalism, and "History of Capitalism" has
become a field in its own right, with courses in history departments. In the 2000s, Harvard University founded the
Program on the Study of U.S. Capitalism; Cornell University established the History of Capitalism Initiative; and
Columbia University Press launched a monograph series entitled Studies in the History of U.S. Capitalism. This field
includes topics such as insurance, banking and regulation, the political dimension, and the impact on the middle
classes, the poor and women and minorities. These initiatives incorporate formerly neglected questions of race,
gender, and sexuality into the history of capitalism. They have grown in the aftermath of the financial crisis of
2007–2008 and the associated Great Recession.

WHEN IS CAPITALISM FOUND?

The Debate Over Capitalism

The claims for capitalism differ from the classical case for a competitive market economy. Adam Smith’s thesis
two centuries ago was that the presence of many buyers and many sellers competing with one another in the
marketplace would weed out wasteful resource allocations “as if by an invisible hand.” (So, in equilibrium
conditions, one person’s earnings could not be further increased except at the expense of another’s.) This
valuable ability of unimpeded markets could not be matched by a central government bureau, as Ludwig von
Mises warned the socialists in the 1920s. But Smith’s insights left it unclear how or whether economic change
might be generated. Would competition among firms suffice to generate change, with or without private
ownership?

A few central European economies twice became laboratories in recent decades for testing competition
without private ownership. From the late 1960s to the late 1980s they allowed each state-owned firm to set their
own prices, outputs, wages and workforce in competition with the others. Whether or not efficiency improved,
it was clear that economic dynamism did not ensue. It was said in defense of these state firms that their
managers’ plans for them were often blocked by the state and that the managers knew they could get their
losses covered by the state so they didn’t need to take chances. In the 1990s, the state firms were put on their
own. This time, with their backs to the wall, they began innovating like mad, hoping that with luck it would be
their ticket to survival. But these state firms were not able to innovate successfully.

1. Competition, it appears, is not sufficient for economic dynamism.

More recently, it has come to be argued that the corporatist economies of east Asia, which had achieved
wonders when there was a yawning gap with the West, ran into trouble in the 1990s because state intervention
in the corporate sector through permissions, subsidies and guarantees led ultimately to mass overinvestment and
insolvency.

2. On this thesis, private ownership is not sufficient for dynamism either: capitalism, in which capital is free to go
in new directions without a green light from the state, becomes necessary at some point in economic
development if dynamism is to continue.

How does capitalism do it? The mechanism of capitalism’s economic advances became the leading object of
economic research early in the twentieth century and remained so for decades. With the upheavals of the late
19th century still in their thoughts, the German School, led by Arthur Spiethoff and Gustav Cassel, linked
innovations to technological developments and the opening up of overseas markets and materials.

3. A new discovery creates new outlets for investment. The investments made “express the zeal of employers to
profit by meeting the increased demand of the community for fixed capital.”

4. This made macroeconomic sense of big waves of innovation: they are exogenous and markets react
constructively to them.

5. But it failed to identify the institutions crucial to fostering early and decisive responsiveness to the newly arrived
opportunity. And it did not provide an economics of innovations in normal times, when capitalism has to generate
endogenous innovations, if there are to be any at all.

A decade later, Joseph Schumpeter arrived with a new perspective. Innovations are normally the creation of
business people, he said, and do not spring reliably or quickly from recent inventions by scientists and engineers.
Furthermore, innovations “are as a rule embodied...in new firms.”

6. Thus the agent of change was the entrepreneur who, hitting upon the prospective profitability of some
unnoticed commercial application, sought to start up an enterprise to implement the innovative idea. Banks—
the venture capitalists of that era—selected which investment projects of these entrepreneurs to finance. The
start-ups that met success inspired other entrepreneurs and together caused the “creative destruction” of various
established enterprises. However, this mechanism of Schumpeter, for which he became renowned, is not
consonant in an important respect with subsequent understanding of the essential nature of innovative ideas,
and it doesn’t apply to a large sector of capitalist economies in the present age.

