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Capitalism, Its Characteristics, with Pros

and Cons
How It Works Compared to Socialism and Communism
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 Image by Evan Polenghi © The Balance 2019

BY KIMBERLY AMADEO

 Updated February 07, 2020

Capitalism is an economic system where private entities own the factors of production. The four factors are entrepreneurship, capital goods, natural
resources, and labor.1 The owners of capital goods, natural resources, and entrepreneurship exercise control through companies. The individual owns
their 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.2  

Key Takeaways

 In capitalism, owners control the factors of production and derive their income from it.
 Capitalism incentivizes people to maximize the amount of money they earn through competition. 
 Competition is the driving force of innovation as individuals create ways to do tasks more efficiently. 

Characteristics 
It can be tricky to understand an economic theory such as 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.3 This incentive could be 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.4

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.5

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. The laws of supply and demand set fair prices for stocks,
bonds, derivatives, currency, and commodities.3 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. 6 It should intervene only to maintain a level
playing field. The government's role is to protect the free market.7  8 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.9 Global governmental bodies adjudicate international trade.1 0

Advantages
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, co-founder of Apple Computer Inc., said in an interview with Inc. magazine, "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." 1 1

Disadvantages 
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 good nutrition, support, and education may
never make it to the playing field. Society will never benefit from their valuable skills.1 2

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 limits 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. 1 3 The government should impose
Pigouvian taxes to monetize these external costs and improve the general welfare. 1 4

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 the promotion of general welfare in the Constitution to balance these flaws.1 5 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.
Capitalism and Democracy
Monetarist economist Milton Friedman suggested that democracy can only exist in a capitalistic society. 1 6  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 protect free enterprise and freedom of choice. They prohibit 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.1 7

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 
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 the Index of Economic Freedom. It bases its 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:

1. Hong Kong
2. Singapore
3. New Zealand
4. Switzerland
5. Australia
6. Ireland
7. United Kingdom
8. Canada
9. United Arab Emirates
10. Taiwan

The United States ranks 12th. Its weakest points are the massive government spending and poor fiscal health. It's also weak in its tax burden that
restricts taxpayer freedom. Its strongest points are labor freedom, business freedom, and trade freedom. 1 8

Difference Between Capitalism, Socialism, Communism,

and Fascism
 Attribute Capitalism Socialism Communism Fascism

Factors of production are

Individuals Everyone Everyone Everyone
owned by:

Usefulness to Usefulness to
Factors of production provide:Profit Nation-building
people people

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

Value to the
Each gives according to: Market Ability Ability
nation

Value to the
Each receives according to: Wealth Contribution Need
nation

Capitalism Versus 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. 1 9

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.1 2

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.1 2  

https://www.merriam-webster.com/dictionary/capitalism
capitalism
 noun

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cap·i·tal·ism | \ ˈka-pə-tə-ˌliz-əm  , ˈkap-tə- \

Definition of capitalism
: an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by
private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free
market

Communism,  Socialism,  Capitalism, and  DemocracyDid You Know?Example Sentences Learn More
about capitalism

