Capitalism

Capitalism is an economic system where goods and services are provided by private
individuals or businesses. These individuals are allowed to keep the profit they gain from
selling their goods and services. The theory behind this philosophy is that individuals will be
forced to compete with each other, and, wanting to make a profit, will be incentivized to
produce their good or service more efficiently, increasing overall productivity.
Though no single person can be said to have developed capitalism, modern capitalist
theory was first popularized by Scottish economist Adam Smith who noticed the
inefficiencies of mercantilism, the dominant economic theory in Europe at the time. Smith’s
book “The Wealth of Nations,” was extremely influential and over the next few centuries
Smith’s ideas were increasingly applied.
Beginning in the 18th century, England was one of the first nations to adopt
capitalism. Capitalism was extremely successful there and it helped transform England into
an economic powerhouse. Since then, capitalism in some form or another has become an
element of almost every government’s economic policy. Beginning with the Industrial
Revolution, capitalism started the cycle of increased efficiency through innovation that we
are still in today. M
One of the greatest disadvantages of capitalism is the fact that it encourages people
to have materialist mindsets in that they think only of increasing profits when making
decisions. Capitalism does not give any incentives to consider external costs such as
pollution, and does not provide for those who lack the skills to compete, such as children,
the elderly, and the disabled.

Free Market Philosophy

The free market is an economic system where there is no government control, and the
economy is controlled by the laws of supply and demand. The theory behind the free
market philosophy is that in the absence of government regulation and interference,
capitalism will be able to operate most efficiently.
No country has a true free market system, but economies are judged on a spectrum
to determine how free they are. The most economically free countries in the world are
Singapore, New Zealand, and Switzerland. Libertarians are strong advocates for free market
system. There is an approximate correlation between GDP/capita and economic freedom.
There are many disadvantages to a truly free market system. For one thing, the
disadvantages of capitalism are accentuated in an absence of government regulation. Also,
an absence of government regulation can actually hurt capitalism, since anti-competitive
practices like monopolies and collusion can occur. One of the greatest failures of the free
market system is the 2008 financial crisis, which was caused by an absence of regulation in
the US financial sector.