The essence of capitalism’s innovations was uncovered by European theorists in the interwar period. Friedrich
Hayek saw it as a core feature that, under capitalism, entrepreneurs are self-selected, aided by their particular
experience and driven by their distinctive visions. For this reason capitalism will generally draw on richer
experience and wider knowledge than any one central planner could draw on.

7. John Maynard Keynes added that entrepreneurs (and others) may also have opposing notions about the
macro forces and mechanisms in the economy, which complicates predicting their investment activity.

8. Lastly, Michael Polanyi argued that entrepreneurs, like discoverers generally, take creative leaps and
invariably these leaps involve some “tacit” or “personal” knowledge, which is outside of objectively recognized
knowledge and which goes beyond what can be communicated in explicit terms.

9. For this reason; a state investment bank would not be well-suited to select among entrepreneurs’ projects:
being accountable to the central government for its mistakes, it would avoid all the very innovative proposals
because of the ambiguity of the evidence for them and thus the uncertainty of their profitability. This modern
view of capitalism, however, poses a difficulty for Schumpeter’s model as well. In supposing that lenders and
investors selecting among entrepreneurs’ projects were capable of discerning the talent of every entrepreneur
and the worth of very project, Schumpeter was attributing information and knowledge to financiers that is
incongruent with the modern view of entrepreneurs’ ideas. In reality, financiers must also act on intuition, taking
an initial and limited chance on an applicant in spite of the ambiguity of the evidence. Since an innovative
project is in part inherently difficult to articulate, the success of bankers and venture capitalists in selecting among
them hinges not so much on their knowledge of the project as on their ability to enter into a sequential and
provisional relationship with the entrepreneur that leaves the latter leeway to experiment and prove himself.

10. The other shortcoming of Schumpeter’s mechanism is that, in centering on the entry of start-up firms, it does
not encompass the innovations that come from the sector of established firms. The innovation is there: the heavy
research and development expenditure in the sector of established firms is circumstantial evidence that many
large firms are oriented toward innovation.
11. Besides, we have the direct evidence of radical innovations made by established firms—from Bang &
Olufson’s designs to Sony’s Walkman to the Swatch to Bert Claeys’ rethinking of cinemas. But the entrepreneurship
differs: in contrast to Schumpeter’s theory, the big corporations do not usually have a principal lender or core
investor and even the entrepreneur can barely be identified, if at all. In this sophisticated sector, other institutional
mechanisms are evidently at work but their functioning is not well understood and their effectiveness is not yet
estimated with much confidence.The thesis of Amar Bhidé is that small firms have a role in innovation since they
can better tolerate ambiguity while large firms have a role since they can better manage and finance projects
with high capital costs.

12. The specialization between the start-up and the established firms, and also the possible interplay between
the small-firm sector and the large-firm sector, are obviously areas ripe for further research.

Thus the system of innovation is the great “black box” in research on capitalism and it will be the most central of
the Center’s interests. Yet innovation is not the only aspect of capitalism on which there is not yet much
fundamental understanding. The influence of capitalism on fluctuations is not addressed in standard monetary
macroeconomics or in the “real business cycle” literature. It is obvious that jobs are far more precarious in the
relatively capitalist economies than in the corporatist ones, where governments try to avoid any rocking of the
boat and to backstop with assorted job protection laws.

Capitalism’s proponents respond that the right both to hire and to fire freely helps to embolden firms to take the
risks of job creation and thereby raises the average level of wages and perhaps employment too. However,
capitalism appears to exhibit long swings in economic activity, as measured by employment and unemployment
rates, of far wider amplitude than those detectable in the more corporatist economies. Here too a reply is
conceivable. It may be that when contractionary forces strike, the prompt restructuring that firms in the relatively
capitalist economy are generally permitted to do actually dampens the size of the slump that follow, while the
rigid posture maintained by firms in the relatively corporatist economies, with their strictures against layoffs, entails
a much deeper and longer slump. Another of the fluctuation issues is the justice of regarding long booms as no
better than long slumps. A more radical position raises questions about the justification for blocking or moderating
long slumps, provided they are purely or mainly structural rather than the result of monetary malfunctioning.