Communism, Socialism, Capitalism, and Democracy
Communism, socialism, capitalism, and democracy are all among our top all-time lookups, and user comments suggest that this is
because they are complex, abstract terms often used in opaque ways. They're frequently compared and contrasted,
with communism sometimes equated with socialism, and democracy and capitalismfrequently linked.
Part of the confusion stems from the fact that the word communism has been applied to varying political systems over time. When
it was first used in English prose in the mid-19th century, communism referred to an economic and political theory that advocated
the elimination of private property and the common sharing of all resources among a group of people; in this use, it was often
used interchangeably with the word socialism by 19th-century writers.
The differences between communism and socialism are still debated, but generally English speakers use communism to talk
about the political and economic ideologies that find their origin in Karl Marx’s theory of revolutionary socialism, which advocates
a proletariat overthrow of capitalist structures within a society; societal and communal ownership and governance of the means
of production; and the eventual establishment of a classless society. The most well-known expression of Marx’s theories is the
20th-century Bolshevism of the U.S.S.R., in which the state, through a single authoritarian party, controlled a society’s economic
and social activities with the goal of realizing Marx’s theories. Socialism, meanwhile, is most often used in modern English to
refer to a system of social organization in which private property and the distribution of income are subject to social control. (The
term is also often used in the phrase democratic socialism, which is discussed here.)
Communism and socialism are both frequently contrasted with capitalism and democracy, though these can be false equivalencies
depending on the usage. Capitalism refers to an economic system in which a society’s means of production are held by private
individuals or organizations, not the government, and where products, prices, and the distribution of goods are determined
mainly by competition in a free market. As an economic system, it can be contrasted with the economic system of communism,
though as we have noted, the word communism is used of both political and economic systems. Democracy refers not to an
economic system but to a system of government in which supreme power is vested in the people and exercised through a
system of direct or indirect representation which is decided through periodic free elections. For discussion about whether the
United States is accurately described as a democracy or as a republic, see the article here.)
Readers should consult the individual entries for a full treatment of the various ways in which each of these four words is used.
Did You Know?
Capital is wealth—that is, money and goods—that's used to produce more wealth. Capitalism is practiced enthusiastically
by capitalists, people who use capital to increase production and make more goods and money. Capitalism works by
encouraging competition in a fair and open market. Its opposite is often said to be socialism. Where a capitalist economy
encourages private actions and ownership, socialism prefers public or government ownership and control of parts of the
economy. In a pure capitalist system, there would be no public schools or public parks, no government programs such as Social
Security and Medicare, and maybe not even any public highways or police. In a pure socialist system, there wouldn't be any
private corporations. In other words, there's just about no such thing as pure capitalism or pure socialism in the modern world.
Examples of capitalism in a Sentence
 Capitalism is at once far too rational, trusting in nothing that it cannot weigh and measure, and far too little as well, accumulating wealth as
an end in itself.— Terry Eagleton, Harper's, March 2005The United States has assumed a global burden—not just fighting terrorism and rogue
states, but spreading the benefits of capitalism and democracy …— Brian Urquhart, New York Review Of Books, 9 Oct. 2003

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https://www.britannica.com/topic/capitalism

Capitalism
WRITTEN BY: 

 The Editors of Encyclopaedia Britannica

See Article History

Alternative Titles: free enterprise economy, free market economy, private enterprise economy

Capitalism, also called free market economy or free enterprise economy, economic system, dominant in the Western world since the breakup
of feudalism, in which most means of production are privately owned and production is guided and income distributed largely through the
operation of markets.
 Trading floor of the New York Stock Exchange, New York City. Justin Guariglia—xPACIFICA/Redux

READ MORE ON THIS TOPIC

economic system: Market systems

It is usual to describe the earliest stages of capitalism as mercantilism, the word denoting the central importance of the merchant overseas…
A brief treatment of capitalism follows. For full treatment, see economic systems: Market systems.
Although the continuous development of capitalism as a system dates only from the 16th century, antecedents of capitalist institutions existed in
the ancient world, and flourishing pockets of capitalism were present during the later European Middle Ages. The development of capitalism was
spearheaded by the growth of the English cloth industry during the 16th, 17th, and 18th centuries. The feature of this development that
distinguished capitalism from previous systems was the use of accumulated capital to enlarge productive capacity rather than to invest in
economically unproductive enterprises, such as pyramids and cathedrals. This characteristic was encouraged by several historical events.
In the ethic fostered by the Protestant Reformation of the 16th century, traditional disdain for acquisitive effort was diminished, while
hard work and frugality were given a stronger religious sanction. Economic inequality was justified on the grounds that the wealthy were more
virtuous than the poor.
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Another contributing factor was the increase in Europe’s supply of precious metals and the resulting inflation in prices. Wages did not rise as fast
as prices in this period, and the main beneficiaries of the inflation were the capitalists. The early capitalists (1500–1750) also enjoyed the benefits
of the rise of strong national states during the mercantilist era. The policies of national power followed by these states succeeded in providing the
basic social conditions, such as uniform monetary systems and legal codes, necessary for economic development and eventually made possible
the shift from public to private initiative.
Beginning in the 18th century in England, the focus of capitalist development shifted from commerce to industry. The steady capital
accumulation of the preceding centuries was invested in the practical application of technical knowledge during the Industrial Revolution.
The ideology of classical capitalism was expressed in An Inquiry into the Nature and Causes of the Wealth of Nations (1776), by the Scottish
economist and philosopher Adam Smith, which recommended leaving economic decisions to the free play of self-regulating market forces. After
the French Revolution and the Napoleonic Wars had swept the remnants of feudalism into oblivion, Smith’s policies were increasingly put into
practice. The policies of 19th-century political liberalism included free trade, sound money (the gold standard), balanced budgets, and minimum
levels of poor relief. The growth of industrial capitalism and the development of the factory system in the 19th century also created a vast new
class of industrial workers whose generally miserable conditions inspired the revolutionary philosophy of Karl Marx (see also Marxism). Marx’s
prediction of the inevitable overthrow of capitalism in a proletarian-led class war proved shortsighted, however.