13. The subject of long swings is only now beginning to enjoy a revival of attention in the economic literature,
and there is much to be done in this area.

The last of the great questions about capitalism is whether it is best only for the elite of more able and advantaged
participants, who can find rich rewards from its stimulation and challenges, or whether ways can be found to
integrate the less able and less advantaged into capitalism’s sphere. This is the question of economic
inclusion. Quite possibly, there is little cost from a failure of highly corporatized or highly socialized economies to
include the less advantaged; in those economies a low rate of inclusion is often deemed acceptable and, in
some of them, only a minority of the population are in the labor force. Far more may be at stake in the inclusion
of the less advantaged where the business sector is predominantly capitalist. If these capitalist business sectors
offer relatively good job satisfaction and personal growth on the whole or offer relatively high wages in
comparison with the pay in underground and domestic activities, then an appreciable deficiency in inclusion
arising from a wide gap between low-end wage rates and the median wage, with the consequent
demoralization and decline of employability, may be deemed unacceptable and may impose high social costs
on virtually everyone.14

Even more difficult than the task of measuring these social effects of capitalism is the problem of finding solutions
to them, if solutions exist. And that problem is now more difficult since the West has grown aware of how fortunate
it was to have had the capitalist engine driving its development over the past two centuries and how valuable
this engine can be again. So the West is faced with a conundrum: How does society respond to the social
defects and deficiencies of capitalism without choking off capitalism’s potential dynamism? Among the issues
are whether retraining can address job losses, whether long booms are to be treated, and whether employment
subsidies are cost-effective as a remedy for a deficiency in inclusion.

ADAM SMITH - FATHER OF MODERN CAPITALISM

Adam Smith’s Political Legacy

The Wealth of Nations was the basis for Britain’s industrial revolution and the political economy during the
nineteenth century, right through to the political thrust of the 1980s. This was the work that truly made his name
and for which we most remember him. According to Harwood, this is much more than just a book about
economics:

“It is a heady mixture of philosophy, economics, political science, history, sociology, and even anthropology.”

While she embraced Adam Smith’s theories, Margaret Thatcher was not known for having any special empathy
with the status of other women. However, Smith, her inspiration, while not especially celebrated for upholding
feminist values, sought equality and fairness in his philosophy. He believed that the unexpected consequences
of intended actions would always be to the benefit of society in general.
From Mercantilism to Capitalism

During the 18th century, Europe’s economic system was mercantile. Mercantilism was a system that operated
through government regulations in order to increase a nation’s wealth. In other words, all commercial interests
were subject to government intervention in the allocation of goods and the determination of prices.

“Smith’s work is the first comprehensive treatment of the whole subject of political economy, and is remarkable
for its breadth of view,” says the entry in the Oxford Companion to English Literature.

Adam Smith objected to the mercantile system, although he did not believe, like another order of economists
known as the “French physiocrats,” that land is the sole source of wealth. On the contrary, he felt that labour was
a far more important aspect of a nation’s wealth and life. He also valued the division of labour.

A free market with limited government intervention replaced the mercantile system. Image by kzinn

“Labour is the standard of value, and originally was the sole determinant of price; but in a more advanced state
of society, three more elements enter into price – wages, profit and rent,” says the Oxford Companion.

In Book I, Chapter V, Smith says: “What every thing is really worth to the man who has acquired it, and who wants
to dispose of it or exchange it for something else, is the toil and trouble which it can save to himself, and which it
can impose on other people.”

This theory is firmly rooted in the present, and we can take no history of value into account. If an item took a great
deal of toil and trouble to produce, but is now useless, then for Adam Smith it has no value.

The second Book of The Wealth of Nations analyses capital, what it is, how it is accumulated and issues about
employment.

“With the increase of capital there is an increase of productive labour and an increase in the rate of interest,” says
the Oxford Companion, which then comments on Adam Smith’s vehement attack on the mercantile system,
while maintaining his core belief in advocating the freedom of commerce and industry.