Adam SmithAdam Smith, paste medallion by James Tassie, 1787; in the Scottish National Portrait Gallery, Edinburgh. Courtesy of the Scottish National Portrait Gallery, Edinburgh
World War I marked a turning point in the development of capitalism. After the war, international markets shrank, the gold standard was
abandoned in favour of managed national currencies, banking hegemony passed from Europe to the United States, and trade barriers multiplied.
The Great Depression of the 1930s brought the policy of laissez-faire (noninterference by the state in economic matters) to an end in most
countries and for a time created sympathy for socialism among many intellectuals, writers, artists, and, especially in western Europe, workers and
middle-class professionals.

Great Depression; breadlineDetail of a sculpture depicting unemployed men in a breadline during the Great Depression, by George Segal, part of the Franklin Delano Roosevelt Memorial, Washington, D.C. ©
Zack Frank/Fotolia

In the decades immediately following World War II, the economies of the major capitalist countries, all of which had adopted some version of
the welfare state, performed well, restoring some of the confidence in the capitalist system that had been lost in the 1930s. Beginning in the
1970s, however, rapid increases in economic inequality (see income inequality; distribution of wealth and income), both internationally and
within individual countries, revived doubts among some people about the long-term viability of the system. Following the financial crisis of
2007–09 and the Great Recession that accompanied it, there was renewed interest in socialism among many people in the United States,
especially millennials (persons born in the 1980s or ’90s), a group that had been particularly hard-hit by the recession. Polls conducted during
2010–18 found that a slight majority of millennials held a positive view of socialism and that support for socialism had increased in every age
group except those aged 65 or older. It should be noted, however, that the policies actually favoured by such groups differed little in their scope
and purpose from the New Deal regulatory and social-welfare programs of the 1930s and hardly amounted to orthodox socialism.
 economic inequalityA protester holding a placard at a demonstration against economic inequality in Toronto, Canada, on October 17, 2011. © arindambanerjee/Shutterstock.com

The Editors of Encyclopaedia BritannicaThis article was most recently revised and updated by  Brian Duignan, Senior Editor.

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economic system: Market systems

It is usual to describe the earliest stages of capitalism as mercantilism, the word denoting the central importance of the merchant overseas traders who rose to prominence in
17th- and 18th-century England,…


 history of Latin America: Capitalism and social transitions

The social ramifications of the rise of export economies were vast. The acceleration of the export economies and related commerce fostered a tendency toward urbanization.
The period was one of general population growth in much of Latin America, most spectacularly in…

urban culture: Urban cultures since the capitalist world system

Beginning in the 15th century, the Age of Discovery, Europeans carried the capitalist system burgeoning at home to distant places, whose labour and productivity were
harnessed to the European core in an unequal, colonial relationship. The result was the capitalist world system,…

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Capitalism

KEY PEOPLE

 Frederik Stang
 Johan August, Baron Gripenstedt
 A.M. Schweigaard
 Karl Marx
 Max Weber
 Rosa Luxemburg
 Thomas Piketty
 Richard Henry Tawney
 Daniel Bell
 Albion W. Small

RELATED TOPICS
  Neoliberalism
 Free market
 Protestant ethic
 Commercial capitalism
 Market economy
 Industrial capitalism
Christian Social Union

POLITICAL PARTY, GERMANY

 ARTICLE

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Christian Social Union

POLITICAL PARTY, GERMANY

WRITTEN BY: 

 David P. Conradt

See Article History

Alternative Titles: CSU, Christlich-Soziale Union

Christian Social Union (CSU), German Christlich-Soziale Union, conservative German political party that was founded

in Bavaria, Germany, in 1946 by various Roman Catholic and Protestant groups and is committed to free enterprise, federalism, and
a united Europe operating under Christian principles.
Since December 1946, when party leader Josef Müller guided the CSU to an overall majority in that year’s Land (state) elections,
the CSU has governed Bavaria continuously with only one exception (1954–57), though until 1962 it was sometimes forced to form
a coalition with other parties. In national elections it consistently performed well—averaging more than half of the votes in Bavaria—
into the 21st century. In 2008, however, having suffered its worst state election results since 1954, it lost its long-standing absolute
majority in the state. In Germany’s parliamentary elections in 2009, the CSU, continuing to falter, garnered the smallest percentage
of the Bavarian vote (42.6 percent) since 1949. In September 2013, however, the CSU regained its absolute majority in the Bavarian
parliament one week before it and its alliance partner, the Christian Democratic Union (CDU), won the federal parliamentary election
by capturing nearly 42 percent of the vote. The CSU is the Bavarian affiliate of the CDU; although the CSU has its own leadership,
organization, and fund-raising structures, it does not run candidates outside Bavaria. In turn, the CDU does not compete in Bavaria.
In parliament the two parties maintain a common caucus (Fraktion), with cochairmen representing each party.
From 1961 to 1988 the CSU was led by Franz Josef Strauss, who served as a member of the Bundestag, the lower house of the
national legislature, from 1949 to 1988 and as premier of Bavaria from 1978 to 1988. He also often served as a minister in CDU-
CSU federal governments, notably as minister of defense (1956–62) and of finance (1966–69). In 1980 Strauss unsuccessfully ran
as the CDU-CSU candidate for chancellor—the first time the coalition had nominated a CSU leader as its candidate for chancellor.
In 1999 the party selected as its leader Edmund Stoiber, who had served as premier of Bavaria since 1993. In 2002 Stoiber was
 selected as the CDU-CSU’s candidate for chancellor in the federal election, which the CDU-CSU narrowly lost. Stoiber had little
electoral appeal in the eastern states and was not selected as the CDU-CSU’s candidate for chancellor in 2005.
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The CSU is more conservative than the CDU, especially on social issues such as abortion, church-state matters, immigration, and
the rights of Germany’s many foreign residents. In foreign policy the CSU also tends to take a more nationalist position; in the 1970s
it opposed the effort of the Social Democratic Party-led government of Willy Brandt to normalize relations with eastern Europe and
the Soviet Union, and it has tended to be less supportive of European integration than the CDU.
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David P. Conradt

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Germany: Political parties

…but still important, parties: the Christian Social Union (Christlich-Soziale Union; CSU), the Bavarian sister party of the CDU; the Free Democratic Party (FDP),
which has served as a junior coalition partner in most German governments since World War II; Alliance ’90/The Greens (Bündnis ’90/Die Grünen), a party formed
in 1993…

Germany: Allied occupation and the formation of the two Germanys, 1945–49

…its Bavarian sister party, the Christian Social Union (Christlich-Soziale Union; CSU). The leaders of this Christian Democratic coalition had for the most part
been active in the moderate parties of the Weimar Republic, especially the Catholic Centre Party. They sought to win popular support on the basis of a
nondenominational…

Christian Democratic Union

…with its Bavarian affiliate, the Christian Social Union (CSU), emerged out of the ashes of the Third Reich to become Germany’s most successful political party,
governing the Federal Republic of Germany for the first two decades after its founding and for most of the last two decades of the 20th…
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Christian Social Union

QUICK FACTS

DATE

 1946 - present

RELATED PEOPLE
 Franz Josef Strauss
 Edmund Stoiber
 Otto von Habsburg

AREAS OF INVOLVEMENT

 Conservatism
 Federalism
 Capitalism
 Right
Land

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Land
ECONOMICS

WRITTEN BY: 

 The Editors of Encyclopaedia Britannica

See Article History

Land, In economics, the resource that encompasses the natural resources used in production. In classical economics, the
three factors of production are land, labour, and capital. Land was considered to be the “original and inexhaustible gift of nature.” In
modern economics, it is broadly defined to include all that nature provides, including minerals, forest products, and water and land
resources. While many of these are renewable resources, no one considers them “inexhaustible.” The payment to land is
called rent. Like land, its definition has been broadened over time to include payment to any productive resource with a relatively
fixed supply.
This article was most recently revised and updated by Jeannette L. Nolen, Assistant Editor.