The Cambridge Guide to Literature details the remainder of the work. There was a Book III which explains different
rates of growth in different countries and compared economic systems in town and country, while Book IV shows
that mercantilism regards wealth only as money and not as goods. Book V outlines the need for limited
government intervention where appropriate, for example, roads, canals, armies and education.

Capitalism is an economic system where private entities own the factors of production. The four factors
are entrepreneurship, capital goods, natural resources, and labor. The owners of capital goods, natural
resources, and entrepreneurship exercise control through companies. The individual owns his or her labor. The
only exception is slavery, where someone else owns a person's labor. Although illegal throughout the entire world,
slavery is still widely practiced.

ADVANTAGES OF CAPITALISM

Capitalism results in the best products for the

best prices. That's because consumers will pay more for what they want the most. Businesses provide what
customers want at the highest prices they’ll pay. Prices are kept low by competition among businesses. They
make their products as efficient as possible to maximize profit.

Most important for economic growth is capitalism's intrinsic reward for innovation. This includes innovation in more
efficient production methods. It also means the innovation of new products. As Steve Jobs said, "You can't just
ask customers what they want and then try to give that to them. By the time you get it built, they'll want something
new."

DISADVANTAGES OF CAPITALISM

Capitalism doesn't provide for those who lack competitive skills. This includes the elderly, children, the
developmentally disabled, and caretakers. To keep society functioning, capitalism requires government
policies that value the family unit.

Despite the idea of a “level playing field,” capitalism does not promote equality of opportunity. Those without
the proper nutrition, support, and education may never make it to the playing field.

Society will never benefit from their valuable skills.

In the short term, inequality may seem to be in the best interest of capitalism's winners. They have fewer
competitive threats. They may also use their power to "rig the system" by creating barriers to entry. For example,
they will donate to elected officials who sponsor laws that benefit their industry. They could send their children to
private schools while supporting lower taxes for public schools.
In the long term, inequality will limit diversity and the innovation it creates. For example, a diverse business team
is more able to identify market niches. It can understand the needs of society's minorities, and target products to
meet those needs.

Capitalism ignores external costs, such as pollution and climate change. This makes goods cheaper and more
accessible in the short run. But over time, it depletes natural resources, lowers the quality of life in the affected
areas, and increases costs for everyone. The government should impose Pigouvian taxes to monetize these
external costs and improve the general welfare.

Some critics say these problems are signs of late-stage capitalism. They argue that capitalism's flaws mean it has
evolved past its usefulness to society. They don't realize that capitalism's flaws are endemic to the system,
regardless of the phase it is in.

America's Founding Fathers included promotion of the general welfare in the Constitution to balance these flaws.
It instructed the government to protect the rights of all to pursue their idea of happiness as outlined in
the American Dream. It's the government's role to create a level playing field to allow that to happen.

CHARACTERISTICS OF CAPITALISM

1. PRIVATE PROPERTY

Is a legal designation for the ownership of property by non-governmental legal entities. It is distinguishable from
public property, which is owned by a state entity; and from collective/ cooperative property, which is owned by
a group of non-governmental entities.

This can be either personal property (consumer goods) or capital goods. Private property is a legal concept
defined and enforced by a country’s political system.

2. CAPITAL ACCUMULATION/ ACCUMULATION OF CAPITAL

Is a dynamic that motivates the pursuit of profit, involving the investment of money or any financial asset with the
goal of increasing the initial monetary value of the said asset as a financial return whether in the form of profit,
rent, interest, royalties or capital gains. The process of capital accumulation forms the basis of capitalism, and is
one of the defining characteristics of a capitalist economic system.

3. WAGE LABOUR/ LABOR

Is a socioeconomic relationship between a worker and an employer, where the workers sells their labor power
under a formal or informal employment contract. These transactions usually occur in a labor market where wages
or salaries are market-determined.

4. VOLUNTARY EXCHANGE

The act of buyers and sellers freely willing engaging in market transactions. Moreover, transactions are made in
such a way that both the buyer and the seller are better off after the exchange then before it occurred.

5. PRICE SYSTEM

A component of any economic system that uses prices expressed in any form of money for the valuation and
distribution of goods and services and the factors of production. Except for possible remote and primitive
communities, all modern societies use price system to allocate resources, although price systems are not used
exclusively for all resource allocation decisions.