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

history of Europe: The economic background

…the classical “factors of production”—labour, land, and capital. The fall in population forced up wages in the towns and depressed rents in the countryside, as the
fewer workers remaining could command a higher “scarcity value.” In contrast, the costs of land and capital fell; both grew relatively more abundant and…

art conservation and restoration: Effects of economic and social change

…population, the value of urban land continues to climb steeply, with some curious effects on the fate of old buildings. Increased demand brings increased land
values and, at first, better prospects for the repair and maintenance of old buildings. But as land values rise higher, the older building must also…


land reform

…the range of functions which land itself has performed: as a factor of production, a store of value and wealth, a status symbol, or a source of social and political
influence. Land value reflects its relative scarcity, which in a market economy usually depends on the ratio between the area…

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Land

QUICK FACTS

KEY PEOPLE

 Léon Walras

RELATED TOPICS

 Origins of agriculture
 Land reform
 Rent
 Collectivization
 Zoning
 Sovkhoz
 Estate in land
 Production
 Ujamaa
 Agrarian law
Free trade

ECONOMICS

 ARTICLE MEDIA
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Free trade
ECONOMICS

WRITTEN BY: 

 The Editors of Encyclopaedia Britannica

LAST UPDATED: Feb 14, 2020 See Article History

Free trade, also called laissez-faire,a policy by which a government does not discriminate against imports or interfere
with exports by applying tariffs (to imports) or subsidies (to exports). A free-trade policy does not necessarily imply, however, that a
country abandons all control and taxation of imports and exports.
international tradeConcept illustration of the world showing trade relationships between countries.© 3alexd/iStock.com
 READ MORE ON THIS TOPIC

20th-century international relations: Developments in free trade

Throughout 1993 and 1994 Republicans accused Clinton of naïveté and vacillation. Opinion polls showed that the American people lacked confidence…

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The theoretical case for free trade is based on Adam Smith’s argument that the division of labour among countries leads to
specialization, greater efficiency, and higher aggregate production. (See comparative advantage.) From the point of view of a single
country there may be practical advantages in trade restriction, particularly if the country is the main buyer or seller of a commodity.
In practice, however, the protection of local industries may prove advantageous only to a small minority of the population, and it
could be disadvantageous to the rest.
Since the mid-20th century, nations have increasingly reduced tariff barriers and currency restrictions on international trade. Other
barriers, however, that may be equally effective in hindering trade include import quotas, taxes, and diverse means of subsidizing
domestic industries.
The Editors of Encyclopaedia BritannicaThis article was most recently revised and updated by Adam Augustyn, Managing Editor, Reference Content.

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comparative advantage

Comparative advantage, economic theory, first developed by 19th-century British economist David Ricardo, that attributed the cause and benefits of international
trade to the differences in the relative opportunity costs (costs in terms of other goods given up) of producing the same commodities among countries. In Ricardo’s
theory, which was based…

20th-century international relations: Developments in free trade

Throughout 1993 and 1994 Republicans accused Clinton of naïveté and vacillation. Opinion polls showed that the American people lacked confidence in U.S.
foreign policy, while European and Asian leaders were dismayed by what they saw as weak leadership from Washington. On issues of…


India: Revolution in Bengal

The company’s trade with Europe had since 1717 been exempt from such taxes, but the application of such concessions to individual employees—or to anyone,
for that matter, who held an exemption pass (dastak)—was a fiscal disaster, since the pass system was widely abused. Local Indian traders were…

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Free trade

QUICK FACTS

KEY PEOPLE

 John Bright
 Joseph Hume
 Rudolph von Delbrück
 William Huskisson
 Johan August, Baron Gripenstedt
 Ivo De Souza
 Pat Buchanan
 Pierre-Samuel du Pont
 Jagdish Bhagwati
 Thomas Tooke

RELATED TOPICS

 Economic openness
 Free-trade zone
 Free trade association
Liberal Front Party

POLITICAL PARTY, BRAZIL

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Liberal Front Party

POLITICAL PARTY, BRAZIL

See Article History

Alternative Titles: PFL, Partido da Frente Liberal

Liberal Front Party (PFL), Portuguese Partido da Frente Liberal, centre-right Brazilian political party that supports free-market
policies.
Founded in 1984, the Liberal Front Party (PFL) was established ostensibly to oppose the presidential candidacy of Paulo Maluf
in Brazil’s 1985 elections—the first civilian democratic elections since 1964. The new party subsequently joined the Democratic
Alliance (Aliança Democrática; AD) in support of the candidacy of Tancredo de Almeida Neves. José Sarney, a cofounder of the
PFL, was selected as Neves’s vice presidential candidate. The Neves-Sarney ticket won the balloting, but when Neves fell ill and
died before taking office, Sarney became president; he served in the post until 1990. In 1987 the PFL withdrew from the AD, and in
1988 Sarney left the party in an unsuccessful attempt to form a winning coalition for the 1989 presidential election.
The PFL later became one of the most important groups that supported the presidential candidacy of Brazilian Social Democratic
Party (Partido da Social Democracia Brasileira; PSDB) cofounder Fernando Henrique Cardoso, who won election handily in both
1994 and 1998. The party has had particular success in national legislative elections. In 1992, for example, it was the largest pro-
government group in the Chamber of Deputies, the legislature’s lower house, and in 1998 it emerged as the chamber’s largest party.
With support particularly concentrated in the poorer Amazon regions, in the northeast, and in small and medium-sized towns, the
PFL is well represented at the state and municipal level. During Cardoso’s second term, relations between the PFL and the PSDB
increasingly grew tense, and in 2001 the alliance of the two parties formally ended. In the elections of 2002, the PFL finished
second, capturing one-sixth of the seats in the Chamber of Deputies.
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São Paulo: From metropolis to megametropolis

 …Gilberto Kassab of the right-wing Liberal Front Party (PFL), came into office in the midst of major urban renewal projects, transportation expansions, and
massive cost overruns. He remained mayor until 2013, when he was replaced by Fernando Haddad of the Workers’ Party. In 2014 Haddad was confronted with
massive student-led…

Brazilian Social Democratic Party

Brazilian Social Democratic Party (PSDB), centre-left Brazilian political party. It is particularly strong among Brazil’s middle classes and nonradical leftist
intellectuals. The Brazilian Social Democratic Party (PSDB) was formed in 1988 by leftist congressional members of the Party of the Brazilian Democratic
Movement (Partido do…

Political party

Political party, a group of persons organized to acquire and exercise political power. Political parties originated in their modern form in Europe and the United
States in the 19th century, along with the electoral and parliamentary systems, whose development reflects the evolution of parties. The…

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Liberal Front Party

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DATE

 1984 - present

RELATED PEOPLE
 Antônio Carlos Magalhães

AREAS OF INVOLVEMENT

 Capitalism
Property
 LEGAL CONCEPT

 ARTICLE

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Property
LEGAL CONCEPT

WRITTEN BY: 

 The Editors of Encyclopaedia Britannica

See Article History

Property, an object of legal rights, which embraces possessions or wealth collectively, frequently with strong connotations of
individual ownership. In law the term refers to the complex of jural relationships between and among persons with respect to things.
The things may be tangible, such as land or goods, or intangible, such as stocks and bonds, a patent, or a copyright.

READ MORE ON THIS TOPIC

Christianity: Property, poverty, and the poor

 The Christian community’s response to the questions of property, poverty, and the poor may be sketched in terms of four major perspectives,…

A brief treatment of property follows. For full treatment, see property law.