6. COMPETITIVE MARKETS

Competition is a condition where different economic firms seek to obtain a share of a limited good by varying
the element of the marketing mix: price, product, promotion and place. In classical economic thought,
competition causes commercial firms to develop new products, services and technologies, which would give
consumers greater selection and better products. The greater selection typically causes lower prices for the
products, compared to what the price would be if there was no competition (monopoly) or little competition
(oligopoly)

OTHER CHARACTERISTICS OF CAPITALISM

Capitalistic ownership means two things. First, the owners control the factors of production. Second, they derive
their income from their ownership. That gives them the ability to operate their companies efficiently. It also
provides them with the incentive to maximize profit. This incentive is why many capitalists say "Greed is good."

In corporations, the shareholders are the owners. Their level of control depends on how many shares they own.
The shareholders elect a board of directors. They hire chief executives to manage the company.
Capitalism requires a free market economy to succeed. It distributes goods and services according to the laws
of supply and demand. The law of demand says that when demand increases for a particular product, price
rises. When competitors realize they can make a higher profit, they increase production. The greater supply
reduces prices to a level where only the best competitors remain.

The owners of supply compete against each other for the highest profit. They sell their goods at the highest
possible price while keeping their costs as low as possible. Competition keeps prices moderate and production
efficient.

Another component of capitalism is the free operation of the capital markets.

That means the laws of supply and demand set fair prices for stocks, bonds, derivatives, currency, and
commodities. Capital markets allow companies to raise funds to expand. Companies distribute profits among
the owners. They include investors, stockholders, and private owners.

Laissez-faire economic theory says the government should take a "hands-off" approach to capitalism. It should
intervene only to maintain a level playing field. The government role is to protect the free market. It should
prevent the unfair advantages obtained by monopolies or oligarchies. It ought to prevent manipulation of
information, making sure it is distributed equitably.

Part of protecting the market is keeping order with national defense. The government should also maintain
infrastructure. It taxes capital gains and income to pay for these goals. Global governmental bodies
adjudicate international trade.

VARIETIES (other forms) OF CAPITALISM

Laissez-faire capitalism, a social system in which the government is exclusively devoted to the protection of
individual rights, including property rights – one in which there exists absolutely no government intervention in the
economy.

Agrarian capitalism, sometimes known as market feudalism. This was a transitional form between feudalism and
capitalism, whereby market relations replaced some but not all of feudal relations in a society.

Mercantilism, where national governments sought to maintain positive balances of trade and acquire gold
bullion.

Industrial capitalism, characterized by its use of heavy machinery and a much more pronounced division of
labour.

Monopoly capitalism, marked by the rise of monopolies and trusts dominating industry as well as other aspects
of society. Often used to describe the economy of the late 19th and early 20th century.

Colonialism, where governments sought to colonize other areas to improve access to markets and raw materials
and improve the standing of nationally based capitalist firms. Predominant in the 1890s, notably as a response to
the economic crises of the 1890s.

Welfare capitalism, where mixed economies predominated and governments sought to provide a safety net to
alleviate the worst abuses of capitalism. The heyday of welfare capitalism (in advanced economies) is widely
seen to be from 1945 to 1973 as major social safety nets were put in place in most advanced capitalist
economies.

Mass production, post-World War II, saw the rising hegemony of major corporations and a focus on mass
production, mass consumption and (ideally) mass employment. This stage sees the rise of advertising as a way
to promote mass consumption and often sees significant economic planning taking place within firms.

State capitalism, where the state intervened to prevent economic instability, including partially or fully
nationalizing certain industries. Some economists also include the economies of the Soviet Union and the Eastern
Bloc in this category.

Corporatism, where government, business and labor collude to make major national decisions. Notable for being
an economic model of fascism, it can overlap with, but is still significantly different from state capitalism.

Financialization, or financial capitalism, where financial parts of the economy (like the finance, insurance, or real
estate sectors) predominate in an economy. Profit becomes more derived from ownership of an asset, credit,
rents and earning interest, rather than actual productive processes.