Every known legal system has rules that deal with the relations among persons with respect to (at least) tangible things. The
extraordinary diversity of the property systems of non-Western societies, however, suggests that any concept of property other than
the descriptive one is dependent on the culture in which it is found. Because property law deals with the allocation, use, and transfer
of wealth and objects of wealth, it must reflect the economy, family structure, and politics of the society in which it is found.
Very few, if any, non-Western societies generalize about property in the way that Western legal systems do. What distinguishes the
Western property system from the systems of most, if not all, other societies is that its category of private property is
a default category. Western legal systems regard individual ownership as the norm, derogations from which must be explained. The
legal concept of property in the West is characterized by a tendency to agglomerate in a single legal person, preferably the one who
is currently in possession of the thing in question, the exclusive right to possess, privilege to use, and power to convey the thing.
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In classical Roman law (c. AD 1–250), the sum of rights, privileges, and powers that a legal person could have in a thing was
called dominium, or proprietas (ownership). The classical Roman jurists do not state that their system tends to ascribe proprietas to
the current possessor of the thing but that it did so is clear enough. Once the Roman system had identified the proprietarius (the
owner), it was loath to let him convey anything less than all the rights, privileges, and powers that he had in the thing.
The medieval English legal system similarly showed the tendency at critical points to agglomerate property rights in a single
individual. A notion of property in land emerged at the end of the 12th century in England from a mass of partly discretionary, partly
customary, feudal rights and obligations. What began as essentially an appellate jurisdiction, offered by the king in his court to
ensure that a feudal lord did right by his men, ended with the free tenant being the owner of the land, in a quite modern sense, with
the lord’s rights limited to receipt of money payments.
The fundamental tendency in Western property law to agglomerate property rights in a single individual is probably not the product
of the influence of a particular philosophical idea or the dominance of one social group over another or even of a balancing of social
interests. As the need arose for a category to describe the sum of the rights, privileges, and powers that an individual could have
with respect to a thing, the Romans, followed by the English, chose a noun derived from an adjective that means “own.” The
category at once described the concept and also the tendency. As time went on, the tendency took on an independent life. Western
law excluded from the category “property” certain rights, privileges, and powers with respect to a thing because they existed in
someone other than the property holder. In modern legal systems, though not in the Roman, property came to represent one of the
rights of the individual against the state, perhaps originally because property had come to rest in the freeholder and not in his lord,
and the king was the lord of all.
In Western law today, most tangible things may be the object of property, although certain kinds of natural resources, such as wild
animals, water, and minerals, may be the object of special rules, particularly as to how they are to be acquired. Because Western
law gives great emphasis to the concept of possession, it has had considerable difficulty in making intangible things the object of
property. Some Western legal systems still deny the possibility of property in intangibles. In all Western legal systems, however, the
great increase of wealth in the form of intangibles (stocks, bonds, bank accounts) has meant that property or property-like treatment
must be given to such intangibles. Certain government-created rights such as patents and copyrights have traditionally been treated
as property. Others, such as the right to receive social-insurance payments, have not normally been so treated, although there
appears to be some tendency to treat these rights as property also. (This is the “new property” of recent writing.)
The use of property, particularly property in land, is extensively regulated throughout the West. Neighbours injured by adjoining land
uses may sue in nuisance in the Anglo-American countries. Similar actions exist in the civil-law countries. Throughout the West,
landowners may agree to allow others to use their land in ways that would otherwise be actionable, and such agreements may be
made to bind those to whom the land is conveyed. Anglo-American law tends to divide these grants of use rights into categories that
reflect their common-law origins: easements (such as rights of way), profits (such as the right to take minerals or timber), real
covenants (such as a promise to pay a homeowners’ association fee), and equitable servitudes (such as a promise to use the
property for residential purposes only). The civil law does not have as many categories, the category of “servitudes” tending to cover
for them all, and the civil law is a bit more restrictive. Most of the same practical results, however, can be achieved in civil-law
countries as in Anglo-American.
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Throughout the West, public regulation of land use has increased dramatically in the 20th century. Most familiar is zoning, the
division of a given area into districts with limitations on the types of land use (such as residential, commercial, or industrial).
Extensive regulation of types of building (such as height or density) and of materials and methods of construction (building codes) is
also very common. When public authorities cannot achieve their purposes through regulation, they may “expropriate” the land. This
occurs, for example, when land is acquired by government for construction of a highway or by a utility company for creation of a
reservoir. Such expropriation may not be a voluntary exchange between the parties, but compensation for property value is
commonly provided.
Throughout the West, property may be acquired by various “original modes” of acquisition. For instance, “occupancy” is a means of
original acquisition when the thing possessed belonged to no one formerly. A thing can also be acquired if someone possesses it for
a certain period of time as if he were the owner. This is called “acquisitive prescription” in civil-law countries, “adverse possession” in
Anglo-American countries. The privileges conferred by public authorities, such as rights to mineral resources in the public domain or
to exclusive use of an invention, can be viewed as types of original acquisitions.
A far more common means of acquiring property is by transfer from the previous owner or owners (“derivative acquisition”). Most
forms of such transfer are voluntary on the part of the previous owner. “Sale,” the voluntary exchange of property for money, is the
most common of these. A “donation,” or gift, is another voluntary form. Succession to property upon death of the previous owner is a
central concept in nearly all property systems and falls into the category of derivative acquisition. In the West, succession may by
 dictated by a will made by the deceased or by the laws of intestacy, statutes that determine the distribution of property in the event
the deceased left no will. Other instances of derivative acquisition are involuntary. A bankrupt person, for example, may have
property sold by judicial sale to pay his debts.
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

property law

Property law, principles, policies, and rules by which disputes over property are to be resolved and by which property transactions may be structured. What
distinguishes property law from other kinds of law is that property law deals with the relationships between and among members of a society with respect to…