CHARACTERISTICS

In general, capitalism as an economic system and mode of production can be summarised by the following:

-Capital accumulation: production for profit and accumulation as the implicit purpose of all or most of
production, constriction or elimination of production formerly carried out on a common social or private
household basis.
-Commodity production: production for exchange on a market; to maximize exchange-value instead of use-
value.

-Private ownership of the means of production:

-High levels of wage labour.

-The investment of money to make a profit.

-The use of the price mechanism to allocate resources between competing uses.

-Economically efficient use of the factors of production and raw materials due to maximization of value added
in the production process.

-Freedom of capitalists to act in their self-interest in managing their business and investments.

DIFFERENCE BETWEEN CAPITALISM, SOCIALISM, COMMUNISM, AND FASCISM

Attribute Capitalism Socialism Communism Fascism

Factors of production are owned

Individuals Everyone Everyone Everyone
by

Factors of production are valued Usefulness to Usefulness to

Profit Nation-building
for people people

Supply and
Allocation decided by Central plan Central plan Central plan
demand

From each according to his Market decides Ability Ability

Value to the
nation
To each according to his Wealth Contribution Need

Capitalism vs. Socialism

Proponents of socialism say their system evolves from capitalism. It improves upon it by providing a direct route
between citizens and the goods and services they want. The people as a whole own the factors of
production instead of individual business owners.
Many socialistic governments own oil, gas, and other energy-related companies. It’s strategic for a government
to control these profitable industries. The government collects the profit instead of corporate taxes on a private
oil company. It distributes these profits in government spending programs. These state-owned companies still
compete with private ones in the global economy.

Capitalism Versus Communism

Communism evolves beyond both socialism and capitalism, according to theorists. The government provides
everyone with a minimum standard of living. That's guaranteed, regardless of their economic contribution.
Most societies in the modern world have elements of all three systems. This blend of systems is called a mixed
economy. Elements of capitalism also occur in some traditional and command economies.

Capitalism Versus Fascism

Capitalism and fascism both allow private ownership of businesses. Capitalism gives those owners free rein to
produce goods and services demanded by consumers. Fascism follows nationalism, requiring business owners to
put national interests first. Companies must follow the orders of the central planners.

Capitalism and Democracy

Monetarist economist Milton Friedman suggested that democracy can only exist in a capitalistic
society. But many countries have socialist economic components and a democratically-elected government.
Others are communist but have thriving economies thanks to capitalistic elements. Examples include China and
Vietnam. Some others are capitalist and governed by monarchs, oligarchs, or despots.
The United States is mostly capitalistic. The federal government does not own corporations. One important reason
is that the U.S. Constitution protects the free market. For example:

Article I, Section 8 establishes the protection of innovation through copyright.

Article I, Sections 9 and 10 protects free enterprise and freedom of choice. It prohibits states from taxing each
other's production.

Amendment IV prohibits unreasonable government searches and seizures, thereby protecting private property.

Amendment V protects the ownership of private property.

Amendment XIV prohibits the government from taking property without due process of law.
Amendments IX and X limit the government's power to those outlined explicitly in the Constitution. All other
powers not mentioned are conferred to the people.

The Preamble of the Constitution sets forth a goal to "promote the general welfare." It requires the government
to take a more significant role than that prescribed by a pure market economy. That's why America has many
social safety programs, such as Social Security, food stamps, and Medicare.

EXAMPLES OF CAPITALISM

The United States is one example of capitalism, but it's not the best. In fact, it doesn't even rank within the top 10
countries with the freest markets. That's according to both Global Finance Magazine and The Heritage
Foundation, a conservative think tank. They based their ranking on nine variables. These include a lack of
corruption, low debt levels, and protection of property rights.

The top 10 most capitalistic countries are:

-Hong Kong -Singapore -New Zealand -Switzerland -Australia -Ireland -Estonia

-United Kingdom -Canada -United Arab Emirates

The United States ranks 18th. Its weak spots are in business freedom and property rights. Its immense national debt
also limits fiscal policy. It's created a future tax burden that will restrict taxpayer freedom.