Christianity: Property, poverty, and the poor

The Christian community’s response to the questions of property, poverty, and the poor may be sketched in terms of four major perspectives, which have
historically overlapped and sometimes coexisted in mutuality or contradiction. The first perspective, both chronologically and in…

John Locke: Property

Before discussing the creation of political society in greater detail, Locke provides a lengthy account of his notion of property, which is of central importance to his
political theory. Each person, according to Locke, has property in his own person—that is, each person literally…
HISTORY AT YOUR FINGERTIPS

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Property

QUICK FACTS

KEY PEOPLE

 Jean-Jacques Rousseau
 Pierre-Joseph Proudhon

RELATED TOPICS

 Property law
 Inheritance
 Land reform
 Security
 Canadian aboriginal reserves
 Servitude
 Copyright
 Patent
 Branding
 Trust
Credit

FINANCE

 ARTICLE

INFOPRINTCITE

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Credit
FINANCE

WRITTEN BY: 

 The Editors of Encyclopaedia Britannica

LAST UPDATED: Feb 11, 2020 See Article History

Alternative Titles: borrowing, lending, loan, money lending

Credit, transaction between two parties in which one (the creditor or lender) supplies money, goods, services, or securities in return
for a promised future payment by the other (the debtor or borrower). Such transactions normally include the payment of interest to
the lender. Credit may be extended by public or private institutions to finance business activities, agricultural operations, consumer
expenditures, or government projects.

READ MORE ON THIS TOPIC

Great Depression: International lending and trade

Some scholars stress the importance of other international linkages. Foreign lending to Germany and Latin America had expanded greatly in…

Most modern credit is extended through specialized financial institutions, of which commercial banks are the oldest and most
important. In present-day industrial economies, the banks are able to extend and increase the supply of credit by the creation of new
deposits for their loan customers.
The lender must judge each loan he makes on the basis of the character of the borrower (his intention to repay), his capacity to
repay (based on his potential for earning income), and his collateral (property pledged in case of default on the loan). The terms of
credit transactions may be publicly regulated to prevent abuses by customers and lenders as well as to channel credit into particular
sectors of the economy.
In fields for which adequate private financing is not available, governments may extend credit. Public lending programs, often
combined with public systems of savings collection, provide a large portion of housing finance in many European and Asian
countries. In the U.S., public credit is frequently extended for housing, small business, and agriculture.

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Commercial banks in both industrialized and less developed countries are often reluctant to extend agricultural credit because of the
high risk involved; such loans are usually made only to very large farms. In addition to government credit, cooperative credit
 systems have been particularly important in less developed countries, where they are often the only source of funds available to
small farmers at reasonable rates of interest.

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

Great Depression: International lending and trade

Some scholars stress the importance of other international linkages. Foreign lending to Germany and Latin America had expanded greatly in the mid-1920s, but
U.S. lending abroad fell in 1928 and 1929 because of high interest rates and the booming stock market in…

bank: Last resort lending

In its role as a lender of last resort, a central bank offers financial support to individual banking firms. Central banks perform this role to prevent such banks from
failing prematurely and, more important, to prevent a general loss of confidence that could trigger…

bank: Bank loans

Bank loans, which are available to businesses of all types and sizes, represent one of the most important sources of commercial funding throughout the
industrialized world. Key sources of funding for corporations include loans, stock and bond issues, and income. In the United States,…
HISTORY AT YOUR FINGERTIPS

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Credit

QUICK FACTS

KEY PEOPLE

 Esther Afua Ocloo

 Yasuo Takei

RELATED TOPICS

 Mortgage
 Credit card
 Finance
 Subprime lending
 Bond
 Credit bureau
 Subprime mortgage
 Credit score
 Consumer credit
 Microcredit

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